Defense Conversion: Redirecting R&D

May 1993

OTA-ITE-552

NTIS order #PB93-192938

GPO stock #052-003-01324-0
Recommended Citation:

U.S. Congress, Office of Technology Assessment, Defense Conversion:

Redirecting R&D, OTA-ITE-552 (Washington, DC: U.S. Government

Printing Office, May 1993).
Foreword

D

efense conversion means finding productive civilian uses for the resources and people

formerly devoted to the Nation’s defense. Channeling the savings from reduced

defense R&D to civilian R&D is, of course, only one option for using the peace

dividend. There are many others, including deficit reduction, This Report examines

opportunities to advance civilian technologies and improve U.S. industrial competitiveness

internationally by redirecting research and development from defense to dual-use or civilian

purposes.

The Report has two parts. Part One analyzes how R&D institutions currently pursuing

defense missions could be more responsive and useful to civilian technology development.

Defense R&D has historically dominated government R&D, and it will continue to do so even

with reduced funding. However, there are opportunities to use a growing portion of the

resources and talents of the defense research infrastructure for civilian technology development.

The Report focuses particularly on the Department of Energy’s (DOE’s) three nuclear weapons

laboratories, Livermore National Laboratory, Los Alamos National Laboratory, and Sandia

National Laboratories. These labs are very large, with combined operating budgets of $3.4

billion and more than 24,000 employees. More than other defense-related R&D institutions,

these labs are under heavy pressure to devote greater resources to civilian technologies, largely

through cooperative research and development agreements (CRADAs) with industry. In the

short term, DOE needs an improved process for initiating CRADAs in order to be responsive

to industry’s surprisingly large demand for shared R&D with the defense labs.

In the longer term, the labs’ ability to contribute to civilian technologies will depend

on whether they are given new, nondefense national missions. One serious option is to radically

shrink the labs, in accord with reduced nuclear weapons development needs. Another is to find

new public missions for the Nation, to which the weapons labs and other R&D performing

institutions (public and private) might contribute. Part Two of the Report examines how

proposals for new national missions might replace defense in contributing to the country’s

repository of technology, high-value-added jobs, and gross domestic product. A secondary

consideration in examining these initiatives is whether existing defense R&D institutions,

including the DOE weapons labs, might be able to contribute. As an illustration, the report

examines two sectors in Part Two: new kinds of automobiles that pollute less and could reduce

dependence on foreign oil, and high speed surface transportation.

This is the second of two OTA Reports on the implications for the U.S. civilian economy

of the end of the Cold War. The first Report, After the Cold War: Living With Lower Defense

Spending, considered the effects on defense workers, defense-dependent communities, and

defense companies.

Roger Herdman, Director

. . .

Ill
Advisory Panel

McGeorge Bundy, Chairman

Professor Emeritus of History

New York University

Michael Borrus

Deputy Director, Berkeley Roundtable

on International Economics

University of California

H. Kent Bowen

Co-Director, hinders for Manufacturing

Massachusetts Institute of Technology

Charles Bradford

Director, Occupational Safety and

Health and Community Services

International Association of Machinists

and Aerospace Workers

Robert W. Carlton

Vice President, Community and

Business Services

Jackson Community College

Philip W. Cheney

Vice President of Engineering

Raytheon Co.

Robert S. Cooper

President, Chief Executive Officer,

Chairman of the Board of Directors

Atlantic Aerospace Electronics Corp.

Christopher Demisch

Partner

McFadden Brothers

R.C. Dynes

Department of Physics

University of California, San Diego

Craig Fields

President, Chief Technical Officer and

Chief Operating Officer

Microelectronics and Computer

Technology Corp.

Arthur Flathers

Director of Independent Research and

Development

GE Aerospace

Douglas Fraser

Professor of Labor Studies

Wayne State University

Gregory S. Frisby

Chief Executive Officer

Frisby Airborne Hydraulics

Donald A. Hicks

Professor, Political Economy

School of Social Sciences

Bruton Center for Development Studies

University of Texas at Dallas

Frank J. Lewis

Senior Vice President and Special

Assistant to Chairman and Chief

Executive Officer

Harris Corp.

Ann Markusen

Director of the Project on Regional and

Industrial Economics

Rutgers University

John P. McTague

Vice President for Technical Affairs

Ford Motor Co.

Basil Papadales

Site Manager

W. J. Schafer Associates, Inc.

Jack Simon

Manager of’ Government Research and

Development Programs

General Motors

Suzanne Teegarden

Executive Director

Industrial Services Program

State of Massachusetts

Charles D. Vollmer

Vice President, Technology Initiatives

Booz-Allen and Hamilton Inc.

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the advisory panel members. The panel

does not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility .for the report and the accuracy

of its contents.

iv
Project Staff

Peter D. Blair, Assistant Director, OTA

(after February 1, 1993)

Lionel S. Johns, Assistant Director, OTA

(until February 1, 1993)

Energy, Materials, and International Security Division

Audrey B. Buyrn, Program Manager

Industry, Technology, and Employment Program

Katherine Gillman, Project Director

(until April 21, 1993)

Julie Gorte, Deputy Project Director

(Project Director after April 21, 1993)

Mark Roberts Jerry Sheehan

Sean Headrickl

Susan Lusi

CONTRIBUTORS

Jeffrey Lewis Robert Weissler

Joy Dunkerley

Takashi Mashiko Elizabeth Sheley, Editor

ADMINISTRATIVE STAFF

Carol A. Guntow, Office Administrator

Diane D. White, Administrative Secretary

v
Contents

1 Summary and Findings, 1

Overview, 1

Background, 3

The Structure of Federal R&D, 7

Disposition of the DOE Weapons

Laboratories, 15

Summary of Policy Issues and Options, 30

New National Initiatives. 38

2 Policy Issues and Options, 4 3

Options to Reduce the Size of

DOE Weapons Labs, 46

Options to Improve Technology Transfer From

the DOE Weapons Labs, 48

Definitions of National Interest Within the

Technology Transfer Process, 56

Measuring the Value of Cooperative R&D, 60

Strategic Direction of Cooperative Technology

Development, 61

New National Initiatives, 64

PART ONE: Redirecting Research

and Development in Federal

Laboratories and Agencies

3 Nuclear Weapons Laboratories: From

Defense to Dual Use, 7 3

Federal Laboratories, 75

The DOE Weapons Laboratories, 78

4 Technology Transfer From DOE Weapons

Laboratories, 97

Technology Transfer at Federal Labs, 97

Technology Transfer at DOE Laboratories: Early Efforts, 99

CRADAs and the National Technology

Initiative, 103

vii
5

6

ARPA: A Dual-Use Agency, 121

ARPA and Dual-Use Technology, 122

The Future of ARPA, 131

Technology Transfer From ARPA, 139

Extending the ARPA Model, 142

Department of Defense Laboratories, 145

RDT&E in DoD Facilities, 146

DoD Labs and the “Peace Dividend,” 148

Technology Transfer From DoD Laboratories, 152

Appendix A: R&D Institutions in Germany, 159

PART TWO: New National Initiatives: Energy-Efficient

7

8

Transportation

Introduction to Part Two, 167

Personal Transport: Road Vehicles, 173

Electric Vehicles, 173

Legislative Context and Federal R&D Support for EVs, 182

Existing and Near-Term EVs, 193

Employment and Competitiveness, 197

Intelligent Vehicle and Highway Systems, 199

Concluding Remarks, 206

Energy-Efficient Transportation: Public Systems, 207

High-Speed Intercity Ground Transportation, 207

Intracity Mass Transit, 221

Index, 231

. . . Vlll
T

he end of the Cold War frees the Nation to turn more of

its energies into building a stronger civilian economy.

There are hardships in adjusting to a peacetime footing

that demand national attention, but there are opportunities to grasp as well.l This report concentrates on new opportunities to advance civilian technologies and improve industrial

competitiveness. Part One asks how government R&D may be

put on a new course, shifting from the military goals that

dominated Federal technology efforts for half a century to a

greater emphasis on civilian purposes. Part Two considers some

options for new national initiatives that meet public needs while

fostering the growth of knowledge-intensive, wealth-creating

industries.

A key issue in Part One is whether the Nation can put to good

use on the civilian side research talents and institutions that were

formerly devoted to defense. Many diverse R&D institutions—in government, universities, and private defense companies—were part of the defense effort, but this report concentrates

on three of the Nation’s largest R&D institutions, the U.S.

Department of Energy’s (DOE) multiprogram nuclear weapons

laboratories, Lawrence Livermore, Los Alamos, and Sandia.

Public concern is fixed on these labs because they are big, they

1

Summary

and

Findings 1

1 This is the second of two reports by the Office of Technology Assessment on the

implications for the civilian economy of the end of the Cold War. The first was Afrer the

Cold War: Living With Lower Defense Spending, OTA-ITE-524 (Washington+ DC: U.S.

Government Printing Office, February 1992). It considered effects of deep, sustained

cutbacks in defense spending on defense workers, defense-dependent cornmunitics, and

defense companies.
2 I Defense Conversion: Redirecting R&D

are publicly funded, and they face a clear need for

change. They still have important nuclear weapons responsibilities, including decommissioning,

non-proliferation, and environmental cleanup, as

well as modernizing existing weapons; they do

nondefense energy work as well. But their central

task, the design of the Nation’s arsenal of nuclear

weapons, is much diminished.

A widely asked question is whether the labs

should take up other tasks in place of weapons

development. Proposals range from radical downsizing of the labs, with possible closure of at least

one, to using their resources for new national

initiatives devoted to peacetime goals. Whatever

their longer term future--whether they shrink,

take on new missions, or do some of both-a

more immediate question is whether the labs can

work effectively with industry. This involves two

further questions: Do the labs possess technology

and abilities that could be of substantial value to

industry? And if so, can these be made available

without too much trouble or delay?

Recent evidence strongly indicates that the

labs’ technology, and their ability to develop new

technologies, are indeed valuable to industry.

Despite earlier disappointments in technology

transfer, industry interest in cooperative costshared R&D projects is now at an all-time high,

and is matched by interest on the labs’ side. Far

more proposals for cooperative R&D are being

made than can be funded. The answer to the

second question is less certain. In early 1993,

there were still delays and difficulties in signing

agreements, partly because of red tape, but also

partly because DOE, the labs, and their industrial

partners were blazing new trails in government/

industry cooperation. It is not yet clear whether

the way can be smoothed enough to make the

process work swiftly and easily, or that it can be

done before the new enthusiasm cools. For the

near term, the issue is whether lab/industry

partnerships can yield concrete benefits for industry. A few years’ experience should be enough to

tell whether good results are coming out of the

many projects begun in 1992-93, and whether

industry interest in signing new agreements is

holding up.

For the longer term future, R&D partnerships

with industry, per se, are not likely to prove a

satisfactory central mission for the weapons labs.

As public institutions, the labs’ existence is best

justified if they serve missions that are primarily

public in nature. The lab technologies that are

currently exciting high interest from industry are

drawn from the well of public missions of the past

half century, especially nuclear defense. As the

defense task fades, other public missions could

replenish the well. The labs’ traditional missions

are quite broad, encompassing not only military

and nonmilitary uses of nuclear energy, but also

basic high energy physics research and applied

research into various forms of energy supply and

use, including their environmental implications.

There is also a growing interest in expansion of

the labs’ public missions into newly defined

areas, based on expertise they have developed in

such fields as high performance computing, new

materials, and advanced manufacturing technologies.

Broad expansion of the labs’ missions, by

itself, is often interpreted as an effort to ‘‘save the

labs. Another approach would be for the Federal

Government to set R&D priorities for selected

national initiatives, and then to allocate funding

to whatever performers, public and private, can

make the best contributions. There are few such

coordinated Federal R&D initiatives; the best

example is the High Performance Computing and

Communications Program, which is aimed at

well-defined dual-use goals and involves eight

government agencies, including DOE and its labs.

Up to now, no Federal agency has had both the

responsibility and the authority to coordinate

technology development efforts in selected areas

of national importance.

Selecting areas of national importance that call

for a substantial infusion of public funds for R&D

involves political choices at the highest levels of

government. There is no lack of candidates for

new programs. Some of the most attractive are in
1-Summary and Findings 13

the area of sustainable economic growth, the

development of knowledge- and technologyintensive industries that do not burden the environment. Energy efficiency is almost always a

critical element in environmentally benign industrial growth.

Part Two of this report opens a discussion of

broad new initiatives the Nation might adopt to

serve peacetime goals. The illustrative case chosen for analysis is that of transportation systems

that offer greater energy efficiency, reduced

pollution, and lesser dependence on foreign

oil-all public benefits that could justify public

investment. The systems include cleaner cars,

powered by electric batteries or a combination of

fuel cells and batteries; intelligent vehicle and

highway systems; and high-speed mass ground

transportation systems, including steel-wheel train

cars on rails, such as France’s TGV (Train a

Grande Vitesse), and magnetically levitated vehicles on guideways.

Without attempting to analyze all the transportation policy issues involved, the discussion here

looks at the systems from a defense conversion

perspective. It concentrates on the benefits these

environmentally attractive systems might offer in

the way of advancing critical technologies, promoting world-class industries, and creating good

jobs—benefits that defense spending often provided in the past—plus their potential for using

human talents and institutions formerly devoted

to defense. The analysis suggests that nonpolluting cars, though farther from technological

success than high-speed ground transportation

systems, hold greater promise for pushing technological frontiers and could, if they succeed, create

larger numbers of well-paid productive jobs in

America. There may be other good reasons,

however, for government support of the highspeed ground systems.

However desirable they may be, it is not likely

that any of these systems would create nearly

enough jobs at the right time and in the right

places to compensate for the hundreds of thousands of defense jobs being lost as the Nation

adjusts to post-Cold War military budgets. Some

of the initiatives could use the talents of people

now working in the defense sector-especially

research scientists and engineers-but the match

would not be perfect.

This is the second of two Office of Technology

Assessment (OTA) reports on the implications for

the U.S. civilian economy of the end of the Cold

War. The greatest effects, of course, are relief

from the threat of global nuclear war and the

freedom to pursue national goals other than

military security. Nevertheless, adjustment to

deep sustained cuts in defense spending is not

simple or painless. The first report of this

assessment, After the Cold War: Living With

Lower Defense Spending, considered effects of

the cutbacks on defense workers, men and women

in the armed services, defense-dependent communities, and defense companies. It concluded

that there would be hardships-greater perhaps

than the relative size of the cutback suggests,

because our economy is burdened with more debt

and higher unemployment than in times past, and

is under much greater challenge from foreign

competitors. First aid to affected workers and

communities, in the form of reemployment,

retraining, and redevelopment assistance, can

help them through the transition. But the best

conversion strategy is a broad one: investment in

programs that train workers well, help businesses

perform better, promote technology advance, and

invigorate local and national economic growth.

BACKGROUND

The 1990s are uncharted territory. For the first

time in half a century, the United States faces no

massive military threat from a superpower foe.

Instead, the major challenge is to keep up with the

economic competition from friendly countries.

Some are doing better than we are in industries

that disproportionately advance knowledge, generate new technologies of wide application, and

support rising living standards.
4 I Defense Conversion: Redirecting R&D

This Nation’s success in reaching a peaceful

conclusion to 40 years of Cold War will bring

sustained cuts in defense spending; that, ironically, threatens to handicap us in rising to new

challenges in the economic realm. Military spending should and will continue to decline. Yet

military spending and the military-industrial complex are concentrated strongly in things that

increase our potential for growth-research and

development, technology and knowledge intensity. In fact, military spending has sometimes

been described as America’s de facto technology

and industry policy. If so, it is a blunt instrument

of policy; it is an unfocused and expensive way of

advancing important commercial technologies.

Nevertheless, there is enough commonality in

military and commercial applications of some

critical core technologies that defense spending

over the years has strongly supported both. It has

produced semiconductor chips of various kinds

that find uses in autos and engineering work

stations as well as guided missiles;programmable

machine tools that can make parts for fighter

aircraft or lawn mowers, tractors, and commercial

airliners; computational techniques that model

nuclear explosions or analyze what happens to

cars in crashes.

This report focuses on one element of military

spending that has greatly benefited the U.S.

civilian economy—sustained, generous funding

for research and development. Of course, R&D is

not the only benefit defense spending has bestowed. Having the Department of Defense (DoD)

as a large, reliable first customer for groundbreaking new technologies was at least as important; it

was the combination of defense R&D and defense

purchases that launched the semiconductor and

computer industries. Moreover, R&D is far from

the whole story in industrial competitiveness.

Figure 1-1—R&D Spending as a Percentage of GDP:

United States, Germany, and Japan, 1971-90

Percentage of GDP

3

2.7

/

2.4 I

2.1

4

1.8

IA-————— , , /

1971 73 75 77 79 81 83 85 87 89

● United States 1 Germany ● Japa n

SOURCE: National Science Board, The Competitive Strength of U.S.

Industrial Science and Technology: Strategic Issues (Washington, DC:

1992), table A-9.

Many other factors are at least as important.

Among them are a Nation’s financial environment, whether hospitable or not to long-term

private investments in technology and production

equipment; training and education of managers,

engineers, and shop floor workers; and management of people, equipment. and the organization

of work to produce well-designed, reliable goods

at reasonable prices.2 Neglect of R&D was not the

main reason for one U.S. industry after another to

fall behind our best competitors in the 1970s and

1980s. Much more important were inattention to

the tasks of improving quality and efficiency,

linking design and production, and getting new

products to market quickly.

Nevertheless, R&D is an essential element in

the mix, and it has been a traditional source of

strength for the U.S. economy. Today, American

preeminence in R&D is fading. By the late 1980s,

2 OTA reports over the past dozen years have analyzed the international competitiveness of U.S. industries, pointed to problems, and

suggested policy options for improving the Nation’s performan W. Recent studies include U.S.-Mexico Trade: Pulling Together or Pulling

Apart (October 1992); Competing Economies: America, Europe, andthe Pac@cRim (October 1991); Worker Training: Competing in the New

International Economy (September 1990); Mah”ng Things Better: Competing in Manufacturing (Febnmry 1990); Paying the Bill:

Manufacturing and Ametica’s Trade Deficit (June 1988); Commercializing High-Temperature Supercomiuctivity (June 1988); and

International Competition in Services: Banking, Building, Sojlware, Know-How (July 1987).
1-Summary and Findings 15

Figure 1-2—Nondefense R&D Expenditures: United

States, Germany, and Japan, 1971-90

1992 dollars (billions)

120 ~ - -1

I

o~

1971 73 75 77 79 81 83 85 87 89

United States ● Germany * Japan

SOURCE: National Science Board, The Competitive Strength of U.S.

Industrial Science and Technology: Strategic Issues (Washington, DC:

1992), table A-10.

Japan, West Germany, and Sweden all spent a

higher proportion of gross domestic product on

total R&D than the United States. As for nondefense R&D, those nations devoted 2.6 to 3.1

percent of Gross Domestic Product (GDP) to the

purpose in 1990, compared with 1.9 percent in the

United States (figures 1-1 and 1-2). Moreover, the

U.S. position is deteriorating. While foreign

countries have stepped up the pace of their R&D

spending in recent years, this Nation’s has stagnated. In the United States, total and industryfunded R&D hit high points in 1989, have

remained essentially flat in constant dollars since,

and have dropped as a percentage of GDP.

Government R&D has declined in constant

dollars, mostly due to defense cutbacks (figures

1-3 and 1-4).

The reasons for the current lackluster R&D

record in the United States reflect several factors.

Declines in military R&D have certainly affected

the government’s R&D spending and probably

industry’s as well (figure 1-5). The recession and

Figure 1-3—Nondefense R&D as a Percentage

of GDP: United States, Germany, and Japan,

1971-90

Percentage of GDP

4 ‘-– ‘

–—- “—— ‘—- -

-

r

‘

-

1

I

3.5 !

31 9

1 I I I 1

1971 73 75 77 79 81 83 85 87 89

. United States ~ Germany ● Japa n

SOURCE: National Science Board, The Competitive Strength of U.S.

Industrial Science and Technology: Strategic Issues (Washington, DC:

1992), table A-10.

sluggish recovery of the early 1990s may have

dampened industry’s R&D spending; this happened in the recessions of the 1970s, although not

in the turndown of 1981 -82.3 Corporations are

burdened with more debt today than in earlier

times when industry’s R&D spending was rising

steadily. Some American companies that were

traditionally the flagship R&D performers of

private industry have recently suffered stunning,

unprecedented losses. Even innovative companies are now more ready than heretofore to

abandon R&D in areas where they see foreign

competitors ahead of them. Leading corporate

labs that formerly undertook large-scale, longterm R&D projects and produced such innovations as the transistor, have been scaled back,

broken up, or sold.

Government policy has a variety of options for

directly encouraging more R&D by private industry, but there is also a good case for government

sharing with industry some of the large risks and

3 possibly, ~5~= because defense spend~g was rising so fast during this period that defense COmptitifX were Cofildent R&D ~vestments

would pay off later in large military procurements.
6 I Defense Conversion: Redirecting R&D

180

160

140

120

100

80

60

40

20

0

Figure 1-4-U.S. R&D Spending by Source of Funding, 1960-92

1992 dollars (millions) — — .

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990

D Federal Government ~ private industry _ Other

SOURCE: National Science Foundation, National Patterns of R&D Resources: 1992 (Washington, DC: 1992), table B-3.

50

40

30

20

Figure 1-5—Federal Budget for Defense

and Nondefense R&D, 1955-93

1992 dollars (billions)

I

10

v

I o ! r I I I ~ I I I ~~ 1 1 1 1 1 1 1 , 1 1 1 I 1

1955 58 61 64 67 70 73 76 79 82 85 88 91

. Defense R&D t Nondefense R&D

SOURCE: National Science Foundation, National Patterns of R&D

Resources: 7992 (Washington, DC: 1992), table B-21; National

Science Foundation, unpublished data.

Figure 1-6-Federal R&D Funds by

Budget Function, 1992

8 %

Energy

4%

General

science r

4%

w

“ Space

11% 

Health

13%

SOURCE: NationaJ Science Board, Sd-andt%grneenng /ndk.akxs1991 (Washington, DC: U.S. Government Printing Office, 1991), table

4-17.
1--Summary and Findings 17

Figure 1-7—R&D for National Defense as a

Percentage of Total Federal R&D, 1970-92

30 J I

1970 72 74 76 78 80 82 84 86 88 90 92

SOURCE: National Science Foundation, National Patterns of R&D:

1992 (Washington, DC: 1992).

high costs involved in today’s leading edge R&D.

Most other advanced Nations do this as a matter

of course. There is increasing evidence to show

that, in competition with foreign firms whose

governments share the costs of developing technologies, American firms are handicapped. And

the financial environment in the United States has

for a long time been less friendly than that of our

best competitors-especially Japan—for longterm private investments in technology development and equipment.4

The Nation does not inevitably have to lose the

benefits of government supported R&D as defense spending declines. The Federal Government pays for 43 percent of the Nation’s R&D

spending, most of it for defense purposes; some

could be redirected from military to economic

goals. Opportunities to do that are present in

DOE’s nuclear weapons laboratories but they are

certainly not the only candidates. Assuming that

some former defense R&D spending is rechanneled to civilian-oriented R&D (instead of being

applied to many other worthy purposes, from

Federal debt reduction to improved health care),

other claimants for public R&D funds include

universities, private research laboratories, and

civilian government R&D institutions. The DOE

weapons labs have human and physical resources

that they are eager to redeploy into dual-use or

civilian efforts, but conversion of defense resources is only one consideration in deciding how

best to put public funds into R&D partnerships

with industry.

THE STRUCTURE OF FEDERAL R&D

The U.S. Government is a major force in the

Nation’s research and development, and defense

dominates the government’s share. In 1992, the

Federal Government spent $68.2 billion overall

for R&D out of a national total of $157.4 billion;

$41.5 billion of the Federal share was defenserelated. 5 Health is a distant second to defense in

Federal R&D, followed by civilian space and

aeronautics, energy, and scientific research

(figure 1-6). At times in the past, defense has been

even more dominant, reaching a recent peak of

69 percent of Federal R&D in the mid-1980s

(figure 1-7).

The leading performers of federally funded

R&D are private companies, which account for 45

percent of the total.6 Eighty percent of their work

is for DoD, and the National Aeronautics and

Space Administration (NASA) occupies most of

the rest. Universities and colleges, which receive

d For discussion of the reasons and principles for government-industry collaboration in developing technologies with commercial promise,

see U.S. Congress, Office of Technology Assessment Mak”ng Things Better, O’IA-ITE-443 (Washington DC: U.S. Government Printing

Office, February 1993) ch. 2; and Competing Economies, OTE-ITE-498 (l%shingto% DC: U.S. Government Printing Office, October 1991),

ch. 2; also, John Alic, Lewis Branscomb, Harvey Brooks, Ashford Carter, and Gemld Epstein, Beyond Spinofl: Mi/itary and Commercial

Technologies in a Changing World (BostoG MA: Harvard Business School Press, 1992), ch. 12.

5 National Science Foundation, National Patterns ofRiW Resources: 1992, by J.E. Jankowski, Jr., NSF 92-330 (Washington DC: 1992),

tables B-3 and B-21.

b National Scienee Foundation, Selected Data on Federal Funds for Research and Development: Fiscal Years 1990,1991, and 1992, NSF

92-319 (Washington, DC: July 1992), table 9.
8 I Defense Conversion: Redirecting R&D

Table l-l—R&D by Selected Government Agencies and Laboratories, FY 1992 (millions of dollars)

Department/Agency Total R&D Total Lab Intramural FFRDCs

Department of Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Department of Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

National Aeronautics and Space Administration . . . . . . . . .

Department of Health and Human Services . . . . . . . . . . . .

National Institutes of Health . . . . . . . . . . . . . . . . . . . . . . .

Department of Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . .

Department of Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . .

National Institute of Standards and Technology. . . . . . .

National Oceanic and Atmospheric Administration . . . . .

Department of the Interior . . . . . . . . . . . . . . . . . . . . . . . . . . .

National Science Foundation . . . . . . . . . . . . . . . . . . . . . . . .

$38,770

6,499

8,543

9,781

8,253

1,256

539

186

337

562

2,102

$11,596

4,698

3,499

2,039

1,559

826

431

144

272

482

211

$9,890

449

2,613

1,966

1,486

826

431

144

272

479

89

$1,707

4,249

886

74

73

●

o

0

0

3

123

“Indicates amount less than $50,000.

KEY: Federally Funded Research and Development Centers.

SOURCE: National Science Foundation, Federal Funds for Research and Development: Fiscal Years 1990, 1991, 1992, Volume XL, NSF92i322

(Washington, DC: 1992), table C-O..

15 percent of the government’s R&D budget, are

less defense-dependent. They are the biggest

performers in the areas of health and general

science, with a substantial presence as well in

defense, energy, and agriculture.

Laboratories owned or principally funded by

the Federal Government receive 35 percent of

Federal R&D funds. Their growth and strength

are largely a phenomenon of post-World-War-II

years, and their work reflects the Nation’s priorities during that period. About half the $25 billion

they received in 1992 went for defense, with

aerospace, energy, health, and agriculture sharing

much of the rest (table l-l).

In considering how to redirect R&D resources

from military purposes to strengthening the civilian economy, this report concentrates on the

government’s own research institutions. Although

two-thirds of defense R&D dollars are spent in

private industry, public policy has a stronger and

more direct influence on the conduct of government R&D than on how private firms manage

their laboratories and research teams. (Box 1-A

briefly describes some public policies related to

technology conversion by defense companies).

The report therefore focuses on government

laboratories that, up to now, have put most of their

effort toward military goals.

I Federal Laboratories

The often-quoted figure of “more than 700”

Federal laboratories summons up a rather misleading picture of a national network of large

well-equipped research centers. In fact, the Federal research, development, testing, and evaluation (RDT&E) system includes everything from

single offices staffed by a handful of people to

sprawling weapons testing centers like the Flight

Test Center at Edwards Air Force Base in

California, or large campuses with thousands of

researchers, such as the National Institutes of

Health (NIH) in Bethesda, Maryland. Some

Federal labs are owned by the government and

managed and staffed by Civil Service employees

(government-owned, government-operated, or

GOGOs), like the labs of the National Institute of

Standards and Technology (NIST) and most DoD

labs. Some, including many of the biggest, are

government-owned but operated by universities,

companies, or non-profit institutions acting as

contractors (GOCOs); these include all nine of the

DOE multiprogram labs and NASA’s biggest lab,

the Jet Propulsion Laboratory. Some are owned

by other institutions but do virtually all of their

work for the government (Federally Funded

Research and Development Centers, or FFRDCs)

like the Lincoln Laboratory at the Massachusetts
1--Summary and Findings 19

Box l-A—Conversion of Military Technologies by Defense Companies

Among private defense companies there is no lack of military technologies that might be adapted for use in

commercial products. Some major companies, in fact, have taken steps to reorient a portion of their R&D toward

civilian applications. For example, Westinghouse Electronics Systems, TRW, Martin Marietta, and Lockheed

Electronics are using information, data processing, and remote sensing technologies of military origin for such

civilian uses as air and highway traffic control systems, drug interdiction, and office security systems.l Although

most of the customers so far have been civilian government agencies, and sales are small compared to defense

contracts of the recent past, opportunities for converting technologies are certainly there and could be sizable.

Nevertheless, there are serious barriers to technology conversion by private firms. The barriers are not so much

at the technical or engineering level, but rather at the broader level of how the company operates.

Many studies and reports have called attention to the gulf in company culture and management practice

between defense and commercial firms.2 During 45 years of Cold War, most large defense companies and defense

divisions of diversified corporations withdrew from commercial markets into what has been termed the “defense

ghetto.” The reasons are several. Defense contractors that make complex weapons systems or major subsystems

are geared to producing at low volume while meeting very exacting demands for technical performance. By

contrast, the emphasis in the commercial world is on high-volume production that combines product reliability with

affordable cost. And while some U.S. commercial industries have fallen behind their best foreign competitors in

getting new generations of products to market quickly, they are years ahead of defense industries. The time from

design to production for military systems is often 15 to 20 years, compared to 3 to 5 years for many commercial

items. Furthermore, major defense companies typically have little acquaintance with commercial marketing and

distribution. DoD prime contractors have very few buyers to deal with and no need for a distribution network.

Department of Defense (DoD) requirements are another major source of division between commercial and

defense companies. DoD often imposes rigid, detailed specifications and standards, not only for the product itself

but also for the process of manufacture. These “roil specs” and “roil standards” have blocked technological

progress for defense applications in fast-moving fields such as electronics, and have locked into defense contracts

technologies that commercial companies no longer produce. Even more important are the government’s special

auditing, review, and reporting requirements for defense contractors, which are intended to guard against waste

and fraud but which also impose heavy extra costs. A leading reason why many companies keep defense and

commercial work separate is to avoid burdening the commercial business with overhead from the defense side.

It is therefore hard for defense contractors to combine their defense business with commercial production,

or to change from one to the other. Technology conversion, per se, might not be such a formidable challenge. But

if defense companies are to adapt their military-generated technologies to civilian use, they must make themselves

into civilian, or at least dual-use, companies. This is no small task.

Despite the difficulties, some defense companies are making the attempt. Besides the major defense

contractors who are dipping a toe into t he water of commercial markets, there are many smaller companies who

1 Forfljrtherdiscussion of theoutfookforand experience of conversion by defense COmpaniOS, see U.S. Con9ress,

Office of Technology Assessment, Afler the Cold War: Living WWJ Lowr Defense Spending, OTA4TE-524 (Washington,

DC: US. Government Printing Office, February 1992), ch. 7.

2 See, for ~xample, u-s, ~ngress, ~fi~ of Te~no@y Assessment, ~ol~ln~ the Edge: hfahta.hh~ the fMfer)Se

Tbchno/ogy Base, OTA-ISG420 (Washington, DC: US. Government Printing Office, April 1989); Integrating CornmercM

and Military Technologies for Nationa/ Strength: An Agenda for Change, report of the CSIS Steering Committee on

Security and Technology (Washington, DC: The Center for Strategic & International Studies, 1991); John A. Alic, et al.,

Beyond Spinoff: Military and Commercial %chnologiesin a Changing 14hld (Boston: Harvard Business School Press,

1992).
10 I Defense Conversion: Redirecting R&D

Box 1-A--Continued

see their only salvation in the civilian economy. Some are getting help from State programs. For example,

Connecticut the State that tops the list in economic dependence on the private defense industry, provides

converting firms with various forms of financial aid, including both conventional low-interest loans and

success-dependent investments in new product development, to be repaid in royalties. Even wit h help, these firms

face years of effort and uncertain prospects.3

The Federal Government has very broad interests, both military and civilian, in encouraging defense firms

to convert to more civilian production and to integrate the military and civilian sides of their business. Most of the

Federal programs are framed to promote the development of dual-use technologies and integrated companies.

Efforts to raise the share of DoD purchases off the shelf from commercial vendors are at least 20 years old,4 but

the incentive to do so today is far stronger today as defense budgets tighten. The same motive is pushing Federal

policymakers toward removing some of the burdens of military accounting requirements? Moreover, new laws and

policies already allow defense companies to recover more of their own R&D expenses--for dual-use as well as

strictly military technologies-as allowable overhead on government contracts.6

These changes should help to breach the walls of the defense ghetto and support a more effective, efficient

defense industrial base. However, defense contractors still face the need to find more commercial business or else

shrink, or possibly perish. At least one Federal program is explicitly directed at helping defense-dependent

companies enter the commercial marketplace with dual-use products. The $1.7 billion defense conversion

package that Congress passed in 1992 includes a $97 million Defense Dual-Use Assistance Extension Program.

It provides cost-shared grants to centers sponsored by Federal, State, or local governments that offer defense

firms technical assistance in developing, producing, and marketing dual use products; it also provides for

government-guaranteed loans to small defense businesses. For the most part, however, Congress took a broader

view of defense conversion and threw open to all firms-whether or not they are defense-dependent--new or

enlarged technology development and diffusion programs. Two of the new programs, each funded at $97 million

for fiscal year 1993, are a manufacturing extension program supporting State and local agencies that help small

firms adopt best practice technologies, and a regional technology alliance program, which concentrates on

applications-oriented R&D for locally clustered industries. In addition, several hundred millions of dollars were

provided for government-industry R&D partnerships to develop critical dual use technologies

In sum, the issue of technology conversion by defense companies quickly turns into broader policy areas.

From the standpoint of military interests and requirements, civil-military integration is highly desirable; but it is not

clear whether that can be achieved better by trying to turn defense firms into dual-use companies, or by forming

R&D partnerships with commercial companies for defense needs (as ARPA does, see ch. 5 of the full report) and

by changing DoD’s acquisition policies to allow more purchases from companies whose essential nature is

commercial. From the standpoint of the nation’s economic performance, a very broad definition of conversion

seems most desirable. This implies a policy approach that offers transition assistance to defense companies

struggling to survive in the commercial world while opening technology diffusion and development opportunities

to all companies equally.

3 ~ev~ pmbw, “timpanies struggle to Adjust As U.S. Cuts Military Budget,” The N8w Yofk mm-, Feb. 10,

1993.

4 U.S. bngre~, offb of Technology Assessment, &JMlhg FutureSscurfty:&rateg/es bf R6SfIUCfUd17~ fhe

Defense Tbchno/ogyand/n&stria/ Base, OTA-ISC-530 (Washington, DC: U.S. Government Prlntlng Office, June 1992),

pp. 99-103.

5 In January 1w3 the Advisory Panel on Streamlining and Codifying Acquisition 1.awSSubmitt8d to DoD ib report

on reforming the body of aoquisitkm law; at this writing the Department had not yet responded.

6‘rhig is in~petint research and development, or IR&D, an important source of funding for defense ~mpanies’

development of teohnologles with no speolfic weapons application. IR&D Is destined to beoome less important as

procurement deofines, since it is reoovered from government oontracts.
1--Summary and Findings I 11

Institute of Technology, sponsored by the Air

Force.

It is also sometimes mistakenly assumed that

all the Federal labs have an untapped potential for

contributing to the Nation’s economic performance, but that is an exaggeration. Some already

have longstanding close relations with industry.

Examples are NIST’s labs, which have a central

mission of serving industry’s needs; the NASA

aeronautics labs, with their history and explicit

mission of R&D support for the aircraft industry,

civil as well as military; and the NIH labs, with

substantial research that is of immediate interest

to the pharmaceutical, medical devices, and

biotechnology industries. No doubt some of these

laboratories could improve their links with industry, but they are not starting from zero.

DoD has the biggest budget of any Federal

agency for its laboratories--$11.6 billion in

1992; this includes not only R&D laboratories per

se but also testing and evaluation (T&E) centers,

such as the Air Force’s Arnold Engineering

Center in Tennessee and the Navy’s Weapons

Center at China Lake, California. Less than half

of DoD’s total budget for the labs is spent

in-house; the rest is passed through to outside

performers, mostly defense contractors.7 With

few exceptions (e.g., the science-oriented multiprogram Naval Research Laboratory), the Defense Department’s R&D labs pass through well

over half of their budgets while the T&E centers

spend more than half in-house.8 overall, more

than $5 billion was available for in-house RDT&E

in DoD facilities in 1992.

The next biggest spender was DOE, with $4.7

billion. 9 In contrast with the DoD labs, most of the

funding DOE provides its labs is spent in-house,

and in fact is supplemented by about $1 billion

from other Federal agencies, mostly DoD. DOE

labs also differ from most DoD labs (and most

other Federal labs as well) in that most are

GOCOs.

For this report, with its focus on redirecting

government R&D resources from military to

commercial or dual-use applications, DOE nuclear weapons labs and DoD labs are most

relevant. The former are of prime interest, for

several reasons. The term ‘‘weapons labs” usually refers to Los Alamos and Lawrence Livermore, which design nuclear warheads, and Sandia, which develops field-ready weapons using

the warheads. These labs are in a class by

themselves. Their collective budgets were over

$3.4 billion in 1993, and together they had over

24,000 employees.

10 Nuclear weapons-related

activities accounted for 51 to 60 percent of their

operating budgets (least for Lawrence Livermore,

most for Los Alamos); if the labs’ work for the

DoD is added in, funding for military-related

activities ranged from 67 percent at Lawrence

Livermore to 78 percent at Sandia. However, a

growing share of activities funded by the nuclear

weapons accounts is not, properly speaking,

military. Nonetheless, funding for the labs from

7 Department of Defense In-House RDT&E Activities for Fiscal Year 1990, prepared for the OtXce of the Secretary of Defense, Ofilce of

the Deputy Director of Defense, Research and Engineering/Science and Technology (Rkshingtonj DC: The Pentagoq n.d.). This document

reports spending for total and in-house RDT&E activities in 91 Army, Navy, and Air Force facilities, employing about 100,000 civilian and

military personnel. Spending for the total RDT&E program was $8.4 billioq with $3.9 billion (46 percent) spent in-house in f~cal year 1990.

These figures are not exactly comparable with R&D data collected by the National Science Foundation. They are mostly limited to RDT&E

activities where funding for in-house RDT&E is at least 25 percent of the in-house portion of the facility’s budgec they do not include spending

in FFRDCS. See also Michael E. Davey, ‘‘Defense Laboratories: Proposals for Closure and ConsolidatiorL’ Congressional Research Service,

The Library of Congress, Jan. 24, 1991, p. CRS-6.

8 Ibid. ~ 1990, tie R&D labs spent $24 bfllion of heir tot~ $5.8 bfiion RDT&E budget in-house (41 percent); the T&E CtXlkXS Sj)ellt $1.6

billion of $2.7 billion (59 percent) in-house.

g Note Mt ~ese figures are only for R&D performed in government-owned, - operated, or -funded labs. DoD’s total 1992 budget authority

for R&D, excluding expenditures for R&D plant and e@pmen4 was about $38.8 billion. DOE’s was $6.5 billion.

10 ~s ~u~ o~y re~a employees. On-site contract employees amount to many more. IrI 1993, Sandia’s 8,450 regular employees Wae

supplemented by 2,000 on-site contract employees; Los Alamos, with about 7,600 regular employees, had some 4,000 on-site contractors.
12 I Defense Conversion: Redirecting R&D

the nuclear weapons accounts rose in FYs 1992

and 1993 (in constant dollars, taking inflation into

account), but this growth was largely due to big

increases for a massive environmental cleanup

job, plus rising amounts for non-proliferation

work, decommissioning existing weapons, and

safety and security of the remaining nuclear

stockpile, all of which are funded by the nuclear

weapons accounts.

The fact is that the nuclear weapons labs are

looking at a future that is very different from their

past. Their mission of nuclear weapons design is

fading; in 1993, no new nuclear weapons were

being designed. Among Federal R&D institutions, the nuclear weapons labs face the clearest

need to change with the end of the Cold War.

1 The DOE Laboratory Complex

DOE’s laboratory complex consists of the nine

multiprogram laboratories (including the weapon

labs) that are usually called the national labs, plus

eight single-program energy labs.1l They are

funded by six program areas: Defense Programs

and related nuclear weapons offices, which includes work in all aspects of nuclear weapons

design, safekeeping, non-proliferation, and environmental restoration of the damage from 50

years of weapons work; Energy Research, which

supports fundamental scientific research; the

Nuclear Energy, Fossil Energy, and Conservation

and Renewable Energy Programs, which concentrate on applied energy R&D; and the Environmental Restoration and Waste Management Program.

In 1992, the weapons labs got over one-half of

the funding for all the labs in the DOE complex.

The biggest part of their funding comes from

DOE’s atomic energy defense weapons account

(including Defense Programs and related nuclear

weapons offices); DoD contributes an additional,

though declining, share (figures 1-8, 1-9, and

1-10). These labs have fluctuated in size over the

last two decades. In the early 1970s as the

Vietnam War wound down, their budgets were

cut substantially (in constant dollars). With the

new emphasis on energy supply and conservation

programs in the Carter years, the weapons labs

diversified into more nondefense work; both their

energy and defense funding rose. Then in the

military buildup of the 1980s, nuclear and nonnuclear defense work grew rapidly,12 pushing the

weapons labs’ budgets up 58 percent from 1979

to 1992 (in constant dollars), while the energy

labs’ funding rose 15 percent (figure 1-11).13 The

budgets for the three labs combined continued to

climb through 1993, when their funding was

almost two and one-half times what it was at the

low point in 1974 (figure 1-12). Only Lawrence

Livermore took a substantial cut in 1993; funding

for Sandia and Los Alamos continued to rise.

Although details of the FY 1994 budget were

not yet available as this report was completed,

cutbacks were probably in store for the weapons

labs as well as the rest of the defense establish-

] 1 me nu~r of DOE labs differs as counted by various sources. If small, specialized labs are included, the number cm be m @I@ m 29.

The figure of 17 comes from Secretary of Energy Advisory Board, A Report to the Secretary on the Department of Energy National

Laboratories (mimeo), July 1992. The other national labs are the six energy multiprogram laboratories: Argome National Laboratory,

Brookhaven National Laboratory, Idaho National Engineering Laboratory, Lawrence Berkeley Laboratory, Oak Ridge National Laboratory,

and the Pacific Northwest Laboratory. DOE’s eight single-program laboratories include: Ames Laboratory, Continuous Electron Beam

Accelerator Facility, Fermi National Accelerator Laboratory, National Renewable Energy Laboratory (formerly the Solar Energy Research

Institute), Princeton Plasma Physics Laboratory, Stanford Linear Accelerator Center, Stanford Synchrotrons Radiation Laboratory, and the

Superconducting Super Collider Laboratory.

12 Much of tie non-nucl~ defense work was for the Strategic Defense ~~ve.

13 U.S. Dep~mentof Enm~, Unp”bfished dam from tie ~titutio~P1-Da@~e, US DOE ST-31 1, These CdCUkitiOIIS include the

Idaho National Engineering Laboratory (INEL) among the energy labs. INEL is sometimes categorized separately as a “nuclear energy”

laboratory because its work is concentrated largely in producing nuclear materials (mostly for weapons) and handling nuclear wastes. Argonne,

Brookhaveu Lawrence Berkeley, Oak Ridge, and Pacific Northwest National Laboratories are considered “energy research” laboratories.

Excluding INEL, the total funding for the energy research labs rose about 10 percent horn 1979 to 1992.
1--Summary and Findings I 13

Figure 1-8-Nuclear Weapons and DoD Funding for Sandia National Laboratories

—-

1978 1980

I 1 1

1982 1984 1986 1988 1992

~ Nuclear weapons B DoD funding = Other

NOTES: Operating budget only. DoD funding data not available prior to 1977.

SOURCE: Sandia National Laboratories.

Figure 1-9—NucIear Weapons and DoD Funding for Lawrence Livermore National Laboratory

. . 1993 dollars (billions)

1972 1974 1976

1 I

1978

~- ~ Nuclear weapons

1980 1982 1984 1986

n DoD funding = Other

1 I 1 1 I 1 r i I 1 IJ

1988 1990 1992

NOTES: Operating budget only. DoD funding data not available prior to 1979.

SOURCE: Lawrence Livermore National Laboratory.
14 I Defense Conversion: Redirecting R&D

Figure 1-10—Nuclear Weapons and DoD Funding for Los Alamos National Laboratory

1993 dollars (billions) —

1.2

1

0.8

0.6

0.4

0.2

0 b

1 1

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992

m Nuclear weapons ~ DoD funding _ Other

NOTES: Operating budget only. DoD funding data not available prior to 1974.

SOURCE: Los Alamos National Laboratory.

Figure 1-1 l—Funding for DOE Multiprogram Laboratories in 1979 and 1992 (in millions of 1992 dollars)

623

623

851

1979

Los Alamos

Lawrence

Livermore

Sandia

472 Idaho

National

214 Pacific

Northwest

...—— .

213 Lawrence

Berkeley

228 Brookhaven ——

435 I Argonne

—.———.

538

1

Oakridge

1011

1023

1277

1992

Los Alamos

Lawrence

Livermore

Sandia

614

363

214

273

391

551

Idaho

National

Pacific

Northwest

Lawrence

Berkeley

Brookhaven

Argonne

Oakridge

Weapons labs

NOTE: Operating budget only.

Energy labs Weapons labs Energy labs

SOURCE: U.S. Department of Energy, DOEMu/t@rograrn Laboratories: 1979 to 1988A Decade of Change (Washington, DC: Sedember, 19921:

U.S. Department of Energy; Los Alamos National Laboratory, Lawrence Livermore National Laboratory, Sandia National Laboratories. “ “
1--Summary and Findings I 15

Figure 1-1 2-Combined Funding for Lawrence

Livermore, Los Alamos, and Sandia

National Laboratories, 1970-93

1993 dollars (billions)

4

I I

I I

3

2

“ =_-= ”

1

1970 72 74 76 78 80 82 84 86 88 90 92

NOTE: Operating budget only.

SOURCE: Lawrence Livermore National Laboratory, Los Alamos

National Laboratory, and Sandia National Laboratories.

ment. In any case, further changes in direction

appeared certain. Announcing a new technology

initiative in February 1993, President Clinton and

Vice-President Gore committed the Administration to altering the mix of government R&D

support; the share for civilian technologies would

be lifted from 41 percent in 1993 to over 50

percent by 1998, they said.14 While emphasizing

the part to be played by a strengthened Department of Commerce, they also promised a review

of all laboratories managed by DOE, NASA, and

DoD ‘‘that can make a productive contribution to

the civilian economy,’ with the aim of devoting

at least 10 to 20 percent of their budgets to R&D

partnerships with industry.

DISPOSITION OF THE DOE

WEAPONS LABORATORIES

The end of the Cold War has raised persistent

questions about the future of the weapons laboratories. First, what if anything do the labs have to

offer beyond their traditional work in nuclear and

nonnuclear defense-in particular, what do they

have to offer that is truly valuable to civilian

industry and national competitiveness? Second,

assuming the labs have outstanding capacities in

technologies of importance to industry, how

readily available are these capacities? Can the

labs work in partnership with private companies

without crippling delays or red tape? Finally,

assuming private industry can get reasonable

access to valuable capacities in the labs, how do

these partnerships fit into a national technology

strategy? What place does cooperative government/

industry R&D in large expensive national laboratories have in a broader scheme for technology

development and diffusion that will help U.S.

industries keep up with the world’s ablest competitors? Answers to these questions are not easy,

and some can come only as the fruit of several

years’ experience.

1 Opportunities for Technology Transfer

The human talents and physical equipment in

the three weapons labs are often described as

among the Nation’s freest. A central question is

whether these resources fit with the needs of

industry. Some skeptics have doubted that technologies dedicated to the exotic demands of

nuclear warhead and weapon design could be of

any use to civilian industry, but this view is too

narrow. It is not in the final weapons system itself

that synergies with commercial needs are most

likely to occur, but rather in core competencies,

technologies and production processes. Box 1-B

summarizes the core competencies claimed by

each of the three weapons labs (see ch. 4 for more

detail).

In a report on industry relations with the

Federal labs (mainly DOE labs), the private sector

Council on Competitiveness concluded that there

is clearly “extensive overlap between industry

needs and laboratory capabilities. ” Citing an

informal poll of several of its member companies,

1.$ ~e~ident W~~J4 Clhton and vic~~~ident ~~fl@re, Jr., Techno[ogyforAmerica ‘S ECOrWmI”C Growth, A New Direction to Build

Economic Strength, Feb. 22, 1993.
16 I Defense Conversion: Redirecting R&D

Box l-B-Core Competencies of DOE’s

Nuclear Weapons Labs

Lawrence Livermore National Laboratory

Measurements and diagnostics

Computational science and engineering

Lasers, optics, electro-optics

Manufacturing engineering

Electronic systems

Engineered materials

 Applied physics and chemistry

Atmospheric and geosciences

Defense sciences

Bioscience

 Alamos National Laboratory

Nuclear technologies

High-performance computing and modeling

Dynamic experimentation and diagnostics

Systems engineering and rapid prototyping

Advanced materials and processing

Beam technologies

Theory & complex systems

Sandia National Laboratories

Engineered materials and processes

Computational simulations and high-performance

computing

Microelectronics and photonics

Physical simulation and engineering sciences

Pulsed power

SOURCE: Lawrence Livermore, Los Alamos, and Sandia National

Laboratories, 1993.

the Council said that industry rated several

technologies as major technical areas in which

they need assistance.

15 The technologies included

advanced materials and processing, advanced

computing, environmental technologies, and manufacturing processes, testing, and equipment. The

labs specified these same areas as ones in which

they have unique capabilities that could help

industry. Three out of four of these areas have

contributed to and

weapons program

been supported by the nuclear

for decades, and the fourth,

environmental technologies, is now a prominent

part of the program.

Examples of synergies are numerous, especially in computer modeling and simulation. All

three weapons labs have demonstrated mastery in

high performance computing. They were the first

customers of early supercomputers and were

close collaborators in developing both hardware

and software (the relation between Los Alamos

and Cray Research was especially close). They

are still leaders today as early purchasers and

contributors to the design of massively parallel

machines and software. Applications of computing power developed in the labs for weapons

purposes have already found many civilian uses

and have the potential for many more. For

example, computer codes developed to model the

effects of nuclear explosions have been adapted to

model crash dynamics and are widely used in the

auto industry.

In addition, each of the labs has distinctive

assets. One of Lawrence Livermore’s particular

strengths is in laser technology. Sandia, with its

experience in engineering weapons that contain

nuclear warheads, has special facilities and experience in advanced manufacturing technologies,

in particular for semiconductors. Sandia’s Combustion Research Facility at Livermore, California, is a magnet for university, industry, and other

weapons lab researchers in a variety of fields,

including ‘‘lean-burn’ combustion of hydrocarbons in auto engines. Los Alamos has traditionally concentrated on basic scientific research; its

meson physics laboratory attracts university and

other laboratory researchers, and it is a center for

the development of complexity theory in mathe15 council on competitivene55, Zndwtv as a Customer of the Federal Laboratories (Washingto% Dc: co~cil on Competitiveness\

September 1992), p. 10.

16 DoE$s enaw ~seuch ~bs ~50 ~vesome di5fictive fac~hties and asse~ of interest to industry. For example, IBM hM ~d

Brookhaven’s synchrotrons storage ring as a source of x-rays for advanced lithography technology for semiconductors, and several companies

use Oak Ridge’s High Temperature Materials Facility for development of advanced ceramics.
1--Summary and Findings I 17

matics. All three labs are leaders in developing

advanced materials.16

Behind the specific technologies in which the

laboratories excel are their human resources and

their experience with state-of-the-art equipment.

Leaders at the labs claim unique capacities to take

on large-scale projects where science makes a

difference, engineering is also required, and

teamwork is essential; the multidisciplinary approach is ingrained in the labs, they say, Recognizing the contribution of universities, especially

in scientific research and in training new generations of researchers, they see the labs as having

the additional capacity to marshal the people and

spend the time required for tackling big, longterm problems. And they believe their ability to

concentrate on the long term is a distinctive

addition to privately funded industrial R&D,

which generally has a shorter term focus—

especially since some of the Nation’s leading

corporate labs have been scaled back or disbanded. The DOE labs’ role can be seen as

intermediary between the universities, the source

of most basic research, and industry, which turns

new technologies into commercial products and

processes. Their best contribution may be the

ability to carry scientific concepts into large-scale

demonstration projects. (Figure 1-13 schematically represents the roles of universities, industry,

and the DOE labs in various aspects of R& D.)

Assuming that the labs do have technological

resources of potential value to industry, there

remains the question of whether they can work

successfully with industrial partners to transfer

technology to the commercial realm. Until the

1990s, most of the evidence suggested that the

answer was no. A few Federal agencies and their

labs have long worked effectively with the private

sector, but most—including DOE--+oncentrated

on their public missions and gave relatively little

attention to technology transfer. Despite urging

Figure l-13-Capabilities in Semiconductor

Technology

SOURCE: Los Alamos National Laboratory.

from various commissions and internal evaluations, despite several laws in the 1980s pushing

technology transfer, there was not a great deal to

show for it.

Since 1989, the picture has changed, with

several significant developments. First, the National Competitiveness Technology Transfer Act

(NCTTA) of 1989 allowed the contractoroperated DOE labs, for the first time, to sign

cooperative research and development agreements (CRADAs) with industry.17 Although it

was possible for the labs to undertake cooperative

projects before, and some had done so, CRADAs

have some significant advantages, including clearcut legislative authority and the ability to protect

intellectual property generated in the projects for

as long as 5 years. Cooperative projects with the

labs often have a good deal more appeal for

industry than simply licensing existing technology, because so much of what the labs have to

offer needs extensive development before it is

useful to commercial firms.

17 G-labS ~d b~~ @ventie ~u~onty t. sign c~As~1986,in me Feder~ Tw~oIogy Tr~sfer At of 1986, and ~ecutive Order

12591, issued by President Ronald Reagan in April, directed Federal agencies to delegate to GOGO lab directors authority to negotiate terms

of CRADAS.
18 I Defense Conversion: Redirecting R&D

Second, by 1992, top officials of the Administration as well as Congress were actively pushing

technology transfer from Federal R&D programs

and labs. DOE claimed technology transfer as a

“formal, integrated mission” of all its labs, with

the primary goal of ‘assisting U.S. based companies in the global race for competitive technologies. ’18 In February 1992, President George

Bush launched a National Technology Initiative,

with 15 conferences around the country at which

10 Federal agencies19 invited industry to make

commercial use of government-sponsored research.

Interest on the part of industry has been unprecedented—a third major factor. No doubt this

was partly because the power and prestige of the

President and his cabinet officers were now

behind the program. At the same time, many in

U.S. industry had come to recognize that they

needed the government as a partner in R&D,

especially for high-risk, long-term, expensive

projects.

Fourth, there is a new pot of money for

cooperative R&D projects—at least for the DOE

weapons labs and for Defense Programs (DP) in

the energy labs. NCTTA and subsequent legislation encouraged the labs to build cooperative

projects with industry into their R&D programs to

the maximurn extent practicable,20 and to set a

goal of devoting 10 percent of their DP funds to

cooperative agreements. 21 But to give the CRADA

process a jump-start, Congress also directed that

$20 million of Defense Programs’ R&D funds in

fiscal year 1991 be explicitly set aside for

cooperative projects with industry; the sum was

raised to $50 million in 1992 and at least $141

million in 1993.22

Finally, the labs themselves now have a powerful motive for making technology transfer a

central mission. During the 1980s, while Congress was urging this mission on the labs, it was

at the same time providing steep rises in funding

for both nuclear and nonnuclear defense work.

Little wonder that the weapons labs, which saw

their nuclear weapons and DoD funding swell by

more than half in the 1980s, should redouble their

concentration on their historic defense mission

and that a new mission of working with industry

on commercially promising technologies should

be relatively neglected. The end of the Cold War

and the dissolution of the Soviet Union has

upended these priorities. Although some in the

labs still believe they will get the biggest part of

a shrinking defense pie, many of the labs’

managers and researchers know their defense

responsibilities must decline.

This combination of factors means that now,

for the first time, there is broad, significant

interest in lab/industry partnerships. Evidence

can be seen in the fact that in July 1992 there were

1,175 CRADAs joining private companies and

Federal laboratories, compared with 33 in 1987.

By November 1992, DOE’s CRADAs numbered

292.23 It is noteworthy too that for every CRADA

signed with DOE weapons labs there are many

more that did not make the cut. The competition

for getting CRADAs approved and funded is now

keen.

18 U.S. Department of Energy, “The U.S. Department of Energy and Technology Transfer, ” mimeo, n.d.

19 p~cipa~g agencies incl~d~ the r)ep~ments of Commerce, Energy, Transpo~tioG Defense, hterior, Agriculture, and Health and

Human Services as well as NASA, the Environmental protection Agency, and the White House ~lce of Science and Technology Policy,

20 me D~e~e Autho~tiOn Act for Fiscal y-s 1992 and 1993, sec. 3136 (enacted in 1991).

21 U.S. Semtej co~ttm on tied Semices, National D#en~e Authorization ~t for F&al year 1993: Report, report 102-352, to

accompany S. 3114.

22 rbid. A@ me c~ton A&s&ationpropo=d in ~ch 1992 @ @ aside anadditio~ $47 million from DPR&D fid.!i fOr COO~rative

projects; a set-aside of $47 million from other DOE programs was also proposed.

n ~sfiWe ~cludes w DOE labs, not the weapons labs alone. Data provided to O’E4 by the U.S. Depa@ent of Enmgy.
-—

1 Roadblocks to Technology Transfer

Despite the unprecedented interest in cooperative lab/industry projects, the process of getting

agreements actually signed got off to a very slow

start. In some cases, lags were due to unfamiliarity—

on industry’s side as well as DOE’s—and some

was due to bureaucratic foot dragging at DOE

headquarters. It took well over a year for DOE to

put in place some of the basic procedures for

signing CRADAs. From 1989, when DOE’s

national labs gained authority to sign CRADAs,

to early 1991, only 15 CRADAs were signed.

Since then the pace has picked up, with close to

300 agreements signed by 1993 and the time for

negotiations becoming shorter. Even so, some of

the many companies keenly interested in the labs’

technological offerings were still expressing impatience with the time and expense involved.

Possibly, the windows to cooperative R&D that

were opened so recently might close if the

difficulties are not soon solved.

REASONS FOR DELAY

In early 1993, it still took 6 to 8 months or more

to nail down most individual CRADAs--starting

with the submission of a proposal, which itself

may have taken many months to develop in talks

between lab and industry researchers. Much of the

delay is laid at the door of DOE headquarters

control, though some also occurs at the labs and

at DOE field offices; company legal counsels are

also named as sources of delay. The progress of

CRADAs at DOE labs is often compared unfavorably (but not altogether fairly) with the process at

other Federal labs—in particular NIST labs,

whose parent agency, the Department of Commerce, has delegated most of the authority to sign

1--Summary and Findings 119

CRADAs to lab directors. NIST agreements are

often out the door in a few weeks. Some in the

private sector have strongly advocated giving

both authority and money for CRADAs to the lab

directors, with DOE exercising control through

evaluations of the labs’ performance and budgets

for subsequent years.24

This solution is possible and might well speed

up the process, but it is not as simple as it may

seem. First, the legal authority for CRADAs in

GOCO labs (e.g., the DOE labs) is quite different

from that in GOGOs (e.g., NIST labs and most

DoD and NASA labs25). NCTTA requires that the

parent agency must approve every joint work

statement (the first step in preparing a CRADA)

from GOCOs as well as the CRADA itself; under

the Federal Technology Transfer Act of 1986,

GOGO labs may go ahead with a CRADA so long

as the parent agency does not disapprove within

30 days. This difference in the laws reflects a

fairly common attitude in Congress that some

GOCO contractors, laboratory directors, and researchers are less reliably committed to public

purposes than the government employees who

staff GOGOS.

26 Congressional oversight covering details of lab operations is seen as partly

responsible for DOE’s close management of

many of the labs’ doings, including CRADAs.

Other factors-probably still more important—

are size and visibility. DOE’s national labs,

especially the weapons labs, are far larger than

most other labs in the Federal system, their

CRADAs involve much more money, and they

get much more scrutiny. DOE feels obliged to be

above reproach on issues such as fairness of

opportunity for companies wishing to work with

labs and requirements that jobs resulting from

M see, for emple, Comcil on competitiveness, IrtAS~ as u customer of the Federa/ Luborutoties (w-tom N: September 1992).

25 one~jor NASA lab, me Jet ~p~sion ~boratory at tie c~~omia ~stitute of Technology, is a GOCO, but in my case NASA labs

do not use CRADAS. They have their own legal authority to make cooperative agreements with industry under the 1958 Space Act, and have

long done so.

26 Those holding MS view do make some distinctions among GOCO contractors ad the ~bs ~ey manage; some are seen as more responsive

to public purposes than others. One contractor that has received little criticism is Sandia Corporation, a subsidiary of AT&Tj which has managed

Sandia National Laboratories for $1 per year since 1949. However, AT&T announced in 1992 that it would not renew the Sandia Corporation

contract the following year. AT&T’s long stewardship of Sandia comes to an end in September 1993.
20 I Defense Conversion: Redirecting R&D

lab/industry R&D partnerships stay in the United

States.

Finally, some delay is inherent in the system

Defense Programs at DOE headquarters has

devised to exercise guidance over a cooperative

R&D program that has grown to substantial size.

By far the largest sum of money available for

DOE CRADAs is in Defense Programs, in the

set-aside from the atomic weapons RDT&E

account for cooperative agreements and technology transfer. The set-aside was $141 million in

fiscal year 1993 and was planned to rise to $250

million by 1995. Most of the projects DP funds

come from the three weapons labs, since they are

the leading performers of atomic weapons R&D,

but several of the energy labs also have some DP

funding.

DP managers believe that strategic direction is

essential in a program of this size, and that it

should be a coherent part of multilab initiatives to

develop dual-use technologies. As of 1992, DP

managers planned to fund initiatives in semiconductor lithography, flat panel displays, a broad

array of automotive and transport technologies,

and advanced materials and ceramics. Several

times a year, DP issues a call for proposals from

the labs and potential industry partners for R&D

in these areas. 27 Dp then reviews the proposals in

two steps (see ch. 4 for details); the purpose of the

review process is to minimize unnecessary duplication and encourage complementarily.

All of this precedes the preparation of a joint

work statement and CRADA that, by law, DOE

must review. The agency has formally delegated

to DOE field offices responsibility for these two

final reviews, which can take up to 120 days, but

in practice has shrunk to less than 90 in most

cases.28 DP aims to keep the time from the formal

submission of a lab/industry proposal to approval

of the work statement and CRADA to no more

than 6 months, and eventually reduce it to 4

months.29 This goal had not been met by early

1993.

The time for negotiating CRADAs will probably decrease as everyone becomes more familiar

with the exercise; it was already somewhat

shorter in 1992-93 than a year or two earlier.

There were still delays at several points in the

system, however; and there is some inherent

delay in a system that aims for strategic direction,

coherence, and selection on merit among competing proposals.

FUNDING BOTTLENECKS

Up to now, the DP set-aside has been the source

of nearly 70 percent of DOE’s funds for CRADAs. Another option is to use program funds,

rather than tapping into a special set-aside. Indeed

Congress has urged DOE to use this route, writing

into law that the labs are to use all their weapons

R&D funding to the “maximum extent practicable” for cooperative agreements and other forms

of technology transfer, and using committee

report language to suggest that at least 10 percent

be devoted to the purpose.30 At present, this is

hard to do. At the beginning of each budget cycle,

DOE and the labs establish how they will spend

their program funds and allocate lab budgets to

individual projects. Afterwards, it may be difficult for lab project leaders to adjust the focus or

scope of project work to accommodate the

interests of a potential industrial partner. A

project that has been significantly redefined needs

27 ~ere may be only one cd for proposals in f~cid yerU 1993.

28 ~cor~g t. tic ~w, ~~ review of tie jo~t work statement must be Completed in 90 days, and review of the CRADA in 30 &JY3.

Although the labs have proposed submitting both documents at once, and keeping the time to 90 days, some of the field offkes have taken the

position that the review periods should be sequential. However, in practice, nearly all the reviews have been completed within the 90 days.

29 AS noted, ~S Wholeprwess com~ on top of tie time tittie ~b ~d company r~~chem take to define the work they want to do tOgethtX.

The same is true of other Federal labs, such as NIST; the CRADA approval process starts after much prelhinary work has been done by the

researchers involved.

~ r)epartment of Defe~ Authorization Act for Fiscal Years 1992 ~d 1993, Public hw 102-190, sm. 3136.
1--Summary and Findings 121

the approval of lab managers and DOE headquarters.

In DOE programs outside DP, funding for

CRADAs has been meager. For example, General

Motors held a “garage show” at its technical

center in Warren, Michigan, in January 1992 to

acquaint hundreds of company engineers and

scientists with technologies available at DOE

labs. The meeting was a success, with enthusiasm

on both sides. The upshot was that GM researchers identified over 200 interesting cooperative

prospects, afterwards winnowed to 25 formal

proposals. About half of these proposed to use DP

facilities, and were eligible for funding from the

DP set-aside. The other half were submitted to

various energy programs; only 2 received funding, compared with 14 submitted to DP. According to GM, this was because money outside DP

was lacking.

The DP set-aside is not a bottomless well. In its

June 1992 call for proposals, DP received 398

first-round submissions, requesting $170 million

in first year funding from DOE; these were later

winnowed to 184, requesting $79 million. 31

Eventually, 61 were funded with first-year funding of $40 million (matched by an equal amount

from the industry participants). In November

1992, a call for proposals for a still smaller pot of

DOE money—about $25 million-drew hundreds of proposals. Even if the DP set-aside were

raised to $250 million a year, many proposals

would fail to make the cut.

LEGAL BOTTLENECKS

Just as there is a genuine tension between the

goal of fast action on CRADAs and that of

coherent, strategic direction of cooperative technology development, so there are some real

conflicts regarding legal agreements between the

labs and industry. One source of disagreement is

protection of intellectual property.

The public interest in allowing private companies rights to intellectual property developed in

part at taxpayer expense has been recognized in a

series of laws, starting with the StevensonWydler Act of 1980. Companies that put their

own money into cooperative R&D with government labs are interested in exclusive rights to

resulting inventions.32 If they can’t get those

rights, at least for some period, they are not likely

to find much appeal in the project. On the other

hand, government also has an interest in broad

diffusion of new technologies, especially those

partly funded by public funds.33

NCTTA allows the labs to protect intellectual

property generated in a CRADA for up to 5 years,

and further exempts from the Freedom of Information Act any intellectual property companies

bring to the CRADA (thus protecting against

discovery by competitors). Although industry

welcomed the changes under NCTAA, some

potential industry partners still consider the

protection of intellectual property insufficient,

especially for software. However, some in government foresee trouble down the road if the

balance tips too far, and intellectual property

developed in part at the expense of the taxpayer

is held too tightly by CRADA partners. DOE does

s 1 Full m~tiyew tifig requested was $778 million for all the CRADA proposals submitted, and $3%? million for the winnowed list. ~ese

numbers represent DOE’s share, to be matched by industxy.

32 Subjat, titis,t.the government’s royalty-free use of the invention for is own pvses.

33 me U.S. patent system, which protects intellectual property and rewards inventors with exclusive rights for a nar of years, also has

some positive technology diffusion effect.s in its requirement for disclosure of the technical workings of the patented device or process. Although

others camot freely copy the patented device, they may be able to invent around i~ i.e., devise another version with help from the disclosure.

NC’ITA not only provides patent rights to CRADA partners, but also protection for another form of intellectual property, or proprietary

information that is not patented. Data that is generated by industrial partners in CRADAS may be kept free from disclosure under the Freedom

of Information Act for up to 5 years. In some industries (e.g., computer software) protection of data is more important than patent rights.
22 I Defense Conversion: Redirecting R&D

not take a direct hand in negotiations over

intellectual property in CRADAs or other cooperative agreements; it assigns the rights from lab

activities to the contractors who operate the labs,

and the terms are largely up to the labs and their

industrial partners, within the general limits set by

the law. Nevertheless, DOE can if it wishes

exercise some oversight over the labs’ handling of

intellectual property rights, and the issue remains

a live one for public policy.

An attempt to compromise and settle the problem for a whole industry was part of the umbrella

CRADA for manufacturing process technologies

signed between four DOE labs (the three weapons

labs and Oak Ridge) and the National Center for

Manufacturing Sciences (NCMS) on behalf of

itself and member companies. The CRADA gave

NCMS exclusive rights to license commercial

applications in fields covered by the project’s task

statement for 30 months after project completion.

The terms are similar to those used by NIH and

are somewhat more generous to industry than

those of NIST, two agencies generally considered

successful in transferring technology from government lab to industry. However, the agreement

is coming unraveled. Some NCMS member

companies are dissatisfied with the terms; in

particular, they want to widen the field of use

(breadth of application) to which their intellectual

property rights apply. In another industry, computer systems companies are insistent on protecting the source code for software developed in lab

partnerships; without this protection, they argue,

their investment in the software will gain them

nothing.

There is no simple or obvious solution to the

problem of balance in disposing of intellectual

property rights. It is not just in DOE labs that

these rights can become a thorny issue. They are

often a sticking point in negotiations with other

labs as well, including NASA and NIST. The

problems are considerably less when the industrial partners to cooperative agreements are members of consortia, and the technologies being

developed are considered generic or precompetitive.

A second field of conflict is the issue of U.S.

preference. A central goal of R&D partnerships

between government and industry is to improve

U.S. competitiveness and thus promote economic

growth and rising standards of living. Accordingly, there is a strong public interest in seeing

that publicly financed innovations are used in

ways that directly benefit the U.S. economy. The

Federal Technology Transfer Act of 1986, which

authorized GOGO labs to sign CRADAs with

industrial partners, directed the labs to ‘‘give

preference to business units located in the United

States which agree that products embodying

inventions made under the [CRADA] will be

manufactured substantially in the United

States.’ ’34 Taking its cue from this law, DOE

wrote into its model CRADA a requirement, not

just a preference, for U.S. manufacture.

The realities of international ties between

businesses have forced departures from this

requirement. The first major exception was in the

umbrella CRADA with the Computer Systems

Policy Project (CSPP), which represents U.S.

computer systems manufacturers; in this CRADA

the requirement was rewritten to cover R&D only,

not manufacture. CSPP insisted that existing

networks of manufacturing, R&D, and crosslicensing among computer companies of all

nationalities made the requirement for domestic

manufacture impossible. Other companies subsequently began to demand the same terms and in

February 1993 DOE modified its stance, saying it

would consider case-by-case exceptions where

substantial U.S. manufacture is shown not to be

feasible, and where industrial partners commit

themselves under contract to appropriate alternate

3415 us-c, 371q~)(4)@)o

35 Me~~~~~d~frOmu.S, De,p~entofEnqyto progr~s~e~~icers mdFi&J offiwlvla.nagers, ‘Restatement of Departmental

Technology Transfer Policy on U.S. Competitiveness, ” Feb. 10, 1993.
.——

benefits to the U.S. economy. 35 The general rule

remains to demand U.S. preference; if industrial

partners ask for exceptions they bear the burden

of showing in detail why it should not apply.

This probably does not settle the matter.

Controversy seems bound to arise when a technology developed under a CRADA yields a

successful commercial product that is manufactured abroad, possibly by a foreign company.

Whenever foreign companies exploit an American technology in a high-tech field, there are

those who regard this as a failure of public policy,

and the condemnation is likely to be still stronger

if the technology was developed in part with

public money. This view, though understandable,

is simplistic.

First, it has always been hard to stop the

diffusion of technology, even 200 years ago at the

dawn of the industrial age. Today, with rapid

communication and increasing worldwide trade

and investment, the tendency toward technology

diffusion is far stronger and to a great extent is

beyond the control of governments. Second, and

less well-known, is the fact that U.S. fins’ ability

to use access to technology as a bargaining chip

in negotiations with foreign firms and governments can be a powerful advantage. That advantage can, in the end, work to the benefit of the U.S.

economy and standard of living. For example, the

ability of General Electric’s Aircraft Engine

division to sell jet engines to European airlines

may well hinge on adding some value in Europe,

and that in turn may mean licensing some of GE’s

technology to a European partner. The European

company gets some of the manufacturing work

and some of the know-how, but the European

sales also create good jobs and technology

advance in the United States.

The issue of U.S. preference does not simply

pose a private interest against a public one, Two

conflicting public interests are also involved: the

benefits of government/industry R&D partnerships on terms industry finds useful vs. the

benefits of keeping manufacturing jobs at home.

1--Summary and Findings 123

One more major difficulty has bedeviled DOE’s

CRADA negotiations: who is liable in cas e

someone sues for injury from a commercial

product based on technology developed under the

CRADA? DOE’S initial answer, contained in its

first model CRADA, was that the industrial

partner must reimburse the lab or government for

any damages awarded; in other words, the company bears all the liability, no matter who is at

fault. So many companies found these terms

unacceptable that DOE changed its position, and

its policy guidelines now exempt the industrial

partner from liability when the damages are due

to the negligence of the lab.

The new formula is not entirely satisfactory to

industry. In case of a suit, it may be difficult for

the partners to sort out responsibility for damages.

DOE is considering whether it might be simpler

to leave out any reference to liability in CRADAs

and let the courts determine who is at fault. This

issue is probably best seen as part of the larger

product liability problem that plagues some of

America’s industrial sectors, and is most likely to

find satisfactory solution as part of a broader

resolution.

H The Longer Term Future of the

Weapons Laboratories

The discussion so far has assumed that the labs

will continue to exist in recognizable form,

though they may change in goals, emphasis, or

size. However, many people are asking more

fundamental questions about the labs. The DOE

weapons labs had their origin in the atomic

weapons program of World War II, and afterwards expanded their goals, first to peaceful uses

of nuclear energy, then to energy supply and use

more broadly, including the environmental consequences of both. More than at any time since

they were created, insistent questions are arising

about what national purposes the labs ought to

serve and what size and shape is appropriate to

those purposes. Assuming, for the sake Of argument, that the labs have exceptional capacities to
24 I Defense Conversion: Redirecting R&D

work in harness with industry to advance commercially promising technologies, and that they

can work out effective ways of doing so, are they

also reasonably efficient institutions for the

purpose? What part do they have in a coherent

U.S. Government technology policy?

Three divergent points of view have begun to

emerge. First, drastically shrink and restructure

the whole DOE laboratory system, perhaps giving

the job to a commission like the military base

closing commission. Second, maintain and reinforce the labs’ traditional focus on nuclear and

energy technologies. Third, give the weapons labs

major new civilian missions, including both

partnerships with industry and new or enlarged

programs directed to public purposes (e.g., environmental protection). Although there are overlaps in these differing positions, they do represent

three distinct evaluations of the labs’ potential.

SHRINK THE DOE LABORATORY SYSTEM

There is little written or formal expression of

this point of view, but some in Congress (especially in committees concerned with government

operations) and in the university/industry research community put it forward quite forcefully

informally. They are dubious that DOE labs have

a useful place in developing commercial or

dual-use technologies-or perhaps even in their

traditional fields of energy and nuclear power,

except for a much circumscribed weapons mission. The criticisms are twofold. First, the weapons labs are too imbued with the culture of

national security and a reward system that promotes weapons experts to fit in the civilian world.

Second, the labs and the contractors who operate

them are not held properly accountable for their

use of public funds, and use the money inefficiently.

The first objection might perhaps fade if the

weapons labs were to show in a few years’ trial

that they can in fact work productively with

industry. The second is more difficult. Historically, the labs’ parent agencies (DOE and its

predecessors) have given the contractors and

directors of the labs an unusually free hand in

management. On the other hand, the labs have

been subjected to a good deal of congressional

scrutiny on management issues. It is outside the

scope of this report to evaluate the prudence or

efficiency of the labs’ management (or of any one

of them; very likely there is a range, with some

better managed than others).36 Nevertheless it is

certainly true that for their national defense work

the labs have been showered with funds and

equipment as few other government institutions

have been. This largesse may have contributed to

habits of inefficiency. If the weapons lab budgets

decline significantly—as they had not yet done as

of fiscal year 1993--financial stringency might

force greater efficiencies. It is useful to remember, however, that the government’s historic

generosity and flexibility in funding for the DOE

labs have contributed to what is generally thought

to be their core strengths: multidisciplinary teams

of high professional caliber combined with superb leading edge equipment.

REINFORCE THE LABS’ FOCUS ON NUCLEAR

AND OTHER ENERGY TECHNOLOGIES

Those who occupy this middle ground regard

the DOE national labs as treasures worth preserving, but consider that several of the labs have lost

focus and should reconcentrate their efforts in the

traditional fields of nuclear power and energy,

with their environmental ramifications. These

views were stated recently by the Secretary of

Energy Advisory Board (SEAB) Task Force,

appointed by Secretary of Energy James D.

Watkins in November 1990 to advise him on “a

36 ~~ ~epm respn~g t. tie expre5S~ interests of the requesting congressional committees and keep~g ~ fid 0~’s

technology-oriented missiom concentrates on the potential technological contributions of the DOE weapons labs to the civilian economy.

Analysis of complex management and accounting issues related to the labs is outside the scope of OTA’S assessment.
1--Summary and Findings 25

strategic vision for the National Laboratories . . .

to guide [them] over the next 20 years. ’ ’37

The future laid out by the Task Force would

define these major missions for the DOE labs:

energy and energy-related science and technology, nuclear science and technology for defense

and civilian purposes, and the fundamental science and technology that underlie these. For the

weapons labs, the Task Force recommended a

tight focus on nuclear defense (including nonproliferation, verification, and arms control) with

whatever reductions and consolidation are necessary in an era of overall reduction of the Nation’s

defense effort. Major new responsibilities for

environmental cleanup and waste management

were included, however, for both the weapons and

energy labs. Cooperative work with industry won

a cautious endorsement. The Task Force suggested that a few flagship labs be designated as

centers of excellence for technology partnerships

with industry, selecting technologies consistent

with their particular missions and devoting as

much as 20 percent of their R&D budgets to

cost-shared projects.

ASSIGN NEW CIVILIAN MISSIONS TO

THE WEAPONS LABS

This approach for more thoroughgoing change

has several versions. One suggestion, proposed

by Rep. George E. Brown, Jr., Chairman of the

House Committee on Science, Space, and Technology, would radically restructure the three big

weapons labs. It would consolidate nuclear weapons design and non-proliferation work at Los

Alamos; put verification activities at Sandia and

continue its responsibilities for engineering the

nonnuclear components of nuclear weapons, while

also making it a center of excellence for technology transfer; and make Lawrence Livermore a

civilian National Critical Technologies Laboratory, building on the lab’s strengths in materials

science, computational science, fusion, environmental remediation, and biotechnology .38 Brown

also proposed cutting the nuclear weapons RDT&E

budget from about $2.7 billion a year to half that

level over 4 years, and using all the savings for

civilian technology programs in the DOE lab

system. Another suggestion, coming from several

sources, was to devote from 10 to 20 percent, or

more, of the labs’ budgets to cooperative projects

with industry .39

Both these plans would put into the DOE labs

an unprecedented amount of money for costshared development of dual-use and commercial

technologies—possibly $500 million to more

than $1 billion a year, depending on the labs’ total

budgets, with more than half coming from the

weapons labs. Compare this with the Advanced

Technology Program (ATP), operated by NIST,

which has the general mission of supporting

commercially promising R&D and awards costshared government funding to industry projects,

selected on a competitive basis.40 ATP is the

closest thing to a civilian technology agency that

37 ,$ecretq of Enerw Advisory Board Task Force, Fina/ Report, July 1$)92, at~chen~ Memorandum for the chairman and Executive

Director, .%crctary of Energy Advisory Board, from the Secretary of Energy, James D. Watkins, Nov. 9, 1990.

38 ~ttcr t. he HO~Orabl~ James D, Watis, Secrew, U.S. Depmrn@ of Energy, from George E. Bm~ Jr., (hlhlll an, U.S. House of

Representatives, Committee on Science, Space, and Technology, Feb. 8, 1992.

39 See, forexmple, Council on Competitiveness, ItiUSq US a Customer ojthe Federa/ Luboraton’es (Wstigton, DC; 1992). me COUC1l

is sometimes confused with two other groups with similar names: the President’s Council on Competitiveness, a government interagency

comrnitlcc made up of Cabinet members and chaired by Vice-President Dan Quayle under the Bush Administration; and the Competitiveness

Policy Council, an independent advisory committee created by Congress and composed of Federal and State officials as well as private sector

mcmbers.

40 u~~c tic cooperative ~ctiviti~s at DOE and o~ergovernment labs, &eA’rp program simply provides cost-shared funding for R&D

performed by the industrial partners.

331-050 - 93 - 2 : QL 3
26 I Defense Conversion: Redirecting R&D

now exists in the Federal Government.41 Its initial

funding in fiscal year 1990 was $10 million; 4

years later, in 1993, its funding was $68 million.

The possibility of a sudden infusion of a much

larger pot of government money for cooperative

R&D than ever before raises several important

questions. One is whether a lab mission broadly

defined as ‘‘economic competitiveness’ is workable. Some top officials at the labs fear that such

an imprecise definition of their responsibility

could lead the labs to scatter their efforts and

become nothing but job shops for industry. A

particular strength of the billion-dollar weapons

labs is their depth and versatility, but even these

labs need to focus on technologies that fit their

core competencies best.

A different approach would be to assign to the

labs responsibilities for new missions that are

clearly public in their goals and benefits, but also

have the potential to replace defense activities as

generators of technology, good jobs, and wealthcreating industries. Although the definition of

“public missions‘‘ is not fixed and immutable,

there is general agreement on certain areas in

which technological progress is important for

human welfare, but is not likely to attract

adequate private R&D investment because it does

not promise individual companies enough profit

to compensate for the risks. Some obvious

candidates are the large, various, and growing

field of environmental cleanup and pollution

prevention; a nationwide communications “superhighway;’ revitalized education and training

that take full, imaginative advantage of computer

aids and networks; and energy-efficient transportation systems that offer the public benefits of

reduced environmental damage and less dependence on foreign oil (for more discussion, see chs.

7 and 8 and this chapter, below). Public missions

could also encompass such things as support of

advanced manufacturing technologies-an area

of relative neglect for U.S. public and private

investment.

It seems unlikely that any one new national

mission can attract the generous, sustained level

of funding that nuclear defense has received for

50 years, but it is possible that some combination

of missions might be sufficient to keep the labs in

the frost rank of R&D institutions, able to draw

excellent researchers and do outstanding scientific and technical work.

A question that immediately follows is how

new national missions might be assigned to the

DOE weapons labs. The primary national interest

is in the substance of the missions themselves,

and there are certainly public and private R&D

institutions other than the weapons labs—

including industry and universities-that could

share some of the tasks. Other agencies and their

labs also have abilities that overlap with certain

strengths of the weapons labs. Although some

overlap in R&D is desirable, money and effort

could be wasted if there is no interagency

coordination or strategic planning. A coherent,

rational R&D plan for a big new national initiative in areas such as environmental cleanup or less

polluting transportation systems would set clear,

concrete goals, milestones, and measures of

performance, and would parcel out work to

whichever government agencies are most fit for it,

as well as enlisting university and industry

collaboration. In fields of most interest to industry, such as advanced manufacturing technologies, industry guidance and cost-sharing would be

essential.

Although coherent planning is unusual in

government-supported R&D, there is a precedent

in the High Performance Computing and Communications Program (HPCCP). The program’s

goal is “to accelerate significantly the commer41 As ~ot~, ~~er agencies ~ve R&D pmg~ tit yield res~ts of -t benefit to VariOUS industries, e.g., MI-I, NASA, the Department

of Agriculture. But with the exception of NIST’S manufacturing engineering and standards and measurements labs, Federal agency R&D is

directed toward specific public missions (e.g., health) or to particular industrial sectors identified as important to public purposes (e.g., aircraft,

space, agricuhure)--not to commercial goals or competitiveness generally.
1--Summary and Findings 27

cial availability and utilization of the next generation of high performance computers and networks’ ’42 and allow the private sector to leapfrog

over improvements in supercomputers and networks that would otherwise be gradual and

incremental. While HPCCP has encountered some

criticism, it generally gets high marks both from

participating agencies and from industry observers. Some planning for other Federal technology

programs (e.g., advanced materials and processing, biotechnology, advanced manufacturing R&D,

new energy technologies) is taking place but is in

early stages compared with HPCCP, and the

planning process is laborious.

I Alternative R&D Institutions

Assuming that the DOE weapons labs achieve

smooth working relationships with industrial

R&D partners, are they too big, too expensive and

too encumbered by their nuclear weapons history

to serve the purpose efficiently? Some have

suggested that a more useful kind of institution

might be relatively modest regional centers with

an unequivocal mission of doing applicationsoriented R&D partially funded by industrial

clients. Another model is ARPA. This small,

free-wheeling DoD agency has a stellar record of

advancing high-risk high-payoff technologies—

not only in strictly military systems such as smart

weapons and stealth aircraft, but also in dual-use

core technologies, including microelectronics and

computer hardware, software, and networks. ARPA

does virtually no lab work of its own, but uses

contracts, grants, and cooperative funding for

R&D in private companies and universities.

THE FRAUNHOFER MODEL

Germany’s Fraunhofer Society (Fraunhofer

Gesellschaft, or FhG) has been proposed as a

model for small-scale R&D institutions working

in harness with industry. It is the smallest but

probably best known and most admired of Germany four major publicly funded research

institutions, which are managed and funded by

BMFT, the science and technology agency. The

FhG consists of 47 regional institutes with

combined budgets of about $375 million a year;

about 30 percent of their funding comes from

contracts with industry, another 30 percent from

government contracts, and most of the rest from

national and state government grants. The FhG’s

clear mission is to promote innovation in civilian

technologies and rapidly transfer research results

to industry. The institutes put their efforts into

applications-oriented R&D, often focused on the

needs of regionally concentrated industries, and

forge links between universities, industry associations, and individual companies.

There is little parallel with the FhG in the

United States. Federal support of regional centers

working with local industries on applicationoriented R&D and technology demonstration has

scarcely existed, but a new program called

Regional Technology Alliances (RTAs) may

develop into that kind of system. Authorized in

fiscal year 1992, the RTAs received their first

funding in fiscal year 1993, at the very substantial

level of $97 million. This new program was part

of a $1-billion defense conversion package to

encourage technology development and diffusion

in both defense and civilian sectors, but the law

strongly emphasizes national security goals, and

the program is lodged in DoD, managed by

ARPA. This might constrain the RTAs from

developing the frankly commercial character of

FhG.43 However, in planning the program, ARPA

formed close cooperative ties with NIST, DOE’s

Defense Programs, NASA, and the National

42 Fede.~ cOOrd~fig cOmcll for Science, Engineering ~d TcckoIogy, Grand challenges: High perjiormance cOmpUfi?lg and

Communications, a Report by the Committee on Physical, Mathematical, and Engineering Sciences, to Supplement the President’s Fiscal Year

1992 Budget (Washington, DC: OffIce of Science and Technology Policy, n.d.), p. 2.

43 Intcr~~t~gly, the ~G fomd it5 ewly support from the milit~, but ~slong sin~ outgrown that identity. Today, Ody 7 Of tk 47 FhG

institutes perform primarily military R&D.
28 I Defense Conversion: Redirecting R&D

Science Foundation, and each was expected to

take some of the responsibility for this and other

defense conversion programs.

Assuming the RTAs succeed in forming links

with commercial companies, they might fill an

important niche in U.S. cooperative R&D. They

would not be suited, however, to undertaking

large-scale, long-term projects with a strong

public purpose. Nor does it seem feasible for DOE

labs to remake themselves on the FhG model

(though that suggestion has been aired). Although

some of the labs (Sandia in particular) have

already demonstrated some ability to work with

small companies in adapting lab technologies to

the companies’ needs, the labs’ main strengths—

technical talent in depth, multidisciplinary teams,

expensive state-of-the art equipment—seem more

suited to big projects.

ARPA

ARPA has attracted even more attention as a

model for government-supported R&D. Through

its 35 years of existence, ARPA has gained a

reputation for rapid, flexible decisionmaking, and

for placing its bets intelligently. At times it has

been a major player in promoting advanced dualuse technologies and has fostered the development of industries whose main markets were

commercial but that also could be an important

source of supply for DoD. At other times, political

pressures have confined ARPA more narrowly to

strictly military objectives (see ch. 5).

The pressures today are running the other way.

With defense budgets declining, DoD has more

reason than ever before to emerge from the

defense procurement ghetto, and buy more from

the civilian sector. The advantages are twofold:

prices are usually lower on the commercial side,

and very often commercial technologies are more

advanced--especially in computers and telecommunications. After at least a partial eclipse in the

1980s, ARPA has reemerged as a premier dualuse agency.

Despite the apparent divergence of military and

commercial products (no one needs a stealth jet

transport), critical technologies embodied in these

products—advanced materials, semiconductors,

software-are converging. Five of ARPA’s 10

offices direct their research toward core technologies in electronics, microelectronics, computing,

software, and materials, and they control 80

percent of the agency’s budget. Moreover, they

are putting more emphasis than ever before on

manufacturing process technologies. Many of the

agency’s projects in this area are cooperative,

partly funded by industry. ARPA typically prefers

to work on these projects with commercial

companies or commercial divisions of companies

that also do defense work. The advantage for

ARPA is that the company will support continued

development of the technologies through its

commercial sales, while serving as a source of

supply for DoD. The broader economic advantage

is wide diffusion of the ARPA-supported technologies and superior commercial performance.

ARPA is so highly regarded as a promoter of

advanced technologies that, while the rest of the

defense establishment faced shrinking missions

and budgets, ARPA received a huge jump in

funding in fiscal year 1993, from $1.4 billion to

$2.25 billion; this included $257 million for s&

defense conversion programs for codeveloping

dual-use technologies and supporting manufacturing process technologies and education. In

addition, in recent years Congress has mandated

ARPA funding for specific dual-use programs,

beginning in 1987 with the unprecedented 5-year,

$500-million funding for Sematech (the semiconductor manufacturing consortium, cost-shared

with industry), and continuing on a smaller scale

with programs in high-definition systems, advanced lithography, optoelectronics, and advanced

materials.

Besides all this, the defense conversion legislation for 1993 gave ARPA some entirely new

responsibilities in areas with which it had no

experience. These are the Defense Manufacturing

Extension program, which will contribute to the

costs of State and regional industrial extension

programs for small and medium-size manufactur-
1--Summary and Findings 129

ers; the Defense Dual-Use Extension Assistance

program, aimed at helping defense companies

develop dual use capabilities; and the RTAs

described above. Each of these programs was

funded at $97 million; for all of them, including

the RTA, ARPA formed a joint Technology

Reinvestment Project with four other Federal

agencies to plan and oversee the programs.

ARPA is becoming, de facto, a dual-use

technology agency with a wide range of responsibilities. Congress expressed its intention to formally give the agency a dual-use mission by

dropping the word ‘‘Defense” from its title,

restoring its original name of Advanced Research

Projects Agency; in February 1993, President

Clinton directed DoD to make the change. Congress has stopped short of naming ARPA as the

Nation’s lead agency for technology policy, and

there is support in Congress, as well as Administration backing, for much higher funding for the

small civilian technology development and diffusion programs lodged in NIST.44 ARPA, with all

its cachet of success in dual-use technologies, is

still a defense agency with the primary mission of

meeting military needs. Despite the many overlaps in technologies having both defense and

commercial applications, the match is by no

means complete, nor are priorities necessarily the

same.

1 Coordinating Institutions for

New Missions

Whether new missions for the weapons labs are

defined as supporting U.S. competitiveness

through R&D partnerships with industry, or as

taking part in new national initiatives for public

purposes, with collateral benefits for competitiveness, the question of strategic planning becomes

more insistent the more money is involved. At

DOE headquarters, the managers of Defense

Programs have felt the need to impose a strategic

plan on a cooperative program funded at $141

million. If the amounts available to the DOE labs

for industrial partnerships were to rise to $500

million or $1 billion, as is implied by some

current proposals for the labs’ future, the problems of managing such a big, visible program

without order, priorities, and interagency coordination could become still more apparent. Of

course, if lab/industry partnerships were managed

at the lab level on a first-come-first-served basis,

most would likely concentrate on critical technologies, simply because these are of greatest

interest to both public and private partners. It is

doubtful, however, that uncoordinated, individual

projects would advance critical technologies as

effectively as a well-planned multiagency strategy, such as the HPCCP.

There is no U.S. Government agency with a

clearly defined responsibility for managing technology initiatives that span several agencies. The

committees of the Federal Coordinating Council

on Science, Engineering, and Technology

(FCCSET) in the White House Office of Science

and Technology Policy (OSTP) are the nearest

approximation, but they have generally operated

as consensus groups with no real locus of

decisionmaking authority. Other Nations do have

institutions that guide technology initiatives,

usually in a science and technology agency.

Germany has its Federal Ministry of Research and

Technology (the Bundesministerium fur

Forschung und Technologies, or BMFT) and Japan

has its Science and Technology Agency. Also, the

Japanese Ministry of International Trade and

Industry (MITI) contains another technology

agency, the Agency of Industrial Science and

Technology. 45 Both have many technology policy

responsibilities, including funding and overseeing R&D laboratories that contribute to civilian

44 Bills in ~e Hou~~ and Scmtc ~ he Iosrd con~css (s 4 and H.R$ 820) would geafly ~creme fuding for NIST’S IWilNlfiiChUiIlg

technology centers and tbe Advanced Technology Program. President Clinton has proposed similar measures.

M Japan’s Science and Tec~ology Agency bd a budget of 522 billion yen ($3.9 billion) fi 1991; ~~’s Agency of ~dus~~ Science ‘d

Technology bad 117 billion yen ($870 million). The German BMIT had a 1992 budget of 9.4 million DM ($4.4 billion).
30 I Defense Conversion: Redirecting R&D

technology development, often with substantial

participation and support from industry.

SUMMARY OF POLICY ISSUES

AND OPTIONS

While military needs will continue to consume

sizable government resources for R&D, DOE

weapons labs may soon face significant reductions in funding. There are plenty of claims for

money not spent on development of nuclear

weapons. An obvious candidate is deficit reduction. In the long run, a smaller burden of

government dissaving could contribute to more

private investment, and to the growth prospects of

the American economy. Accordingly, deficit

reduction will be a policy priority for Congress

and the Administration over the next few years.

Deficit reduction is only one of the claims on

whatever resources are saved through reduced

weapons development. There are plenty of others,

from improved education and health care to

support for the newly democratic but struggling

regime in Russia. There are also persuasive

arguments in favor of stronger government backing for American industry competitive performance since R&D-traditionally part of the foundation that supports U.S. competitiveness—

shows signs of weakening.

There is substantial support both in Congress

and the Clinton Administration for cooperative

R&D partnerships between government and industry, including cost-shared agreements between companies or consortia of companies and

government laboratories. Those who favor lab/

industry collaboration share the conviction that

now—at a time when R&D is flat but competitive

industries rely more than ever on knowledge

intensity-is not the time to cast away technology

resources that have taken decades to build up.

Rather, every attempt should be made to use them

in ways that contribute directly to the civilian

economy. This does not preclude cutting the

weapons labs to a size appropriate to their new

defense missions, which will largely be nonproliferation, safety and security of nuclear stockpiles, and decommissioning of excess weapons,

though some nuclear design capability will be

maintained. It does require prompt action to solve

problems that are hindering cooperative R&D.

This positive point of view is not universal.

There is a strongly held opinion that all DOE’s

national labs—the multiprogram energy labs as

well as the weapons labs—have lost their original

focus, which was to promote peaceful and military uses of atomic power, and are now an

extravagance the Nation can ill afford. They

would like to see the lab system given ruthless

scrutiny, possibly leading to closure of some labs,

downsizing of others, and redirection of government R&D spending.

For the longer term, survival of the DOE lab

system may depend on the labs’ success in

focusing on new missions that provide clear

public benefits. The weapons labs built their

excellent staffs, equipment, and technologies

around their core public mission of national

defense (and to a lesser extent, energy technologies and the science underlying them). Peacetime

public missions could include a larger and more

explicit interest in promoting industrial competitiveness, but the grounds for supporting national

labs with the taxpayers’ money are more compelling if the labs’ missions feature public benefits

that the market is not likely to supply.

I Options to Shrink the DOE Laboratories

Those who consider the weapons labs too big

and their culture too remote from that of private

industry to contribute effectively to competitiveness see the present moment as a good one to

rationalize, downsize, and consolidate the labs.

Many would include all the DOE’s multiprogram

national labs (and possibly other Federal labs as

well) in the scrutiny. But it is the weapons labs,

with their lion’s share of DOE R&D funding and

the obvious change in their mission, that are

getting the most attention.
I-Summary and Findings 131

Policy Option 1: Cut the labs’ budgets to fit the

scope of scaled-back weapons functions.

Through their regular budget and appropriations functions, Congress, the Administration,

and DOE are already engaged in cutting back

nuclear weapons activities at the labs. However,

the cuts may be fairly small and gradual as the

labs take on expanded nondefense functions,

especially in environmental cleanup and energy

programs.

Policy Option 2: Create a Laboratory

Rationalization Commission.

Should Congress decide to thoroughly restructure and downsize the weapons and other DOE

labs, it may wish to create a Laboratory Rationalization Commission composed of experts from

DoD, DOE, the private sector, and other appropriate institutions to recommend how to manage the

cuts, organize the work remaining to the labs, and

make any necessary improvements in lab management. To do this with care and forethought

would inevitably take time. It is likely that the

commission’s recommendations would take at

least a year or so to formulate. This argues for

postponing any deep cuts or major reorganizations while the commission is at its task, and

meanwhile working to improve the technology

transfer from the labs, including the CRADA

process.

I Options to Improve Technology Transfer

From the DOE Weapons Laboratories

A second approach is to make the talents and

resources of the weapons labs more readily

available to private firms. This approach is not

incompatible with reduced funding for the labs

and might even be combined with a strategy of

thoroughgoing restructure and downsizing of the

labs, should Congress choose that option.

The months that it usually still takes to

conclude a CRADA with the weapons labs is a

real threat to the effort’s success. There is no

simple answer to speeding up and simplifying the

process. Some laboratory people and many representatives of companies that have tried to negotiate CRADAs with DOE favor giving more

authority to lab directors. They believe, probably

correctly, that this would hasten the process,

especially if the labs had the power to spend

designated funds from their R&D budgets for

CRADAs rather than redesigning ongoing projects to include cooperative agreements with

industry.

There are several criticisms of this approach

that deserve to be taken seriously. A major one is

that with the funds for CRADAs in DOE’s

Defense Programs so large, it makes some sense

to take a strategic approach to lab/university/

industry partnerships, concentrating resources on

critical technologies and minimizing overlaps.

Second, there is the question of trust. The view of

some at DOE headquarters is that the directors of

GOCO labs maybe too willing to compromise the

national interest in order to find industry partners,

to avoid deep budget cuts in a time of changing

missions and uncertain funding. Furthermore,

some in Congress have little faith in the dedication of some of the labs’ contractors to putting the

national interest first. If lab directors are given

more authority over CRADAs, fear of congressional investigations might stall the process.

Finally, the division of congressional responsibility for DOE authorizations (energy and natural

resources committees authorize energy program,

and armed services committees authorize defense

programs) complicates legislative guidance on

funding and managing technology transfer.

In short, there is little consensus among experienced, knowledgeable people on how to streamline the CRADA process while getting the most

out of it in technologies that advance the national

interest. The lack of a U.S. Government coordinating agency for technology development and

diffusion programs makes the uncertainties more

acute. Greater coordination might be initiated in

the new Administration, which seems committed

to a more active government technology policy

than the previous administrations but, at this

writing, that is unknown.
32 I Defense Conversion: Redirecting R&D

The specific policy options that follow are

mostly confined to short-term issues of making

the new process of industry/lab cooperative R&D

projects work more smoothly. Broader issues,

including the longer term future of the labs, their

possible role in R&D support for new national

initiatives, and coordination of government-wide

technology policy, are discussed in more general

terms. Government-supported R&D has entered a

genuinely new era, and all the issues involved

cannot be solved at once. In the face of the

uncertainties, the options proposed here should be

regarded as experiments, and results should be

monitored. This does not imply that experiments

should be tentative, or that monitoring should

devolve to micromanagement. Congressional monitors should remember that the labs will need

freedom to experiment that positive results take

time, and that failures are part of any high-risk

undertaking.

Policy Option 3: Shorten the process of

initiating CRADAs.

Several actions could be taken under this

umbrella (see ch. 2 for details). For example,

Congress might wish to shorten the time allowed

for DOE field offices to approve CRADA documents; or it might eliminate separate approvals,

first for the joint work statement and next for the

CRADA itself-a two-step process that can take

up to 120 days.

Another option in this connection is to give

DOE an exemption from the Freedom of Information Act (FOIA) covering proposals for cooperative R&D. In describing proposed research

projects, companies often include information

that they wish to keep out of the hands of

competitors (including foreign companies). The

DOE labs are protected from FOIA requests to see

the proposals, but DOE headquarters is not. The

labs and their industry partners have on occasion

removed or marked proprietor-y information from

proposals before sending them to headquarters for

review, but this adds delay and aggravation to the

process. NIST has, and uses, a FOIA exemption

for proposals it receives for R&D projects in its

Advanced Technology Program. Congress might

wish to give DOE the same authority.

Policy Option 4: Reallocate CRADA authority.

Another option would be to direct that the

screening process Defense Programs has established be shortened or dropped. Much of the delay

in getting CRADAs out of the weapons labs is due

to DP’s coordinating process, which involves a

call for proposals and then a two-step evaluation

of the proposals. All this takes place before the

submission of work statements or CRADAs to the

field offices. The purpose, as noted, is to minimize overlap, assure complementarily of projects,

and determine the fit with the strategic goals of

DPs cooperative R&D program. But the effect,

inevitably, is delay. DP aims to keep the whole

process-its review plus the CRADA negotiation—

to no more than 6 months, with the eventual goal

of 4. In practice, in the last half of 1992 the DP

process by itself was taking 5 or 6 months; with

the addition of another 1 to 3 months at the field

offices, the total time to initiate CRADAs probably exceeded 6 months for most CRADAs. This

counts only the time after lab and outside

researchers have spent time defining a piece of

work together.

Suggestions have come from several quarters

for delegating CRADA authority to the lab

directors, This could weaken or undermine the

system DP has set up to impose a coordination

and strategic goals on cooperative agreements.

Also, it could mean a change in the law; NCTTA

explicitly requires GOCO labs to obtain parentagency approval of both the joint work statement

and the CRADA. Two variants of the option are

as follows.

●

●

Option 4a: Give lab directors greater discretion in allocating budgets to technology

transfer. This would not necessarily require

a change in the law.

Option 4b: Give GOCO lab directors full

legal authority to execute and fund CRADAs. This would require a change in the law.
1--Summary and Findings 133

Some compromise choices, also requiring legislative

●

●

change, might also be considered.

Option 4c: Give the lab directors authority

to conclude CRADAs of a certain size (up to

as much as $1 million, say) without DOE

oversight, or on the same terms as the GOGO

labs (30 days for parent agency disapproval).

Option 4d: Put up to one-half the funds

available for CRADAs at the disposal of the

labs, reserving the other half for a more

strategic program managed by DOE headquarters and requiring agency approval;

these projects would be national in scope and

the labs would submit competitive proposals, as they do in the present DP scheme.46

Policy Option 5: Require that DOE allocate a

certain percentage of the labs’ budgets to

technology transfer.

This proposal is gaining currency. In their

February 1993 statement of technology policy,

President Clinton and Vice-President Gore stated

that all DOE, NASA, and DoD labs that can make

a productive contribution to the civilian economy

will be reviewed, with the aim of devoting 10 to

20 percent of their budgets to cooperative R&D.47

Congress had previously expressed support for

the idea.48 In 1992, the portion of the weapons

labs’ budget funded by DOE programs was about

$2.7 billion;49 10 to 20 percent of that would

amount to $270 to $540 million in the weapons

labs alone—assuming that their present levels of

funding continue.

Although there is some concern that the 10 to

20 percent target is unrealistically high, the

concern is probably misplaced. In fiscal year

1993, when DP had $141 million set aside for

CRADAs (mostly in the three big weapons labs),

there were many more proposals than could be

funded; that amount was more than 5 percent of

the weapons labs’ total DOE funding for 1992 and

nearly 9 percent of their DP funding. Another

concern is how such a scheme would work its way

through Congress. It could prove tricky, since

DOE’s authorizations are handled by two committees in the Senate and four in the House of

Representatives; appropriations are handled by

two subcommittees of each chamber’s Committee on Appropriations.

Policy Option 6: Establish stronger incentives

for technology transfer.

Incentives might compensate for difficulties

that now stand in the way of lab researchers

spending time on technology transfer projects. In

their annual planning process, DOE and the labs

decide on the projects the labs will work on in the

following year. Once the plans are in place, lab

researchers find it hard to devote more than a few

days to planning cooperative work with outside

partners; they have to account for their time quite

strictly. The lab’s overhead account is the only

place to charge for time spent in planning joint

R&D, and there are many claims on that account.

When researchers spend time planning cooperative work, it is often their own time, on nights and

46 something like this so percent SOIUtiOn was proposed by Albert Narath, President of Sandia National Laboratories, in hetigs &fore the

U.S. House of Representatives, Committee on SrnaU Business, Subeornmittee on Regulation Business Opportunities, and Energy, “Reducing

the Cycle Time in Lab/Industry Relationships,’ Dec. 4, 1992. While supporting DOE’s role in approving CRADAS, Narath also made a case

for greatly streamlining the process.

47 c *TwhnOlOgy for America’s Economic Growth, ” op. cit., footnote 15. A variant is the suggestion from the Secretary of Energy Advisory

Board Task Force that certain labs in the DOE system be designated as technology partnership “centers of excellence, ’ and devote up to 20

percent of their budgets to the purpose. Somewhat inconsistently with its recommendation that the weapons labs confiie their activities to

nuclear defense, the Task Force suggested Sandia as well as Oak Ridge as candidates.

48 ~ its repo~ on be fix- yea 1$)93 Dor) ~u~onmtion bill, tie semte co~ttee On AXIII@ Sel-vices directed DOE to set a god of

allocating 10 percent of the Defense Programs R&D budget to technology transfer. U.S. Senate, Committee on Armed Services, National

Defense Authorization Act for Fiscal Year 1993: Report, report 102-352, to accompany S. 3114.

@ Theti total budget was $3.4 billio~ but about $700 million was Work for Others (WFO), mostly the Department of Defense. A few

CRADAS have been funded by WFO, but most CRADAS currently come from DOE program funds.
34 I Defense Conversion: Redirecting R&D

weekends. This constraint, combined with lukewarm enthusiasm for technology transfer on the

part of some of the labs’ middle managers, can

slow or abort potential CRADAs.

The law already encourages technology transfer by providing that 15 percent of the royalties of

any patent licenses may be awarded to the

individual lab researchers who developed the

technology. This incentive is chancy and rather

remote, however. Top managers at the labs could

institute more immediate rewards. These might

include giving to project managers active in

technology transfer extra staff positions or a

coveted piece of lab equipment. The lab managers

might make technology transfer a more prominent factor in employees’ performance ratings.

None of these measures would require congressional action, but might be encouraged in oversight hearings.

Congress might wish to take more direct

action, as in the following two suggestions:

Option 6a: Direct that part of the labs’ overhead account be allocated to pre-CRADA

development of proposals of joint work.

Option 6b: Establish a governmentwide set

of awards for effective technology transfer

from Federal laboratories. Awards of this

kind, if sparingly used, can be surprisingly

effective. 50

Policy Option 7: Reassess definitions of

national interest in the context of technology

transfer.

Private industry creates most of the Nation’s

jobs, value added, and technology development.

It is clearly in the national interest for American

fins, and foreign firms that do business here, to

prosper. However, the match between national

interest and corporate objectives is not perfect. In

the context of cooperative R&D agreements,

three issues that have generated conflict, legal

wrangling, and delay are U.S. preference for R&D

and manufacture, disposition of intellectual property rights, and liability for damages.

A strict requirement for U.S. manufacturing

could drive many potential partners away from

the labs, possibly leaving only smaller companies

with few international ties and limited R&D

resources of their own to match lab contributions.

Moreover, requiring U.S. preference might even

deprive some companies of their best shot at

commercializing advanced technologies. A broad

portfolio of technologies, including those developed in partnership with the labs, is a distinct

advantage to a U.S. company negotiating with a

foreign company for access to its technologies.

The most reasonable course may be to choose

something less than an ideal outcome and accept

the discomfort.

● Option 7a: In relevant legislation Congress

could either insist on U.S. preference, understanding that many industrial partners will

opt out; or permit a form of preference that

companies can comfortably handle, as in the

umbrella CRADA that DOE signed with

computer systems companies, which requires only that companies perform substantial R&D, not substantial manufacturing, in

the United States. The latter option would

accept the possibility that this Nation may

eventually import products based in part on

American publicly funded R&D.

Another choice is to establish a general principle

of U.S. preference, but to make exceptions case

by case. This could be done in one of several

ways:

. Option 7b: Congress could direct agencies

with cooperative government R&D programs to grant exemptions from U.S. preference only when industrial partners show that

substantial manufacturing in this country is

50 ~~=ple is the ~co~ B~dl-idge Natio~ Q~ity Aw~d, ~:r~ted by Congress in 1987 and awarded each year to a few companies

or organimations that bave benefited the Nation through improving the quality of their goods and services. Hundreds of companies apply for

the award each year, even though bidders must go through a rigorous self-examina tion merely to apply.
—

not feasible, and they commit themselves to

providing alternative benefits to the U.S.

economy. As noted, DOE has adopted a

policy along these lines.

. Option 7c: Congress could establish a U.S.

Preference Review Board to make case-bycase decisions on exceptions to the U.S.

preference rule for any agency with costshared R&D projects with industry. Congress might consider empowering OSTP to

exercise this function, or creating a small

independent agency to consider U.S. preference issues governmentwide. The board

would have to pursue the dual aims of acting

swiftly but avoiding rubber-stamp approvals.

Both these last options are inclined to cause

delay. Having a governmentwide board make

these decisions might well be more unwieldy than

leaving it to the agencies, though there would

probably be more consistency in the decisions.

Another disadvantage is that the board’s decisions might please no one. It has certainly been

difficult for officials in the Commerce, State, and

Defense Departments to agree on control over

exports of technologies that might, if allowed,

threaten U.S. national security but, if forbidden,

unnecessarily harm U.S. commercial interests.

The same kind of conflict, and possibly the

same kind of resolution, exists for intellectual

property rights. This is an unsettled area in DOE

CRADAs, and is the subject of much hard

bargaining between the labs and their industrial

partners and consequent delay. Possibly, settlement of some of these issues may evolve with

more experience, but differences among industries, and among companies within industries, are

likely to remain. Congress may wish to emphasize one side or another of the intellectual

property issue and live with the consequences. If

Congress chooses to support the public purpose of

wider diffusion, fewer companies may be interested in partnerships; if it chooses to give

companies more protection, the public return on

1--Summary and Findings 135

taxpayers’ investment may be more limited, or at

any rate less direct.

DOE turns over to GOCO lab operators most of

the authority for settling with industrial partners

on the disposition of intellectual property rights,

subject to the government’s right to use the

intellectual property for its own purposes. Congress may wish to provide some guidance that

would more clearly define the scope of negotiations over intellectual property.

. Option 7d: Congress might choose, in the

form of resolution or law, to provide guidance that discourages the grant of exclusive

licenses that have a broad field of use, or that

limits the time during which exclusive

licenses prevail. Alternatively, Congress might

encourage DOE and the labs to accommodate companies’ desires for broader intellectual property rights.

One further problem is that some companies

have run into frustration and delay in CRADAs

involving more than one DOE lab because each

negotiates terms separately, and makes differing

demands in such areas as intellectual property

rights and U.S. preference. DOE’s recent guidance to field offices on U.S. preference should

make for more uniformity and predictability

among the different labs on this issue, but the

potential for inconsistency among labs remains in

the handling of intellectual property. Though

DOE has given GOCO contractors most of the

authority over disposition of intellectual property

rights in cooperative agreements, it can still

exercise oversight and provide guidance.

. Option 7e: DOE might, through technical

assistance and policy guidance, encourage

the labs to harmonize the terms of their

agreements with industrial partners, especially in multilab projects. Through oversight, Congress could encourage such action

by DOE, or alternatively require it by law.

Another national interest issue is liability.

There may be some practical possibilities of

agreement on this issue that would suit both the
36 I Defense Conversion: Redirecting R&D

government and private companies. Both perceive that damage claims are becoming more

burdensome, and both would no doubt welcome

some general limitation on liability. However, no

policy option is proposed here, as OTA has not

done extensive analysis of the product liability

issue.

Policy Option 8: Measuring the value of

cooperative research and development.

Assuming that the CRADA process can be

made to work more smoothly, a longer term

question will be how to measure the value of the

agreements. Success cannot, of course, be measured overnight. Nor is it easy to establish meaningful measures of success for R&D projects,

especially from the standpoint of social returns.

Economic results such as numbers of jobs created

or value added are hard to trace with any precision

to R&D; other factors are too important.

A practical measure of success, after 5 years or

so of experience, might be the continued or

growing interest by industry in submitting proposals for cooperative work. If companies, which

have their own internal measures for success of

R&D investments, continue to put money and

effort into the projects, it is fair to conclude that

they consider the ventures worthwhile. In the

longer run, cooperative R&D projects may be

judged by the general measure of whether they are

developing technologies that form the basis for

commercial production, keeping in mind that

there must be allowance for failures as well as

successes in any program of high-risk, potentially

high-reward R&D.

Evaluation of the results of public R&D

investment may have to be largely judgmental

rather than precisely quantitative. That does not

argue against making the attempt. If after a fair

trial period the labs’ cooperative R&D is judged

to be seriously disappointing, it would make

sense to shift money to other R&D performers.

Congress might direct the Secretary of Energy to

develop an evaluation procedure for cooperative

R&D. Alternatively, OSTP might be directed to

develop evaluation procedures for all government/

industry cost-shared R&D.

The options laid out above are mostly aimed at

streamliningg the CRADA process. In some cases,

the streamlining comes at the expense of minimizing strategic guidance at the DOE headquarters level, as Defense Programs is now attempting

to provide. Given the large size and scope of

DOE’s R&D program, a screening process and

strategic direction make a good deal of sense—

still more so if DOE takes part in governmentwide

initiatives to advance certain technologies. The

downside is that DP’s internal screening prolongs

the CRADA process, trading oversight for faster

action. A middle course may be possible, giving

labs more direct authority over a portion of the

funds available for CRADAs, or over CRADAs

below a certain size.

In the short run, it might be worth sacrificing

some coordination and strategic direction in the

interests of getting the program working while

industry interest is high. In the longer run, once

DOE, its field offices, and its laboratories become

more accustomed to cooperative R&D, it may be

possible to set priorities for CRADAs and other

cooperative work that fit within strategic initiatives without months of delay in selecting proposals.

H The Longer Term Future of the

DOE Weapons Laboratories

Most of those who see a national role of

continuing significance for the labs consider

cooperative work with industry an important

though not necessarily central part of their future.

Thus, the future of the labs will depend in part on

their success in making the cooperative process

work. In thinking about the long-term future of

the labs, however, cooperative R&D and other

forms of technology transfer should not be

considered in isolation. The option of making at

least one of the weapons labs into a center for

cooperative development of critical technologies

has been floated, but it has some important
1--Summary and Findings I 37

drawbacks. The weapons labs built their eminence by their work on public missions of

national importance, primarily defense. The technologies and talents that private companies are

now eagerly pursuing are the legacy of that

mission. A national mission of ‘‘economic competitiveness’ seems an unlikely replacement,

because it is so diffuse.51 The fear of lab officials

that labs with such a mission could become

nothing but job shops for industry is probably

well-founded.

NEW PUBLIC MISSIONS

There is no lack of candidates for new public

missions that might take the place of a much

reduced national defense mission and spend at

least part of a “peace dividend. ’ Not forgetting

that deficit reduction will claim a high priority,

there are also strong arguments for new public

investments to strengthen the foundation of the

civilian economy and mitigate the economic and

technological losses from defense cuts.

In choosing amongst a number of worthy new

national initiatives, one factor to keep in mind is

their ability to match the benefits the shrinking

defense effort has conferred on the Nation (excepting, of course, the ability to defend the Nation

militarily). Foremost is the capacity to meet a

clear public need-one that the commercial

market cannot fully meet but that is well understood and broadly supported as essential to the

Nation’s welfare. In meeting such a need, the

defense complex also created other public benefits. It supported a disproportionate share of the

Nation’s R&D, some of which had such important

civilian applications that whole industries were

founded on them. It provided many well-paid,

high-quality jobs. It provided a large market—

often the crucial first market-for technologically

advanced goods and services. A final factor,

though not a determiningg one, in choosing among

new national missions is their ability to make

good use of valuable human, institutional, and

technological resources formerly devoted to defense purposes-such as those in DOE weapons

laboratories.

NEW INSTITUTIONS

the President, his Cabinet, and

on new national missions, set

NEW MISSIONS,

If and when

Congress settle

priorities, and establish finding levels, the next

question is who will carry them out. Whatever

initiatives are chosen, it seems likely they will

involve many agencies, universities and nonprofit

institutions, and hundreds, maybe thousands, of

private companies. While there are immediate

questions of how to deal with the changing size

and missions of DOE weapons laboratories and

some DoD laboratories and test facilities as well,

the answer probably is not to assign any of them,

a priori, the leading responsibility for a major

new public mission. The job calls for management and coordination at a broader level than that

of individual R&D institutions.

Lacking a technology agency at Cabinet level,

such as many other nations have, the U.S.

Government has recently relied on OSTP in the

Executive Office of the President for whatever

coordination of government R&D programs has

taken place. Within OSTP, the job has gone to

interagency FCCSET committees. As noted, the

committees have had no clear decisionmaking

authority. Moreover, at times their influence has

gone into complete eclipse, as in the early to

mid-1980s when the Reagan Administration saw

no need for a government technology policy. As

an agency in the Executive Office of the President, OSTP is especially subject to the prevailing

outlook in the White House. It also lacks continuity; often it is staffed primarily by detailees from

51 NO(C, howev~~, tit ~Omc U,s. @vernmentR&D institutions ~ve successfu~y ~ected (heir

industries. Examples are the aeronautics R&D program and facilities of NASA (’growing out of the support provided by the National Advisory

Committee on Aeronautics, or NACA, from 1915 to 1958) and the cooperative research program of the U.S. Department of Agriculture, States,

and land-grant colleges, dating back to the 19th century.
38 I Defense Conversion: Redirecting R&D

executive branch agencies and l-year fellows

from professional scientific organizations. On the

other hand, in an Administration interested in

technology policy, OSTP could play a particularly influential role, since multiagency policy

coordination is usually considered a special

responsibility of White House offices.

Other ideas are to transfer some DOE labs, and

possibly other Federal laboratories, to a different

or new agency with overall responsibility for

national technology policies and programs. These

might include application-oriented R&D programs, such as Regional Technology Centers, and

technology diffusion programs, such as industrial

extension services, as well as multidisciplinary,

science-based R&D programs. Several bills in

past Congresses have proposed to create an

agency or Cabinet-level department for the purpose.

Alternatively, an existing agency might be

adapted to the purpose. MST, which houses the

Advanced Technology Program, a small technology extension program (Manufacturing Technology Centers), and the Baldridge Award, as well as

its own laboratories, has been suggested as a

possibility. ARPA, with its fine reputation as a

funder of long-term, high-risk dual-use technologies, has attracted still more attention. It controls

more R&D funds for dual-use technologies than

any general purpose civilian agency, and the

defense conversion legislation of 1992 gave it

new responsibilities in technology diffusion.

Still, despite the interest in reaffirming its dualuse character, ARPA is not likely to be given the

leading responsibility for overall U.S. Government technology policy, because it is frost of all a

defense agency answering to defense needs.52

NEW NATIONAL INITIATIVES

Of the possible choices for new national

initiatives that meet public needs, some of the

most persuasive could not only promote advanced

technologies and foster the growth of knowledgeintensive industries, but do so in environmentally

benign ways. Environmental protection itself is

an obvious candidate; this very broad category

includes cleanup of hazardous wastes from past

activities, management of wastes currently being

generated, end-of-pipe pollution control and,

perhaps most promising, clean technologies that

prevent pollution. Public support for environmental improvement in this country is strong and

growing. Global environmental issues too are

rising to the top of the policy agenda, fed by

concerns over global warming, the ozone hole

over the Antarctic, acid rain from industrialized

countries, and deforestation and species loss

throughout the world.

Part of the drive for pollution prevention

centers on energy. World demand for energy is

expected to continue growing well into the next

century, especially in the developing world.

Technical progress in the last decade raises the

possibility that nonpolluting or less-polluting

renewable energy sources may be able to meet

much of this demand. There are special opportunities to substitute more environmentally benign

forms of energy use in the United States, because

we are such disproportionately large consumers

of energy, especially in auto and air transport.

Energy-efficient transportation is a theme that

is often proposed for new national initiatives.53

New forms of transportation-both advanced rail

or guideway systems and cars that use new types

of energy—are centers of interest. These systems

not only offer the public benefits of reduced

52 me que5tion of where to lodge respo~ibility for technology policy or for broad initiatives related to U.S. competitiveness is diSCUSSed

in some detail in U.S. Congress, Office of Technology Assessment, Competing Econonu”es: Amen”ca, Europe, and the Pacific fi”m,

OTA-ITIW98 (Washington DC: U.S. Government Printing Office, October 1991), ch. 2. See also John Alic, et al., Beyond Spinofl: iUiZitary

and Commercial Technologies in a Changing World (Bosto~ MA: Harvard Business School Press, 1992), ch. 12.

53 ~esid~t Clhton and vicefi~ident Gore included in their program for technology initiatives one to help industry develop nOr@hU@

cans that run on domestically produced fuels. “Technology for America’s Economic Growtlq ” op. cit., footnote 15,
1--Summary and Findings 39

pollution and lesser dependence on foreign oil,

but might also provide economic benefits that

defense once bestowed on the economy. In

addition, some might use technologies and skills

formerly devoted to defense purposes. As an

example of one such initiative, new transportation

systems are considered in this report from the

viewpoint of their potential to replace benefits

defense formerly provided. This report does not

address transportation policy broadly; other OTA

studies have analyzed many of the relevant

questions, including the degree of greater energy

efficiency and reduced dependence on foreign

sources of oil that various transportation alternatives might offer, as well as issues such as

adequate capacity and convenient connections

between highway, air, rail, and water transport.

Less polluting or nonpolluting personal vehicles look promising as an area of industrial

growth, a driver of advanced technologies, a

potential provider of good jobs, and a user of

technologies and skills no longer needed for Cold

War purposes. Americans have historically chosen the automobile as their means of transport,

and much in this country (e.g., the interstate

highway system, cities that sprawl out into

suburbs) favors its use. Electric vehicles (EVs),

which depend completely or substantially on

batteries for propulsion, could have some nearterm market potential in meeting stiffer airquality standards. California has mandated that 2

percent of vehicles sold in the State by 1998, and

10 percent by 2008, must have zero emissions,

and some other States (New York, Massachusetts) are following suit. EVs are at present the

only cars able to meet that standard.

Battery EVs will probably fill most of the early

demand for ultra-clean cars, and they are eminently suitable for some niches (e.g., Postal

Service or other in-town delivery vehicles);

however the market for them may turn out to be

limited. Vehicles powered by a combination of

fuel cells and batteries are currently less advanced

than battery EVs, but in the long run could be the

more successful technology if they are more

easily able to provide the range and quick

refueling that battery EVs are struggling to

achieve. Still, fuel cell technology for automobiles is immature and unproved; whether affordable cost and reliability can be achieved is not yet

known. Both battery and fuel cell EVs face

competition from other kinds of less polluting

vehicles, many of which are better developed, are

continuously improving, and require much less

new infrastructure. Alternative less polluting

fuels for vehicles using the time-tested internation combustion engine include methanol and

ethanol, natural gas, and reformulated gasoline.

Moreover, although battery and fuel cell EVs are

themselves without emissions and do not cause

local pollution, the energy source used to generate

electricity for them may be polluting.

U.S. Government support for the development

of nonpolluting cars was already underway in

early 1993, but in a limited and uncoordinated

way. The Clean Air Act of 1990 and the stricter

California standards have provided strong impetus for industry to develop clean cars, and there is

some very modest support for purchase of nonpolluting or less polluting vehicles for government fleets. However, the main encouragement

on the part of government is, first, in the field of

regulation, and second, in research, development,

and demonstration (RD&D). DOE and the Department of Transportation (DOT) both have

scattered RD&D projects underway. The biggest

of these is in DOE’s Conservation and Renewable

Energy program, which had a fiscal year 1993

budget of $60.8 million for electric and hybrid

vehicle research, of which more than half ($31.5

million) was for battery EVS.

54 DOT has a

$12-million project for cost-shared funding of

consortia to develop EVs and advanced transit

54 Fuel ~elj R~ @ $12 ~lli~q ~~d h~bfid vehicles, def~ed M hose powered by elec~ci~ Cornbhed with a SXIldl iKlterIld Combustion

engine, got $16.8 million.
40 I Defense Conversion: Redirecting R&D

systems, related equipment, and production processes.

The U.S. Advanced Battery Consortium (USABC),

formed in 1991 as a collaborative effort between

DOE and the Big Three American automakers, is

the largest government-supported R&D project

for EVs. It is funded at $260 million over its frost

4 years, 1992-96 (there are plans to continue it for

12 years); of this, each auto company is providing

$36 to $40 million, the Electric Power Research

Institute is contributing $11 million, and DOE is

picking up the rest, which amounts to $130

million or one-half. USABC has set development

and performance goals for mid- and long-term

batteries, on a timetable shaped in part by the

coming requirements of the California emissions

law.

So far, defense conversion (i.e., the use of

defense talents and resources for new civilian

purposes) has played little part in USABC. It is

largely a civilian enterprise, with the Big Three

automakers running the show from the private

sector side. Sandia is the only weapons lab

involved, but other DOE labs—Argonne, the

National Renewable Energy Lab, Lawrence

Berkeley, and the Idaho National Engineering

Lab-are participants. Outside USABC, several

defense firms are using their experience with

electric propulsion systems in building power

trains for electric vehicles. Westinghouse Electric’s electronic systems group, for instance, is

cooperating with Chrysler in such a program. The

DOT program for EVs has explicitly tried to enlist

defense resources in some cases. One of its four

1992 awards was a $4-million grant to California’s Calstart project, a consortium that aims to

create a new industry providing transportation

technologies and systems. It includes in its

members aerospace companies, utilities, universities, small high tech companies, transit agencies, and representatives of environmental and

labor interests.

Key areas in the development of both batterypowered EVs and the fuel cell-battery alternative

overlap with many technologies developed for

military purposes both by industry and government labs. These include the handling and use of

new fuels such as hydrogen; the application of

advanced materials such as ceramics, plastics,

alloys, and ultra-light composites; the use of

computers to model manufacturing processes and

performance and thus improve design; the development of fuel cells, batteries, and ultracapacitors; and the use of electronic controls and

sensors. The demands of space flight, stealth,

undersea operation, strategic defense, and other

military and aerospace programs have pushed

forward work on these technologies.

Most of the government’s efforts for EVs have

so far been directed toward developing and

showcasing battery EVs in the near future. The

fuel cell-battery alternative has received less

attention. The R&D investment needed for a

concerted, integrated program to overcome the

formidable technical challenge is substantial, and

would seem to offer the promise of highly paid

scientific and engineering jobs over the next few

years. If the efforts are successful, they might

eventually support the creation of a new kind of

auto industry with substantial numbers of production jobs and the advance of many new technologies.

High-speed ground transportation systems

(HSGT)---in particular magnetically levitated

trains-are also often proposed as new initiatives,

but here there may be fewer attractions in the way

of new technologies, new jobs, and defense

conversion. These systems may fill the bill for

many transportation policy objectives, including

less pollution and less dependence on foreign oil,

and they have the additional attraction of less

impact than highways on the use of land. However, most analysts agree that maglev or high

speed rail systems are probably limited to a few

heavily traveled corridors like the route from San

Francisco to San Diego, the Eastern seaboard, and

parts of Texas, at least if the system is not to rely

on ongoing heavy public subsidy. There may be

other growth opportunities abroad, but several

foreign companies, having long experience in the
field and historic, generous government subsidies, are much better positioned to take advantage

of them than fledgling U.S. companies.

Whether HSGT could spur the advance of

highly innovative, broadly applicable technologies is questionable. There are no breakthrough

technologies in high speed steel-wheel-on-rail

systems, such as France’s Train a Grande Vitesse

(TGV) and Japan’s Shinkansen; rather they embody incremental advances over rail systems that

have evolved over nearly 200 years. Even maglev

trains, long the favorite technology of the future

for engineering optimists, are not necessarily held

back by technological problems that the ingenuity

of the aerospace and defense industries could

solve so much as the tremendous expense of the

systems, the difficulty of acquiring rights of way,

and the tough competition of air and auto travel in

a big country with widely separated cities and

relatively low population density. Maglev might

contribute to the advance of some technologies,

such as strong lightweight composite materials,

an area in which the defense sector is a leader, but

overall the effects would probably be helpful

rather than crucial. Still, it is unwise to be too

dismissive about the technological possibilities.

The Japanese maglev system uses lowtemperature superconducting magnets, and work

for the system has contributed to cryogenic

technologies with applications in other fields.

Possibly, high-temperature superconductivity (HTS)

will get a boost from maglev, though this is by no

means certain since the magnets are a very small

part of this large system and may not offer enough

advantages to offset their development cost and

technological uncertainties. One DOE weapons

lab, Los Alamos, and two multiprogram energy

labs, Oak Ridge and Argonne, have ongoing

cost-shared projects with industry on commercial

applications of high-temperature superconductivity. The application nearest fruition is energy

storage devices for electric utilities, to help solve

the problems of peak use.

1--Summary and Findings 41

The hope for large numbers of manufacturing

jobs from HSGT initiatives is probably misplaced. Japan is a premier producer, consumer,

and exporter of passenger train cars, but the

industry there (finished cars, freight and passenger, and parts) employed fewer than 15,000

people in 1990, of whom about 3,000 were

employed in building 288 cars for the Shinkansen. Similarly, about 100 train sets (including 200 locomotives and 800 cars) were built over

a 3-year period for France TGV with a manufacturing workforce for the rolling stock and parts of

about 4,000. Most of the jobs involved in building

a HSGT system are in construction; many of these

are skilled high-wage jobs, but they are temporary

and often create boom-and-bust effects in local

economies. There may be excellent transportation

policy reasons for building HSGT systems in

parts of the United States, but on the basis of the

preliminary analysis in this report, they do not

look like a very promising replacement for the

civil benefits of defense.

Indeed, there is no one new national initiative

that fills that bill. For example, in the long run,

nonpolluting cars might form the basis for a new

industry that would foster technology advance

and create large numbers of productive well-paid

jobs (perhaps only replacing jobs lost in the

conventional auto industry, but possibly creating

new ones, if the world market for ‘‘green’ cars

expands). However, such anew industry will take

years to grow. Eventually, a combination of new

public and private investments can provide benefits that formerly came from defense, and do it in

ways more directly rewarding to the civilian

economy and US. competitiveness. Meanwhile,

measures that help U.S. workers and firms do

their jobs more productively and spur local and

national economic growth are the best bet for

defense conversion.
—— —

Policy

Issues

and

Options 2

T

he end of the Cold War and the accompanying cuts in

defense budgets give the United States an opportunity

for abroad reexamination of national priorities. Throughout the past five decades, the United States has concentrated most of its public research and development (R&D) in

military security, with health a distant second. While military

needs will continue to consume significant R&D resources, the

largest R&D institutions contributing to national security—

Department of Energy (DOE) weapons laboratories—are expected to face serious budget cuts in nuclear weapons development programs. These cuts could amount to several hundred

million to over a billion dollars, a number that could be regarded

as significant if, as many have proposed, the money is applied to

one or two new national technology initiatives. For comparison,

the National Aeronautics and Space Administration (NASA)

spends upwards of $800 million annually on aeronautics R&D

and facilities, and the eight-agency High Performance Computing and Communications Initiative also receives over $800

million. NASA programs are acknowledged to have made

significant contributions to technology, and less directly, to

competitiveness; HPCCI, which is still in progress, is expected

to improve high performance computing technologies.

The potential savings from the DOE labs’ nuclear weapons

development and other defense program budgets are, however,

small compared with many people’s expectations and with the

Federal budget deficit. Many who talk about redeployment of

defense R&D funds speak of the $25 billion spent on federally

owned or funded laboratories. Only about half, however, goes to

defense; while a significant chunk of this may eventually be

available for deficit reduction or other missions, the amount

43
44 I Defense Conversion: Redirecting R&D

available from curtailing nuclear weapons research, development, testing, and evaluation

(RDT&E) at DOE labs is a much smaller slice—

only about 8 percent of the $25 billion. Moreover,

the savings are unlikely to be realized all at once;

it may take 2 or more years for the full extent of

savings to be made available.

Money not spent on nuclear weapons RDT&E

could go toward a number of other purposes. One

obvious candidate is deficit reduction. In the long

run, smaller deficits could contribute significantly to the health and growth prospects of the

American economy, and a realistic plan for deficit

reduction will probably be a priority for both

Congress and the Administration over the next

few years.

However, deficit reduction is not the only

claim on resources ‘‘saved’ at DOE weapons

labs. There is a broad array of social programs and

federal outlays that might wish to make a claim on

the money. Some possibilities could include

health care, environmental investments, infrastructure, and increased assistance to the struggling new democracies of Eastern Europe. The

list of worthy causes is long, but it would be

incomplete without some consideration of shifting the money to other types and performers of

R&D, including universities, private research

laboratories, and nondefense government labs.

Research and development is an important part

of the foundation on which competitiveness is

built,l and while it has always been considered

healthy in the United States, there are some

ominous signs. Total U.S. R&D spending, while

far higher than R&D spending in any other nation,

is a smaller percentage of our gross domestic

product (GDP) than in Japan and Germany, the

best of the international competition. Japan

spends 3.1 percent of its GDP on R&D, and

Germany spends 2.8 percent. U.S. R&D funding

tilts much more heavily toward defense than in

most other developed nations. Military R&D

spending was 24 percent of American R&D

spending in 1990, less than 1 percent of Japan’s

and about 5 percent of Germany’s.

Analysts can muster logical arguments supporting the proposition that absolute spending is

more important than percentage of GDP, and vice

versa; lacking a definitive test, the question will

remain unsettled. However, the fact that R&D--

both civilian and military-is shrinking as a

proportion of U.S. GDP, is reason for concern.

This is particularly so in light of other indicators

that show American companies still struggling to

compete with their best foreign counterparts in a

variety of fields, including high-tech industries.

In the past, R&D has been considered one of

the strengths of the United States. Other factors—

such as access to patient capital, well-educated

and trained workers, and institutions to help

diffuse new technology—are much more at the

heart of the Nation’s competitiveness problems.

However, this is not an argument against ensuring

that R&D remains healthy. Both public and

private R&D are under strain. Private R&D is

difficult to fund in times of shrinking or nonexistent profits and heavy competition. The recession

increased the burden on R&D managers to justify

projects, and unless the recovery and subsequent

growth greatly exceed all expectation, private

R&D funds may remain scarce.

The pressures on publicly funded R&D are also

heavy. Financing the Nation’s 1991 debt of more

than $4.4 trillion consumes a growing share of

Federal revenue, and the consequent pressure to

cut all optional spending is increasing. Continued

funding for defense-related activities will demand

exacting justification.

More specifically, nuclear weapons development in the post-Cold War era will not be

1 Many other things affect competitiveness as well. For a thorough analysis of America’s manufacturing competitiveness, see U.S.

Congress, Oftlce of Technology Assessment, Mah”ng Things Better: Competing in Manufacturing, O’IA-lTE-443 (Washington, DC: U.S.

Government Printing Office, February 1990), passti and U.S. Congress, OffIce of Technology Assessment, Competing Economies: America,

Europe, and the Pacific Rim, OTA-ITE-498 (Washington, DC: U.S. Government Printing OffIce, November 1991), passim.
supported at the levels of the recent past. Although budgets of the DOE weapons laboratories

had hardly shrunk by 1993, it was highly likely

that they would in the near future. To many, that

is appropriate; the people and facilities at DOE

weapons labs, they argue, have little adaptability

to the needs of commercially-oriented R&D and

the DOE bureaucracy makes the technologies of

the laboratories difficult to access anyway, The

advisory board of the Secretary of Energy recommended that the weapons labs adopt no new

missions, and that their funding be cut to the point

where they can adequately fulfill their nuclear

weapons missions.2

A contrary argument is that now is not the time

to cut billions from national R&D budgets, unless

it is impossible to use the formerly military

resources in ways that will contribute more

directly to civilian technologies. There have been

several attempts to make the Federal laboratories

more accessible to U.S. industry, and to give them

missions that contribute more directly to the

overall economy, but generally the results have

been seen as disappointing, A few laboratories in

the Federal system have developed good working

relationships with companies, but DOE’s largest

labs (the nine multiprogram labs, and more

particularly the three weapons labs) did not

develop technology transfer activities to the point

where their contributions to economic goals were

clear. That may be changing. Industry interest in

forming cooperative R&D partnerships with Federal labs, and particularly with DOE multiprogram laboratories, has been unexpectedly strong

since the beginning of the National Technology

Initiative in February 1992. While there is still no

real consensus, increasing numbers of people

from the private sector are coming to view the

national laboratories as sources for development

of advanced technology.

2—Policy Issues and Options 145

Despite the weapons labs’ greater accessibility

to industry and interest in technology transfer,

working out cooperative R&D agreements (CRADAs) with them has been anything but easy.

Unless better ways can be found to make the

abilities of the labs serve potential codevelopers

of civilian technologies, interest in finding new

ways to use the weapons labs will wane. The

immediate task, unless the labs are simply cut to

the size needed for post-Cold War nuclear defense, is to make the CRADA process easier,

faster, and more transparent.

In the longer term, there are other considerations. First among them is the idea that the

dividend from a shrinking nuclear weapons development mission could be reallocated to other

R&D performers, With some justification, researchers at universities, private research labs,

and civilian-oriented government R&D labs feel

as though they have been increasingly short of

funds while defense labs and defense companies

have had generous budgets. Many of them see the

shrinking of the weapons labs as their chance to

capture a larger share of Federally funded R&D.

Another idea is that, rather than trying to settle

how to redeploy R&D funding first, the Nation

ought to set new R&D priorities, and allocate the

funding based on the abilities and cost structures

of all the different performers, public or private.

There are already a few Federal R&D initiatives,

such as the High Performance Computing and

Communications Program, aimed at dual-use

goals, that coordinate public and private technology development efforts. One notion is that more

such initiatives could be adopted, to develop new

technologies that are somewhat broadly defined.

Finding ideas for new national initiatives is easy;

for example, environmental and transportation

initiatives generally rank high.

z Secretary of Energy Advisory Board Task Force on the Department of Energy National Laboratories, ‘‘A Report to the Secretary on the

Department of Energy National Laboratories, ’ July 1992, mimeo, p. 10. The nuclear weapons missions of the labs include veriflcatioq

non-proliferation, and arms control technologies; restructuring of the weapons production complex; and environmental restoration and waste

management.
46 I Defense Conversion: Redirecting R&D

Some analysts have suggested that government

play a larger role in cooperative development of

high-risk, high-payoff commercial technologies;

the defense labs have considerable expertise in

some, though not all, of these fields. DOE

weapons labs are big and full of talent, but their

abilities are not suited to all problems, nor is the

mandate of their parent agency. Several of the

new national initiatives suggested would fit easily

within the purview of DOE; others would not.

More importantly, conflicts or overlaps with the

work of other R&D institutions will come up.

For example, many in universities and private

companies fear that their potential contributions

might not be weighted as heavily as those of the

national labs in contributing to new R&D initiatives. These analysts often advocate some sort of

competition, adjusting for necessary differences

between public and private institutions (e.g., the

need to build in a margin for profit), to decide how

to allocate responsibilities and funding among the

various R&D performers in pursuing new national missions.

Another set of ideas aims more directly at

coordination among existing institutions-either

creating a civilian technology agency to coordinate Federal technology development efforts, or

increasing the scope and responsibilities of existing agencies, like the National Institute of Standards and Technology (NIST) of the Department of

Commerce and the Advanced Research Projects

Agency (ARPA; until recently the Defense Advanced Research Projects Agency), that have

done a good job of supporting commercially

relevant R&D. Finally, some have suggested

creating new institutions with cultures and purposes more compatible with those of civilian

industry, perhaps modeled on institutions in

foreign countries. A leading candidate for a model

institution that uses public and private money to

contribute to civilian technology development is

the Fraunhofer Gesellschaft of Germany.

A summary of policy options is in Box 2-A.

OPTIONS TO REDUCE THE SIZE OF

DOE WEAPONS LABS

The burgeoning enthusiasm for CRADAs does

not obscure the conviction of many analysts—

including many potential CRADA partners-that

the weapons complex is too large for the postCold War era, and that budget cuts are necessary

and appropriate. This argument has been fueled

by the difficulties and delays involved in negotiating and initiating CRADAs with the DOE

GOCO (government-owned, contractor-operated)

labs, especially early in the process. Frustrations

have not yet overwhelmed interest in joint research, and in fact, the CRADA process has

become more predictable. However, DP labs

(Defense Programs), many argue, are still too big

to fit their remaining missions. In 1993, combined

funding for the three weapons labs was $3.4

billion.

The report of the Secretary of Energy Advisory

Board (SEAB) summed up the argument for

cutting the weapons complex in a paragraph,

saying the most appropriate strategy is to scale the

labs appropriately to meet the Nation’s diminished nuclear defense needs.3 The SEAB went on

to say that DOE should devise a plan to rationalize the labs, taking care to maintain their excellence during the adjustment.

A common assumption among those who

espouse the view that the labs should be smaller

is that reduced nuclear weapons missions will

result in large savings. This is almost assuredly

true, but the size of the dividend may disappoint

those who envision billions of dollars in savings.

3 Ibid., p. 10. The report is not entirely consistent on the topic of the defense laboratories, it should be noted; on page 8, the report

recommends that DOE designate several labs, “. . . for example, Sandia and Oak Ridge National Laboratories . . . to become technology

partnership ‘centers of excellence.’ “ There is some inconsistency in recommending that the Department consider Sandia as a candidate for

a center of excellence in technology partnership, and recommending tbat it maintain its devotion to nuclear weapons missions, and be sized

accordingly.
2—Policy Issues and Options [47

1.

2.

3.

4.

5.

6.

7.

8.

Box 2-A-Summary List of Policy Options

Cut the DOE weapons laboratories’ budgets to fit the scope of scaled-back nuclear weapons functions.

Establish a Laboratory Rationalization Commission to review thoroughly laboratories’ funding and

missions.

Shorten the process of cooperative research and development agreement (CRADA) initiation.

a.

b.

c.

d.

e.

Direct that the Defense Programs proposal screening process be shortened or dropped.

Shorten the times allotted for the approval of joint work statements and CRADAs; make the approval

a shorter, one-step process; eliminate the extra 30-day approval process for CRADAs that follow the

DOE model.

Make the period for approval of joint work statements continuous, from the time the lab submits a JWS

to the field office to approval.

Provide DOE headquarters with an exemption from the Freedom of Information Act covering proposals

for cooperative R&D.

Provide DOE headquarters with an exemption from FOIA covering proposals for CRADAs.

Reallocate authority for CRADA signoff.

a.

b.

c.

d.

Give lab directors greater discretion in allocating budgets to technology transfer.

Give government-owned, contractor-operated (GOCO) lab directors full legal authority to negotiate,

sign, execute, and fund CRADAs.

Give lab directors the authority to complete the process for CRADAs up to a certain limit, e.g., half a

million or a million dollars.

Give lab directors authority to execute CRADAs unless the parent agency objects within 30 days, the

same terms as for many GOGO laboratories.

Allocate a certain percentage of DOE labs’ R&D budgets to technology transfer or to direct DOE to do so.

Direct DOE and lab staff to establish stronger incentives for technology transfer.

a. Encourage DOE to develop stronger incentives for technology transfer.

b. Establish a governmentwide set of awards for effective technology transfer from Federal laboratories.

c. Earmark money for activities that support proposal development at the labs.

d. Encourage DOE to allocate sufficient funds for proposal development; direct DOE to build in the

budgets and authority necessary for proposal development in its yearly planning process with the

laboratories.

Reassess definitions of national interest within the technology transfer process.

a. Establish a U.S. Preference Review Board, and to make determinations on companies’ contributions

to the U.S. economy as a condition for CRADA approval, and to screen participation in many federally

funded programs by American affiliates of foreign companies.

b. Establish guidance on disposition of intellectual property among companies, labs, and DOE.

c. Encourage and guide the labs to harmonize intellectual property provisions.

Measuring the value of cooperative R&D

a. Direct the Secretary of Energy to develop an evaluation procedure for cooperative R&D.

b. Direct OSTP to develop a generic evaluation procedure for all cost-shared R&D that involves

government and private funds.

SOURCE: Office of Technology Assessment, 1993.
48 I Defense Conversion: Redirecting R&D

The end of the Cold War indeed means, almost

assuredly, cuts in nuclear weapons RD&T, but it

has also expanded nuclear weapons decommissioning and dismantling functions. It is increasingly clear that the weapons complex, along with

the rest of the DOE labs, has a burgeoning

responsibility for environmental restoration and

waste management, much of which is associated

with past nuclear weapons activities. While the

three nuclear weapons labs’ budgets are still close

to their peaks (in constant dollars) of the past two

decades, spending priorities within Defense Programs and related nuclear weapons offices have

shifted in accord with the reduced emphasis on

weapons development and increased needs for

other nuclear-weapons-related functions.

Policy Option 1: Cut the laboratories’ budgets

to fit the scope of scaled-back nuclear

weapons functions.

This option probably is not much different than

the exercise currently ongoing within DOE, the

Administration, the Office of Management and

Budget (OMB), and Congress. It probably means

more than simply following routine budget procedures in an agency whose missions are shifting.

There may be pressure within DOE or the labs to

keep the institutions at or close to their current

size, since most organizations resist downsizing

if they can. There maybe some pressure to expand

other weapons-related missions to take up the

slack left by reducing nuclear weapons RD&T,

rather than doing a thorough review and overhaul

of existing programs.

A point to consider in scaling back is that all

three weapons labs also have nondefense missions as well. Altogether, the weapons labs spend

nearly $570 million on energy programs in fiscal

year 1991. The continuation and health of energy

research at the weapons labs should be considered

in the process of scaling them back.

Policy Option 2: Establish a Laboratory

Rationalization Commission to review

thoroughly laboratories’ funding and

missions.

Should Congress cut the labs’ budgets, it might

also wish to establish a Laboratory Rationalization Commission, composed of experts from

Department of Defense (DoD), DOE, the private

sector, and other institutions as appropriate, to

recommend how to manage the cuts and reorganize the remaining work. The outcome of such a

reorganization might even mean no budget cuts at

all, if, for example, the Commission finds that

there are legitimate reasons to expand funding for

missions whose importance is growing. The

Commission, if it is to exercise the “care and

forethought” the SEAB recommended, would be

of little help in 1993 when the fiscal year 1994

budget is under consideration, but its findings

could be valuable the following year. This, in

turn, is an argument for postponing deep cuts and

major reorganizations for 1 more year, which

might be time well spent. While significant

changes in the labs’ funding and organizations

might be desirable, they will inevitably cause

disorder and chaos; if steps are not taken to

keep the disorder to a minimum we could well

lose the ability to establish an effective program of technology transfer (particularly CRADAs) for many years to come.

OPTIONS TO IMPROVE TECHNOLOGY

TRANSFER FROM THE DOE

WEAPONS LABS

Another approach (not necessarily incompatible with reduced funding for the weapons labs) is

to find ways to make the talents and resources of

the labs available to private firms and universities

as part of an effort to improve technology

development and diffusion nationwide. Congress’s several efforts since 1980 to improve

technology transfer from Federal labs aimed in

this direction (see ch. 4). A notable expansion of

the labs’ authority to conduct technology transfer

was the ability to enter into CRADAs with private

institutions (mainly businesses and universities).

Government-owned, government-operated (GOGO)

labs gained this authority in 1986, and GOCOs in
2—Policy Issues and Options 149

1989. 4 Unlike many other forms of technology

transfer, CRADAs not only permit but require

extensive face-to-face contact between researchers. This contact is almost always necessary for

effective technology transfer.

Past efforts to make lab resources more generally available have had disappointing results,

particularly when it comes to DOE weapons labs.

The CRADA process in particular was slow

getting off the ground at the agency and its

GOCOS.

5 In well-publicized cases, some of

DOE’s initial model CRADAs took many months

to over a year to put in place; and even with

models in place, many industry representatives

complain that individual CRADAs using those

models take well over 8 months to negotiate,

starting with the submission of a proposal.6 Many

in industry compare DOE’s delays and bureaucracy to the relative swiftness and simplicity of the

CRADA procedure at NIST, where lab directors

have broad authority to initiate and authorize

cooperative R&D, and the process can take as

little as a few weeks, starting with the submission

of a proposal.

Delays have happened at many points in the

DOE system, not all of which result in frustration.

One step that appropriately consumes a fair

amount of time (at any lab, not just DOE’s) is the

first, when lab and outside researchers discuss

their respective research and explore areas where

they might cooperate. The culmination of this

phase is the construction of a research proposal.

In the case of a Defense programs CRADA, the

labs and their outside partners submit research

proposals when DOE initiates a call for proposals.

The proposals then go through two review-andranking sieves, and the winnowed list of fundable

proposals is sent to the responsible official in

DOE Defense Programs for authorization to

proceed with CRADAs. This authorization signals that DOE is willing to fund the proposal once

a CRADA is in place; negotiation of the actual

agreement can then begin. This step still takes

several months. The agency aims for a 4-month

turnaround from proposal submission to CRADA

signing, but so far the process has taken longer

than that in every call for proposals. Delays can

also occur in the lab. At times individual researchers report that they cannot get their superiors’

approval to spend the time they need to develop

proposals. Moreover, negotiation of the CRADA

agreement, once the proposal is approved, still

takes months. These negotiations involve the lab

and the DOE field office. DOE headquarters has

also taken extra time to approve funding for

CRADAS.

7 Finally, company legal counsels have

also been named as sources of delays in CRADA

negotiation. The CRADA process is reportedly

working much more smoothly as of early 1993,

although less than half the CRADA proposals

-4 Other mechanisms for technology tramfer include technology licensing, work for others (WFO), personnel exchanges, publications, user

facilitlcs, consulting arrangements, university interactions, and cooperative arrangements (besides CRADAS).

5 Some dispute this. DOE representatives point out thal, considering the agency’s total unfamiliarity with the CRADA process when it was

given the authority 10 enter thcm at the end of 1989, it had a fairly good process up and running as of early 1993 (some maintain that the process

was working well in mid-1992). This, they say, is a fast learning cwve. It is true that the agency deserves credit for ironing out many of the

more serious bugs in the CRADA process since the passage of the National Competitiveness Technology Transfer Act of 1989, and that the

process is working much more expeditiously now than it was in early 1992. However, outside DOE, few would describe the agency’s learning

process as f:u+t.

~ Development of the proposal itself can take months. Some lab researchers complain that their time accounting system makes it difficult

for them to spend the needed time talking to industry contacts about their resemh programs and joint interests, but even if it were easy, the

process of learning about mutual research interests and devising a proposal for joint development would be arnany-month process. What ranktes

industry and lab rcprcscntativcs is not so much the time taken to develop the proposal as the time it takes to get a research proposal through

the CRADA systcm.

7 In the June 1992 call for proposals, according to onc lab official, DOE headquarters got the winnowed list of proposals from the rcvicwcrs

by the beginning of September, and didn’t announce which proposals could be funded until the cnd of October. None of the proposals approvcl

in October could have been funded before the beginning of fiscal year 1993. The June 1992 call was the most expeditious ever at DOE, however,

and it might not have caused a stir had there not been far more lengthy delays before mid-1992.
50 I Defense Conversion: Redirecting R&D

submitted in June 1992 were executed by the

beginning of March 1993.

This is longer than the 6 months that NASA

officials report that it takes to sign a Space Act

Agreement, or that NIST takes to evaluate, select

and fund proposals under the Advanced Technology Program, but DOE has less experience with

the process than NIST or NASA. Moreover, once

NIST’s ATP awards are made, work can begin;

MST labs take no part in R&D, and no CRADA

is necessary. Even so, DOE’s CRADAs are

probably more comparable to NIST’s ATP program than to NIST’s CRADAs, for several

reasons. For one thing, NIST labs are GOGOs,

which reduces the perceived need for agency

oversight. More important, however, is the size of

the programs. NIST is far smaller than any one of

the DOE weapons labs, and while it has many

CRADAs (131 were active in January 1992) they

are smaller than DOE’s. The average NIST

CRADA is valued at $200,000, compared with

over $800,000 for DOE CRADAs. ATP, on the

other hand, has $68 million in fiscal year 1993,

and was under consideration for a supplemental

appropriation of $103 million as of April 1993;

the Administration plans for ATP to grow to $750

million by 1996, In size and importance, ATP is

far more like the DOE CRADA program than

NIST’s CRADAs.

Launch delays are understandable, to some

extent. Because DOE labs are GOCOs, many in

Congress and the Executive branch consider lab

directors and researchers to be less concerned

with the public mission of the labs than the

government employees who staff GOGOs. This

may justify heavier headquarters involvement in

the CRADA process, and headquarters involvement itself accounts for a significant share of the

delay in signing a CRADA with a DOE defense

lab. Another consideration is that DOE multiprogram labs’ ability to do CRADAs only began in

1989, while other government labs (all GOGOs)

have had the authority to do so since 1986, and

therefore have more experience making the process work.

Finally, technology transfer is notoriously

difficult, even within large organizations. Company representatives often make the point that it

takes real work to transfer know-how and technology between groups within the company. Transfers from outside organizations are, ceteris paribus, even harder. DOE’s task in devising a

process to make labs accessible to outsiders is

therefore extremely challenging. In addition,

however, there are pressures to do more than just

develop a CRADA process. Because of the

multibillion-dollar size of the agency’s R&D

establishment, it also makes some sense to design

a strategic approach to lab/industry/university

partnerships that concentrates resources on critical problems and minimizes overlaps. Tens or

hundreds of millions of dollars spent on technology development could, according to one school

of thought, accomplish more for the welfare of the

Nation if some of it were spent on critical

technologies than if it were simply allocated on a

first-come, first-served basis. A strategic approach calls for much heavier headquarters involvement than would be needed simply to design

an acceptable model CRADA and oversee the

process. DOE is trying to do both.

There is no simple answer to speeding up and

simplifying the process. There is very little

consensus on what makes the CRADA process

cumbersome or how to fix it. Lab staff and many

industry sources would like to see lab directors

given more authority to initiate CRADAs; they

believe, probably correctly, that this would speed

up the process, particularly if the labs also had the

power to allocate designated CRADA funds as

well. As it is, DOE headquarters is now closely

involved in the approval process for work state6 One caveat pertains. CRADAS can be tided from s~called program money, or money the labs spend on their own missions according

to the work plan they negotiate with DOE. In order to use program money, however, the proposed cooperative work must fit almost completely

with an ongoing project, requiring little or no change.
2—Policy Issues and Options 51

ments, and controls all the money for CRADAS.

8

The view from headquarters and observers of

various affiliations is that directors of these

GOCO labs, especially during times of uncertain

budgets and changing missions, might be somewhat too willing to compromise the national

interest in order to find industry partners, so as to

prove to the agency and Congress that they should

not be cut back too far. Others hold that there are

problems within the labs—that some researchers,

interested in seeing their work used broadly, are

enthusiastic and entrepreneurial about technology

transfer, while others see it as a sideshow. The

cooperation of this latter group-often referred to

as middle managers—is essential in designing

joint work, Lab culture, especially in the defense

areas that have been ‘‘behind the fence’ for

decades, is sometimes raised as an impediment.

Congress comes in for a share of the blame too.

Congressional oversight covering details of lab

operations is seen as responsible in part for some

of DOE headquarters’ zealous management of lab

operations, including CRADAS.

9 Along the same

track, some believe that if lab directors are given

greater authority to initiate cooperative R&D, fear

of Congressional investigations could prompt

labs or headquarters to micromanage the process.

Finally, the division of authority over DOE

authorizations (energy and natural resources committees authorize energy programs, and armed

services committees are responsible for defense

programs) complicates legislative guidance on

funding and managing technology transfer.

The lack of broad agreement on the source of

the problems with DOE CRADAs makes it

difficult to specify solutions with any confidence.

Consequently, the policy options identified here

should be regarded as experiments, which also

means that results ought to be monitored. It does

not mean that any experiments should be undertaken tentatively, or that the monitoring function

should devolve to micromanagement. If Congress

chooses to implement any of the options suggested below, it should recognize that positive

outcomes will be hard to come by if the subsequent oversight of the DOE CRADA process, by

Congress or by designated monitors, interferes

with the implementation.

Policy Option 3: Shorten the process of CRADA

initiation.

This option is an umbrella for a number of

possible actions. The National Competitiveness

Technology Transfer Act of 1989 specifically

directs the parent agency of GOCOs to sign off on

both the joint work statement of a CRADA and

the legal agreement that is the CRADA itself,

requiring a two-step approval that does not

pertain at the parent agencies of GOGOs.

DOE has delegated to its field offices the

authority to sign off on Joint Work Statements

(JWSs), which lay out what the proposed R&D

entails and the roles of the lab and the outside

partner, and the CRADA, or the legal agreement

required before work can begin. The field office

has 90 days to approve the JWS, and 30 days to

approve the CRADA. Whether or not the clock

ticks continuously following the lab’s submission

of a JWS or CRADA to the field office, or only

begins after the details are worked out, is a matter

of dispute; the labs maintain that the clock should

tick constantly and the field offices take the other

view. In practice, some labs submit JWSs and

CRADAs simultaneously. The time allotted for

field office review of these is also a matter of

dispute; the field offices maintain that they have

120 days in such cases, while the labs feel that

time should be saved by submitting the two

documents simultaneously.

However, many potential CRADAs have another hurdle to clear, even before the submission

of a joint work statement to the DOE field office.

This frost hurdle is at DOE headquarters, and all

g Much of the congressional interest in the labs over the past decade has been in lab management issues, defm~ much more broadly man

simply management of the technology transfer process. This study does not go into lab management questions, beyond this examination of the

CRADA process.
52 I Defense Conversion: Redirecting R&D

CRADAs funded by Defense Programs (which

has far more money to spend on CRADAs than

any other DOE program) must pass it. Several

times a year, DP issues a call for proposals. The

labs, together with their potential outside partners, submit CRADA proposals to DP,10 and DP

reviews these proposals in two steps, operating in

parallel. ll This review process has the understandable objective of minimizing overlap and

assuring complementarily to the extent possible

between individual CRADAs. DP aims to keep

this process to no more than 6 months, with the

eventual goal of reducing it to 4. Once this

process is finished, the field offices, labs, and

outside partners are notified which projects DP is

prepared to fund, and the work on the JWS can

begin.

In short, if all steps take the time they are

allocated and no more, the upshot is that initiating

a CRADA may take 8 months.12 For the past

couple of years (1990-92), the process has taken

longer on average; as of early 1993 it’s probably

still close to 8 months. The CRADA-processing

time has shrunk as everyone becomes more

familiar with the exercise, In addition, it may be

possible for the lab/field office process of approving JWSs and CRADAs to be compressed to less

than 120 days, at least for CRADAs whose

language is the same as or very similar to the

agency model CRADA.

Many actions could shorten the process. Congress could direct that the DP proposal screening

process be shortened or dropped. Congress might

consider shortening the times allotted for the

two-step approval process of JWSs and CRADAs, making the approval a shorter, one-step

process, or eliminating the extra 30-day approval

process for CRADAs that follow the DOE model.13

Congress could also consider stipulating that the

period for approval of joint work statements is to

be continuous, from the time the lab submits a

JWS to the field office to approval.

Another issue that came up in the evaluation of

proposals submitted in the November 1992 call is

protection of the proprietary information contained in the proposal itself. In describing proposed research projects, companies often include

information in proposals that they would not wish

to fall into the hands of competitors. The labs are

protected from Freedom of Information Act

(FOIA) requests to see proposals, but DOE

headquarters is not.14 Fearing that competitors

could access proprietary information in the proposals, the labs refused in February 1993 to send

DOE headquarters proposals to review after the

Technology Area Coordinating Teams (TACTs)

and Laboratory Technology Transfer Coordination Board (LCB) had finished their two-step

screening of proposals to DP. The same worry

arose in 1992, but it was resolved when DOE

headquarters promised the labs that each DP

proposal would be screened by only a few people

at headquarters.

Since 1992, however, concerns within DOE

and in Congress prompted DOE to widen the

headquarters proposal review process to include

10 ~e~e ~row~~ ~q~e n. sm~ ~out of work to put together; they are not sketches. They require a work pla~ es~tes of cos~ ~d

benefits to the government and to industfy, and commercialization plans.

11 ~s pr~ess is described in ch. 4.

12 ~S ~SmeS tit me Dp review process &&eS no more or ]ess ~~ d mon~, ~d tit &e field office &dce:; 120 &lys to approve the JWS

and the CRADA, with the clock ticking. Currently, however, field offices are spending considerably less than the 120 days they are allotted

to approve JWSS and CRADAS. The average in early 1993 is probably less than 4 weeks for both documents.

13 One biu cwenfly before the senate, “Department of Energy National Competitiveness Technology Partnership Act of 1993,” would

reduce to 30 days the time allocated to headquarters to approve, request modifications to, or disapprove a CRADA. If modifications are required,

the agency is required to approve or disapprove resubmissions within 15 days. The Act does preserve the agency’s mandate to approve both

the JWS and the CRADA.

M perso~ com~mtion witi Roger hwis, Director, OMce of Technology UtiIiz.atioW and Warren Chernock Deputy Science ~d

Technology Advisor, Defense programs, DOE, February 12, 1993.
2—Policy Issues and Options 153

other divisions of DOE (e.g., Conservation and

Renewable Energy, Energy Research), which

manage the other 6 multiprogram labs. With the

expanded review process, lab staff feared that

there would be too much access to proprietary

information contained in proposals. The situation

was resolved, but only after a substantial delay

while the labs, in consultation with the industry

partners, removed or marked passages in proposals that contained proprietary information. LCB’s

prioritized list of proposals was due at DOE

headquarters by March 18, but because of the

FOIA problems, were submitted on May 6,

1992.15 DOE headquarters staff object to reviewing proposals at the labs, because it means a great

deal of travel and extra time; labs dislike sending

proposals to Washington, where they could be

subject to FOIA requests. This is not an idle fear;

NIST officials report that their FOIA exemption

for Advanced Technology Program (ATP) proposals is necessary to fend off requests, many of

them by foreign corporations. To expedite and

protect the review process, Congress could provide DOE headquarters with an exemption from

FOIA covering proposals for cooperative R&D.

Policy Option 4: Reallocate authority for

CRADA signoff.

This option, like the first, could be enacted in

several ways. Currently, the National Competitiveness and Technology Transfer Act (NCTTA)

requires lab directors and staff to have DOE

approvals of both the JWS and the CRADA.

Many suggest that if lab directors had the

authority to approve CRADAs, the process could

be considerably shortened. A recent report of the

Council on Competitiveness included two variants of this option; one suggested that lab

directors be given greater discretion in allocating

budgets to technology transfer, and another stated

that Congress and executive agencies ought to

give GOCO lab directors ‘‘full legal authority to

negotiate, sign, execute, and fund” CRADAS.

16

Another way to configure this option is for

Congress to give the lab directors the authority to

complete the process for CRADAs of a certain

size (up to, say, half a million or a million

dollars) .17 Or they might be authorized to execute

CRADAs on the same terms as do many of the

GOGO laboratories, including NIST’s; the lab

director negotiates CRADAs, which take effect

within 30 days unless the parent agency objects.

For example, Albert Narath, the President of

Sandia National Laboratories, suggests:

About eight percent of the government agency’s

operating budget should be set aside for technology transfer initiatives. These should be marketdriven, cost-shared programs that are national in

scope. The national labs should compete for these

funds to provide the best technology solution . . .

[In addition, approximately eight percent of each

Lab’s base program funds should be made

available to encourage Lab/industry partnerships

to address significant technological challenges

faced by industry. These efforts should be managed at the Labs.18

Narath, in the same document, supports DOE’s

role in approving CRADAs (while making a case

for greatly streamlining the process), but other lab

directors have argued for their being given the full

authority to approve at least some CRADAs. In

combination, these variants add up to the option

of giving lab directors the authority to initiate

15 pcrsOml ~Om@catiOn ~1~ c~]es FOwlcr, Tec~OlO~ Tr~fer Specialkt, Defe~e ~qgams, ad James van Flee~ Ac@ Director,

Technology Transfer Division, Defense Programs, DOE, May 7, 1996.

16 Council on Competitiveness, z~u~fn ~~ ~ cu~[o~er ~)f fhe Federal ~boraron’~s ~mhingto~ DC: Coun

,

September 1992, p. 1.

17 The average F~er~ Co~~b~ti~~ to ~ c~DA, as of tic end of calend~ year 1992, was just over $860,000.

18 statement of Albefl Nma~, ~esldent of Sandia National ~bora[ohes, us. House of Representatives, Committee On Small Business,

Subcommittee on Regulation, Business Opportunities, and Energy, Dec. 4, 1992, ‘‘Reducing the Cycle Time in Lab/Indus&y Partnerships, ’

p. 3.
54 I Defense Conversion: Redirecting R&D

some CRADAs, while retaining agency oversight

and approval of others.

Any of these permutations would require a

change in NCTTA. The act states clearly that the

parent agency of any GOCO must review and

approve each joint work statement and CRADA.19

Policy Option 5: Allocate a percentage of DOE

labs R&D budgets to technology transfer.

Yet another option, alluded to briefly above, is

to allocate a certain percentage of DOE labs’

R&D budgets (or to direct the agency to do so) to

technology transfer. In their February 1993 statement of technology policy, President Bill Clinton

and Vice-President Albert Gore stated that all

DOE, NASA, and DoD labs that can make a

productive contribution to the civilian economy

will be reviewed, with the aim of devoting 10 to

20 percent of their budgets to cooperative R&D.20

Similar proposals have come from several other

quarters as well.21 The Council on Competitiveness suggests, as do many others, that 10 percent

of the budget of DOE labs be assigned to joint

civilian technology programs with industry immediately, with a target of 20 percent (or possibly

more) in a few years. This could prove somewhat

tricky, since DOE’s authorizations are handled by

two committees in the Senate and four in the

House of Representatives (see ch. 4). Appropriations are somewhat simpler, with defense appropriations and all other appropriations being separated into different subcommittees in both houses.

Coordination between the authorizing committees and appropriations subcommittees may be

necessary to assure that any overall spending

target for technology transfer or CRADAs is

feasible.

Policy Option 6: Direct DOE and lab staff to

establish stronger incentives for technology

transfer.

In their annual planning process, DOE and the

multiprogram labs establish projects for the labs.

After these plans are agreed to, some lab researchers report that it is difficult to devote more than a

few days of project time (possibly a couple of

weeks) to working out a plan of joint work with

an outside partner. Lab researchers must account

for their time on a strict basis, and their ability to

charge to ongoing projects the time they spend

with industry or university researchers planning

joint R&D is quite limited. This constraint,

combined with the lukewarm enthusiasm for

technology transfer on the part of some middle

managers at the labs, can slow or even abort

potential CRADAs. Both lab staff and DOE

headquarters staff acknowledge that, partly because of the prestige attached to weapons work

over the past decade, and partly because DP

budgets were quite generous throughout the

1980s and into the 1990s, many DP researchers

19103 Stat. 1363, ~bll~ ~w 101.189, ~*Nati~n~ Defen~eAu~~nzati~n Act f~r Fiscal Yws 1~ and 1991, ” s~. 3133(a)(6)(C)(i), s~tes,

“Any agency which has contracted with a non-Federal entity to operate a laboratory shall review and approve, request specific modifkd.ions

to, or disapprove a joint work statement that is submitted by the director of such laboratory within 90 days after such submission. In any case

where an agency has requested specific modifications to a joint work statement, the agency shall approve or di sapprove any resubmission of

such joint work statement within 30 days after such resubmission, or 90 days after the original submission, whichever occurs later. No

agreement may be entered into by a Government-owned, contractor-operated laboratory under this St?Ch”On before both approval of the

agreement under clause (iv) and approval under this clause of a joint work statement. . . . (iv) An agency which has contracted with a

non-FederaI entity to operate a laboratory shall review each agreement under this section. Within 30 days after the presentation, by the director

of the laboratory, of such agreemen~ the agency shall, on the basis of such review, approve or request specific modification to such agreement.

Sue\ agreement shall not take @ect before approval under this clause. ” [emphasis added]

20 ~esident Willim J. Clkton ad Vice-president Albert Gore, Jr , ‘S Economic Growth, A New Direction to Build

Economic Strength, Feb. 22, 1993.

21 For example, The Dep~ment of Energy Nation~ Competitiveness Technology p~ership Act of 1993, S. 473, dkC~ tit at IeMt 10

percent of the annual budget of each multiprogram departmental lab be devoted to cost-shared partnerships with IJ.S. industry. See also Council

on Competitiveness, op. cit.,

footnote 16.
2—Policy Issues and Options ! 55

are reluctant to commit more than the minimum

required effort to technology transfer.

While there is little Congress could do to

change the sentiments of lab researchers who are

skeptical of the value of technology transfer, it

could encourage greater support by directing

DOE to develop stronger incentives. Already, the

law encourages researchers to engage in technology transfer by providing that 15 percent of the

royalties of any patent licenses may accrue to the

developers—that is, individual lab scientists and

engineers. However, this incentive may seem

distant to many researchers; technologies must be

developed, patented and licensed before there is

any hope of royalties.

More immediate incentives might help effect a

change in lab culture. According to a representative of the Sandia Office of Research and Technology Applications (ORTA), such incentives

need not be directly monetary. They might

include rewards such as additional staff positions,22 access to a capital equipment fund, or

increasing the prominence of technology transfer

as a factor in employees’ performance ratings.

None of these require legislative action; Congress

could encourage DOE to direct the labs to take

such actions through oversight or a nonbinding

resolution.

Another kind of nonmonetary incentive is

recognition. It is easy to overuse this kind of

option, but there are examples of how prominent

awards have had real impacts, such as the

Malcolm Baldridge National Quality Award,

created by Congress in 1987. Congress might

consider establishing a governmentwide set of

awards for effective technology transfer from

Federal labs, possibly with separate categories for

GOGOs and GOCOs. If such an option is

adopted, it might be worthwhile to direct the

agencies managing labs to study and adopt many

of the procedures of the Baldridge Award.

Congress could also facilitate technology transfer by setting aside, or directing DOE to set aside,

part of the labs’ appropriation for pre-CRADA

development of proposals for joint work. While

Congress does not now allocate part of DOE’s

appropriation for CRADAs, it may be worthwhile

to earmark money for activities that support the

CRADA process on a one-time basis, to jumpstart the process. After the first year, Congress

could encourage the agency to allocate sufficient

funds for the purpose. Congress did something

similar in 1991, designating $20 million for

CRADAs at DOE, because many members felt

that the agency needed the lure of an explicit

appropriation. DOE could itself, allocate more

funds as needed to the activities of the labs’

ORTAs.

How much money would this option take? It

depends on how much money could usefully be

spent on CRADAs. If, for the sake of argument,

we assume that the objective is to use 10 percent

of the labs’ budgets for CRADAs, the target

would then be $250 million.23 If the cost of

preparing proposals is around $5,000 in the time

and travel of lab researchers (a conservative

estimate), this would mean that, to start 50 to 100

CRADAs, each weapons lab would need approximately $250,000 to $500,000.24 The only other

lab that has generated interest in cooperative

research comparable to that of the weapons labs

is Oak Ridge, which could also probably make

zz Sandla ~epre~entativc~ pointed out mat, at tie end of 1992, SNL wti COIIS@fied by its pefsonnel ceiling (which SeU-imPoSed).

23 me ~ombfied budget of the ~ee weapons labs in 1992 was $3,4 bfllio~ but about one-fo@ of tit was Work For Others, mairdy DoD.

It probably is not reasomble to expect that 10 percent of the work DoD asks the labs to do should consist of CRADAs, so the 10 percent figure

was based on 75 pereent of $3.4 billion.

24 However, the c~A process ~S been functioning on anything approaching a vol~e basis for on]y a yw--+den(h yW ] 992—and

is still not routine. As of December 1992, Sandia had initiated 69 CRADAS, Los Alamos 35, and Livermore 33. While there is probably not

enough FY 1993 funding to continue signing agreements at the pace of late 1992 and early 1993, it is conceivable that the three wapons labs

could average 50 to 75 CRADAS apiece in FY 1993, by the time all the agreements that are in the pipeline have been initiated and those that

came in as a result of the November 1992 call are awarded.
56 I Defense Conversion: Redirecting R&D

good use of a similar amount of money. These

four labs accounted for about 60 percent of all the

CRADA activity in DOE facilities at the end of

1992. All told, then, to sustain the activity levels

of 1993, DOE labs might need a set-aside of $1.7

to $3.4 million for pre-CRADA activity.

Another possibility is for Congress to direct

DOE to build in the budgets and authority

necessary for pre-CRADA development in its

yearly planning process with the laboratories.

DEFINITIONS OF NATIONAL INTEREST

WITHIN THE TECHNOLOGY TRANSFER

PROCESS

Many of the options described above aim at

facilitating tech transfer with ‘volunteers’ (mostly

companies and private sector consortia, and a few

universities) from outside. They presume that

facilitating these volunteers’ agendas in the

CRADA process is in the national interest, and

indeed it is. Private industry accounts for the

majority of the Nation’s job creation, value

added, and technology development; it is clearly

in the national interest for firms, American or

foreign, that make and sell products and/or do

R&D here to prosper.

However, the match between national interest

and corporate objectives is not perfect. There will

always be tension between public and private

interests in technology diffusion. The agency’s

interest in assuring that technologies the labs

develop (in partnerships or alone) are diffused

and applied widely; companies participating in

CRADAs, and to an extent the lab operators, want

as much control over intellectual property as

possible. So, for example, industry might support

an option to specify that private sector partners

retain more control over intellectual property

rights developed in CRADAs, while some in

DOE would prefer to strengthen the agency’s

right to restrict companies’ proprietary rights to

certain applications, or expand march-in rights.25

U.S. preference is another thorny issue. Increasingly, companies of all nationalities are

knitted together in a complex fabric of crossborder investments and alliances. In some industries, successful competition is not possible without international partnerships. During its CRADA

negotiation, for example, the Computer Systems

Policy Project (CSPP) rejected a stipulation in the

agreement obliging companies to manufacture in

the United States any products resulting from

technologies developed in partnership with labs.

Systems companies, CSPP argued justifiably,

are obliged to operate globally by innumerable

factors. Government procurement regulations and

habits often oblige computer and telecommunications equipment makers to manufacture goods in

the purchasing country; private sector purchasing

and other business arrangements likewise argue

for a local presence in many markets. Trade

restrictions have led many systems companies to

set up manufacturing and marketing subsidiaries

or agents in many Nations. Finally, the costs of

technology development are increasingly beyond

the reach of individual firms, even the largest;

development costs running in the billions of

dollars have encouraged (even driven) companies

into partnerships. Under such conditions, requiring U.S. manufacture would discourage such

companies from taking advantage of CRADAs.

There are some who would pay that price. R&D

financed by U.S. taxpayers, according to this

point of view, ought to be used to create American

jobs and value added, not just to improve the

fortunes of companies operating overseas. Already, DOE has compromised on the provision of

an earlier model CRADA that stipulated that

manufacture of all products based on technologies developed jointly with labs take place in the

254 cMarch.infigh~>’ refers toasi~tion inwhichafirm has exclusive rights to technology developed with go vernment funding, but is t-g

too long to commercialize the technology and to make it widely available. In some cases, the government has the right to “march in” and take

back the exclusive rights, and to license other fm to commercialize the technology. In the case of patents, march-in rights are required by

law (35 U.S.C. 203), though the specific procedures are set by agency regulations.
2—Policy Issues and Options 157

United States. The CSPP CRADA, after hard

negotiation, ended up as a compromise, with the

requirement that the CRADA R&D take place

in the United States, There are some in DOE, and

certainly in Congress (which strongly encouraged

U.S. preference in the first place), who would be

disappointed or at least concerned if the CSPP

CRADA’s provision on U.S. preference became

the convention rather than the exception, and their

fears may become reality. Officials of DOE’s

Defense Programs Technology Transfer office

report that more companies are asking for the

same compromise CSPP got, and DOE’s new

CRADA guidelines now requires only that CRADA

partners contribute significant benefits to the U.S.

economy (although substantial U.S. manufacture

is still the preferred option).

There may be no comfortable resolution of this

issue. Stricter requirements for U.S. R&D and

manufacturing could well drive potential R&D

partners away from the DOE labs. Under this

circumstance, it is possible that the only companies willing to work with labs on CRADAs would

be smaller, with few or no ties to companies in

other countries, and typically with less money to

spend on R&D. Moreover, even requiring U.S.

manufacturing is not a guarantee that American

companies will have the best shot at commercializing or applying technologies developed in

CRADAs. Companies with international crosslicensing agreements may put part or all of their

portfolio of technology before other companies in

exchange for the same rights to their partner’s

technology; any technologies developed and patented in a CRADA might automatically become

part of those portfolios.

On the other hand, both manufacturing and

R&D jobs are important to America, and it makes

sense to discriminate between companies, given

limited money for CRADAs, on the basis of the

size of the contribution they can or might be

willing to make to U.S. national interests. Allowing offshore manufacture on a routine basis could

become a much more serious public policy issue

in the event that a company decided to manufacture offshore all or substantial parts of products

based on technology developed in CRADAs.

Policy Option 7a: Establish a U.S. Preference

Review board.

Policy options at either end of the argument

outlined above are almost guaranteed to alienate

someone. One possible compromise would be to

set up a review board to decide, on a case-by-case

basis, whether companies may manufacture products based on cooperative work with the government offshore. For this to be a better alternative

than simply insisting on U.S. manufacture, the

board would have to operate in such a way that

approvals could be gained expeditiously. In order

to avoid becoming a rubber stamp that allowed

companies to manufacture offshore at will, the

board would have to be objective and analytical.

Congress might consider empowering the White

House Office of Science and Technology Policy

(OSTP) or the Department of Commerce to fulfill

this function, or create a small independent

agency along the lines of the International Trade

Commission, to consider U.S.-preference issues

on a governmentwide basis.

DOE is not the only agency struggling to

maintain a domestic preference in R&D and

technology transfer activities; NASA, too, has

come under scrutiny for offshore transfer of

technology, and there are many agencies vulnerable to criticism if the point is pressed. Perhaps the

context in which a Preference Review Board

makes the most sense is as a governmentwide

advisory body, handling questions and contracts

involving foreign firms and their U.S. affiliates,

and the location of U.S. firms’ activities, insofar

as Federal funding is involved. The board might

also help to expedite the process of review. After

ascending the learning curve, the agency might

have enough information and experience to make

decisions on U.S. preferences and eligibility more

expeditiously than any agency acting alone, with

a smaller caseload.

The other possibility, though, is that

board might, no matter how constituted,

such a

simply

331-050 - 93 - 3 : QL 3
58 I Defense Conversion: Redirecting R&D

be more time-consuming for everyone. A preference review board is a compromise between

competing interests (attracting many firms to

cooperative R&D vs. assuring that the benefits of

cooperative agreements remain in the United

States). But this issue may be too contentious for

such a compromise to work. It may simply prove

that making decisions on a case-by-case or

company-by-company basis will prove infeasible

or obstructive. Certainly, the level and extent of

dissatisfaction with the Coordinating Committee

for Multilateral Export Controls (CoCom), which

controlled exports of technology and high-tech

products with the aim of preventing enemies from

obtaining them, is ample proof that wellintentioned policies can be implemented in ways

that please no one. If this is the case, then

Congress’s options are simple, if uncomfortable:

choose something and accept the less-thanoptimal outcome. One possibility is to choose to

maintain a U.S. preference that is stricter than

many companies are prepared to accept, and live

with the consequences. That could lead to increased pressure to close or cut the budgets of

Federal laboratories, as potential CRADA partners opt out. The other option26 is to permit a form

of U.S. preference that companies are more

comfortable with, such as the clause in the CSPP

CRADA requiring the R&D to take place in the

United States, and live with those consequences,

which might mean that the United States ends up

importing a product whose soul was invented

here.

Policy Option 7b: Establish guidance on

disposition of intellectual property.

Another issue that comes under the heading of

national interest is the disposition of intellectual

property. Like U.S. preference, this issue is

unlikely to be resolved in a way that completely

satisfies either public or private interests; rather,

the solutions are compromises. Under their operating contracts with DOE, the contractors often

are allowed to take title to intellectual property

developed there. In the case of patents or other

intellectual property developed with funding

from DP, the labs must apply for a waiver from

DOE in order to retain title to the patent; it is usual

for the agency to grant these waivers, and DOE

retains a fully paid license in perpetuity.27 In fact,

in 1992, DOE delegated the responsibility for

handling waivers to operations (field) offices to

make the process more efficient. Because the labs

have so much control over the intellectual property generated within their walls, DOE has

delegated to them responsibility for negotiating

with CRADA partners the disposition of intellectual property within a CRADA, provided that the

intellectual property belongs to the contractor and

not DOE. However, in the CRADA negotiation

process, it is still common for intellectual property rights to consume a disproportionate share of

the time, for there are still conflicts between

different interests in the disposition of intellectual

property.

The government’s preferred option is to assure

wide dissemination of the technologies developed at taxpayer expense, for two reasons. First,

wider dissemination of technologies has greater

potential to raise standards of practice, productivity, and the other benefits that new technology

confers broadly throughout the Nation, which in

turn helps raise living standards. Second, broad

dissemination helps to avoid the appearance or

reality of government benefiting specific firms at

the expense of competitors. In fact, many in DOE

26 ~em is ano~a ~~se, and that is to make the United States an attractive enough place to do R&D td manufacturing tit most h

wouJd choose, without additional pressure, to locate the vast majority of their R&D and manufacturing here. This course involves a number

of actions, some of them representing major changes in the course of U.S. policy. Options to make the United States a more attractive location

for investment in R&D, manufacturing, worker training, and the Mm are described in U.S. Congress, OTA, Making Things Better: Competing

in Manufacturing, op. cit., footnote 1; and Competing Econom”es: ,4nen”ca, Europe, and the Pac&ic Rim, op. cit., footnote 1.

27 IXI cases where techology development is funded by energy programs, which includes most of the work at the Other sti mdtiprogram

labs, DOE allows the labs to take title to the intellectual property immediately, with no waiver required.
2—Policy Issues and Options I 59

would prefer to work with consortia rather than

individual fins, for the simple reason that such

arrangements make it more difficult to accuse the

agency of playing favorites.

Intellectual property developed within CRADAs may be held by the industrial partner, the

contractor (operator of the lab), or both, depending on who was primarily responsible for the

invention. By law, CRADA participants are free

to agree on any allocation of intellectual property

developed within the agreement, subject only to

Government’s retention of a royalty-free license.

As a rule, the government would prefer that the

contractors (labs) retain title to the patents developed within CRADAs (except, of course, when

the technology was developed by the company),

to grant nonexclusive licenses to the intellectual

property, or to limit the field of use (breadth of

application) under exclusive licenses. Companies, on the other hand, are not anxious to see

technologies that they have partly funded licensed by another party. Having put up half the

money for developing intellectual property, companies want to be able to have first crack at

practicing the technologies, or to have control

over licenses.

Exclusive rights need not be all or nothing. For

example, a firm might get exclusive rights only to

specific fields of use, or only for a few years

duration. Still, the issues are divisive enough to

prolong negotiation. Here, too, the option for

Congress, if it wants to change the status quo,

comes down to picking one side or the other and

living with the consequences. Put simply, if

Congress chooses to strengthen support for the

public purpose of wider diffusion, fewer companies may be interested in partnerships; if it

chooses to give companies more protection, the

taxpayers’ immediate return on their investment

may be more limited. Congress may wish to

provide some guidance, in the form of a resolution

or a law, that would eliminate the source of many

disagreements during negotiations over intellectual property, and thus help to shorten the

negotiations. One route is to discourage exclusive

licenses that have broad field of use, or limit the

time during which the exclusive license prevails;

the other is to encourage DOE and its contractors

to accommodate companies’ desires for broader

intellectual property rights.

A final consideration is that of signing a

CRADA with several laboratories. Different contractors have different preferences on intellectual

property, and companies that devise multilab

CRADAs complain that it takes a separate

negotiation with each of them to work out

intellectual property rights. DOE could encourage and guide the labs to harmonize intellectual

property provisions; Congress could encourage

this through oversight or a resolution.

Product Liability. A final national-interest

issue is liability. In contrast with the other two,

there is more here for the labs, the agencies, and

companies to agree upon. Currently, the outside

institution that signs a CRADA is liable for any

damages or penalties except the labs’ own negligence. This is more acceptable than DOE’s

original position, which was that the outside

partner was required to indemnify DOE completely; however, it is still riskier than companies

would like. DOE, and presumably, other government agencies, are nervous with any liability,

because it raises the likelihood of having to pay

for damages. The perception of both government

and industry representatives is that liability

claims are becoming larger, and damages more

expensive to pay; they also see that large companies or government agencies with deep coffers are

more vulnerable to costly litigation and possible

heavy damages. As long as product liability law

remains as it is, both the agencies and the

companies would like to shift as much liability as

possible onto other parties; both, however, would

welcome some limitation of liability. No policy

option is proposed here, however, for the Office

of Technology Assessment (OTA) has not done

an extensive analysis of product liability in this or

other contexts.
60 I Defense Conversion: Redirecting R&D

MEASURING THE VALUE OF

COOPERATIVE R&D

Even if the process of initiating CRADAs can

be made to work more efficiently, longer-ter m

questions of how to measure the value of th e

agreements remains. This point is particularl y

stressed by R&D providers other than National

labs, who view the labs as having more or less

carte-blanche funding without the accountability

built into other institutions-for example, the

peer review system or the competition for National Science Foundation (NSF) grants among

universities, and the necessity of satisfying paying clients among privately-funded R&D institutions.

Ideally, we could develop measures of the

efficacy of R&D that could gauge the performance of any institution. However, R&D is notoriously difficult to measure adequately. Standard

economic measures used to rate the performance

of policies or businesses can be applied to R&D,

but with so little precision and accuracy as to

render them nearly meaningless. For example, we

can measure the performance of the economy in

terms of value added and numbers of jobs created

(among other things). But when we try to use

these to compare various R&D projects, the range

of interpretation is vast. Public investments.

many decades ago, formed an essential part of the

development of the American semiconductor and

computer industry. Without the military’s support

of early efforts to design and build integrated

circuits and electronic computers, it is likely that

the industries would look very different today, but

it is impossible to tell how different. We might,

for example, be one to several generations farther

behind in technologies essential to the industries,

or technologies may have taken a different turn

altogether. Probably the least likely scenario is

that things would be pretty much as they are. Yet

it is clearly incorrect to count the entire volume of

sales or numbers of jobs involved in these

industries as benefits of the original public R&D,

not to mention the jobs and value added in

industries downstream, that depend on modern

computation and circuitry. R&D is only the initial

link in a long chain of activities and investments

that end up creating value and employment;

without it, the entire chain might disappear, yet it

is by no means the only critical link.

Other problems abound. Private R&D institutions point out, probably correctly, that R&D at

the National labs costs roughly twice what it costs

at private institutions, on a per-researcher basis.

This is an important consideration, but it does not

mean that anything that could be done at a

National lab could be done for half the cost at

another institution. Different performers have

different strengths, and different facilities. It is

hard to generalize about these different abilities,

but a few (possibly overstated) may be valid. It

may be the case, for example, that DOE weapons

labs are uniquely suited to carrying out R&D that

demands the sophisticated facilities and computational power they possess, especially if the

problems are long-term in nature and highly

complex. Private R&D labs, either stand-alone or

within companies, are usually regarded as better

at doing R&D that is more tightly focused on

commercial products or processes and bringing

the results in at a time when they can be useful in

production. Universities are often regarded as

having particular value in pursuing things more at

the research than the development end of the

spectrum-investigating new approaches to problems, exploring the scientific bases for technologies. These are, as stated above, generalizations;

universities have contributed to near-term technological problems, for example.

Perhaps the best measures of performance are

less quantitative and more judgmental. Some in

industry have suggested that the ultimate yardstick of CRADAs is whether companies are
2—Policy Issues and Options 61

willing, after 5 years or so28 of experience, to

continue to put in significant amounts of money

to cooperative R&D with the labs, and whether

key company researchers are encouraged to spend

significant amounts of time participating in the

projects. In the short run, the fact that industry is

willing to put up money to fund many more

CRADAs than DOE has money for can be

interpreted as a measure of faith that cooperative

arrangements can be made to work, perhaps

tempered by the experience of a few companies

with longer-standing cooperative arrangements

(like the Specialty Metals Processing Consortium

at Sandia—see ch. 4 for details).

Policy Option 8: Develop Ways to Evaluate

Cooperative R&D

The fact that the best measures of CRADA

performance are somewhat judgmental and may

be several years coming is not an admonition

against attempting evaluation. R&D money is

precious, and scarce. If the labs prove to be

inefficient or slow R&D providers for the private

sector, shifting money to other providers (after a

fair trial period) is prudent. Congress could direct

the Secretary of Energy to develop an evaluation

procedure for cooperative R&D. Another option

is to direct OSTP to develop a more generic

evaluation procedure for all cost-shared R&D that

involves government and private funds.

STRATEGIC DIRECTION OF COOPERATIVE

TECHNOLOGY DEVELOPMENT

The options laid out above aim mostly at

streamlining the process of developing and initiating CRADAs. In a few cases, that streamlining

comes as a direct result of downplaying or

eliminating agencywide strategic direction, which

is now provided by the LCB process in Defense

Programs. The LCB process, described in greater

detail in chapter 4, consists of reviews of each

proposal by two groups of lab staff (one technical

experts and one composed of the heads of the

Offices of Research and Technology Application

at each of the sites in the DP research complex)

and, eventually, in parallel, an industry advisory

board. 29 The prioritized list of fundable research

projects that results is both a form of peer review

of research and a safeguard against unnecessary

redundancy (some being desirable) among research projects.

Within limits, the LCB review process also

gives DOE’s DP staff some ability to allocate its

CRADA funds to strategic industries or critical

technologies, either in accord with agencywide

plans or with broader, multiagency technology

policies. For example, Warren Chernock, the

Deputy Science and Technology Advisor of

Defense Programs, had developed tentative plans

in mid-1992 to allocate $75 million over 5 years

to semiconductor lithography, and $10 million in

fiscal year 1993 money to a program to develop

better flat-panel display technologies. Chernock

also had plans to allocate CRADA money (ranging from a few million to over $20 million) to

programs in advanced materials and ceramics,

manufacturing, and transportation technologies.

Many of these technologies were identified by

Congress, DoD, and the OSTP as critical to both

military and economic security of the United

States.

28 Five ~ea~ ~m not ~ick~ at ~ndom. Most of tie p~cip~~ agree titit took Sematech a couple of years tO get On the right ~C~ ~d

then another couple to start making real progress. By the end of 5 years, Sematech’s members are in agreement that the consortium has

contributed substantially in tangible and intangible ways to their competitiveness. Sematech is credited by members and observers with

revitalizing the American semiconductor production equipment industry, and a few insiders speculate that if it hadn*L some of the

semiconductor companies might not be in business at all now, It has also contributed to lowered costs per wafer, another boost to

competitiveness. Finally, it has significantly improved communication and coordination within the industry, vertically and horizontally. Now,

in its sixth year of operation, Sematech continues to contribute substantially to American semiconductor manufacture, and member companies

are willing to dedicate substantial amounts of money and the time of important company representatives to Sematech.

29 s.f~, fie indus~ advisory board is not pm of the review process. Officials in Dp hd initially planned to gather ~ industry bored tO

advise the LCB, but by April 1993, the group did not yet exist.
62 I Defense Conversion: Redirecting R&D

The purpose of the LCB process is clear and

logical. Some kind of internal screening will be

necessary should DOE participate in governmentwide initiatives to advance specific technologies,

and the process makes sense even if it is only

applied within the agency, given the large size

and scope of DOE’s R&D program. The downside is that this level of internal screening

prolongs the CRADA process by several months,

trading expedition for oversight. In the short run,

in order to streamline CRADA initiation, it might

be worth sacrificing some control over the portfolio of research covered by cooperative R&D.

Otherwise, the lively interest industry has recently shown in R&D partnerships with the labs

could evaporate. In the longer run, once DOE and

its field offices and labs become more accustomed to CRADAs, it might be desirable to rank

CRADA activities to fit within strategic initiatives to develop specified technologies, without

delays of months for proposal selection. For

example, proposals for joint R&D superconductivity are processed much more rapidly than

CRADAs. Perhaps other technology initiatives

could be identified, allowing the agency to

process pertinent proposals on a faster track.

Interest is growing in allocating at least some

money and effort to specific technologies or

industry sectors on the basis of their contributions

to economic well-being or National security. The

competitive position of many of America’s hightech industries is too precarious for comfort, even

though private and public efforts have improved

competitiveness in many sectors over the past

decade. Critical industries and technologies make

disproportionately large contributions to National

well-being through creation of larger than average numbers of highly skilled, well-paid jobs; the

promise of productivity or product improvement

in many industries; and, in many cases, fastgrowing markets here and abroad. Yet many fear

that, without new initiatives to advance critical

industries and technologies, market signals and

current government programs alone are insufficient to assure that American companies maintain

prominent places among the world’s best competitors.

While the pressures for both economywide and

sector-specific policies to improve competitiveness have grown, the American approach toward

such policies has been mostly not to adopt them,

except where military security is concerned. Over

the past decade, the United States has embarked

on a few initiatives aimed at improving the

performance of sectors whose contributions to

defense needs were irreplaceable, but whose

ability to make those contributions depended

mainly on performance in primarily civilian

competition. Sematech was one such initiative;

ARPA’s work in semiconductor manufacture and

flat panel displays also count.

1 The High Performance Computing and

Communications Program

An example of a different approach to sectorspecific technology policy is the High Performance Computing and Communications Program,

or HPCCP. The program’s goal is ‘‘to accelerate

significantly the commercial availability and

utilization of the next generation of high performance computers and networks.’ ’30 HPCCP has

four component programs.

1.

2.

High Performance Computing Systems

(HPCS), aimed at developing innovative

systems to provide a 100- to 1,000-fold

increase in sustained computational capability over conventional designs;

Advanced Software Technology and Algorithms (ASTA), whose objective is to match

hardware improvements with new and innovative software and algorithms;

30 Feder~ cw~~~ Comcil for Science, -ee@, and Tec~o@y, Grand Challenges: High pe~ormance computing and

Communications, A Report by the Committee on Physical, Mathematical, and Engineering Sciences, To Supplement the President’s Fiscal

Year 1992 Budget, no date, p. 2.
2—Policy Issues and Options 163

3.

4.

The National Research and Education Network (NREN), which aims to expand interconnected computer networks in the United

States, and greatly enhance the capabilities

of the network; and

Basic Research and Human Resources

(BRHR), aimed at meeting long-term National needs for educated and trained people

capable of sustaining greatly expanded high

performance computing.31

Many of the activities of HPCCP began as

efforts on the part of individual agencies in the

early 1980s. For example, NSF established several National Supercomputer Centers to serve the

science and engineering community, and connected them with the research community on a

net work called NSFNET. ARPA funding

spawned the first generation of commercial,

scalable parallel computer systems. DOE expanded an existing computer network of the

National Magnetic Fusion Computer Center to

serve users of energy research in National laboratories, universities, and industries; several DOE

labs also formed computational groups to experiment with high performance computing and

develop advanced algorithms. NASA established

a National data network to link researchers in

computational aerodynamics through the Numerical Aerodynamics Simulation facility at its Ames

research laboratory .32

In 1986, Congress directed that OSTP study the

problems and options for communication networks supporting high performance computing.

The charter of the the Federal Coordinating

Council for Science, Engineering, and Technology (FCCSET) Committee on Computer Research and Applications was broadened to accommodate the study. The Committee’s report, High

Performance Computing Strategy, formed the

basis for the four components of today’s HPCC.

Congress put its imprimatur on the program with

the High Performance Computing Act of 1991,

which now has an overall budget of $805 million.

While the program has been criticized on a few

counts, HPCCP enjoys widespread approval and

support, both among the agencies that are part of

it and among industry observers. According to

one source at DOE, the program increased the

emphasis given to high-performance computing

within the agency, while also helping to eliminate

needless redundancies among agencies. In addition, it has several attributes that could guide

Congress as it considers the longer-term future of

the DOE labs. There are doubtless several technologies to which many Federal agencies and

several institutions in the R&D infrastructure

could contribute, including many of the technologies on the DOE headquarters list. While lab/

industry partnerships enacted on a first-come-firstserved basis would doubtless end up concentrating on many critical technologies simply because

they are of great interest to both the public and

private partners, uncoordinated funding of individual partnerships is not so likely to advance

critical technologies as a well-designed multiagency strategic program.

The key phrase is “well-designed.” While

good planning will probably mean that the shape

of the initiative depends on the characteristics of

the industry, technology, and competitive position, several generalizations are possible. One is

that the core competencies of all the participating

Federal R&D performers are exploited appropriately. Hastily planned programs sometimes err in

the direction of adding too many new missions to

existing agencies, and even competent institutions are rarely capable of a dramatic change.

Another characteristic of a good criticaltechnology initiative is that it builds in significant

and ongoing roles for private companies and other

institutions. Initiatives with the sole or primary

31 ~id$, pp. 12 to 21.

32 Executive Offiw of tie presiden~ The Federal High Performance Computing Program, OffIce of Science and Teckology policY, SePt8, 1989, p. 9.
64 I Defense Conversion: Redirecting R&D

mission of boosting competitiveness need substantial and continuing guidance and participation from industry. Industry is usually the end

user of technology generated with Federal spending, and must be involved at all stages in order to

increase the chances for success.

Critical technology initiatives are also likely to

work better if they have clear, concrete goals,

milestones, and performance metrics. They must

be given time to work—and not evaluated too

soon after birth-and they must have the freedom

to take risks. This, in turn, means that they must

possess the ability to sustain failures from time to

time, without necessarily risking immediate cancellation. However, the ability to cancel an

initiative when it has failed too many times, or

when it has succeeded to the point where it is no

longer needed, must exist in reality, not just on

paper. This principle may be especially important

for OSTP, which has emerged as a more important player in initiating and coordinating Federal

technology initiatives, and which has had more

difficulty than other agencies in obtaining advice

from industry.

In isolation, these guidelines are mere platitudes; they will mean different things in different

initiatives. It might be wise to examine the

conduct and structure of past technology initiatives, particularly successful ones, for some

guidance in the preparation of new ones. HPCCP,

while not a completed success story, is worth

examining, as are Sematech and NASA’s aeronautics research program (stretching back many

decades, including the work of NASA’s predecessor, the National Advisory Committee on Aircraft).

Based on the analysis conducted for this

assessment, OTA is not prepared to suggest

which of the many possibilities for new national

R&D initiatives that have been proposed are the

best candidates for Congressional consideration.

The following policy-related discussion should

serve as a general guide to selection and construction of broad critical-technology issues, using a

few examples for clarity; it is not a recipe for

initiatives in the technologies used as illustrations.

NEW NATIONAL INITIATIVES

The “peace dividend” that accompanies the

end of the Cold War will not be hard to spend; in

fact, quite the opposite. Defense cuts are already

spoken for by a growing list of petitioners. While

a high priority for any Administration has to be

deficit reduction, the powerful arguments for

finding new investments to repair national problems and mitigate the economic impact of the

defense cuts have also had an effect. Even after

winnowing away the half-baked ideas, proposals

for new national initiatives outnumber the resources that could be dedicated to them, without

a major overhaul of the Nation’s fiscal policies

and priorities. Intelligent development of new

initiatives will depend on our ability to select a

few, based on their potential for conferring broad

public benefits.

One factor in selecting the initiatives is their

ability to match the things the Nation values most

in its shrinking defense establishment (excepting,

of course, its ability to defend the Nation). For

example, the defense complex supported a disproportionate share of the Nation’s R&D, some of

which was applied broadly; advanced technologies in many civilian industries can be traced to

DoD support. Defense was also a large provider

of relatively well-paid, high-quality jobs, and

many of the proposed new initiatives have been or

should be held up to the employment yardstick.

DoD also provided a large market for goods and

services; the size of the market for products of a

new national initiative will also be a consideration. The smaller the eventual market, the less the

opportunity to mitigate the damage done by

defense cuts. Finally, as conversion opportunities, the extent to which existing defense-related

institutions like DOE weapons labs can contribute to new national initiatives could be important,

though it ought not be the highest priority.

Whether all of these can or should be used as a
2—Policy Issues and Options ! 65

sieve for selecting new national initiatives is a

question. The best way to understand how such

criteria might work is through the use of some

examples.

One obvious choice is environmental restoration and waste management. It is a frontrunner

because, in a sense, it is already a $200 billion

enterprise. A number of programs, run by different agencies and governmental units, are already

in place, though they could hardly be called

coordinated. Cleanup as a national initiative has

many of the attributes of a good replacement for

defense: the government has a great need for

environmental remediation technologies, products, and services and is expected to continue

providing a multibillion dollar market; the output

is a public good; there are many possibilities for

spillovers to other sectors.

U.S. employment in a range of environmental

jobs was about 970,000 in 1991, and was expected to rise to nearly 1.5 million within 5 years.

U.S. sales of environmental goods and services

were about $120 billion in 1991 and rising at the

rate of 7 percent a year.33 The world market is

estimated at $200 billion and growing at an

annual pace of 5 to 6 percent, faster than the

expected average growth of any advanced national economy. 34 Environmental cleanup (along

with other environmental concerns) is high on the

agenda of public policymakers all over the globe,

so both growth prospects and opportunities to

develop and test new technologies should be

outstanding for the foreseeable future.

Finally, environmental restoration is a large

and growing focus of activity at DOE. All nine of

the multiprogram labs are working on environmental remediation and waste management (EM).

DOE’s interest in the problem stems largely from

the fact that the agency’s weapons complex (not

just the labs, but the weapons manufacturing and

nuclear waste management facilities) is a big part

of the hazardous waste problem. Over 3,700 sites,

covering 26,000 acres, are contaminated. Four

sites—Hanford, Washington; Rocky Flats, Colorado; Fernald, Ohio; and the Idaho National

Engineering Laboratory (one of the nine multiprogram laboratories)--present particularly nasty

radioactive and hazardous waste problems. The

three weapons labs all have special expertise to

devote to improving traditional cleanup methods

and developing new restoration technologies.

If environmental remediation is an obvious

choice for a national initiative, then companion

pieces might be considered as well. That we need

to cleanup the waste of the past decades is crystal

clear, but cleanup, as currently conceived, is an

after-the-fact approach. In the future, demand for

technologies that create less or, if possible, no

pollution is expected to increase. Pollution prevention is, however, an umbrella; the technologies for pollution prevention are probably more

numerous and more varied than for cleanup, since

pollution prevention can mean many different

things even within even one industry. For example, in motor vehicles it could encompass projects

aimed at creating cars with completely recyclable

parts, eliminating greenhouse gases and other

polluting emissions through new propulsion technologies, and several changes in manufacturing

methods to reduce or eliminate the pollution and

waste heat generated there. How good a candidate

pollution prevention makes depends heavily on

what projects are included; without greater specificity, this option is hard to compare with other,

more concrete, proposals.

Another theme that has often been raised for

new national initiatives is transportation. Ideas

for new transportation initiatives are varied—

some propose new infrastructure projects; others

focus on high-speed ground transportation, super3J Dam provided to OTA by the Environmental BUShXS JOIKd.

M D~, Clyde w+ Fm& Depu~ Assist~t s~re~ for Technology Developmen~ Offlve of mvironment~ Restoration ad ‘Xte

Management, DOE, statement at the conference, Environmental Technology Transfer from the DOE National Labs, Washington, DC, Nov.

11, 1992.
66 I Defense Conversion: Redirecting R&D

sonic commercial air travel, or nonpolluting cars.

All of these may have merit in meeting transportation goals; OTA has not evaluated them on that

basis for this report. As defense conversion

initiatives, some look better than others.

One of them, nonpolluting cars (and other

motor vehicles), is already in the works, in a small

way. Most developed nations, particularly those

with automobile industries, have invested in

alternative fuel-alternative vehicle programs, especially in ones to develop technologies for

electric or hybrid vehicles whose propulsion

systems have few emissions. In the United States,

several defense firms are interested in using their

experience with electric propulsion systems to

build powertrains for electric vehicles; Westinghouse Electric’s electronic systems group, for

instance, is cooperating with Chrysler in such a

program. Many DOE labs could make contributions, based on ongoing research programs, to

electric vehicle technologies. In fact, DOE’s

Conservation and Renewable Energy Program

has a fiscal year 1993 budget of nearly $60

million for electric and hybrid vehicle research,

most of which is being spent on the U.S.

Advanced Battery Consortium (USABC), formed

in 1991 as a collaborative effort among the Big

Three automakers and DOE.

For several reasons, electric vehicles (EVs),

which depend completely or substantially on

batteries for propulsion, are unlikely to replace

internal-combustion vehicles in all market segments, although there are niches (such as vehicles

for in-town mail delivery) for which EVs could be

eminently suitable. In addition, EVs are likely to

have some near-term market potential in meeting

stiffer air-quality statutes, beginning with California’s Clean Air Act Amendments of 1990,

which requires that 2 percent of the vehicles sold

in California by 1998 have zero emissions, with

the percentage increasing to 10 percent by 2008.

USABC is aimed only at developing battery

technology, which will be necessary for electric

vehicles, but could contribute to an effort to

develop hybrid vehicles35 as well. Should the

United States opt to extend its effort to contribute

to electric vehicle technologies, it could build on

the experience and contributions of USABC in

crafting a program aimed at developing the

technologies needed for hybrid vehicles. As a

defense conversion initiative, such a program has

several attractions: the expertise of several defense contractors and Federal labs can already

make a contribution, offering those that are

interested some relatively straightforward opportunities for conversion; and the potential market

is enormous, both in the United States and

offshore. The R&D investment needed to overcome the rather formidable technical challenges

is substantial, which probably means that a

vehicle initiative would offer the promise of many

of quite highly paid and high-value-added R&D

jobs over the next several years. There are many

legitimate public goals that could be fulfilled if

the program is successful. It could help eliminate

America’s dependence on imported oil and contribute to environmental goals, as well as provide

opportunities to companies, labs, and workers

hurt by defense cutbacks (though the latter is, as

stated before, not the highest priority).

High speed surface transportation-in particular, maglev trains-is also often proposed as a

new initiative, but here there may be fewer

attractions, at least as far as defense conversion

opportunities are concerned. Maglev or highspeed rail systems could contribute to many

transportation goals, but most analysts agree that

potential applications are limited to a few heavily

traveled corridors like the Eastern seaboard, parts

of the West Coast, and a portion of Texas, at least

if the system is to be liberated from continued

heavy public subsidy. There may be other growth

opportunities abroad, but several foreign companies are already better positioned to take advantage of them than American companies, several of

which are struggling just to survive startup. There

35 ~ MS repofi, tie term hybrid vehicle refers to vehicles that use, for example, a battery and a fuel cell, for propulsion.
2—Policy Issues and Options 167

are, however, many ways that national labs and

probably several defense companies could bring

relevant expertise to bear on the problems of

maglev systems, should such an initiative be

adopted. In particular, high speed systems need

vehicles made of strong, lightweight materials, an

area in which the defense sector is a leader. Also,

maglev systems might become a market for high

temperature superconducting magnets; three DOE

multiprogram labs (Los Alamos, Argonne, and

Oak Ridge) have ongoing cost-shared projects

with industry on commercial applications of high

temperature superconductivity.

I New Missions, New Institutions

Whatever initiatives are chosen, it seems clear

that they will involve many agencies and hundreds, maybe thousands, of private companies. It

is also quite likely that many of the initiatives now

under discussion are broader than the mission of

any single government institution or agency,

which brings up the question of who should

manage such initiatives, and how. The immediate

problem may be how to deal with changing size

and missions of DOE labs (and likely DoD labs

and test facilities as well), but the long-term

solution is probably not to try to give DOE, DoD,

or any of their labs the primary mission of

managing new national initiatives. Indeed, some

of the institutions formerly devoted wholly or

mostly to defense technology development may

be unable to adapt well enough to civilian market

conditions to play major roles in civilian technology development, despite current hopes. Some,

anticipating this development, have suggested

that this is the time to consider new national

technology-development institutions to help the

U.S. economy adapt to the post-Cold War world.

Another approach is to assign new, broader

missions to existing institutions that already have

responsibility for technology development.

One suggestion that has been raised a few times

is to make one or more of the DOE multiprogram

labs into centers of excellence for technology

transfer. The Secretary of Energy Advisory Board’s

July 1992 report, for example, says:

The Task Force recommends that the Department designate several National Laboratories, for

example, Sandia and Oak Ridge national labs

which are considered to have successful technology transfer programs, to become technology

partnership “centers of excellence. ” These centers could lead the DOE Complex and other

Federal R&D centers in developing the most

effective processes for including the private

sector in the planning and developing of technology projects, and making technology available

for private sector use. The Department should

target roughly twenty percent of the base funding

for technology R&D programs to be committed to

long-term, large-scale partnerships with the private sector at these experimental centers.36

Others have proposed larger-scale reorganizations along similar lines. One suggestion, for

example, was to turn one of the weapons labs into

a civilian technology development center. One

difficulty with suggestions of this kind is that they

beg the question of what technologies the labs

will have to transfer, assuming significant shrinkage of their defense missions. One reason for the

avid interest in CRADAs that many companies

have shown is the repository of technologies

available, and that repository, in turn, is a result

of years of generously funded work in nuclear

weapons development and management. Without

some new mission or missions, interest in partnerships might decline after the initial few years,

after industry discovers the research that has long

been inaccessible to it, at least in the weapons

labs. There is a great deal of interest in finding

new missions for DOE labs, but only as part of

larger, national missions to do things like cleanup

the environment, develop nonpolluting transpor36 SEA.B, op. cit., footnote 3, p. 8.
68 I Defense Conversion: Redirecting R&D

tation systems, and the like. DOE labs have a

great deal to contribute to some new national

initiatives, but few can envision them taking the

major responsibility for research or management

of a new set of national R&D goals.

This is not meant as a condemnation of DOE or

its labs; there is currently no agency or laboratory

with the charter of performing research or leadership functions for broad national technology

initiatives that span jurisdictions of existing

agencies. Institutions of this sort do exist in other

nations, but usually under the auspices of a

Federal agency for science and technology. Agencies like the Federal Ministry for Research and

Technology (BMFT) in Germany or Japan’s

Ministry of International Trade and Industry

(which contains Japan’s science and technology

agency) have many technology-policy responsibilities, including funding R&D labs that contribute to civilian technology development, often

with substantial private matching funding.

BMFT, for example, had a budget of $4.4

billion in 1992, more than half the money the

German Government spent on R&D.37 Its missions are: to contribute to innovation supporting

Germany’s environmental and economic goals; to

pursue a variety of long-term scientific and

technological developments such as space exploration, nuclear fusion, and advanced transportation; to increase the pool of human knowledge;

and to expand knowledge about environmental

threats in order to contribute to policy decisions.

BMFT funds R&D at four kinds of institutions,

including national labs that resemble DOE labs in

many ways. Another, the Fraunhofer Society (or

Fraunhofer Gesellschaft, FhG) consists of 47

R&D institutions, funded at nearly $453 million

in 1992, that aim to promote innovation in

civilian technologies and transfer research results

to practical use in industry. About 30 percent of

FhG’s funds come from industry contracts to

develop specified technologies; the rest comes

from Federal and state governments. FhG are

considered

their goals,

quite successful in accomplishing

though institutes that concentrate on

longer-term, riskier technologies have more trouble

attracting industrial support than those whose

work focuses on technologies with a more immediate payoff. Broadly speaking, the FhG resemble

some of the proposals made for DOE labs’

metamorphosis, or alternatively, for some newlycreated institution in the United States. For a

variety of reasons, it is hard to see DOE labs

performing like FhG institutes-the greatest difficulty, of course, being that the DOE has a far

different charter than BMFT.

Another idea is to transfer some DOE labs (and

possibly other Federal laboratories) to a different,

or new, agency with responsibility for implementing national technology policies. For example, if the United States created a Department of

Industry and Technology, or a National Technology Foundation, it is possible to imagine such an

agency taking on the administration of some parts

of the Federal R&D infrastructure, or at least

contributing heavily to the missions and funding

of labs belonging to other agencies under the

auspices of national technology initiatives. There

have been several bills in past Congresses to

create a new Cabinet-level or other executive

agency for technology policy,

Without an agency whose marching orders

include technology development in pursuit of

national goals, those seeking a home for the

management of national technology initiatives

may continue to focus on reconfiguring existing

agencies whose missions are somewhat similar.

NIST is sometimes raised as a possibility for the

Nation’s technology agency, and it has been

given several new programs to manage in the last

few years. These include the Advanced Technology Program, Manufacturing Technology Centers, and the Baldridge Award. In addition, NIST

runs four labs that, though modest in size, have

good reputations for cooperative technology development with industry.

37 See tie App~ to pm One for a discussion of German R&D iIIStitUtiOIIS.
2—Policy Issues and Options 169

ARPA has attracted even more attention.38

ARPA is responsible for most of what DoD does

in advancing high-risk, high-payoff technologies.

Increasingly, DoD is interested in technology

advances made in civilian markets that are

applicable to military needs-and are often cheaper

and more advanced. ARPA portfolio of research

projects is now about two-thirds dual-use.39 On

the dual-use side, ARPA managers often prefer

working with civilian companies or civilian

divisions of companies that do defense work, so

as to help assure wide diffusion of the technologies that are developed. ARPA is not a research

performer, but instead uses a variety of mechanisms-including contracts under which ARPA

pays for all research, and cooperative agreements

in which ARPA shares funding with companies

and universities-to advance technology both in

military systems and throughout the community

of companies and other institutions on which

DoD depends.

ARPA is considered very successful in supporting long-range, relatively speculative technologies that private companies (whether or not

they depend mainly on DoD for business) would

invest little or no money on their own. It has had

failures, but it could not fulfill its mission

properly without taking risks, and there is no

reasonable expectation that every risk could pay

off. In fact, ARPA is so often touted as a success

in technology development that, even while the

rest of the defense establishment is in the midst of

shrinking missions and budgets, ARPA’s budget

has been augmented far above its request, and its

missions have been broadened to include activities with which it has no experience. ARPA’s

1993 budget of $2.25 billion is more than 50

percent above its 1992 budget, and it has been

given responsibility for managing several new

programs for defense conversion. The largest of

these new responsibilities are the Defense DualUse Extension Assistance program, aimed at

helping defense companies develop dual-use

capabilities ($95.4 million in fiscal year 1993);

Regional Technology Alliances, which would

fund regional centers to apply and commercialize

dual-use technologies ($95.4 million); and the

Defense Manufacturing Extension program, to

share the costs of supporting State and regional

manufacturing extension programs to aid small

manufacturing companies to convert to civilian

markets (also $95.4 million). These extension

programs are very different from anything ARPA

has done. ARPA has also been given four other

new conversion programs aimed at codeveloping

dual-use technologies and supporting manufacturing process technologies and education, with

funding that totals $128.8 million. Other dual-use

programs were continued and given additional

funding.

These new programs effectively broaden ARPA’s

mission, just as earlier proposals to turn the

agency into the National Advanced Research

Projects Agency (NARPA) would have. A NARPA,

according to one report, could support dual-use

technologies; fund long-range, high-risk, highpayoff technologies; and advance technologies

that would help other government agencies fulfill

their missions.40 Turning the agency into NARPA

would, argued proponents, give it a permanent

mission to advance dual-use technologies, considering the effect such technological advance

would have on both military and economic

security.

Whether or not ARPA, or NARPA, could

function as the implementation agency of the

Nation’s technology policies and initiatives is

unknown. It does a good job of advancing more

speculative technologies of interest to the military, Many of the needs that drive the military’s

38 see Ch. 5 for a more detailed discussion of ARPA.

39 see Ch. 5 for details.

40 Technology ~~ Economic Pe#ormnce: the Executive Branch for a Stronger National Technology Base mew York:

Carnegie Commission on Science, Technology, and Governmen6 September 1991, p. 7.
70 I Defense Conversion: Redirecting R&D

need for goods and services also propel competition in civilian markets, and vice versa; to some

extent, ARPA can be said to have experience in

managing national technology initiatives. Yet

unless it is removed from DoD--in which case

DoD would be worse off, in the eyes of many

analysts-it is possible that military needs might

still dominate ARPA’s agenda, especially if there

is a resurgence of concern for military security in

the future. It is also uncertain that ARPA, with no

additional staff, can cope adequately with its

various new missions, or that its particular

expertise will equip it to manage things like

technology extension.

In short, there is no perfect home for management of new national initiatives in the executive

branch. Many agencies might be made to function

adequately, if the initiative chosen fits largely (if

not completely) within its existing charter and

experience. Initiatives that span multiple departments and agencies, and cannot be mostly contained within any one, might prove difficult to

coordinate in the continued absence of an executive agency charged with implementing national

technology policies and initiatives.
PART ONE:

Redirecting

Research and

Development

in Federal

Laboratories and

Agencies
Nuclear

Weapons

Laboratories:

From Defense to

Dual Use 3

T

he Federal Government pays for nearly half the research

and development (R&D) done in the United States, and

defense dominates the government’s share. In 1992,

Federal spending for military R&D was $41.5 billion, or

nearly 60 percent of all government R&D, amounting to $69.8

billion. It was over one-quarter of the Nation’s $157.4 billion

total bill for R&D, spent by industry, government, universities,

and nonprofit institutions (figures 3-1 and 3-2).1

The predominant role of defense in Federal R&D has held for

many years, and indeed was an even more prominent part of the

government’s, and the Nation’s, R&D in earlier decades.

Through its sponsorship of cutting edge technologies and its

sheer size, defense R&D spending over the years has been an

important source of technology advances that spilled out into the

whole economy, sometimes fostering the growth of entire new

industries, e.g., semiconductors and computers. As a spur for

civilian technology advance and economic growth, military

R&D was unfocused and unpredictable but often it worked—

especially when the Department of Defense (DoD) also served as

a large, reliable first customer of the new technologies. It was this

1 The total of $41.5 billion for military R&Din fiscal year 1992 included $38.7 billion

by the Department of Defense and $2.8 billion by the Depaxtrnent of Energy for

defense-related atomic energy R&D. (National Science Foundation Nationul Patterns of

R&D Resources: 1992, NSF-92-330 (Washingto~ DC: 1992), table B-21 and unpublished data provided to the Office of Technology Assessment by the National Science

Foundation). This figure does not include Independent Research and Development

(IR&D) with potential military relevance done by private fins. Private IR&D amounted

to $3.8 billion in 1989 (the last year for which data are available), of which the government

(the Department of Defense and National Aeronautics and Space Administration)

reimbursed $1.8 billion.

73
74 I Defense Conversion: Redirecting R&D

Figure 3-l-National R&D Spending

by Source, 1992

Other

5%

Total $157.4 billion

SOURCE: National Science Board, Science and Engineering lndicators1991 (Washington, DC: U.S. Government Printing Office, 1991), table

4-1.

combination of defense R&D and defense purchases that launched the semiconductor and

computer industries.

The long-term decline in defense spending

following the end of the Cold War will almost

certainly mean eventual declines in military

R&D.2 This raises some issues of prime importance to the civilian side of the economy. Continued American preeminence in R&D-historically a strength of the U.S. economy—is not

assured; after rising for years, R&D spending has

remained essentially flat since 1988. Sustained

losses in military R&D spending will rob civilian

enterprises of one important source of technology

advance, unless they are made up in some other

way. A related issue is what use can be made of

the research institutions and people, many of

Figure 3-2-Federal R&D Funds,

by Budget Function, 1992

Energy

4%

General

science

4%

Space

1 10/0

13%

SOURCE: National sciemx Board, Menee arxfEngkreeting kxiimtor~

1991 (Washington, DC: U.S. Government Printing Office, 1991), table

4-17.

them highly skilled scientists and engineers, who

have served a defense purpose that is now

declining or vanishing. Are there ways to turn

these resources to good use on the civilian side of

the economy and thus help to improve our

competitive performance? These issues are the

subject of this chapter.

Another implication of the decline in defense

R&D is that future weapons systems may come to

depend more on technologies and devices developed for civilian uses; already, many electronics

devices in commercial use are far more advanced

than those developed for strictly military purposes. One of the central policy questions for

defense planners in the post-Cold War era is how

to foster dual-use technology development and

encourage the armed services to buy commercial

products when they are cheaper or better than

products custom designed for the military. 3

z It my, however, hold Up better than procurement. In fiscal year 1993, DoD funding included a 1 percent real h~e~e in R~ but a 13

percent decrease in procurement. Over the longer rUIL R&D will probably decline, but to a lesser degree than procurement it may assume a

relatively more prominent part in a new post-Cold War defense strategy. For discussion of such strategies, see U.S. Congress, Office of

Technology Assessmen6 Bw”lding Future Security: Strategies for Restructuring the Defense Technology and Industrial Base, OTA-ISC-530

(Washington DC: U.S. Government Printing Office, June 1992).

3 For Yws, ~ntics of~~procmement ~ve ~ged review of audit and r~rdk~p~ r~uir~enfi tit discourage my cOIllXll~Ciid

compania from selling to the military, and reform of the antiquated system of designing and building to military speci.tlcations. Change has

been minimal. However, deep and sustained cuts in military budgets have created urgent new reasons for modernizing procurement. Ibid., pp.

100-103.
3--Nuclear Weapons Laboratories: From Defense to Dual Use 175

Though dual-use technology development and

production is not as central to commercial competitive performance as it is to managing a

smaller, leaner defense system, it is still relevant.

Defense is going to remain a major source of

R&D support, and it will still be a big market for

goods and services from private firms even at half

the size it was in the 1980s.4

In considering how to compensate for losses of

military R&D and how to use the people and

resources formerly devoted to it, public policy

can have most effect in research institutions that

the government operates or supervises. Although

two-thirds of defense R&D dollars are spent in

private industry (figure 3-3), public policy has a

stronger and more direct influence on the conduct

of government R&D than on how private firms

manage their laboratories and research teams. The

focus of this chapter is therefore on government

laboratories that, up to now, have put most of their

effort toward military goals. Singled out for

special attention are the Department of Energy’s

(DOE) three big weapons laboratories—Los Alamos, Lawrence Livermore, and Sandia National

Laboratories-which, beginning with the Manhattan Project at Los Alamos, have designed and

engineered the Nation’s arsenal of nuclear weapons for half a century. With the collapse of

America’s rival nuclear superpower, that mission

is much diminished.

FEDERAL LABORATORIES

Out of a total Federal R&D budget of more than

$70 billion in 1992, $25 billion went to the

hundreds of laboratories owned or principally

funded by the U.S. Government.5 About $18

Figure 3-3-Department of Defense R&D Spending

by Performer, 1992

Government

NOTE: Figures do not include DOE spending for nuclear weapons R&D.

SOURCE: National Seienee Foundation, Federal Funds for Researeh

and Deve/opmenf: fiscal Years 1990, 1991 and 1992, Volume XL, NSF

92-322, (Washington, DC: 1992), table C9.

billion was spent in government-owned, governmentoperated labs (GOGOs), while the other $7 billion

went to government-owned, contractor-operated

labs (GOCOs) and to Federally Funded Research

and Development Centers (FFRDCs), which are

owned and administered by nongovernment institutions (e.g., universities) but do most of their

work for a government agency6 (table 3-l).

It is misleading to think of all the labs and the

entire $25 billion as equally available (or conversely, equally limited) for helping to advance

commercial technologies. The Federal laboratories are a varied lot, ranging from vast campuses

with thousands of researchers to single offices

within an agency or university staffed by 5 or 10

people. Many of the labs are relatively small

outfits, and even the big ones have widely

differing potential for forming industrial partner4 See chapter 5 of this report for a discussion of some of the dual-use projects supported by DoD’s Advanced Research Projeets Agency,

and the implications for competitiveness.

5 The figure of 726 Federal labs is often used but is misleadingly precise; the number varies depending on deftition. There is no readily

available count of all Federal labs using a consistent deftition, but “hundreds” is the right order of magnitude, R&D figures given in this

section are estimates for fiscal year 1992, and are Federal obligations for total R&D not including expenditures for R&D plant and equipment.

The source is National Science Foundatio% Federal Funds for Research and Development: Fiscal Years 1990,1991, and 1992, NSF 92-322,

Detailed Statistical Tables (Wash@to% DC: 1992).

6 Lincoln Laboratory, sponsored by the Air Force and administered by the Massachusetts Institute of Technology, is a leading FFRDC.
76 I Defense Conversion: Redirecting R&D

Table 3-l—R&D by Selected Government Agencies and Laboratories, FY 1992 (millions of dollars)

Department/Agency Total R&D Total Lab Intramural FFRDCs a

Department of Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Department of Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

National Aeronautics and Space Administration . . . . . . . . .

Health and Human Services . . . . . . . . . . . . . . . . . . . . . . . . .

National Institutes of Health . . . . . . . . . . . . . . . . . . . . . . .

Department of Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . .

Department of Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . .

National Institute for Standards and Technology . . . . . .

National Oceanic and Atmospheric Agency. . . . . . . . . . .

Department of the Interior . . . . . . . . . . . . . . . . . . . . . . . . . . .

National Science Foundation . . . . . . . . . . . . . . . . . . . . . . . .

$38,770

6,499

8,543

9,781

8,253

1,256

539

186

337

562

2,102

$11,596

4,698

3,499

2,039

1,559

826

431

144

272

482

211

$9,890

449

2,613

1,966

1,486

826

431

144

272

479

89

$1,707

4,249

886

74

73

●

o

0

3

123

● Indicates amount less than $50,000

a FFRDCS: F~eml& Funded Research and Development Centers.

SOURCE: National Science Foundation, Federal Funds for Research and Development: Fiscal Years 1990, 1991, 1992. Volume XL, NSF-92-322

(Washington, DC: 1992), table C-9.

ships and developing technologies with commercial promise.

About half the money going to government

labs is spent for nondefense purposes, much of it

by agencies that already have close, longstanding

relationships with private industry. The Department of Health and Human Services, which runs

the National Institutes of Health (NIH), had a lab

budget of $2 billion in 1992;7 in addition to its

strong emphasis on basic research, NIH supports

applied research of immediate interest to the

pharmaceutical, medical device, and biotechnology industries. The National Aeronautics and

Space Administration (NASA), which operates

the largest of the nondefense laboratories, spent

$3.5 billion in its labs in 1992. About 10 percent

of NASAs R&D is in aeronautics, which over the

years has been closely aligned with the needs and

interests of the commercial aircraft industry; in

fact, that is part of the agency’s statutory mission.

NASA’s space R&D, on the other hand, has less

direct links with commercial markets (even

though Earth-orbiting satellites and remote sensing have ultimately affected the civilian economy

in remarkable ways).

Other major, but smaller, players among civilian agencies are the Departments of Agriculture,

Commerce, and the Interior, some of them having

important industry ties. The central mission of the

Commerce Department’s National Institute of

Standards and Technology (NIST) and its labs is

to serve industry’s needs; NIST labs received

$144 million from their pa-rent agency in 1992,

but contributions from other agencies and private

industry collaborators brought the total up to

about $450 million. A large share of the $575 lab

budget of the Agricultural Research Service is for

applied research that is more or less directly

useful to American farmers, and at least a part of

the $147 million spent in the Forest Service’s labs

is likewise useful to the timber and wood products

industries. On the other hand, research in the

Commerce Department’s National Oceanographic

and Atmospheric Administration labs (funded at

about $272 million in 1992) is usually on

scientific subjects of less immediate interest to

industry.

T Note that the figures given here are only for R&D done in laboratories that the agency operates, owns, or funds, not for its entire R&D

spending. For example, HHS had an R&D budget of $9.8 billion in 1992 (table 3-l), with universities and colleges the major performers.

NASA’s whole R&D budget in 1991 was $8.3 billion (mostly for space), and private industry was the main pefformer.
3-Nuclear Weapons Laboratories: From Defense to Dual Use 177

The government’s defense labs have traditionally focused on their primary mission, which is to

develop military technologies, with any benefits

to the civilian side of the economy more or less

fortuitous. True, some big defense R&D programs have been sold to Congress and the public

partly on the basis of potential spinoffs to

commercial industry. A prime example is the

Strategic Defense Initiative. The same has often

been true of NASA’s costly space R&D which,

like military R&D, is targeted to a noncommercial government mission. However, for the past

dozen years, starting with the Stevenson-Wydler

Act of 1980, Congress has shown increasing

interest in urging Federal labs to transfer the

technology they develop for government purposes to private industry. Federal labs with

defense missions are big spenders, and are the

object of most of the urging.

Topping the list of government spenders for

in-house R&D is the Department of Defense, with

a 1992 lab budget of $11.6 billion. However, less

than half of the money going into DoD labs is

spent on research, development, testing and

evaluation (RDT&E) activities within the labs;

the rest is passed through to outside performers,

mostly defense contractors.8 With few exceptions

(e.g., the science-oriented multiprogram Naval

Research Laboratory), the Defense Department’s

R&D labs pass through well over half of their

budgets while testing and evaluation (T&E)

centers, such as the Navy Weapons Center at

China Lake, California, spend more than half

in-house (see ch. 6).9

The next biggest spender was the Department

of Energy, with $4.7 billion .10 In contrast with the

DoD labs, most of the funding DOE provides its

labs is spent in-house, and indeed is supplemented by about $1 billion from other Federal

agencies, mostly DoD. DOE labs also differ from

most DoD labs (and most other Federal labs as

well) in that they are GOCOs, owned by the

government but run by contractors-universities,

other nonprofit institutions, and private industrial

firms (some of the latter on a not-for-profit basis,

but some for profit). As discussed in chapter 4,

their status as GOCOs makes a difference,

sometimes favorable and sometimes not, in the

DOE labs’ abilities to work with industry in

developing advanced technologies.

This report, with its focus on redirecting

government R&D resources from strictly military

to dual-use and commercial applications, concentrates on the DOE nuclear weapons laboratories.

The term “weapons lab” usually refers to Los

Alamos and Lawrence Livermore, which design

8 Department of Defense In-House RDT&E Activities for Fiscal Year 1990, prepared for the OffIce of the Secretaxy of Defense, OffIce of

the Deputy Director of Defense, Research and Engineering/Science and Technology (WashingtorL DC: The Pentagou n.d.). This document

reports spending for total and in-house RDT&E activities in 91 Army, Navy, and Air Force facilities, employing about 100,000 civilian and

military persomel. Spending for the total RDT&E program was $8.4 billio~ with $3.9 billion (46 percent) spent in-house in fiscal year 1990.

These figures are not exactly compwable with R&D data collected by the National Science Foundation. They are mostly limited to RDT&E

activities where funding for in-house RDT&E k at least 25 percent of the in-house portion of the facility’s budge~ they do not include spending

in FFRDCS. See also Michael E. Davey, ‘‘Defense Laboratories: Proposals for Closure and Consolidation” Congressioti Research se~i%

Library of Congress, Jan. 24, 1991, P. CRS-6.

9 Ibid For exmple, at the big RDT&H COrnpleX at Wfight Patterson ~FOrCe Base, the six MD labs spent ()~y 17 perCent of their RDT&E

budgets ($131 million of $789 million) in-house in 1990, while the one T&E center spent 70 percent ($66 million of $96 million) in-house.

The R&D centers are the Aero Propulsion and Power Laboratory, the Aerospace Medical Research Laboratory, the Avionics Laboratory, the

Electronic Twhnology Laboratory, and the Materials Laboratory. The T&E center is the 4950th Test Wing. Overall, in 1990, the Defense

Department’s R&D labs spent 41 percent of their budgets in-house compared with 59 percent at the T&E centers.

]0 Ag~ note titthese fiW= we o~y for R&D performed in government-owned, -operated, or -fundd labs. DoD’s totid 1992 budget

for R&D, excluding expenditures for R&D plant and equipment, was an estimated $38.8 billion. DOE’s was $6.5 billion.
78 I Defense Conversion: Redirecting R&D

nuclear warheads, and Sandia, which develops

field-ready weapons using the warheads.ll These

labs are in a class by themselves. They are very

large, with collective budgets of $3.4 billion in

fiscal year (FY) 1993, and over 24,000 regular

employees. 12 Nuclear weapons activities took

from 50 to 61 percent of their operating budgets

(least for Lawrence Livermore, most for Los

Alamos); if the labs’ work for DoD is added in,

funding for military-related activities ranged

from 67 percent at Lawrence Livermore to 78

percent at Sandia. These labs also have a history

of substantial nondefense work.

Among Federal R&D institutions, the nuclear

weapons labs face the clearest need to change

with the end of the Cold War. Their mission of

nuclear weapons design is fading; in 1993, no

new nuclear weapons were being designed. Nonetheless, funding for the labs continued to rise (in

constant dollars, taking inflation into account)

through FY 1992 and barely dropped in FY 1993.

This growth was partly due to steep increases for

a massive environmental cleanup job, plus more

modest amounts for non-proliferation work, decommissioning existing weapons, and safety and

security of the remaining nuclear stockpile; all

these activities are funded by the nuclear weapons

account. Spending for nuclear weapons-related

activities, after declining from the late 1980s

through 1991, turned up in 1992 and again in

1993. The fact remains that the nuclear weapons

labs are looking at a future that is very different

from their past.

THE DOE WEAPONS LABORATORIES

The DOE’s laboratory complex consists of the

nine multiprogram laboratories (including the

weapon labs), which are usually called the

national labs, plus eight single-program energy

labs.13 They are funded by six program areas:

Defense Programs (DP) and related nuclear weapons offices, which include work in all aspects of

nuclear weapons design, safekeeping, non-proliferation, and environmental restoration of the

damage from 50 years of weapons work; Energy

Research, which supports fundamental scientific

research; the Nuclear Energy, Fossil Energy, and

Conservation and Renewable Energy programs,

which concentrate on applied energy R&D; and

the Environmental Restoration and Waste Management program.

The weapons labs dominate the DOE lab

complex. In 1992 they got over one-half of the

funding for all the DOE labs. The biggest part of

their funding comes from DOE’s atomic energy

defense weapons account (including Defense

Programs and related nuclear weapons offices);

DoD contributes an additional, though declining,

share (figures 3-4, 3-5, and 3-6). The weapons

labs grew rapidly in the military buildup of the

1980s, increasing their operating funding (in real

noninflated dollars) by 58 percent from 1979 to

1992, while the energy labs’ funding rose 15

11 me Iddo Natio~ E@JNXX@ hbomto~ (INEL), Which handles defense waste and materials production programs, is Sometimes

included among the weapons labs. So is the weapons part of the Y-12 facility at Oak Ridge National Laboratory, which processes nuclear fuel

(uranium and lithium) and does precision machining of weapons components.

u mCOUM Only re~wemployees. (h-site contract employees amount to many more. IN 1993, Sandia’s 8,450 mgularemployees we=

supplemented by 2,000 on-site contract employees; Los Alamos, with about 7,600 regular employees, had some 3,000 on-site contractors.

13 me n-r of DOE ~bs ~em ~ ~omt~ by vfio~ so~es. Hs~ specH hbs are included, the number Cm bC tis’ h.@h u 29.

The figure of 17 comes from Secretary of Energy Advisory Board, “A Report to the Secretary on the Department of Energy National

Laboratories,’ mimeo, July 1992. The other national labs are the six energy muhiprogram laboratories: Argome National Laboratory,

Brookhaven National Laboratory, Idaho National Engineering Laboratory, Lawrence Bexkeley Laboratory, Oak Ridge National Laboratory,

and the Paciilc Northwest Laboratory. DOE’s eight single-program laboratories include: Ames Laboratory, Continuous Electron Beam

Accelerator Facility, Fermi National Accelerator Laboratory, National Renewable Energy Laboratory (formerly the Solar Energy Research

Institute), Princeton Plasma Physics Laboratory, Stanford Linear ~wlerator Center, Stanford Synchrotrons Radiation Laboratory, and the

Superconducd.ng Super Collider Laboratory.
1.4

1.2

1

0.8

0.6

0.4

0.2

0

3-Nuclear Weapons Laboratories: From Defense to Dual Use 179

Figure 3-4-Nuclear Weapons and DoD Funding for Sandia National Laboratories

1993 dollars (billions)

1970 1972 1974 1976 1978

m Nuclear weapons

1980 1982 1984 1986 1988

B DoD funding _ Other

1990 1992

NOTE: Operating budget only. DoD funding not available prior to 1977.

SOURCE: Sandia National Laboratories, 1993.

Figure 3-5-Nuclear Weapons and DoD Funding for Lawrence Livermore National Laboratory

. . 1993 dollars (billions) 1.4

1.2

1

0.8

0.6

1970 1972 1974 1976 1978 1980 1982 1984

m Nuclear weapons n DoD funding

NOTE: Operating budget only. DoD funding not available prior to 1979.

SOURCE: Lawrence Livermore National Laboratory, 1993.

_ Other

1990 1992
80 I Defense Conversion: Redirecting R&D

Figure 3-6-Nuclear Weapons and DoD Funding for Los Alamos National Laboratory

1993 dollars (billions)

1.4,

1 . 2

I

1“

0.8

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992

m Nuclear weapons ~ DoD funding _ Other

NOTE: Operating budget only. DoD funding not available prior to 1974.

SOURCE: Los Alamos National Laboratory, 1993.

Figure 3-7—DOE Multiprogram Laboratories Funding in 1979 and 1992

(In millions of 1992 dollars) -

623

623

851

Weapons labs

1979

Los Alamos

Lawrence

Livermore

Sandia

NOTE: Operating budgets only.

472

-4

Idaho

National

214 Pacific

Northwest

+

213 Lawrence

Berkeley

228 Brookhaven

435 Argonne

538

1

Oakridge

Energy labs

1011

1023

1277

1992

Los Alamos

Lawrence

Livermore

Sandia

614

363

214

273

391

551

Weapons labs Energy labs .

SOURCE: U.S. Department of Energy, DOEMultiprogram Laboratories: 1979 to 1988A Decade of Change; U.S. Department of Energy; lms Alamoa

National Laboratory, Lawrence Livermore National Laboratory, Sandia National Laboratories.
3--Nuclear Weapons Laboratories: From Defense to Dual Use 181

percent (figure 3-7).14 The weapons labs’ budgets

continued to climb through 1993, when their

combined funding was almost two and one-half

times what it was at the low point in 1974 (figure

1-12). In 1993 only Lawrence Livermore took a

substantial cut; funding for Sandia and Los

Alamos continued to rise.

Table 3-2 shows details of funding of nuclearweapons related activities at the three labs. (Note

that these figures are in current dollars.) In

constant 1993 dollars (table 3-3) the total for the

three labs was at a 6-year high in 1993, but a

growing share of this was for activities that are not

really military (see the discussion below).

H Mix of Military and Civilian Activities

Despite their dominant size and focus on

military R&D, the big three weapons labs share

with the other national labs some varied nonmilitary functions and much of their history. The

origin of four of the national labs—Argonne,

Brookhaven, Los Alamos, and Oak Ridge-was

in the Manhattan Project during World War 11.15

After the war, on the reasoning that the A-bomb

was too important to be left to the generals, the

Atomic Energy Act of 1946 put control of both

atomic weapons and civilian applications of

atomic energy in the hands of a civilian agency,

the newly created Atomic Energy Commission

(AEC). Additional national labs were created

under the aegis of AEC; they were charged not

only with continuing weapons work but also with

developing atomic energy for peaceful purposes

and, as a foundation for both, the advancement of

basic scientific research in nuclear and high

energy physics. Eventually, after DOE was

formed in 1977, all the AEC labs were transferred

to the new department.

At one time or another, all nine national labs

have had responsibilities for both military and

civilian activities. Lawrence Berkeley, the least

military of them all today and one of the smallest,

had no funding from Defense Programs by 1988

and just 2 percent of its money from DoD, but

during World War 11 it was almost wholly

devoted to the Manhattan Project.l6 Brookhaven,

which concentrates heavily on fundamental scientific studies, nonetheless owed 8 percent of its

funding to Defense programs and DoD in 1988.

Oak Ridge, the largest and most diverse of the

energy labs, got 21 percent of its support from the

military side; Argonne, another large and versatile lab, was 19 percent military. Both the Pacific

Northwest and the Idaho National Engineering

(INEL) labs received 45 percent of their financial

support from the military; INEL in fact is

sometimes classified as a weapons lab. Both

concentrate much of their work on management

of nuclear wastes, prominently including defense

wastes.

Conversely, the weapons labs have at times had

quite a substantial mix of nonmilitary projects.

Los Alamos, founded by physicists, has kept an

emphasis on basic scientific research, including

14 U.S. Dep~ment of EKMXgy, unpublished data from the ~titut.iond PI arming Database, US DOE ST-311. These calculations include the

Idaho National Engineering Laboratory (INEL) among the energy labs. INEL is sometimes categorized separately as a “nuclear energy”

laboratory because its work is concentrated largely in producing nuclear materials (mostly for weapons) and handling nuclear wastes. Argonne,

Brookhavem Lawrence Berkeley, Oak Ridge, and Pacific Northwest National Laboratories are considered “energy research” laboratories.

Excluding INEL, the total funding for the energy research labs rose about 10 percent from 1979 to 1992.

14 us. mpartrnertt of Energy, unpublished data from the btitutionat PI arming Database, US DOE ST-311. These calculations include the

Idaho National Engineering Laboratory (INK) among the energy labs. INEL is sometimes categorized separately as a “nuclear energy”

laboratory because its work is concentrated largely in producing nuclear materials (mostly for weapons) and handLing nuclear wastes. Argonne,

Brookhavem Lawrence Berkeley, Oak Ridge, and Pacific Northwest Natiorud Laboratories are considered “energy research” laboratories.

Excluding INEL, the total fimding for the energy research labs rose about 10 percent from 1979 to 1992.

15 LaWence Berkeley ~~ratow, the oldest of tie mtio~ labs, w~ fo~ded iII 1931 to advance tie development of the cycIotro~ invented

by Ernest Lawrence.

lb ~omtionon budgets of national labs is drawn from U.S. Department of Energy, Multiprogram Laborafon”es: 1979 to 1988--A Decade

of Change (WashingtorL DC: 1990).
82 I Defense Conversion: Redirecting R&D

Table 3-2—Funding for Nuclear Weapons-Related Activities in t he DOE Weapons Laboratories, 1988-1993

(In millions of dollars)

FY 1988 FY 1989 FY 1990 FY 1991 FY 1992 FY 1993

Program Actual Actual Actual Actual Actual Budget

Nuclear weapons RD&T

Lawrence Livermore . . . . . . . . . . .

Los Alamos . . . . . . . . . . . . . . . . . .

Sandia ... , . . . . . . . . . . . . . . . . . .

Technology Commercialization

Lawrence Livermore . . . . . . . . .

Los Alarms . . . . . . . . . . . . . . . .

Sandia . . . . . . . . . . . . . . . . . . . .

Inertial Confinement Fusion

Lawrence Livermore . . . . . . . . . . .

Los Alamos . . . . . . . . . . . . . . . . . .

Sandia ., , . . . . . . . . . . . . . . . . . . .

Materials Production

Lawrence Livermore . . . . . . . . . . .

Los Alamos . . . . . . . . . . . . . . . . . .

Sandia . . . . . . . . . . . . . . . . . . . . . .

New Production Reactors

Lawrence Livermore . . . . . . . . . . .

Los Alarms . . . . . . . . . . . . . . . . . .

Sandia . . . . . . . . . . . . . . . . . . . . . .

Stockpile Supporta

Lawrence Livermore . . . . . . . . . . .

Los Alamos . . . . . . . . . . . . . . . . . .

Sandia . . . . . . . . . . . . . . . . . . . . . .

Verification and Control

Lawrence Livermore . . . . . . . . . . .

Los Alamos . . . . . . . . . . . . . . . . . .

Sandia . . . . . . . . . . . . . . . . . . . . . .

Nuclear Safeguards and Security

Lawrence Livermore . . . . . . , . . . .

Los Alamos . . . . . . . . . . . . . . . . . .

Sandia . . . . . . . . . . . . . . . . . . . . . .

Intelligence

Lawrence Livermore . . . . . . . . . . .

Los Alamos . . . . . . . . . . . . . . . . . .

Sandia . . . . . . . . . . . . . . . . . . . . . .

314.9

285.5

439.2

315.6

288,7

445.7

297.7

276.4

443.9

267.8

267.7

429.1

287.0

298.1

467.9

2.8

5.2

8.3

84.1

23.6

31.4

4.9

13.1

0.0

0.2

10.8

7.3

0.0

79.4

143.3

22.8

48.9

47.7

3.7

16.2

11.2

8.0

4.3

2.1

68.2

128.5

88.8

3.0

3.0

5.0

481.9

625.9

804.7

253.5

273.1

449.8

30.5

15,0

38.0

90.0

24.8

30.0

2.0

12.4

0.0

0.3

0.7

4.0

0.0

91.0

133.0

50.3

57.0

65.7

3.4

9.4

9.1

8.2

3.5

2.1

71.4

195.2

100.1

9.7

20.1

3.0

488.8

687.2

796.8

0.2

0.5

1.3

66.1

29.0

28.3

64.6

29.9

25.8

67,7

30.9

27.5

77.2

24.2

29.2

69.6

32.7

0.0

68.5

35.8

0.0

61.1

23.2

0.0

66.0

26.5

0.0

1.0

0.0

0.0

0.0

16.4

7.7

0.0

14.3

4.3

6.9

49.4

117.0

6.0

56.0

118.9

0.0

49.5

118.0

0.0

57.1

122.8

19.1

30.7

37.1

24.1

38.1

44.4

25.5

39.3

39.6

20.8

42.5

43.3

3.3

14.5

12.6

2.8

15.7

13.6

3.7

17.8

12.4

3.7

16.3

11.4

8.4

3.7

2.0

Environmental Restoration and Waste Management (Defense)

Lawrence Livermore . . . . . . . . . . . 10.1 13.0

Los Alamos . . . . . . . . . . . . . . . . . . 12.1 14.1

Sandia . . . . . . . . . . . . . . . . . . . . . . 19.9 23.3

Program Direction

Lawrence Livermore . . . . . . . . . . . 0.7 1.0

Los Alamos . . . . . . . . . . . . . . . . . . 0.2 0.0

Sandra . . . . . . . . . . . . . . . . . . . . . . 0.0 0.0

Total Nuclear Weapons-related Activitiesb

Lawrence Livermore . . . . . . . . . . . 490.7 496.6

Los Alarms . . . . . . . . . . . . . . . . . . 454.1 478.3

Sandia . . . . . . . . . . . . . . . . . . . . . . 654.1 671.7

31.0

52.4

43.2

46.5

88.0

56.2

2.4

0.0

0.0

0.6

0.3

0.2

489.1

505.9

692.3

491.0

540.6

698.5

a Most nuclear weapons decommissioning activities are included under stockpile SUPPOrt.

b All ~tomic energy ~fen~e weapons ~tivfties are in~~ed. ME has r~ently moved some activities formedy h Defense Prqrams to separate

offices, but they are included here as weapons-related activities for consistency with former years.

SOURCE: Office of Technology Assessment, based on data from Lawrence Livermore National Laboratory, Los A amos National Laboratory, and

Sandia National Laboratories.
3--Nuclear Weapons Laboratories: From Defense to Dual Use 183

Table 3-3-Summary of Nuclear Weapons-Related Activities and Total Funding at the DOE Weapons

Laboratories, 1988-93 in Current Dollars and 1993 Dollars

Nuclear weapons RD&T

Current year dollars (millions) 1993 dollars (millions)

Lawrence Los Lawrence Los

Year Liver more Alamos Sandia Total Liver more Alamos Sandia Total

1988 . . . . . . . $ 314.9 $ 285.5 $ 439.2 $1,039.6 $ 379.9 $ 344.4 $ 529.8 $1,254.1

1989 . . . . . . . 315.6 288.7 445.7 1,050.0 364.8 333.7 515.2 1,213.7

1990 . . . . . . . 297.7 276.4 443.9 1,018.0 329.8 306.2 491.7 1,127.7

1991 . . . . . . . 267.8 267.7 429.1 964.6 283.7 283.6 454.6 1,021.9

1992 . . . . . . . 287.0 298.1 467.9 1,053.8 295.5 307.0 481.8 1,084.3

1993 . . . . . . . 253.5 273.1 449.8 976.4’ 253.5 347.1 449.8 1,050.4a

Total nuclear weapons-related activities

Current year dollars (millions) 1993 dollars (millions)

Lawrence Los Lawrence Los

Year Livermore Alamos Sandia Total Liver more Alamos Sandia Total

1988 . . . . . . . $ 490.7 $ 454.1 $ 654.1 $1,598.9 $ 592.0 $ 547.8 $ 789.1 $1,928.9

1989 . . . . . . . 496.6 478.3 671.7 1,646.6 574,0 552.8 776.4 1,903.2

1990 . . . . . . . 489.1 505.9 692.3 1,687.3 541.8 560.4 766.8 1,869.0

1991 . . . . . . . 491.0 540.6 698.5 1,730.1 520.2 572.7 740.0 1,832.9

1992 . . . . . . . 481.9 625.9 804.7 1,912.5 496.2 644.5 828.6 1,969.3

1993 . . . . . . . 488.8 687.2 796.8 1,972.8 488.8 687.2 796.8 1,972.8

Total funding (operating budgets only)

Current year dollars (millions) 1993 dollars (millions)

Lawrence Los Lawrence Los

Year Liver more Alamos Sandia Total Liver more Alamos Sandia Total

1988 . . . . . . . $ 895.6 $ 884.4 $1,068.1 $2,848.1 $1,080.4 $1,064.5 $1,288.5 $3,433.4

1989 . . . . . . . 953.0 902.3 1,081.6 2,936.9 1,101,6 1,043.1 1,250.2 3,394.9

1990 . . . . . . . 983.5 926.0 1,110.6 3,020.1 1,089.4 1,025.7 1,230.2 3,345.3

1991 . . . . . . . 1,052.5 947.5 1,134.7 3,134.7 1,115,0 1,003.9 1,202.1 3,321.0

1992 . . . . . . . 1,022.6 1,010.9 1,276.6 3,310.1 1,053.0 1,041.0 1,314.6 3,408.6

1993 . . . . . . . 963.0 1,104.8 1,350,0 3,417.8 963.0 1,104.8 1,350.0 3,417.8

a Includes $82 m Illion fm technology wmmercializationc

SOURCE: OTA, basal on data from Lawrence Livermore National Laboratory, Im Alamos National Laboratory, and Sandia National Laboratories.

nuclear and particle physics. An official at

Lawrence Livermore describes it as a center of

“applied science, ’ with nondefense work in

fusion energy research, laser isotope separation,

and environmental and biomedical research (e.g.,

mapping the human genome). In 1993, defense

activities at Los Alamos were 71 percent of the

total operating budget, down from 78 percent in

1987; Livermore’s share of defense activities was

67 percent, compared to 76 percent in 1988.

Sandia, consistently more defense-oriented, went

from 87 percent defense-related activities in 1989

to 78 percent in 1993.

These percentages are misleading, however,

leaving an impression of more military activity

than is the case. In FY 1993, Defense Programs

and related nuclear defense funding of the three

weapons labs amounted to about $2 billion; of

this, about $1.1 billion was for weapons research,

development and testing and other activities that
84 I Defense Conversion: Redirecting R&D

are clearly military (see table 3-2). In addition,

over $400 million went for non-proliferation

responsibilities, safety and security of the stockpile, and decommissioning of excess weapons.

Nuclear weapons funds also now pay substantial

amounts for activities that are better described as

dual use than defense. The largest of these is

environmental restoration and waste management, which is mainly intended for cleaning up

the nuclear and hazardous chemical detritus left

by 50 years of nuclear weapons production but

also has plenty of civilian applications.17 Nuclear

weapons funding for this purpose in the three labs

was about $350 million in FY 1993. A smaller but

growing activity funded by the nuclear weapons

account is cooperative agreements with industry

to develop dual-use technologies (discussed below);

funding at the three weapons labs for this purpose

was $84 million in 1993.18

The present is not the first time that DOE and

its nuclear weapons labs have cut back on defense

work. In the early 1970s, following the Vietnam

War and coinciding with the Nixon-Kissinger

policy of detente with what was then the Soviet

Union, the labs went through a few years of

declining budgets (in constant dollars). Sandia,

the biggest and most defense-oriented, shrank the

most (figures 3-4,3-5, and 3-6). In the later 1970s,

the labs’ budgets recovered, thanks in part to the

nondefense energy research and applied energy

programs that the Carter Administration strongly

supported. By 1979-80, only about 50 percent of

the Los Alamos budget was defense-related, 60

percent of Livermore’s and 70 percent of Sandia’s.

All this changed with the enormous military

buildup of the 1980s. Already in the Carter

administration, the amounts spent (in constant

dollars) for defense projects in the weapons labs

were rising from the low point of the Nixon-Ford

years. After President Ronald Reagan took office,

spending in the labs by DOE’s Defense Programs

and DoD took off; a good deal of the latter was for

the Strategic Defense Initiative. Together, Defense Programs, related nuclear weapons offices,

and DoD accounted for more than 100 percent of

the huge rise in the weapons labs’ budgets in the

1980s, as spending for energy programs declined.

M Changing Missions

Over the years, the character and missions of

the national labs have changed and diverged,

reflecting in part the talents, interests, and traditions of the individual labs and their directors.

The big changes, however, have come about in

response to policy direction at the highest level,

i.e., from the President and his Cabinet officers or

from concerted efforts by Congress. Presidents

Richard Nixon and Gerald Ford sharply cut back

weapons work in the labs. President Jimmy Carter

restored it to some degree and added a new

mission of energy conservation and development

of alternative energy sources. President Reagan

largely undid the energy mission (and would have

undone it more without the resistance of Congress) while pushing weapons work to heights

unprecedented in peacetime. At the same time,

through a series of laws and oversight, Congress

energetically pushed the labs toward a new

mission: transferring technology to private industry and working in partnership with industry to

develop technologies with commercial promise.

In the last year of the Bush Administration, the

Secretary of Energy and other top officials joined

in urging this new direction.

Even in the early postwar years, the national

labs took different directions within the atomic

energy complex and most became identified with

a particular leading mission in the field. For

Brookhaven and Lawrence Berkeley, it was

scientific research; for Argonne, development of

fission reactors for both defense and civilian uses;

for INEL and (a bit later) Pacific Northwest, it

17 DOE ~.so M a lwge ~pmtely funded nondefense environmental restoration and waste management R&D program.

18 ~ese Coopemtive proj~ts are mostly funded from the atomic weapons RD&T accowt.
3-Nuclear Weapons Laboratories: From Defense to Dual Use 185

was nuclear waste handling and materials production. Design of nuclear warheads was lodged in

the rival Los Alamos and Livermore labs, and

engineering of the weapons containing the warheads at Sandia.

Oak Ridge had a less distinct identity .19 Its

Y-12 plant was the Manhattan Project center for

producing weapons-grade uranium, but after World

War H Oak Ridge lost out to other labs in the

major activities of the AEC (e.g., physics research, reactor development, weapons design).

By 1955, Oak Ridge’s energetic and wellconnected director, Alvin Weinberg, had begun to

talk about diversified projects and sponsors for

the projects other than AEC. In 1960, AEC and

the congressional Joint Committee on Atomic

Energy approved diversification, and Dr. Weinberg instituted seminars with senior members of

the lab staff to search out national problems that

fit the lab’s abilities. The idea was to concentrate

on large-scale, long-range problems of broad

national interest that had little appeal to profitmaking institutions. Weinberg’s vision was to

create programs that formed a comprehensive

whole, rather than a collection of disparate

projects.

Oak Ridge did diversify, but the vision of a

comprehensive whole did not materialize. The lab

undertook programs successively in desalination

of water, civil defense, large-scale biology and,

eventually, environmental research. None, however, offered the sustained generous funding of

AEC’s nuclear energy projects or its hands-off

management that left a great deal of discretion to

the lab. In 1960, all of Oak Ridge’s funding came

from the AEC; by 1974, 15 percent came from

other government agencies. But all the big

initiatives Oak Ridge had launched in a grand

plan for diversification eventually devolved to

sets of relatively small projects.

Oak Ridge was the earliest but not the only

national lab to look for other projects and other

sponsors outside AEC.20 Under the Nixon Administration, beginning in 1969, lab budgets got

tighter; as the Vietnam War wound down and the

Administration negotiated detente with the Soviet

Union, funds for nuclear weapons research and

design shrank substantially. For the first time

since it was founded, Sandia laid off employees.

Other labs looked for nonnuclear work. With a

certain amount of prescience (the ‘energy crisis’

had not yet happened), some researchers at

Lawrence Berkeley turned their efforts into renewable energy and energy conservation. Argonne began moving into nonnuclear fossil energy and environmental research.

Like Oak Ridge’s much stronger push to

diversify, these were lab-initiated efforts. Not

until the energy crisis of 1973-74-the embargo

by Mideast oil producers that created long lines at

gas stations and the huge runup in oil prices

resulting from cartel controls over oil production

by the Organization of Petroleum Exporting

Countries (OPEC)---was there high-level direction to the labs to alter their missions. Project

Independence, decreed by President Nixon, was

the beginning of a national effort to find ways

other than OPEC oil to meet the Nation’s energy

needs. One result of this new emphasis was the

creation of the Energy Research and Development Administration (ERDA) to oversee all the

Federal Government’s energy research programs.

The AEC labs and several nonnuclear energy

programs went to ERDA, and AEC’s regulatory

functions went to the new Nuclear Regulatory

Commission.

19 Most of fie ~aten~ on tie ~vers~lcatlon effofis of O* Wdge Natio~ ~boratoq h tie 1960S and early 1970s is drawn from Albert

H. Telch and W. Henry Larnbrigh4 “The Redirection of a Large Natioml hboratory, ” Minerva, vol. xiv, No. 4, winter 1976-77.

zo Soumes for expe~enw of tie ~tio~ labs ~ he 1970s ~clude Energy Res~ch and Development Atis~tio~ Report ofrhe Field

and Laboratory Utilization Study Group (December 1975); U.S. Department of Energy, Review of Roles and Funcfi”ons of the .Luboratories

and Operations Ofice, DESM 79-3 (August 1979); Energy Research Advisory Board to the U.S. Department of Energy, The Department of

Energy A4ultiprogram Laboratories, DOE/S-0015 (September 1982); U.S. Congress, Offke of Technology Assessmen4 National

Laboratories---oversight and L.egis/arion Issues, background paper (1980); interviews with present and former lab persomel.
86 I Defense Conversion: Redirecting R&D

However, only after the Carter Administration

took office in 1977 was there a strong sustained

drive with the power of the President behind it for

alternative energy supply and energy conservation. ERDA became the U.S. Department of

Energy. And for the first time, substantial funding

for applied energy R&D other than nuclear was

open to the labs. Plenty of money was still

available for R&D in nuclear power (e.g., for the

breeder reactor, other forms of fission energy and,

as a long shot, fusion), but new programs in solar

energy, conservation, cleaner coal, and synthetic

fuels from coal and shale got growing support.

These new energy programs accounted for a

rising share of the weapons labs’ resources in the

later 1970s, helped to swell their budgets, and

contributed to the shift to a less military character

in the weapons labs, especially Los Alamos.

With the military buildup of the 1980s, the

weapons labs regained their overwhelmingly

defense character and abandoned some of the

energy programs they had begun under the Carter

Administration. The energy labs too were affected by the powerful emphasis on defense in the

Reagan years; Argonne and Oak Ridge both

added fairly substantial DoD-funded programs.

At the same time-perhaps surprisingly in view

of the weight being given to defense-Congress

led increasingly active efforts to promote the

transfer of commercially promising technologies

from the national labs to private industry. Technology transfer is a broad term that covers many

kinds of activities, including spin-offs, that is,

licensing to existing commercial firms technologies that the labs developed to meet their parent

agencies’ needs; startups, or helping new firms to

license and commercialize lab technologies; letting firms use costly, specialized lab equipment or

hire lab researchers as consultants; and-perhaps

the most powerful form of technology transfer—

collaborative projects in which the lab and a firm

or consortium of firms team up to create new

technology that meets industry needs.

From 1980 through 1989, Congress passed

several major laws 21 that directed Federal agencies and the labs to transfer technologies to State

and local governments and the private sector,

where appropriate; mandated that every lab set up

mechanisms for technology transfer, including

creating an Office of Research and Technology

Application and joining the Federal Laboratory

Consortium for technology transfer; successively

broadened the labs’ authority to give private

companies exclusive rights to technologies developed in the labs (thus encouraging the companies

to put their own money into commercializing the

technologies); and authorized the labs to sign

formal cooperative research and development

agreements (CRADAs) with industry. At first (in

1986), only government-operated labs got the

CRADA authority; a 1989 law extended it to

contractor-operated labs, which include nearly all

the DOE labs.

Technology transfer has been an issue for the

labs ever since their responsibilities were broadened beyond civilian and military uses of nuclear

power. Relations between the AEC labs and the

nascent nuclear power industry in the 1950s were

necessarily close; the industry could hardly have

existed without the labs. But from the time the

labs undertook nonnuclear energy activities, they

and their parent agency (first ERDA, then DOE)

were concerned about getting their R&D results

and new technologies out into the commercial

energy world.22

21 ~jor~ws promo% t=kolo= ~~er kc]ude the Stevenson-Wyder Technolow Innovation Act of 1980, tie patent ~d T~de~k

Amendments Act of 1980, the Bayh-Dole Patent Amendments of 1984, the Federal Technology Transfer Act of’ 1986, the Omnibus Trade and

Competitiveness Act of 1988, and the NationaI Competitiveness Technology Transfer Act of 1989.

22 wConwrn got ~bs~nti~ a~ntion in two reports on DOE labs and field offices in the 1970s: Repo?7 of the Field and bbOratOV

Utilization Study Group (December 1975), prepared by an independent study group that included members from universities, nonprofit research

groups, and private companies, as well as from ERDA headquarters and the labs; and DESM 79-3 Review of Roles and Functions of the

Laboratories and Field Operations Ofices (August 1979), prepared by DOE and lab personnel.
3-Nuclear Weapons Laboratories: From Defense to Dual Use 187

In the 1980s, expectations about technology

transfer took on a new character. Congressional

interest in the issue centered increasingly on what

lab technologies could do for American industry

generally, rather than just feeding into the energy

industry. Despite the rising and broadening expectations, however, and despite encouragement

from the new laws, an executive order by

President Reagan,

23 and congressional hearings,

technology transfer from the national labs—

indeed from most Federal labs—remained at very

modest levels throughout the 1980s. In 1989, all

the DOE labs, funded at about $5 billion, had

issued 211 patents, concluded 54 license agreements, and received about $900,000 in royalties

from outstanding licenses.24 These measures do

not capture all the technology transfer activities

that were going on in the 1980s. Argonne and Oak

Ridge, the two biggest of DOE’s six multiprogram energy labs, both created institutions to help

startup firms exploit lab technologies. Oak Ridge’s

Tennessee Innovation Center, formed in 1985,

contributes equity capital to new fins, as well as

providing various business services. Argonne’s

ARCH Development Corp., founded 1986, handles all the patents and licensing of Argonne’s

inventions, and has a venture capital fund that

enables it to start up firms itself, if need be, to

commercialize the lab’s technologies. Sandia, the

most energetic of the weapons labs in technology

transfer during the 1980s, considered that its free

consultations with 600 industry visitors per month—

and even occasional house calls-were its most

productive but hardest to measure form of transfer.25 Nevertheless, on the whole, progress in

commercializing the labs technologies was slow.26

As we shall see in the discussion below, the

picture had changed markedly by 1992. Increasingly, the action in technology transfer was

focused on cooperative lab/industry research, in

which firms share the costs (often paying more

than half) of projects to develop technologies of

interest to both parties. Scores of firms responded

enthusiastically to a pilot program for cooperative, industry-led projects in high temperature

superconductivity, begun in late 1988 at three

DOE labs, Argonne, Oak Ridge, and Los Alamos.

By 1991-92, literally hundreds of firms were

responding to calls for proposals to team up with

the labs in collaborative R&D projects funded by

DOE’s Defense Programs.

Why the change? Several major factors played

a part. First, the National Competitiveness Technology Transfer Act (NCTTA) of 1989 allowed

the contractor-operated DOE labs, for the frost

time, to sign CRADAs with industry. Although it

23 Exe~tive Order 12591, Apr. 10, 1987, established guidelines for the Federal labs on h~sfer.

24 Gener~ ~ou~g office, fio~~ Ev~~tion and Methodology Division, Di~sing Innovations: Implementing the Technology

Transfer Act of 1986 (1991). This record is sometimes compared with that of the Massachusetts Institute of Technology, which has one of the

best-regarded technology licensing programs in the country. MIT (including Lincoln Laboratory, an FFRDC that is managed by MIT and does

most of its work for the Air Force) had an amual research budget of about $800 million in the period 1990-92, had over 100 patents issued

each of those years, concluded an average of 87 technology licensing agreements per year, and received income from these agreements ranging

from $4 to $16 million a year. (Information provided by Christina Janseni Technology Licensing Office, Massachusetts Institute of Technology,

Aug. 27, 1992.) The comparison is not altogether a simple one, however. For example, in MIT’s streamlined technology licensing process, fms

are usually treated on “first-come, fust-sewed” basis, As a private institutiorL MIT does not have the same obligation most government

agencies undertake to give all potentially interested firms an equal chance at every license (though MIT considers that its system as a whole

offers a fair opportunity to all).

25 For more de~s, See us. congre55, Office of Tec~ology Assessment M&ing Things

OTA-ITE443 (Washingto% DC: U.S. Government Printing Office, February 1990).

26 Several major repo~ ~he 19805 foc~~ on tie performance of tie DOE ~bs and o~er Feder~ labs in transferring teChLIOIOgy tO

industry, generally concluding that the labs still had a way to go. In particular, see Energy Research Advisory Board to the U.S. Department

of Energy, Research and Technology Utilization (Washington, DC: U.S. Department of Energy, August 1988) and U.S. General Accounting

OffIce, D1fhoing Innovations: Implementing the Technology Transfer Act 1986 (WashingtorA DC: U.S. General Accounting OffIce, 1991).

The tone of the latter report was guardedly optimistic. It found that the major provisions of the 1986 act had not been fully implemented, but

that some departments had made considerable progress, and it was reasonable to expect more progress in the next year or so.
88 I Defense Conversion: Redirecting R&D

was possible for the labs to undertake cooperative

projects before, and some had done so, CRADAs

have some significant advantages, including clearcut legislative authority, the ability to handle

patent rights more flexibly, and authority to

protect information generated in the projects for

as long as 5 years. Cooperative projects with the

labs often have a good deal more appeal for

industry than simply licensing existing technology, because much of what the labs have to offer

is core technologies and capacities that need

further development before they begin to be

useful to commercial firms.

Second, by 1992, top officials of the Administration as well as Congress were actively pushing

technology transfer from Federal R&D programs

and labs. The Department of Energy claimed

technology transfer as a ‘‘formal, integrated

mission’ of all its labs, with the primary goal of

“assisting U.S. based companies in the global

race for competitive technologies. ’27 In February

1992, President George Bush launched a National

Technology Initiative, with 15 conferences around

the country at which 10 Federal agencies28 invited

industry to make commercial use of governmentsponsored research.

Interest on the part of industry has been

unprecedented-a third major factor. Partly, no

doubt, this was because the power and prestige of

the President and his Cabinet officers were now

behind the program. It was also because many in

U.S. industry had come to recognize that they

needed the government as a partner in R&D,

especially for high-risk, long-term, expensive

projects. R&D spending by private industry, after

climbing for many years, leveled off and even

declined slightly in real terms after 1989. In the

1980s many firms went into deeper debt than ever

before and that, plus a U.S. financial climate that

is generally rather unfriendly to long-term investment,29 made the prospect of sharing R&D risks

with government attractive.

Fourth, there is a pot of money for cooperative

R&D projects—at least for the DOE weapons

labs and for Defense Programs in the energy

labs—that was never before available. The NCTTA

and subsequent legislation30 encouraged the labs

to devote program funds to cooperative projects

with industry, insofar as practicable. But to give

the CRADA process a jump start, Congress also

dedicated $20 million of Defense programs’

R&D funds in FY 1991 to cooperative projects

with industry; in 1992 Congress raised the sum to

$50 million and to $141 million in 1993. Although there was some dispute between DOE and

Congress as to whether funds for technology

transfer should be explicitly dedicated in this

way, or whether all program funds should be

regarded as available for the purpose, the amounts

were becoming substantial enough to go at least

part way toward meeting the keen new interest

from industry.

Finally, the labs themselves now have a

powerful motive for making technology transfer

a central mission. During the 1980s, while

Congress was urging this mission on the labs, it

was at the same time providing steep rises in

funding for both nuclear and nonnuclear defense

27 u.S. Department of Energy, ‘‘The U.S. Department of Energy and Technology Transfer,’ mimeo, n.d.

28 p~cipatfig agencies includ~ the Departments of Commerce, Energy, Transportation% Defense, the Interior, A@ctime, andHAti~d

Human Services as well as NASA, the Environmental Protection Agency, and the White House Ol%ce of Science and Technology Policy.

29 There is ~rswsive evidence tit capiM cos@ for investments in new equipment ~d teCh.dOgy (~cIu@ ~ Pmvisio~ ~ we~ ~

interest rates) were higher in the United States than in Japan and Germany for a decade and a half through the late 1980s. Following actions

by the FederaJ Reserve BanlG U.S. short-term interest rates dropped sharply in the recession and weak recovery of the early 1990s, but long

term rates remained higher, and the expectation was that if deep Federal deficits persistcxl, they would lead to higher rates generally with

business recovery. Moreover, the whole fmcial system in the United States, including the stock market and relations between fms and their

banks, emphasizes and rewards high profits in the short run. For discussio~ see OffIce of Technology Assessment Mzking Things Betier, op.

cit., footnote 26, ch. 3.

30 The ~feme Authorization Act for Fiscal Years 1992 and 1993, SW. XX.
3-Nuclear Weapons Laboratories: From Defense to Dual Use 189

work. Little wonder that the weapons labs, which

saw their nuclear weapons and DoD funding

swell by nearly 60 percent in the 1980s, should

redouble their concentration on their historic

defense mission, and that a new mission of

working with industry on commercially promising technologies should be relatively neglected.

The end of the Cold War and the dissolution of the

Soviet Union has upended these priorities. Although old attitudes die hard and some in the labs

still believe they will get the biggest part of a

shrinking defense pie, the labs’ leaders and many

researchers are more realistic; they know their

defense responsibilities must decline. In the new

atmosphere, many in the labs are embracing the

role of contributors to the economic security of

the United States as well as its military security.

1 The Future of the Labs

The discussion so far has assumed, implicitly

at least, that although the labs may change their

emphasis, goals, and size, they will continue to

exist in recognizable form. However, many people are asking more fundamental questions about

the future of the labs. More than at any time since

they were created, issues are coming to the fore as

to what real national purposes the labs serve and

what size and shape they need to assume to serve

those goals effectively. A crucial question is

whether they can make a significant contribution

to advancing commercial technologies and thus

help U.S. industries compete against the best in

the world.

Some basic questions about the future of the

labs were raised as long ago as 1983. Dr. George

Keyworth, then Science Advisor to President

Reagan, established a Federal Laboratory Review

Panel, chaired by business leader David Packard,31 to review the Federal laboratories and

recommend actions to improve their use and

performance. In a report to the White House

Science Council,32 the panel’s top priority recommendation was that parent agencies should define

clear, specific, and appropriate missions for the

labs, and increase or reduce their size-to zero, if

necessary-depending on mission requirements.

Although the panel did not evaluate in detail the

quality of work at the various labs, it criticized the

alternative energy research projects at several

multiprogram DOE labs as having departed from

a clearly defined mission. The mission and

quality of work at the weapons labs, on the other

hand, were praised. These views were in tune with

the times; the Reagan Administration had already

sharply reduced the labs’ research on alternative

energy and was greatly expanding funds for

weapons work. However, the panel took the

discussion a step further, suggesting that some

(unspecified) labs might be downsized or closed.

“It would be better to reduce the size of a

laboratory to meet the real needs of its legitimate

missions than to maintain its size by filling in

with unrelated research projects, ’ said the panel,

adding: “If necessary, a laboratory without a

mission should be shut down.”33

Nothing so drastic occurred. While the weapons labs grew throughout the 1980s, even the

multiprogram energy labs more or less held their

own (in constant dollar funding), although they

did it by tilting to more weapons work. At the

same time, another major recommendation of the

Packard panel echoed earlier evaluations of the

labs, and matched the rising congressional interest in more collaboration between the Federal labs

and universities and industry. The panel said:

[T]his country is increasingly challenged in its

military and economic competitiveness. The national interest demands that the Federal laboratories collaborate with universities and industry to

31 ~en ~lef Executive officer of Hewlett-Packard.

32 Report ~fr~e w~ite ~ouSe science counci/: Federal Panel, report to the OffIIX Of Science and Tec~olosy poIicYs

Executive Office of the President (Washington, DC: May 1983).

33 Ibid., p. 4.

331-050 - 93 - 4 : QL 3
90 I Defense Conversion: Redirecting R&D

ensure continued advances in scientific knowledge and its translation into useful technology.34

The end of the Cold War and the dissolution of

the Soviet Union brought into sharper focus the

question of the future of the DOE labs, especially

the three big weapons labs. Three divergent

points of view began to emerge. First, maintain

and reinforce the labs’ traditional focus on.

nuclear and energy technologies. Second, give the

weapons labs major new civilian missions, including both partnerships with industry and

programs directed to public purposes (e.g., environmental protection). Third, drastically contract

the whole DOE lab system, perhaps giving the job

to a commission like the military base closing

commission.

The first approach is essentially cautious and

status quo, while the other two envision thoroughgoing changes, but in different directions. The

view that the labs’ mission should be broadened

rests on the conviction that they have special

assets to offer, available nowhere else: the ability

to do large projects with a long-term payoff, using

flexible, multidisciplinary teams that combine

scientists and engineers. It also reflects concern

over the ebbing of private R&D spending in the

United States and hope that lab/industry partnerships can compensate to some degree. The

contrary view is that the labs are an extravagance

the Nation can ill afford; they can do little of

interest to industry that cannot be done as well by

universities or companies themselves, and that

little costs too much. Some of the skeptics also

hold the traditional view that government support

for R&D should be limited to defense and basic

science and should not extend to technologies

with commercial potential. This idea is losing

force, however. Support for government/industry

cooperation in precommercial R&D has broadened in recent years and by 1992 included many

in the Bush Administration as well as in Congress

and, most significantly, in industry .35 The more

relevant question is whether the labs are the right

place, or one of the right places, for government/

industry R&D partnerships.

An advisory task force appointed by Secretary

of Energy James E. Watkins in November 1990 to

consider the future of the DOE labs combined a

status quo approach to the labs’ missions with

more radical suggestions to narrow the weapons

labs’ focus to nuclear defense only and downsize

them accordingly. Watkins’s charge to the Secretary of Energy Advisory Board Task Force on the

Department of Energy National Laboratories was

to define “a strategic vision for the National

Laboratories . . . to guide [them] over the next 20

years. ‘’36 He asked the Task Force to give special

emphasis to national defense, economic competitiveness, energy security, scientific and technological education, and environmental protection.

In its report of July 1992, the Task Force laid

out a future in which the major missions for the

DOE labs would continue to be energy and

energy-related science and technology, nuclear

science and technology for defense and civilian

purposes, and the fundamental science and technology that underlie these. It also emphatically

recommended a tight focus on nuclear defense for

the three big weapons lab, with whatever reductions and consolidation are necessary in an era of

overall reduction of the Nation’s defense effort. It

emphasized new lab responsibilities for environmental cleanup and waste management, at both

the energy and the weapons labs. And it cautiously endorsed more cooperative work by the

labs with industry. It suggested that a few flagship

u Ibid., p. 11.

35 S&&e discussionofinmemi.ng support for government partnerships with industry in developing preeompetitive commercial techolo~es

in U.S. Congress, Office of Technology Assessmen6 Competing Econom”es: Amen”ca, Europe, and the Pac@c Rim, OTA-ITE-498

(Washingto~ DC: U.S. Government Printing Office, October 1991), pp. 62-63.

36 sare~ of Energy Advisory Board. op. cit., attachment, Memorandum for the~and Executive Director, Secretary of Energy

Advisoxy Board, from the Secretary of Energy, James D. Watkins, Nov. 9, 1990.
3-Nuclear Weapons Laboratories: From Defense to Dual Use 191

labs be designated as centers of excellence for

technology partnerships with industry, selecting

technologies consistent with their particular missions.

For the weapons labs, the Task Force called on

DOE to develop a coherent new defense program,

responsive to the changing nature of the nuclear

threat and putting more emphasis on nonproliferation, verification, and arms control; restructuring of the weapons production complex;

and environmental restoration and waste management. The Task Force underscored its view that

the weapons labs must concentrate on nuclear

defense and little else, recommending that nonnuclear defense work be limited so the labs would

not depend on DoD to maintain their size and

work forces. Somewhat contradictory, however,

was the suggestion that Sandia—the largest of the

weapons labs—be one of the several national labs

designated as technology partnership centers of

excellence, devoting as much as 20 percent of its

R&D budget to cost-shared projects with industry.

For the multiprogram energy labs, the Task

Force supported energy science and technology

directed toward energy efficiency, assurance of

future energy supplies—including renewed attention to civilian nuclear power—and understanding of the environmental effects of energy use.

The Task Force further stated that each of the

national laboratories must have its own clearly

defined, specific missions to support DOE’s

over-arching missions, and should depart from its

core mission only when a rigorous review shows

that it is better qualified than other R&D performers to perform the research job at hand.

While supporting lab collaboration with appropriate private sector partners, the Task Force

warned against overoptimism and premature expectations. It said the labs should build on their

individual expertise and identify the industrial

sectors they can work with best, rather than trying

to satisfy all customers. For in-depth arrangements with industrial partners, long-term planning will be necessary.

The Chairman of the House Committee o n

Science, Space, and Technology, Rep. George E.

Brown, Jr., of California, proposed a different

approach. 37 Noting that the Nation no longer

needs and cannot afford three nuclear weapons

labs-’’ all of which are trying desperately to

retain as much of their defense activity as

possible, while also diversifying feverishly toward civilian missions—Brown suggested making a different use of these labs. He offered a 3- to

5-year plan that would consolidate all nuclear

defense and non-proliferation work at Los Alamos

and concentrate verification activities at Sandia,

while also making it a center of excellence for

technology transfer. Lawrence Livermore would

become a civilian National Critical Technologies

Laboratory, building on the lab’s strengths in

materials science, computational science, fusion,

environmental remediation, and biotechnology .38

Brown proposed a cessation of nuclear tests in 3

years, and a phased 4-year reduction of the

nuclear weapons RDT&E budget from nearly $3

billion a year to about half that level. The money

ST ~~cr to the Honorable James D. Watkins, Secretary, U.S. Department of Energy, from George E. Brow Jr., ~an, U.S. House of

Representatives, Committee on Science, Space, and Technology, Feb. 8, 1992.

3S ~~ ~ropo~al bore some ~e~emblance t. a suggestion in a 1992 repofi from tie National Academy of Sciences titlooked at the whole

Federal R&D establishment and its role in civilian technology. (Committee On Science, Engineering, and Public Policy, National Academy

of Sciences and National Academy of Engineering, The Government Role in Civilian Technology: Building a New Alliance (Washington, DC:

National Academy Press, 1992)). The report is sometimes catled the Brown report, after Harold Brow former U.S. Secretary of Defense, who

chaired the Panel on the Government Role in Civilian Technology that prepared the report. The report concluded that orIly a few laboratories

had the potential to contribute much to private sector commercializatio~ but it did single out the multipurpose DOE labs as having greater

potential to transfer commercially relevant tedmology than others. It suggested that agencies with activities related to commercially relevant

R&D should select one laboratory to focus on technology development and transfer.
92 I Defense Conversion: Redirecting R&D

saved could be directed toward civilian technology programs in the DOE lab system.

A proposal from a quarter that is less sanguine

about the labs’ ability to contribute to industry,

but wants it given a fair chance, came from the

private Council on Competitiveness.39 The Council, made up of chief executives from business,

labor, and universities, appointed an advisory

committee led by Erich Bloch, former director of

the National Science Foundation, to investigate

the labs’ potential. The Council’s report called the

labs a “major national resource” that should not

be squandered, but warned against “holding up

technology transfer from the labs to industry as

the answer to our competitiveness problems. ”

The report confined itself to the prospects for

useful partnerships between the labs and industry,

and recommended several steps to make technology transfer work. It did not outline a broad future

for the labs, but cautioned that industry/lab

cooperation is not a justification for maintaining

the labs’ current staffing levels or programs, or a

carte blanche for expansion into new activities, or

a way to avoid the need for closing or consolidating some labs.

What the Council found was plenty of valuable

basic technology in the labs, but plenty of barriers

to its use by industry. “Clearly,” said the report,

“there is extensive overlap between industry

needs and laboratory capabilities. ’ But the Council found the pace of technology transfer, from the

DOE labs in particular, has been disappointingly

slow. Major barriers, it said, are too little funding

for technology transfer, not enough attention to

the mission of technology transfer in the lab

system or rewards for its success, and too much

bureaucratic interference from parent agencies

(especially DOE) in lab-industry partnerships.

Principal recommendations were: 1) authority to

handle cooperative projects with industry should

rest with the labs themselves-not with Congress,

Federal agencies, or intermediaries; and 2) technology transfer does not require new funds but a

redirection of existing funds-specifically, 10

percent of the labs’ budgets should go to cooperative projects, with the share rising to 20 percent or

even higher over the next few years. In addition,

the Council recommended that the labs and

industry should establish criteria for success now,

apply the criteria after 3 to 5 years, and stop the

program if it is not working.

The Council’s report seems to blend two

divergent, but not really contradictory, points of

view: first, that the DOE labs do have valuable

assets that industry could tap, but second, that

they are expensive institutions, and the obstacles

to fruitful partnerships are high. The upshot is a

pragmatic approach: let the labs prove what they

can do, but set a time limit for showing results.

Central to any real redirection of the DOE

weapons labs is the issue of what missions they

are supposed to carry out. Although the nuclear

defense mission that occupied them in the past

will not disappear, it will certainly diminish

greatly and can no longer be central for all three

of the biggest labs in the Federal system. Nor can

it continue to be the preeminent source of

technical strength in those labs as it has in the

past. An informal poll by the Council on Competitiveness showed that industry rated advanced

materials and processing, advanced computing,

environmental technologies, and manufacturing

processes, testing, and equipment as major technical areas in which they need assistance.40 The

labs specified these same areas as ones in which

they have unique capabilities that could help

39 Cowcil on Comwtitiveness, In&stv as a Fe,ieral Laboratories (Washington DC: 1992). The Council

confused with two other groups with similar names: the President’s Council on Competitiveness, a government interagency committee that

was made up of Cabinet members, was chaired by Vice-president Dan Quayle, but was abolished by President Bill Clintow and the

Competitiveness Policy CounciI, an independent adviso~ committee created by Congress and composed of Federal and State officials as well

as private sector members.

~ Ibid., p. 10.
3--Nuclear Weapons Laboratories: From Defense to Dual Use 93

Box 3-A-Core Competencies of DOE Weapons Laboratories

Lawrence Livermore National Laboratory

Measurements and Diagnostics Engineered Materials

● Sensors and detectors . Ceramic-metallic composites

. Data acquisition and analysis . Multi-layers

. Imaging and signal processing . Ultralightweight materials

Computational Science and Engineering Applied Physics and Chemistry

. Solids, fluids, atomic structure . Plasma, solid-state and atomic physics

. Electronics, electromagnetic ● Chemical kinetics

● Scientific visualization . Magnetics and superconductivity

● Massively parallel processing . Nuclear chemistry

Lasers, Optics, Electro-optics . Linear accelerators

. High power/high radiance lasers Atmospheric and Geosciences

● High power semiconductor diode laser arrays . Seismology and imaging

. X-ray sources, optics, and materials s Geochemistry

. High power optical fiber transport . Transport modeling

Manufacturing Engineering . Global climate

. Precision engineering Defense Sciences

. Computer modeling . Nuclear measurements

. Computed tomography . X-ray optics and diagnostics

Electronic Systems . Energetic materials

. High density packaging . Conventional munitions

. Pulsed power Bioscience

● High speed data transmission . Genomics

● Physical biology

● Analytical cytology

(continued on next page)

industry. Three out of four of these areas have highly uncertain payoff in the commercial marcontributed to and been supported by the nuclear

weapons program for decades, and the fourth,

environmental technologies, is now a prominent

part of the program. Box 3-A shows in more detail

the labs’ own estimation of their core competencies, and possible civilian applications.

If the nuclear weapons program will not be the

main source of technology advance in the labs in

future years, what will be? Responsibilities for

new public missions might be assigned to the

labs. “Public missions” are usually defined as

goals of national importance that benefit the

public at large, but require heavy financial

commitments and offer either no payoff or a

ketplace, so that private industry is unlikely to

tackle the goals alone. National defense clearly

fits the definition. But Federal R&D has long

been extended to other areas as well that lay claim

to a public purpose, including agriculture, aeronautics, health, energy, and the exploration of

space. Besides benefits to the public, research in

most of these areas has contributed to commercial

success for U.S. industries.

The list of public missions is expanding. The

dawning realization over the last few years that

many U.S. industries are in trouble, with foreign

competitors passing them by, has raised economic competitiveness to the level of a new
94 I Defense Conversion: Redirecting R&D

Box 3-A-Continued

Los Alamos National Laboratory

Nuclear Technologies Advanced Materials and Processing

. Nuclear weapons design ● Plutonium processing

. Reactor design and safety analysis . Manufacturing process analysis

. Nuclear medicine . Materials modeling (materials by design)

. Nuclear measurements . Polymers

High Performance Computing and Modeling . Ceramics

● Global environment (climate change, etc.) . Metallics

. Computational test bed for industry . Composites

. Massively parallel processing Beam Technologies

. High data rate communications . Accelerator transmutation of waste laser

. Traffic modeling diagnostics

● Visualization . Laser diagnostics

Dynamic Experimentation and Diagnostics . Material characterization

. Arms control/verification/safeguards ● Photonics

. Global environment . Photolithography

. Neutron scattering Theory and Complex Systems

. Measurement of explosive phenomena . Human genome

● Light detection and ranging (LIDAR) for ● Traffic simulations

atmospheric measurements . Neural networks

Systems Engineering and Rapid Prototyping . Non-linear phenomena

. Transportation systems

. Environmental and energy systems analysis

. Lasers manufacturing

. Accelerator systems

national goal. Many of the new missions now indeed any generic, precompetitive critical techbeing proposed for the labs reflect a sense of

urgency and public responsibility for shoring up

technologies important to American industry. For

example, the Department of Energy Laboratory

Technology Partnership Act of 1992, a bill that

passed the Senate in July 1992, directed DOE and

the labs to establish partnerships for developing

“technologies critical to national security and

scientific and technical competitiveness. ’41 Some

of the areas specified in the bill were high

performance computing, including hardware, software, and complex modeling programs; advanced

manufacturing, including laser, robotics, microelectronics and optoelectronics technologies; and

nology listed by the Department of Defense, the

Secretary of Energy, or the biennial National

Critical Technologies Report. Areas designated

in the bill that fit a more traditional definition of

public missions included renewed attention to

energy conservation and energy supplies, transportation systems that reduce energy use and

environmental damage, and, more broadly, health

and the environment.

Several issues come up in connection with new

missions for the labs. First, a mission broadly

defined as “economic competitiveness” may be

unworkable. Top officials at the labs fear that

such an imprecise definition of their responsibil-
3--Nuclear Weapons Laboratories: From Defense to Dual Use 195

Sandia National Laboratory

Engineered Materials and Processes Physical Simulation and Engineering Sciences

. Synthesis and processing of metals, ceramics, . Fluid and thermal sciences

organics . Combustion science

● Characterization and analytical technique . Geological sciences

development . Experimental mechanics

. Theory, simulation and modeling of materials and . Solid and structural mechanics

processes ● Aerodynamics

. Melting, casting and joining metal alloys ● Radiation transport and aboveground radiation

● Chemical vapor deposition and plasma testing

processing ● Diagnostics and instrumentation development

. Ion beam processing and analysis ● Nondestructive evaluation

Computational Simulations and High Performance ● Environmental testing and engineering

Computing ● Research reactor engineering and

● Massively parallel computation experimentation

● High Performance scientific computing Pulsed Power

● Quantum chemistry and electronic structure ● Intense particle beam physics and technology

● Computational hydrodynamics, mechanics, and ● High speed switching

dynamics ● Intense x-ray physics

● Digital communications and networking ● Radiation effects simulation

● Information surety ● Plasma and electromagnetic theory

● Development and application of intelligent and application

machines

● Signal processing

Microelectronics and Photonics

. Microsensors

● Optoelectronics and photonics

● X-ray lithography

● Reliability physics and engineering

● Radiation hardening technologies

● Advanced microelectronics and photonics

packaging

● Advanced compound semiconductors

SOURCES: Lawrence Livermore National Laboratory, Livermore, CA; Los Alamos National Laboratory, @ Alamos, NM; %mdia National

Laboratories, Albuquerque, NM.

ity could lead the labs to scatter their efforts and the DOE labs but to the whole diverse Federal

become nothing but job shops for industry. A laboratory system, in which dozens of labs (at the

particular strength of the billion-dollar weapons least) are capable of contributing to technologies

labs is their depth and versatility, but even these with commercial promise. In such a system, some

labs need to focus on a limited number of overlap in R&D is inevitable. In fact some

technologies that fit their core competencies best. overlap is useful, but some could be sheer waste.

This raises the related question of which labs Certain strengths of the weapons labs are in areas

should do what. The question applies not just to covered by other agencies. For example, Liver-
96 I Defense Conversion: Redirecting R&D

more’s work on genome sequencing could overlap with or complement the work of NIH.

Sandia’s work in specialty metals for jet engines

might overlap with or complement some of the

work of NASA’s Lewis or Jet Propulsion Laboratories. The precision engineering developed at

Livermore and the Y-12 weapons plant at Oak

Ridge might overlap with or complement work at

NIST’s manufacturing laboratories.

A search for alternate public missions was the

path trodden by Oak Ridge National Laboratory

in the 1950s and 1960s, when its nuclear mission

seemed to be drying up. As Oak Ridge discovered, some of the areas in which it claimed special

prowess were already staked out by other agencies’ labs. It was mainly for this reason that Oak

Ridge’s initiatives in large-scale biology eventually dwindled when there was a budget pinch, and

returned to NIH. A serious long-term program to

assign new public missions to the weapons labs

would have to survey the talents, resources, and

activities in the whole Federal laboratory system,

to see where the missions-or various pieces of

them-most properly belong.

Oak Ridge also discovered that it is hard for

other public missions to command the same

support as national defense. Even in a post-Cold

War world, when Americans may be ready as

never before to put their energies into nonmilitary

national goals, it is possible that no single one, or

even a combination of several, will get the level

of funding that nuclear weapons received for 50

years. However, to keep the labs in the first rank

of R&D institutions, able to draw excellent

researchers and do outstanding scientific and

technical work, the combination of missions

would need to attract funding that is both reasonably generous and reliably sustained.

A different future and new missions for the

weapons labs would raise other issues as well—

for example, whether it makes sense for the labs

to remain in the Department of Energy; still more

important, whether there is need for an agency to

give strategic direction to U.S. technology policy,

of which the role of the labs is only apart. These

issues are discussed further in chapter 2 of this

report. A critical question is whether the labs, no

matter how splendid their human abilities and

excellent the technologies they have developed,

are really capable of working productively with

industry. Is their history and culture as elite

military institutions so far from the practical

industrial world that they cannot be useful for

cooperative work on precompetitive, generic

technologies? Is DOE management a crippling

bureaucratic handicap? These questions are inescapable but probably cannot be answered without

the passage of a few years. Only now, with the

definitive end of the Cold War, have the labs

become serious about finding work outside defense that is truly important to the Nation. Only

now, with the recognition that the world is full of

tough competitors, have hard-pressed U.S. companies become serious about finding government

partners to share the risk of developing new

technologies.
Technology

Transfer

From DOE I

Weapons

Laboratories 4

T

he Federal laboratories of the United States differ greatly

in mission, size, and operation. A few Federal labs have

transferred technology effectively to private industry for

years, but most labs in the Federal system have until

recently concentrated on their public missions and have done

little to make their technologies available for commercial

development. One school of thought holds that there is, in fact,

little technology in the labs that is useful or interesting to

industry. Others believe that Federal labs are full of useful

technologies that have not been exploited commercially. Until

the 1990s, most of the evidence regarding technology transfer,

particularly from the Department of Energy (DOE) labs that are

among the biggest and best funded, supported the view that there

was little of commercial interest in the labs. In 1989, however,

the situation began to change.

TECHNOLOGY TRANSFER AT FEDERAL LABS

The Stevenson-Wydler Technology Innovation Act of 1980

was the first of a series of laws that focused specifically on

technology transfer from the Federal labs. Stevenson-Wydler

was aimed at innovation throughout the economy, with technology transfer from the labs a prominent part of the law. One of its

five major initiatives required most Federal labs to establish an

Office of Research and Technology Applications (ORTA).

ORTAs were given the responsibilities of assessing potential

applications of the labs’ R&D projects and disseminating

information on those applications. Each Federal agency that

operated or directed at least one lab was required to set aside at

least 0.5 percent of the agency’s R&D budget for technology

97
98 I Defense Conversion: Redirecting R&D

transfer.l Before Stevenson-Wydler, only the

National Aeronautics and Space Administration

(NASA) and the National Institute of Standards

and Technology (NIST) were directed to transfer

technology as part of their missions, though

several other federal agencies had good working

relationships with private companies that facilitated technology transfer.

Though ORTAs were set up in response to

Stevenson-Wydler, the record of technology transfer from Federal labs to other potential users was

disappointing. Inadequate ORTA staffing, unfunded provisions of the Act, and the fact that the

Act dealt only with technologies already on the

shelf were identified as some of the culprits.2

Over the next 6 years, several more laws further

encouraged technology transfer from Federal

labs. These included the Bayh-Dole Act of 1980,

the Small Business Innovation Development Act

of 1982, and Section 501 of the Trademarks-State

Justice Institute-Semiconductor Chips-Courts Patents Act of 1984 (amending the Bayh-Dole Act).

Like Stevenson-Wydler, these laws eased the

transfer of technology from labs to companies,

particularly small businesses, but their combined

impact was modest at best.

The next significant piece of technologytransfer legislation was the Federal Technology

Transfer Act (FTTA) of 1986. It amended StevensonWydler to allow government-owned, governmentoperated (GOGO) labs to sign cooperative research and development agreements (CRADAs)

with any outside organization, including businesses, nonprofits, and state and local government organizations (e.g.. many universities).

Earlier legislation had encouraged small businesses to enter cooperative R&D partnerships

with labs, but the FTTA significantly broadened

the range of potential cooperation. The FTTA

permitted-and Executive Order 12591, issued in

April 1987, required-that Federal agencies delegate to directors of GOGO labs the authority to

negotiate the division of funds, services, property,

and people with outside organizations in CRADAs, subject to the requirement that the lab could

only contribute in-kind resources, not funds.

Although some were slow to comply, most

agencies responded fully.3 For example, NIST

gives its lab directors nearly complete authority to

select and negotiate CRADAs, as has DoD.4

NASA labs do not use CRADAs, 5 but lab

directors have long had the ability to negotiate

and sign cooperative agreements to do R&D with

outside partners under the 1958 Space Act (called

Space Act Agreements).6

The FTTA also formalized the existence of the

Federal lab Consortium for Technology Transfer

(FLC). Originally established by the Defense

Department as an informal coordinating group in

1971, the FLC, relying on a small staff and

1 Public Law 96-480, Sec. 1 l(b), codified at 15 U.S.C. $3710. Agency heads could waive this requirement. In 1989, the 0.5 percent

requirement was replaced with the directive to provide “sufficient funding, either as a separate line ilem or from the agency’s research and

development budget. ” Public Law 101-189, Sec. 3133(e)(l)(2),

2 Barry Bozeman and Kaen Coker, ‘‘Assessing the Effectiveness of Technology Transfer From U.S. Government R&D Laboratories: The

Impact of Market Orientation’ Technovafiun, vol. 12, No. 4, p. 241.

s me Dep~ment of Commerce repofied in 1989 that “[m]ost [agencies] have attempted to delegate authority to the smallest tittit cm

realistically be called a laboratory. ’ See U.S. Department of Commelce, The Federal Technology Trarqfer Acl of 1986: The First 2 Years,

Report to the President and the Congress from the Secretary of Commerce, July 1989, p. i. However, both the General Accounting Office and

the DoD Inspector General issued reports the same year that found many agencies slow in delegating authority to their labs. See U.S. General

Accounting Office, Technology Transfer: Implementation Status qf the Federal Technology Transfer Act of 1986, RCED-89-154

(Gaithersburg, MD: 1989), pp. 23-30; U.S. Department of Defense, Office of the Inspector General, “Report on the Audit of the DOD Domestic

Technology Transfer Program, ’ Report No. 9M06, Oct. 19, 1989, p. 10.

d See Council on Competitiveness, Zndusmy as a Customer the Federal Laboratories (Washington, DC: {’ouncil on Competitiveness,

September 1992), p. 12.

s NASA labs are all GOGOS except the Jet Propulsion Laboratory, which is government-owned, contractor-operated (GOCC).

6 Space Act Agreements are subject to the same rule that the labs not transfer money to outside R&D pefiorrners.
4—Technology Transfer From DOE Weapons Laboratories 99

volunteer representatives from hundreds of labs,

tries to match inquiries from firms with th e

appropriate lab researcher. It has also held conferences on possible collaboration in selected areas

(e.g., manufacturing technology, management of

hazardous waste) and has funded projects to

demonstrate technology commercialization.7

FTTA marked a real change in Federal technology transfer policies. By encouraging cooperative

research and development, and enabling decentralization of authority to enter into cooperative

agreements, FTTA implicitly recognized that

technology transfer involves much more than a

handoff. To use the current cliche, technology

transfer is a contact sport. There were, however,

two holes in FTTA’s mandate, not addressed until

the National Competitiveness Technology Transfer Act of 1989 (NCTTA).8 One was protection of

proprietary information and another was the

treatment of GOCO (government-owned contractor-operated) labs.

According to some DOE officials, Executive

Order 12591 filled part of the gap. It directed

Federal agencies, “to the extent permitted by

law, ’ to give lab directors the authority to license,

assign, or waive rights to intellectual property

developed in cooperative agreements.9 This, according to some in DOE, mitigated some of the

concern of some potential cooperators that proprietary information developed in a cooperative

arrangement with a Federal lab could be transferred to a competitor through the Freedom of

Information Act (FOIA). But Executive Order

12591 did not really resolve concerns regarding

the Freedom of Information Act.

Second, FTTA did not address the safeguarding of information developed in cooperative R&D

projects. Potential partners were concerned that

such information could be accessed by competitors through FOIA, which discouraged some

companies from participating. NCTTA, however,

permitted the lab director or, in the case of

GOCOs, the parent agency, to exempt the results

of collaborative R&D from release under FOIA

for up to 5 years.10

The gap affecting GOCOs remained. While

most Federal labs are GOGOs, the largest, including all nine of DOE’s large multiprogram national

labs are GOCOs. While some DOE labs established cooperative projects with industries and

universities, broad legislative authority to do so

was not granted until NCTTA, in 1989. This law,

together with the Department of Defense Authorization Act for Fiscal Years 1992 and 1993, not

only strongly encouraged cooperative R&D but

also gave agencies more flexibility in meeting

industry’s concerns about the disposition of

intellectual property developed in or brought to a

CRADA.

TECHNOLOGY TRANSFER AT DOE

LABORATORIES: EARLY EFFORTS

CRADAs are only one form of technology

transfer. Others have long been available to DOE

and other Federal labs. These include technology

licensing, work for others (WFO), personnel

exchanges, publications, user facilities, consulting arrangements, university interactions, and

cooperative arrangements other than CRADAs.

DOE’s efforts to transfer technology have

spanned a range from marketing off-the-shelf

technologies to cooperative research and development. The advantages to cooperative work, or

other forms of high-contact transfer like personnel exchanges, include close communication

between lab and private sector researchers, creat7 see us, CongeSS, Office of T~~o]o~ Assessment, Muking T~i~g~ Be[(er: c~mpe[ing in (Washington

DC: U.S. Government Printing Office, February 1990), p. 190.

8 Public Law 101-189, Sees. 3131-3133.

g Federal Register, ‘‘Facilitating Access to Science and Technology, ” Executive Order 12591 of Apr. 10, 1987, vol. 52, No. 77, Apr. 22,

1987.

10 ~blic IAW 101-189, Sec. 3133(a)(7), adding 15 U.S.C. 3710a(C)(7).
100 [ Defense Conversion: Redirecting R&D

Box 4-A–A Cooperative Lab/Industry Project:

The Specialty Metals Processing Consortium

Specialty metals include a wide variety of metals and metal alloys not in common use, with exceptional

properties such as high strength at unusually high or low temperatures, corrosion resistance, exceptional

toughness, low density, or high or low neutron absorption. To achieve the desired properties, specialty metals

require unusually complex processing. That means high R&D costs and often investment in expensive equipment.

Both can be problems for the specialty metals industry, which consists of about 30 modest-sized companies (most

have 500 to 1,000 employees), with no particularly dominant player. Early in the 1970s, many of the companies

then in the industry curtailed R&D spending because of low profits, and continued to use existing processes with

little improvement.l Over the next two decades, producers in Europe and Asia pursued more active research

programs, with the result that the American industry’s competitiveness is now threatened.

Sandia National Laboratory’s involvement with specialty metals processing dates back to 1969, when Sandia

established a melting and solidification laboratory to deal with problems in processing uranium alloys for nuclear

weapons. In the years since, the lab’s interest in specialt y metals expanded to encompass titanium and iron- and

nickel-based alloys as well. The applications expanded to include a variety of aerospace and nuclear power uses.

During the 1970s, Sandia’s leading specialty metals researcher, Frank Zanner, began modeling specialty metals

remelting processes and testing the models at furnaces Sandia installed at two companies. In 1979, Zanner first

published and presented the results of his work on vacuum arc remelting (VAR), which led to his being invited to

confirm his research results at many producers’ plants. Informally, the consortium had begun to operate.

In 1988, Sandia hosted a workshop on melting and liquid metal processing, attended by over a hundred

participants from 33 domestic companies, 5 universities, and 5 government agencies. At the end of the workshop,

Sandia agreed to form a steering committee to investigate forming a joint research collaboration of the lab and

industry. The collaboration, participants hoped, would help compensate for declining industry R&D spending,

bolster flagging competitiveness, and improve relationships between producers and users of specialty metals.

1 F, ~nner, Sanctia Naticmal Laboratories, personal ~mmunidion, June 7, 1991.

ing greater likelihood of effective transfer. Ac- tive technology transfers were done in other kinds

cording to one report,

Argonne recognizes that most of its technology transfer results from personal contacts by the

Argonne staff. Although the positive impacts of

such contacts are harder to document than the

successful licensings and commercializations of

Argonne patents, the personal contacts (numerous in number) remain the major way that

Argonne interfaces with industry, business and

the government sectors.11

Before NCTTA made CRADAs a choice for

GOCOs, many of the weapons labs’ most effecof cooperative arrangements with industry—

consortia of firms in many cases. Examples

include the three superconductivity research and

information centers, and the Direct Injection

Stratified Charge program (DISC) of the weapons

labs together with General Motors and Princeton

University. An often-cited success of laboratory/

industry cooperative work is the Specialty Metals

Processing Consortium (SMPC) at Sandia National Laboratories in New Mexico (see box 4-A).

SMPC, while formally initiated after the enactment of NCTTA, probably is typical of what it

took to establish a good cooperative program with

11 Rictid E. Engler, Jr., and ~p G. Vmg=, ‘‘Global Competition and Technology Transfer by the Federal Laboratories, ’ contractor

report for the Office of Renewable Energy, U.S. Department of Energy, contract number CE-ACO1-85CE 30848.000, Feb. 20, 1987.
4—Technology Transfer From DOE Weapons Laboratories I 101

Even with a great deal of enthusiasm on all sides, it took 3 years to get the consortium started. It took time

to work out solutions to issues like intellectual property rights, membership qualifications (including foreign

participation), and funding. It took a year for DOE to approve legal and contractual matters. Finally, in July 1990,

the contract between the Specialty Metals Processing Consortium (SMPC) and DOE was signed, officially allowing

work to begin.

The consortium includes 11 companies, not including Sandia. Both industry and DOE are funding the project

on an equal basis for the first 5 years, each putting up about $2.75 million. DOE’s contribution peaked at $750,000

in 1992, and is scheduled to drop to zero by FY 1994. After DOE’s contributions cease, industry and others are

expected to fully fund the research Sandia performs for the consortium. The companies put up $50,000 per year.

Each company elects one person to the board of the consortium, and the board establishes research priorities

in consultation with the other companies and DOE. The work is mostly done by five employees in the Sandia

metallurgy and computations analysis departments. Additional manpower comes from industrial interns sent by

member companies for a year each,2 and by postgraduate students and professors from various universities.

Sandia’s work is mostly on paper. Research results are tested in the production facilities of member companies;

the lab provides portable test equipment as needed.

SMPC has already accomplished several things beyond the R&D itself. It helped to establish the conditions

for cooperative work between labs and industry before DOE or the labs had any familiarity with the cooperative

research and development agreement (CRADA) process made available to DOE labs in 1989. While the process

of developing models and negotiating CRADAs has been a rocky one, the experience of SMPC may have helped

to avoid still greater problems. SMPC also helped to overcome the initial reservations of many intermediate

managers at Sandia about doing cooperative work in general; in part because of its experience with SMPC, Sandia

has become a leader among DOE labs in initiating CRADAs. Finally, the enthusiasm of the industry participants

has helped to overcome some of the resistance in the private sector to doing cooperative work with “the

government.” None of the companies in the consortium was happy with the red tape, delay, and bureaucracy

involved in negotiating the original contract with DOE, but all are enthusiastic about the work of the SMPC. One,

encouraged by the SMPC, is negotiating another cooperative agreement with Sandia dealing with welding.

2 Sending an intern to SMPC entitles the member company to a 40 percent reduction in dues that Year.

a DOE lab in the days before the labs could and for the existence of a champion, Frank Zanner, at

were encouraged to do CRADAs. It was by no

means simple; it took 3 years from the time the

companies and Sandia researchers resolved to

form the consortium until the agreement establishing it was signed. Much of this delay can be

attributed to appropriate cautiousness in Sandia

and in DOE regarding an unfamiliar way of

accomplishing a government mission. A great

deal, however, is also attributable to what commonly is called ‘bureaucracy’ ‘-there were many

players at many levels whose concurrence was

needed; actions and approvals were slow; there

was much haggling over particular terms of the

agreement. SMPC probably would not exist if not

Sandia.

Superconductivity pilot centers, on the other

hand, took much less effort. Superconductivity is

a property of many metals, alloys, and chemical

compounds at temperatures near absolute zero,

where resistance to electricity vanishes. When

superconductivity happens at higher temperatures--35 to 40° Kelvin and above—it is referred

to as high temperature superconductivity (HTS).

In the late 1980s, the U.S. scientific community

became concerned that American companies,

which had not been as aggressive as Japanese

companies in investigating commercial applica -

tions of HTS technology, might fail to rea p
102 I Defense Conversion: Redirecting R&D

commercial benefits.12 Such applications could

include inexpensive bulk power transmission,

magnetic resonance imaging, efficient motors,

particle accelerators, sensors, hand-held supercomputers, and magnetically levitated trains.

In 1987, the Reagan Administration announced

a research initiative in HTS involving cooperation of government, industry and universities. In

1988, then-Secretary of Energy Barrington announced the establishment of DOE’s High Temperature Superconductivity Pilot Centers. Three

labs—Argonne, Los Alamos, and Oak Ridge—

were given the mission of developing applications for HTS in collaboration with industry. At

the time, these labs did not have the authority to

enter into CRADAs, and cooperative agreements,

while possible, were rare. To make the collaboration function smoothly, DOE created Superconductivity Pilot Center Agreements (SPCAs) to

provide a mechanism enabling the agency to

initiate cooperative R&D agreements. The agreements were modeled after sales agreements,

which were both common and legal, committing

the agency to ‘‘sell” R&D to cooperators (who

also were expected to perform some research).

The SPCA proved a successful mechanism: since

its invention, the three labs have signed 82 of

them, 39 of which are still active. 13 Funding for

the program in 1993 totaled $13.9 million, split

roughly evenly between the three centers; in

addition, DOE funds $12 million in related basic

research projects that support the work of the pilot

centers.

SPCAs and CRADAs, while generally similar,

have some differences. SPCAs may protect information generated in a project from FOIA requests

for up to 2 years; CRADA protection stretches to

five. SPCAs are only available at Argonne, Los

Alamos, and Oak Ridge; CRADAs can be initiated with any DOE lab. SPCAs allow the agency

to transfer finds to an industry partner, while

CRADAs do not.

Perhaps a more salient difference is ease of

negotiation. Companies using SPCAs mostly

report few delays or disagreements with DOE or

the labs in the negotiation process. CRADAs, on

the other hand, were time-consuming and difficult

to negotiate for nearly 3 years; only now is DOE

beginning to handle CRADAs on a more routine

and timely basis. A representative of Xsirius

Superconductivity, Inc., for example, reported

that it took only 6 weeks to propose, develop, and

gain DOE approval for an SPCA at Los Alamos,

while the same company’s CRADA with another

DOE facility took a year.]4 Richard Cass, President of HiTc, said it required only 8 to 10 weeks

to get something going with one of the HTS pilot

centers .15

Not everyone has had such a smooth ride. An

official of American Superconductor reported

that its first four SPCAs faced serious difficulties,

and negotiations consumed a year. Subsequent

agreements, however, were much faster and

smoother; American Superconductor now maintains close relationships with all three centers.l6

The fact that companies using the pilot centers

still apparently prefer SPCAs to CRADAs, even

though proprietary information is not so well

protected, is telling. Possibly, one difference is

that SPCAs all dealt with a relatively narrowly

specified technology, while CRADAs can apply

to any technology. Moreover, total SPCA funding

has been modest, compared with total finding for

CRADAs. Both factors would tend to make

12 see, for emple, U.S. Confless, Office of Technology Assessmen~ Commercializing High Tenperamre superco~ucti~’if’y,

OTA-ITE-388 (Washington DC: U.S. Government Printing Office, June 1988), passim.

13 Data p~~vided by James D~ey, HTS proq Manager, conservation and Renewable Energy, DOE, March 1993. b addition to the

SPCAS, one CRADA is also pending at the Oak Ridge Superconductivity Pilot Center.

]4 Dr. Hahn, scientist, xsiri~~ superconductivity, ~c., Personal cornmunicatiou February 1993.

15 ~c~d CaS5, ~esident of ~Tc, perso~ communi~tio~ Felmmry 1W3.

16 Alexis ~ozemoff, Scientist, American Superconductor, Persomd commlllli~tio~ 1993.
4--Technology Transfer From DOE Weapons Laboratories I 103

SPCAs less controversial and require less in the

way of elaborate selection procedures.

CRADAs AND THE NATIONAL

TECHNOLOGY INITIATIVE

Much has changed in the few years since the

passage of NCTTA, Throughout the 1980s, conventional wisdom correctly saw technology transfer from most government labs as a side show.

Moreover, many believed that the national labs

had little of more than marginal value to offer

industry. Though many still regard the labs as

unlikely contributors to industrial technology,

there is considerable evidence that such sentiments are changing. Several developments were

significant in turning the spotlight on technology

transfer in the 1990s.17 They included:

●

●

●

●

●

The new authority and encouragement for

cooperative work with industry conferred by

the NCTTA, building on previous laws;

The National Technology Initiative (NTI),

launched in February 1992, in which 10

Federal agencies

18 invited industry to become acquainted with lab technologies and

cooperate with the labs to further develop

technologies with commercial promise;

The availability of money earmarked for

cooperative projects in the DOE weapons

labs;

A new interest on the part of lab directors and

researchers in cooperative R&D with industry;

The appearance of enthusiastic government

support for R&D partnerships with industry

at a time when the economy is in the

doldrums and the climate for investment in

private R&D is discouraging;

● Newfound private sector interest in technology-development partnerships with labs,

partly spurred by the paucity of private

resources for R&D, and partly by the identification of numerous candidate technologies

within the labs that could have commercial

promise. Several organizations--among them

General Motors, the “Computer Systems

Policy Project, and the National Center for

Manufacturing Sciences-organized extensive lab visits aimed at identifying areas for

promising cooperative technology development in 1990-92, and came up with lengthy

lists of potential projects.

This combination of factors means that, for the

first time since the efforts that began in 1980 to

commercialize or transfer national lab technologies, there is broad, significant interest in the

private sector in lab technologies. Several of the

Federal labs-especially those of NIST, National

Institutes of Health (NIH), and NASA—have

done cooperative research with industry for years,

but on the whole, there has never been livelier

private sector interest in accessing the abilities

and resources of the labs. Results can be seen in

the fact that in July 1992 there were 1,175

CRADAs joining private partners and Federal

labs, compared with 33 in 1987. Over the same

4-year period, government invention disclosures

increased from 2,700 to 3,500, Federal patent

applications rose from 840 to 1,600, and Federal

patent licenses increased from 140 to 260.19

DOE’s national labs gained the authority to sign

CRADAs in 1989, but by early 1991 had negotiated only 15. By April 1993, DOE’s CRADAs

numbered 382, with planned and committed funding of $321 million (tables 4-1 and 4-2).20 It is

noteworthy too that for every CRADA signed

17 Sec ch. 3 for more discussion of these developments.

18 The Dep~tments of ComerCc, Energy, Trampofiation, Defemc, Interior, Agriculture, and Health and Human Services; NASA, tie

Offlcc of Science and Technology Policy of the White House, and the Environmental Protection Agency.

19 Lucy Reilly, ‘‘An Encore Performance for the NTI Road Show, ’ Technology Transfer Business, Fall 1992, p. 47.

20 Department of Energy, unpublished data.
104 I Defense Conversion: Redirecting R&D

Table 4-l—Distribution of CRADA Activities Among DOE Facilities and Programs

Funding source

Laboratory CE DP EM ER FE NE Other Total

Ames . . . . . . . . . . . . . . . . . .

ANL . . . . . . . . . . . . . . . . . . .

BNL . . . . . . . . . . . . . . . . . . .

INE L. . . . . . . . . . . . . . . . . .

ITRI . . . . . . . . . . . . . . . . . . .

K-25 Plant . . . . . . . . . . . . . .

LBL . . . . . . . . . . . . . . . . . . .

LLNL . . . . . . . . . . . . . . . . . . .

LANL . . . . . . . . . . . . . . . . . .

NREL . . . . . . . . . . . . . . . . . .

ORISE . . . . . . . . . . . . . . . . .

ORNL. . . . . . . . . . . . . . . . . .

PNL . . . . . . . . . . . . . . . . . . .

SNL . . . . . . . . . . . . . . . . . . .

Y-12 Plant . . . . . . . . . . . . . .

SSC Lab . . . . . . . . . . . . . . .

METC . . . . . . . . . . . . . . . . .

PETC . . . . . . . . . . . . . . . . . .

Totals . . . . . . . . . . . . . . . .

Number of CRADAs

5

7

11

4

10

20

6

5

68

1

2

1

3

18

8

3

2

1

7

83

16

186d

2

4

5

c

2

1

18

6

1

4

l 2

b

7

1

1

1

2

3

1

1

10

16

61 34

1

25

8

3 15

3

2 4

1 19

41

46

10

1 2

1 6 53

1 19

92

17

1

10

16

1 14 382”

aofthese, 6werecotinded byER.

bone ofthesewasmfund~ by the office of lnteliiget-tce.

cone oftheseiscofund~ byER.

d~etotalofthisco[umnis l~, butoneCRADAi~~unt~six~mes, sothetota[isadjustedtorefl~tthe actual numberofagreements.The NCMS

CRADA, for$10 million, iscounted by Livermore, lmsAlamos, Sandia, Oak Ridge, Oak RidgeY12, and OakRicigeK25.

e ~is i.s the total of the row, not the ~lumn. ~ adjustment was m~eto individual prograrn# ~lurnfl totals to elirn inate double counting, as eXpklind

in the previous footnote.

KEY: ANL—Argonne National Laboratory; BNL-Brookhaven National Laboratory; CE<onservation and Renewable Energy; DP—Defense

Programs; EM-Environmental Restoration and Waste Management; ER-Energy Research; FE—Fossil Energy; INEL—ldaho National

Engineering Laboratory; ITR1-inhalation Toxicology Research Institute; K-25 Plant-Oak Ridge K-25 Plant; LBL-Lawrence Berkeley National

Laboratory; MHC-Morgantown Energy Technology Center; NE-Nuclear Energy; NREL-National Renewable Energy Laboratory; ORISE-Oak

Ridge Institute for Science Education; ORNL-Oak Ridge National Laboratory; PETC-Pittsburgh Energy Technology Center; PNL-Pacific

Northwest Laboratory; Y-1 2 Plant4ak Ridge Y-12 Plant; SSC La&Superconducting Supercollider Laboratory.

SOURCE: Department of Energy, unpublished data.

with DOE weapons labs there are several more

proposals that did not make the cut--one DOE

official estimates that considerably fewer than 1

in 10 proposals are funded. The competition for

getting CRADAs approved and funded is now

keen.

None of this is to gainsay the fact that there are

still many in industry-possibly the majority—

who think there is little useful technology to be

had from the national labs, and would support

closing or shrinkin g the labs as their traditional

missions decline in importance, rather than trying

to find other applications for them. Even among

the many companies that recognize the value of

technological offerings of the labs and take

advantage of the opportunity for shared research,

there is a growing sense of impatience. The

CRADA process, at the DOE GOCO labs in particular, has been marked by frustration and delay

--enough that, if problems are not remedied, enthusiasm may begin to wane. So far, DOE and the

labs have made enough improvements that there

is no noticeable lessening of enthusiasm for

CRADAs, though there are still vocal critics of

both the usefulness of CRADAs generally, and

the difficulties of initiating agreements specifically.
4-Technology Transfer From DOE Weapons Laboratories I 105

Table 4-2-Distribution of CRADA Federal Funding Among DOE Facilities and Programs

Funding source

Laboratory CE DP EM ER FE NE Other Total

Dollar value of CRADA

Ames . . . . . . . . . . . . . . . . . . $ 160

ANL . . . . . . . . . . . . . . . . . . . $3,900 $ 50

BNL . . . . . . . . . . . . . . . . . . .

INEL . . . . . . . . . . . . . . . . . . .

ITRI . . . . . . . . . . . . . . . . . . .

K-25 Plant . . . . . . . . . . . . . .

LBL . . . . . . . . . . . . . . . . . . .

LLNL . . . . . . . . . . . . . . . . . . .

LANL . . . . . . . . . . . . . . . . . .

NREL . . . . . . . . . . . . . . . . . .

ORISE . . . . . . . . . . . . . . . . .

ORAL . . . . . . . . . . . . . . . . . .

PNL . . . . . . . . . . . . . . . . . . .

SNL . . . . . . . . . . . . . . . . . . .

Y-12 Plant . . . . . . . . . . . . . .

SSC lab . . . . . . . . . . . . . . .

METC . . . . . . . . . . . . . . . . .

PETC . . . . . . . . . . . . . . . . . .

Totals .,...... . . . . . . . . $33,986 $226,719 $6,029

a~e NCMSC~DA,tota~ng $Iomiilion, isnotinclwedin thistotal. TheNCMSCRADA isshared byOakRi~eNational Laboratory, OakRidge

K-25, OakRidge Y-12,Lawrence LivermoreNational Laboratory, LosAtarnasNationalLaboratory, andSandiaNational Laboratory. Forthesake

of accounting, the CRADA is represented in this table by allocating $2.5 million to each of the four national laboratories, leaving out the K-25 and

Y-12 plants.

b See footnote a on the allocation of NCMS CRADA funding.

c See footnote a on the allocation of the NCMS CRADA funding.

d See footnote a.

e This in~udes one CRADA funded by EM at $230,000, plus half of an $806,000 CRADA funded jointly by ER and EM.

f See footnote e.

9 See footnote a.

KEY: ANL—Argonne National Laboratory; BNL—Brookhaven National Laboratory; CE<onservation and Renewable Energy; DP—Defense

Programs; EM—Environmental Restoration and Waste Management; ER-Energy Research; FE—Fossil Energy; INEL—ldaho National

Engineering Laboratory; ITR1-inhalation Toxicology Research Institute; K-25 Plant-Oak Ridge K-25 Plant; LBL-Lawrence Berkeley National

Laboratory; M ETG-Morgantown Energy Technology Center; NE-Nuclear Energy; NREL-National Renewable Energy Laboratory; ORISE-Oak

Ridge Institute for Science Education; ORNL-Oak Ridge National Laboratory; PH&Pittsburgh Energy Technology Center; PNL—Pacific

Northwest Laboratory; Y-1 2 Plant-Oak Ridge Y-12 Plant; SSC La&Superconducting Supercollider Laboratory.

SOURCE: Department of Energy, unpublished data.

9 The CRADA Process at DOE office, various officials from DOE headquarters,

Observers and potential R&D partners who and the companies) were common, especially in

have been through the process of trying to sign a 1991-92. Some felt that there was no clear line of

CRADA with DOE point to many things that authority to expedite or approve CRADAs; the

prolong the effort and increase the frustration. terms of the model CRADAs DOE has used were

Complaints that there are too many people unacceptable; that there was too little DOE

affecting the negotiation21 (including, at various money available to fund CRADAs, particularly

points in the process, the labs, the DOE field considering the trouble taken to initiate them.

21 Not ~ fic ~~ie~ ~ect~g ~egotiatiom were fo~y involved. For ex~ple, some company represenQtives told storiti Of prOpOSing

a change in CRADA regulations to lab officials, who passed them to field offices and then headquarters, often involving long waits.
106 I Defense Conversion: Redirecting R&D

Things improved in 1992 and 1993. DOE has

heeded many of its critics, and has made several

important compromises. Some of these compromises have resulted in a more predictable process

for initiating CRADAs, and DOE is still examining ways to smooth the rough spots. There are,

however, limits to how far the agency is prepared

or permitted to go to meet its critics, and problems

remain.

There is no doubt that the relatively heavy

involvement of headquarters staff makes the

Defense Programs CRADA process lengthier and

more irritating than the cooperative research

processes at other agencies. Critics compare the

DOE process unfavorably with that of NIST and

sometimes NASA, both of which have delegated

most of the authority for initiating and signing

CRADAs to the directors of their labs. The

NCTTA provides for greater agency supervision

for GOCO laboratories than for GOGO labs

(which include all of NIST’s labs and all but one

of NASA’s); but if DOE could simply give its

own lab directors the same authority that directors

of GOGO labs have, according to critics, the

frustration would evaporate. There is some evidence to support this contention: Sandia, which

plunged into the CRADA business shortly after

the passage of the NCTTA, signed up several

potential cooperators in 1990 only to wait through

months of negotiation with DOE headquarters.22

Some lab directors have argued, as have many in

the private sector, that DOE could exert appropriate control over the process if the lab directors

were given both authority and money for CRADAs, and the agency used evaluations of the labs’

performance in subsequent years’ budgets. This

would require a change in the law; the NCTTA

specifically directs DOE to approve both CRADAs and Joint Work Statements before an agreement can be executed.

DOE argues for (and the law provides for) more

headquarters control over the process than, for

example, at NIST and for most NASA labs.

Several things set DOE apart from NIST and

NASA, whose cooperative agreement processes

are usually compared favorably with DOE’s. First

and foremost, DOE’s labs are contractor operated.

Some people believe that the GOCO lab directors

and personnel are less likely to keep the public

purpose firmly in mind and conflicts of interest

out than the government employees running

NIST’s labs and all but one of NASA’s labs.

Many in Congress agree that GOCO labs cannot

be granted the same trust in allocating funds that

GOGO labs can; DOE has had to answer to

congressional inquiries about the propriety of

actions at its GOCO labs, and is anxious to avoid

repeating the experience.

Another factor is visibility. DOE labs, particularly the nuclear weapons labs, are far larger than

most other labs in the Federal system, and their

missions are among the most controversial of any

undertaken by the Federal Government. Anything

they do, many feel, is subject to more scrutiny

than is devoted to other agencies’ labs. Their

CRADAs in particular are under a microscope,

because the authority and process are new and

have been heavily advertised through the NTI.

DOE may believe that it is especially important to

be above reproach about things like fairness of

opportunity, U.S. preference for manufacturing,

and the like. As a result, the agency has taken a

great deal of time to develop a CRADA process,

which is still undergoing changes, and subjects

each agreement to more control and scrutiny than

agencies whose processes have been operating

with less agency oversight for years.

Finally, officials of Defense Programs (DP) in

DOE believe that the amount of money allocated

to cooperation with industry is far too large to be

zz DOE ~wes that Sandia cut several deals with indushy that disregarded DOE’s model CR4DA, ~d tit ex amining and evaluating all

the changes took time. DOE did waive some of the conditions Sandia and its potential cooperators objected to, and the agency has been revising

the model CRADA in response to similar problems over the past 2 years or so. Many observers-not all of them stakeholders-have speculated

that if DOE had pulled industry in earlier to the exercise of developing its model CRADA, many of these problems could have been avoided.
4—Technology Transfer From DOE Weapons Laboratories I 107

spent without strategic direction. Delegating all

authority to lab directors could largely preclude

the agency’s ability to use the CRADA process as

part of strategic, multilab and possibly multiagency initiatives to develop technologies. For

example, Warren Chernock, Deputy Science and

Technology Advisor for Defense Programs, would

like to develop and fund initiatives in semiconductor lithography, flat panel displays, a broad

array of automotive and transport technologies,

and advanced materials and ceramics that would

include numerous lab and cooperative programs

throughout DOE. Chernock believes that with

this kind of strategic direction, DOE’s CRADA

funds can accomplish much more than the same

amount of money spent on CRADAs without

common purposes, avoid duplication, and exploit

to best advantage the abilities of all the DP labs .23

However, DP, which funds the lion’s share of

DOE CRADAs, selects among potential projects

using a process that takes quite a chunk of

time—in the case of the both the June 1992 and

November 1992 calls for proposals, about 5

months—to decide which proposals it is prepared

to fund, DOE is required by the NCTTA to

approve both the joint work statement (which lays

out the proposed work of a CRADA) and the

CRADA itself (the legal document governing the

work), but DP’s proposal selection process is not

specifically required by NCTTA; other offices in

DOE (e.g., Energy Research, Conservation and

Renewable, Nuclear Energy) use simpler screening measures.

Partly because of the extra proposal evaluation

step required by DP’s selection process, it usually

takes more than DP’s hoped-for 6 months to

initiate a CRADA (beginning with the submission of a project proposal, which, in DP’s case, is

supposed to happen only when there is a call for

proposals). Companies have come to know this.

Lab ORTA representatives report that potential

industry cooperators start off armed with the

expectation of a many-month wait-much more

so than they had the year before—and they are

now aware of certain things that could be done to

expedite the process (e.g., partnering with other

firms,24 bringing specific problems to the attention of the highest ranking officials of DOE

during NTI meetings). Yet nearly everyone agrees

that the process needs further improvement.

Though there are no good statistics on how

long it takes to put a CRADA into operation,

nearly everyone involved, inside the agency and

labs and in the private sector, agrees that the

process has been much too slow, especially early

on. For example, a model CRADA for computer

systems companies (negotiated by the Computer

Systems Policy Project, or CSPP) took 9 months

to agree on and a year from initiation to signature

(see box 4-B). The National Center for Manufacturing Sciences (NCMS) reported that it took

nearly 2 years to negotiate an umbrella CRADA

for its members to use. While smaller CRADAs

with single firms often take considerably less

time than CRADAs intended to serve as models,

initiating a CRADA with a DOE lab has not been

expeditious.

A variety of things can prolong the process.

One, already outlined, is the selection process for

fundable proposals in Defense Programs, which

adds several months up front, before a formal

joint work statement or CRADA agreement is

23 OTA staff interview with Warren chernoc~ Deputy Science and Technology Advisor, Defense Programs, DOE, May, 1992.

z~ For scvcral good rcasom, DOE h~ been more inclined to favor proposals from consortia@ from individual firms. First, CWAS with

multiple firms increme the likelihood of technology dissemination. Also, it helps DOE avoid charges that the department is unfairly favoring

one firm at the expense of its competitors. This kind of allegation has ariserv officials of Convex Computer, after learning that their competitor

Cmy Research hoped to initiate a sizable CRADA with Los Alamos, accused the agency of picking favorites. In the end, the controversy was

a key factor in DOE’s decision not to fund the CRADA, which had reportedly been on a fast track for approval before objections arose. DOE

is expccttxi to restructure the CRADA to allow forgreatercompctition among supcrcomputer manufacturers. See, for example, ‘Convex Voices

Great Displeasure Over Cray’s CRADA With Los Alamos,’ New Technology Week, Nov. 30, 1992; and “KAPUT: Cray’s CRADA With Los

Alamos, DOE, ” High Pe~ormance Computing and Communications Week, Mar. 18, 1993, pp. 1-2.
108 I Defense Conversion: Redirecting R&D

Box 4-B–The Computer Systems Policy Project CRADA1

The Computer Systems Policy Project (CSPP) was organized in 1989. The 11 computer companies 2 that form

the group aim to inform policymakers of the critical concerns of the computer systems industry, and to provide

information to help illuminate public policy.3

One of the policy areas of greatest interest is technology policy. CSPP identified increasing interaction

between industry and the federal laboratories as one of its goals.4 The CEOs of the companies met with the director

of the Office of Management and Budget (OMB), Richard Darman, in December of 1990 to discuss their interest

in increasing the relevance of Federal R&D to the computer industry, particularly in focusing federal laboratory

spending to better serve computer competitiveness needs. Darman reportedly was not interested in overhauling

the entire federal laboratory system, but suggested that the CEOs look at the DOE labs. DEC assigned an

engineer, Jack DeMember, to look into possibilities of CSPP-DOE lab cooperative work. DeMember did an internal

survey of what technologies t he member companies were most interested in, and what laboratories they viewed

as the most likely candidates for interaction. DeMember and other technical experts from CSPP companies talked

extensively with people at labs, and in the Department of Commerce, OMB, and the private sector to assess the

potential contributions of the DOE labs, and in spring of 1991 recommended that CSPP pursue a model CRADA,

which any company could use as a starting point in CRADA negotiations with DOE.

The model CRADA approach was adopted because CSPP interviews had indicated that it was too

time-consuming and difficult to pursue CRADAs on a one-on-one, Iab/company basis; CSPP hoped that by

agreeing to a model CRADA, the companies would be able to initiate cooperative R&D with labs5 as needed. The

CEOs approved the plan to negotiate a model in June 1991, and set December 1991 as a target date for having

a CRADA. CSPP appointed a team of CRADA negotiators, headed by Piper Cole of Sun Microsystems.

Negotiations quickly bogged down. DOE already had a draft model CRADA, which the CSPP negotiators

found instantly unacceptable, The firms were concerned most about the DOE model’s8 treatment of intellectual

property (including confidentiality and software protection), requirements that products resulting from CRADA

technology be manufactured in the United States (the so-called U.S. preference stipulation), and the requirement

that participating firms indemnify DOE and the labs for any damage from products made using technology

developed in a CRADA. Departures from DOE’s model, however, proved extremely difficult to negotiate; after a

couple of months, representatives of the labs were brought in to try to help. In October, three of the CEOs came

to Washington to meet with Admiral Watkins, the Secretary of Energy, asking for some way to reduce the difficulties

1 nes~rces of information for this box are OTA staff interviews with Fiona Branton, amciate lawyer, preston

Gates Ellis, May 21, 1992; Jack DeMember, Federal Laboratory Liason, Digital Equipment Corporation, May 29; and

Warren Chernock, Deputy Sdence and Technology Advisor, Defense Programs, DOE, June 5,1992.

2 The 11 Conlpanies are Apple, Compaq, Control Data, Cray Research, DEC, Hewlett-Packard, IBM, NCR, Sun

Microsystems, Tandem, and Unisys,

3 Computer Systems Policy Project, “Perspectives: Success Factors in Crttlcal Technologies,” July 1990, p. 1,

4 The other two g~[s incfuded jrnpro~ng ind~ry inpt to the federal R&D budget revfew, and implementing the

High Performance Computing and Communications Initiative, or HPCC. Source: CSPP, “Perspectives on U.S.

Twhnology Policy, Part 11: Inweasing Industry Involvement,” February 26, 1991, p. 1.

5 CSpp vw interested in working with five laboratories: the three weapons labs, Oak Ridge, and Argonne.

6 *Nof their ~ncern w~t with the provisio~ in the model, but with things that were mksing,
4—Technology Transfer From DOE Weapons Laboratories I 109

and pick up the pace of negotiation. That worked, to some extent; Watkins responded positively, and there were

many meetings in November. But the negotiations still dragged on until March, when CSPP and DOE finally

initialed a letter of agreement on a model CRADA. Even then, some issues remained to be settled in individual

CRADAs. For example, while some of the issues regarding allocation of software copyrights were resolved in the

CSPP model CRADA, some were shunted into an appendix (appendix C), for which it was not then possible to

develop a model.

The CSPP effort finally paid off, but only because of a number of favorable circumstances; without them, it

would likely have taken longer or broken down entirely. CSPP members had access to Secretary Watkins, and

convinced him that the CRADA was in everyone’s interest. When progress slowed, Watkins directed DOE’s

negotiators to work hard to accelerate the process. Watkins appointed a lead negotiator for DOE who was effective

in making sure that all of the key players within DOE were included in the negotiations, rather than having long

delays while each iteration passed through numerous reviews off-line. CSPP also put in long hours, and spent

considerable effort presenting evidence regarding the nature and needs of the computer industry. DOE showed

some flexibility; when some thorny issues threatened to tear the negotiations apart, DOE finally left the labs and

CSPP to work out whatever reasonable solution they could agree on.

One week after the model was initialed, Cray Research signed three individual CRADAs with Los Alamos7

using its terms. CSPP officials did not regard these CRADAs as a true test of the speed with which individual

agreements could be signed using the model, for these three had been in the pipeline for months, concurrently

with the model CRADA negotiations.

Painful as it was, the CSPP CRADA accomplished several things. Together with another CRADA negotiated

at the same time (an umbrella CRADA8 of t he National Center for Manufacturing Sciences), the negotiation gave

many companies the opportunist y to initiate work with t he labs. The CSPP CRADA can be used by any computer

company, not just members, as long as they focus on one of the technologies covered by the agreement. The

technologies include displays, software engineering, electronics packaging, microelectronics, optoelectronics,

graphics, manufacturing technology, and integrated circuit fabrication equipment.

The CSPP CRADA also contributed to DOE’s ongoing effort to improve its standard model CRADA offered

to all potential cooperators. After the negotiation, some in DOE maintained that its model, which it hoped to use

for everyone in subsequent calls, would not compromise to the extent that the CSPP model did, but the ice was

broken; an official from one of the weapons labs said that several companies had asked for provisions similar to

the ones in the CSPP CRADA (for example, an exemption from products liability for damage caused by lab

negligence), and were likely to get them.

Finally, the CSPP negotiations, like those of NCMS, General Motors and the automobile industry, and others,

uncovered boulders in the stream, and got many people in DOE, labs, and industry thinking about how to manage

the process of collaborative government Iaboratory/industry R&D better. While many of the problems have not

been solved, and the process still needs considerable improvement, the efforts devoted to dreaming up better

ways of managing CRADAs have spawned several ideas that go far beyond simply making the process of initiating

a CRADA easier and faster. For example, some people advocate that lab directors have authority to allocate some

CRADA funds according to their own discretion, with the extensive reviews and priority-setting processes of DOE

being reserved for larger CRADAs or agreements that are part of broader, multiagency technology initiatives.

7 me agreemen~ involved global climate modeling, Computational eiectromagnetics, and modeiing Of nlOieCuieS.

8 An “m~elia C~DA, unlike a model, h~ form and indudes oommitted funds to be spent on subsequent

approval of individual project task statements. A modei oniy serves as a tempiate for actual CRADAS. DOE did, however,

commit itself to fund CRADAS using the CSPP model.
110 I Defense Conversion: Redirecting R&D

considered. Two others are overall funding for

CRADAs, and the terms of CRADA agreements.

E The Funding Bottleneck

Even if the process for selecting fundable

proposals were shorter, finding money for CRADAs is sometimes difficult. This is so even

though Defense Programs, which has funded the

majority of all DOE CRADAs, has set aside more

money for CRADAs this year than ever before

($141 million), and has asked for authority to

allocate an additional $47 million.

The agency can fund CRADAs either through

ordinary program funds or through a designated

CRADA fund. NIST and NIH routinely use

program money; DOE occasionally uses program

funds, but most often, DOE CRADAs are funded

with money set aside within the agency for the

purpose. DP’s set-aside dwarfs others within

DOE.

In 1991, Congress appropriated a line item of

$20 million for Technology Transfer, to get the

CRADA process started. It worked; in the succeeding 2 years, DP set aside $50 million and

$141 million. DP’s $141 million is widely

regarded as the major pot of CRADA money

available in DOE, and according to one source,

other assistant secretaries (for example, in energy

programs) are envious of it. However, by some

standards, this allocation is inadequate.

NTI contributed to the burgeoning of outside

interest in R&D partnerships, and now DP

routinely gets far too many proposals to fund from

its setaside. In response to the avalanche of

proposals, DP asked Congress for authority to

reprogram $50 million for CRADAs in FY 1992,

(it already had set aside $50 million in fiscal year

1992), but the request was turned down by the

House Committee on Armed Services.25 As a

result, there was very little money to fund any

proposals that came in response to the June call,

and proposals that were approved for funding had

to wait until FY 1993.

Now that DP has $141 million for CRADAs for

FY 1993, DOE is able to fund proposals submitted last summer, and CRADA negotiations are

underway for many of these projects. According

to Dan Arvizu of Sandia, this has broken the

logjam that began when DP’s request for authority to reprogram $50 million was turned down in

late FY 1992.

The impetus provided by FY 1993 money was

short-lived. About half the money ($71 million26)

in DP’s CRADA pot this year is already ‘ ‘mortgaged,’ or committed to multiyear projects

begun in FY 1991 or 1992. Of the remainder, a

small amount was taken off the top for SBIR

(Small Business Innovative Research) projects,

and one lab official27 estimated that funding the

CRADAs approved in early November (from the

June call for proposals) will take around $40

million. This leaves only $25 to $30 million for

new CRADAs not already in the pipeline. DP

issued another call for proposals in November of

1992, and there will be less to fund CRADAs in

that round than there was in the two previous

rounds, even making no precision for further calls

in FY 1993. According to one report, DP hopes to

be able to reprogram an additional $47 million for

CRADAs in FY 1993, but it is unknown at this

writing whether it can. DP is hoping to be able to

allocate $191 million to technology transfer in FY

1994, and $250 million in FY 1995.

25 T~~~~~y, DOE did not n~ au~rity to reprogr~ tie ~ds as low x tie spe- didn’t Span different IipprOprititiOn line itemS.

DP’s request was turned down initially because the request to reprognun money from DP to DOE’s NTI activities would have switched money

from one line item to another. However, even after reformulating the request to reprogram money to CIL4DAS only within DP, the request was

mrned down. The $50 million did not disappear forever, however. DP had initially requested $91 million for ICRADAS for FY 1993, which

it go~ along with an additional $50 million.

26$71 million is me Sm of tie tie pr=e@g fisc~ Yems’ apprOpriatiOILS for Dp -As--$1 .1 million ~ FY 1990, $20 rniflion k ~

1991, and $50 million in FY 1992.

27 J~ia Giller, Off Ice of Research and Technology Applications, Livermore.
4—Technology Transfer From DOE Weapons Laboratories I 111

Looking outside DP for CRADA money may

bean even drier well. Certainly up to now, DP has

provided the lion’s share of all CRADA money

available at DOE; as of April 1993, over seventy

percent of committed and planned funding for

DOE CRADAs came from DP.

Another option is to use program funds,

without having to tap a special pot of money for

CRAD AS.

28 This can be done now, but the

constraints in DP are tight. DP and the labs, at the

beginning of each year, establish how they will

spend their program finds, and allocate lab

budgets to individual projects. After the planning

process, there is little room for adjusting the focus

or scope of project work to accommodate the

interests of a potential CRADA partner, so any

CRADAs funded with program money must

entail essentially no change in work on the part of

the lab project teams.

Several anecdotes illustrate how discouraging

29 Dp initially agreed inadequate finding can be,

to put aside $1 million in FY 1991 and $5 million

in FY 1992 to fund individual projects that used

the model CRADA for the computer industry

negotiated by the Computer Systems Policy

Project (CSPP). According to one official of a

CSPP member company, his company had identified $30 to $40 million in work at Los Alamos

alone.

General Motors provides another illustration.

In January 1992, GM hosted a meeting in Warren,

Michigan. The meeting was attended by hundreds

of company engineers and scientists and technical

representatives from eight of DOE’s nine multiprogram labs, NASA’s Ames lab, the Air Force’s

Wright Patterson facility, and NIST. The meeting

was the culmination of months of spadework on

the part of a few people at GM and the labs who

realized that there were enormous possibilities for

collaboration that people in both organizations

were mostly unaware of. The meeting was a big

success; as one participant put it, lab people

realized that GM presented interesting technical

challenges, and GM people learned that labs had

much to offer them in collaborative arrangements.

Moreover, the meeting at GM had high-level

management support both in the company and

among the labs, which helped a great deal.

Finally, GM identified very specific needs and

problems up front, and provided money and

support people to facilitate collaborations.

Following the meeting, GM identified over 200

interesting cooperative projects. Realizing that it

would be futile to submit so many proposals, GM

whittled the projects down to about 25, which it

submitted in the June, 1992 call for proposals.

About half proposed to use DP facilities, and the

other half various energy programs. None of

GM’s CRADAs had been signed by the end of

calendar year 1992. By April 1993, 9 GM

CRADAs had been executed.

1 DP Selection of Proposals

The process of initiating a CRADA is months

long even under ideal circumstances, considering

all the steps. The courtship phase—when industry

and lab people get together, discuss their work,

and develop ideas for joint R&D-often takes

half a year or more. Once the idea passes muster

in both the lab and the company (ies), the researchers prepare a proposal describing the proposed

work, and submit it to DOE. If the proposal

involves work done in Defense programs (as most

do), the proposal must then go through the DP

selection process, initiated in 1992.

The selection process precedes the negotiation

of the actual work statement (called a joint work

statement, or JWS) and the CRADA itself. DOE

has delegated to its field offices the authority to

approve JWSs and CRADAs, but the field offices

28 one bill ~unen~y before ~c sc~te, tie DeP~ment of Energ Natioml Competitiveness TNhIIO]Ogy p~crship Act Of 1993, would

make all program funds in DOE available to fund CRADAS.

29 ~c tcm ~ ‘~dquatc’ iS king used t. desCfibe how many in ~dus&y and DOE f~l about WA money so far. OTA haS nOt weighed

CRADA funding against other uses of public money.
112 I Defense Conversion: Redirecting R&D

Figure 4-1—The Call for Proposals Process of DOE Defense Programs

Call for proposals

Summary proposal

submittal (participant)

Summary proposal

distribution (field office)

Summary proposal

ranking (TACTs)

Summary proposal review

(headquarters Information)

LCB ranking (cross-cut)

DOE selection

based on LCB ranking

Independent

reviews DOE notification

Final proposal/JWS

submittal (participant)

CRADA “open issues” resolution

(participant/lab/HQ/field office)

JWS/CRADA

processing (field office)

JWS/CRADA

approval work initiates

——

●

● Point in time ‘

= Time span

-

L..—

0123 4

——

SOURCE: U.S. Department of Energy, Defense Programs, 1993.

cannot begin the approval process until DP has

decided which proposals to fund. The process

consists of several steps (figures 4-1 and 4-2).

DP’s call for proposals is the first step. The

proposals are then reviewed by teams of technical

experts, one from each weapons lab and one from

the Y-12 Plant at Oak Ridge National lab. There

are five such teams, called Technology Area

Coordinating Teams (TACTs): 1) precision engineering and advanced manufacturing, 2) materials and processes for manufacturing, 3) microelectronics (and photonics), 4) computer architec567 8 9 10 11 12 13 14 15 16

Week

ture and applications, and 5) energy and environment. After the TACTs finish their reviews, the

results are submitted to another review group,

called the DP Laboratory Technology Transfer

Coordination Board (LCB,). LCB consists of the

directors of the ORTAs of each of the three

weapons labs and the Oak Ridge Y-12 Plant.

Using the TACTs’ ranking as part of its own

review, LCB then makes its own ranking, and

forwards a list of ranked proposals to DP.30 DP

makes whatever adjustments deemed necessary,

and announces which work. statements have been

w o~~ly, tie LCB WU meat to ~ve an industry advisory board to review the proposals. SO far, tie bowd M not ~~ form~, ~d

outside private sector review is lacking in the process. This has not proved a handicap, although both DOE and Congress have continued to

express interest in forming an industry advisory board to review CRADAS.
4-Technology Transfer From DOE Weapons Laboratories ! 113

Figure 4-2—The CRADA Proposal Review Process of DOE Defense Programs

Computer

Architecture and

Applications

Industry input

chosen. At that point, the lab and the company can selected among the proposals, has

prepare a JWS and negotiate a CRADA.31

DP’s initial goal was for the proposal review

process described above to take 13 weeks, and the

approval of CRADAs following DP’s selection to

take another 3 weeks, for a total of 4 months from

submission of a proposal to approval of a

CRADA. Knowing that was optimistic, DP aimed

initially for a 6-month turnaround, and hoped, as

everyone gained experience with the process, to

whittle it to 4.32 Currently, some CRADAs may be

meeting the 6-month target, but probably most are

not. Nevertheless, the process of negotiating the

agreements, which can begin only after DP has

Energy and

Environment

Industry input

become more

predictable. For the June 1992 call for proposals,

the LCB made its rankings by the end of August.

DP made final selections at the beginning of

November. 33 All the agreements approved from

the June call have not been approved, but many

have. From the time approvals are granted by DP

until the final CRADA is signed usually takes,

according to ORTA officials from Sandia and

Livermore, 4 to 5 months.34

Things are moving no faster for proposals

approved in the latest (November 1992) call, but

under circumstances that are unlikely to be

repeated. In early 1992, DOE planned to change

J 1 ~s negotiation pr~ms often ~~umes more than4 months. The field offices, which have authority to approve both JWSS and ~As,

have 90 days to approve the JWS and 30 to approve the CRADAS. There has been some friction between field offices and labs over whether

the clock ticks continuously following the submission of the JWS to the field office (questions or problems with the proposed agreement might

stop the clock); if it does no~ as the field offkes have maintained, then the process can take even longer than the maximum of 120 days. In

practice, many JWSS and CRADAS are submitted to field offices simultaneously.

32 o~ Sti ~teniew ~th Wmen p. chemoc~ Deputy science and ‘1’echoIogy Advisor (Defense), May 4, 1992.

33 fJpOffiC~s ~~t out tit not ~1 he heif took to act on he L~recommen~tions co~tituteddelay. Dphd &ady spent all the money

it had set aside for CRADAS in FY 1992 by the time the proposals from the June call came in; DP had been turned down in its request to

reprogram an additional $50 million in FY 1992 funds for technology transfer. There was no possibility of funding any of the proposals that

came in June 1992 until the new fiscal year, or, more properly, until DOE’s FY 1993 appropriation was signed.

34pm of tit tie ~ ~en by lab/industry negotiations, in which DOE offices do not p~cipate. ~so, not u the delay can be attributed

to bureaucratic procedures at the labs or the field offices; company (or other cooperator) legal counsel can and do take time to review the

provisions of the proposed agreement, and have proposed changes.
114 I Defense Conversion: Redirecting R&D

the review process at headquarters for DP proposals, to include staff in other divisions of the

agency. Lab officials had expressed nervousness

in 1992 about the distribution of proposals in

DOE headquarters, because proposals often contain sensitive or proprietary information. DOE,

unlike NIST, does not have an exemption from

the Freedom of Information Act (FOIA) covering

R&D proposals, and some in companies and labs

feared that competitions could access information

in the proposals through DOE (the labs do have an

exemption from FOIA). With the expanded headquarters review in early 1993, the concerns

deepened, and lab officials initially balked at

sending proposals to DOE. The matter was

eventually worked out, but only after a delay of a

month or so. This problem is unlikely to come up

again soon, mostly because DP plans no more

calls for proposals in fiscal year 1993, even if it

gets an additional $47 million for CRADAs.

Partly because of the time it has taken to get the

DP selection process up and running, and partly

because of funding bottlenecks, DOE officials

have come close to admitting that their latest

proposal call, combined with the publicity garnered from NTI, has been a bigger success than

they can handle. In its June call for proposals, DP

received 105 proposals from the LCB. It approved

only 61 of them, not because the others weren’t

interesting but in order to set aside some money

for other projects (such as automobile technology, lithography, and computer projects using the

CSPP CRADA). Dan Arvizu, the head of the

ORTA at Sandia, reports that the NTI campaign,

begun in February 1992, has resulted in DOE

receiving 460 proposals (120 from Sandia alone).

The November 1992 call also received an overwhelming response; one lab reported receiving

hundreds of proposals. The TACT’s and LCB

reduced the number considerably, but even so, DP

was able to fund only one-eighth the dollar value

of proposals forwarded to it by LCB (less than 30

proposals), for a total of $25 million. Unless DP

is able to reprogram more money for CRADAs in

fiscal year 1993 (in April, its request for authority

to reprogram $47 million was pending), there will

probably be no new proposals approved until

fiscal year 1994, except those using program

funds. Even with $250 million, which Warren

Chernock thinks is the right amount of money to

allocate to CRADAs for the foreseeable future, it

is clear that there is far more work to do than

money to do it with.

I The Legal Terms of CRADAs:

Intellectual Property Issues

There are inevitably conflicts between public

and private interests in the terms of cooperative

agreements. Even agencies that have been working cooperatively with private companies for

years, such as NASA, still have occasional

problems. For example, one NASA official said

that it usually takes longer to negotiate the

disposition of intellectual property rights than any

other single item in a Space Act Agreement. A

NIST official made the same observation about

industry/government R&D projects under NIST’s

Advanced Technology Program, adding that the

more companies involved in a single agreement,

the longer the negotiation over intellectual property rights.

Protection of intellectual property can also be

a source of disagreement. Firms sometimes bring

some confidential technical, commercial, or financial information, developed wholly within the

company, to a cooperative project with a government lab. This information is exempt from

disclosure under the Freedom of Information Act,

and by law is not disclosed to third parties.

However, such information can, in some cases, be

used in other government offices. This multiplies

the chances for accidental leaks to competitors,

especially considering the wide participation of

government agencies in the NTI. NIST and NIH

model CRADAs provide that such information

will be used only within the CRADA, and for no
4—Technology Transfer From DOE Weapons Laboratories I 115

other purpose. DOE’s standard model,35 and the

NCMS and CSPP model CRADAs, provides that

such proprietary information may be used by

other government employees, who are in turn

constrained in their ability to transfer the information. The CSPP model tries to minimize disclosures by requiring that they all take place at the

lab site, and that DOE employees do not remove

from the lab any notes or other items containing

the fro’s confidential information. These safeguards have partly assuaged industry’s concerns

about dissemination of proprietary information

that companies bring to cooperative relationships,

but some in the private sector are still wary.36

Judging by the amount of effort devoted to

negotiations, the disposition of information developed in a cooperative arrangement may be an

even greater concern than the disclosure of

proprietary information that industry brings to the

relationship. NCTTA permits agencies to preserve the confidentiality of information developed in a CRADA for up to 5 years, and the

standard DOE model CRADA provides for up to

5 years of confidentiality. However, a firm can

only designate as confidential information generated by its own employees; to so designate

information developed by lab employees, the

lab’s permission is required. DOE may use

information designated as confidential at other

DOE sites, with confidentiality strictly preserved.37

The CSPP model requires that the lab’s permission to designate information generated by lab

employees as confidential ‘‘shall not be unreasonably withheld,” but does not define what is

reasonable. It also provides than an appendix will

list subject areas in which all information generated will automatically be designated as confidential. The NCMS CRADA includes the same

reasonableness requirement, sets the term of

confidentiality at 30 months unless agreed to

otherwise, and provides for disclosure to NCMS

members on the same basis as to other DOE sites.

DOE’s models do not specify the treatment of

information developed jointly; this is a matter to

be settled in negotiations of the lab and the

company. Negotiating these issues adds to the

time and trouble of getting a CRADA approved.38

The division of patent rights for inventions that

come from CRADAs is not constrained by the

NCTTA, except that the U.S. Government must

always retain a license “to practice the invention

or have the invention practiced throughout the

35 ‘r’he discussion below refers to several model CRADAS. DOE’s standard model CRADA is found in a document titled ‘Stevenson-Wydler

(15 USC 3710) Cooperative Research and Development Agreement (hereinafter “CRADA”)” dated October 23, 1992. Accompanying this

model is a document entitled ‘‘Stevenson-Wydler Model GOCO CRADA Guidelines, ’ which explains policies behind the model and discusses

the extent to which certain changes will be permitted. (Both the standard model and the guidelines were distributed attached to an October 27,

1992 memorandum from ST-1, re: Issuance of Redline Model CRADA and Guidelines for GOCO Laboratories.) The DOE-CSPP model

CRADA is found in a document with a similar title to that of the standard model, dated April 1, 1992, which accompanies a “Letter of

Agreement’ between DOE and CSPP, executed on March 19 (DOE) and 20 (CSPP), 1992. The DOE-NCMS umbrella CRADA is found in

a document entitled ‘‘Stevenson-Wydler (1 5 USC 3710) Cooperative Research and development Agreement (hereinafter ‘ ‘CRADA’ No.

DOE92-0077. The NIST model is found in a document entitled ‘Cooperative Research and Development Agreement whh the Natiomd Institute

of Standards and Technology, ’ version dated Oct. 15, 1991, which accompanies a memorandum of Oct. 2, 1991, horn Bruce E. Matso% Chief,

Technology Development and Small Business Programs, ‘‘re: A Guide to the new NIST CRDA for NIST Staff. ” The NIH model is found in

a document entitled “National Institutes of Health; Alcohol, Drug Abuse and Mental Health Administration: Cooperative Research and

Development Agreement,” dated April 24, 1989, at pages 143-159 of Office of Technology Transfer, National Institutes of Healti Bethesda,

Maryland, 1991 PHS Technology Transfer Directory; policy guidelines are found at pages 137-142.

36 sOme of this wfiess ~ t. do ~~ the ~ercnt co~e~atism of leg~ ~~e~, both ~ firms and iKIDOE, Ugd departments have much

to lose if they counsel corporate managers to take risks. If a major leak occurs, the potential damage is much greater, both to the firm and to

the legal counselors’ credibility, than the risk associated with not doing a partnership in the first place, where the losses are only in terms of

what might have been.

37 Both ~ ~d MST models Spwfy tit any ~fol-mation gene~t~ in the f’~Amy be US~ for any government plUpOSe (nOt limited

to a particular agency).

38 ‘r’he~model allows ~o~ldenti~ sta~s o~y for ~o~ation developed sole]y by f~ employees.
116 I Defense Conversion: Redirecting R&D

world by or on behalf of the Government,”

royalty-free. 39 Many arrangements are possible

within the law. For example, a lab could own a

patent and grant an exclusive license to the firm,

which could then practice it free of commercial

competition, except that it might face competition

when the government is the customer. While

many cooperators are interested in exclusive

rights to inventions developed in CRADAs as a

condition of entry, this kind of exclusivity can

create problems for the labs and their parent

agencies. Often, it is in the interest of the

government to see inventions diffused widely,

both on general principles of stepping up the rate

of innovation and best practice for societal good,

and especially to avoid potential accusations of

unfairness of access. However, sometimes the

promise of exclusive rights might be necessary to

encourage a firm to invest in technology development and commercialization.

Another twist in the plot is the fear, expressed

by one official of Livermore, that by agreeing to

the industry taking title to the lion’s share of

intellectual property developed, the lab might

sacrifice strength in later bargaining over U.S.

preference. For example, if a lab is involved in

trying to convince an industry partner to maintain

substantial domestic manufacturing of products

that developed from technologies produced in

CRADAs, it could help to have the ability to deny

the company an exclusive license if it decided to

manufacture offshore.

DOE’s standard model leaves allocation of

patent rights to be worked out by the lab and the

firm, subject to the government retaining at least

a royalty-free nonexclusive license. However,

accompanying guidelines imply that DOE’s approval could be required for certain allocations.

The NCMS CRADA spells out the rights in more

detail. Each party takes title to inventions made

solely by its employees; for joint inventions, the

lab takes title. However, special rules apply for

commercial applications in a field covered by the

project’s task statement. NCMS will have exclusive rights to license such applications for 30

months following the project’s completion. After

that, NCMS and the lab each have a nonexclusive

right40 to license commercial applications. Royalties on all licenses by either party for any

application are shared according to a complex

formula.

Like DOE’s NCMS CRADA, the NIH and

NIST model CRADAs spell out patent right in

more detail than DOE’s standard CRADA. With

NIH, each party takes title to inventions developed solely by its employees; jointly developed

inventions are jointly owned. For inventions

owned jointly or by NIH, in some cases NIH will

grant an exclusive license for specified fields of

use. The model CRADA commits NIH to ‘ ‘negotiate, in good faith, the terms of an exclusive or

nonexclusive commercialization license that fairly

reflect the relative contributions of the Parties to

the invention and the CRADA, the risks incurred

by the Collaborator and the costs of subsequent

research and development needed to bring the

invention to the marketplace. NIH is also

willing at times to grant exclusive licenses in

advance as a condition of signing the CRADA.41

NIST’s approach is more restrictive. Jointly

developed inventions are owned by NIST alone;

and NIST’s model CRADA commits NIST to

good faith negotiations on nonexclusive commercialization licenses.

Another intellectual property issue that has

proven to be a sticking point in past DOE

CRADA negotiations is software protection. Software can be protected by secrecy and/or copyright. Software written wholly or partly by

government employees (which does not include

employees of GOCO labs) cannot receive a U.S.

3915 U.S.C. 3710a(b)(2).

40 L1~en~e~ by NCMS me subject to lab app~vd, which “shall not be unreasonably withheld if [i.he lice~’;e] is my~~ be~g.”

41 NIH policy Guidelines, M. 9.
4—Technology

copyright, though it can be copyrighted in other

nations.

DOE’s standard model CRADA leaves the

allocation of copyrights up to the lab and the firm,

except for the provision that the U.S. Government

must have a nonexclusive license free of charge

for government use. For copyrighted software

developed under a CRADA, the source code and

documentation must be provided to DOE’s Energy Science and Technology Software Center,

where it will be publicly available. The copyright

is also subject to DOE’s march-in rights, 42

although the beginning of those rights can be set

as late as 5 years after the software is produced.

The CSPP model CRADA, while retaining the

basic approach of DOE’s standard model, makes

an important exception. Special rules43 apply to

software, listed in an Appendix E, which the lab

and the firm agree is “being developed principally for commercialization” by the firm. The

firm owns the copyright in appendix E of the

model, software that it develops on its own. For

appendix E software developed either jointly or

solely by the lab, the lab may own the copyright

but must offer the firm an exclusive or nonexclusive license at the firm’s choosing, on reasonable

terms. For all appendix E software, only object

code and documentation are provided to DOE’s

Energy Science and Technology Software Center,

and only for use on DOE contracts; the source

44 For appendix E software, code is kept secret.

DOE has march-in rights only for software

created solely by the lab. Also, if DOE ever

exercises march-in rights (for any software, not

Transfer From DOE Weapons Laboratories I 117

just that covered in appendix E), DOE must leave

the firm with at least a nonexclusive license.

March-in rights, more generally, are another

instance of the divergence of public and private

interests. Typically, the government’s interest in

publicly-funded R&D is for broad application;

hence, DOE wants march-in rights in its CRADAs. However, inclusion of march-in rights can

be a problem for firms; some worry that their own

best efforts to commercialize technology might

not be regarded as sufficient by the government,

and that a long-term commercialization plan

might be cut short if the government thinks the

plan is taking too long. A firm might also not be

willing to commit itself to justifying its progress

to government officials over the years. The law

requires march-in rights for patents,45 and DOE’s

standard model, as well as the NCMS and CSPP

model CRADAs, all provide for such rights

according to standard DOE procedures.

I The Legal Terms of CRADAs:

U.S. Preference Issues

One of the aims of both the NTI and NCTTA

is to improve U.S. competitiveness. Accordingly,

there is a strong bias in public institutions

(Congress included) to try to ensure that publiclyfinanced innovations are exploited in ways that

benefit the U.S. economy directly. In the case of

the FTTA, that means that labs are directed to

“give preference to business units located in the

United States which agree that products embodying inventions made under the [CRADA] or

produced through the use of such inventions will

AZ c ‘~ch.~rights’ refers t. asituationinwhich a firm has exclusive rights to technology developed with government f~d~g, but is tig

too long to commercialize the technology and make it widely avaitable. In some cases, the government has the right to ‘‘march in” and take

back the exclusive rights, and to license other fii to commercialize the technology. IrI the case of patents, march-in rights are required by

law (35 U,S.C. 203), though the specific procedures are set by agency regulations.

43 me p~ovi~iom ~v~g these spwi~ ~es (~cle xm, p~a~ap~ E ad F, of DOE’S Cspp model CRADA) are difilcti( to undemtand;

OTA’S tentative interpretation is given below.

44 object code i.s fu less usef~ t. ~tentiaJ comWtitors than some code. U NE took possession of source code, company repreSen@tiVeS

rnaintaini then few companies would even be interested in co-developing software with the labs. While GOCO labs are likely not subject to

the Freedom of Information Act DOE is; after the period of FOIA exemption for information generated in a CRADA (at most 5 years),

competitors could get the source code, and could use it to create their own commercial software.

4535 U.S.C. $203.
118 I Defense Conversion: Redirecting R&D

be manufactured substantially in the United

States." 46 DOE’s standard model, up until early

1993, took its cue from the statute, but made U.S.

manufacturing a requirement rather than a preference. The model required that any ‘‘products,

processes, or services for use or sale in the United

States” covered by a U.S. patent awarded for an

invention arising under the CRADA's performance be “manufactured, practiced or provided

substantially in the United States. ’

Many of the firms most interested in CRADAs,

like all the members of CSPP and many of the

members of NCMS, are multinationals. They

produce goods and services throughout the world,

and, perhaps even more important, hold a growing portfolio of cross-licensing arrangements

with foreign multinationals. For such fins,

requiring domestic production of all goods and

services using technologies developed in CRADAs is a significant discouragement to participation. As in several other cases, DOE, after

encountering friction on this point in CRADA

negotiations, made a compromise in early 1993.

Now, the agency has declared itself willing to

grant exceptions to the U.S. manufacturing stipulation on a case-by-case basis where substantial

U.S. manufacture is demonstrably infeasible. In

addition, the CRADA partners must commit

themselves to provide appropriate alternative

benefits to the American economy .47 This new

flexibility is welcome, but unless additional

guidelines can be established, allowing companies to anticipate how the department will decide

in individual cases, this requirement may not

shorten the negotiation of a CRADA.

Both the NCMS and CSPP CRADAs depart

from the original, stricter requirements, and these

departures, along with other feedback from industry, helped to establish the basis for DOE’s

compromise. The NCMS CRADA narrows the

requirement to cover only products, not processes

or services.48 CSPP rewrites the requirement

entirely to cover R&D, but not manufacturing. In

the negotiations, CSPP argued that existing networks of manufacturing, R&D, and crosslicensing among computer companies of all

nationalities made the domestic preference requirements impossible; if no compromise could

be reached, argued CSPP, the CRADA would be

useless. Moreover, CSPP maintained, in the

computer industry the greatest benefit to the U.S.

economy comes from domestic R&D, not from

manufacturing. Accordingly, the CSPP model

specifies that “all research and development

under this CRADA shall be conducted in U. S.-

based facilities, ” and ‘‘for a period of 2 years

following the CRADA subsequent research and

development. . . for the purpose of commercializing technologies arising from this CRADA,

which are the primary focus of this CRADA, shall

be performed substantially in U.S.-based facilities.

The U.S. preference issue may be a sleeper,

even under DOE’s new, more flexible requirements. It has been a major sticking point in

several negotiations, but has not been a prominent

part of the public debate over lab/industry R&D

partnerships. However, some lab officials worry

that DOE has been too willing to compromise,

and that, by giving as much ground as the agency

did in the CSPP CRADA, the labs lose some of

their ability to enforce reasonable requirements

for domestic manufacturing (such as requiring

that products for the domestic market be substan4615 U.S.C. 371w(c)(4)(B). The same provision also directs that if a potential CRA.DA partner is a foreign-owned organization or a fomi~

citize~ the lab ‘take into consideration whether or not such foreign government permits United States agencies, organizations, or other persons

to enter into cooperative research and development agreements and licensing agreements.’

47 Memorandmfromu.s. Dep~mentof Enermto progr~ se~e~~offlcersmd Field Office M~gers, ‘ ‘RmtatementofDepartmen@l

Technology Transfer Policy on U.S. Competitiveness, ’ Feb. 10, 1993.

48 By late 1992, N~S w=, a~or~g to one of ifi spokesmeq asking the Agency fOr additional IOOSe*g of the domestic ~~act~g

provisions of its CRADA. In initiating individual agreements, member companies found that they were uncomfortable with the provisions of

its original CRADA requiring domestic manufacturing of products.
4—Technology Transfer From DOE Weapons Laboratories I 119

tially manufactured in the United States). The

issue is likely come up again, especially in the

event that a CRADA yields a technology that is

commercially successful. Many American multinationals are bound by the terms of existing

cross-licensing arrangements to license their patents to other companies, often foreign multinationals. Should a company grant a license to a

technology developed partly with public money,

it is likely, at the very least, to stir up a debate.

There have already been analogous controversies.

For example, some of the technology for GE’s

new aircraft engine, the GE-90, was developed

through cooperative research and development

with NASA. GE licensed the French aircraft

engine company SNECMA to manufacture some

high-pressure compressors for the GE-90. Any

time foreign companies acquire American technology in a high-tech field, there are some who

would take the view that this represents a failure

of either public or private policies, but when the

technology is at least partly publicly financed, the

tendency to condemn is even stronger. This view,

understandable though it is, is simplistic.

No nation, and no company, has ever been able

to sequester technology for its own use. Even 200

years ago, when trade was minuscule and information flow glacial compared with today, knowledge of technology leaked abroad, often in the

face of stiff personal penalties for transferring it.

Now, with far more rapid communication and

burgeoning trade and investment around the

world, technology diffusion is wide, rapid, and to

a great extent uncontrollable by governments.

That is well understood; what is less well known

is that, increasingly, American firms’ ability to

put access to technology on thebargaining table

with foreign firms and foreign governments can

give those U.S. companies powerful advantages,

and that such advantages can work to the benefit

of the U.S. economy and living standards just as

domestic application of technology does. GE’s

ability to sell its engines to European airlines may

well depend on its adding some value in Europe,

which may, in turn, hinge on its licensing the

technology to a European company. IBM’s control of key patents gave it better access than other

foreign companies had to the tightly regulated

Japanese market in the 1960s; without the ability

to negotiate with the Japanese Government on

access to its patents, IBM would have faced even

tougher restrictions than it did,49 and it probably

would not now be the force it is in Japan, the

world’s second largest economy.

DOE, NASA, and possibly other government

agencies in the NTI are caught in a potentially

fractious situation. Practicality dictates that their

CRADA process will be less useful to industry if

they insist on strong domestic preference in

manufacturing and R&D. Yet Congress tends to

favor even tighter restrictions on foreign transfers

of technology financed partly by the taxpayers.

So far, the issue is mostly confined to CRADA

negotiations, but the more successful the NTI or

other kinds of government-industry technology

development partnerships are, the greater the

likelihood of controversy.

The issue has yet to surface with respect to U.S.

affiliates of foreign multinationals. Already, however, there are a few CRADAs with affiliates—

Schlumberger and Philips Semiconductor are

examples —and interest among Japanese firms in

exploring CRADA opportunities is increasing.

According to some reports, one Japanese transplant automaker was willing to sign up to the

strict requirement requiring U.S. manufacture if it

could join the U.S. Advanced Battery Consortium, but the consortium ended” up with only

American members. DOE’s new guidelines on

U.S. preference may apply as well to affiliates of

foreign firms as to U.S. fins, but this has not yet

been tested.

49 o~er ~omp~es ~me fo~ Japanese companies, or denied aCCeSS altOge~er.
120 I Defense Conversion: Redirecting R&D

H The Legal Terms of CRADAs: Liability

Another issue that has been tricky to negotiate

is liability for personal injury or property damage

resulting from the commercial application of

CRADA technology by: 1) a firm that participated in a CRADA, or 2) an entity that bought

rights to the technology from such a participating

firm. If someone sues the labor the government,

the CRADA participant must reimburse the labor

the government for any damages awarded. That,

for most of 1992, was the position of the DOE

model CRADA, with no qualification. Many

potential CRADA partners objected to this complete indemnification of DOE. CSPP, for example, argued that participating firms should not

have to pay for damages clue to labs’ negligence.

CSPP won the point; its model CRADA excludes

liability “resulting from any negligent or intentional acts or omissions of” the lab.50 (The NIH

model has a similar exclusion.) There is still

uneasiness on both sides. Like many other contentious issues in CRADA negotiations, liability

provisions are most apt to become problems in

CRADAs are successful in developing technology that succeeds commercially.

SO me cspp ~~del ~~wfia tit if me ~b licenses any ~rd pq, tie license must include a provision requiring the third p&Wy to

similarly reimburse the CIWDA participant if the latter is sued for harm resulting from the third party’s commercialization of the technology.
.

ARPA:

A Dual-Use

Agency 5

T

he Advanced Research Projects Agency (ARPA) is the

primary agency within the Department of Defense

(DoD) for conducting long-range, high-risk research and

development (R&D) for advanced technologies that

contribute to national security needs.l Though receiving only a

small percentage of DoD’s R&D budget, ARPA has funded

many technologies throughout its 35-year history that have both

satisfied defense requirements and enjoyed great commercial

success. Advanced computer architectures, packet-switched

networks, and lightweight composite materials are all examples

of technologies that have found widespread use in the private

sector after initial development by ARPA.

Since the late 1980s, ARPA has assumed increasing responsibility for dual-use technology. Dual use is now the centerpiece

of ARPA’s development efforts, accounting for $1.8 billion of

the agency’s $2.3 billion funding in fiscal year (FY) 1993.

Military interest in manufacturing and electronics has driven

some of the increase in ARPA’s dual-use R&D, but Congress has

also played an important role. Since 1987, with the founding of

SEMATECH, the government/industry consortium for advancing semiconductor manufacturing, legislative initiatives have

assigned several dual-use programs explicitly to ARPA. More

recently, Congress gave ARPA a premier role in Federal defense

conversion programs enacted in 1992.2 This legislation raised

1 The agency’s original name was ARPA. Renamed DARPA (.Defense Advanced

Research Project Agency) in 1972, its name was changed back to ARPA in February 1993

at the direction of President Bill Clinton and in accordance with the expressed intention

of Congress.

2 The Department of Defense Authorhtion and Appropriations Acts for Fiscal Year

1993.

121

331-050 - 93 - 5 : QL 3
122 I Defense Conversion: Redirecting R&D

ARPA’s funding for development of dual-use

technologies by about $500 million over the

previous year and gave the agency new responsibilities in the diffusion of manufacturing technologies to small and medium-sized fins. Congress

has also granted ARPA legal authorities by which

it can enter into cooperative partnerships with

commercial industry to develop dual-use technologies.

Nevertheless, there are limits to ARPA’s role

as a supporter of civilian technologies. As a

defense agency, ARPA must carefully balance its

dual-use activities against other missions relevant

to DoD. Several times in the past, ARPA has been

called upon to link its objectives more closely to

short-term military needs than to long-range,

high-risk research with commercial application.

Moreover, ARPA cannot demonstrably perform

all the activities required to support commercial

technology development. Not only are the agency’s

resources limited, but ARPA’s particular expertise is in identifying and supporting pathbreaking, new technologies; it has not traditionally focused on issues such as technology diffusion or infrastructure development, which are

equally important to commercial competitiveness. Thus, while ARPA will undoubtedly make

substantial contributions to commercial industry

in the future, the development and diffusion of

civilian technologies is not likely to become a

central mission of the agency. ARPA is just one

component of a larger Federal effort to stimulate

U.S. industrial competitiveness.

ARPA AND DUAL-USE TECHNOLOGY

ARPA was founded in 1958 as a defense

agency independent of the three services (Army,

Navy, Air Force)

high-risk R&D of

for supporting long-range,

interest to the military as a

whole. Established largely in response to the

Soviet launching of Sputnik, ARPA was initially

directed to oversee U.S. space and ballistic

missile defense technology programs3

, a mission

that would have entailed both research and

significant systems development work. However,

with the creation of the National Aeronautics and

Space Administration (NASA) shortly thereafter,

ARPA’s responsibility for civilian space applications was rescinded and control of military space

programs reverted to the individual services.

With its primary development mission gone,

ARPA became, and remains, mostly a research

agency; though it funds some development of

prototypes for new military systems, ARPA

directs the bulk of its funding to basic and applied

research.

ARPA is a small agency by DoD standards; it

received just $1.6 billion of the military’s $38

billion in research, development, test, and evaluation (RDT&E) funding in 1992. Yet its charter is

broad, allowing it to contribute to many fields

with potential military application.4 As a small

player in a relatively undefined field, ARPA has

succeeded by carving out its own territory so as

not to compete directly with the services or with

other technology development agencies, such as

NASA or the Department of Energy, that have

significantly more resources. From its early days,

ARPA has targeted its resources toward specific

technologies in which it could gain a large return

and has aimed to be an agent for ‘‘order of

magnitude’ improvements in military weapons

and support systems. ARPA has succeeded in

nurturing new, emerging technologies such as

s See Richard J. Barber Associates, The Advanced Research Projects Agency, 1958-1974, report prepared for ARPA under contract

MDA-74-C-(X)96, December 1975, chapter III.

4 ARPA’s charter directs the agency to ‘Pursue imaginative and innovative research and development projects offering significant military

utility . . . [m]anage and direct the conduct of basic research and applied research and development that exploits scientitlc breakthroughs and

demonstrates the feasibility of revolutiomuy approaches for improved cost and perfo rmance of advanced technology for future applications

. . . [and s]tirmdate a greater emphasis onprototyping in defense systems. . . .“ DoD Directive 5105.41, ‘Defense Advanced Reseach Projects

Agency,” September 30, 1986. See also statement by Dr. Victor H. Reis, Director, DARPA, before the Subcommittee on Research and

Development Armed Services Committee, House of Representatives, Apr. 23, 1991.
5—ARPA: A Dual-Use Agency I 123

computing and materials that require much enabling work before their full military (or commercial) impacts become clear and that can contribute

to the mission of DoD as a whole. This focus has

led to ARPA’s support of a number of dual-use

technologies.

B Early Investments in

Dual-Use Technology

As early as 1962, ARPA began funding university research in materials science and computing.

ARPA effectively established the field of materials science as an independent discipline by

founding a series of 12 Interdisciplinary Laboratories at universities to conduct basic research on

new materials.5 ARPA also established centers of

excellence in industry and universities for basic

research in computer science that could contribute to improving command, control, communications, and intelligence (C3

I) systems used by the

military. 6 These efforts gave rise to significant

achievements in timesharing computers (Project

MAC and MULTICS), computer networking

(ARPANET), artificial intelligence, and parallel

computers (ILLIAC IV).7

Unlike other ARPA programs of the time,

which were driven by specific national defense

requirements, the materials and computer science

programs were motivated by the need to further

basic research. The original mission statement for

the materials science labs stated that they should

‘‘conduct research in the science of materials with

the objective of furthering the understanding of

the factors which influence the properties of the

materials and the fundamental relationship which

exists between composition and structure and the

properties and behavior of materials.”8 Military

applications, it was assumed, would arise as

byproducts of the effort.

Similarly, in supporting development of computer technology in the 1960s, ARPA acted on the

grounds that DoD was a large user of computing

technologies and that accelerating the development of new technologies within the commercial

U.S. computer industry would have important

second-order effects on defense, through military

procurement of commercial products.9 Programs

did not focus on particular military applications,

but on research with long-term importance to the

field, regardless of the potential for immediate

military application.

10 As with materials science,

many of the innovations that ARPA pursued in

computers were fundamental ‘enough that they

applied to both commercial and military systems.

Political pressures caused a shift in ARPA’s

focus toward the end of the 1960s. With the

escalation of hostilities in Vietnam, the military

began demanding greater coherence between its

needs and ARPA’s research programs. At the

same time, unrest at U.S. universities inflamed

debates over the propriety of ARPA’s sponsorship of university research.ll In response, Congress passed the Mansfield amendment as part of

the Defense Authorization Bill of 1970, requiring

that DoD’s RDT&E funds be used only to support

5 ~c~d ~. van Al~ et ~,, DARpA Te~hni~ai the Technical

Accomplishments of the Defense Advanced Research Projects Agency: 1958-1990 (Alexandrk VA: Institute for Defense Analysis, July 1991),

p. V-17.

6 Funding was concentrated in a limited number of laboratories at universities such as W Stanford, Camegie-Mello% and the University

of California at Berkeley, and in commercial corporations such as WI Intematiorml and Systems Development Corp.

T KemethF- Government’s Role in Computers and Superconductors, report prepared for OTA under contract H3-6470, March 1988,

p. 13.

g Richard J. Barber Associates, op. cit., footnote 3, pp. V-47-V~.

g Ibid, pp. VII-32-W-33,

10 FkUDIII, op. cit., footnote 7, p. 1A.

I I some p~es ~~ev~ tit~A~ouflived its usefuhless and considered abolishing the agency. ~chard H. VaII At@, oP. cit.! footnote

5, p. II-lo.
124 I Defense Conversion: Redirecting R&D

projects with a “direct and apparent” relationship to specific military functions or operations.l2

Though softened somewhat in 1971 and later

removed from legislation, the amendment had a

more lasting influence. It effectively restricted

ARPA’s funding of basic research, especially in

universities, and tended to focus the agency on

projects of strict military relevance. The agency’s

defense mission was further reinforced when

DoD officially changed ARPA’s name to the

Defense Advanced Research Projects Agency

(DARPA) in 1972.13

Although ARPA continued to fund R&D in

some dual-use areas such as computing and

communications throughout the 1970s and 1980s,

its primary emphasis during much of this time

was on defense programs more narrowly defined.

In 1976, ARPA initiated a large-scale demonstration program for military systems such as followon forces attack, armor/anti-armor systems, spacebased surveillance, high-energy lasers, and

stealth. 14 These programs accounted for most of

the increase in ARPA’s budget through the early

1980s. Research programs in areas such as

computing and materials were challenged to

demonstrate defense-relevant applications.15By . 

the early 1980s, the focus of the demonstration

program had shifted from military systems to

dual-use technologies such as aviation and computing, but programs were still required to demonstrate defense relevance. For example, the

Strategic Computing Program, announced in

1983 as a 10-year program to develop computers

capable of demonstrating machine intelligence,

targeted three specific military applications of

interest: an autonomous land vehicle for the

Army, a pilot’s associate for the Air Force, and an

aircraft carrier battle management system for the

Navy. Unlike earlier computing research sponsored by ARPA, which was conducted mostly at

universities, funding for Strategic Computing

was directed toward more traditional defense

contractors.l6 The program did contribute to the

advancement of massively parallel computing,

but its effects were more narrowly focused than

ARPA’s earlier computing research.

ARPA Today

In many respects, ARPA today is a dual-use

technology agency. Despite its small size, ARPA

makes a substantial portion of DoD’s contribution

to basic and applied research, the two stages of the

R&D cycle that DoD refers to as the ‘technology

base.” 17 It is in the technology base-rather than

in subsequent development of weapons systems

such as tanks, missiles, and fighter aircraft-that

12 ~b~c ~w 91.121, Tlfl~ ~, s~tion 203, 83 s@~t~ 204, No”. 19, 1969,

13 Dep~ment of Defense Directive No. 5105.41, “Defense Advanced Research Projects Agency (DARPA),” Mar. 23, 1972,

1A ~ese Pmgm w~e tiste~~der the Experimental Evaluation of Major Innovative Technologies I%ogrw @.E~,w~ch

consumed a large portion of ARPA’s budget. The EEMIT program continues to this day, but at a much smaller s~ale.

15 v~ At@ op. Cit., foo~ote 5s p. ‘-2”

16 of he 30 p~e con~acton for Shategic Compufig ~volved ~ softw~e or AI rm~ch i.rI 1987, fewer than 9 were new to defense

contrac~. Nance Goldsteiq “The Defense Advanced Research Projects Agency’s Role in Artificial Intelligence,” Defense Anu[yds, vol.

8, no. 1, p. 71. See also Kenneth Flamm, op. cit., footnote 7, p. 28.

17 DOD divides its budget ~to 10 acco~@ RDT&E is further subdivided kto Six

more specitlc areas: 6.1, basic research; 6.2, exploratory development or applied researck 6.3, advanced development; 6.4, engineering

development 6.5, management and support; and 6.6, operational systems development. Budget item 6.3 is further subdivided into 6,3a,

advanced technology development which includes activities to demonstrate the feasibility of a given type of military system, and 6,3b, in which

technology is applied to a specitic military program. Categories 6.1 and 6.2 are considered the technology base; categories 6.1 through 6.3a

comprise “science and technology” (S&T).
5—ARPA: A Dual-Use Agency I 125

Table 5-l—Defense Department and ARPA Budgets for RDT&E, FY 1992

Defense Department ARPA

Budget activity (millions) (millions) (percent of DoD)

Technology base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,920 $ 862 22%

Basic research (6.1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,020 116 11

Exploratory development (6.2) . . . . . . . . . . . . . . . . . . . 2,890 746 26

Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,420 $ 736 3

Advanced technology development (6.3a) . . . . . . . . . . 6,470 701 a

11

Advanced development (6.3b) . . . . . . . . . . . . . . . . . . . . 4,170 0 0

Engineering development (6.4) . . . . . . . . . . . . . . . . . . . 10,300 0 0

Management support (6.5) . . . . . . . . . . . . . . . . . . . . . . 2,890 35 1

Operational systems development (6.6). . . . . . . . . . . . 10,590 0 0

Total obligational authority. . . . . . . . . . . . . . . . . . . . . . . . $38,340 $1,597 4%

a Includes ARPA programs in manufacturing technology.

b Totals may not add due to rounding.

SOURCES: Richard M. Nunno, Defense /?&D F/estruchmlrg, IB-92090 (Washington, DC: Congressional Research Service, Aug. 20, 1992), p, 3;

Advanced Research Projects Agency, Office of the Comptroller, “Project Level Summary Report,” Mar. 25, 1993.

dual-use technologies are most likely to be

found.18 While a basic research program might,

for example, investigate quantum effects in semiconductor devices, and an applied research program might attempt to create a semiconductor

device that exploits quantum effects--both of

which are applicable to commercial industry as

well-the subsequent development program might

be aimed at designing and fabricating a specific

chip for a military weapon system that has no

commercial corollary.

In FY 1992, DoD spent $38 billion for RDT&E.

Only 10 percent went to basic research and

exploratory development; 90 percent went to the

development of weapons systems. ARPA, on the

other hand, invested over half its $1.6 billion

budget on basic and applied research; the remainder funded advanced development, some of

which may generate dual-use technology (table

5-l). Thus, while ARPA managed only 4 percent

of the DoD budget for RDT&E, it made 20

percent of DoD’s investment in the technology

base.

Virtually all of ARPA’s 10 program offices

contribute to the technology base, but half are

explicitly involved in dual-use technology development. The five “technology offices’ ‘—the

Microelectronics, Electronic Systems, Computers Systems, Software and Intelligent Systems,

and Defense Sciences offices-develop component technologies for use in military systems

(table 5-2). These technologies include optoelectronic components, advanced lithography systems, multichip modules, and parallel computing

architectures, many of which are dual-use. The

other five ‘‘mission offices’ within ARPA—

Maritime Systems Technology, Land Systems,

Advanced Systems, Nuclear Monitoring, and

Special Projects (typically classified)--focus on

the development of technologies for military

systems such as the advanced tactical fighter,

quieter submarines, and smart weapons systems.

These systems generally have less potential for

commercial application, although some spinoffs

do occur.

The technology offices controlled a combined

budget of almost $1.8 billion in FY 1993, some

18 ~~ is not ~way~ he me, R~~e~ch and development does not ne~ss~]y fo~ow a ~W pro~ssion fmm basic research through

advanced development to operational systems development. There is considerable feedback or circularity between the generic technology base

and subsequent development of specific products or systems. Also, there are instances of civilian use of advanced military systems; for example,

night vision goggles developed for the military are beginning to be used by civilian security teams.
126 I Defense Conversion: Redirecting R&D

Table 5-2—ARPA Program Offices and Major Activities

Program office Primary activities

Technology offices

Microelectronics Microelectronics manufacturing (e.g., modular fabrication facilities, lithography,

SEMATECH); gallium arsenide integrated circuits; optoelectronic components;

nanoelectronics; infra-red focal plane arrays.

Computing Systems Parallel processing; computer networking.

Electronic Systems Microwave and millimeter wave, monolithic integrated circuits (MIMIC); electronic

packaging (multi-chip modules); high-definition displays.

Software and Intelligent Software engineering; reusable software; artificial intelligence (Al).

Systems

Defense Sciences High-temperature superconductors; high-temperature ceramics; composite materials;

materials processing.

Mission offices

Advanced Systems Sensors (radar, infrared, electro-optic); miniature turbine engines; X-31 advanced

technology fighter; smart weapons; space technology; war gaming and simulation.

Land Systems Armor/anti-armor systems; smart mines; advanced diesel engines; hyper-velocity

projectile launcher,

Nuclear Monitoring Research Surveillance and monitoring systems for nuclear events; treaty verification.

Maritime Systems Technology” Submarine technology; anti-submarine warfare technologies; unmanned undersea

vehicles; submarine propulsion systems.

Special Projects Classified.

a me Maritime systems Technology office was named the Undersea Warfare Of fim before 1993.

SOURCE: Office of Technology Assessment, 1993. Based on information contained in Amended FY 1992/1993 Biennial RDT&E Descriptive

Summaries (Arlington, VA: Defense Advanced Research Projects Agency, January 1992).

three-quarters of ARPA’s total R&D budget of

$2.2 billion, and an increase of $725 million over

their 1992 funding (table 5-3). Half of the

technology offices’ funding was invested in the

technology base in FY 1993, compared with just

one-fifth for the mission offices. Development

work funded by the technology offices (the

remainder of their budgets) also went toward

dual-use technologiess-mostly manufacturing processes for electronics and semiconductors plus

defense conversion programs.

The composition of ARPA’s current research

program is not solely an outgrowth of the

agency’s attempt to fulfill its defense mission.

Since the late 1980s, Congress has given ARPA

increasing responsibilities for dual-use partnerships with industry. The first of these was

SEMATECH, the Semiconductor Manufacturing

Technology consortium. Congress directed ARPA

to fund SEMATECH for 5 years at $100 million

per year starting in 1988 (see box 5-A). Since then

Congress has given ARPA additional responsibilities for lithography, high-definition displays,

multichip modules, and high-performance computing. In 1993 alone, Congress added over $200

million to ARPA’s budget for specific dual-use

programs (table 5-4). These programs have made

ARPA a leading agency for support of dual-use

technology and puts it in good position to insert

commercial technologies into military applications to the benefit of DoD. They also put ARPA

in position to contribute toward dual-use technologies for commercial applications, especially in

the fields of microelectronics, computing, communications, and advanced materials.

ARPA has been given a lead role in the

High-Performance Computing and Communications Initiative (HPCCI), a multiagency project

designed to accelerate the development and

utilization of high-performance computers.
5-ARPA: A Dual-Use Agency I 127

Table 5-3—ARPA’s FY 1993 Program Budget

Appropriations

Budget

(millions)

Office/Program element category 1992 1993

Technology offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Defense Research Sciences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Computer Systems and Communications. . . . . . . . . . . . . . . . . . . .

Particle Beam Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

integrated Commandant Control Technology . . . . . . . . . . . . . . . . .

Materials/Electronics Technology . . . . . . . . . . . . . . . . . . . . . . . . . . .

Small Business innovative Research . . . . . . . . . . . . . . . . . . . . . . . .

Defense Reinvestment (Partnerships) . . . . . . . . . . . . . . . . . . . . . . . .

Electronics Manufacturing Technology . . . . . . . . . . . . . . . . . . . . . . .

Microelectronics Manufacturing (SEMATECH)a 

..,. . . . . . . . . . . . .

Consolidated DoD Software Initiative . . . . . . . . . . . . . . . . . . . . . . . .

Mission offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tactical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treaty Verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EEMIT C 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Relocatable Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Advanced Submarine Technology . . . . . . . . . . . . . . . . . . . . . . . . . . .

Advanced Simulation (National Guard) . . . . . . . . . . . . . . . . . . . . . .

DoD Intelligence Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comptroller/Director’s office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.1

6.2

6.2

6.2

6,2

6,2

6.3

6.3

6.3

6.3

6.2

6.2

6.3

6.3

6.3

6.3

3.5

6.5

$1,756

110

347

0

152

255

16

5 6 2

b

219

95

—

$466

98

0

287

0

52

29

aFundingforSEMATECHWasincluded inthe Electronics Manufacturing Technologyprogram element before 1993.The FY1992 appropriation was

$100 million,

bThe 1993 figure inc[udes $95 mfltion for Dual-lJse Critical Technology Partnerships, $28 million for advanced materials partnerships, andan

additional $439 million for other partnerships to support defense conversion activities in industry. Funding in 1992 was for Dual-Use Critical

Technology Partnerships only.

cA large advanced technology demonstration program for new technological systems.

SOURCE: Advanced Research Projects Agency, “Project kvel Summary Report,” Mar. 25, 1993.

Planned by the President’s Office of Science and

Technology Policy and coordinated by the Federal Coordinating Council on Science, Engineering, and Technology, HPCCI was given major

impetus by the passage of the High Performance

Computing Act of 1991 (Public Law 102-194),

which provided multiple-year authorizations to

eight Federal agencies, including DoD. Funding

for HPCCI totaled $805 million in 1993, with

ARPA receiving the largest portion at $275

million. ARPA’s efforts in HPCCI will cut across

all four portions of the program: HighPerformance Computing Systems, Advanced Software Technology and Applications, National

Research and Education Network, and Basic

Research and Human Resources. In recognition

of the fact that ARPA’s particular strengths lie in

the development of advanced technology, ARPA

has the lead role in developing high-performance

computer systems, their associated operating

system software, and high-speed data network

technology; responsibility for evaluating advanced

computers, coordinating work in applications

software, and for organizing the National Research and Education Network has been given to

other agencies, including NASA, the Department

of Energy, the National Institute for Standards

and Technology, and the National Science Foundation.

Congress also added funds to ARPA’s 1993

budget to support defense conversion programs.

The technology offices’ budget for FY 1993

includes $439 million in new programs mandated

by Congress to assist industry in the transition
128 I Defense Conversion: Redirecting R&D

Box 5-A–ARPA’s Cooperation With SEMATECH

The Semiconductor Manufacturing Technology consortium (SEMATECH) was founded by 14 member

companies in 1987 to help U.S. manufacturers recapture world leadership in the semiconductor industry, a position

that had been eroded by intense Japanese competition throughout the early 1980s. The group, which has its own

facilities and staff at its headquarters in Austin, Texas, proposed to meet this goal by developing within 5 years

a process for manufacturing chips with 0.35-micron feature size on 8-inch wafers. In December 1987, Congress

authorized DoD to provide SEMATECH with 5 years of funding at a level equal to industry’s contribution, expected

to be $100 million per year. DoD assigned ARPA responsibility for working with SEMATECH in April 1988.

SEMATECH originally planned to develop new production processes in-house for manufacturing

next-generation semiconductors, but later decided that its primary goal should be to develop a strong base of

semiconductor manufacturing equipment suppliers. Without strong suppliers, U.S. semiconductor manufacturers

could not expect to keep up with their Asian competitors, who have closer contacts with Japanese equipment

makers and thus have earlier access to the most advanced Japanese semiconductor manufacturing equipment.

At SEMATECH’s inception, U.S. semiconductor equipment suppliers were losing market share at the rate of 3.1

percent per year.1 Semiconductor manufacturers expected to purchase less than 40 percent of their submicron

equipment from U.S. suppliers.2

SEMATECH established a number of partnerships with U.S. equipment manufacturers to help them develop

next-generation production tools. It also helped the semiconductor industry achieve consensus as to its future

needs, especially in regard to requirements for new semiconductor manufacturing equipment. As a result,

equipment manufacturers have been able to produce equipment to one set of industry specifications rather than

to diverse company specifications. In addition, SEMATECH has developed standard methodologies for evaluating

candidate manufacturing technologies both analytically and experimentally. Perhaps most important, the

Partnership for Total Quality program established by SEMATECH has improved communication links between

semiconductor manufacturers and their suppliers. While some suppliers had previously maintained close

relationships with preferred customers, SEMATECH replaced and repaired those that had been severed and

created a much broader set of ties, in this way, information that is not easily quantified can be exchanged directly

between users and suppliers of manufacturing equipment.

While critics claim that SEMATECH has benefited only its member companies, others credit the consortium

with contributing to the recent improvement in the health of the semiconductor equipment industry as a whole.

Since 1990, equipment manufacturers have reversed their declining market share and currently command 53

percent of the world market versus 38 percent for Japan? U.S. semiconductor manufacturers now purchase over

70 percent of their equipment domestically. Motorola’s new wafer fabrication facility in Austin, Texas, which was

originally planned to include 75 percent foreign tools, now has an 80 percent U.S. tool set.4 Production yields of

U.S. semiconductor manufacturers, which were 60 percent versus Japan’s 79 percent in 1987, have improved to

84 percent versus 93 percent in Japan.5

ARPA managers consider their relationship with SEMATECH highly successful. Many of ARPA’s objectives

for SEMATECH are now reflected in SEMATECH’s new mission statement, which commits the consortium to focus

on developing methods for more rapidly converting manufacturing technology to practice and to develop

technology for more flexible, highly automated semiconductor production (in coordination with other ARPA

programs).

1 petw Bu~r~~, 4(Bill spe~~ ~~ggl~ to Reform SEMA~CH,” E/eofron/c Busin~, May 18,1992, p. ~.

2 SEMATECH, 1991 A/7rwa/R8p0rt, p. 2.

s ne WMM@On POSZ NOV. 18, 1992, p. A7, from data provided by VLSI Research, inc.

4 sEMATEcH, Op. dt,, P. 18

5 U.S. &neral A~unting offi~, 41F~ml R~ear~: SEMATECH’S TWhnologlcal Progress and Proposed R&D

Program,” GAO/RCED-92-223BR, July 1992, p. 10.
5-ARPA: A Dual-Use Agency I 129

Table 5-4-Congressional Add-ens for Dual-Use Technology in FY 1993

Program funding (millions)

Technology Request Add-on Appropriationa

SEMATECH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8 0 $ 2 0 $100

Advanced lithography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 75 75

High-resolution displays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 90 100

Multi-chip modules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 31 75

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $134 $216 $350

a ~l993figuresdonotreflecta3-percent,congreSionaHymandated, general reductionfromoriginalappropriationstobe apportioned toindividual

programs.

SOURCE: U.S. Congress, Making Appropriations for the Department of Defense for the Fiscal Year Ending September 30, 1993 and For Other

Purposes, conference report 102-1015, October 5, 1992.

from defense to civilian activities (table 5-5). The

programs fall into three categories: technology

deployment programs to help defense companies

convert to commercial markets and better their

commercial performance; technology development partnerships to enable the military to

maintain its technological superiority over potential adversaries while increasing its reliance on a

commercial technology base; and investments in

the future of the industrial technology base. These

programs aim both at near-term defense conversion and longer-term investment in the Nation’s

military prowess and economic well-being.

These programs depart from ARPA’s traditional mode of supporting the development of

new, pathbreaking technologies through contracts with universities and industry. Several

require ARPA to enter cooperative partnerships

in which industry supplies half or more of the

funding and ARPA contributes the rest; others

require the agency to manage programs for

technology diffusion and extension—tasks outside ARPA’s traditional realm of expertise. ARPA

has only recently begun conducting cooperative

research and has not previously supported extension activities.

To carry out these unaccustomed tasks, ARPA

has formed the Defense Technology Conversion

Council (DTCC). With participation from the

Department of Energy (Defense Programs), the

Department of Commerce (through the National

Institute of Standards and Technology), NASA,

and the National Science Foundation, the Council

will solicit, evaluate, and select proposals for

participation in the program. ARPA plans to use

its capabilities in information technology to

satisfy some of the new missions. Other programs

that depend less on ARPA’s unique capabilities

will benefit from the contributions of the other

participating agencies.19

Congressional add-ens for dual-use programs

reflect a tension that existed during the late 1980s

and early 1990s between the legislative and

executive branches with regard to ARPA’s mission. Congress favored greater Federal involvement in supporting precompetitive R&D and,

seeing ARPA as an effective agency for technology development, sought to increase its sponsorship of advanced technologies with both commercial and military application. The Reagan and

Bush Administrations often viewed such support

as involving the Federal government too closely

in commercial technology development, and sometimes in support of individual companies.

Congressional add-ens provide government

support, that would have otherwise be lacking, for

19 wri~ he ~xpfitlon ~ ~199A of tie of 1991, w~ch man&ted tit through 1993 reductions in the defense

portion of the budget not be redirected to nondefense programs, some of the funding given to ARPA for defense conversion could be redirected

to these other federal agencies.
130 I Defense Conversion: Redirecting R&D

Table 5-5-New ARPA Conversion-Assistance Programs for FY 1993 (millions)

Program Funding Purpose

Partnerships for Technological Superiority

Commercial-Military Integration $47.7

Partnerships

Defense Advanced Manufacturing 23.9

Technology Partnerships

Industrial Base Transition and Integration

Regional Technology Alliances $95.4

Defense Dual Use Extension Assistance 95.4

Defense Manufacturing Extension 95.4

Establish cost-sharing partnerships for the development of

commercial technologies with defense applications.

Encourage cost-shared efforts with industry to develop

manufacturing technologies, especially those that reduce health,

safety, and environmental hazards,

Fund regional efforts to apply and commercialize dual-use

technologies. ARPA may match funds contributed by State and

local government or by industry.

Enable ARPA to work with the Departments of Energy and

Commerce to support Federal, State, and local programs that

assist defense companies in obtaining dual-use capabilities.

Support on a cost-shared basis existing State and regional

manufacturing extension programs to assist small and mediumsized manufacturers in improving their commercial performance,

Investments in the Future Industrial and Technology Base

Agile Manufacturing $28.6 Develop agile manufacturing technologies in partnership with

industry.

Manufacturing Engineering Education 28.6 Support manufacturing education, in coordination with the National

Science Foundation, through rest-sharing with universities.

Miscellaneous Manufacturing 23.8 Support programs such as U.S.-Japan management training and the

Technology Initiatives Instrumented Factory for Gears.

Total $438.8

SOURCE: Dee D. Dawson, Assistant Director, Financial Management, Defense Advanced Research Projects Agency, personal communication,

Dec. 9, 1992; “Summary of Conference Actions: FY93 Defense Authorization and Appropriations Bills,” attachment to Statement by Senator Jeff

Bingaman, Chairman, Subcommittee on Defense Industry and Technology, Senate Committee on Armed Services, Oct. 8, 1992.

critical technologies. However, in some cases ticular technologies or institutions. The conferCongressional intervention has resulted in micro- ence report for 1993 defense authorizations lists

management. For example, Congress added fund- 14 suggested technologies for ARPA to support

ing to ARPA’s 1991 and 1992 budgets for x-ray through industry partnerships.

20 The approprialithography. ARPA officials and many industry tions committee conference report identifies 24

representatives favored a broader approach to technologies for ARPA to support through its

lithography that would examine both optical and defense conversion programs, earmarking over

x-ray systems, but were unable to sway this $120 million in funds.21 The Defense Appropriadecision by Congress until the 1993 appropria- tions Act of 1993 itself also contains over $100

tions cycle. million in earmarked funds for defense agencies

Legislation enacted in 1993 contains an un- (including ARPA) to spend at particular instituprecedented level of funding earmarked for par- tions.22 With greater collaboration between Con20 Natio~[ Defense Authon”zation Act for Fiscal Year 1993, COnf~enCe report 1~-%6, Oct. 1, 1~, P. 374.

21 ~a~”ngAppropriations for theDepart~ntofDefensefortheFiscalyearEnding SeptemberJO, 1993, ati$~r0therpuwoses, ~nf~~ce

report 102-1015, Oct. 5, 1992, pp. 162-163. ARPA is not legally bound to satisfy these earmarks, as they are spelled out not in legislation but

only in the conference report. Moreover, ARPA is required bylaw to use a competitive process to select among prclposals solicited from industry

for its dual-use partnership programs.

22 ~bfic ~w 102-396, Tide IV, 1~ Smmte 1893-1894.
gress and the Administration, the level of Congressional add-ens for specific dual-use technologies and earmarking of funds for particular

institutions could decline. The Clinton Administration has expressed support for greater involvement by the Federal Government in precompetitive commercial technology development, suggesting that such cooperation may replace or

augment congressional initiative in this area.

THE FUTURE OF ARPA

ARPA will continue to be an important part of

the defense R&D infrastructure despite recent

changes in the national security environment.

Former Secretary of Defense Richard Cheney

announced a new, post-Cold War DoD strategy of

spending less on procurement of new military

systems, while maintaining funding for R&D to

develop new technologies for building future

systems and for upgrading existing systems.23

The FY 1994 budget request reflects similar

priorities, suggesting that the Clinton Administration may continue to pursue this strategy. Early

stages of R&D, in which ARPA is most heavily

involved (basic research through technology demonstration), will probably be least affected by

reductions in defense spending. This strategy

reinforces trends in ARPA funding that have been

evident since the end of the Cold War. While

defense spending has declined since the late

1980s, ARPA’s funding has grown markedly.

Defense RDT&E funding dropped 13 percent in

real terms between 1988 and 1993; but ARPA’s

budget more than doubled from $1 billion to $2.3

billion in real terms (figure 5-l). ARPA’s 1993

budget appropriation included some $960 million

above the Administration’s request.

ARPA’s mission will therefore continue to be

of central importance to DoD. Furthermore, based

on military interests alone, ARPA will probably

5—ARPA: A Dual-Use Agency I 131

Figure 5-l—ARPA Budget Compared Wit h DoD

RDT&E, FY 1988-93

2

1.5

1

0.5

0

50

45

40

35

30

25

1988 1989 1990 1991 1992 1993

~ ARPA ● DoD RDT&E

SOURCE: Budget of the United States Government: Fiscal Year 1993,

Supplement.

become more involved in the development of

dual-use technologies. Despite the apparent divergence of military and commercial systems,

many component technologies from which these

systems are constructed continue to converge.

The most recent science and technology strategy

promulgated by the director of Defense Research

and Engineering identifies 11 key areas in which

defense research (much of it supported by ARPA)

will be concentrated. These areas include: computers, software, communications and networking, electronic devices, materials and processes,

and design automation.

24 All are areas in which

commercial industries have a strong interest.

In strengthening its ties to commercial industry, DoD can benefit from improved access to the

most advanced technologies. As commercial

markets for computers and other electronic devices have expanded, the commercial electronics

industry has surpassed the defense electronics

23 o~ ~~yz~ Optiom tit follow a s~m s~ate~. SeeU. S. Conwess, O&Ice of Technology Assessment, Building Future

OTA-ISC-530 (Washington, DC: U.S. Government Printing Offke, June 1992).

24 Dfi~tor of Defe.e Re~e~h and (Washingto~ Dc: U.S. Department of Defense,

July 1992), p. I-23.
132 I Defense Conversion: Redirecting R&D

industry as the primary source of technological

innovation. In fact, by the time the military

initiated its VHSIC (Very High Speed Integrated

Circuit) program in 1980, the microelectronics

technology being incorporated into military systems were already 8 to 10 years old.25 This lag

reflects, in part, the impediments erected by

defense procurement practices. DoD is no longer

the principal driver of technology advance in

many portions of the electronics industry. Its

purchases make up less than 10 percent of the

semiconductor market and are expected to comprise only a small percentage of the demand for

high-definition displays and multichip modules

once they become commercially available. Although DoD cannot expect to drive these industries, it can, by becoming allied with them, lower

its costs both in development and procurement

while taking better advantage of new technologies.

Commercial industries may also benefit from

the alliance. Although private companies will

invest in many of the technologies that are key for

defense, ARPA can help by assuming some of the

technological and financial risks. For example,

ARPA is developing processes for manufacturing

multichip modules (MCMs). MCM technology

allows manufacturers to interconnect bare (unpackaged) integrated circuit (IC) chips on a single

substrate rather than packaging the chips individually and connecting them on a printed circuit

board. MCM offers many benefits to both military

and commercial manufacturers of electronic systems, including higher chip densities, higher

operating speeds, reduced power consumption,

improved reliability, and reduced manufacturing

costs. Many commercial firms and consortia such

as the Microelectronics and Computer Technology Corporation (MCC) are funding research on

MCMs, mostly for “chips-last” systems, in

which the bare ICs are attached to the substrate

after the interconnects are etched. ARPA is

supporting ‘‘chips-last systems, but is also

developing “chips-first” processes in which the

interconnects are etched after the chips are affixed

to the substrate. Commercial manufacturers have

found this technology too risky to pursue themselves, but ARPA believes it can achieve higher

densities than with chips-last technology.

9 Manufacturing Technology

DoD is increasing its emphasis on new manufacturing technologies, a direction that is also

likely to generate dual-use technologies. As

defense procurement budgets fall, the military is

looking for ways to reduce manufacturing costs

for new systems. DoD’s new science and technology strategy identifies ‘‘Technology for Affordability” as one of its seven thrusts for future

research. 26 Primary goals are to support integrated product and process design tools (referred

to as concurrent engineering), develop flexible

manufacturing systems for low-cost production

of a wide variety of goods, promote enterprisewide information systems for improved program

control and reduced overhead costs, and develop

integrated software engineering environments to

increase software productivity.

If successful, ARPA’s work on manufacturing

technology could benefit commercial manufacturers. Many manufacturing technologies are

inherently dual-use. While commercial and military products themselves may vary, the processes

for manufacturing them are often very similar.

For example, some commercial and military

semiconductors and jet engines are made side-byside in the same facilities, using much of the same

equipment. Even when military and commercial

production is separated, many of the underlying

processes are the same. DoD was a strong, early

p~~s, fi@~WOfi ~d J-e M. J~~se, vHSIcElec~onics U&the cost ~fAirForceAviom’cs in the Force r~rt

prepared for the U.S. Air Force (Santa Monica, CA: RAND Corporation November 1990), p. 1.

26 D~Wtorof Defe~Re_h U.S. Department of Defense,

Jtdy 1992), pp. II-65 to H-73.
5-ARPA: A Dual-Use Agency 133

supporter of numerically controlled machine

tools that have since found application in many

commercial companies. Today, military and commercial manufacturers often use the same machine tools and semiconductor fabrication equipment in their plants.

Moreover, manufacturing technology is a field

in which U.S. commercial industry, universities,

and the Federal Government have traditionally

underinvested. The large expenditures for product

development have not been matched for process

development. U.S. companies typically spend

two-thirds of their R&D budgets on product

development and only one-third on process design; Japanese companies reverse these proportions.27 For Federal R&D spending, the disproportion is even greater. DoD’s expenditures for

manufacturing R&D together with the defenserelated share of the Department of Energy’s

manufacturing expenditures totaled about $1.2

billion in 1992. These expenditures represented

some 80 percent of all Federal funding for

manufacturing R&D, but equaled only 2 percent

of total defense-related R&D. 28 Much of the

concern over flagging U.S. competitiveness in

manufacturing stems from the lack of investment

in process development.29

ARPA is taking a new approach. ARPA’s

office managers estimate that about one-third of

ARPA’s total budget is spent on manufacturing.

In FY 1992, ARPA allocated $206 million, or 14

percent of its budget, to a program designated

“Manufacturing Technology;” FY 1993 allocations will grow to $313 million (table 5-6). This

program contains funding for five programs:

SEMATECH, to improve semiconductor manufacturing equipment and processes;30 MIMIC, 31

to accelerate development, manufacturing and

demonstration of affordable microwave and millimeter-wave monolithic integrated circuits;

Infrared Focal Plane Array (IRFPA), to establish

a manufacturing base for producing infrared

sensors for military weapons systems; Electronic

Module Technology, to rapidly develop state-ofthe-art, application-specific electronic modules

for quick insertion into electronic systems; and

High-Definition Systems, to focus on the manufacture of high definition displays for military

systems. While the MIMIC and IRFPA programs

are targeted primarily toward military goals, the

other three programs are directed toward technologies in which defense markets may be much

smaller than commercial markets. Other ARPA

programs not contained under the Manufacturing

Technologies programs are also geared toward

manufacturing and could be of value to commercial industry. These programs address software

productivity, manufacturing automation, and concurrent engineering (table 5-7).

1 Microelectronics Manufacturing

Science and Technology

The Microelectronics Manufacturing Science

and Technology (MMST) program is one of

ARPA’s manufacturing efforts that could potentially benefit commercial industry. This 5-year,

$86-million program, funded jointly by ARPA,

the Air Force’s Wright Laboratory, and Texas

Instruments (TI), is intended to develop fast,

flexible, cost-effective techniques for manufac27 Edw~ ~~~eld, c(~dus~ ~ovation b Japm and tie United States,’ Science, Sqtember 30, 1988, p. 1770.

J~~ tic et ~1,, Beyond Splnof: Militaq and co~rcial Technologies in a Changing World @(M()~ MA: Wmd BUS&SS School

~SS, 1992), pp. 341-343.

29 us, ConBess, Offlce of T~~olo~ As~ssment, O’IA-ITE-443 ~dlkgtOQ DC:

U.S. Government Printing Office, Februmy 1990).

30 ~ ~1993, f~d~g for SEMATECH ~fl be list~ m a ~p~te line item at the r~UeSt Of COn~SS.

31 me ~crowave and ~~eter-wave Mono~~c htegrated ckCdt prOgR311L
134 I Defense Conversion: Redirecting R&D

Table 5-6—ARPA’s Budget for Manufacturing Technologies, FY 1992-93 (millions)

Budget authority

(millions)

Project title FY 1992 FY 1993

Semiconductor Manufacturing Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9 8 $ 9 4

Microwave and Millimeter-wave Monolithic Integrated Circuit . . . . . . . ... , . . . . . . . . . . 86 80

infrared Focal Plane Array. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 34

Electronic Module Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 67

High Definition Systemsb 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 38

Totalc 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— -

. . . . . . . . . . . . . . . . . . . . . . . . . . . $313

aFunding fOrSemi~nduCtor Martufacturing Teclmology (SEMATECH) isincluded underaseparate progr~elernentin FY1993.

b In ~ 1992,$75 million w= provided for High Definition Systems under a separate program element, Some of whkh w- man~acturing-oriented.

In 1983, $38 million was provided for High Definition manufacturing programs, and another $152 million was provided under another program

element, some of which may also have manufacturing implications.

c Totals not add due to rounding.

SOURCE: DARPA, Amended FY 199U1993 Biennial RDT&E Descriptive Summaries, (Arfington, VA: DARPA, Jaluary 1992).

Table 5-7-Other ARPA Initiatives in Manufacturing

Lead Annual funding

Program title office (millions) Purpose

Software Technology for SSTO $20 Improve productivity in software generation; develop

Adaptable, Reliable Systems reusable code, software engineering environments,

(STARS)

Manufacturing Automation SSTO 9 Apply information technology to manufacturing; develop

for Design Engineering (MADE) product data models.

ARPA Initiative on Concurrent DSO 20 Develop tools for concurrent engineering; establish pilot

Engineering projects,

KEY: SSTO - Software and Intelligent Systems Technology Office.

DSO = Defense Sciences Office.

SOURCE: Defense Advanced Research Projects Agency, Amended W 199271593 Biennial RDT&E Descriptive Summaries (Washington, DC:

January 1992); and OTA staff interviews.

turing microelectronic devices.32 The primary

goal of MMST is to overcome limitations in

current semiconductor manufacturing processes

that prevent the military from procuring small

volumes of specialized integrated circuits at

affordable prices.

Current semiconductor manufacturing practices are characterized by large economies of

scale that result from high capital costs and

inflexible production processes. Due to rising

equipment costs and the increasing number of

processes required for each new generation of

semiconductor chip, the cost of a state-of-the-art

wafer fabrication facility ("fab”) has risen to

over $500 million and is expected to exceed $1

billion by 1995.33 Equipment costs comprise

about 75 percent of this cost and double with each

new generation of semiconductor technology as

equipment prices climb and additional equipment

is needed to maintain throughput effectively

doubles equipment costs. Processing a typical

wafer now requires over 3(K) steps, conducted on

32 ARPA and the Air Force’s Wright Laboratory are contributing a total of $58.5 million to the progrw n, the ptie cOnhWtOr, k

contributing the balance. ARPA’s contribution will total $28.3 million over 5 years, having peaked at $9.5 million in 1992.

33 { ‘Wtiers’ we &SICS of sificon on which hundreds of semiconductor ChipS are Shdtieody plUdUCd
5--ARPA: A Dual-Use Agency I 135

Table 5-8--lnitial Goals of ARPA’s MMST Program for Flexible

Intelligent Microelectronics Manufacturing

Current State- MMST

Characteristic of-the-art fab scalable fab

Minimum efficient throughput (wafers/month). . . . . . . . . . . . . . . . . . . . . . . 30,000 1,000

Minimum efficient plant cost (millions of dollars) . . . . . . . . . . . . . . . . . . . . $750 $50

Cycle time (days) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 5

Equipment utilization time (percent). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35% 90%

Test Wafers (percent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . >10% 0%

Processing steps . . . . ., . . 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300 >200

Clean Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . clean rooms “micro-environments”

Clean room requirement (class) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1oo 1,000-10,000

SOURCE:Arati Prabhakan Direetor,ARPAMicroelectronics TechnologyOffice, ’’Flexiblelntelligent MicroelectronicsManufacturing:’ briefingtothe

OTA,June 16,1992.

hundreds of pieces of semiconductor manufacturing equipment, each of which can cost between

$200,000 and $3 million, and each of which must

be maintained in a clean environment that allows

fewer than one 0.15 -micron particle per cubic

foot.

Because existing semiconductor manufacturing equipment cannot be easily reconfigured to

produce ICs of different designs,34 manufacturers

tend to produce large quantities of a limited

number of circuit designs in order to spread their

capital investments over abroad production base.

This strategy is effective for volume production

of standardized devices such as memory chips

and microprocessors, but it does not allow for

cost-effective production of specialized chips of

interest to both military and commercial customers.

35 Firms that produce custom chips tend to be

small and operate only in niche markets. Often it

is not economical for them to invest in state-of-theart capital equipment.

The aim of MMST is to develop technologies

for flexible, “modular’ fabs that can quickly and

easily switch between product designs. R&D is

centered around three primary enabling technologies: single-wafer processes, cluster tools, and

real-time process control and routing (see box

5-B). The new semiconductor manufacturing

equipment and computer-integrated manufacturing (CIM) software developed under MMST are

intended to allow not only increased flexibility,

but a reduction in the minimum scale for an

efficient-sized plant, reduced capital costs for

minimum capacity, and reduced manufacturing

cycle time as well (table 5-8). Modular fabs

constructed using MMST technologies could

then operate efficiently at low levels of production; higher levels of output could be achieved by

combining several modules into one production

facility. These technologies could have significant benefits for producers of both commercial

and military ICs.

Numerous technical and financial obstacles

could prevent MMST from achieving commercial

success; but if these hurdles can be overcome,

MMST could benefit some commercial U.S.

semiconductor manufacturers by allowing shorter

product development times, shorter manufacturing times, smaller inventories, smaller efficientsized plants, reduced retooling requirements,

M Rwo~l~g ~fis~g se~conductor man~ac~g equipment to produce ICS with different desi~ is a diffi~t Pr~~s: ne

w

sequences of processing steps must be developed and tested for each new chip desi~ and individual pieees of equipment must be eonf@red

to deposit the correet thickness of insulator between layers of conductor on the wafer or implant the desired coneent.ration of dopant into the

substrate to give the material its semiconducting characteristics.

35 ~l~pr~ucu ~emore ~ely ~ncom~c~ products t. ~eawide varie~of custom irltegated ctititsbased onpropnetaxy designs.

Many are procured only in limited numbers.
136 I Defense Conversion: Redirecting R&D

Box 5-B-Microelectronics Manufacturing Science and Technology (MMST)

and Single-Wafer Processing

The Microelectronics Manufacturing Science and Technology program is an attempt to meet DoD’s

requirements for fast, flexible, affordable production of microelectronic devices by replacing traditional batch

processing techniques with single-wafer processes, cluster tools, and real-time process control. Texas

Instruments, the industry partner in the program funded jointly with ARPA and the Air Force, is developing an

operational pilot production line that will demonstrate the technical feasibility of these new manufacturing

techniques. The line is being designed to provide Iess than 3-day turnaround on more than 1,000 integrated circuit

(IC) designs per year with a throughput of 800 wafers per month and with line widths as small as 0.35 microns.1

As of April 1993, final demonstration and test were scheduled for completion within the month.

Key to MMST’s success is the development of single-wafer processing tools, which process wafers rapidly

one at a time rather than slowly in large batches, as is done with much existing equipment. Single-wafer tools can

help eliminate bottlenecks in manufacturing lines caused by mismatches in the processing speeds of different

pieces of equipment. Such bottlenecks, which are often found in batch processing lines, reduce equipment

utilization time and lengthen manufacturing cycle times.2 With single-wafer processes, production lines can also

be balanced at lower levels of throughput, effectively reducing the economies of scale in production.

Single-wafer processes also allow the use of real-time monitoring and control systems to help maintain

process uniformity across the wafer and achieve high yields. Uniformity and yield are becoming increasingly

1 AO.35 micron linewfdttl isrequirecfto produce devtcesizesonthe scaie ofthoserequired for6+megabit DMMs

(Dynamic Random Access Memories). Testing of the production system was on schedule in April 1993 andwasexpected

to be oompieted within the month.

2 Wlthbatch processes there can besubstantiaf variation inthepfooessing speed of different Pk6sof Wuipnt.

Certain pieoes of equipment may have to remain idle while wafting for a downstream operation to be completed. In order

to overoome these inefficiencies, manufacturers can use multiple pieoes of equipment In parallel to speed up siow

prooesses, but doing so increases the oapital investment required for an efficient pfant. Krishna C. Sa raswat artd Samuel

C. Vbod, “Adaptabfe Manufacturing Systems for Mioroefectronios Manufacturing: Economic and Performance issues,”

paper presented at StriW?g/es ~of /rJnowaWI tirfd Changes h the U.S. and Japan, an IBEAR Research Conference,

University of California, Los Angeles, May 10-12, 1992.

greater product variety, and a shift toward compe- 11,000 integrated circuits for specific applicatition based on functionality instead of price. tions. 37 The ability to produce multiple products

Since 1975, the number of new chip designs cost-effectively in a single facility may therefore

produced each year has increased from 2,000 to provide many firms with a competitive advanover 100,000.36 LSI Logic Corp., the world leader tage.38 Economic models suggests that factories

in the production of application specific inte- producing less than 1 million chips per month

grated circuits (ASICs), has itself designed over using MMST could have costs about half those of

36 C. Cmt (NpS), Dam Quest, C)ctobti 1988. Cited in Krishna C. SaraSwat and Samuel C. Wood, “Adaptable ManufaC@g systems

for Microelectronics Manufacturing: Economic and Performance Issues,’ paper presented at ‘‘Strategies for Innovation and Changes in the

U.S. and Japan,’ an IBEAR Research Conference, University of Southern Califomi% Los Angeles, May 10-12, 1992.

37 LII ~gic Cowratiow “An ASIC comp~y ~ a ~ocess ~de~ oxymo~n or com~titive Model,” fjp~ 1992,

38 Fora more ~omplete ~sc~sion of tie economic b~efits of flexible~~ac- to sticonductor ~UfaC~erS, SySb3XnS hlteWatO~,

and the semiconductor manufacturing equipment industry, see W. Edward Steinmueller, “The Economics of Flexible Integrated Circuit

Manufacturing Technology,” Review of Industrial Organization, vol. 7, pp. 327-349, 1992.
5-ARPA: A Dual-Use Agency [ 137

difficult to maintain with batch processes as minimum feature sizes on ICs decline and wafer sizes continue to

expand. With single-wafer processing it is possible to design small process chambers in which uniform conditions

can more easily be monitored and maintained. Before each wafer is processed, a computer determines the

required equipment settings and sends appropriate instructions to properly configure the machinery. Sensors

measure the conditions within the chamber (temperature, optical emission from plasmas, etc.) and on t he wafer

during processing. Feedback from the sensors is used to automatically adjust equipment settings and correct

conditions within the chamber, ensuring proper processing.3 TI completed a prototype of this computer-integrated

manufacturing (CIM) system in 1990 and expected to test a beta version in a 1993 demonstration.

TI has combined single-wafer process modules into “cluster tools” that perform multiple steps, sequentially,

on individual wafers. A cluster tool consists of several process modules centered around a single-wafer handler

and computer system. Each module maintains a clean “microenvironment” around the wafer while it is being

processed; the wafer can then be transferred in vacuo to the next processing chamber so it is not exposed to the

external environment. In this way duster tools might replace large clean rooms. Cluster tools could also help

reduce capital costs if modules can be designed with common mechanical and electrical interfaces. In that case,

only portions of the equipment might have to be replaced to accommodate new generations of semiconductor

technology, and it might be possible to produce common modules of equipment such as the wafer handler and

vacuum chambers in large quantities.4

The manufacturing equipment and software developed under MMST are demonstration models only, and are

far from being commercial products. Additional development is required before such tools can be manufactured

cost- effectively and made to operate reliably overlong production runs at high levels of throughput. SEMATECH

and TI are working together to commercialize the CIM system developed under MMST Portions of the lithography

and rapid thermal processing technologies developed under MMST have been licensed to commercial companies,

but additional efforts may be needed to ensure commercialization. Few equipment companies can assume the

risk associated with further development. Though reportedly pleased with the program to date, ARPA has not

committed itself to funding additional work to bring MMST to commercialization.

3 RoIMrt R. Doering, Texas Instruments, Inc., Semiconductor Process and Design Center, “Microelectronics

Manufacturing in the 1990s-MMST” p. 1.

4 T! is curre~ly wo~ng ~th the Modular Equipment stan~r~ mmrnittee d SEMISEMATECH to develop

standards for modular interfaces.

a conventional fab at similar capacity .39 Flexible In addition, as product life-cycles have shortproducers should find that MMST can lower ened, time-to-market has become a more signifiwafer production cost regardless of production cant competitive factor in the electronics indusvolume, though the cost advantages of modular try. Many traditional fabs take up to 75 days to

fabs may become more apparent at low produc- produce a wafer; TI has achieved 3-day cycle

tion volumes where high yields are harder to times on the MMST line, even for chips with

achieve with traditional manufacturing techniques. complicated designs. 40 Markets for both commodity and custom chips are becoming increas39 Sauel c. w~d, 1‘me ~crw]w~o~cs ~~ac~g scicn~ ~d Tw~oIogy Rograrn (h4MST): Ovemiew and Implications, ’ Feb.

15, 1992, p. 1.

40 Computer m~del~ demom~ate tit at p~od~ction levels of 5,)00 wafers per mo@ cluster fabs bas~ on shlgle-wtlfer prOCtY@lg tOOk

can theoretically produce wafers with cycle times half those of conventional fabs and at compaable cost. For higher levels of throupul

additional modules of production equipment may need to be added to the plant. Depending on the chip technology, tbe degree of loading, and

product variety, models indicate that MMST can reduce production time by a factor of 3 to 10 over traditional manufacturing methods. See

Krishna C. Saraswat and Samuel C. Wood, op. cit., footnote 32, pp. 1, 11-13.
138 I Defense Conversion: Redirecting R&D

ingly time-sensitive. 41 Flexible tools may also

help reduce time-to-market by allowing semiconductor manufacturers to rapidly expand a pilot

facility to production capacity, adding additional

modules as demand increases. This would enable

manufacturers to avoid large up-front commitments to new production facilities. Companies

interested more in speed than in flexibility will

probably find, however, that flexible MMST

technologies result in higher manufacturing costs

per wafer than traditional methods. They will

have to consider the tradeoff between cycle time

and cost.

Other portions of the MMST program might

benefit traditional as well as flexible semiconductor manufacturers. Enhanced simulation capabilities developed for real-time control systems

might be adapted for developing new processes

on a computer. More than 10 percent of all wafers

processed in today’s fabs are test wafers used to

troubleshoot new manufacturing processes. Computer simulation can bypass much of this trial and

error troubleshooting. In addition, CIM software

used for routing wafers between cluster tools

could help batch manufacturers use their equipment more efficiently. Semiconductor manufacturing equipment is used productively only 35

percent of the time in most fabs. While equipment

failures and required set-up times account for part

of the downtime, much of it occurs while machines are operable but lags in the production

system prevent wafers from being delivered.

Single-wafer processing techniques developed

under MMST may also help semiconductor

manufacturers maintain uniform distributions of

reactants and energies across wafers as they

become larger and feature sizes become smaller.

Sensors to measure processing conditions such as

temperature and pressure across the surface of

each wafer are not as easily deployed in batch

processing chambers as in single wafer processing chambers. With batch thermal processes,

which comprise about one-third of the processing

steps in a typical fab, hundreds of wafers are

loaded just millimeters apart into a hot-wall

furnace. Only the edges of the wafers may be

visible to sensing devices, and conditions cannot

be varied over localized areas. Some manufacturers have expressed concern that an approach

based on real-time sensing and control will not

prove robust enough for high-volume commercial

production and that instabilities could be generated in systems relying on real-time process

control. These companies wish to improve their

understanding of variables affecting individual

processing steps so they can continue to use

existing processing techniques, but with a greater

probability of success and higher yields. Nevertheless, participants in a recent workshop indicated that single wafer rapid thermal processing

would probably reach the break-even point when

device sizes reach 0.25 to 0.18 microns.42

Even if technical obstacles can be overcome,

commercialization of MMST results may be

difficult. Despite the benefits of flexible production, manufacturers in many segments of the

semiconductor market, such as DRAMs (Dynamic Random Access Memories) and microprocessors, will continue to produce large quantities

of a limited number of device types. These

manufacturers will likely find traditional manufacturing techniques more cost-effective than

MMST processes. While some effort is being

made to commercialize technologies developed

under MMST, there is still considerable uncertainty about the size of future markets for MMST

technologies, enough to make equipment manufacturers hesitant to commit resources to their

development. Many semiconductor equipment

manufacturers are small and are therefore unable

41 First.m~ve. ~dvan~ges ~strong in commodity ctips. wi~ ody 3 y&US or so ~meen product and hlrge Cripitd COStS,

manufacturers must try to get to market fwst in order to move rapidly down the learning curve and expand output.

42 Given Cment sc~ ~~ds, ~s pofit wo~d & reach~ ~tw~n 1995 ~d 1998. See Semiconductor hd~try z%sSOCiatiOQ

Semiconductor Technology: Workshop Working Group Reports, Prekninary Copy, 1993, p. 69.
to take on the risk of commercializing risky, new

technologies. Few can independently support the

development of MMST-like tools while continuing to pursue development of traditional tools. As

of early 1993, ARPA did not plan to fund

continued commercialization of MMST technologies.

TECHNOLOGY TRANSFER FROM ARPA

As the MMST program demonstrates, commercialization and dissemination of technologies

developed by ARPA cannot be taken for granted.

If technologies are to be put into commercial

practice they must match industry’s needs, and

linkages to industry must be established. While

some ARPA programs fall short of providing

commercial prototypes for new technologies, the

agency as a whole has become more interested in

bringing research results to the point at which

they can be incorporated into products or manufacturing processes. This is one of the primary

factors behind a shift in ARPA’s funding priorities from universities to industry in recent years.

1 Linkages to Industry

ARPA has neither research facilities nor research staff. Instead, ARPA charnels funding to

researchers in industry, universities, and nonprofit research centers, with its staff of approximately 109 program managers and 76 staff

personne143 providing management oversight and

technical direction. This structure tends to forge

links between ARPA and industry and keep the

agency in contact with members of the technical

community outside government.

ARPA often links together research groups

with complementary capabilities to work on a

common project. Some companies share proprietary information with ARPA managers, giving

ARPA a better understanding of the strengths and

weaknesses of individual companies within an

5—ARPA: A Dual-Use Agency I 139

industry than companies themselves may have.

ARPA can use this information to form loose

teams of collaborators, in which several companies are given individual contracts to work on

different pieces of a single problem; or subcontracting arrangements may be used to link university researchers with commercial product developers. In some cases, ARPA has formed explicit

teaming arrangements with a consortium of

companies.

ARPA has also had some success in transferring research out of university labs and into

corporate development centers. For example, the

Defense Sciences Office is funding research in

high-temperature superconductors (HTSC) by the

University of California at Santa Barbara via a

contract with a small manufacturer of superconducting products that has little in-house R&D

capability, but a strong knowledge of practical

problems that can be solved with superconductivity. Under its contract the company must subcontract the full value of the contract to the university

without deducting costs for overhead and management. In effect, this arrangement requires the

company to manage the university’s research free

of charge, giving the company a stake in the

project and helping to assure the potential practical value of the research. In return, the company

gains access to research results that it can then

incorporate into new products. ARPA benefits

through the purchase of products from the company.

M Industry Partnerships

Several programs initiated by Congress have

established legal mechanisms and provided funding to more explicitly support cooperative partnerships between ARPA and commercial industry. The goal of these programs is to improve

ARPA’s (and hence DoD’s) access to commercial

technology and to link ARPA’s R&D programs

more closely to commercial needs. The programs

AS ~e~e fiWe~ ~flect ~u~o~~ to~~ of 145 Civflims, 24 fifi~ Persomel, and 16 scien~lc personnel assigned to ARPA under the

Inter-Departmental Personnel Act (WA) for FY 1993.
140 I Defense Conversion: Redirecting R&D

include cost-sharing and other financial arrangements that are not allowed under traditional

contracting regulations.

As with other Federal agencies, ARPA’s funding of R&D has historically been governed by the

Federal Acquisition Regulations (FAR). With the

purpose of assuring fair procurement practices

and avoiding fraud, the FAR requires Federal

agencies to work only with companies that

establish approved accounting and auditing procedures. Many high-tech companies-especially

small startup fins-do not adhere to the FAR’s

accounting and auditing requirements because of

the costs involved or simply because they are

unwilling to open their books to government

auditors. 44 The FAR also precludes ARPA and

other government agencies from entering into

collaborative relationships with industry in which

both project costs and management control are

shared, and it prevents them from entering into

agreements with unincorporated groups of companies (in consortia).

Starting in 1990, Congress began lifting some

of these prohibitions for ARPA, granting the

agency authority to enter into ‘cooperative agreements and other transactions’ with research

partners. 45 Under cooperative agreements, ARPA

can support research programs in which it maintains an active role but shares management and

direction with participating partners. Also, ARPA

can share project costs with industry, up to 50

percent of the total, and work with groups of

companies in informal consortia. ‘‘Other transactions” are to be used in cases in which other

mechanisms are inappropriate; they may take on

any legal form consistent with the completion of

the desired mission, but as with cooperative

agreements, must be approved by the Office of the

Secretary of Defense. The new authority also

established an account in the Federal Treasury

where ARPA can bank returns on the earnings

commercial companies make from ARPAsponsored research. ARPA may use these funds to

support additional R&D programs.46

Congress also included provisions in the National Defense Authorization Act of 1991 and in

subsequent legislation directing ARPA to use its

cooperative agreements authority to fund precompetitive R&D projects with industry consortia. The law requires that these ‘‘Dual-Use

Critical Technology Partnerships’ ’47 be with two

or more eligible companies or a nonprofit research corporation established by two or more

eligible firms.48 Funding for dual-use partnerships totaled $50 million in 1991, $60 million in

1992, and $95.4 million in 1993, and through the

frost 2 years has been used to support 13 projects

(table 5-9). Although these partnerships were

designed so that ARPA could use its cooperative

agreements authority, most have been funded

through traditional contracts because of resistance within the Bush Administration to use of the

new authority.

44 WA bkm able to WO* with comrnerci~ companies only by subcontracting through a university or defense contractor or by Wtivfig

FAR regulations. FAR requirements can be waived in the best interest of the government.

45 me Natio~ ~fe~e Authorization Act for Fiscal Years 1990 and 1991 granted DMWA the authority, for a 2-year WWriod e*g

September 30, 1991, to enter into cooperative agreements or other transactions with commercial fm. The authority was made permanent in

the National Defense Authorization Act for Fiscal Years 1992 and 1993 and coditled in Section 2371 of Title 10, U.S. Code.

46 paPats my ~ b~~ on roy~ties from COmmeZCia.1 products that result from ARPA’s investmen~ increases in tie v~ue of *e

company’s stoclq or other measures of the company’s perforrnanc e. While the government can receive pa~ments under R&D contracts

governed by the F~ money is returned to the U.S. Treasury rather than ARPA and practical problems have precluded full use of this

mechanism.

47 ofi~ Provisiom for pHomFtitive p~er~ps ~pmvid~ iII U.S. House of Rqre~n~ves, Nafionaf Defense Authorization &t

for Fiscal Year 199J, conference report 101-923, Oct. 23, 1990, p. 562. bgislation to incorporate these provisions into Title 10 of the U.S.

Code are contained in U.S. House of Representatives, National Defense Authorization Act for Fiscal Year 1993, conference report 102-%6,

Oct. 1, 1992, pp. 372-374.

48 Otier ~overment facfities ~& Mowd to p~cipafi ~ me p~ers~ps witi appKwd of the StXHW~ of Defense.
Table 5-9-ARPA Dual-Use Critical Technology

Partnerships

Funding

Year Technology (millions)

1991

1992

1993

Ceramic fibers

Opto-electronics

Superconducting electronics

Linguistic data processing

Scalable computer systems

Advanced Static Random Access

Memory chips

Total

Magnetic and optical storage

Algorithms for Maxwell’s Equations

Microelectronics technology ComputerAided Design

Micromagnetic components

Precision investment casting for

propulsion

Ultra-dense capacitor materials

Ultra-fast, all-optical communications

systems

Total

[Projects yet to be determined]

Total

$ 3

20

2

5

10

10

$ 5 0

$ 1 2

9

8

10

6

5

10

$ 6 0

$100

SOURCE: U.S. Congress, National Defense Authorization Act for

Fiscal Year 1993, Conference Report 102-966, Oct. 1, 1992; DARPA,

memorandum from Gary L. Denman, Director, to House and Senate

Armed Services and Appropriations Committees, Apr. 20, 1992; and

Senator Jeff Bingaman, “Why We Need an ARPA in the Defense

Department,” address to the American Enterprise Institute, July 28,

1992.

ARPA’s cost-shared partnerships are somewhat different from research projects it funds

under traditional contracting arrangements. Under

its contracts, ARPA maintains full management

control of programs. It selects their objectives,

costs, and time frames. With partnerships, ARPA

must share management and costs with industry;

all participants must reach consensus on the

programs’ goals and costs. As a result, partnerships tend to pursue projects that are less revolutionary and in which the technological risks are

smaller than in many traditional ARPA projects.

ARPA’s work with SEMATECH demonstrates

this difference. Compared with MMST, which is

attempting to develop an entirely new framework

5-ARPA: A Dual-Use Agency I 141

for manufacturing semiconductors, SEMATECH’s

goals, though ambitious, are in the mainstream.

Technologies developed under SEMATECH are

geared toward moving existing semiconductor

manufacturing processes ahead to make nextgeneration chips, not toward creating a new

model for factory organization. Nevertheless,

such goals are within ARPA’s interest and play a

significant role in the portfolio of programs

ARPA conducts. ARPA would like to ensure a

domestic supply of semiconductor chips and of

requisite production equipment to meet DoD’s

demand.

While effective in linking ARPA’s programs

with industry needs, partnerships do not necessarily resolve all issues of commercialization. In

interviews conducted by OTA staff, industry

representatives reported that, in order to avoid

antitrust problems, they often involve only their

research personnel-not their product development personnel-in cooperative R&D programs.

While this precaution may ensure that developed

technologies are truly ‘‘precompetitive," such

rigid barriers run counter to the idea of concurrent

engineering and may also retard attempts at later

commercialization. Further, industry partners in

ARPA’s consortia are not always interested in

commercializing new technologies themselves.

For example, the Optoelectronic Interconnect

Consortium, founded in July 1992, has four

industrial partners: General Electric, Honeywell,

IBM, and AT&T. Of the four, AT&T is the only

company that may decide to develop a commercial product.

49 The other companies hope that once

the technology is developed, a supplier industry

will develop (possibly from spinoffs) to commercialize the new technology. The current partners

would prefer to act as systems integrators, not

component manufacturers.

ARPA views its cost-shared partnerships with

industry in a positive light. Reportedly, program

managers compete vigorously for the funding,

trying to piece together partnerships that build on

49 David ~~s, &ne~ El&~c cow, A&s@ator, Optoelec@ofics CODSOrtiQ pXSOd comrnunicatio% NOV. A, 1992.
142 I Defense Conversion: Redirecting R&D

partners’ strengths and that complement other

ARPA R&D projects. ARPA managers regard the

partnerships as a effective way of diffusing new

technologies to industry and developing sources

for new defense and commercial products.

EXTENDING THE ARPA MODEL

ARPA’s reputation for successfully identifying

and supporting risky technologies with significant long-term benefits has led some people to

suggest that the agency be given broader purview

over technology development. While some proposals have called for removing ARPA from DoD

and giving it a civilian mission, most have pushed

for a more explicit broadening of ARPA’s dualuse responsibilities while keeping it within DoD.

The Carnegie Commission on Science, Technology, and Government, for example, recommended

that ARPA (then DARPA) be renamed the

National Advanced Research Projects Agency

(NARPA) and be given a charter within DoD to

support dual-use technologies and long-range,

high-risk technologies with potentially high payoff.50 The 1993 Defense Authorization Act also

expressed a Sense of the Congress that DARPA

be renamed ARPA, with responsibility for researching imaginative and innovative technologies applicable to both dual-use and military

missions, and for supporting development of a

national technology base.51 President Clinton

implemented the frost portion of this recommendation, renaming the agency ARPA in March

1993.

ARPA is, in many ways, already a dual-use

agency. Even without legislation to specifically

mandate such work, ARPA will continue to

pursue technologies of interest to commercial

industry. In its projects to develop manufacturing

technologies, ARPA is trying to work primarily

with commercial companies, not dedicated defense companies or defense divisions of larger

companies. To ensure access to state-of-the-art

technology and procure advanced technologies

affordably, DoD will have to become more

closely allied with commercial industry. Reform

of DoD’s procurement regulations will be a

central part of such integration. At the same time,

AREA’s focus on enabling technologies such as

materials, computers, and electronics, combined

with DoD’s growing interest in manufacturing

technology, will allow ARPA programs to contribute to commercial as well as military missions. ARPA has experience working with industry and the legal authority to enter into cooperative, cost-shared partnerships with commercial

industry. With the recent decline in corporate

R&D spending, additional government funding

through ARPA may prove especially helpful.

There are limits to ARPA’s ability to support

commercial competitiveness, however. As a defense agency, ARPA is unable to fund strictly

commercial technologies with no military application. The agency has channeled little support to

fields, such as biotechnology, that have demonstrated significant potential for contributing to

commercial competitiveness but little potential to

support national security .52 Even with dual-use

technologies, ARPA’s support is influenced by

the political and national security environment.

Both the Mansfield amendment in the early 1970s

and more recent concerns about the role of

Federal Government in funding commercial R&D,

have required ARPA to link its research programs

more closely to established defense needs. The

current national security environment may be

more receptive to dual use as a large part of

9 Carnegie Co remission on Science, Technology, and GovexnmenL Technology and Econom”c Performance: Organizing the Executive

Branch for a Stronger National Technology Base (Washingtorq DC: Carnegie Commission on Scieme, T’kchnology, and Government,

September 1991), pp. 3941.

51 U.S. Congress, Authorization Act for Fiscal Year 1993, conference report 102-966, @:t. 1, 1992, PP. 390-391.

SZ WA ~, however, co~id~ed applying its expertise in information technology to health care on the grounds that DoD iS the West

single health care provider in the Nation.
5-ARPA: A Dual-Use Agency I 143

ARPA’s responsibilities and funding, but future

changes might refocus ARPA’s projects more

narrowly on technologies that are unique to

defense. While giving ARPA specific authority to

pursue dual-use technology may help legitimize

the dual-use mission, such programs will continue to be balanced against other military objectives.

There may also be a limit to the additional

duties ARPA can effectively undertake. Too

many new responsibilities could diminish the

very qualities that have made ARPA a success.

ARPA has been successful, in part, because it is

a small, non-bureaucratic agency. Its managers

can respond rapidly to new opportunities and cut

off programs that are not producing results.

ARPA officials have stated that the agency could

perhaps double in size without losing its efficiency, but beyond that, its character and mission

could suffer. ARPA’s budget more than doubled

in real terms between 1988 and 1993, but its staff

grew minimally. ARPA officials admit that understaffing is impeding effectiveness. Many of

ARPA’s FY 1992 research contracts were slow in

receiving approval, and some were not yet signed

by the start of the new fiscal year.53

In addition, ARPA’s strength is in the intelligent placement of its bets on high-risk, highpayoff technologies. Development of commercial

technology requires much more than that. Commercial success also requires attention to incremental product and process improvements, to the

development of infrastructure, and to the diffusion of best practices throughout industry. While

ARPA has gained some experience with industry’s concerns through partnering, that is not its

principal area of expertise. Nor is ARPA experienced in technology diffusion. As a projectoriented agency, ARPA funds projects only to the

point of demonstrating technological feasibility

and perhaps through the construction of prototypes. Its portfolio of projects changes rapidly

with time. Technology diffusion, in contrast, is a

continual process that has no identifiable end

point and cannot be terminated upon reaching a

specific objective.

Thus, ARPA is best viewed not as the single or

the foremost Federal agency for supporting commercial technologies, but as one component of a

broader government effort. Programs like the

High Performance Computing and Communications Initiative (HPCCI) and the Defense Technology Conversion Council demonstrate ways in

which ARPA’s capabilities can best be used to

complement those of other Federal agencies such

as the National Institute of Standards and Technology, NASA, the Department of Energy, and

the Department of Commerce in support of

objectives other than national security. By linking

ARPA’s capabilities with those of other Federal

agencies as these programs do, the benefits of its

dual-use research may best serve commercial

competitiveness.

53 ~c~el E. Davey, The Research Projects Agency: DARPA, 93-27 SpR ~m~~o~ DC: COn~eSSiO~ ‘eseach

Service, Jan. 15, 1993), p. 11.
Department

of Defense

Laboratories 6

T

he U.S. Department of Defense (DoD) spent approximately $9,9 billion on research and development (R&D)

in its laboratories and test and evaluation (T&E)

facilities in 1992.1 While more than half of these funds

went to industry and university contractors, DoD facilities still

spent approximately $4.7 billion in-house. The end of the Cold

War will undoubtedly cause some consolidation and downsizing

of defense labs and closure of individual facilities, but unlike the

Department of Energy’s nuclear weapons labs, which may be

facing some fundamental changes in character and mission, basic

changes in mission seem unlikely for DoD labs as a whole. Their

budgets have declined only slightly in real terms since 1989, and

current plans to consolidate and shrink the laboratory system do

little to alter their fundamental defense mission.

Nevertheless, some opportunities exist for DoD labs to

contribute to U.S. industrial competitiveness. Congress, the Bush

Administration, and the Clinton Administration have all encouraged the defense labs to take a more active role in working with

commercial industry through cooperative research and development programs. Industry can gain from these programs through

cost-shared R&D, access to lab facilities, and the expertise of lab

personnel. DoD can benefit from the contribution of commercial

partners to R&D programs and from the possibility that partners

may become cost-effective sources of dual-use technology.

Despite a slow start in the mid-1980s, DoD’s cooperative

R&D programs have grown considerably in recent years. Many

1 This figure represents 26 percent of the $38.8 billion DoD spent on RDT&E in 1992.

Of the funding for labs and T8zE centers, 3 pereent was for basic research 10 percent was

for applied researehi and 86 percent was for development (p rimarily early stages of

development).

145
146 I Defense Conversion: Redirecting R&D

cooperative research projects are conducted with

traditional defense contractors who may not be

the best conduit for transferring technology to

commercial markets, but the services have stated

their intention to engage more commercial participants.

RDT&E IN DOD FACILITIES

By some measures, DoD operates the largest

lab program in the Federal Government. In

addition to the $9.9 billion that DoD budgeted for

its own government-owned, governmentoperated (GOGO) research, development, test,

and evaluation (RDT&E) facilities in 1992,

another $1.7 billion went to Federally Funded

Research and Development Centers (FFRDCS).2

Though privately owned and operated, these

FFRDCs perform most of their work for DoD.

DoD’s combined expenditures on GOGO R&D

labs and T&E centers and on FFRDCs exceed

those of all other agencies in the Federal Government; however, much of the money budgeted to

DoD’s government-owned labs is contracted out

to industry and universities. R&D labs spend only

about 43 percent of their funds in-house; T&E

facilities spend about 65 percent in-house (figure

6-1). 3 As a result, less than half of DoD's lab

RDT&E budget, or $4.7 billion, was used to

support work within government-owned facilities

in 1992. About $3.4 billion of this total was spent

in R&D labs; $1.3 billion was spent in T&E

centers.

The DoD laboratory system is managed and

operated largely by the individual services (Army,

Navy, and Air Force). The Navy operates the

largest lab program with a total budget of $3.3

billion in 1990, $1.8 billion of which was spent

in-house (table 6-l). R&D labs received $2.8

10

8

6

4

2

n I

~ Contracted out

“ R&D labs T&E Total FFRDC

centers GOGO

NOTES: Funding Ievels for R&D labs and T&E centers were estimated

by taking the National Science Foundation’s figure for DoD’s 1992

“intramural R&D” and distributing it according to DoD’s reported

funding levels for 1990. In-house percentages are also based on 1990

data

SOURCE: Office of Technology Assessment, 1993; based on U.S.

Department of Defense, Office of the .Seeretary of Defense, Deputy

Director of Defense Researeh and Engineering/Scienee and Tdnology, Department of De ferrse In-House RDT&EActivities: Management

Analysis Report for l%ca/ Year 19%) (Washington, DC: 1992), pp.

vi-xiv; National Scienee Foundation, Fwiera/ Funds for Research and

Development: Fiscal Years 1990, 1991, and 7992, NSF 92-322

(Washington, DC: July 1992), p. 51.

billion of the total. The Navy system includes one

corporate lab, four warfare centers (that contain

their own R&D labs, T&E centers, and support

facilities), and six small medical labs. The Navy’s

corporate lab, the Naval Research Lab, or NRL,

conducts basic and applied research on a broad

range of technologies that support service goals

and missions.4 The four Naval Warfare Centers—

Air, Surface, Undersea, and Command, Control,

and Ocean Surveillance--each focus on a set of

applied technologies relevant to their particular

mission. Each maintains in-house expertise in all

2 National Science Foundatiox& Federal Funds for Research and Development: Fiscal Years 1990, 1991, and 1992, Detailed Statistical

Tables, NSF 92-322 (Washingto% DC: July 1992), p. 51.

s ~ese percentages are approximations based on reported funding levels for fiscal year 1990, the most recent year for which such figunx

are available. Some of the funds spent outside the labs are used to hire contractors who work in DoD facilities.

‘$ These areas include information sciences, artitlcial intelligence, environmental sciemxs, micro- and nanoeledronics, electronic warfare,

advanced materials, sensor technologies, and space technologies.
6—Department of Defense Laboratories

Table 6-1—Service Budgets for R&D Labs and T&E Centers, 1990

RDT&E funding (millions)

147

R&D labs T&E centers Total, GOGO facilities

Service Total In-house Total In-house Total In-house

Army . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,150 $ 923 $ 470 $ 322 $2,620 $1,245

Navy ., ... , . . . . . . . . . . . . . . . . . . . . . 2,815 1,521 477 317 3,292 1,838

Air Force . . . . . . . , , . . . . . . . . . . . . . . . 1,798 439 805 507 2,603 946

Total ., . . . . . . . . . . . . . . . . . . . . . . . $6,763 $2,883 $1,752 $1,146 $8,515 $4,029

SOURCE: U.S. Department of Defense, Office of the Secretary of Defense, Deputy Director of Defense Research and Engineering/Science and

Technology, Department of Defense In-House RDT&E Activities: Management Analysis Report for fiscal Year 7990 (Washington, DC: 1992), pp.

vi-xiv.

stages of R&D, from research to development and

support of fielded systems. But whereas NRL

focuses on the early “science and technology”

stages of RDT&E, warfare centers tend to focus

on subsequent advanced development, engineering development, and system support stages.5 The

warfare centers are also responsible for T&E

activities and operate several large test ranges

(formerly the Air Test Center, Ordnance Missile

Test Center, Pacific Missile Test Center, and

Weapons Evaluation Facility) that are used for

flight tests of aircraft and missiles as well as for

operational testing of electronic warfare and radar

devices.

The Army system is similar to the Navy’s in

that it contains a corporate lab (the Army Research Lab, or ARL), eight Research, Development, and Engineering Centers (RDECs), several

small medical laboratories, and nine T&E centers.

It also contains four laboratories run by the Army

Corps of Engineers and the Research Institute for

Behavioral and Social Sciences. These facilities

had a total RDT&E budget of $2.6 billion in

1990-80 percent of which went to R&D facilitiesand spent $1.2 billion in-house (table 6-l). ARL

conducts the Army’s technology base activities in

areas such as electronics, materials, ballistics, and

human engineering. Army RDECs, like the Navy’s

warfare centers, perform a full spectrum of R&D

activities in specific technical areas: aviation,

chemicals, communications, missiles, tank and

automotive technology, and troop support. Its

T&E centers, including such facilities as White

Sands Missile Range and the Yuma Proving

Ground, measure and test the operational performance of Army aircraft, missiles, artillery, and

electronics. They had a total budget of $470

million in 1990.

The Air Force operates the smallest of the

service lab systems with $2.6 billion in funding in

1990. It also uses the smallest percentage of its

RDT&E funds in-house (table 6-l). Air Force

R&D facilities are organized into four large

‘‘super-labs: Wright Lab for aviation and weaponry; Phillips for space technologies; Armstrong

for medicine and human factors; and Rome for

command, control, and communications (C3

).

Each is considered a‘ ‘full spectrum’ lab capable

of research, development, and support activities,

but each focuses primarily on applied research

and advanced technology development. Basic

research activities are managed by the Air Force

Office of Scientific Research; operation and

support activities are managed by the four major

5 DoD divides its budget into 10 accounting categories. Category 6 contains all RDT&E activities. RDT&E is further subdivided into six

components: 6.1, basic resmrc~ 6.2, exploratory development or applied researck 6,3, advanced developmen~ 6.4, engineering development

6.5 , management and suppo~ and 6.6, operational systems development. Budget item 6.3 is further subdivided into 6.3a, advanced technology

development which includes activities to demonstrate the feasibility of a given type of military systerni and 6.3b, in which technology is applied

to a specitic military program. Categories 6.1 and 6.2 are considered the technology base; categories 6.1 through 6.3a comprise ‘ ‘science and

technology” (s&T).
148 I Defense Conversion: Redirecting R&D

Table 6-2—Employment in Service RDT&E Facilities, 1990

Personnel

Service Total R&D T&E Military Civilian Professional Ph.D.

Army . . . . . . . . . . . . . . . . . . . . . 31,198 21,280 9,918 6,235 24,963 15,593 1,825

Navy . . . . . . . . . . . . . . . . . . . . . 42,186 32,133 10,053 4,730 37,456 20,234 2,138

Air Force . . . . . . . . . . . . . . . . . . 27,245 7,390 19,855 17,228 10,017 9,696 775

Total . . . . . . . . . . . . . . . . . . . 100,629 60,803 39,826 28,193 72,436 45,523 4,738

SOURCE: U.S. Department of Defense, Office of the Secretary of Defense, Deputy Director of Defense Researdl and Engineering/Sdence and

Technology, Department of Defense In-House RDT&EActivities: Management Analysis Report for Fiscal Year 1990 (Washington, DC: 1992), pp.

vi-xiv.

commands to which these labs report. The Air

Force also operates five T&E centers, which

together comprise the largest testing program of

the three services with over $800 million in

RDT&E funding. These facilities include the

Arnold Engineering Development Center, the Air

Force Development Center, the Flight Test Center, and two test wings. They house test ranges for

aircraft, parachute drop zones, impact ranges for

testing bombing and gunnery systems, wind

tunnels, engine test cells, and instrumented labs

and ranges for testing avionics and radar systems.

Service R&D labs and T&E facilities employed over 100,000 people in 1990 (table 6-2),

a figure that has declined only marginally in the

last 3 years. About 60 percent of these employees

work in the R&D labs. Over 70 percent of all

employees are civilian, the Air Force being the

only service to employ more military than civilian

personnel 6 Almost half of all the employees in

these DoD facilities are professional scientists

and engineers; 4,700 hold Ph.D. degrees.

FFRDCs funded by the DoD include 11

organizations that employ over 8,000 professionals and conduct a variety of services for the

military, not all of which are strictly R&D. Only

one FFRDC, MIT’s Lincoln Laboratory, conducts actual R&D for military hardware. Lincoln

Lab receives some $400 million a year for defense

RDT&E and conducts programs ranging from

basic research to design, development, and demonstration of prototype systems. Four FFRDCs,

including MITRE Corporation, perform systems

engineering and systems integration work for

DoD, much of which is associated with the

management of large systems development programs.

7 Six other FFRDCs, such as the Institute

for Defense Analysis, are study and analysis

centers that help solve organizational and operational problems, but perform little or no hardwarerelated research or development. While their

funding comes from the RDT&E budget, most of

their work is quite remote from the R&D done in

DoD labs and test facilities.

DOD LABS AND THE “PEACE DIVIDEND”

Through fiscal year (FY) 1993, defense RDT&E

had been relatively unaffected by the end of the

Cold War. While overall defense spending had

declined 20 percent in real terms since 1989,

RDT&E dropped only 12 percent, from $41.6

billion in 1989 to $36.7 billion in 1993 (table 6-3).

Budget cuts took their greatest toll on procurement, which dropped almost 30 percent, from

$91.7 billion to $65.1 billion between 1989 and

1993. Defense RDT&E has been insulated from

defense budget cuts by DoD’S new acquisition

strategy, formally announced in early 1992,

which attempts to maintain the technological

superiority of U.S. military forces through contin6 Much of this difference is attributable to the fact that two of the Air Force’s largest T&E facilities am predominantly military.

7 This work includes formulation of requirements for new systems, development of design specifications, and certification of system

performance upon completion of development.
6—Department of Defense Laboratories I 149

Table 6-3—Defense Outlays Since 1989

Outlays (billions of 1992 dollars)

Budget category 1989 1990 1991 1992 1993

RDT&E . . . . . . . . . . . . . . . . . . . . . . . . . . . . $41.6 $40.4 $35.7 $36.1 $36. 7

Procurement . . . . . . . . . . . . . . . . . . . . . . . 91.7 87.2 84.5 74.0 65.1

Operations and maintenance . . . . . . . . . . 97.7 95.1 105.0 97.8 84.8

Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . 90.6 81.4 86.0 79.3 74.5

Other a . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.7 8.0 -40.6 -7.4 8.2

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $331.2 $312.0 $270.5 $294,6 $269.4

a Includes outlays for milita~ construction, family housing and revolving/management funds. A minus sign denotes incmme from these funds in

excess of outlays.

SOURCE: Budget of the United States Government, Hsca/ Year 7993 (Washington, DC: U.S. Government Printing Office, February 1992), pp. Part

Five-46-47.

Table 6-4-Proposed Defense Outlays, 1993-97

Proposed outlays (billions of 1992 dollars)

Budget category 1993 1994 1995 1996 1997

RDT&E . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36.7 $36.4 $34.8 $32.8 $31.0

Procurement . . . . . . . . . . . . . . . . . . . . . . . 62.5 58.5 55.8 54.0 52.2

Operations and maintenance ., , . . . . . . . 84.8 78.5 76.6 76.4 75.8

Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . 74.5

Other a . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67.8 65.1 64,4 64.1

6.2 10.3 11.6 11.3 10.6

Total. . . . . . . . . . . . . . . ., . . . . . . , . . . . $264.7 $251,5 $243.9 $238.8 $233.7

a Includes outlays for militaw construction, family housing and revolving/management funds. A minus sign denotes income from these funds in

excess of outlays.

SOURCE: Budget of the United States Government, fisca/ Year 7993 (Washington, DC: U.S. Government Printing Office, February 1992), p. Part

Tw05.

ued investment in the technology base (i.e., basic operational field support portions of their RDT&E

and applied research). Under this policy, DoD budgets so as to leave the science and technology

stated its intention to upgrade existing weapons portion (from which the labs are funded) relasystems rather than develop new ones, but con- tively intact. With a new Administration in office,

tinue to fund development of new technologies, changes in appropriations are almost certain.

through prototype, from which future systems can

later be constructed.8

The effect of acquisition strategy on future

RDT&E funding was unclear in Spring 1993. The

Bush Administration, in its final budget request,

projected only a modest decline in RDT&E

spending, from $36.7 billion in 1993 to $31

billion in 1997, again in constant 1992 dollars

(table 6-4). The services planned to take most of

the reduction in the systems development and

President Clinton has signaled that defense spending will be cut at a somewhat faster rate than was

previously projected, perhaps to $200 billion in

FY 1997, but it is not yet clear how much of this

reduction will be taken from RDT&E. The budget

released by the Clinton Administration in April

1993 proposed a 1 percent real decline in outlays

for defense RDT&E in FY 1994;9 assuming

RDT&E remains about 15 percent of the defense

budget, it could still total $30 billion in FY 1997.

8 U.S. Department of Defense, ‘‘Defense Acquisition’ white paper, May 1992.

g Budget of the United States Government, Fiscal Year 1994 (Washington DC: U.S. Government Printing Office, 1993), p. Appendix-72.
150 I Defense Conversion: Redirecting R&D

However, the services may argue that they have

already trimmed their operations and procurement budgets to the maximum extent practicable

and may therefore take a larger portion of future

defense cuts from RDT&E. Similarly, the new

Administration may opt to cut defense RDT&E

further and redirect R&D funding from defense to

nondefense programs after 1993 to boost commercial competitiveness.10

Even less certain is the way in which reductions

in RDT&E will affect the size of the labs’

budgets. In order to reduce the cost of developing

military systems, DoD is considering additional

changes in its acquisition process that would

allow greater reliance on commercial technology.

If successful, these changes might, in turn, allow

the Defense Department to reduce its expenditures on in-house R&D and shift the greater

proportion of RDT&E funding to the private

sector. However, it is also possible that with the

shrinkin g defense industrial base, DoD may opt to

rely more on its own institutions for developing

military technology if it concludes that commercial industry will not satisfy all defense needs.

In response to declining budgets and congressional pressures, DoD has initiated steps to reduce

the size of its lab system through both downsizing

and consolidation. The 1991 Defense Authorization Act requires the services to cut back their

civilian acquisition workforce--which includes

RDT&E employees—by 20 percent between

1991 and 1995.11 The 1991 legislation also

created the Advisory Commission on Consolidation and Conversion of the Defense Research and

Development Laboratories, composed of both

private and public sector representatives, to

recommend ways to improve the operation of the

DoD labs through consolidation or closure of

some or all of the labs. The Army, Navy, and Air

Force submitted their plans to the commission in

April 1991 for consideration and review. With

only a minor reservation regarding the Army’s

plan to construct a new microelectronics facility,

the commission recommended that the plans be

implemented without delay .12

The services may also submit proposals for

closure to the Base Closure Commission, which

was reinstituted for another 6-year term by the

1991 act. The Base Closure Commission was

authorized to recommend closure of all types of

military facilities, including RDT&E facilities, to

Congress and the President in three phases: 1991,

1993, and 1995. According to the law, Congress

may not pick and choose among the Commission’s recommendations; all must be voted up or

down as a unit-and if Congress fails to vote, they

become law automatically}’. The Commission’s

first and second slates of base closings and

realignments (announced in 1989 and 1991) were

adopted; the second included the closure of 34

military bases, many of which contain R&D

facilities.

The Army’s consolidation plan, as proposed,

would eliminate 4,000 to 6,000 of the 31,000

positions in its labs and centers and transfer

another 3,000 jobs among locations. As part of

this plan, the Army has consolidated seven labs

along with portions of its RDECs into a single

corporate lab, the Army Research Lab, that will

have facilities in two primary locations: Aberdeen

and Adelphi, Maryland. About 800 civilian positions will be eliminated in the move; another

1,600 will transfer to new locations. By 1993,

construction had already begun on new facilities

to house transferred personnel. Three Army

medical labs are also affected by the plan, with

10 Foll~~ ~ ~~ec~ co~ess ~d pr~ident George Bush me Edor~m~t &t of 1991 mandated thiit thrOU@ ~

1993 reductions in the defense portion of the budget could not be redirected to nondefense programs.

11 U.S. ConwSs, Accompany H.R. &’3g, &t. 23, 1990, p.

143. This act was codified as Public Law 101-510.

12 F~e~ Advisory COmmiS sion on Consolidation and Conversion of Defense Research and Development Laboratories, Report to the

Secretary of Defense, September 1991.
6—Department of Defense Laboratories I 151

one slated for elimination and two for consolidation with labs in the other services.

The Navy also plans a significant realignment

of its RDT&E facilities. Three major facilities,

the Naval Air Development Center (NADC) in

Warminster, Pennsylvania and two Naval Surface

Warfare Centers in White Oak and Annapolis,

Maryland, had already begun closing down by

1993.13 About 670 positions will be eliminated,

and another 3,200 will be transferred as a result of

these closings; most are associated with NADC.

Several smaller RDT&E support activities are

also slated for closure, as is the Weapons Evaluation Facility in Albuquerque, New Mexico. The

Navy will also eliminate three medical labs in

cross-service mergers. According to the Navy’s

April 1991 submission to the Base Closure

Commission, consolidation alone will result in

the loss of 2,280 laboratory positions.14 In its

1993 budget submission, however, the Navy

projected the elimination of 11,252 positions

from R&D laboratories-roughly one-quarter of

its 42,000 member workforce--due to both consolidation and general workforce reductions.15

Plans to implement most of these changes had not

yet been formalized.

The Air Force’s consolidation plans have

already been implemented and are strictly organizational in nature. The Air Force does not plan to

close any facilities; rather it has reorganized its 14

labs into 4 “super-laboratories” that align with

and reside in the Air Force Materiel Command’s

four product divisions: Aeronautical Systems,

Electronic Systems, Space Systems, and Human

Systems. Of some 27,000 jobs in Air Force labs,

approximately 800 positions—58 percent of which

are scientists and engineers-are expected to be

eliminated by the consolidation.

If accomplished in their entirety, the services’

closure and consolidation plans could have a

significant effect on the size and structure of the

DoD RDT&E system. Initial estimates provided

by the services to the base closure and lab

consolidation commissions indicate that restructuring plans could lead to the closure of up to

one-third of all DoD laboratories and the elimination of 12,000 to 15,000 jobs in the labs alone,l6

but these figures may need to be revised upward

in light of the Navy’s 1993 estimates. Most of the

job loss is expected to result from downsizing and

identified ‘‘workload reductions, rather than

consolidation, per se.

17 Consolidation is intended

primarily to help improve lab management and

eliminate redundancy. The three services operated 73 R&D laboratories and 18 T&E centers in

1990, 18 many of which conducted research in

related areas-not just across services, but within

services as well. For example, the Navy alone

13 ~ou@ be bu~ of N~C’s ~ctiom wi~ be transferred to pa~ent River, -land, some unique navigationat facilities W rin operation in Warminster under control of the Naval Command, Control, and Ocean Surveillance Center. Both of the Surface Warfare Centers

slated for closure will be retained as operating sites, but the majority of their functions will be transferred to other locations.

14 me Navy’s April 1991 Projections were ~d on be ass~ption tit of the 4,800 employees (including 2,800 scientists

and engineers, 300 of whom hold Ph.D. or equivalent degrees) affectedly consolidation and relocation of laboratory functions would be willing

to move. The rernaining 47 percent the Navy estimated, would retire early, leave the govemmen$ be lost through normal attrition, or be

unwilling to move.

15 U.S. Gener~ A~o~~g OffIce, ~i/2tav ~u~e~: Navy’s Planned c~n~~zi&fi~n (Wd@toQ DC: U.S. General

Accounting Office, August 1992).

16 (Washingto~ DC: Congressional R~h

Service, Jan. 24, 1991), p. 23.

17 For a discussion of emploPent prosp~~ for displaced defense engin~rs, see U,S. con~ss, Office of TfxkloIogy A.ssessmen~ Afier

the Cold War: Living With Lower Defense Spending, OTA-ITE-524 (Washington, DC: U.S. Government Printing Offke, February 1992),

chapter 4.

18 us, Department of Def~se, Office of tie S=rew of Defeme, Deputy Dir&tor of Defense Research and E@Iee@/SCienCe and

Technology, Department of Defense In-House RDT&EActivities: Management Analysis Report fOr Fiscal Year 1990 (Washingto~ DC: 1991),

pp. vii-xiv.
152 I Defense Conversion: Redirecting R&D

operated three centers, the Underwater Systems

Center, the Ocean Systems Center, and the

Coastal Systems Center, all of which conducted

overlapping research on torpedoes. Under the

Navy consolidation plan, all torpedo work will be.

transferred to the Undersea Warfare Center.

Nevertheless, lab closure and consolidation, as

currently envisioned, will have only a minimal

effect on the nature of the services’ RDT&E

facilities and programs. DoD’s new acquisition

strategy, by continuing to fund the early stages of’

R&D (basic research through technology demonstration), will continue to support the kinds of”

work currently conducted in the labs. Testing

facilities will continue to be maintained to evaluate the performance of upgraded military systems.

Moreover, the services will continue to develop

many of the same types of weapons and support

systems (e.g., tanks, aircraft, radar, communications systems) that they develop today. Consolidation and downsizing of DoD labs will therefore

result in a system that continues its defense

mission, but in a smaller organizational package.

In contrast to some of the suggestions for the

future of the Department of Energy’s nuclear

weapons labs, there have been few if any proposals to give DoD labs central missions related to

the civilian economy.

Future changes in lab structure that might more

radically alter the mission of DoD labs cannot be

entirely ruled out. Numerous suggestions have

been made to convert the labs into governmentowned, contractor-operated (GOCO) facilities or

to centralize control of the labs in the Office of the

Secretary of Defense. Many of these proposals are

intended only to improve management and coordination of the labs and would not greatly alter the

mission of the defense labs, but one cannot rule

out the possibility that after reviewing the security requirements of the post-Cold War period and

examining the capabilities of universities and

industry, DoD may decide to limit its support of

in-house work in certain areas in order to protect

other portions of its budget. Labs that would be

closed under this scenario--especially those that

work on dual-use technologies-could conceivably be converted to civilian missions. At present,

though, no such plans have been made, and DoD

RDT&E facilities will continue to serve their

central defense missions.

TECHNOLOGY TRANSFER FROM

DOD LABORATORIES

While continuing to pursue their traditional

missions, DoD labs can still contribute to U.S.

industrial competitiveness. With the passage of

the Stevenson-Wydler Act of 1980, Congress

established technology transfer as a legitimate

mission of every Federal laboratory and has since

encouraged DoD labs to enter into cooperative

R&D programs with industry. With the BayhDole Act of 1980, GOGO labs, including the DoD

labs, were given authority to grant private companies exclusive licenses to patents. The Federal

Technology Transfer Act (FTTA) of 1986 expanded these powers by allowing each federal

agency to grant directors of GOGO labs the

authority to enter into cooperative R&D agreements (CRADAs) with commercial partners and

to negotiate licensing agreements. Executive

Order 12591, issued in 1987, directed agencies to

delegate authority for entering into CRADAs to

the labs and issued guidelines for intellectual

property rights (see ch. 4 for a more complete

discussion of this legislation).

Technology transfer legislation allows DoD

labs to contribute facilities, time, and personnel

(but not funding) to R&D programs conducted

jointly with industry. Industry may contribute

facilities, personnel, and/or funding. Such programs can benefit both industry and the labs.

From DoD’s perspective, cooperative agreements

provide a potential source of new technologies

that could serve defense missions. They can also

provide lab personnel with exposure to commercial technologies and practices that in many cases

are more advanced than defense technologies.

From the industry side, technology transfer provides a means of gaining access to technologies in
6—Department of Defense Laboratories I 153

which defense requirements may have anticipated

commercial markets, of sharing the costs of R&D

programs (through in-kind contributions by the

labs), and of gaining access to laboratory facilities

and capabilities.

The services, which for the purposes of the

FTTA are considered separate Federal agencies,

were initially slow to implement provisions of the

1986 act. Two-and-a-half years passed before

DoD granted the services authority to enter into

CRADAs,19 and another year and a half went by

before the services developed regulations governing the process. Thus, technology transfer initiatives were slow to start during the first 4 years of

the program. Part of the problem no doubt

stemmed from the DoD limited prior experience

with technology transfer programs. Whereas other

agencies, such as the National Aeronautics and

Space Administration (NASA) and the Department of Agriculture, had longstanding programs

of technology transfer, DoD did not; much of its

effort was instead directed toward preventing

unwanted disclosures of technological innovations to protect national security.

Since 1990, the labs have made considerable

progress in their technology transfer activities.

Each of the services has developed a model

CRADA that they continue to update as they gain

experience with the technology transfer process,

and each has developed procedural guides for

their labs. In addition, Offices of Research and

Technology Application (ORTAs) have been

established at most DoD labs—though not at all

T&E centers—in accordance with the StevensonWydler Act.20 The Navy now has ORTAs at 47

facilities, including NRL, the four Naval Warfare

Centers (including some of the test facilities), the

Naval Academy, and the Naval Postgraduate

School; but only 15 of these ORTAs are full time.

The Army has 48 ORTAs, located at labs and

RDT&E facilities but not at T&E centers. The Air

Force has just seven ORTAs, located at the

headquarters of each of its superlabs and at three

of the geographically dispersed labs. Directors of

the superlabs sign CRADAs for each of the

facilities under their jurisdiction. This arrangement has slowed the signing of CRADAs at some

Air Force labs, but change is underway. The Air

Force is drafting new procedures that will assign

an ORTA to each individual facility with more

than 200 full-time scientists and engineers, including Air Force T&E facilities and logistics

centers .21

The fruits of these efforts are becoming evident. Though still low compared to the size of the

labs’ RDT&E budgets, revenues from patent

licenses have increased every year since 1987 and

approached $500,000 in 1992 (figure 6-2). The

Navy, led by the Naval Research Lab, has earned

the highest returns from patent licenses of the

three services, with a cumulative total of over

$630,000 between 1987 and 1992. License revenues are by no means a complete or adequate

indication of success in technology transfer,

partly because of the lag from the time the license

is issued to the time companies start reaping

income from commercialization of the technology—and paying royalties. More importantly,

many other forms of technology transfer, from

informal contacts between lab researchers and

companies to more formal cost-shared partnerships between the labs and industry, are not

measured by patent revenues.

CRADA activity can provide an indicator of

the level of cooperative R&D between the labs

and industry. Between 1987 and 1989, DoD labs

signed only 40 CRADAs. By 1992, however, the

number of active CRADAs in service labs had

19 SW U.S. D~~~t of Defense, Unda s~~~ of Defense for +isitio~ ‘ ‘Domestic TNh.ao]ogy ‘llansfer hgriilll Regulation’

DoD 3200.12-R4, December 1988.

Z1 me SteveMn-Wydler ~tr-.agencies to es~b~h OR~ at W Feder~ R&D facfities ~~ more tin 2(M) full-time science ~d

engineering employees.

21 o~ SW ~temiew ~~ Dr. c. J. Chdynne, Domestic T~~olo~ Tmnsfer ~0~ ~Mger, LJ.s. Air Force, J~. 14, 1993.

331-050 - 93 - 6 : QL 3
154 I Defense Conversion: Redirecting R&D

Figure 6-2—Annual Income From Patent Licenses

400

300

200

100

0

1987 1968 1989 1990 1991 1992

m Army n Navy ~ Air Force -* Total

SOURCE: Office of Technology Assessment, 1993; based on official

statistics of the U.S. Department of Commerce; Helen Moltz, U.S.Army

Domestic Technology Transfer Office, personal communication, Feb.

1, 1993; Lt. Butch Howard, U.S. Navy Office of Legislative Affairs,

personal communication, Feb. 2, 1993; Dr. C.J. Chatlynne, Program

Manager, Domestic Technology Transfer, U.S. Air Force, “Summary of

Air Force lncome-Producing Patents,” Feb. 9, 1993.

risen to 349 (figure 6-3). The Army has been the

most active of the services in promoting CRADAs, with 212 active agreements at the end of FY

1992.

22 The Walter Reed Army Institute of

Research (a medical lab) and the Electronics &

Power Sources Directorate (formerly the Electronics Technology & Devices Lab and now part

of the Army Research Laboratory) have been the

most prolific of Army labs, having signed 41 and

21 CRADAs respectively between 1987 and.

1992.

Many of the defense labs’ CRADAs are not

with firms operating in commercial markets.

however, but with universities or with traditional

defense contractors who may be more interested

in military than commercial markets for new

products. The Army estimates that about 35

percent of its CRADAs are with commercial

partners. The Navy, on the other hand, believes

200

150

100

50

0

Figure 6-3-Active Cooperative Agreements

by Service, FY 1987-92

Number of agreements

by service - Total ---

1987 1988 1989 1990 1991 1992

350

300

250

200

150

100

50

0

_ Army D Navy ~ Air Force ~ Total

NOTE: Not all cooperative agreements are included under the provisions of the Federal Technology Transfer Act of 1986. Army figures

include 200 CRADAs and 34 other cooperative agreements signed by

the Corps of Engineers under separate authority.

SOURCE: Office of Technology Assessment, 1993; based on official

statistics from the U.S. Department of Commerce; Helen Moltz, U.S.

Army Domestic Technology Transfer Office, personal communication,

Feb. 1, 1993; U.S. Navy, Office of Naval R-earch, “Navy CRDA

History: CRDAS Approved by ONR,” Feb. 22, 1993; U.S. Air Force,

Domestie Technology Transfer Of ficq “United States Air Fores Cooperative R&D Agreements,” Feb. 9, 1993.

that the majority of its CRADAs are with

commercial partners. Service spokesmen say they

hope to bring in more commercial companies as

they gain experience with the technology transfer

process.

23 These companies will then have to

incorporate new technologies into commercial

products in order for lab partnerships to benefit

U.S. industrial competitiveness.

DoD medical labs have implemented a disproportionate share of the cooperative agreements.

Medical labs are the top producers of CRADAs in

both the Army and the Navy, despite the fact that

they receive less funding than most other types of

labs (tables 6-5 and 6-6). The Air Force’s

Armstrong medical lab, though not that service’s

top performer, has signed more CRADAs than
6–Department of Defense Laboratories I 155

Table 6-5—Signed Army Cooperative Research Agreements by Laboratory, 1992

Estimated value of CRADAsa

Total (thousands)

RDT&E budgetb

cooperative

Laboratory (millions) agreements Total 1992

Army Surgeon General . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Walter Reed Army Institute of Research . . . . . . . . . . . . .

Medical Research Institute of Infectious Diseases. . . . .

Institute of Dental Research ... , , . . . . . . . . . . . . . . . . . .

Medical R&D Command . . . . . . . . . . . . . . . . . . . . . . . . . .

Medical Research Institute of Chemical Diseases . . . . .

Aeromedical Research Lab . . . . . . . . . . . . . . . . . . . . . . . .

Research Institute of Environmental Medicine . . . . . . . .

Letterman Army Institute of Research . . . . . . . . . . . . . . .

Biodynamics Research Lab. . . . . . . . . . . . . . . . . . . . . . . .

Corps of Engineers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cold Regions Research & Engineering Lab ., . . . . . . . .

Construction Engineering Research Lab , . . . . . . . . . . . .

Engineer Waterways Experimentation Station . . . . . . . .

Engineer Topographic Lab . . . . . . . . . . . . . . . . . . . . . . . .

Army Research Lab . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Electronics and Power Sources Directorate . . . . . . . . . .

Sensors, Signaturesr Signals, & information

Processing Directorate. . . . . . . . . . . . . . . . . . . . . . . . . . .

Materials Directorate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Structures Directorate. ... , . . . . . . . . . . . . . . . . . . . . . . .

Research, Development, and Engineering Centers . . . .

Aviation Command . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Communications Electronics Command . . . . . . . . . . . . .

Natick RDEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tank Automotive RDEC . . . . . . . . . . . . . . . . . . . . . . . . . .

Chemical RDEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Missile RDEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Strategic Defense Command . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benet Lab . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Uniform Services University of Health Services . . . . . . .

Total ... , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

NA-not available.

a ln~l”de~ government’s and partners contributions to 235 of the 257 CWDAS signed between 1988 and 1992.

b ~b RDT&E budgets as of FY 1990.

c The “half-Cf+ADA” indi~tes a joint CRADA with another lab.

d includes 34 cooperative agreements signed under the Corps of Engineers’separate authofity: 15 by the Engineers Waterway Experimentation

Station, 11 by the construction Engineering Lab, 7by the Cold Regions Research& Engineering Lab, and 1 jointly by the tinstruction Engineering

and Cold Regions Labs.

e These facilities are DOD assets, but for administrative purposes repofl to the Army bmestic Technology Transfer Program Office.

SOURCE: Office of Technology Assessment, 1993; based on data from the Army Domestic Technology Transfer Program Office, “Army Accepted

CRADA#PIAs,” Feb. 12, 1993.

labs with twice the funding (table 6-7). With the many medical labs’ CRADAs tend to be small—

notable exception of one CRADA at the Walter $10,000 to $15,000 or less. The total value of

Reed Army Institute of Research that totals over CRADAs signed by Army medical labs averaged

$33 million (the estimated contribution of both less than $100,000 in 1992, compared with almost

the government and the commercial partner), $450,000 for other Army labs. Nevertheless, they
156 I Defense Conversion: Redirecting R&D

Table 6-6-Signed Navy CRADAs by Laboratory, 1992

are mostly with commercial industry or universities rather than defense companies.24 Although

the medical labs conduct some research of solely

military interest (e.g., effects of chemical weapons), much of their research is inherently dualuse. Moreover, the military is the largest single

health care provider in the Nation; DoD medical

researches well-funded and wide-ranging.

The Army Research Lab and the Navy Research Lab have also signed large numbers of

CRADAs relative to the size of their budgets. As

of 1992, laboratories now under the Army Research Laboratory had signed 53 CRADAs, and

the Naval Research Lab had signed 13—more

than any of the 4 naval warfare centers, all of

which have larger budgets (tables 6-5 and 6-6).

ARL’s planned contribution to CRADAs signed

in 1992 will total about $4.5 million, most of

which comes from the Structures Directorate and

the Electronics and Power Directorate. ARL’s

partners will contribute an additional $4 million

in-kind. 25 Corporate labs have an advantage over

the more mission-oriented labs in forming partnerships with commercial industry. Not only do

the corporate labs work on a broader range of

technologies, they also tend to focus primarily on

basic and applied research, which are more likely

to have commercial applications than more advanced development of weapons systems.26 In

basic and applied research, many technologies are

general enough that they are dual-use in nature.27

Despite the fact technologies in this stage are far

from marketable products, they are often the most

suitable for cooperative work.

24 U.S. ~y, Domestic TwhnoIogy Transfer Program OffIce, “Agency CRADA Information” response to U.S. General Accounting

OffIce data request December 7, 1992.

25 ~cludes tie es~at~ value of resourees dedicated to the CIL4DA other than cash cwmibutions.

 of ~eh COrnbiU~ $362 million budget on basic ~d applied

research in FY 1992. Most of the remainder was spent on weapons analysis and evaluation including testing at the White Sands Missile Range.

27 ~mem a b~ic rese~h program might investigate methods of growing crystals and an applied resewh program m.i@t explore ~Ys

of growing single crystal turbine blades for jet engines, subsequent development programs would focus on the growth and demonstration of

a single-crystal turbine blade for a specitlc military jet engine.
6—Department of Defense Laboratories I 157

Table 6-7-Signed Air Force CRADAs by Laboratory, 1992

 RDT&E budget Number of

Laboratory (activity) (millions) CRADAs

Armstrong (Medical and Personnel) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Phillips (Space).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rome (Electronics) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Wright (Aviation and Weapons) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Air Force Office of Scientific Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Air Force Academy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Air Force Surgeon General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Othera . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total. .....,.., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$148

317

111

572

217

NA

NA

NA

9

10

22

7

3

5

3

4

63

NA= not available.

alncludesthecivfl Engineering Support Agency, Electronic Systems Centec and Lincoln Labs (an FFRDC).

SOURCE:OfficeofTechnologyAssessment, 1993,basedoninformationsupplied bytheAssistantSecretaryoftheAirForce, Directorateforscience

and Technology.

In comparison, mission-oriented labs can be

more limited in their ability to work with industry by their greater emphasis on development

activities. wholesome support applied research as

well as advanced development activities, much of

their work is directed specifically to military

systems. Some of the centers work on technologies that are almost exclusively military—

missiles, chemical weapons--for which few commercial applications exist. On the other hand,

mission-oriented centers that specialize in electronics and communications and in biological

sciences—inherently dual-use technologies—

have been successful in working with industry.

The Air Force’s Rome electronics lab has signed

22 CRADAs, more than any other Air Force lab

despite having the smallest budget. Labs operated

by the Army’s Aviation Command and Communications Electronics Command have signed a

total of 31 CRADAs, and the Natick RDEC has

signed 9. In 1992, Natick led all Army labs by

contributing $3.6 million to CRADAs and attracting $11,4 million in in-kind contributions from

industry. Its CRADAs address topics such as

biodegradable packaging, irradiation of food, and

microwave sterilization of packaged food products.

Some mission-oriented labs and test centers

have unique capabilities or facilities unequaled in

the commercial sector. The former Naval Ocean

Systems Center (now part of the Naval Command, Control, and Ocean Surveillance Center) is

reputed to have the most advanced capability in

the country for manufacturing silicon semiconductor devices on sapphire substrates. The center

has already signed two CRADAs with companies

interested in further developing this technology

for their own applications. The Air Force’s

Arnold Engineering Development Center houses

some of the most advanced wind tunnels and

turbine engine test cells in the country .28 The

Army’s Corps of Engineering labs have several

unusual facilities that attract industry and university researchers. The Cold Regions Research and

Engineering Lab has 23 active CRADAs for

researching and testing the performance of materials and systems at low temperatures. Under

one CRADA, the lab will work with the University of Alaska to test the durability of paving

materials after repeated freezing and thawing.

The Engineer Waterways Experiment Station and

the Construction Engineering Research Lab

lagged only the Natick RDEC and the Structures

Directorate of AR-L in the estimated value of their

28 AS of April 1993, the Air Force had not yet granted Arnold the authority to enter into c~As.
158 I Defense Conversion: Redirecting R&D

contributions to cooperative R&D programs in

1992.

Nevertheless, cooperative R&D represents only

a small fraction of the activities underway in DoD

labs. Army labs provided less than $15 million in

in-kind contributions to cooperative agreements

in 1992, and industry contributions totaled about

$22 million, mostly in the form of in-kind

contributions. Unlike the Department of Energy

labs which received a $50 million appropriation

specifically for CRADAs in 1992 and $141

million in 1993 (see ch. 4), DoD labs have not

received funding designated specifically for CRADAs. Hence, DoD lab managers have funded only

those cooperative R&D programs that fit in with

defense programs that are already underway.

Defense labs are unlikely to take on strictly

civilian missions in the foreseeable future, but

will continue to conduct R&Din some areas with

dual-use potential. These areas will provide the

labs with an opportunity to work with commercial

industry in support of U.S. industrial competitiveness. As the recent growth in CRADA activity

among the DoD labs suggest, industry is interested in, and capable of, working with defense

labs in these areas.
Appendix A:

R&D

Institutions

in Germany

f this Nation seriously undertakes a new approach of partnership

between government and industry for technology development,

foreign countries might provide possible models. Germany has

long-established government research and development (R&D)

institutions whose main purpose is to advance civilian technologies,

often in tandem with industrial partners. Ninety-five percent of German

R&D spending is for nondefense purposes. A greater share of German

gross domestic product (GDP) is devoted to nondefense R&D (2. 7

percent) than is the case in the United States (1.9 percent).1 Private

companies are the principal funders and performers of R&D but

government institutions also play a prominent role.

~ Public R&D Institutions in Germany

Public R&D institutions are a major factor in Germany’s total public

and private research establishment. The national R&D budget amounted

to 76 billion Deutsche marks (DM) in 1990, or about $35.3 billion.2

Industry paid for 59 percent of this, the federal government 22 percent,

and state governments 16 percent (figure A-l). Although most of the

R&D (66 percent) was done in industry labs, government-sponsored

1 National Science Board, The Competitive Strength of US. Industrial Science and

Technology: Strategic Issues, NSB-92-138 (Washington+ DC: National Science Foundation 1992), table A-10.

2 The purchasing power parity (PPP) exchange rate developed by the Organimtion for

Economic Cooperation and Development for 1991 of 2.15 DM per $1 US is used here.

At the market exchange rate of about 1.5 DM per $1 US, German R&D expenditures

would equal about $46.7 billion. Neither exchange rate is ideal, but the PPP rate probably

better reflects differences between the United States and Germany in laboratory costs and

is therefore used throughout this section. Most of the materiat on R&D institutions in

Germany is drawn from “Research Institutions in Germany” (October 1992), report to

OTA by Engelbert Beyer, a visiting scholar, under the auspices of the National Science

Foundation, from the German Federal Ministry for Research and Technology (.Bundesministeriurn fiir Forschung und Technologies, BMFT).

159
160 I Defense Conversion: Redirecting R&D

Figure A-l-German R&D Funding by Source, 1990

Total R&D budget: 76 billion DM ($35 billion)

SOURCE: German Federal Ministry for Research and Technology.

research institutions were major performers, nearly as

prominent as universities (both 15 percent, as shown in

figure A-2).

Since the turn of the century, there has been strong

support in Germany for public research institutions

that can undertake work beyond the competence of

universities or not profitable enough for private

companies to attempt. The reasons put forward at that

time for public R&D are familiar today: the need for

interdisciplinary research, the changing boundaries of

research fields, the need for large basic research

facilities. 3

Funding for public research institutions comes from

both the federal and state governments in Germany,

but the single agency with most responsibility and

influence is the Federal Ministry for Research and

Technology (Bundesministerium für Forschung und

Technologies, or BMFT). BMFT is unusual among

research funding agencies in that its responsibilities

cover both scientific research and national technology

policy. BMFT's 1992 budget was 9.4 billion DM ($4.4

billion), more than half the 17.9 billion DM that the

German federal government spent for R&D that year.

(Other principal German government funders of R&D

are the Defense Ministry, the Economics Ministry, and

the Ministry of Science and Education.)

The research policy of the BMFT has these overall

goals:

Contribute to innovation to environmental and

economic goals;

Pursue long-term technological developments

such as nuclear fusion, space exploration, and

advanced transportation technologies;

Increase the pool of knowledge of mankind, e.g.,

in high energy physics;

Expand knowledge about environmental threats

(e.g., global climate change) as a basis for

appropriate policies.

The BMFT is the main funder for Germany’s four

major publicly funded research institutions, and its

priorities are reflected in the research areas they cover.

The

●

●

●

institutions are:

The Grossforschungseinrichtungen (GFEs), or

large research organizations, working in a variety

of fields from energy to advanced materials,

information technology, environment, aeronautics and space. The GFEs are similar in some

ways to the U.S. Department of Energy laboratories, but dissimilar in having no nuclear weapons

responsibilities. The 16 GFEs were funded at 3.5

billion DM ($1.6 billion) in 1992 and had 24,000

employees.

The Max Planck Society (Max Planck Gesellschaft, or MPG), founded in 1911 as the

Kaiser Wilhem Society to perform basic scientific

research, mostly in the natural sciences. The MPG

maintains 62 research institutes with a total

budget of 1.3 billion DM ($605 million), a

permanent staff of 8,700, including 2,400 scientists, plus nearly 3,000 scholarship holders and

guest scientists (from Germany and elsewhere).

The Institutes of the Blue List, a miscellaneous

collection of independent research organizations,

jointly founded and financed by the federal and

state governments, and working in such various

fields as social science, economics, medicine,

biology, history, and scientific museums. With

reunification, 24 new East German institutes were

added to the Blue List; most of these work in

fields of natural science and environmental sci3 Hans Winy Hohn and Voider Schneider, “Path Dependency and Critical Mass in the Development of Research and Technology: A

Focused Comparison” Science and Public Policy, vol. 18, no. 2, 1991, pp. 111-122, cited in Engelbert Bcyer, “Research Institutions in

Germany,” paper prepared for the ~lce of Technology Assessme]lt (October 1992).
Figure A-2-German R&D Performers, 1990

Industry

Appendix A–R&D Institutions in Germany I 161

Figure A-3-Total Funding for German GFE’s, 1990

Federal and state

Foreign funding

SOURCE: German Federal Ministry for Research and Technology.

ence and technology. The overall budget of these

institutes is about 975 million DM ($453 million).

The Fraunhofer Society (Fraunhofer Gesellschaft,

or FhG), probably the best-known and most

admired feature of Germany’s public research,4

but also the smallest of the four major research

institutions. The FhG’s mission is to transfer

research results into practical use by private

industry, promoting innovation in products and

production technology as rapidly as possible. The

FhG’s total budget is about 975 million DM

($453 million) and its staff numbers about 6,000,

including 2,000 scientists and engineers and

1,200 graduate students.

Of these four German institutions, the GFEs and the

Fraunhofer institutes are of most interest to this report,

since the former have many points in common with the

U.S. DOE labs, and the latter represent a very different

approach to cooperative government-industry R&Done with little parallel in the United States.

THE GFEs

By far the largest of the four government-supported

R&D institutions is the group of 16 GFEs. Threequarters of their funding is “basic financing” (e.g.,

institutional support, not tied to individual projects)

from the national and state governments, and most of

SOURCE: German Federal Ministry for Research and Technology.

the rest comes from specific projects funded by the

national government or the European Community

(figure A-3).

Like the U.S. DOE 17 major laboratories (including

9 multiprogram national laboratories and 8 large single

program laboratories), the GFEs occupy the most

prominent position in their nation’s R&D establishment. They are funded at levels roughly comparable to the DOE labs in relation to their national

economy.

5 They were first founded in the late 1950s

mainly to do research in nuclear energy technology and

high energy physics, though energy has since declined

in relative importance. They are strongest in large

team, long-term research, and a substantial part of their

budget is devoted to large research facilities (e.g.,

synchrotrons colliders) that are open to use by private

industry. Since the early 1980s, government policy has

emphasized cooperation with industry as a primary

task, but they have made little headway; industry

projects are still a minuscule part of their total budgets.

There are important differences with the U.S. DOE

labs too. Besides the fact that GFEs have never had any

part in designing nuclear weapons, their missions are

more broadly delineated than the energy and weapons

related missions of the U.S. DOE labs. Their R&D

covers some fields that are mostly the province of other

agencies in the United States, i.e., space and aeronautics, health and biotechnology, oceans and polar

4 See, for example, Council on Competitiveness, German Technology Policy : IncentiveforIndusm”allnnovation (Washington+ DC: 1992);

“UK Science Policy—Parties Discover Technology,” Nafure, Feb. 27, 1992, p. 757.

5 The German GDPof 2.6 trillion DM($l.2 trillion) in 1991 was about one-fti the size of the $5.7 @iWonU.S. economy. The GFEs’ 1992

budget of 3.5 billion DM ($1.4 billion) is about one-fourth the $5.7 billion ($4.7 billion from U.S. DOE and about $1 bmon from o~~

govemmmnt agencies) of the U.S. DOE lab complex.
162 I Defense Conversion: Redirecting R&D

Figure A-4-Research Performed at German GFE’s, 1991

Information technology 11%

Large-scale

Environment 11°/.

research (figure A-4). Nevertheless, at least threequarters of their combined R&D budgets are devoted

to energy, environment, information technology, materials research, and large facilities-all of which are

major research areas for the U.S. DOE labs. The two

largest of the GFEs, the Forschungszentrum Julich, or

KFA, and the Kernforschungszentrum Karlsruhe, or

KfK, are most similar to the DOE labs. They are

multipurpose, with research encompassing nuclear

energy and fusion, environmental and safety technologies, materials research, information technology,

health and biotechnology, and systems analysis. They

have budgets of 445 million and 470 million DM

respectively ($206 and $219 million), and each employs over 3,000 people.

Germany’s postwar technology policy is reflected in

its R&D institutions. In the 1950s and 1960s, the

government supported technologies-especially nuclear energy and aerospace--that were seen as important in re-establishing Germany as a world power.6

When the Social Democrats took over from the

conservative Christian Democrats in the 1970s, they

added an emphasis on industrial technologies and

transportation. In the early 1980s, nuclear energy

programs were drastically cut back, partly because the

technology had matured, and partly because of growing public resistance to nuclear power. In the 1980s the

two biggest GFEs added major programs in so-called

Space research 7%

SOURCE: German Federal Ministry for Research and Technology.

key technologies (information technology, materials

research) and in renewable energy, nuclear safety and

waste disposal research, and environmental research.

At the same time, a conservative government now

returned to power directed the GFEs to focus on

cooperation with industry. The mandate produced little

change. From 1983 to 1990, industry projects barely

edged up from about 2 to 3 percent of GFE funding

sources (figure A-5). By contrast, the Fraunhofer

Society’s contract research with industry thrived. In

fact, some of the GFEs’ difficulty in expanding their

contracts with industry was probably due to competition from the FhG institutes, which were growing

rapidly in the 1980s and even managed to gain a near

monopoly position in some contract research markets.

In addition, to encourage regional development, state

governments expanded their investments in Institutes

of the Blue List and in applied research institutes at

universities. However, the GFEs did improve relations

with universities; senior researchers now teach at

nearby universities and the labs are training young

scientists.

With the high costs of reunification in the early

1990s, budgets for all the publicly supported R&D

institutions were tightened, except for new spending

by a unified German Government in East German

facilities.7 For the years through 1995, new R&D

guidelines require the GFEs to concentrate on research

b JOhII A. Mc, IXWiS M. BEUISCOmb, Harvey Brooks, Ashton B. Carter, and Geratd L. Epste~ Beyond SpirJoff: Military and CO~rcial

Technologies in a Changing World (Bostoq MA: I-Iamard Business School Press, 1992), pp. 228-229.

7 A review of East German research facilities by the West Gerrnaa Wissenschaftsrat (a science policy advi]ory body) found a number of

them well qurdi.tied to join a united German public R&D system. Three new single purpose GFEs (for geology, health, and environmental

research) were added in East GermanY, ~ wem M @tire@ Of the Blue List 9 institutes and 12 subsidiaries c}f the Fraunhofer society, and

Z institutes and 29 working parties of the Max Plmck Society.
Appendix A—R&D Institutions in Germany I 163

fields where they have a comparative advantage over

competing institutions. This means more emphasis on

environmental and health research, high energy physics, and multidisciplinary basic science. On the other

hand, GFE projects in technology development will

have to be specially justified in the future. In the East

German states, Institutes of the Blue List, which are

more flexible and closer to state economic development policies, will have primary responsibility for

technology development.

THE FRAUNHOFER SOCIETY

Despite its renown, the Fraunhofer Society (FhG) is

the smallest of Germany’s four major publicly funded

research institutions. It fosters application-oriented

research, often focused on the needs of regionally

concentrated industries, and forges links between

universities, industry associations, and private companies. It comprises 47 institutes throughout Germany,

including 9 new ones in the East German states. In

recent years, about 30 percent of the FhG budget has

been basic funding from the national and state

governments; the actual amount depends on the

individual institute’s success in getting contracts from

industry and government. 8 Industry contracts provide

another 30 percent of FhG funds, and government

projects a bit more than 30 percent.

The FhG buys equipment and builds up in-house

research abilities with its basic financing from the

government, and then sells its expertise in the marketplace--

typically to individual fins, but sometimes to consortia of small and medium-sized enterprises (SMEs).

About half of the FhG’s industry contracts are with

SMEs.

The strength of the FhG system is in its responsiveness to industry’s needs and its ability to go beyond the

research capacities of individual firms. This is due in

part to FhG’s funding scheme, which rewards institutes with more government funds the more they

succeed with industry contracts, but also provides

generous startup funding for new institutes and a

continuing solid infusion of funds for general institutional support-in effect, a subsidy for industrial

contract work. The clear mission to work with industry

Figure A-5-Total Funding for German GFE’s,

1983 and 1990

--1

m Federal and state ~ Infrastructure

~ Foreign funding _ Private Industry

~ National R&D institution m Others

SOURCE: German Federal Ministry for Research and Technology.

is another source of strength, So is the close linkage

with universities, which allows the FhG to tap into

university research and employ large numbers of

students, who often go on to work in the industries

served by the FhG.

The institutes are not universally successful. According to a report by the Council on Competitiveness, 9 institutes that concentrate on technologies

with immediate applications in industry are likely to

flourish while those focusing on longer term, riskier

research may have trouble generating industry interest.10 The Council compared two FhG institutes in

Stuttgart. The thriving Fraunhofer Institute for Manufacturing Engineering and Automation does R&D in

such fields as flexible manufacturing systems, automation of assembly and handling, industrial robotics and

sensors, and quality engineering; it gets 84 percent of

its funding from industrial firms, mostly in the auto

industry. By contrast, the Fraunhofer Institute for

Surface Phenomena and Bioengineering Technology

is struggling. Its research includes work in physical

chemistry and biochemistry, with possible applications of surface and membrane technologies in medicine and microbiology. With its focus on sophisticated

8 The share of government basic funding is higher in new institutes, such as those in the East German states.

9 A private u.S. organization made up of leaders from business, labor, and academia.

10 (_Omcfl on competitiveness, t’Je~~ Te~h~~/~g~ policy: z~ce~~vefo~ f~~~yu(io~ (wastigtoq Dc: 1992), p. 12.
164 I Defense Conversion: Redirecting R&D

research with a longer term and less certain payoff, this

institute is far from financial self-sufficiency and only

about 20 percent of it work is repeat contracts with

industry.

Moreover, the present success of the FhG was by no

means assured in its infant years. Created in the state

of Bavaria in 1949, the FhG floundered for several

years, losing its backing from Bavaria and lacking

federal support. It barely survived on meager subsidies

from another state (Baden-Wurttemberg) and was not

able to attract industrial clients. Rescue came at the end

of the 1950s, in the form of funding from the Ministry

of Defense for four university-connected institutes.ll

By the 1960s, about half the FhG’s budget came from

military funds. With this backing, the FhG was able to

branch out a bit, subsidizing some civilian research

projects of its own with cross-subsidies from the

military and laying the groundwork for attracting

industry contracts. Even so, the FhG’s total funding

remained below 100 million DM into the early 1970s.

Then, under the social democratic government and

policies of the 1970s, the BMFT gave industryoriented applied research much stronger emphasis, and

chose the FhG--virtually the only German institution

with relevant experience-as the organization to build

for the purpose. This helped the FhG take off. Growth

rates shot up exponentially, with annual funding

reaching 800 million DM ($372 million) by the early

1990s. Today, 7 of the 47 FhG institutes still perform

military research, but the rest are firmly established in

work with civilian industries.

In the United States, there is little to compare with

Germany’s Fraunhofer Society. Some States have

supported regional centers that link local industries

and universities to promote the commercialization of

new technologies; Pennsylvania’s Ben Franklin Partnership and Oregon’s Key Industries Initiative are

examples. Federal support of regional centers working

with local industries on application-oriented R&D and

technology demonstration has scarcely existed,12 but a

new program of Regional Technology Alliances (RTAs)

may develop into that kind of system.

Authorized in fiscal year 1992, the RTAs received

their first funding in fiscal year 1993, at the very

substantial level of $97 million. This new program was

part of a $1-billion defense conversion package to

encourage technology development and diffusion in

both defense and civilian sectors. Funding for RTAs

comes from the U.S. Department of Defense (DoD),

with the Federal share limited to not more than half the

total cost of any center, and to last no longer than 6

years.

13 The law states the main purpose of the

program as helping U.S. firms apply critical dual-use

technologies to enhance national security; it is also

meant to foster the emergence of new firms that are

capable of applying dual-use technologies.

With its strong emphasis on national security and its

home in the Department of Defense, the RTAs might

be constrained from developing the frankly commercial character of most of the FhG institutes.14 The

Fraunhofer Society also had its beginnings in military

R&D, but it has long since outgrown that identity. It

should also be noted that, although the RTA program

is starting off with much higher funding than the FhG

had in its earlier years, that support is limited to 6

years. Unlike the FhG institutes, the RTA centers will

have no continued public funding to maintain their

institutional base.

11 ~S acco~t of the J?hG’s wly history is drawn mainly from Hans-Winy Hohn and Volker Schneider, “Path-Dependency and CritiCd

Mass in the Development of Research and Technology: A Focused Comparison” Science and Public PoZicy, vol. 18, No. 2, April 1991, pp.

11 1-122+

12 ~exception is tie Natio~ App~el Technology Center in Ralei@ North Carol@ which demonstrates a wide range Of rnodmn

apparel-making equipment to its mernbcr companies and arranges scrnimws with the apparel engineering faculty of nearby North Carolina State

University. The center is an outgrowth of the TC2 (Textile/Clothing Technology Corporation) projec6 an unusual government.hdustry R&D

partnership founded in 1979 to develop automated sewing equipment.

13 The R~ were origi@ly named critical technology application centers, in the 1992 act; they were renam ed regional technology alliances

in the 1993 act, and the limit for Federal funding of the centers was raised from 30 percent to 50 percent. Department of Defense Authorization

Act for Fiscal Years 1992 and 1993, section 2524, and Department of Defense Authorization Act for Fiscal Year 1993, section 2513.

14 me AdvmWd ReSeWh ~ojec~Agency, &e DoDag~cy c~ged wi~ sup~ising he RTAs, ww working CIOS.Cly with O~Cr U.S.

Government agencies to establish the system in early 1993.
PART TWO:

New National

Initiatives:

Energy-Efficient

Transportation
Introduction

to Part Two

I

n retrospect, the fight against communism in the Cold War

provided a widely agreed, largely nonpartisan national

purpose, and a coherence to our foreign policy. The defense

effort of the Cold War years also had important economic

and social benefits. It advanced technology, admittedly largely

military, but with some important civilian spillover; created a

large number of high-quality jobs in the research establishment

and the defense industry; and provided education, training, and

equal opportunities for advancement in the military. Now that the

defense imperative has lessened, the question arises of how to

reestablish our sense of national purpose, and to redirect

resources from military goals into building a strong civilian

economy, including improved competitiveness and the creation

of high-level, productive jobs.

A broad range of nondefense needs is vying for national

attention: health, education, jobs, infrastructure, the environment, and assistance to the new democracies of the former Soviet

empire. The list swells and every cause has merits and vocal

support. Setting priorities among them is a matter of public

discussion and political decision at the highest levels. There is

little difficulty in naming good initiatives; the task is to choose

among them, and this is the job of the President, Congress, and

ultimately American citizens.

Most of the candidates do have certain elements in common.

They usually involve technology in some important way, and

many of them also include the idea of sustainable uses of that

technology. Historically, the use of technology to transform

natural resources into products or the provision of services was

viewed as limited only by the efficacy of the technology.

167
168 I Defense Conversion: Redirecting R&D

Conservation of the resources transformed was

not much in question, nor were the side effects of

the technology-products or results other than the

ones directly sought. This picture is, of course,

incomplete. Resources become depleted, and

although in many cases good substitutes may be

found (usually thanks to technology), in others

the economic or political cost of substitution is

high; foreign oil to replace the depleted U.S.

resource is a case in point. Moreover, indirect

effects associated with new technologies have

often damaged the environment and diminished

the quality of life. Consequently, there is widening agreement that economic growth and the

technologies that support it must be sustainable,

taking into account resource conservation and

protection of the environment.

Energy production and use are central issues

for sustainable growth, and the United States is a

central player. This country, with 5 percent of

world population, is the world’s single largest

consumer of commercial energy, accounting for

one-quarter of the total; per capita, our energy

consumption is more than twice as high as

Europe’s and 25 times higher than Africa’s. Our

oil consumption per capita is the highest in the

world, and two-thirds of this oil is used in the

transportation sector. Social and technological

changes that reduce the demand for oil in

transport can cut pollution, lessen the political

tension generated by the oil trade and, by

diversifying the range of energy sources on which

a large sector of the economy draws, contribute

significantly to a more sustainable energy regime.

As the largest single contributor to global environmental problems related to energy-global

warming in particular-the United States can

have a disproportionately large effect in improving matters. Moreover, our relatively high standard of living and technological strength offer an

opportunity for leadership. We have the financial

and human resources to develop clean energy

technologies.

The range of activities possible for a clean

energy initiative is broad. Electricity generation

and transmission and the use of energy in industry

and buildings are all important aspects of a full

discussion of efficient, sustainable energy use.

Transportation is worth particular attention. It is

a principal source of the greenhouse gases that

cause global warming (globally, 22 percent of

carbon dioxide emissions from fossil fuels is

traceable to transport) as well as taking two-thirds

of U.S. oil consumption. For this report, we have

chosen to examine two transportation initiatives

that have the potential to conserve energy, reduce

pollution, and lessen the Nation’s dependence on

foreign oil. These examples are illustrative; many

others might have been selected.

The analysis here does not consider transportation policy per se but concentrates instead on how

certain options might generate some of the

economic and technological benefits formerly

provided by defense. Other OTA studies have

analyzed many of the issues involved in developing and maintaining a first-class transportation

system, including adequate capacity; connections

between highway, air, rail, and water transport;

energy efficiency; environmental quality; and

reduced dependence on foreign sources of oil.l

This report draws on those studies but its focus is

on how certain transportation systems that are

appealing on other grounds might promote advanced technologies, foster the growth of knowledgeintensive, wealth-creating industries, create productive jobs, and contribute to America’s competitiveness. It also considers the possible overlap

of these systems with technologies and skills

1 See U.S. Congress, Offke of Technology Assessmen4 U.S. Passenger Rail Technologies, OTA-STI-222 (Springfield, VA: National

Technical Information Se~ice, 1983); Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles OTA-E-364 (WashingtoxL DC: U.S.

Government Printing OffIce, September 1990); Moving Ahead: 1991 Surface Transportation Legislation, OTA-SET-496 (WashingtorL DC:

U.S. Government Printing OffIce, June 1991); New Ways: TiltrotorAircrafi andMagnetically Levitated Vehicles, OTA-SET-507 (WMingtoq

DC: U.S. Government Printing Office, October 1991).
Introduction to Part Two I 169

available in sectors of the economy hardest hit by

the end of the Cold Wm.

The next two chapters examine two sets of

options: personal transportation, primarily cleaner

cars; and public transportation systems, including

high-speed intercity ground transportation systems and intracity mass transit. Both can be

considered in the light of the conversion and

redirection of resources once expended for strategic military reasons. Mass transit vehicles were

prominent among conversion attempts by defense

companies in the post-Vietnam drop in military

orders, 2

and high-speed intercity systems currently have a good deal of political and popular

support as conversion initiatives. Development of

less polluting cars and smart vehicles and highways could draw on a number of technologies

developed for military purposes.

Rail systems—both urban mass transit and

high-speed intercity systems-employ technologies that already work or, in the case of magnetic

levitation, seem close to working. However,

while they may fit the bill for many transportation

policy objectives, their potential to support a

large, competitive industry that creates many

good jobs or uses many high-tech devices—some

adapted from the military-appears moderate at

best. The challenges to those entering the business are less in technology than in the chancy

economics of a business in which the market is

limited, and where orders can fluctuate widely

from one year to the next. Even magnetically

levitated trains, long the favorite technology of

the future for engineering optimists, are not held

back by technological problems that the ingenuity

of the aerospace and defense industries could

solve so much as by the tremendous expense of

the systems, the difficulty of acquiring rights of

way, and the tough competition of air and auto

travel. In any case, rail system industries in other

countries, most of them generously subsidized by

their governments, are far ahead of America’s in

experience and the capture of markets. Even if

U.S. industries were to challenge them successfully, the markets and manufacturing employment are of moderate size. Japan is a premier

producer, consumer, and exporter of passenger

train cars, but the rolling stock industry there

(finished cars—freight and passenger--and parts)

employs only 14,000 people.

Nonpolluting personal vehicles, on the other

hand, might become a very big market. Americans have historically chosen the automobile as

their means of transport and so much in the

country favors its use that it is probably unrealistic to imagine a large-scale shift away from some

form of individual personal vehicle. The automobile sustains a large slice of the Nation’s economic activity-the Department of Labor identified 776,000 jobs in 1992 in the manufacture of

motor vehicles and equipment.3 The U.S. auto

industry is thirsty for technological innovation

that can enable it to produce cars to increasingly

demanding environmental and performance standards. The opportunities for technology transfer

and conversion from Federal labs and military

contractors to supply this demand are considerable. Key areas in the development of new cars

overlap with the expertise of the military industrial research community. They include the handling and use of new fuels such as hydrogen; the

application of advanced materials such as ceramics, plastics, alloys, carbon fiber, and composites;

the use of computers to model manufacturing

processes and performance and so improve design; the development of fuel cells, batteries, and

ultracapacitors; and the use of electronic controls

2 See U.S. Congress, OffIce of Technology Assessment, After the Cold War: Living with Lower Defense Spending, OIX-ITE-524

(Washingto% DC: U.S. Government Printing Office, February 1992), pp. 207-209 for an account of some of the attempts made by defense

contractors in the 1970s to move into transport.

3 Annual average for 1991, U.S. Department of Labor, Bureau of Labor Statistics, Table 12, ‘‘Employment of Workers on nonfarm payrolls

by industry, monthly data seasonally adjusted, ” Monthly Lubor Review, vol. 115, No. 6, June 1992, p. 83.
170 I Defense Conversion: Redirecting R&D

and sensors.4 The demands of space flight,

stealth, undersea operation, strategic defense, and

other military and aerospace programs have

pushed forward work on these technologies.

In the following chapter we consider principally battery powered electric vehicles (EVs) and

electric hybrids that use fuel cells. These are

personal vehicle technologies that promise very

large reductions in emissions and that offer a

bridge to a future of reduced fossil fuel use. They

pose technical problems that are far from solved,

but if solutions are found they will include

innovative technologies that could have wide

application. At the same time, alternative fuels for

internal combustion engine vehicles (ICEVs),

including methanol, ethanol, natural gas, and

reformulated gasoline, also offer considerable

benefits in lowered pollution. They have the

advantage of easy introduction into the familiar

ICEV, and they require much less in the way of

new infrastructure than EVs. These factors, combined with the technological uncertainties of EVs,

could give alternative fuel ICEVs a considerable

edge over EVs in the near or medium term.

However, if EVs succeed technologically, and if

the electricity they require is generated by renewable sources, they could prove to have decisive

advantages.

At the moment battery EVs are more advanced

than fuel cell vehicles, and will probably meet

most of the early demand for ultraclean vehicles

in places with strict air quality standards, in

particular California. In the longer term, however,

the fuel cell vehicle could be the more rewarding

technology, better able to serve a broader market

that extends beyond specialized niches. Fuel cells

seem more easily able to provide the range and

quick refueling that battery EVs still struggle to

achieve. Both battery EVs and fuel cell vehicles

using hydrogen are themselves without emissions, and don’t contribute to local pollution

where they are driven. However, the generation of

electricity for battery EVs or the production of

hydrogen for fuel cell vehicles may be polluting;

depending on the source, there could be an

increase in emissions of sulphur oxides at powerplants and continuing emissions of carbon dioxide. With a renewable or less polluting energy

source, emissions of greenhouse gases could be

eliminated or reduced, as could pollution at the

point of electricity generation.

Federal laboratories have some useful experience with fuel cells and batteries. Industries in

other countries do not so far have a clear lead over

the United States. New law authorizes more

support of EV R&D than it has had in the recent

past, and environmental regulation may create a

market for these vehicles. However, the Japanese

Government’s Ministry of International Trade

and Industry (MITI) has what looks to be a more

integrated plan of support for the development of

EV technologies and markets than we do, and car

companies in Japan and Europe are vigorously

developing prototypes and even marketing early

models. And it remains a question whether EVs,

even with government support, can overcome

their technical problems enough to compete with

the ever-improving ICEV.

A different approach to applying new technology to personal vehicles is through the development of intelligent vehicle/highway systems (IVHS).

The potential size of the markets, in the United

States and abroad, means that the commercial

opportunities are promising, perhaps highly so.

Many of the systems incorporate technology with

which defense firms have experience; not only

defense contractors and their suppliers but also

the national laboratories could probably play a

considerable part. To achieve the greatest longterm benefits for the Nation from IVHS will

require coordination between different levels of

government, research institutions, and the private

sector. A successful IVHS effort might contribute

public benefits by reducing the time wasted in

4 GM Advanced Engineering Staff, memo to Deputy Assistant Secretary, U.S. Department of Energy Defense Programs, on “Cooperative

R&D Programs Between the Domestic Automobile Industry and the DOE Defense Program Laboratories,” Mar. 27, 1992.
congestion and through the creation of a variety

of skilled jobs, in the design, production, installation, and management of advanced integrated

systems. In the near term, domestic and foreign

consumer electronics firms are likely to continue

to develop and sell systems that can be independently installed in cars.

Energy-conserving transportation as a new

national initiative is one part of a larger shift in

Introduction to Part Two 171

national technology goals toward achieving greater

energy efficiency and self-sufficiency, this being

fundamental to any program of achieving longterm sustainability in the economic and environmental life of the Nation. The chapters o n

transport technologies that follow identify some

specific tasks that lie within the broader context

sketched above.
Personal

Transport:

Road

Vehicles 7

ELECTRIC VEHICLES

E

lectric vehicles (EVs), powered by batteries or fuel cells,

require much new vehicle technology and infrastructure.

The competitive potential is great-the whole world is

interested in cleaner personal vehicles—but uncertain,

both because of the technical problems that still bedevil EVs and

because of the difficulties in creating the new infrastructure.

Nonetheless, the benefits in technology spillovers and the

creation of high-value-added, knowledge intensive jobs could be

very substantial, with opportunities for defense and aerospace

firms to fill new niches for component suppliers.

Battery electric vehicles emit virtually no air pollutants, and

because they draw on electricity that can be produced by a variety

of generation technologies, they offer the prospect of considerably reducing dependence on foreign oil. If renewable or nuclear

energy were to provide the electricity, EVs could significantly

reduce the greenhouse impact of transport. Over their entire fuel

cycle, EVs use energy more efficiently than internal combustion

engine vehicles (ICEVs). Although the initial generation of the

electricity at the power station and its distribution through the

grid require more energy than petroleum refining does, the EV’s

powertrain is more efficient than the ICEV’s. Its motor does not

run when the vehicle is standing still, offering further savings,

and EVs can use ‘regenerative braking’ to recapture some of the

173
174 I Defense Conversion: Redirecting R&D

energy that is normally wasted as heat and noise

when the brakes are applied.l

Fuel cell vehicles also emit little if any

pollution. Their main exhaust product is water

but, as with battery EVs, their overall environmental impact depends on what happens beyond

the vehicle. Hydrogen can be produced by electrolyzing water, an energy intensive process that

raises the same issues as other uses of electricity,

or by reforming a hydrocarbon, the process used

for most of the world’s hydrogen today. Reforming releases carbon dioxide. However, if the

hydrocarbon used is methanol derived from

biomass or organic waste, the net contribution to

the greenhouse effect is very low, just as it would

be for battery EVs charged with electricity from

renewable sources. At present, however, most

hydrogen is derived from fossil fuels.

EVs also pose new environmental challenges

in their manufacture and disposal. Some kinds of

batteries, in particular, incorporate exotic materials, some of them poisonous, caustic, or otherwise

dangerous. Extracting and processing these, handling them during manufacture, containing them

during use and in case of accidents, and finally

disposing of them all require careful attention to

ensure human and environmental safety.2 In some

cases there is scope for recycling-lead acid

batteries, for example, are already recycled to a

limited extent, reducing the quantity of harmful

lead introduced to the environment.

Both battery and fuel cell EVs (FCEVs) face

competition from other kinds of less polluting

vehicles, many of which are better developed and

improving all the time. Alternative fuels include

methanol and ethanol, straight or blended with

gasoline, hydrogen, and natural gas. Gasoline is

itself being continuously improved, as are engine

technologies; the widespread use of reformulated

gasoline might bring significant reductions in air

pollution from autos. All of these fuels would

require much less new infrastructure than EVs;

reformulated gasoline in particular could be

smoothly introduced into wide use in the existing

fleet. These advantages, combined with the technological gaps in the development of EVs, cast a

good deal of uncertainty over the future of EVs.

Moreover, recent increased attention to EV research and development today is mostly a result

of legislative pressure. The technology is still so

immature that continued public pressure of this

sort is probably needed to drive development

further. Nevertheless, if they succeed, EVs could

offer a combination of reduced pollution and

decreased dependence on foreign oil that would

be hard to match.

Finally, EVs offer considerable scope for using

talents and technologies formerly devoted to

military purposes. Westinghouse Electric’s electronic systems group, for example, is putting its

experience of building electric propulsion systems for military underwater devices to use, in

collaboration with Chrysler, to design a powertrain for improved EV performance.3 Hughes

Aircraft has developed a battery charging system

and was to have provided much of the expertise

and labor in developing a GM EV based on the

Impact prototype, until the plan was scaled back

1 Regenerative braking takes advantage of the fact that a motor and a generator are essentially the same thing-a means of transforming

energy from one form to another. III a motor, one puts electric current in and gets motion out in a generator, one provides the motion and gets

current out. The physical principles at work and the construction are fundamentally the same in boa so that by turning an electric motor one

can use it as a generator, which is what happens in a regenerative braking system. In normal driving the motor turns the wheels, but when the

brakes are applied the rotation of the wheels drives the car’s motor around, causing a current to flow back through the batteries, which chemically

store the energy h carries. As the current flows and energy is stored, so the energy of rotation falls, and the wheels slow down. The wheels in

effect do work by pushing against the electromagnetically produced forces on the motor. To achieve effective regenerative braking requires

careful wiring and electronic management in practice, but the basic principle is straightforward.

2 See U.S. Congress, Office of Technology Assessmen4 Green Products by Design: Choices for a Cleaner Environment, 0114-B541

(Washington DC: U.S. Government Printing Office, October 1992) for a study of environmental issues in desqq.t and manufacturing.

s Ted ~icester, Wesfighouse Electric, electronic systems group, personal communication, Aug. 27, 1992.
7—Personal Transport: Road Vehicles I 175

at the end of 1992. Moreover, the Department of

Energy’s (DOE) national labs have ongoing

research programs in several technologies relevant to EVs, notably batteries and fuel cells.

Sandia, Argonne, and Idaho National Engineering Laboratory (INEL) are among the labs that

have cooperative research and development (R&D)

agreements (CRADAs) with the U.S. Advanced

Battery Consortium (USABC). Ultracapacitors,

energy storage devices that can deliver tremendous power and that might supplement an EV fuel

cell, are a result of strategic defense initiative

(SDI) research at Lawrence Livermore to develop

power sources for laser beams originally meant

for space defense.

1 History

The history of battery EVs as a form of

highway transport is as long as that of ICEVs.4

From the 1880s through the early part of the 20th

century, the two forms of vehicle competed

intensely. In 1899, the world speed record was

claimed by an EV after a hard fought contest

between the French count Chasseloup de Laubat

and Camille Jenatzy, his Belgian rival, who

triumphed in his torpedo-shaped electric car, Le

Jamais Contente, traveling at 104 kmh (65 mph)

and demonstrating in the process that human

lungs did not burst at speeds greater than 100

kmh, as some had feared. The turning point for

ICEVs came with the 1911 invention of the

electric self-starting motor, which did away with

the need for heavy cranking by hand. With their

advantage in convenience gone, EVs rapidly lost

popularity as people increasingly began to enjoy

the greater freedom of ICEVs’ longer range.

Engineering attention fried on the ICEV, so that

progress on the EV was slight, and the technology

more or less languished for 60 years. EVs

continued to be used in specialized applications

where their low emissions, low running costs, or

silence were of particular value, such as for early

morning milk deliveries in the United Kingdom,

but the mainstream swung away from them.

Oil crises and increased environmental consciousness began to prod a few auto designers to

reconsider EVs—there were particular bursts of

interest with the passage of the National Environmental Protection Act in 1967 and the 1973 oil

embargo by the Organization of Petroleum Exporting Countries (OPEC)--and there has been a

slow increase in the amount of R&D over the last

20 years, accelerating since the late 1980s. This

has led to some important breakthroughs-the

development of practical AC convertors allowed

the use of lighter motors, for example-but

overall progress has been incremental. The basic

problem of EVs remains energy storage, just as it

was when Edison developed the nickel iron

battery for EV use. Electric vehicles have long

been “the car of the future” in some circles-a

future continually predicted to lie 10 years

ahead-but without breakthroughs-this future has

come no closer. Whether the current interest,

prompted this time by recent Californian clean air

regulations’ stipulations for sales of at least

20,000 “zero emission vehicles” in 1998, can

succeed where earlier efforts have not remains to

be seen. But the attempt is bringing together a

greater number of researchers and established

auto manufacturers than ever before.

1 Technology

An EV uses a motor drawing on electric energy

to propel itself along the road. The energy is

usually stored by chemical means, either in

batteries, or as fuel from which the energy is

chemically released in a fuel cell, or a combination of the two. Two physical characteristics are

very important in considering how effectively the

energy is stored. One is the energy density, or the

amount of energy a given weight or volume of the

system will store, which dictates how much work

a system of a given size can do. The other is the

d Information taken from S.R. Shacke4 The Complete Book of Electric Vehic/es (Chicago, IL: Domus Books, 1979).
176 I Defense Conversion: Redirecting R&D

power density, which indicates how fast the

stored energy can be released. In terms relevant to

a vehicle, energy density broadly dictates range,

and power density the top speed and acceleration.

BATTERIES

Batteries contain chemicals that react to produce an electric current. The reaction is reversible, so that the battery can be recharged, enabling

it to produce more current, by connecting it to an

external electricity supply. The properties of the

battery depend on its combination of materials,

for which there are many different possibilities,

and its design. Battery research explores these

possibilities and pursues the most promising.

The energy and power densities of all battery

systems available even in prototype form today

are several orders of magnitude lower than those

of gasoline. This means that a given amount of

gasoline has enough energy in it to propel a car

much further than the same weight or volume of

batteries. The greater efficiency of electric motors

than internal combustion engines compensates

for this somewhat, but even so a much greater

fraction of the total weight and space of a car is

likely to be taken up by batteries than by a

gasoline tank, so that in turn a much greater

fraction of the energy stored in a battery system

will go towards simply moving that system

around. In plain terms, this makes it hard to design

an electric car with the speed and acceleration of

an ICEV, and also that the distance it can travel

before the stored energy is exhausted is likely to

be short. This range limitation is serious because,

unlike the refueling procedure for gasoline, recharging batteries usually ties a long time,

typically several hours rather than a few minutes.

The length of journey for which an EV could

sensibly be used is therefore limited to the

distance it can travel on a single charge. For

current designs this is usually less than 100 miles.

Batteries are expensive. Mass production may

bring down the price, but many of the more

advanced batteries under development incorporate rare and expensive materials, as well as

demanding sophisticated engineering techniques

in their construction. Lead acid batteries for the

experimental EV that GM will produce in 1993

are likely to cost at least $2,000 and last for

15,000 miles, probably less than 2 years.5 This

would mean spending over $12,000 on batteries

over a 100,000 mile vehicle life. The nickel iron

battery packs for the Chrysler electric minivan,

the TEVan, cost over $6,000 but are hoped to last

up to 75,000 miles.6 The nickel metal hydride

battery under development by Ovonic Battery, a

subsidiary of Energy Conversion Devices of

Troy, Michigan, is projected to cost $5,000, with

a life of over 100,000 miles.7 Sodium sulphur

batteries being installed in six Ford Escort conversions for the Postal Service cost $40,000.8 For

these batteries, which are effectively handmade,

the expense is the manufacture; the materials

themselves are not expensive--sulphur costs less

than 10 cents a kilogram.

Most batteries today would not last as long as

the rest of an EV; the number of times they can be

put through a cycle of discharging and recharging,

the ‘cycle life,‘‘ is only a few hundred. When this

is reckoned into the running costs of the vehicle,

the small cost-per-mile advantage that the electricity consumed by a battery EV offers over the

gasoline used by an ICEV is likely to be more than

canceled out. The initial price of the complete EV

is also likely to exceed that of its ICEV equivalent

because of the fact that one has to buy an entire

battery system at once when purchasing the car.

The Japanese EV program, sponsored by the

5 William J. Cook “Motoring Into the Future, ” U.S. News and World Report, Feb. 4, 1991, p, 62; and Gerry Kobe, “EV Battery

Breakthmu~” Automotive Indusm”es, September 1992, p. 63.

6 Chrysler Corporation, “Electric Vehicles,” section in Chrysler Technology Positions and Programs, no date, received May 1992.

7 Kobe, op. cit., footnote 5.

8 David Phillips, fleet management, United States Postal Service, personal CQmmunicatioq Apr. 15, 1992.
7—Personal Transport: Road Vehicles I 177

Ministry of International Trade and Industry

(MITI) aims to produce EVs costing not more

than 1.2 times as much as an equivalent ICEV

(see below), while Fiat’s Panda adaptation, the

Elettra, with a range of about 50 miles, sells for

the equivalent of $22,300 ,2.6 times the cost of the

gasoline model.9

Given these obstacles, the main focus of EV

research is now on batteries. Motors and control

systems have improved tremendously over the

last decade with the development of magnet

technology and compact electronics, so that the

energy efficiency of many EV systems apart from

the battery is well over 90 percent. The goal is to

develop a battery that is cheap to manufacture,

high in power and energy, reliable, safe, and

quickly rechargeable, and that can be easily and

safely recycled or disposed of. No battery yet

exists that meets all these criteria.

FUEL CELLS

Like a battery, a fuel cell produces electricity

through an electrochemical reaction between two

electrodes mediated by an electrolyte. But unlike

a battery, the electrodes are not fixed in the cell,

but must be continually added as fuel, while the

product of their reaction is removed. The chemicals used as electrodes are hydrogen, usually

stored in some form on board the vehicle, and

oxygen, from the air. Fuel cells’ main exhaust

product is therefore water.

Fuel cells have two particular advantages over

batteries. First they do not need to be electrically

recharged to restore the electrodes, but instead

can be quickly replenished by refueling. Second,

because of the great efficiency of the reaction,

they allow a much greater range before they need

refueling. This overcomes one of the major

performance drawbacks of the battery-powered

EV.

The overall environmental impact of a fuel cell

vehicle will depend on the means of production

and transportation of the hydrogen it uses. Just as

battery EVs may be especially environmentally

benign if the batteries can be recharged using

renewable energy, FCEVs could have very low

overall emissions if biomass or organic waste

were used to produce methanol for reforming into

hydrogen. Reforming does produce carbon dioxide, but in this case the global carbon budget

would not be affected. However, most hydrogen

today is derived from fossil fuel hydrocarbons, in

a process that is less energy efficient than refining

gasoline from crude oil. The fuel cell is so much

cleaner and more efficient than the ICE that even

under this regime the overall impact of a fuel cell

vehicle is less than that of a conventional ICEV;

however, the effects are not insignificant. A

long-term possibility is to couple solar energy to

hydrogen production through photovoltaic cells

connected to electrolysis units, using electricity

to split water. This would be a very clean method

of producing hydrogen, but it is very expensive

and likely to remain so for a long time.10

Despite their energy capacity, fuel cell systems

do not usually provide any better acceleration on

their own than batteries. Broadly, the power

capacity of a fuel cell depends on its size, while

the energy it can provide does not. ll Most

designers of FCEVs therefore favor combining a

fuel cell with some kind of storage device that can

handle demands for a surge of power when

accelerating or climbing a hill, say, allowing the

fuel cell to be scaled to the average power demand

rather than the peak-which would result in a

much heavier system. Such a hybrid vehicle

would incorporate a fuel cell for stamina and then

for peak power perhaps a small battery, or an

ultracapacitor, or even an advanced flywheel,

sometimes called a “mechanical battery” (see

9 William R. Diem, “Cost Is Biggest Questiorq Most Elusive Answer,” Automotive News, Oct. 12, 1992, p. 34.

10 ~DeLuchi, Hydrogen Fuel cell Vehic/eS, rese~ch report uCD-ITS-RR-92-14 (Davis, CA: Institute of Transportation Studies,

University of California, Sept. 1, 1992).

11 Convti5ely, a ~tteg’s powm is f~ly cons~~ but its energy capacity SCdeS with Sire.
178 I Defense Conversion: Redirecting R&D

Box 7-A—Peak Power Devices

Flywheels-’ ’Electromechanical Batteries”

A small contingent in the battery research field maintain that, rather than juggling chemicals, the secret to

storing energy successfully lies in using flywheels. The principle is to use a rapidly spinning rotor to store energy,

which is then tapped electromagnetically, as in a generator driven by external force. The principle of storing energy

in a rotating wheel is an old one--potters use it, and many combustion motors employ a flywheel to smooth out

fluctuations in their output--but new technology allows rotation speeds far greater than conventional steel-rimmed

wheels. Modern flywheels are small and light but strong, and have high energy densities because they spin so

fast.

Richard F. Post of Lawrence Livermore National Laboratory has developed designs based on light, strong

composite material for the rotor, which would be suspended in a vacuum chamber on magnetic bearings,

minimizing frictional This lightweight wheel can spin at tremendous speed (up to 2,000 revolutions a second),

storing large amounts of energy. Once spinning, the flywheel system can be Ieft for several months without running

down (provided the vacuum is good), until power is needed. Sealed electromechanical systems, of which the

flywheel battery is an example, often have very long lifetimes, and the minimal friction of this one certainly suggests

that this would be so here. A flywheel battery, unlike an electrochemical battery, would be Iikely to outlast the rest

of the car it was put into, virtually eliminating the cost of replacements.

The energy density predicted for a flywheel system is comparable with batteries under development today,

but its most impressive aspect would be power density--far better than the best electrochemical batteries, and

even superior to internal combustion engines. This means that a flywheel battery could deliver a tremendous jolt

of energy for sudden acceleration. For this reason, some vehicle designers seethe flywheel as a natural adjunct

to the fuel cell, which has better energy density than power density. The flywheel could allow regenerative braking,

too.

A well-known danger of flywheels as they spin faster is that of sudden failure, when the stresses on the wheel

become such that it flies apart explosively. In steel wheels this sends lethal shards of metal flying in all directions

at high speed, but the composites used in the proposed wheels shred themselves into a mass of hot, dense fluff,

which can be effectively contained by a strong composite box surrounding the vacuum chamber.

The designs have not been built yet, and to do so will demand precision and exacting material and physical

specifications. Several groups are working to develop the concept. In addition to Dr. Post at Lawrence Livermore,

who is seeking industrial partners to build a trial system, there is American flywheel Systems Inc. (AFS), of

Bellevue, Washington. AFS received patents in June 1992 for a flywheel design of which they intend to develop

a prototype by mid-1 994, working with Honeywell, Inc., which also has patents in flywheel technology. 2 Honeywell

has been using flywheels in space and defense applications for 30 years and brings expertise in bearings,

electronic controls, and vacuums to the team.3 After the prototype, the companies aim to produce commercial

battery packs for EVs in 1998. At this early stage, cost estimates are vague, but the materials used are no rarer

than those in electrochemical batteries, so that the main factor affecting price is Iikely to be ease of manufacture.

Ford Motor Co. has also announced that it will develop a flywheel system for use in a hybrid EV.4 Unique Mobility

Inc. of Golden, Colorado will be a partner and supplier.

1 Mi&ael J. Rie~enman, “A Different Spin on an EV ~ttery,” /~~~sp@w~, 100; and Glenn

Rifkln, “Using Spin to Power Eleolric Cars,” New York 77n?es, Nov. 11, 1992, p. D5.

2 A/co/10/ ink’s /Vew Fue/s Report, vol. 14, No. 11, Mar. 15, 1993, p. 1.

3 Dan Kaptan, ‘+toneywe[i Joins American ~ywhwl f~ Electric Vehicle,” /ns@ ~OTand T~nsj)Ottatkln ~e~

vol. 4, No. 10, Mar. 12, 1993, p. 1.

4 William R. Diem, “Ford Aims to son E[ectflc Energy From FlyWh~l,” Automo~/ve ~eWS,, Apr. !5, 1993, f). 37.
7—Personal Transport: Road Vehicles 1179

Ultracapacitors

Capacitors store charge on metal surfaces separated by thin layers of insulator. Recent developments in

materials technology, including the creation of aerogels--very light porous solids--at Lawrence Liver more, allow

the creation of substances with very large surface areas in comparison to their volume, which makes them suitable

for the construction of capacitors capable of storing particularly large amounts of charge. These are called

ultracapacitors, and t heir electrical properties are such that they can deliver t he stored energy extremely rapidly,

in a sudden jolt of high voltage current. Their high power density possibly makes them suitable for combining with

some energy storage device that has a higher specific energy but less impressive power density, such as a fuel

cell. Their development has been driven in part by the search for very high power sources to fire t he intense lasers

used in SDI research. Idaho National Engineering Laboratory is testing ultracapacitors for EV use.

Little direct work has been done on applying ultracapacitor technology to EVs, although rumor has it that an

Isuzu “mystery” EV on display in 1990 was powered by a large capacitor, in part because of its high acceleration

and its very quick charge up time, another feature of capacitors.5

5 AI Haas, WJZU’S NW Device May Propel Work on Electric Car,” Phi/ade/phla Enquirer, May 13, 19W, P. 1-D.

box 7-A). The presence of such a storage device anol can be produced from natural gas and is

would also allow the use of regenerative braking

to recapture some of the kinetic energy otherwise

lost when slowing down.12 The exact relative size

of the fuel cell and battery is a subject of ongoing

research that seeks to balance the system’s size

and weight with demands for range and acceleration.

As well as the engineering of the cell itself, an

important challenge to designers of fuel cell

systems is the means of storing the hydrogen.

This can be done in a number of ways (see table

7-l). Factors at play in the development of

hydrogen storage systems include the energy and

power densities in terms of weight and volume,

the safety during refueling and in case of accidents, and the cost of the materials and construction. The methods likely to see the most use early

in the development of fuel cell vehicles are

methanol, reformed on board, and compressed

gas in strong tanks. The former adds complexity

and weight to the system, since an additional

device, the reformer that splits the methanol into

hydrogen and carbon dioxide, must be carried.

Offsetting this is the advantage that methanol is

already quite widely and cheaply available. Methsometimes described as a bridge to wider use of

hydrogen in the future, since a pipeline distribution infrastructure could be shared to some extent,

and reforming at point of use would allow early

use of hydrogen.

Hydrogen compressed in tanks has the virtue of

simplicity, and with recent drops in the price of

carbon fiber, a reinforcing material strong and

light enough to wrap around tanks, it is becoming

more economically feasible. One of the leading

firms developing compressed hydrogen storage

systems for FCEVs is an engineering consulting

firm, most of whose previous work has been for

the aerospace industry, including the National

Aeronautics and Space Administration (NASA),

but which received support from Ford to develop

automotive applications. Much of the expertise

on handling hydrogen as a fuel has developed in

the aerospace community, based on experience

with hypersonic and rocket propulsion, one of the

few previous fuel applications of hydrogen.

Battery-powered EVs will probably arrive in

the market place before FCEVs. Fuel cell technology for vehicle propulsion has not received as

much attention as battery technology, and far

12 See footnote I for an account of regenerative btig.
Table 7-l—Hydrogen Storage Met hods for Vehicles

Storage method Advantages Disadvantages Comments

Compressed Hz gas Familiar and available.

In principal allows fast

refueling like gasoline.

Liquefied H2

Metal hydride

Cryoadsorption

Relatively familiar and

simple.

High energy density: light

and compact.

Safe.

Well-understood

technology.

Liquid organic hydrides Safe.

On board reforming of Methanol is familiar,

methanol relatively cheap and

widely available.

Steam oxidation of iron Potentially cheap.

Compact.

Safe.

Requires bulky tanks that may be

heavy or expensive.

Requires insulated, crashworthy tanks.

Liquefaction is energy intensive.

Refueling might be slow.

Under development.

Expensive.

Refueling probably slow.

Storage bed is heavy.

Fairly expensive.

Bulky.

Under early development.

Handling methylcydohexane (organic

liquid) poses safety challenges.

Bulky and heavy.

Must carry heavy reformer on board.

C02 emissions.

Undeveloped.

Heavy.

Light and strong advanced materials may be expensive. Carbonfiber wrapped, aluminum-lined tanks allow storage at 8,000 psi,

high enough for energy density competitive with other methods.

In the last few years, the price of carbon fiber has dropped from

over $50/lb to around $12/lb.

Could connect to a tanker distribution infrastructure based on

liquefied hydrogen.

Evaporation likely over a few days of disuse.

Powdered metal absorbs hydrogen under pressure and then

releases it when heated.

Hydrogen is adsorbed on activated carbon at low temperature

(150K) and high pressure (825 psi), requiring reinforced, cooled

tanks. Refrigeration would use energy. Refueling stations need

compressor, refrigerator, and vacuum pump.

Under development by Mercedes-Benz as the ‘Hypasse’ method.

Likely to be most common early method because of its relatively

advanced development, and the availability of methanol. Could

serve as a bridge to pure Hz use.

Steam from the fuel cell is used to oxidize powdered iron in a tank

on board the vehicle, releasing hydrogen to be used as fuel.

(The oxygen in the water molecule (H20) reacts with the iron to

form rust, the hydrogen is released.) When the entire tank of iron

has turned to rust it is exchanged for fresh iron and the oxidized

material is reduced back to iron at a central facility. H Power of

New Jersey is developing this technology.

CJ

g

cm

(D

KEY: Hehydrogen; C02.carbon dioxide; psi.pounds per square inch; K=degrees Kelvin

SOURCE: Office of Technology Assessment, 1993, drawing on: Mark DeLuchi, Hydrogen Fue/ CM Wicks, UCD-ITS-RR-92-14 (Davis, CA: University of California, Sept. 1, 1992).
7—Personal Transport: Road Vehicles I 181

Box 7-B—The PEM Fuel Cell: The Front Runner1

The proton exchange membrane (PEM) fuel cell is widely regarded as the most promising type for light duty

vehicle use, as it is relatively light and compact, operates at a lower temperature than most other types of fuel cell

(between 60 and 100 degrees centigrade), has a long life, and starts quickly. (Some kinds of fuel cell, such as the

solid oxide fuel cell, take several minutes to reach operating temperature and to produce significant amounts of

power; they are more suitable for large stationary applications.) The PEM cell was first developed for space power

in the 1960s and was used in the Gemini program, but was not much used after that until the 1980s, when interest

blossomed in its potential for vehicular use.

A jointly funded government and industry effort to develop PEM cells for vehicle use, whose participants

include the Department of Energy, GM Allison Gas Turbine Division, GM Technical Staffs, Los Alamos, Dow, and

Ballard Power Systems Co., began in September 1990.2 The program is set to run for 61⁄2 years, culminating in

the demonstration of a PEM fuel cell hybrid vehicle. The first phase, which drew to a close in late 1992, attempted

to demonstrate the feasibility of the project by producing a working 10kW methanol-fueled cell.

Energy Partners of Florida is designing and building a PEM cell EV that runs on compressed hydrogen and

incorporates a peaking battery.3 H-Power of New Jersey and Rolls Royce are jointly developing a PEM cell vehicle,

and Ballard Technologies of Canada is working to demonstrate a 30-foot PEM cell transit bus. In addition, Los

Alamos National Laboratory continues to research the applicability of fuel cells to certain space missions, such

as for longer term extraterrestrial power supply.4 The U.S. Army is also investigating PEM cells as a lightweight

power source for individual soldiers.5

1 Fuel Ce[[s are Wnventionally known by the name of their electrolyte. In a PEM cell the electrolyte is a solid

polymer, somewhat like TeflonR. The cells have sometimes also been called solid polymer electrolyte (SPE) cells.

2 James R. Huff, “Fuel Cell Power Plants for Transportation Applications,” paper prepared for Seventh Annual

Battery Conference on Applications and Advances, Jan. 21-23, 1992, Los Alamos National Laboratory Paper No.

LA-UR-91-3900.

3 Mark l)eLuchi, Hydrogen Fue/-Ce// Vehic/es, research report UCD-ITS-RR-92-14 (Davis, CA: Institute of

Transportation Studies, University of California, Sept. 1, 1992).

4 Nicholas E. Vanderborgh, James C. Hedstrom, and James R. Huff, “Electrochemical Energy Storage Usin9 PEM

Systems,” paper prepared for Proceedings of the European Space Power conference, Florence, Italy, September 1991,

k Alarnos National Laboratory Paper No. IA-UR-91-2377.

5 Richard Jacobs and Walter G. Taschek, “Individual Power for the Soldier System,” paper delivered at 1992 Fuel

Cell Seminar, Tuscorr, AZ, Dec. 1, 1992.

fewer working vehicles run on fuel cells than on the quantity of platinum catalyst in a cell eighbatteries. On the other hand, the last 5 years have

seen two major technical achievements that

improve the prospects for fuel cells. The first was

the development of membrane materials by Dow

Chemical that allowed a threefold increase in

power density, putting the performance of proton

exchange membrane (PEM) FCEVs within sight

of that of ICEVs (see box 7-B). The second was

the patenting by Physical Science Inc. (PSI) of

Andover, Massachusetts of a method to reduce

tyfold, vastly improving the economic feasibility

of fuel cells. There is no longer a single major

obstacle blocking the eventual use of fuel cell

vehicles in the way that the inability to produce a

long-lived, light, powerful, and energetic battery

has done so far for battery EVs. A growing

minority of researchers think that the fuel cell

vehicle, rather than the battery EV, represents the

auto industry’s best hope for the longer term

future.
182 I Defense Conversion: Redirecting R&D

ALTERNATIVE FUELS

Several other technologies for reducing auto

emissions will compete with EVs in providing

cleaner transport. The Office of Technology

Assessment report Replacing Gasoline: Alternative Fuels for Light Duty Vehicles em-nines the

advantages and disadvantages and states of development of six main alternatives to gasoline:

methanol, natural gas, ethanol, hydrogen, reformulated gasoline, and electricity .13 (See table 7-2

for a summary of their pros and cons.) All but

electricity can be burned in an ICE, so that the

technology of vehicles using them is likely to

resemble that of existing gasoline vehicles. The

existence of an infrastructure for refueling and

servicing ICEVs favors liquid fuel vehicles over

EVs, which are likely to require special charging

facilities or development of an infrastructure to

support hydrogen use.14 However, as noted, EVs

have some decided long-term advantages in

protection of the local and global environment

and energy independence.

LEGISLATIVE CONTEXT AND FEDERAL

R&D SUPPORT FOR EVs

The major legislative efforts to promote means

of transport other than gasoline powered vehicles

have been of three kinds. Clean air regulations

have restricted the emissions of individual cars

and of fleets taken in aggregate, encouraging

manufacturers to explore alternative types of

vehicle, and have been the main driver of most

recent interest in EVs. Transport and energy

legislation have both supported research and

development of alternative technologies directly.

A further approach has been the procurement of

alternative vehicles for use in government fleets.

This approach attempts to reduce uncertainty

about finding a market for the technology in its

commercial infancy, when companies supplying

it will be at their most vulnerable.

~ Clean Air Requirements

The 1963 Clean Air Act first authorized the

setting of Federal standards for automobile emissions, and granted California, alone among the

States, the right to set standards stricter than

Federal ones. The combination of Federal and

California regulation has continued to drive most

auto emissions reductions to this day. Technology

limitations and lack of incentives for manufacturers pushed back standards and time limits during

the 1970s, but the Clean Air Act Amendments of

1990 made two major changes that affect EVs.

One requires that government and private operators of fleets must introduce “clean fuel” vehicles in areas that do not meet the ambient air

quality standards of the act (nonattainment areas),

and the other requires that California establish a

pilot program to lead the way in promoting clean

fuel vehicles. The clean fuel fleet program

requires that in certain ozone nonattainment areas

an increasing percentage of new vehicles added to

all fleets of 10 or more vehicles starting with

model year (MY) 1998 use cleaner fuel. Reformulated gasoline appears to satisfy the act’s definition of cleaner fuel. Although EVs are not

specified, certain provisions that allow fleet

operators credit for exceeding the requirements

may encourage their purchase. Under the California pilot program 150,000 clean fuel vehicles are

to be sold during model years 1996 to 1998, and

300,000 a year thereafter. Other States can opt to

follow the California plan and adopt its standards.

13 U.S. ConPeSS, Off~Ce of Te~lln~@y A~sessmen~ Rep[acing Gasoline: A[ter~tive Fuels for Light Vehicles, 0~-E-364

(Washington DC: U.S. Government Printing Office, September 1990).

14 Hy&ogencan ~ ~~ ~ a ~mpo~ fiel in both ICEVS and FCEVS; in both cases the veh.iCleS wodd have “VeV low emissions, and -Y

of the obstacles are common to both-hydrogen production transpom and on-board storage. If these problems were solved, the choice between

hydrogen FCEVS and ICEVS wotdd become more urgent; at the moment small amounts of R&D are being done in both areas, with no clear

lead, although fuel cells are more efficient than ICES. A few prototype vehicles of each kind exist. This report explores the technology,

employmen4 and conversion opportunities of EVS as an example of a new technology, and is not intended as an endorsement of this particular

technology to the exclusion of all others.
7—Personal Transport: Road Vehicles I 183

Table 7-2—Pros and Cons of Alternative Fuels

Fuel Advantages Disadvantages

Methanol

Ethanol

Natural gas

Electricity y

Hydrogen

Reformulated

gasoline

Familiar liquid fuel.

Vehicle development relatively advanced.

Organic emissions (ozone precursors) will have lower

reactivity than gasoline emissions.

Lower emissions of toxic pollutants, except formaldehyde.

Engine efficiency should be greater.

Abundant natural gas feedstock.

Less flammable than gasoline.

Can be made from coal or wood though at higher cost.

Flexfuel “transition” vehicle available.

Make from many feedstocks.

Familiar liquid fuel-commercial in Brazil.

Organic emissions will have lower reactivity than gasoline

emissions (but higher than methanol).

Lower emissions of toxic pollutants.

Engine efficiency should be greater.

Produced from domestic sources.

Flexfuel “transition” vehicle available.

Lower CO with gasohol (10 percent ethanol blend).

Enzyme-based production from wood being developed.

Though some is imported, likely North American source for

moderate supply (1 million barrels a day or more

gasoline displaced).

Excellent emission characteristics except for potential of

somewhat higher NOX emissions.

Gas is abundant worldwide.

Modest greenhouse advantage.

Can be made from coal.

Domestically produced and widely available.

Minimal vehicular emissions.

Excess capacity available in some places (for night time

recharging).

Big greenhouse advantage if powered by nuclear or

renewable electricity.

Wide variety of feedstocks in regular commercial use.

Excellent emission characteristics-minimal

hydrocarbons.

Would be domestically produced.

Big greenhouse advantage if derived from renewable or

nuclear energy.

Possible fuel cell use,

No infrastructure change except refineries.

Probable small to moderate emission reduction.

Engine modifications not required.

May be quickly available for use by entire fleet, not just new

vehicles.

Lower energy density than gasoline, so larger

fuel tanks.

Would likely be imported from overseas.

Formaldehyde emissions a potential problem.

More toxic than gasoline.

M1OO has non-visible flame, explosive in

enclosed tanks.

Costs likely somewhat higher than gasoline,

especially during transition period.

Cold starts a problem for M1OO.

Greenhouse problem if made from coal.

Much higher cost than gasoline.

Supply is limited, especially if made from corn.

Lower energy than gasoline, so Iarger fuel tanks.

Cold starts a problem for E1OO.

Food/fuel competition if at very high production

levels.

Range quite limited, need large fuel tanks

w/added costs, reduced space (LNG range

not as limited, comparable to methanol).

Dual fuel “transition” vehicle has moderate

performance, space penalties.

Retail fuel distribution system must be built.

Slower refueling.

Greenhouse problem if made from coal.

Range, power very limited.

Much battery development required.

Slow recharging.

Existing batteries are heavy, bulky, and have

high replacement costs.

Vehicle heating/cooling hard-drains power,

limits range,

Potential battery disposal problem.

Emissions from power generation can be

significant.

Fuel storage a challenge.

Vehicle and total costs high.

Extensive research and development effort

required.

Needs new infrastructure.

Fuel cells need further development.

Emission benefits remain uncertain.

Costs uncertain, but will be significant, though

Iow in comparison to many other alternatives.

No energy security or greenhouse advantage.

KEY: LNG-liquified natural gas; NOX-nitrogen oxides; Co-carbon monoxide; E1OO-1OO percent ethanol; M1OO-1OO percent methanol.

SOURCE: U.S. Congress, Office of Technology Assessment, Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles, OTA-E-364

(Washington, DC: U.S. Government Printing Office, September 1990).
184 I Defense Conversion: Redirecting R&D

California passed its own Clean Air Act in

1988, setting emission standards stricter than

those for the rest of the country. Its timetable was

shortened in the California Clean Air Act Amendments of 1990. In September of that year the

California Air Resources Board (CARB) promulgated regulations for meeting the targets set by the

act.15 The regulations apply to all manufacturers

intending to sell more than 3,000 vehicles a year

in the State and require a growing proportion of

the vehicles sold each year to fall into increasingly strict categories. The most striking element

of the plan is the requirement that in 1998, 2

percent of the vehicles sold must be “zeroemission vehicles, ’ a fraction that grows to 10

percent by 2003 (see table 7-3).

California alone is a large market-sales of

new cars were 1,059,926 in 1990 and 1,005,896

in 1991, more than 10 percent of the total U.S.

sales of 9,159,629 and 8,234,017, respectivelyl6—

so that its regulations caused automakers to move

into action. The Governors of nine northeastern

States 17 and the Mayor of the District of Columbia announced on October 29, 1991 that they

would present the California standards to their

legislative bodies for consideration, a further prod

for auto producers. Rhode Island, Vermont,

Texas, Illinois, and Colorado announced their

interest in the standards shortly afterwards.18 The

initial excitement at this news diminished subsequently, as it became clear that there was considerable opposition to the idea within many States.

Legislatures in Vermont, Maryland, and Virginia

rejected the California plan and in several other

States there has been no further action since the

Governors’ announcement. Nonetheless, the onceinterested States purchased almost half of all cars

sold in the United States in recent years .19

Lawmaking is proceeding in some States; on

January 31, 1992 Massachusetts became the first

northeastern State formally to adopt the California program as law, and Maine and New York

followed suit later that year, although a New York

judge subsequently ruled that the 2 percent

mandate was illegal for the State and that only

declines in average emissions could be required.

Zero emission vehicles (ZEVs), the most

stringent category, which are first required in

California in 1998, can effectively only be

electric vehicles. The regulations in effect require

that at least 20,000 EVs a year be sold in

California starting in 1998, rising to more than

100,000 by 2003. If the eastern States were

included, the required market size could increase

to over 65,000 in 1998 and almost half a million

by 2003.

The regulations remain controversial. Major

automakers consider it unjust to impose a requirement that they sell vehicles whose technological

development is still uncertain and that they may

not be able to manufacture for a price comparable

to that of more conventional cars. They argue that

the law would force them to sell some vehicles at

a considerable loss if they could not otherwise

meet their quota of ZEVs, and they are reportedly

considering legal action against California on the

basis that the requirement is an illegal “taking. "

2 0

 If they are forced to sell at a loss, then the

15 u~ver~i~ of c~ofi% ~s ~geles, ~fi Cater for Re@o~ policy StUdiq Prospects Use a n d

Production in Southern California: Environmental Quality and Economic Development, Worldng Paper No. 2 (Los Angeles, CA: The

University, May 1991).

16 c ‘U.S. New-w Regis@ations by State,” Automotive “1991 Market Data BoolL” May 29, 1991, p. 36 and “1992 Market Data

Book” Mily 27, 1992, p. %.

17 me Sines were &.~w=, we,-l~d, ~~chuse~, New -tie, New J~,wy, New York Pennsyhuda, dVir@h.

18 David Woo&M and Thane Peterso~ “Here Come the Greenmo biles,” Business Week, Nov. 11, 1991; and Matthew L. Waldj

“California’s Pied Piper of Clean Air,” The New York Times, Sept. 13, 1992, p. Cl.

19 C ‘u.S. New-~ Re@tratio~ by State,’ Automotive News, “1991 Market Data Book” May 29, 1991, p. 36.

m Joti Wdace, dirmtor, el~tric vehicle planning, Ford Motor Company, personal cmmmmicatioq Jam 9, 1992.
7—Personal Transport: Road Vehicles ! 185

Table 7-3-California Clean Air Resources Board Requirements

Vehicle Emission Standards:

Pollutant emitted per mile (grams)

Carbon Nitrogen

Vehicle category Hydrocarbons Monoxide Oxides

First Step . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.39g 7.0g 0.4g

Second Step:

To 50,000 miles , . . . . . . . . . . . . . . . . . . . . 0.25 3.4 0.4

To 100,000 miles . . . . . . . . . . . . . . . . . . . . . 0.31 4.2 0.4

Transitional low emission (TLEV) . . . . . . . . . . 0.125 3.4 0.4

Low emission (LEV) . . . . . . . . . . . . . . . . . . . . . 0.075 3.4 0.2

Ultra-low emission (ULEV) . . . . . . . . . . . . . . . 0,040 1.7 0.2

Zero emission (ZEV) . . . . . . . . . . . . . . . . . . . . 0.0 0.0 0.0

Annual requirements:

Percentages of automakers’ sales required to meet emissions standards by given dates

First Second

Model year step step TLEV LEV ULEV ZEV

1991 . . . . . . . . . . . . . . . .

1992, . . . . . . . . . . . . . . .

1993 ......., . . . . . . . .

1994 . . . . . . . . . . . . . . . .

1995 ..., , . . . . . . . . . . .

1996 . . . . . . . . . . . . . . . .

1997 ......., . . . . . . . .

1998 . . . . . . . . . . . . . . . .

1999 . . . . . . . . . . . . . . . .

2000 . . . . . . . . . . . . . . . .

2001 . . . . . . . . . . . . . . . .

2002 . . . . . . . . . . . . . . . .

2003 .....,, . . . . . . . . .

100

100

60

10

0

0

0

0

0

0

0

0

0

—

—

40

80

85

80

73

48

23

0

0

0

0

—

10

15

20

—

o

0

0

0

—

25

48

73

96

90

85

75

—

2

2

2

2

5

10

15

—

—

—

—

—

—

—

2

2

2

5

5

10

How to read t hese tables: The upper table defines six categories of vehicles in terms of their emissions. The lower table gives the year by year

requirements for the percentage of an automaker’s sales in that year that must meet each of the progressively stricter categories. Thus, in 1997,

73 percent of ears sold must be such as not to emit more than 0.259 of hydrocarbons (HC), 3.49 of carbon monoxide (CO), and 0.4g of nitrogen

oxides (NOJ per mile (for the first 50,000 miles), 25 percent must not emit more than 0.0759 HC, 3.4g CO, & 0.2g NOX, and 2 pereent must not emit

more than 0.04g HC, 1.7g CO, & 0.2g NOX.

SOURCE: Au?ornotive News, Feb. 25, 1991.

inclusion of more States requiring ZEV sales will heaters in their cars, which can consume a lot of

increase the extent of their loss. Auto manufactur- power.

21 The energy density of most batteries also

ers also raise questions about whether the Califor- drops off steeply in the cold.

nia standards are appropriate to the northeast, Nonetheless, all the major auto manufacturers,

where weather and pollution sources are different. despite their reluctance at some levels, are proDrivers in the cold northeast, for instance, require ceeding with research, development, and design

 for ~wcnt EVs, Efisting h~ting, venti~tioq and draw heavily on

electrical supplies; in an EV they would eat into energy reserves and seriously diminish its range. A component of EV R&D is the development

of high-@lciency, low-energy subsidiary systems such as HVAC.

331-050 - 93 - 7 : QL 3
186 I Defense Conversion: Redirecting R&D

of the technology to comply with the new

requirements. In December 1992, the U.S. Council for Automotive Research (US CAR), an organization formed by the Big Three in June 1992 to

promote cooperative precompetitive research,

announced that anew consortium would focus on

EV technology .22

Whether the California regulation stands in its

present form or not, the momentum of the world

automobile industry is veering towards new,

cleaner, more efficient technologies. Auto companies worldwide are exploring many different

approaches to meeting the demands of the next

decades for cleaner personal vehicles.

1 Electric Vehicle R&D

A total of $98 million has been appropriated for

EVs in 1993--$61 million for DOE, more than

half of it for batteries; $12 million for the

Department of Transportation (DOT); and $25

million for the Advanced Research Projects

Agency (ARPA). At present there is little overall

strategy guiding Federal spending on EVs. Instead each appropriation funds separate programs.

1 ISTEA

A landmark piece of Federal legislation affecting transport, passed by the 102d Congress, was

the Intermodal Surface Transportation Efficiency

Act of 1991 (ISTEA).23 The stated intent of the

act is to develop ‘‘a national intermodal transportation system that is economically efficient,

environmentally sound, provides the foundation

for the Nation to compete in the global economy

and will move people and goods in an energy

efficient manner. ’ The act authorized $119.5

billion for highways and $31.5 billion for mass

transit through fiscal year (FY) 1996, and gives

State and urban authorities much greater discretion in how to spend grant money. The money

actually spent will depend on the size of DOT’s

appropriations over that time.

ISTEA contains some support for EVs. It

established a program to stimulate the development of advanced transportation systems and

electric vehicles by authorizing $12 million for

FY 1992 to support at least three EV consortia.

The consortia are to design and develop EVs and

advanced transit systems, related equipment, and

production processes. The act encourages the

consortia to include small businesses and defense

and aerospace firms. At least one-half of the funds

to support consortia must come from nonfederal

sources. From the $12 million, four awards have

been made: Calstart, a California consortium that

includes Hughes Aircraft, Allied Signal, and

Fairchild Manufacturing is getting $4 million (see

below); the Chesapeake consortium (Chrysler,

Westinghouse Electric, Baltimore Gas and Electric, and the State of Maryland) gets $4 million to

developed an advanced powertrain; a consortium

of the New York Metropolitan Transit Authority,

Bus Industries of America, General Electric, and

several New York utilities, including Consolidated Edison and Niagara and Mohawk, is getting

$2.3 million to develop a 40-foot standard transit

bus that runs as an electric hybrid with an

independent electric drive motor in each wheel;

and the Advanced Lead Acid Battery Consortium,

composed of researchers from the research triangle of North Carolina, gets $1.2 million to

develop rapid recharging and battery monitoring

systems for advanced lead acid batteries.

THE DEPARTMENT OF ENERGY

The DOE conservation and renewable energy

program has a FY 1993 budget of $60.8 million

for the Electric and Hybrid Vehicle Research

program, an increase of 39 percent over FY 1992.

DOE spending on EVs dropped from a high point

22‘1’’h,is is in addition tO eight already existing consortia under the umbrella of USC~ on Such subjects ~ Hyclhlg, g~olirle emiSSiOnS,

the use of lightweight materials for more fuel economical designs, on board electronics, and better crash sirrmlation.

23 Public hW 102-240.
Table 7-4-DOE Electric Vehicle Spending

FY 1978-93 ($ millions)

Current year 1992 constant

Year dollars dollars

1978 . . . . . . . . . . . . . .

1979 . . . . . . . . . . . . . .

1980 . . . . . . . . . . . . . .

1981 . . . . . . . . . . . . . .

1982 . . . . . . . . . . . . . .

1983 . . . . . . . . . . . . . .

1984 . . . . . . . . . . . . . .

1985 . . . . . . . . . . . . . .

1986 . . . . . . . . . . . . . .

1987 . . . . . . . . . . . . . .

1988 . . . . . . . . . . . . . .

1989 . . . . . . . . . . . . . .

1990 . . . . . . . . . . . . . .

1991 . . . . . . . . . . . . . .

1992 . . . . . . . . . . . . . .

TOTAL . . . . . . . . . . . .

1993 appropriation . . .

$ 0.0

37.2

37.0

36.8

18.0

13.9

11.7

8.3

8.3

13.3

14.1

13.8

17.7

25.0

43.0

$298.1

$60.8

$ 0.0

70.5

63.3

57,2

26.1

19,2

15.6

10.7

10.4

16.2

16,5

15.5

19.1

25.8

43.0

$409.1

SOURCE: U.S. Department of Energy.

of $70.5 million (1992 constant dollars) in 1979

to remain around $15 million during the second

half of the 1980s, until starting to climb again in

1990 (see table 7-4). The funding is divided

among fuel cells, which get $12 million; a hybrid

vehicle development program ($16.8 million);

and batteries, which got the remaining $31.5

million, the bulk of this going to the USABC,

described below.24 The rest of the battery money

goes directly to the national labs.

The 1992 Energy Act contained further support

for EVs as well as general provisions mandating

Federal fleet purchases of alternative fueled

vehicles. It authorized a total of $50 million to be

spent over the next 10 fiscal years to fund an EV

commercialization demonstration program based

in several metropolitan areas; no one project may

receive more than 25 percent of the available

funds. The act allows for discount payments to be

made to project proposers to be passed on to users

7—Personal Transport: Road Vehicles 187

of EVs to make up any difference in price between

the EV and a comparable ICEV. A further $40

million for the next 5 fiscal years was authorized

for joint ventures, with at least a 50 percent

nonfederal cost share, to develop EV infrastructure and support technology. No money was

provided for either of these programs in DOE’s

1993 appropriation, so that in early 1993 the

agency was revising its internal budget to try to

comply with the legislative intent by drawing on

overhead funds and other conservation programs.

It was also revising the 1994 budget request to

seek extra funding for these new programs.

ARPA

ARPA received $25 million for FY 1993 to

stimulate commercial EV demonstration programs, $5 million of it to be spent in Hawaii and

$2.5 million in Sacramento, the rest without

restriction. The funding is for setting up consortia

with industry and utilities, sharing at least 50

percent of the cost, starting in the first quarter of

1993. A broad agency announcement (BAA)25 to

solicit proposals went out in late 1992. ARPA has

never funded commercial EV work before, although it has long been involved in the development of electric drives for military vehicles such

as tanks and personnel carriers.26 The agency also

received an appropriation of $11.8 million to

develop fuel cells for a range of applications

including automotive, with the authorizing legislation urging the Department of Defense (DoD) to

encourage dual-use aspects through cost sharing

with industry and cooperation with DOE.

THE UNITED STATES ADVANCED

BATTERY CONSORTIUM

The shape of national battery research has

changed considerably since January 1991, with

the formation of the United States Advanced

M $0.5 nlillion goes to a separate capital and eqtipment ac~unt.

25 A BAA k we a rquest for propo~s ~), but less spixflc in is requirements.

p~soti COIIMIIti~tiO~ Dw. 16, 1W2.
188 I Defense Conversion: Redirecting R&D

Battery Consortium. 27 Previously, most research

was piecemeal. Automakers and small firms did

some-Ford patented the sodium sulphur battery

in 1965—and the national laboratories kept up

small programs, with Lawrence Berkeley Laboratory and Sandia taking the lead.28

USABC, whose principal members are the Big

Three U.S. motor companies, was established to

focus national attention and research on batteries

deemed by the members to have the greatest

commercial potential.29 Decisions as to which

technologies will be pursued are no longer in the

hands of the DOE labs, but are made by the

consortium. Those technologies selected will be

the object of more research, with much larger

budgets than they previously had in the DOE

program; funding for other types of batteries will

be heavily reduced. The boost for the selected

technologies is considerable: the budget for the

first 4 years of USABC is approximately $260

million, provided in equal shares by DOE and the

nongovernment participants.

Chrysler, Ford, and GM are each providing

between $36 and $40 million, and $11 million

comes from the Electric Power Research Institute

(EPRI), a research consortium for the electric

utility business. The Federal Government matches

research funds, and the contractors doing the

research themselves supply some funding. In FY

1993 the DOE contribution to USABC was at

least $24.2 million, out of a total $60.8 million the

agency contributed for EVs.

The consortium is planned to run for 12 years,

although a partner may withdraw at any time,

USABC has set performance and development

Table 7-5--USABC Battery Technical Objectives

Mid term Long term

Specific Energy (Wh/kg). . . . . . . . . . 100

Energy Density (Wh/L) . . . . . . . . . . . 135

Specific Power (W/kg) . . . . . . . . . . . 150

Power Density (W/L) . . . . . . . . . . . . . 250

Life (years) . . . . . . . . . . . . . . . . . . . . 5

Life (cycles to 80% discharge) . . . . . 600

Cost ($/kWh) . . . . . . . . . . . . . . . . . . . <$150

Operating Temperature

Range (°C) . . . . . . . . . . . . . . . . . . -30 to 65

Recharge Time (hours). . . . . . . . . . . 6

>200

>300

>400

>600

10

1,000

<$100

-40 to 85

3

SOURCE: United States Advanced Battery Consortium.

goals for mid- and long-term batteries on a

timetable largely shaped by the coming requirements of California emissions law (see table

7-5).30 The goal for mid-term batteries is to have

completed all the design and development work

and the successful pilot production of a prototype

by 1994. The goals for the longer term batteries

are to have demonstrated feasibility by 1994 and

to be able to produce the battery by 1997.

The consortium is focusing its attention on a

relatively few battery technologies that seem to

offer the best hope of meeting the goals they have

set, probably a main choice and a second choice

in both the mid- and long-term categories. The

main mid-term choice is the sodium sulphur

battery .31 It has higher power density than today’s

principal working batteries, lead acid and nickel

iron, and has been the subject of more research

than most rivals. As well as awarding development contracts, USABC will buy some batteries

for testing from companies that do not wish to

give up any of their proprietary rights by doing

27 Dr. FmnkJame~o~ msistitprogrammanager, electric vehicles, General Motors, personal COmmUni~tiOXL Jan. 13, 1992; JotiW*ce,

director, electric vehicle planning, Ford Motor Company, personal communication Jan. 9, 1992.

28 wKi.uosh@ ~~en~ Berkeley Laboratory, personal communication, Mar. 23, 1992; and Gary Henrickseu Argonne Ntional

Laboratory, personal communication Apr. 8, 1992.

29 u~t~ Stites Advanced Batte~ Consofiq “~sler, Ford, @ner~ Moto~ Form Adv~~d Battery Researeh consortium,” Pr~S

release, Jan. 31, 1991.

~ united Advanced Battery Consortiwq ‘‘Information Sheet,” C)ct. 22, 1991.

31 RepreSenQtiveS of ~S1er, Ford, and Gene~ Motors ~sugg~ted tit~ WaS so d- Sqmate klterviews in eiUIJJ 1992, and the

fti announcement was reported in William R. Diem, “Sodium-SulfurB attery Gets Consortium Backing,” ,4u@norive News, Apr. 5, 1993,

p. 22.
7—Personal Transport: Road Vehicles I 189

funded research.32 The consortium will hire a

technically qualified company to perform tests on

battery systems.

The first contract awarded, however, was for

the development of a nickel-metal hydride prototype. 33 The Ovonic Battery Company of Troy,

Michigan, was awarded $18.5 million to develop

their technology, already employed in a range of

small electronic products such as laptop computers and cellular telephones, into a larger cell

suitable for use in an EV. The contract also called

for initial production of the battery once development is complete. The technology is promising; if

goals are met, Ovonics expects to produce a

battery commercially in 1994, which if used in

place of the lead acid batteries in a car like the GM

Impact would more than double its range while

reducing lifetime cost.34 On October 29, 1992 the

consortium announced further contracts, totaling

$42 million, with three companies and Argonne,

Sandia, and Idaho National Engineering Lab, and

further CRADAs with Lawrence Berkeley Lab

and the National Renewable Energy Lab (see

table 7-6).35

The goals set by the consortium are ambitious;

they require progress in some cases from the level

of a single cell of 2 volts, achieved in a laboratory,

to an entire battery of such cells, capable of

delivering 300 volts. The step up in performance

demands engineering successes that are far from

straightforward. Critics of the consortium worry

that it has put its eggs into too few baskets, and

that many battery technologies are at too early a

stage in their development to allow sensible

decisions to be made about which to support.

They fear that promising opportunities will be

lost when money dries up for some of the

technologies not chosen by the USABC. However, the arguments for concentration of effort on

a few battery types are practical: the pressure of

California’s coming requirements on manufacturers demands that they strongly support those

technologies that appear to offer the best chance

in the near term.

A further source of strain in the consortium,

and one that slowed its early progress, has been

clashes among the Big Three, DOE, national labs,

and small businesses over intellectual property

rights. The USABC agreement was concluded at

the highest level of DOE, in the office of the

Secretary of Energy, and takes a different approach to issues of property rights from that

adopted in most technology transfer agreements

between labs and industry worked out at lower

levels of DOE. The USABC agreement requires

that companies participating in research give up

some intellectual property rights to USABC.

Some experienced government officials see this

as a strong disincentive to participation, particularly for small businesses, which are often a fertile

source of new ideas and whose competitive

position depends largely on the ability to profit

from this inventiveness.36

The USABC agreement does grant small businesses exclusive rights to their inventions in all

fields other than the automotive, and in the

automotive field requires that USABC pay royalties to the firm or lab scientists that made the

invention, although the consortium retains the

32 Jack Guy, Research Institute, personal communication Sept. ~, 1992.

33 Boym Ren.sberger, ‘‘New Battery Required for Autos of Future, ” The Washington Post, May 25, 1992, p. A3; and USABC, “United

States Advanced Battery Consortium Announces First High-Tech Battery Contract With OVonic Battery Co., ” press release, May 19, 1992.

~ Gerry Kobe, “EV Battery Breakthrough?” Automotive Industries, September 1992, p. 63.

inBatteryDevelOpment contracts; ‘rhrIx More National bbs

USABC Researc k“ press release, Oct. 29, 1992.

36 U.S. Dep~ent of Commerw, OffIce of the Undersecretary for Technology, ‘‘Statement of Concerns Relating to DOE’s ‘Exceptional

Circumstances’ Determina tion, ” undated, and accompanying letter from Robert M. White, Department of Commerce, to John J. Eastoq general

counsel, U.S. Department of Energy, Jan. 15, 1992.
190 I Defense Conversion: ‘Redirecting R&D

Table 7-6--USABC Awards as of October 1992

Awarded to: Value Duration Research area

Contracts

Ovonic Battery Co.

W.R. Grace& Co.

Johnson Controls, Inc.

SRI International

EIC Laboratories

UCAR Carbon Company, Inc.

Saft America

Argonne National Lab

Delco Remy

Valence Technologyr Inc.

$18.5 million 2 years Mid-term nickel metal hydride batteries.

$24.5 million 3 years Lithium polymer battery.

$6.3 million in first

year

$17.3 million 3 years Lithium iron disulphide.

not yet announced not yet announced Tentative contract subject to DOE approval, to

develop ambient temperature lithium

polymer technology.

CRADAs

Sandia National Lab $3 million 1 year Applied research on lithium polymer battery

materials.

Argonne National Lab $7.3 miIlion 38 month Lithium metal sulphide research (ANL invented

this technology).

Argonne National Lab $1 million 36 month Nickel metal hydride and high-temperature

battery testing

Idaho National Engineering Lab $900,000 24 month Nickel metal hydride and high-temperature

battery.

Lawrence Berkeley Lab $1.1 million 3-4 years Lithium polymer battery.

National Renewable Energy Lab $2.2 million 3-4 years Insulation for high-temperature batteries.

SOURCE: U.S. Advanced Battery Consortium, press release, Oct. 29,1992.

rights to it.37 Lab staff remain uneasy that they

have been forced to surrender one of the most

powerful incentives they could offer their researchers to do cooperative research, although the

round of CRADA announcements in late 1992

suggests that problems are being ironed out. Early

negotiations were further protracted by the variations among the national labs in their handling of

intellectual property under CRADAs (see ch. 4).

USABC negotiators abandoned the attempt to

make a blanket CRADA covering all their dealings with the labs; instead they forge separate

ones with each participating lab.

The concentration of effort and resources is

intended to push the technology forward to meet

the demands of clean air legislation. Despite its

slow start, the formation of the consortium has

dramatically increased the attention paid nationally to battery research and to EVs in general, and

this may ultimately prove a benefit to all battery

technology research.

FUEL CELL R&D

Funding for fuel cell research has lagged far

behind that for battery R&D. Fuel cells have

received only small amounts of DOE funding for

a number of years, a few million dollars per year,

starting with $1 million in 1986 (see table 7-7).38

This provides for small research programs at

Argonne and Los Alamos national labs and more

recently an $1 l-million demonstration program at

Georgetown University to build three phosphoric

 Cooperative Agreemen6 Nov. 4, 1991, p. 1.

MI pm&t pa~ fiel ce~ pro= vehicle propulsion divisiorq conservation and renewable, U.S. Department of Energy, pemo~

Cornrnunicatiom May 14, 1992.
7—Personal Transport: Road Vehicles I 191

acid fuel cell buses.39 Several transit operators,

including those in New York City and Los

Angeles, are interested in testing the buses. The

other major DOE effort is a contract with Allison

Gas Turbine, a division of GM, to develop PEM

fuel cells.

DOE is preparing a program plan to increase its

support of fuel cell technology, keeping in mind

the possibility of using resources that may become available within the department’s national

labs. 40 A DOE spokesman suggested that the

program might learn from the formation of the

USABC and try to link different groups involved

in fuel cell development more closely in order to

coordinate research on several of the most pressing issues. Defense firms might be among those

to become involved in such a program; aerospace

and other defense technology has found application in fuel cell research, both directly, as a result

of the industrys work on fuel cells for its own

uses, and in other ways, through improvements in

materials. The graphite cloth used in the fabrication of wings and tailplanes on some aircraft has

enabled researchers at Texas A&M University to

develop plates for a PEM fuel cell that have the

potential to greatly reduce the weight of the cell.41

1 Markets for EVs: Fleets

Several institutions already have experience in

the use of EVs as fleet vehicles through Federal

purchases. Fleets are among the most promising

potential markets for battery EVs in the near

future. In many fleets the vehicles are driven on

short routes, and are centrally parked at night,

easing charging and maintenance. The advantages of EVs, such as their efficient use of power

in stop-and-start driving, are often appropriate to

the kind of use delivery or service vehicles get.

For this reason, EV makers and interest groups

Table 7-7—DOE Fuel Cell Funding

(with funding for batteries and EV

systems for comparison)

FY 1990 FY 1991 FY 1992 FY 1993

(millions of dollars)

Fuel cells . . . . . . . . $3.6 $8.9 $10.4 $12.0

Batteries. . . . . . . . . 7.9 8.9 26.7 31.5

EV systems . . . . . . 6.7 7.3 6.1 16,8

SOURCE: Pandit Patil, U.S. Department of Energy, Vehicle Propulsion

Division, Presentation at Princeton Fuel Cell Conference, Princeton

University, Center for Energy and Environmental Studies, Oct. 21,

1992.

have targeted commercial and government fleets.

So far, fleet purchases of EVs that have taken

place have been too small to constitute a significant demand, but the numbers are likely to rise as

the requirements of the Clean Air Act start to take

effect. Annual fleet sales in the United States are

about 1.7 million vehicles, so laws that require a

fraction of these to be less polluting are likely to

affect many more vehicles than are covered in

programs simply designed to demonstrate and

encourage a particular new technology, such as

the DOE site operator program described here.

Electric vehicles still have certain disadvantages even for fleets, primarily their high price.

Nor has all past experience of their performance

been favorable: the Postal Service found the 200

electric jeeps it ran in the 1970s to be unreliable

and costly to service. Legislation that targets fleet

owners can try to reduce the costs of early

investment in EVs through tax incentives and

other financial benefits.

A FEDERAL EV DEMONSTRATION PROGRAM:

DOE SITE OPERATOR PROGRAM

Several institutions are acquiring EVs for use

in their fleets with the financial support of DOE

through its Site Operator Program, a small

development dep~en~ &OrgetO~ University fuel Ceu bus pXUgr~,

communication May 4, 1992.

~ Pandit Pa@ op. cit., footnote 40.

41 Jo~Appleby, dir~tor, t2enterforEkctrochemica.1 Systems and Hydrogen Research Tem En@=@ ~riment SUtiO~ ‘eW ‘&M

University, personal communication May 6, 1992.
192 I Defense Conversion: Redirecting R&D

program established in the mid-1970s in response

to the first oil crisis.42 It began as a demonstration

program, under which DOE provided financial

support for EVs run by 13 different organizations

around the country, and has since evolved to have

a strong testing component as well. Each year the

site operators come to DOE with a proposal for

the coming year’s agenda, including the purchases they want DOE to support. This support

can cover up to half of the cost of an EV.

The site operators, which include utilities,

universities, a technical college, and the U.S.

Navy, run small fleets of EVs and give quarterly

reports on their performance to the central management of the program, at DOE’s Idaho National

Engineering Lab.43 The program is thus accumulating a useful body of data on life-cycle costs,

efficiencies, performance, and so forth for a

variety of vehicles, motors, and batteries. In FY

1991 the program’s budget was $1.8 million, but

the redistribution of DOE’s EV money as a result

of the birth of USABC reduced this to $1.2

million for FY 1992.

THE U.S. POSTAL SERVICE

The U.S. Postal Service (USPS) ran 200

electric jeeps in the 1970s, but abandoned the

program because of problems with the basic lead

acid batteries used by the vehicles at the time.44

The memory of the vehicles’ drawbacks is still

strong within USPS, and disinclines the service to

try its luck again.45

Even though the Post Office vehicles drove

only 20 to 30 miles a day, the 500 or so stops and

starts made on some routes put a great strain on

the batteries, which were less advanced than those

available today and which had the additional

problem that they required constant maintenance,

such as regular topping up of the water in them.

The charging and control equipment was expensive because it was made by only a few manufacturers, and the eventual running costs of the EVs

worked out to be three times those of the ICEVs

ordinarily used by the Post Office.

The Postal Service is nonetheless acquiring

other alternative fueled vehicles for its nationwide fleet of 180,000 vehicles. Most of these at

the moment are versions of the standard long life

vehicle (LLV) built by Grumman and converted

to run on compressed natural gas (CNG). This

choice illustrates the need for caution in assessing

the future potential of EVs: there are other

low-polluting alternatives to gasoline vehicles

available, and these often perform better and cost

less than EVs. The improvements in air quality

that EV use could bring may not appear to

individuals and companies to warrant their price

and performance penalties.

Although CNG is the main focus of Postal

Service fleet alternatives, the service planned to

test six electric Ford Ecostars running on sodium

sulphur batteries in late 1992 in southern California (see section on current EVs below). The vans

were made in the United Kingdom and are

right-hand drive vehicles, which fits postal requirements for stopping frequently at the curb and

getting in and out safely. The batteries cost

$40,000, emphasizing that the economics of the

Postal Service’s fleet do not obviously favor

electric vehicle use at the moment. LLVs, when

 DOE Energy programs site @rater Progr-, IWO Nati~@ %Y~g Laboratory, personal

communicatio~ Apr. 14, 1992.

43 me members Me ei@t utilities-Arizona Public Service, UPart.ment of Water and Power, Orcas Power and Light

(Washington State), Pacific Gas and Electric (California), Platt River Power Authority (Colorado), Potomac Electric Power Company

(Washington DC), Public Service Electric and Gas Company (New Jersey), and Southern California Edisou lhree universitie*Kansas State

University, Texas Engineering Experimental Station at Texas A&M, and University of Southern Florida; York Technical College (South

Carolina); and the U.S. Navy.

44 David p~lips, fl~t ~~emen~ U.S. Postal Apr. 15, 1992, Persoti co~~cation.

45 one of ~ ~of tm pr=ipi~te a rush t. for such ~ tbt of USPS will keep users

from buying future vehicles, even if they are much better than the earlier ones.
7—Personal Transport: Road Vehicles I 193

bought in the quantities the Postal Service does,

cost $13,000; they are driven 6,000 or 7,000 miles

a year, so that gasoline costs are $400 to $500 a

year. At these prices a battery pack would have to

cost one-third to one-quarter the present cost of

even relatively cheap lead acid batteries to

compete. The Postal Service is discussing with

Hughes the possibility of testing a version of the

sealed lead acid battery developed for GM’s

Impact, and Grumman has made initial enquiries

of BMW on the possibility of developing a power

source for the LLV around their sodium sulphur

battery.

GENERAL SERVICES ADMINISTRATION

The General Services Administration (GSA),

which manages 25 percent of the vehicles owned

by the U.S. Government, has no EVs in its fleet of

136,000, but does have 65 alternative fuel vehicles (AFVs) that can use up to 85 percent

methanol. GSA is expanding its AFV fleet

considerably .46 Executive Order 12759, of which

section 11 enjoins the executive branch to acquire

as many AFVs as possible, is driving the increase.

GSA’s choice illustrates again that when “less

polluting vehicles” are stipulated, there are

choices other than EVs, and these alternatives

may often be preferable.

As the buyer of almost half the 300,000

nonmilitary Federal vehicles, GSA represents a

major potential purchaser of EVs. However, a

possible obstacle is regulations that restrict how

much can be paid for particular items. If government agencies are to buy EVs, allowance must be

made for their high cost.

EXISTING AND NEAR-TERM EVs

The first EVs to be produced commercially will

almost certainly be aimed at the California

market, where the 1998 ZEV regulations are

designed to force open a niche for producers.47

With this opportunity as an incentive, a range of

vehicles is being developed.

1 Amerigon

A group that is directly attacking the challenge

of redirecting aerospace and defense capability in

Southern California towards transport is Amerigon, of Monrovia, California.48 The chairman,

Lon Bell, who founded the company in 1991, is

coordinating small and medium aerospace and

other high-tech firms in the area to produce

subsystems for EVs; the company unveiled a

prototype “showcase EV” in December 1992.49

Bell spent the previous 20 years as owner, and

then, after selling it to TRW, manager of Technar,

a company he founded that produces high-quality

automobile and aerospace parts such as&accelerometers for use in triggering airbags and selflocking seat belts.

Amerigon’s vehicle is intended to highlight

strengths of local high-tech firms as quality

suppliers to potential and current manufacturers

of automobiles-conventional as well as EVs. By

matching lists of customer or user requirements

with available skills, Amerigon has broken down

the EV into 45 subsystems that can be developed

independently, and is seeking the appropriate

local engineering firm to work on each of them.

If the initial vehicle is well received, there is a

46 Willim Mvers, dirwtor of altermtive fueled vehicles, General Services Administration personal CQmmtiCXtiOQ Apr. 17, 1992.

47 ~~fier a~apt WaS made to stimulate EV production in a January 1989 effort known as the b Angeles tititive, wtich sought

proposals to supply the I.ms Angeles market with 5,000 electric cars and 5,0(KI electric vans by 1995, However, the outcome of this effort is

increasingly in doubt. None of the Big Three responded to the RFP, and a small Swedish company won the contest. It has fared badly in

California’s troubled wonomy, and has failed to raise the private money it requires to match the support it has received from the city. By the

second half of 1992 the project was operating at a reduced level until a major sponsor could be found. ((L.ars Kyrkhmd, presideng Clean Air

Transpofi personal communication, Jan. 14, 1992; E.J. Constantine, legal consultan~ Clean Air Transpo@ personal communication Sept. 17,

1992; Jerry Enzenauer, Ims Angeles Department of Water and Power (DWP), personal communicatio~ Jan. 23, 1992.))

48 tin Bell, C-mArnerigOq communicatio~ Sept. 23 and 24, 1991, Oct. 17, 1991, and Jan. 23, 1992.

49 Kristine Stiven Breese, “Calif. Group Unveils Electric Concept Car, ” Automotive News, Dec. 7, 1992, p. 14.
194 I Defense Conversion: Redirecting R&D

possibility that Amerigon would produce it commercially.

Many of the subsystems could have application

in conventional vehicles as well as EVs, and the

intention is to turn the high-tech industry of

Southern California into a resource for the auto

industry. Heating, ventilation and air-conditioning (HVAC) systems, for example, present a

pressing challenge to potential EV makers, since

there is no waste heat to use from the engine, nor

can they consume a lot of electricity, as this would

detract from the range of the vehicle, already a

weakness of EVs. A good solution to this design

problem could find application in a wider range of

vehicles, and even in buildings. Amerigon is

working on a design based upon a heat exchange

turbine system, which would have a further

advantage of eliminating chlorofluorocarbons

(CFCs) from the cooling system.

So far the showcase vehicle project has 11 firm

participants besides Amerigon, including AlliedSignal Aerospace, the Composites Automation

Consortium, Fairchild Manufacturing, Hughes,

and Intel.50 Each participant will internally fund

its own R&D on specific components, and

contribute an additional sum of between $25,000

and $50,000 to overall marketing, system design,

and program management costs. The total proposed budget for the program is $10.4 million.

9 Calstart

Since the Amerigon showcase vehicle plan was

first conceived its scope has grown considerably.

It is now one of seven projects taking shape under

the banner of Calstart, a nonprofit consortium.5l

Calstart is intended to create a new industry in

California providing transportation systems and

technologies; it includes utilities, aerospace companies, universities, small high-tech companies,

transit agencies, and representatives of labor and

environmental interests. Its proposed funding is

$37 million, of which $23 million ($4 million in

cash and $19 million in kind) was accounted for

by the contributions and commitments of members by mid-1992. Calstart received $4 million in

Federal funds under ISTEA, as one of four EV

grants awarded in mid-1992, and $2 million from

the State of California, and was trying to raise

further private support.

Besides the showcase EV program, Calstart

includes projects on EV infrastructure, an electric

bus/mass transit program, a “neighborhood EV,"

EV testing, the linkage of university and Federal

lab research, and a fund for discretionary R&D.

The Los Angeles Department of Water and Power

will manage the $14.7-million EV infrastructure

program, which will coordinate activities already

underway individually by each of California’s

five utilities, including work on charging, servicing, and battery recycling. Participants include

Hughes, which has expertise in inductive recharging, as well as the utilities. The Electric Bus

project, with a budget of $4.7 million, is headed

by Southern California Edison. The project plans

to run four electric shuttle bus demonstrations,

and then use the resulting data to develop

prototype light duty transit vehicles.

Strong support for the project has come from

the city of Burbank, a potential site for housing

Calstart’s headquarters and a manufacturing plant

to produce new vehicles.52 Lockheed Corp. recently closed its Burbank facility and relocated to

Georgia, and the city is suffering economically as

a result. An EV manufacturing industry could

potentially provide work for some of the hundreds

of skilled workers left unemployed by this

departure and cutbacks by other area aerospace

companies. The International Association of Machinists and Aerospace Workers backs the idea,

and is working with the University of California

at Berkeley to match the skills of workers to those

M c~s~, “lhecutive Summary, “ unpublished document 1992,

Amerigo~ personal communication May 5, 1992.

parlc EIeCtriC Car Industry,” LosAngeles Times, Jm 22, 1992.
needed for the new industry .53 Lockheed has

provided a 155,000 square foot facility rent-free

for 2 years, starting in mid-1992, and the City of

Burbank has approved $110,000 for minor improvements to speed up the move-in.

1 The Established Auto Industry

The big auto manufacturers are also moving,

although to a more protracted timetable, towards

EV production. Although each of the Big Three

has its own EV program, discussion was underway in early 1993 of cooperation on many aspects

of EV design, including the standardization of

processes and components such as charging

systems.54 This is taking place under the umbrella

of a US CAR consortium announced in December

1992. The pressure of the California requirements

is driving the U.S. automakers, along with the

knowledge that the Japanese auto industry is

already working on EV issues through MITI. 55

Each U.S. manufacturer has a small development

program of its own, but the numbers of jobs

involved have been very small so far-100 or 200

in each case.

GM announced in April 1992 that it would be

producing a commercial EV 2 years later, in the

spring of 1994, based on the Impact, first shown

as a concept car at the 1990 Detroit motor show,

but backed away from this decision later in the

year.

56 The project was scaled back because of its

expense and GM’s financial difficulties (the

company had spent $400 million on its EV

program by late 1992), compounded by uncertainties about the market for a two-seater EV and

7—Personal Transport: Road Vehicles

the performance of the Impact’s advanced

195

lead

acid batteries compared with what might develop

in some of the USABC projects. Plans to use

ex-aerospace workers from Hughes, and a Hughes

facility in Torrance, California, were on hold in

early 1993. The current plan is to produce not

more than 50 of the vehicles during 1993 for trial

use in utility fleets. All of these are to be built in

the Lansing, Michigan, Technology Center. A

GM vehicle, the British-built Griffon, provides

the basis for another EV, the GVan, a light van

with a 60-mile range that runs on lead acid

batteries. About 100 are in service, mostly in the

fleets of electric utilities, and they come in both

passenger and cargo configurations.

Ford is adapting 80 of its European Escort vans

to run as EVs powered by sodium sulphur

batteries (a technology patented by Ford in 1965),

built by Silent Power and Asea Brown Boveri.57

The vans, to be known as Ecostars, will have a top

speed of 75 mph, a range of about 100 miles, and

carry a 900 pound payload (less than the 1,700

pound payload of the ICE version because of the

800 pounds of batteries on board). The drivetrain

was developed by General Electric at their

Cincinnati plant.58 The vehicles will be leased to

fleet customers—mainly electric utilities-for

$100,000 for 30 months, a price that does not

cover the cost of building them. Ford representatives estimate that about 100 engineers are

directly working on the program.

Chrysler plans to produce an electric version of

its popular minivan, the Plymouth Voyager,

 of MachinisB and Aerospace Workers, persod

communication Sept. 27, 1991.

~ ~Weiss, U.S. Council for Automotive Research personat communication Feb. 16, 1!393.

55 Jack K~bler, ‘ ‘It’s Team U.S.A. VS. Team Japan Now, ” Automotive News, Dec. 14, 1S92, p. 53.

56 p~l Fr~e, t ‘GM Readies Elm~c Cw for ‘~Debut,’’A~r~~~Ve New~, Apr. 27, 1~, p, 1; and General Motors, “GMElectric VtiCk?.S

Progress Repom” winter 1993.

57 Rob- Nicho~, ~mger, elw~c ~e~cle s@ategy and planning office, ~d Ann N~e~Mm, govemmenti milks &!XKKia@ fOr

environmental matters, Ford Motor Company, personal communication, Sept. 16, 1992.

58 Ka~y Jac@q C ‘Ford upgr~es IN EIIx@ic Vehicle Project, ” Automotive Ne~S, J~Y 20) 1~, P. 7.
196 I Defense Conversion: Redirecting R&D

called the TEVan.59 This van will seat five

passengers and use nickel iron batteries to achieve

a range of more than 100 miles and a top speed of

65 mph, with a battery life of 100,000 miles. The

50 or so vans to be produced in 1993 will cost

$120,000 apiece to fleet buyers.

If the Big Three succeed in moving into EVs,

they will become large buyers of subsystems and

components, some of which might be supplied by

former aerospace and defense contractors. On

March 3,1992, Chrysler Corporation and Westinghouse jointly announced a program to develop an

improved propulsion system—an AC electric

motor and controller-for electric vehicles.60

Their goal is to improve the acceleration and

range of EVs by increasing the efficiency and

power of the propulsion system. Westinghouse

has long experience with EVs—the company

even built one in 1908--but its recent work has

derived from research in the electric systems

group (ESG) on underwater propulsion units,

61 

mainly for the Navy. Many of the 30 to 40

people working on EV propulsion within Westinghouse started on ESG defense projects. The

division now does 70 percent commercial work,

and the rest defense-related.

Foreign car manufacturers are also developing

EVs. Fiat is the world leader in EV sales: it has

sold 450 Elettras, an electric version of the Panda.

BMW, Mercedes-Benz, Renault, Peugeot, Audi,

Fiat, Mazda, Toyota, Nissan, and the Swiss watch

firm Swatch all have EV programs at various

stages of development.62 There are also more

small firms in the United States (e.g., Solectria of

Arlington, Massachusetts)

car, Horlacher).

i EVs in Japan:

Program”63

The Machinery

Japan’s Ministry

and Europe (e.g., Sol-

“EV Extension

and Information Division of

of International Trade and

Industry (MITI) announced an “EV Extension

Program’ on October 14, 1991. The program is

ambitious, and considerably further advanced

than any U.S. plans thus far. It aims to develop

EVs and supporting technology so that by 2000

an EV production industry should be able to take

off autonomously. To this end performance targets have been set-mileage per charge of 155

miles, 75 mph top speed, a battery life of 4 years,

and a price about 1.2 times that of a corresponding

ICEV; plans are for an EV population of 200,000

on the roads of the Tokyo and Kanagawa areas by

the year 2000, with production of 100,000 units

that year. In 1992 there were about 1,500 EVs

operating in Japan.64

The program has four phases. The first efforts

will be to introduce EVs into use in governmental

agencies through subsidized purchases, and to

support R&D to improve the technology. The

government will also provide infrastructure for

charging and servicing. The second phase, between 1994 and 1997, targets utilities and commercial delivery fleets as users of EVs, with

subsidies through taxation and financing advantages, and incentives such as preferential parking.

For the last 3 years of the decade the focus shifts

to developing a wide public demand for EVs by

 Company’s Alternative-Fuel Vehicle badenship, ’

press release, Apr. 15, 1992.

w Chrysler Corporation and Westinghouse, “Chrysler, Westinghouse Join in Development of New Electric Vehicle Propulsion System,”

press release, Mar. 3, 1992.

61 Ted ~ic=ter, W~S~@OUSe El~&ic, Elec&ic Systems Group, pIXSOnd communicatio~ Sept. 10, 1992.

Review, The Wall Street Journal, The New York

Times, and elsewhere.

63 F~O~ ~o~tion provid~ on my 29, 1992 by me ~lce of tie Assismt Secrew for Technology Policy of the U.S. Department of

Commerce Technology Administration, Washington DC, drawn from the incoming telegrams from the U.S. Embassy in Tokyo, April 1992.

w Wctid Jo~o~ “Jap~~e Se& E1ec~c CM Standards, ” Automotive News, Aug. 31, 1992) P. 6,
7—Personal Transport: Road Vehicles I 197

bringing the price down and establishing mass

production and servicing facilities. The fourth

and final phase, from 2001 onward, is envisaged

as a time of successful maturation for the technology, with continuing extension of their use as

personal transport, and no need for special

promotion measures since demand and supply

will have been well-established. Further details

have not been announced. Japanese automakers

met in August and September 1992 to begin to set

standards for major EV components.65

MITI also announced a 10-year battery development program starting in April 1992 with a first

year budget of 257 million yen ($2 million)

expected to grow to between 1.37 billion yen

($10.5 million) and 2.23 billion yen ($18.5

million). The program will concentrate on developing lithium batteries for utility load leveling

and long-term storage (long life) and for electric

vehicle use (high energy), and will culminate in

pilot production. Some effort will also be expended on continuing existing research into basic

components for sodium sulphur and zinc bromine

batteries. A further program by the auto division

of MITI assigns 1.85 billion yen ($14.2 million)

for Japanese FY 1992 to a new 5-year EV

infrastructure research project.

EMPLOYMENT AND COMPETITIVENESS

The overall employment effects of the birth and

growth of an EV industry are hard to gauge. For

the next several years EVs are unlikely to dent

ICEV sales at all, while the scale of production

and consequent employment will be small. Each

of the Big Three has 100 or 200 employees

engaged in EV-related work. Smaller EV operations and the first-tier suppliers of major components like powertrains and batteries probably

employ several hundred more.

In the longer term, if EVs simply replaced

ICEVs, employment in auto manufacturers would

probably fall, even if their overall sales stayed the

same, as EVs have fewer complex parts for

assembly and are therefore likely to require less

labor. 66 None of the automakers is willing to

divulge employment projections for EV production, but one can make some estimates. If between

40 and 50 percent of the cars sold in the year 2003

were in areas where laws required that 10 percent

be ZEVs, then EV sales night be on the order of

500,000 a year. Based on discussion with companies cooperating with current Big Three efforts

and the pattern of employment in today’s auto

industry, one can estimate that the production of

this number of vehicles might support on the

order of 1,000 jobs in powertrain production, and

10,000 in vehicle assembly.67 The broader supplier base on which this was founded would

extend to many more workers—several thousands in an array of manufacturing industries. The

distribution of these jobs of course would differ

from that in ICEV production; there would be no

call on the 19,000 jobs in carburetor, piston ring,

and valve production, for instance, but a considerable increase in the 23,000 jobs in auto battery

production (1990 auto industry figures).68 These

figures are highly speculative, however, based as

they are on the assumption of widespread adoption of the California standards. This is still in

doubt, given the current state of development of

the technology, and the record of past relaxation

of environmental regulations in the face of

concerted industrial opposition.

65 ibid.

66 For ~~y~~ ICEV~, he ~ropofion of auto indu~~ jobs in assembly is 2’7 percent (lg$)t) figure, down from 35 percent ill 1975). (U.S.

Department of Labor, Bureau of Labor Statistics, Employment and Earnings, 1991.)

67 me fiWe of 1,000 in Powertrain production might be compared to the appro ximately 1,000 employed in one of today’s most efficient

engine factories producing 430,000 ICES a year. The 10,000 order of magnitude for assembly workers is arrived at by taking a ratio of assembly

jobs to vehicles produced somewhat less than that for ICEVS (equivalent to having 25 percent of total employment in assembly).

68 U.S. Dep~ent of ~bor, B~eau of ~bor Statistics, JaII~ 1991.
198 I Defense Conversion: Redirecting R&D

Some of the supplier firms are likely to be

companies with experience in aerospace and

defense production. After the Cold War, an earlier

report in OTA’s assessment of effects of the

defense build-down on the civilian economy,

found that second-tier military suppliers are often

already diversified.69 The machine shops, semiconductor manufacturers, foundries, and other

component suppliers that competed for defense

orders and many of which already supply the auto

industry would naturally compete to supply an

EV industry. In the intermediate tier-suppliers

of major subsystems-several firms are already

involved-notably Hughes, through GM, and

Westinghouse, in collaboration with Chrysler.

Their experience thus far reflects a number of

familiar conversion lessons: the technology match

is often good; workers can adapt; management

and corporate structures reflecting years of dealing with DoD are major obstacles. Even when

firms do successfully refocus efforts, the scale of

EV opportunity is not comparable to the level of

defense activity in the mid-1980s. The 30 people

working on EVs at Westinghouse must be set

against the 1,600 defense workers the company

laid off in 1991, and the 5 percent attrition

through along hiring freeze that has accompanied

the defense build-down. This is not to say that the

opportunities are not good, but simply to reiterate

another familiar point from the earlier report in

this assessment—there is no single solution to

company conversion needs.

Calstart is the most aggressive attempt to link

the rise of the EV to the decline in the fortunes of

the aerospace and defense industries with the end

of the Cold War. It has government support

through the ISTEA demonstration program and

some State programs. Its organizers continue to

look for further support, both financial and in

kind. Calstart hopes to acquire cheaply some of

the equipment mothballed by Lockheed in their

Burbank facility, for example, including office

equipment such as desks and chairs, computeraided design (CAD) systems, and numerically

controlled milling machines.

One concern expressed by some members of

the existing automobile industry is that government support for a fledgling EV industry in

California would be inappropriate because such

jobs as might be created would come at the

expense of workers in Detroit, as the new EV

industry cut into existing markets. Displaced

aerospace workers would benefit at the expense

of auto workers, they argue. These arguments

probably have a greater emotional than factual

content. At least until the late 1990s and probably

after that, any jobs created in California will be

predominantly in the preproduction stage of

vehicle manufacture. Few EVs will be sold, and

those that are sold are not necessarily going to be

bought instead of ICEVs: they will be second and

specialized cars for the most part. There may be

some longer term truth in the claim that, if

successful, a program such as Calstart’s will lead

to a slow restructuring of the geographical distribution of some auto supplier and manufacturing

jobs, but it is by no means clear that in the absence

of such programs Detroit, Atlanta, or Spring Hill

would retain those jobs.

America at the moment leads the world in

much EV technology, particularly motor and

controller design, but the seriousness with which

MITI and the European manufacturers are pursuing batteries, fuel cells, hydrogen storage, fastcharging, light-weight materials, and a host of

other EV-related technologies indicates that this

lead can only be retained if the country strives to

do so. Most of the major European and Japanese

automakers have EV development programs,

motivated both by domestic demand--EVs have

been available and used for commuting on a small

scale in Switzerland and Germany for several

years-and by the promise of a market in

California. Pressure mounts to develop alternaof T~~~lo~ ~~ssmen~ A..erthe Cold War: Li~”ng With LowerDefense Spending, O’E4-ITE-524(W@IiX@Q

DC: U.S. Government Printing Office, February 1992).
7—Personal Transport: Road Vehicles I 199

tive vehicular technologies, and while the risks

are great for the first entrant in this potentially

large business, the danger of being left behind

when the plunge begins is at least as bad.

California will be the first large market, but the

rewards for success, producing a vehicle that

gives vigorous performance at a reasonable price,

will extend to export markets as well. Europe is

enacting environmental standards more exacting

than those of the United States in some other auto

fields-Germany’s recycling laws, for example--

and consumer awareness is high. The demand for

personal vehicles is likely to grow steeply in

developing countries, both those traditionally

thought of as the Third World, and in Central

Europe. Japan is pursuing markets in South East

Asia vigorously—it exported 473,749 vehicles to

the region in 1988, with particularly heavy sales

to such industrializing nations as Thailand and

Indonesia. 70 These countries have an opportunity

to leapfrog the gasoline ICEV and a consequent

heavy dependence on imported oil. China, where

the density of vehicles per capita is very low, but

which has doubled its number of vehicles every 6

or 7 years, is rich in coal and comparatively poor

in oil, and might be a large market for nongasoline

vehicles.

Perhaps the United States’ greatest asset will

prove to be its strength in fuel cells, if these are

developed in the next few years to the point where

they can economically power a mass production

vehicle. Supplying the advanced material components, let alone complete fuel cells, or cars

incorporating them, could be a great export

opportunity for the U.S. companies that hold

crucial technology leads and patents in these

areas.

INTELLIGENT VEHICLE AND

HIGHWAY SYSTEMS

Interest has grown recently in applying advanced engineering to road transport through a

range of technologies encompassed by the terms

‘‘smart cars and ‘‘smart highways"--or, more

formally, intelligent vehicle and highway systems

(IVHS). The idea behind this is that part of the

answer to increasing congestion on roads is not to

build more of them (more difficult as environmental and urban demands on land grow), but to

use the existing ones more efficiently, by carefully directing the flow of traffic, and more

intensively, by increasing the number of cars that

can safely occupy a given stretch. Proponents

claim that IVHS can increase safety, reduce

pollution and oil consumption, make driving

more pleasant, and, by reducing congestion, save

time that some estimate to be worth billions of

dollars annually in lost productivity .71

The range of technologies is considerable, and

markets for IVHS-related industries could potentially be large. IVHS America, a nonprofit association of private, government, and academic parties that promotes and coordinates the development and deployment of IVHS and that serves as

a Federal Advisory Committee, sketches scenarios in which by 2001, $9.95 billion is being spent

on traffic management, traveler information, vehicle control, and other systems.72 Japan and

Europe, like the United States, are devoting

increasing resources to IVHS.

Several obstacles stand in the way of the

development of IVHS. Some of the greatest

benefits from IVHS could result from the combination of many technologies and systems. The

incremental benefits of some of these may not be

sufficient to attract commercial investment and

70 Motor Veficlc ~~ac~em Association of &e United States, ~c., World Motor Vehicle Data, 1990 Edition (Detroit, ~: The

Associatio& 1990).

7] MO*C B~~.~va, David Ber~te@ ~~ony HOt~ Haris Koutsopoulos, and Joseph SUSSllEUL ‘ ‘me Cme for s-Highways!”

Technology Review, July 1992, pp. 3847.

72 ~te~gent Vehicle ~ghwaySwieq of fi~c% Strategic Plan Vehicle-Highway Systems in the United Stales, IVHS

America Report No: IVHS-AMER-92-3, May 20, 1992, appendix D.
200 I Defense Conversion: Redirecting R&D

there is concern about lack of confidence that

other supporting systems will be built. It is not

clear whose interest lies in leading some IVHS

efforts where the costs are high and the benefits

widely distributed; the question is especially

pointed in the United States, where government

and industry cooperation is less the norm it is in

Japan and Europe. On the other hand, since 1990

there has been a marshaling of effort in the United

States to overcome just this “chicken and egg”

problem.

The complexity of IVHS also raises the possibility that institutional barriers will hinder attempts to install systems across the country.

Planning a traffic system for greater New York,

for instance, involves Federal, State, and local

governments, each with overlapping and sometimes conflicting interests and regulations.73 A

further obstacle to some IVHS technology, and a

major one, is the potential for lawsuits over the

liability for accidents. Advanced vehicle control

systems, in which some of the driver’s control of

the vehicle is ceded to automated systems, would

be likely to make the manufacturer vulnerable to

a damaging lawsuit in the case of a crash, harming

its reputation and the acceptability of IVHS even

if crashes actually occurred less often than

previously. This consideration has reportedly

kept Detroit from pursuing research begun as long

as 30 years ago.

1 Technologies

IVHS technologies are usually classified by

application into three broad groups: advanced

traffic management systems (ATMS), advanced

traveler information systems (ATIS), and advanced vehicle control systems (AVCS).74 The

groups overlap and there are synergies between

them, but the categories are widely used, even if

the designation of particular technologies sometimes varies.

ATMS

The first of these, advanced traffic management, uses surveillance and communications

technology to improve the management of traffic.

Surveillance is achieved by widespread traffic

sensors along roads (using computer vision,

radar, or induction loops in the road). A traffic

management center processes the information

from the sensors and other sources, such as

vehicles on the move acting as ‘‘probes,’ and

uses it to regulate traffic flow through signal

timing, freeway ramp controls, and signs with

changeable displays. Systems like this already

operate in a few cities, and new technology is

being added to them continually.

ATIS

Advanced traveler information adds a further

loop to this network. It provides travelers in their

cars with a range of information on traffic

conditions and alternative routes. Systems in the

car might include electronic maps, route guidance

based on “dead-reckoning’ sensors or the global

positioning system (GPS), and information on

local amenities.

AVCS

The most complex of these categories, automated vehicle control, helps drivers by simplifying or assisting in various driving tasks. The range

of possible technology extends from head-up

displays that appear to project dashboard information out ahead of the vehicle into the driver’s

field of vision to the fully automatic road, in

which the driver would cede. complete control of

the car to automatic systems guided by sensors in

the car and the road. This vision of the distant

73 wproblem~ ~per~ evm non-inte~igent highway inhstructure development in the past. See OTA, De/iven”ng the Goods: Public

Works Technologies, Management, and Finance, OTA-SET-477 (Washingto~ DC: U.S. Government Printing CMfice, April 1991).

T4 US, @m~ AccoUting ~lce, Smart Highways: An Assessment of Their Potential To Improve rravel, GAO/PEMD-91-18

(Washington DC: U.S. Govemrnent Printing Office, May 1991).
7—Personal Transport: Road Vehicles 1201

Table 7-8—Federal IVHS Funding, FY 1989-93

(millions of dollars)

1989 1990 1991 1992 1993

General operating expenses

appropriations . . . . . . . . . . . . . . . . . . . . $2,3 $4 $20 $137,9 $30.0

ISTEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 19.2 187.7

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2.3 $4 $20 $157.1 $217.8

SOURCE: U.S. Department of Transportation, Federal Highway Administration, Office of Traffic Operations and Intelligent Vehicle Highway

Systems,

future would allow ‘‘platooning’ of vehicles into

tight clots of three or four vehicles whizzing along

bumper to bumper, greatly increasing the volume

of traffic a road could carry. In between these lie

shorter term prospects for obstacle detection

using microwave or laser radar; adaptive cruise

control, which uses radar or computer vision to

control distance from the car in front as well as

speed; lane guidance; and infrared night and fog

vision enhancement.

APPLICATIONS OF IVHS

Some of the technologies described above, and

others such as vehicle tracking and smart card,75

are used to address particular kinds of transport

problem. For example, electronic and communications technology allows precise tracking of a

company’s vehicles to enhance their quick, efficient dispatch, and can also speed up the monitoring that is required when goods are moved across

the country. Roadside beacons and sensors can

record information about passing vehicles, such

as their loading and weight, that at present

requires a stop. They could also be used for toll

collection on the move, with vehicles equipped

with meters that registered a charge as certain toll

points were passed. This has application to all

traffic, not just commercial. Electronic toll systems are already in use on the North Dallas

Tollway, the Oklahoma Turnpike, the New Jersey

Turnpike, and in Louisiana.76

IVHS applied to public transport can provide

operators and users with information enabling

more efficient use of high occupancy vehicles like

buses and pool vans. Smart card technology could

make payment and transfer within a system

easier.

Much of the early IVHS work focused on urban

and large highway applications such as congestion and routing. However, in-car safety systems

and location technologies, for example, can have

particular value in a rural setting.

1 Federal Funding77

Federal IVHS funding grew dramatically from

1989 to 1993 (see table 7-8) and partially changed

form with the passage of ISTEA. It now has two

components: IVHS appropriations bill (General

Operating Expenses) funding and ISTEA funding. ISTEA funding for IVHS programs comes

from the Highway Trust Fund and does not need

a separate appropriation. However, the congressional appropriations committees do determine

the overall annual obligations from this trust fund,

so that there can be a proportionate increase or

decrease across all programs funded from it. The

appropriations bill money is separate and supple75 (J~~ ~~d~ we Smd[ c~ds, Somewht like credit ~ds, wi~ be capaci~ 10 Store Momtion ~d pcThiips pKKtXS it, UShlg IIElgfledC

stripes and perhaps some embedded electronics. Versions have been used for storing personal medical information in some State programs.

76 B~n.~va et. ~., ‘‘The Case for Smart Highways,’ op. cit., footnote 73.

77 Feder~ fmd~g ~o~ation is ~a~ from us r)ep~ent of Tr~~r@tiO~ Federd H&hay Atimtio@ offlCt? Of Tra.fllc

Operations and Intelligent Vehicle Highway Systems, “An Overview of IVHS Program Implementation Plans in FHWA,’ March 1992; and

Susan Lauffer, U.S. Department of Transportation, Federal Highway Adrninistratio% personal communication Sept. 15, 1992
202 I Defense Conversion: Redirecting R&D

Box 7-C–TravTek1

The curious can gain a feel for

what it’s like to drive a smart car by

visiting Orlando, Florida, where a

group of public and private organizations are trying out several advanced traveller information systems (ATIS) and advanced traffic

management systems (ATMS) in a

program dubbed TravTek (short for

Travel Technology). One-hundred

General Motors Oldsmobile Toronados equipped with computers

programmed with maps and information about the Orlando area are

available through Avis Rent A Car.

The American Automobile Association, GM, the Federal Highway Administration, the City of Orlando, and the

Florida Department of Transportation are the major partners in the $12-million, 3-year project (the driving test part

of which will last 12 months) and will study the way the system performs and how drivers respond to it.

The experience of being told where to go by one’s car is impressive and sometimes entertaining. The system

works well enough to enable strangers to find their way around Orlando with only a few hitches. The car’s special

equipment is not difficult to grasp. The dashboard and wheel have more buttons than most cars but the effect is

not overwhelming (see photos). TravTek has added to the display screen that comes as standard in the Toronado

two computers with hard disk drives that handle the routing and the navigation functions, a global positioning

satellite (GPS) data receiver, a dead-reckoning system to track the car’s movements, and a two-way

communication system to link each car to t he Orlando Traffic Management Center (TMC). The screen serves as

the main interface between the car’s occupants and the computers, with a synthesized voice as an additional

means for TravTek to convey its thoughts to the world.

When the car starts, the computer turns on automatically (there is a password as a security measure).

Instructions and choices are typically provided in a menu of options on the screen. Various destinations are

offered-hotels, restaurants, and

Iocal attractions, with information

about what they offer, how near

they are, and price. One can also

enter a street address or the intersection of two streets, using letter

keys that appear on the screen

when this option is selected. This

selection process must be done

while the car is in “park,” to reduce

the risk of the driver’s attention

being drawn from the road. With the

destination selected and the route

planned (the system takes a few

seconds to do this), the car issues
7—Personal Transport: Road Vehicles 1203

vocal commands (which can be switched off) that supplement the visual display. The voice is startling at first, with

a metallic timbre and an oddly Scandinavian inflection. Two choices are available for the visual display: a

conventional route map, on which an arrow locates the car, or a schematic map that just indicates directions for

the next short stretch.

The basic system thus allows travelers to pick a destination in a city of which they know little or nothing, and

be guided there. The car keeps track of its own position by continually comparing the information it receives every

minute from GPS and the results of the dead reckoning process with its database of geographic information. The

system is generally accurate, although the arrow marking the car’s location is sometimes slightly askew, especially

if the distances covered are short.

A further feature of TravTek is the connection of the system’s cars to Orlando’s central Traffic Management

Center. The communication is two-way, so that the TMC receives information about how fast TravTek vehicles

are moving, which supplements the traffic reports of observers, video monitors on certain busy roads, and

construction reports. This allows the TMC to build up a more detailed picture of traffic conditions in the Orlando

area, and to broadcast to TravTek cars warnings of delays or diversions. Route planning by the TravTek in-car

system takes account of this information, and if a relevant update is received while a journey is underway, the voice

will notify the driver that there may be delays ahead and ask whether the computer should plan a new route that

avoids it.

According to the TMC staff, the existing communication system would not easily cope with many more than

the present 100 TravTek vehicles, if they were all to transmit information back to the TMC. Given the potential

intrusion on a driver’s privacy of having movements tracked, t his feature might be limited to a specialized, limited

group of “probe vehicles.” Taxis would be natural candidates, as they are likely to be in use for a much greater

proportion of time than private vehicles and would therefore provide more traffic information.

1 Research for this box was done on an OTA staff visit to Orfando, Florida on July 27-28, 1992, which included

interviews vdth Elford D. Jackson, traffic signal system manager, Bureau of Transportation Engineering, City of Orlando,

and Don L. Gordon, project manager, Research and Development, American Automobile Association.

ments trust fund money for a number of IVHS 6 deployment studies; 16 FHWA research proprograms.

The Federal Highway Administration (FHWA)

continues to encourage joint funding by nonfederal participants such as State and local government and private sources, aiming to achieve a

50-50 split wherever possible. ISTEA imposes a

limit of at most 80 percent Federal IVHS funds on

any project.

As of May 1992, FHWA listed 63 IVHS

projects underway in the United States.78 These

comprised 23 operational tests, 14 in advanced

traffic management, 7 in advanced traveller

information, and 2 in commercial vehicle operations; 13 advanced public transportation projects;

grams; and 5 Federal Transit Authority evaluation

and research projects. (See box 7-C for a view of

one of these projects.)

1 Competitiveness and Employment Effects

IVHS is not yet a big employer, but it has

grown fast since 1987 and may continue to do so

with the upswing in national interest. A dozen

people attended the first meeting of Mobility

2000, the predecessor of IVHS America, in July

1987; 1,180 people attended IVHS America’s

second annual meeting in May 1992, a hun78 OffIce of T~lc ~Mgement and WS~-l), Feder~ fighwayA&s&ation~d Office Of Tcchnicd kkStiI.IKX ad Safev

(lTS-1), Federal Transit Administrating Intelligent Vehicle-Highway System (IVHS) Projects in the Unifed Srutes, May 1992.
204 I Defense Conversion: Redirecting R&D

dredfold increase in 5 years.79 A May 1990 survey

of 82 North American organizations suggested

that at that point at least 760 people were working

full-time on IVHS.80

The recent growth in the level of involvement

and the potential value of the market suggest that

IVHS has the potential to spawn numerous jobs

across a wide range of engineering, manufacturing, and construction disciplines. IVHS America’s strategic plan, which was used in the

preparation of the federally mandated FHWA

plan in late 1992, envisages expenditure of over

$200 billion over the next 20 years, about 20

percent of it public funds.

The value added to an individual car will

probably be of the order of $1,000 or $2,000

(IVHS America take a figure of $1,500 average

for their cost calculations), in ATIS and AVCS.

Motorola’s GPS unit sold for $400 in 1992, and

navigation units are typically based around one of

these, a PC, and perhaps an optical disk memory.

Motorola’s market research suggests that customers of cars costing $25,000 and more might be

prepared to pay between $500 and $2,500 for a

system giving route and navigation information.

At the moment even the higher of these figures

would be hard to achieve, but the price is likely to

fall fast as sales volume grows. Cellular phones,

which embody some of the same technology, frost

went on sale in October 1983 for $3,500; by 1992

they could be had for less than $100. Indeed,

cellular phones are sometimes literally given

away, as the companies make their profits from

selling the service, which may well also prove to

be the case with ATIS. The distinction between

information services specifically for travelers and

other forms of personal communication and

information service is unlikely to remain sharp, as

each grows and diversifies, The American Automobile Association (AAA) is experimenting with

different ways of making this “yellow pages”

information available to AAA members, through

computer terminals at hotels and airports, at

home, or in the car.81

# Foreign IVHS

Both Europe and Japan have had large IVHS

R&D programs for longer than the United States.

Europe has two principal programs, Prometheus

(Program for European Traffic with Highest

Efficiency and Unprecedented Safety) an $8-

million, 8-year project focusing on vehicle technologies such as collision avoidance and onboard navigation systems, and Drive (Dedicated

Road Infrastructure for Vehicle Safety in Europe), which completed its 3-year, $170-million

first phase in 1991.82 Drive encompasses over 70

projects on the development of basic IVHS

infrastructure, such as cellular broadcasting beacons and communications centers. The second

phase, running from 1992 to 1994 and planned to

cost $280 million, focuses on demonstrating the

technologies investigated in the frost part.83 Several smaller European programs, including tests

of ATIS equipment, are also underway.

79 WifimM.Spreitzer, manager, Vehicle/Systems Coordination, (knend MotocsRe.search Laborato~, pemmal communication Sept. 22,

1992.

80 me Swey ~ repo~~ iI.I WiII&I M. fiprei@r, “M-IS Activities h the Utited States, ” presentation made at National Leadership

Conference: implementing Intelligent Vehicle-Highway Systems, May 3-5, 1990, Orlando, Florida. The survey asked respondents to

characterize their IVHS efforts as small-1 to 5 full-time people working; medium-6 to 25; or large-26 and ow:r. The figure 760 was arrived

at by assigning the lowest number to each category and multiplying it by the number of organimations reporting this level of activity. Thus mall

programs counted as 1 Persou medium as 6, and targe as 26. Seventy-two of the 82 organ.uations “ approached responded to the survey, in a

similar distribution to the original 82.

81 Don L. Gordo~ project ~~ger, Res~h and Developmen~ American Automobile ASSOCiatiOJ4 perso~ comm~catio% J~Y 28J

1992.

82 Ben-Akiva et al,, “The Case for Smart Highways,” Technology Review, op. cit., footnote 73,

as “Special Report/Transportation: Testing the Concepts Worldwide,” IEEE Specmun, May 1991, pp. 303.5,
Table 7-9—Summary of Potential Impacts of EVs and IVHS on Technology Advance and Employment,

and Prospects for Use of Defense Technology and Resources

Electric vehicles Intelligent vehicle highway systems

Technology advanu Battery and fuel cell work drives R&D in materials, catalysis,

membranes.

Fuel cells can stimulate R&D in a range of hydrogen related

technologies--production, transport, storage--contributing to wider

availability and use of this clean fuel.

Development of efficient subsystems could have benefits beyond

EVs--e.g. in other autos and, for HVAC, in housing construction.

Employment effects Small near-term employment effects; numbers currently involved in

EV R&D low-in the 100s.

If 50 percent of the cars in the United States came under regulations

like those passed in California (as would be the case if every State

that expressed an interest in doing so were to pass such

regulations, an unlikely outcome at this point), sales of EVs might

be 500,000a year by 2003, providing on the order of 10,000 jobs

in assembly, with perhaps three times as many in parts supply.

This is highly speculative, however; environmental regulations

have been scaled back in the past when industry made a forceful

case that it could not satisfy them economically, and there is

considerable opposition in the northeast to imposing the California

standards.

In the longer term, direct substitution of EVs for ICEVs would be likely

to Iead to a decrease in overall auto employment, owing to simpler

construction, as well as a redistribution of skills. Export

opportunities to developing countries in central Europe and the

South are a possibility.

Defense conversion National labs are developing batteries for USABC and fuel cells for

DOE, and Argonne has an EV testing facility. Defense contractors

are performing some of the cooperative research.

Ultracapacitors, developed through SDI, might complement fuel cells

in an EV.

Advanced materials developed for aerospace can be used in

designing lightweight vehicle bodies, though they are often very

expensive.

Defense firms are working in collaboration with Big l%r~e on power

trains, inductive charging.

IVHS work rovers many technologies and might stimulate crossfertilization between fields.

More than driving individual new technologies, IVHS is likely to bring

together and apply diverse technologies developed elsewhere,

providing a potentially large market for them.

Greatest potential employment effects in the long term could be large

numbers of construction jobs installing smart highway

infrastructure.

Supply of communication equipment and other components of IVHS

is another potentially large employment opportunity, with the

greatest near-term effects in the supply of in-car systems.

Independent vehicle-installed equipment such as navigation

computers and automated steering and braking systems would

generate little ongoing employment after installation.

Infrastructure based services such as traffic management would

generate sustained employment in operation and maintenance.

Increasingly technologically sophisticated vehicles are likely to

demand correspondingly more complex servicing.

Opportunities for systems integration by defense primes.

Sensing and communications technology developed for military

important for navigation and lane sensing.

Traffic management can draw on air traffic control technology and

experience.

SOURCE: Office of Technology Assessment, 1993.

. .
206 I Defense Conversion: Redirecting R&D

OTA interviews suggest that the U.S. IVHS

community is less concerned about falling behind

Europe, where no clear lead has emerged, than

about Japan, which is well positioned to compete

in producing ATIS units to go in vehicles. Japan

already dominates in technologies, such as compact disk drives and flat panel displays, that are

important components. The keiretsu system facilitates the kind of cooperation between companies

that IVHS demands, and the historical tendency

for close cooperation between government and

industry also favors integrated development of

systems.

Some IVHS technology has already been

commercialized in Japan; about 200,000 vehicles

have been equipped with GPS navigation systems. Most of these have been built by Nippondenso and installed in Toyota cars, or built by

Sumitomo for Nissan Cars.84 Some of the success

of these systems is probably due to the difficulty

of navigating in Tokyo, where streets are haphazard and houses numbered according to when they

were built rather than their position on a street or

within a block. In addition, 74 Japanese cities

operate traffic surveillance and control systems,

such as the one in Tokyo, where the messages on

roadside signs can be varied in response to

information from sensors along the roads collecting data on traffic volume and speed. This traveler

information system is being further developed,

and by 1995 is expected to provide continuous

data radio broadcast of travel information in all

major cities, receivable by an on-board unit

costing a few hundred dollars. A recent University of Michigan report on IVHS in Japan

concluded that “[especially in the imminent

deployment of a system for communicating

traffic data in real time, Japan appears to be well

ahead of other regions of the world. ’ ’85

CONCLUDING REMARKS

Clean air legislation is pushing electric vehicle

development. The intensive focus on rapid technology development provides opportunities for

the defense industry and weapons labs to contribute their considerable experience in advanced

engineering research and applied science. The

research may lead to broader application of some

of the technologies developed. The near- to

medium-term employment effects are likely to be

small, however. Without major improvements in

performance and price, the EV is unlikely to

penetrate the market beyond what is mandated,

and even the extent of this may not be very great,

if legal challenges and other opposition, or a

slackening of government commitment, limit

mandates for ZEVs. If the pressure were to pay

off, however, and an EV industry to establish

itself, perhaps serving an export market as well as

domestic, the country might enjoy considerable

benefits in reduced reliance on oil, reduced

pollution, and technology advance.

IVHS offers potentially more new high-tech

jobs in the next decade than EVs do, as navigation

and other units are built and installed in cars.

While it may not drive new technology development to the same extent as EVs, IVHS will draw

on existing technology, including some developed for defense, and broaden the market for it

considerably. See table 7-9 for a summary of the

potential impacts of EVs and IVHS.

8A Rob@ D. Erv@ An A~n”can Observation of I’W-ZS in Japan (AM Arbor, h’fk ‘l”he Utivemhy Of ~ctig~ 1991).

85 Ibid., p. 1.
EnergyEfficient

Transportation:

I

Public

Systems 8

HIGH-SPEED INTERCITY GROUND TRANSPORTATION

H

igh-speed ground transportation (HSGT)--trains that

operate at speeds significantly above 125 miles per

hour-are technological reality. Whether using steel

wheels on rail to carry the cars, as conventional

passenger trains do, or conveying them on a magnetic cushion

(maglev), HSGT can be built. Steel-wheel trains running at more

than 100 miles per hour were introduced in the United States as

early as the 1930s, and high-speed trains have been transporting

passengers in Japan and France for more than a decade. Maglev

systems are based on principles that have been understood since

the early 20th century and have been under development since

the mid-1960s. Small-scale, low-speed maglev systems currently

operate in Germany and England; high-speed systems are in

prototype testing phases in Germany and Japan and an imported

version may be built in the United States.

Construction of a HSGT system has been “right around the

corner’ for at least 25 years in the United States. While France’s

TGV (Train à Grande Vitesse) has been in service for more than

10 years, and Japan’s Shinkansen (bullet train)l for nearly 30

years, U.S. high-speed train systems have barely advanced

beyond feasibility studies and modest research and development

(R&D) efforts. The reasons have to do with policy as well as

geography and demographics. Both Europe and Japan have

densely populated cities that are not far apart. For many years

their governments have also strongly supported passenger rail

[ Shinkansen simply means new trunk line, but ‘‘bullet (rain’ is the name commonly

used in English.

207
208 I Defense Conversion: Redirecting R&D

systems, plus transit systems linked to intercity

rail, while other policies (e.g., high gasoline taxes

and expensive airfares) have made air and auto

travel less attractive than in the United States.

These differences have a critical bearing on the

feasibility of HSGT in this country.

HSGT—maglev in particular-has received a

good deal of attention and political support

recently in this country. A comprehensive transportation law passed in 1991 authorizes Federal

support to the tune of $725 million for a

demonstration maglev project, and $50 million

for smaller steel-wheel-on-rail projects, though

not much has been appropriated and spent so far.

Both systems have been proposed as candidates

for government-backed defense conversion initiatives. 2

This chapter considers HSGT in terms of its

potential contribution to American economic

competitiveness and its possibilities for defense

conversion. Previous studies by the Office of

Technology Assessment (OTA) and others have

analyzed HSGT from the standpoint of pollution,

dependence on foreign oil, safety, and congestion

and delay at airports and on highways.3 These are

significant public policy issues—indeed they are

key reasons for considering HSGT among the

transportation initiatives the Nation could adopt—

but they are mostly outside the analytic scope of

this assessment. However, the feasibility of HSGT

in the United States is directly relevant to the

issues discussed here, i.e., international competitiveness and defense conversion.

Government support is necessary to make

HSGT systems feasible, according to recent

reports by both OTA and the Transportation

Research Board of the National Research Council. OTA said that maglev or high-speed rail

systems “must be . . . publicly financed in order

to be built’ in the United States.4 The Transportation Research Board said: “It is unlikely that any

new HSGT system in a major U.S. corridor would

cover its capital and operating costs from farebox

revenues.

The studies agreed that the main potential

market for HSGT systems is trips of about

100-150 to 500 miles between cities, on heavily

traveled routes, and the main competition is air

travel. On shorter trips, the studies said, automobiles have a clear advantage, and on longer ones

airplanes would likely win out. The most promising U.S. routes for HSGT are the Northeast

corridor (Washington-New York-Boston) and Los

Angeles to San Francisco, with two more possibilities (Dallas/Fort Worth-Houston and Los Angeles-Phoenix) at present and perhaps a dozen

more by 2010.6 In most of these corridors, it

appears the systems could break even only with

the unlikely combination of costs at the low end

of current estimates, fares that are high compared

with current airfares, and ridership at least as great

as all current air travel in the corridor.7 For the

most likely combination of cost and fare levels,

only one corridor (Los Angeles-San Francisco)

has enough passenger volume at present to break

even, again assuming ridership equals all air

travel in the corridor, and only four are likely to

2 See, for example, Peter H. Stone, “The Faster Track: Should We Build a High-Speed Rail System?” The American Prospect, fall 1992,

pp. 99-105.

3 U.S. Congress, Office of Technology Assessment, New Ways: Tiltrotor Aircrajl and Magnetically Levitated Vehicles, OTA-SET-507

(Washingto% DC: U.S. Government Printing Office, 1991); U.S Congress, OffIce of Technology Assessment, U.S. Passenger RaiZ

Technologies, O’E4-STI-222 (Washingto% DC: U.S. Government Printing Office, 1983); Transportation Research Board, National Research

Council, In Pursuit of Speed: New Oprionsfor lntercity Passenger Transport, special report 233 (Washington, DC: 1991).

4 OTA, New Ways, op. cit., footnote 3, p. 86.

s Tr~po~tion ReWch Board, op. cit., f00t210te 3, p. 8.

6 Ibid., pp. 109-110, tables 4-3 and 4-4.

7 Ibid., pp. 9, 117. The Transportation Research Board study combined capital and operating costs; it defu~ed breaking even as covering

both.
8--Energy-Efficient Transportation: Public Systems 1209

by 2010.8 Hence, the need for government subsidy. Capital costs are a particular obstacle for

private financing; HSGT requires large upfront

investment in a freed asset with little resale

value-an inherently high-risk undertaking.

The need for government subsidy is not an

insuperable obstacle. Modern rail systems in

other countries have all been built on a foundation

of strong government support, though it does

appear that high-speed systems may now be

capable of paying their own way. If the public

benefits of the HSGT systems are great enough—

benefits such as environmental advantages and

lesser dependence on foreign oil-then the argument for public finding for HSGT and for other

supportive government policies (e.g., higher gasoline taxes) could be compelling.

From the standpoint of the systems’ contribution to economic competitiveness, a central question is whether they could spur the advance of

highly innovative, broadly applicable technologies. A look at the requirements of the industry

and experience abroad suggest that development

of HSGT in this country would contribute to the

support of some advanced technologies, but the

effects would probably be helpful rather than

crucial. It seems unlikely that technologies associated with HSGT would have the kind of

widespread creative effects across many industries that technologies at the core of the computer

and telecommunications industries have exerted.

As for employment, judging by experience in

Japan and France, even a successful U.S. industry

would not create a great many jobs in manufacturing rolling stock and parts-probably a few

thousand at most. Construction employment could

be more substantial, since more than two-thirds of

the total cost of creating HSGT systems is in

building the tracks or guideways, but these jobs,

as far as local and regional economies are

concerned, are short-term. Service jobs associated with the systems (in both operation of the

vehicles and maintenance of tracks and guideways) could be permanent and somewhat more

numerous than the manufacturing jobs. If HSGT

were to attract new travelers, beyond those simply

switching from cars or airplanes, these jobs could

be net additions to the economy.

The potential for converting defense plants

from making weapons systems to manufacturing

HSGT vehicles looks limited. Several defense

contractors with experience in some of the

technologies involved in HSGT (e.g., aerodynamics and light-weight materials) have taken part in

small government-led development programs in

the United States. Most report that they are

unwilling to stake much of their own money to

advance this effort. Even for successful international fins, the market for rolling stock is

relatively limited and quite variable from year to

year. The potential looks brighter for defense

firms to supply parts and subsystems in such areas

as signal, communication, and control systems,

which may be based on military technologies. For

large defense contractors with civil engineering

capabilities, such as Raytheon, HSGT might offer

possibilities in guideway engineering and construction. But commercial competition would be

fierce from firms such as Morrison-Knudsen,

Bechtel, and ICF Kaiser Engineers, all of which

have ample experience in transportation system

engineering.

1 Rail Systems in the United States,

Japan, and Europe

Rail transportation, intercity and intracity, is

far more significant in Europe and Japan than in

the United States. In the late 1980s, rail trips in

France were 33 times the number of airplane trips,

and in Japan rail trips outnumbered airplane trips

130 to 1; in the United States, airplane trips were

g Ibid., p. 8.

331-050 - 93 - 8 : QL 3
210 I Defense Conversion: Redirecting R&D

1.2 times the number of rail trips.9 Some of this

difference is explained by the sheer size of this

country and the distance between cities. Also,

higher U.S. incomes (until recently) allowed

Americans to make more long-distance trips than

Europeans and Japanese. But these explanations.

which may be defined as personal preference for

air over rail, are incomplete. Public policy has

played at least as large a role.

The mix of transportation modes in a country

is affected by access, convenience, and cost, each

of which is affected by public policy decisions. In

Europe and Japan, rail and air systems are (or

were until recently) operated by single Stateowned or highly regulated firms. Government

ownership or control of both systems meant that

policymakers could weigh decisions on which to

support by the same criteria. For example, decisions in favor of rail over air may have been

influenced in part by these countries’ reluctance

to increase their dependence on foreign oil. The

reality of foreign oil dependence in the United

States did not begin to take hold until the 1973 oil

embargo, some 15 years after the National

Defense Highway Act set the fundamental direction for the U.S. transportation system in the

post-World War II era.

In both Europe and Japan the commitment to

and subsidies for passenger rail service have been

strong. Some of these systems were operated at

heavy losses; Japan Railways, before its privatization and division in 1986, had debt equal to

one-half of the Japanese Government’s budget.10

Although government support for the railways of

Europe is less extreme, these systems also receive

extensive support, including direct operating

subsidies. In the United States, Amtrak’s operating subsidy has been relatively modest and has

continuously diminished. Note, however, that

most countries operating HSGT systems report

that they are profitable--after the initial government investment in research, development, and

infrastructure. Amtrak’s moderately high-speed

Metroliner corridor is also reported to be profitable.

Aside from direct subsidy, rail travel in Europe

and Japan has been indirectly subsidized by tight

restrictions on domestic air travel (limited numbers of flights and high ticket prices) and large

taxes on gasoline, which tend to discourage both

auto and air travel. The United States, on the other

hand, has not regulated airfares for over 10 years

and limits total flights mainly for safety purposes,

when necessary, not for transportation policy

reasons. U.S. gasoline taxes are extremely light

compared with those in other industrialized nations; prices at the pump are one-third to onequarter those in Japan and Europe.

The Federal Government has long been heavily

involved in building air and highway infrastructure. In the past, general revenues were used to

build airports and pay for air traffic controllers

and their equipment; but the Airport and Airway

Trust Fund, fed by user fees, began to cover

Federal spending on airport improvements in the

1970s and, more recently, the air traffic control

system. Federal highways were once funded

largely through general taxation as well, but the

National Highway Trust Fund paid for the multibillion dollar interstate system that was launched

in the 1950s. Most States fund their road construction through gasoline taxes and airport investments through landing and other fees.

Railroads got their share of Federal largess in

the last century. Rail systems in the West received

enormous government support in the form of land

grants; East Coast rail companies got government

help in the forms of monopoly franchise awards

and right of way acquisition through the Government’s right of eminent domain. Although this

government assistance was critical to their early

development, rail systems today have no trust

9 J)~@ from Euro~~ ~or~ yeurboo~ @ndon: Europa ~bfications, 1991). Jap~ese dati include only Japan RdVfays hips (excludes

private railroads). Data for the United States includes commuter railroads as welJ as Amtxak passengers.

10 ~c~elsel~ ‘‘Jap~ Speed Is of the Essence, ’ Am”an Business, June 1990, p. 66.
8--Energy-Efficient Transportation: Public Systems 1211

fund of their own nourished by user fees, comparable to the airport and highway trust funds, to

support infrastructure improvement. However,

Congress has authorized spending from the highway trust fund for development of high-speed

ground systems, maglev in particular.ll

In contrast to Europe and Japan, with their

continuing legacy of government support for and

heavy ridership of trains, U.S. public policy

related to transportation customs would have to

change for HSGT to succeed. Riders would need

to be drawn from the most advanced airline

system in the world—advanced not only in miles

flown and area covered but also in formidable

marketing capabilities, including price wars that

wipe out weaker competitors.12

Nevertheless, there are signs that HSGT systems may be coming closer to fruition in the

United States. So far, Federal funding for HSGT

has been small. However, foreign governments

may indirectly subsidize early ventures in the

United States. If the Texas TGV project is built,

foreign financing will play a large role, with

subsidies coming in part from the French Government-owned Credit Lyonaise (see box 8-A).

Presumably, the purpose of the French investment is to sell the French system and get in on the

ground floor of an emerging market. If HSGT

progresses in the United States, it may be

unrealistic to expect that foreign governments

will continue to provide financial subsidies and

patient capital to the projects. Federal or State

Government relationships with railroads and

airlines more like those in Europe and Japan are

likely to be the condition for a substantial HSGT

system in the United States.

~ HSGT in Europe and Japan

European and Japanese developments of HSGT

have been extensive. The French TGV is the

fastest steel-wheel-on-rail system in the world.

With two lines in operation and more planned,

TGV is in full swing. France is also aggressively

pursuing foreign markets, e.g., Korea and the

United States. In North America, TGV technology is marketed through Bombardier of Canada,

whose French subsidiary was involved in the

original development of the TGV.13

Germany’s steel-wheel high-speed rail, the

Inter City Express (ICE), entered revenue service

in 1991 between Hamburg, Frankfurt, and Munich. Besides high-speed conventional rail systems, Germany has developed maglev as well.

The German Transrapid system is closer to

commercialization than any other maglev system

and is the one proposed for the Orlando maglev

demonstration project (see box 8-A). Using attractive magnetic force generated by conventional electromagnets, Transrapid reduces some

technical difficulties of building the vehicle (see

box 8-B). However, because Transrapid operates

with such a small gap between the vehicle and the

guideway (about 3/8 of an inch), extreme accuracy

is required in constructing the guideway. Such a

tight tolerance may not be achievable without

drastically inflating costs.14

HSGT systems of various kinds have been

developed in Spain, Italy, Sweden, and the United

Kingdom, as well as Germany and Japan. The

U.K. and Swedish systems have tilting trains that

can be used at higher speeds on existing or

upgraded tracks, in contrast with TGV and ICE,

both of which demand new, straighter rights-ofway and dedicated rail track for extremely high11 The ~temo~ Stiace Transportation Efficiency Act of 1991, Section 1036.

12 k emly 1993, after over2 years of recession followed by weak recovery, even the major airlines were h f~ ia.1 trouble; price wars were

damaging them as well as weaker companies. However, assuming recovery in air travel, in the long run it may be more feasible to build maglev

systems as complements to airlines than as competitors. Japan Airlines has long taken an interest in maglev as a way to connect airports with

downtown artXtS.

13 Bombmditi, Annual Reporl 1991.

]4 Nw York Stite ~erm Research and Development Au~ol-i~, Technical a& EconomiC Maglm Evaluahon, June 1991.
212 I Defense Conversion: Redirecting R&D

Box 8-A—The Orlando Maglev and Texas TGV systems

Orlando, Dallas-Fort Worth, San Antonio, and Houston are likely to be the first places in the United States to

have HSGT systems. The Orlando project, using the German Transrapid maglev system, is limited to a 14-mile

single guideway with only one vehicle, connecting the Orlando airport to Walt Disney World hotels. The project

planned for Texas, using the French TGV steel-wheel-on-rail technology, will be a full-scale transportation system

connecting major cities and points between with 620 miles of track. Instead of complementing air service, as the

Orlando project will do, the Texas TGV will be competing for passengers with airlines. Both systems involve

consortia of foreign and domestic firms and will use a mix of foreign, domestic, and Federal and State Government

financing.

The Texas project began in 1989 with a franchise award from the State Legislature to an international team

headed by the U.S. firm Morrison Knudsen and including foreign rolling stock companies (Bombardier of Canada

and GEC Alsthom of France) and some foreign financial interests, such as the French Government-owned Credit

Lyonaise. Preliminary work, including environmental studies, was underway in 1992.1 Assuming the project goes

forward, total costs are expected to be $5.8 billion, of which about $3 billion would be for construction of the

guideways and stations. Most of the spending will be in the United States. Procurement of rolling stock and

signaling, train control, and electrical power equipment had not yet been worked out in late 1992, but it was

expected that a considerable amount would be from U.S. firms.

The first line, linking Dallas-Fort Worth and Houston, was projected to open in 1998, with San Antonio-Dallas

links to be completed by 1999.2 The Dallas-Houston line will compete directly with southwest Airlines, which flies

between Houston and in-town Love Field in Dallas. Southwest has argued vehemently against the project claiming

that tax-free industrial development bonds (IDBs), which the backers of Texas TGV hope to use for financing some

$2 billion of the project, are an unfair government subsidy.

It is by no means certain that the Texas TGV will get permission to use IDBs, since the Federal tax code limits

the amounts States may issue.3 The reason for the limits is that the Federal Treasury is the biggest loser of revenue

when tax-free bonds are issued, since the Federal Government has higher income taxes than States (indeed, the

State of Texas has no income tax). Railroad construction, unlike airport construction, is counted against States’

IDB quotas. Proponents of the Texas TGV, as well as backers of other rail systems, argue that the code should

be changed to treat railroad construction in the same way as airport construction.

The Orlando project is far more limited in size than the Texas TGV but more daring in its application of new

technology. it promises to be the first high speed (300 kilometers per hour) commercial maglev in the world. Maglev

Transit, Inc., an international consortium of U. S., German, and Japanese firms, plans to build the system at a

projected cost of $622 million, of which Federal funds will supply a substantial part. Congress has approved a

contribution of $98 million to the project, from the mass transit account of the Highway Trust Fund. The rest will

come from the members of the consortium.

Construction costs are expected to account for $300 million and vehicles for roughly another $100 million.

Although the U.S. content of the project has not yet been fully worked out, Maglev Transit officials expect it to be

substantial. Florida has been guaranteed that at least $100 million of work on the project will be within the State.

However, the vehicles will most likely be built in Germany. Part of the Federal Railroad Administration’s certification

of vehicle states t hat the vehicle must have the exact specification of the prototype vehicle operating in Germany.

1 Forexarnpie, some dairy farmers and cattle ranchers opposed the project on grounds that noise frompang

trains might soare their animals, oauslng weight loss and lower milk yields. The Issue Is under study.

2 In December 1992, backers asked for a year’s delay huse funding was not Y@ -rd.

3 states are limit~ t. issuing n. more than $150 per @ta in iD~ f~ projecb othti than ~fpotts, which have

a speciai exemptbn.
8–Energy-Efficient Transportation: Public Systems 1213

Box 8-B--Maglev Systems1

In a maglev train two things must be achieved: the train must float and it must move. For the lift, there are

two approaches; one uses the attractive forces between magnets to pull the train upwards, the other pushes the

train up by magnetic repulsion.

The first approach, used in the German Transrapid system, is electromagnetic suspension (EMS).

Electromagnets on the train are attracted to the metal guideway from below; in practice, the sides of the train wrap

around underneath the guideway beneath the body of the train, effectively lifting the train. The arrangement is

potentially unstable. If the gap between the magnet and the rail becomes too large or the magnetic force too small,

gravity wins and the train drops, but if the gap becomes too small or the magnetic force too strong, the train will

stick to the guiderail and movement will be impossible. (Think of trying to hang a pin beneath a small bar magnet

without dropping it or letting it jump up onto the magnet.) To achieve steady suspension, the magnetic attraction

is continuously adjusted by varying the current to the electromagnets on the train, in response to information from

sensors measuring the distance between the train and the guideway. Because the gap is so small, the guideway

must be very smooth and laid to exacting specifications: there must be no more than a few millimeters of vertical

variation along a length of 25 meters of track.

A second approach, based on repulsion, is electrodynamics suspension (EDS). It uses the fact that when a

magnet is moved over a conductor such as a coil of wire it induces a current in it. The current in the coil itself creates

its own magnetic field opposing the first one. In an EDS train, the magnets are on the train and the induced currents

flow in specially shaped conducting portions of the guideway. These currents produce a magnetic field opposite

to that of the train’s magnets, so that the fields repel each other and the train is pushed upward away from the

track. Unlike EMS, this arrangement is stable, since if the train and the track move closer to each other, the

repulsion gets stronger, and the train is pushed away again, while the force of gravity acts to keep the train from

moving too far upward away from the track. However, the effect depends on the train’s moving, as it is the motion

of the train’s magnets across the metallic guideway that sets the current flowing and hence produces the opposing

field. An EDS train therefore needs wheels to roll on until it is going fast enough for t he electromagnetic effect to

lift it. Another complication is that the electromagnetic fields are stronger than in EMS and are not as contained

within the coils of the train, so the chance of passenger exposure is considerable. However, the Japanese EDS

system has direct current fields, which have not been implicated in the possibility of adverse health effects; it is

the effects of alternating current fields that are in question. Still, shielding is an issue since the strong static

magnetic field from the EDS system could affect some prosthetic implants and pacemakers.

EDS requires stronger fields than EMS, and is only practical using superconducting magnets. This point was

first grasped in the early 1960s by two Brookhaven National Laboratory scientists familiar with the use of

superconducting magnets to focus particle accelerator beams. Thus maglev is often described as a U.S. invention,

coming from one of the Department of Energy’s large national laboratories.

Although other things could push the floating maglev train along-turbofans, for instance--prototypes and

designs today all use linear electric motor technology. This works like a familiar AC rotary motor that has been

unrolled. The variable electromagnets that form the stator, t he stationary part that surrounds the rotating coil of

atypical electric motor, are laid flat along the guideway, while coils on the train play the part of the rotor. The

guideway magnets are fed an alternating current of a carefully controlled frequency that varies the direction and

strength of the force t hey exert on the magnets of the passing train, pulling them forward as they approach and

then pushing them onward as they pass. Electromagnets on the track are switched off behind the train, while the

next section of guideway ahead is activated. The train surfs along as it were on a wave of magnetism.

1 Drawn from Transportation Research Board, /n Pursuit of Speed, SpWial Report 2W, 1991; Gary ~ix! “Air

Trains,” Sci@ificArnericarr, August 1992; U.S. Congress, Office of Technology Assessment, New Ways; ~/trotorAircrtill

& A4agneficdlyf.evifated Vehicles, OTA-SET-507 (Washington DC: U.S. Government Printing Office, October 1991 ); New

York State Energy Research and Development Authority, T~rrica/and Economic &fag/evEva/wtlon, June 1991.
214 I Defense Conversion: Redirecting R&D

speed operation. Tilt train technology allows car

bodies to tilt over their truck so that passengers

remain upright in their seats and comfortable

through turns at high-speed. This incremental

change in technology can yield significant reductions in travel time. Although very high-speed

systems like TGV offer much greater time savings, they also require much greater up-front

investment and preclude sharing track with

freight and slower passenger trains. Amtrak is

considering the purchase of tilting trains from

Sweden for use in the Northeast corridor from

Washington to Boston.15 Along this route trip

times between New York and Boston might be cut

from 4.5 hours to slightly under 3 hours.l6

Japan has more experience with HSGT than

any other country. Its Shinkansen began running

between Tokyo and Osaka in 1964 and by all

accounts has been profitable, even though Japan

Railways as a whole ran enormous losses before

being privatized in 1986. Shinkansen technology

has undergone continuous improvements and the

system was recently expanded. Japan also has an

active maglev program, which originated in the

1960s. The major current project is sponsored by

the Japanese Railway Technical Institute (JRTI),

which is funded in turn by the Ministry of

Transportation and several major industrial firms.17

This project, which uses repulsive magnetic force

created by superconducting magnets on board the

vehicle, began with a 14-mile test track in

Kyushu; a much longer test track is under

construction and is planned to form part of an

operating line. An alternative maglev effort,

HSST, uses technology similar to the German

Transrapid. It has been underway since 1974 and

is closer to commercialization

system. In fact the basic HSST

than the JRTI

technology was

originally developed by the Germans and then

licensed to Japan Airlines when the Germans

decided to pursue only the Transrapid technology.

18

M Benefits and Costs of Developing

HSGT Technology at Home

Since other nations, principally France, Germany, and Japan, already have commerciallyproven high-speed steel-wheel systems and prototype maglev systems near commercial operation,

what are the advantages of developing and

building the systems in the United States versus

importing them from abroad, or possibly licensing foreign technologies? The import option may

reduce costs, because foreign firms and governments have already absorbed the cost of development, and it lessens risks, since foreign companies are experienced in building the systems. The

only high-speed lines progressing toward construction in the United States (those in Texas and

Florida) involve European technologies and firms--

in both cases, in joint ventures with U.S. firms.

Other nations also have some interest (e.g.,

Sweden) in the U.S. market, which is seen as

potentially rich despite the generally guarded

tone of the feasibility studies.19

Possible benefits of the domestic option are the

creation of high-quality jobs, development of

advanced technologies that could have wide

application, productive use of resources formerly

devoted to defense, and the generation of a

competitive, knowledge-intensive industry in the

15 JW~ughe,, ~~H@S@Td~g~Hmd~ for Northe~t Corridor,” PassengerTrunsporc, ~.2, 1 W1, P. l.~tibg~~~g

tilt trains on the WashingtomNew York segment in early 1993.

16 A~p~of ~No-tcorndor improvaent pro= the ~ts~ctio~ ~tbetw~N~ Havmand Bosto]l, was expected to beekxmifkd

by the end of 1993.

1’7 Befo~ is br~p and privatizatio~ Japan Railways directly funded lllttgkv reseamh.

18 As not~ Jap~ Airhes is interested in rnaglev as a connection between @X)rtS ~d City Ce.llklX

19 s=, for _le,@Jo~on ~d Dodd Ro@, MaglOa~~~igh spe~TrainRese~ch inE~ope:A TripRepo~ (Chicago, IL: center

for Transportation Researcq Argonne National Laboratory, July-August 1989).
8--Energy-Efficient Transportation: Public Systems I 215

United States. The question is how likely, and

how large, these benefits may be.

DEVELOPMENT COSTS

Most of the costs of building HSGT systems

are in construction, but research, development,

and demonstration (RD&D) of the technology

takes more than a trivial investment. Although

safe, reliable systems have operated abroad for

years, developing a first-class competitive highspeed steel wheel system in the United States

would probably involve more research into braking technologies, wheel-rail dynamics, electric

current collection techniques, propulsion, switching, and controls systems. For maglev, research is

needed in low-cost guideway construction, switching systems, noise control, and, for systems that

use on-board repulsing magnets, shielding options to limit passenger exposure to electromagnetic fields.20 Coordinated research into lower

materials and construction costs, communication

and automation technologies, and better understanding of the health effects of electromagnetic

fields would benefit both systems.21 OTA has

previously estimated total RD&D costs for a

domestically developed maglev system, including the construction of prototype vehicles and a

short test track, at about $800 million to $1

billion. 22 An estimate of costs for a high-speed

steel wheel demonstration system, based on the

experience of the French TGV and the German

Transrapid and ICE, is much the same.23 The

Japanese Shinkansen, a more mature technology

that has developed incrementally, is a less useful

guide to what development cost might be today.

It is highly unlikely that private funds will pay

for all of this; indeed, there is already legal

authority for a contribution by the Federal Government of $725 million over 6 years for maglev

prototype development and $50 million for other

forms of HSGT (however, little actual funding

has yet been provided; see the discussion below).

The French Government paid for most of the TGV

development costs, while the costs of developing

the German Transrapid and ICE systems were

shared by government and industry. For Transrapid, a consortium of firms paid an increasing

share as the project progressed, starting in the

mid-1970s with the Ministry of Transportation

paying nearly the full cost and ending with private

industry paying about two-thirds. However, all

the firms that paid large development costs had

government assurances that, if their efforts were

technically successful, the governmentcontrolled railway system would buy the finished

product.

EMPLOYMENT EFFECTS

Most of the jobs generated by the building of

new HSGT systems would be in construction.

The overwhelming share of initial system costs—

65 percent or more-is for guideway or tracks,

including power and communication equipment.

Rolling stock accounts for an additional 10 to 20

percent of costs, and the rest is spent mostly on

right-of-way acquisition, design and management

24 For example, the of construction, and facilities.

$3-billion track building project envisioned for

the Dallas-Houston-San Antonio route might

create 11,000 jobs in the construction industry for

20 o~, N~ Ways, Op. cit., footnote 3, pp. 7*-73> 81-8*.

21 Ibid., p. 94.

22 Ibid., p. 9.

23 wllli~Di~~,~, Tra~~apid ~termtio~, persoti comrnunicat.io~ June 9, 1992.

24 me Trampoflati~n Re~em~h B~~d e~timat~ tit more tin 50 per~n[ of tie capi~ cost is for construction Of the track S~C~ ~d

guideway, 10 to 20 percent is for bringing in the power supply, 5 to 10 permnt for signal and communication equipment, 10 percent for

right-of-way acquisition 10 to 15 percent for design construction and management and 10 to 20 percent for rolling stock. The Board’s estimate

did not explicitly include costs for stations and platforms, but did allow less than 5 percent for maintenance facilities. (Transportation Research

Board, op. cit., footnote 3, table 3-3.)
216 I Defense Conversion: Redirecting R&D

the 5-year building phase.25 Besides the jobs on

the site, some secondary effects would be felt in

industries that supply construction materials, e.g.,

concrete and steel.

Rolling stock manufacturers could get a boost

from the construction of HSGT cars but the

number of jobs involved is likely to be rather

small. The Japanese Shinkansen, the largest

HSGT system in the world, has recently been

expanded and much of the rolling stock replaced.

Even with this increase in procurements-288

bullet train cars purchased in 1990--the entire

Japanese rolling stock industry, including parts

producers, employed 14,600 workers in 1990.26

Based on the shinkansen share of Japan’s total rail

car output in 1990, measured in ‘‘freight car

equivalents, perhaps 3,000 people were employed in building bullet train cars that year.27

GEC Alsthom, builder of the French TGV train,

reports that a construction schedule of about 330

cars per year requires a total employment, including parts suppliers, of some 4,000 people.28

The figure of 300 cars per year is higher than

the average number of rail cars bought in either

Japan or France. France’s national railroad has

purchased a total of about 2,300 TGV cars

(including locomotives) over the 10 years the

system has been in operation.29 Average employment created by TGV in the rolling stock and

parts industries would be about 2,800 people,

Considering that the total investment in the

French TGV lines is about $7 billion (32 billion

1985 Francs), not including development costs,30

TGV does not seem to be a very effective

generator of manufacturing jobs. Some additional

manufacturing activity is generated by the purchase of signal and communications equipment as

well as the steel and concrete to build guideways.

Some of the jobs in supplier industries may not be

net additions, however, if construction of the

HSGT system reduces the need to build other

transportation infrastructure such as roads or

runways.

More of the permanent jobs created by a

high-speed rail system would be in operations and

maintenance than in manufacturing. Backers of

the Texas TGV system estimate that two legs of

the system covering 461 miles, from Houston and

San Antonio to Dallas-Fort Worth, would generate nearly 1,900 operations and maintenance jobs

by 1998.31 The system would require 32 train sets,

which would take 31⁄2 to 4 years to produce, and

would probably employ some 1,160 to 1,350

workers over that time.32

DEVELOPING ADVANCED TECHNOLOGIES

HSGT systems, particularly maglev, may provide other economic benefits besides new markets and new jobs. Backers have argued that

maglev, as an important customer, could spur the

development of several high-tech materials that

could find application in a wide range of industries. The technology driving effect of HGST may

be rather moderate, however; it would mostly

involve applications of existing technologies to a

new environment. Certain aspects of the systems

~ Te~ wnpike Authority, Texas Triangle High Speed Rail Study (Dallas, TX: The AUtiOritY, February 1989), P. X-5.

26 “Current State of Japan’s Rolling Stock Industry,” Business Japan, July 1991, p. 59.

27 me Japane~ Roltig Stock Manufacturers Association counts car output in terms of freight car Wuiv;dent8. rn these eqtivak’nt uni@

bullet trains made up about 18 percent of output. Assuming employment ratios are similar, only about 2,600 workers were involved in bullet

train production.

28 Mae G. G~ud, GEC fi~om Transportation Inc., personal communication, June 1992.

29 GEC ~~om T_~o~ kC., TGV promotiord bWhw30 Ibid.

31 Denis mute, GEC AISthOrq telefax ~tittd to OTA, Dec. 16, 1992.

32 ~e= e5@tes we ~~on exWfience in Fr~ce in tie ~~facture of TGV rolling st~no@j above,(TnfOrrnation Mlppkd by ~

Salci of Bombardier, Inc.)
8--Energy-Efficient Transportation: Public Systems 1217

(e.g., sophisticated communications and control)

are also widely applicable to other fields, but it

seems more likely that HSGT could be one of

many user industries that support the advance of

these technologies rather than a powerful driving

force.

OTA found in a previous report that largescale, multibillion dollar systems such as maglev

were not likely to drive high-temperature superconductor (HTS) technology, for two reasons.

First, because superconducting components are a

small fraction of the costs of building a large

system using these devices, the cost advantage of

HTS over low temperature superconducting (LTS)

equipment is likely to be small. Moreover, HTS

is unproven, while the more mature LTS has

proven reliable in several applications.33

Maglev should not be counted out as a supporter of superconducting technology, however.

When the Japanese National Railways started

development of maglev trains in the mid-1970s,

they boldly chose a system that could use

low-temperature superconducting magnets rather

than one using conventional magnets, as the

Germans did. Development of LTS for maglev

forced solutions to handling liquid helium in a

difficult environment, and this led to the development of cryogenic refrigeration equipment that

has proved useful in several other very lowtemperature technologies.34 Furthermore, Japanese researchers are continuing to explore possibilities for using HTS in maglev systems. HTS

would allow the substitution of safer, cheaper

liquid nitrogen for the liquid helium used in LTS

systems, and would involve a simpler cryogenic

system. Possibly, maglev might become one of a

diversified set of customers for a more mature

HTS technology.

Lightweight composite materials, another critical technology, are also required in maglev

vehicles. It is not clear that maglev would be

central to the development of these materials;

aerospace is already the leading industrial supporter of and customer for lightweight composites, and there are others as well, including

sporting goods. Considering the limited numbers

of cars likely to be built each year, maglev might

add a rather modest increment to the R&D and the

markets for these materials that are already

provided by bigger industrial customers.

Construction technologies could be advanced

by maglev. Building extensive elevated guideway

systems would require prefabricated beams and

piers built to higher tolerances than are required

for road or conventional rail track construction.

However, aspects of the technology might find

application in bridge building, highway spans,

and pretensioned concrete for transit systems.

High-speed rail systems require highly automated and precise signal, communications, an d

control systems. These are already standard

equipment on the high-speed systems in operation in Japan, France, and elsewhere. Maglev

systems can be designed to operate at still higher

speeds, requiring still more highly automated and

redundant vehicle tracking and control systems.

Many aspects of such sophisticated systems are

yet to be designed, tested, and evaluated.35 It

seems likely that these communications and

control technologies will be developed in conjunction with the rail or guideway technologies

involved.36 This is an area of HSGT technology

that could have synergies in related fields and

other industries.

of Te~~~logy Assessment, O’IA-EM-&K) (waShklgtO& DC:

U.S. Government Printing Office, 1990), p. 58.

M U.S. Conwess, ~lm of TW~olon Assessmen4 Commercializing OTA-ITE-388 (W~tigtou

DC: U.S. Government Printing Office, 1988), p. 78.

ss Tmmpo~tion Research Board, op. cit., fOOtIWe 3, p. 40.

se Ibid., pp. 69-70.
218 I Defense Conversion: Redirecting R&D

EXPORT MARKET POSSIBILITIES

While both the U.S. and world markets for

HSGT are fairly limited today, there is a potential

in the near future for world market expansion,

especially in Europe. The European Community

(EC) has laid the groundwork for a 180 billion

Ecu (about $250 billion) high-speed rail system to

be completed in the first quarter of the next

century.

37 Included in this grand scheme are new

projects already underway in France, Germany,

Italy, and Spain, plus additional projects in

England, Belgium, Denmark and Greece. The

English Channel tunnel project (the Chunnel) will

be an important link in the system, providing

high-speed service between London and Paris and

other European destinations. Although the plan

has resolved some major technical problems (e.g.,

standard track gauge), others remain to be ironed

out. For example, because of differences in

engineering, trains from different national systems cannot reach full high-speeds on each

others’ tracks. Also, the French TGV trains do not

now have pressurized cabins, a requirement for

the extensively tunneled German high-speed

system.38

High-speed rail systems are also planned for

Asian countries, including Korea and Taiwan,

and for Australia. From the standpoint of geography and demographics, there may be large

potential markets for HSGT in Eastern Europe,

the former Soviet republics, and developing

countries such as India and Brazil, but it is hard to

imagine that these countries will be able to make

the necessary upfront investments any time soon.

Growth in these regions can only be considered a

long-term prospect.

Assuming that substantial growth in HSGT

systems does occur in other countries of the

world, the markets those systems would offer to

U.S. companies are very likely limited. The

General Agreement on Tariffs and Trade (GATT)

constrains countries from favoring domestic producers for many items that governments buy, but

transportation systems are excluded from the

GATT procurement code. Having footed the bill

for developing their own HSGT systems, it is

quite unlikely that European or Japanese governments would buy U.S.-made systems even if the

price or technology were superior. If the GATT

were amended to make HSGT procurements

completely open, European and Japanese firms

would still have a tremendous advantage, at least

in the short term, because their technologies are

proven and they have manufacturing experience.

The strategy of buying from domestic producers is also open to the U.S. and State Governments. Some of the benefits of job creation, and

possibly some technology transfer, can be gained

by requiring U.S. content when foreign companies build HSGT systems in this country. Texas

and Florida are doing just that. Although neither

system has settled on the exact percentage,

domestic content in both the Texas TGV and

Orlando Transrapid is expected to be well over 50

percent.

Korea is following the same strategy. The

planned Korean line from Seoul to Pousan is

expected to cost about $5.5 billion but is projected

to generate a contract of only $390 million to the

country providing the technology. The bulk of the

construction and manufacturing will take place in

Korea. 39 For systems installed in the United

States the amount going to the foreign country

could be still smaller than in the Korean case,

since Korea lacks the manufacturing capability

for some of the electrical equipment used in

high-speed rail.40

37 ~ck ~er, “me S=ond Railroad Revolutio~” New Scientist, h’iay 23, 1992, p. 20.

38 Ibid.

39 ~utomo W* *4 Natiom ~ce to Field Asia’s Fastest passeWer Tr@” .lUpan Econo~”c Jour~/, w. 10, 1990, p. 22.

m Ibid.
8--Energy-Efficient Transportation: Public Systems I 219

CONVERSION POSSIBILITIES

The 1990s are the second time around for

defense conversion opportunities in HSGT. Starting in the late 1960s and continuing in the 1970s,

following the Vietnam War, several defense

companies took part in government-led HSGT

projects, including concept contracts for maglev

and ‘‘air-cushion’ systems. Some of the firms

invested their own funds as well as government

contract money in the projects. However, when

the Federal Railroad Administration (FRA) canceled its HSGT work in 1975, the major defense

companies ceased most of their efforts in the field.

Today, there is renewed government support

for HSGT, and several defense contractors are

involved in the work. The current efforts are

modest and are mostly funded by small government research contracts, as part of the National

Maglev Initiative (discussed below). There has

been little commitment of the companies’ own

funds. 41 These small-scale projects use company

teams of about 5 to 10 people, mostly engineers

who were already with their company and previously worked on missile aerodynamics and materials, aircraft aerodynamics, the superconducting

supercollider, or the strategic defense initiative.

The defense firm most involved in HSGT is

Grumman Corporation. As prime contractor for

one of four maglev system concepts contracts let

under the National Maglev Initiative, Grumman

has put together a team that includes six other

engineering organizations as well as 10 researchers from its own Advanced Concepts Group. This

is a small technical outfit that considers alternative nondefense applications for Grumman technologies, including such things as tilt wing

business aircraft and robots for nuclear waste

cleanup.

So far, neither Grumman, the leader among

defense firms interested in maglev, nor any other

defense companies is investing significant amounts

of its own money in developing the technology.

Grumman is interested enough, however, to have

joined a group of companies that is trying to

develop a plan for a maglev line from Washington, DC, to Baltimore.42 If sufficient government

funding is forthcoming to make such a high-risk

project attractive to private firms, Grumman and

other defense companies now working on smallscale research projects might well be among the

participants.

To sum up, it appears that developing HSGT

technology in this country and building a domestic industry could have modest but limited benefits in such things as creating good jobs, opening

conversion opportunities, and driving technology

advance-though it is well not to be too dismissive of the potential for technology advance, as

that is notoriously hard to predict. Many of the

wider societal benefits of HSGT—including reduced dependence on foreign oil, better environmental quality, and the impetus for regional

economic development-could accrue to this

country whether the technology used to build the

systems is imported or domestically developed.

1 Government Policies to Develop HSGT

U.S. Government involvement in HSGT,

maglev in particular, dates back to the late 1960s.

A 1965 law established the FRA’s Office of

HSGT and authorized it to offer grants to

companies to develop concepts and technologies

for advanced HSGT systems including maglev. In

total about $55 million (1992 dollars) were spent

in the effort over 10 years. Industry giants such as

Ford, Boeing, and Grumman participated in the

program, investing their own funds in it as well as

receiving government grants. In 1975, the FRA

abruptly curtailed high-speed R&D funding and

redirected its passenger rail resources toward

41 OT.A intmiews with research and development personnel at GIWIIMMQ ~“ Marietta (Maryland and Colorado), Boeing Aerospace

and Defense, Raytheon Equipmen4 and General Electric Corporate R&D, All these companies are participating in Federal Government

contracts from the National Maglev Initiative.

42 Gamy Stix, “Air Trains,” Scientific American, August 1992, p. 107.
220 I Defense Conversion: Redirecting R&D

improvements to the Northeast rail corridor

between Washington and Boston. The promised

government aid for HSGT system development

and commercialization evaporated, and the companies involved withdrew. Boeing, for example,

canceled its development program and transferred the technology to Carnegie Mellon University. The Federal Government’s sudden withdrawal from HSGT in the mid-1970s is a major

reason companies now give for not investing their

own money in maglev.

MAGLEV PROGRAMS

In 1990, Congress directed the Army Corps of

Engineers, the Federal Railroad Administration

and the Department of Energy to develop and

jointly manage the National Maglev Initiative, a

2-year, $25-million program to assess the technical and economic feasibility of maglev and to

develop systems concepts and component technologies. Four contracts ranging from about $2.5

to $8 million were let for systems concepts—

ideas of what a U.S. maglev system might look

like and how U.S. technology might improve

upon the existing Japanese and German prototypes. Also included were 27 smaller contracts for

feasibility studies and technology development.

Defense contractors participated in each of the

systems contracts and several of the smaller

contracts.

In 1991, Congress authorized a huge increase

in funding for maglev, creating a $725-million

maglev development and demonstration program

over 6 years as part of the Intermodal Surface

Transportation Efficiency Act of 1991 (ISTEA).

The National Magnetic Levitation Prototype Program calls for selection of a project that would be:

1) longer than 19 miles, to allow for full-speed

operation; 2) intermodal (i.e. connect with existing air or train service); 3) located in a place with

enough potential riders to allow future commercial operation; 4) able to use interstate highway

rights of way, and possibly railroad rights of way;

and 5) an experimental system fully capable of

evaluating technical problems, including switching systems and ability to operate around curves.

In awarding the contract, government officials

should encourage the development of domestic

manufacturers-including ones that are already

in the railroad, aircraft, or automobile businesses.

The maglev prototype project could use Federal money for up to three-quarters of its cost, but

would be expected to attract substantial nonfederal funding as well. No Federal money had been

appropriated for the prototype program by the end

of 1992.43A call for proposals for development of

conceptual designs of the prototype awaited the

feasibility reports of the National Maglev Initiative, which was expected in spring 1993. Speaking at a meeting of the High-Speed Rail/Maglev

Association in February 1993, officials of the

Federal Railway Administration said that preliminary results of the reports showed that maglev is

feasible, and an “attractive alternative in several

high density corridors, covering operating costs

and varying portions of capital costs. The cost of

a maglev system for the Northeast corridor would

be about $22 billion all told, they said, and it

could be ready by 2005.44

OTHER FEDERAL PROGRAMS FOR HSGT

ISTEA also included support for HSGT systems other than maglev, but at a much lower level.

A total of $50 million over 5 years, including $25

million from the Highway Trust Fund, was

authorized to support demonstration projects for

AS As noted in box 8-A, Congress has approved spending $98 million from the mass transit account of the National Highway TrtM F~d

for the Orlando maglev projecq this is not a part of the National Magnetic Levitation Prototype Program.

44 s~taents of Robefi ~c~ IMpUty Associate Administrator for Technology Development for the National Maglev ~t.ititive, Federal

Railroad Administration U.S. Department of Transportation% “NMI Status Repom” statement at the 1993 High Speed RaWMaglev ForunL

Feb. 25, 1993; Gene Koprows~ “Magnetic Levitation: Reality in 2005 for Just $22 Billion!” New Technology Week, Mar. 1, 1993, citing

statements by Krick and Arrigo Mongini, Deputy Associate Administrator for Railroad Services, Federal Railroad Administration U.S.

Department of Transportation.
8—Energy-Efficient Transportation: Public Systems 1221

HSGT technologies of any kind (including steel

wheel on rail) for use in a system that is actually

in operation or under construction. Another $25

million (from general funds) was authorized for

R&D of all kinds of HSGT technologies; the law

specified that the government could provide 80

percent of the costs in R&D partnerships with

industry on HSGT technologies. ISTEA also

required a report from the Department of Transportation by June 1995 on prospects for various

forms of HSGT, including: 1) an economic and

financial analysis, including projections of both

costs and potential markets; 2) a technical assessment, including both environmental and safety

issues and unresolved technical issues; and 3)

recommendations for model legislation for State

and local governments to pave the way for

construction of HSGT systems.

STATE EFFORTS TO PROMOTE HSGT

Many State Governments actively promoted

the development of HSGT, starting with feasibility studies and technology assessments of highspeed rail. Several, including Florida, Ohio, and

Pennsylvania, have gone beyond feasibility studies to pursue environmental assessments and

engineering studies. Funding for full-scale development remains a problem. In 1987, Ohio voters

rejected a measure that would have created a

special sales tax to support HSGT development

and construction, Florida planned to help finance

construction of a HSGT system by granting the

builders land around proposed stations, which the

builders could then sell; however, a sharp drop in

the Florida real estate market killed the scheme.

In Texas, the State legislature that awarded the

franchise for the TGV project stipulated that no

State money could ever be appropriated for it.

However, backers are trying for permission to use

tax-free bonds to finance about $2 billion of the

construction costs (see box 8-A). This option is

also strongly favored by backers of HSGT systems elsewhere in the United States. Under the

U.S. Tax Code, States or localities can issue

tax-free bonds on behalf of private companies to

build projects that result in a public good.

Because no Federal or State income tax is

collected on the interest paid to the bondholder,

individual investors are willing to accept a lower

rate of interest than they would accept for

similarly risky taxable bonds. Since not all States

collect income tax, and those that do charge rates

much lower than the Federal income tax, most of

the advantage that tax-free bondholders receive is

at the expense of the Federal Treasury. It is

estimated that every $1 billion in tax-free bonds

costs the Federal Treasury $33 to $50 million;

thus the cost to the government of the planned $2

billion bond issue by the Texas TGV could be $60

to $100 million.45

Tax-free industrial development bonds (IDBs)

have funded the construction of water and sewage

treatment plants, low-income housing, and, in the

past, projects that simply generate jobs. Because

most of the cost is borne by the Federal Government, and because security for the bonds is

usually no more than the income and assets of the

firm receiving the bond, local governments have

little reason for restraint in issuing IDBs. In 1986,

Congress limited the scope of IDBs, setting caps

on how much money each State can issue in IDBs

every year. Certain projects were excluded from

the caps-including airports but not railroads.

Both the Orlando and Texas high-speed rail

developers are urging congressional action to

amend the law so as to treat railroads like airports.

INTRACITY MASS TRANSIT

Mass transit, particularly rail transit, within

cities has also been proposed as meeting public

needs while also serving as a candidate for

defense conversion. The potentials for reducing

emission of greenhouse gases from cars, improving urban air quality, reducing traffic congestion,

45 wt~m R. lvfarl~ ‘Industrial Development Bonds at 50: A Golden Anniversq Review, “ Economic DevelopmentReview, vol. I, No.

4, September 1987, p.397.
222 I Defense Conversion: Redirecting R&D

and cutting dependence on foreign oil are public

benefits claimed for mass transit. As for the

conversion potential, the idea that defense aerospace companies might convert to rail transit car

production is by no means new. The 1970 Surface

Transportation Act46 specifically authorized the

Federal Transit Administration (then the Urban

Mass Transit Administration) to “encourage

industries adversely affected by reductions in

Federal Government spending on space, military

and other Federal Projects to compete for contracts. ’47

Defense contractors have some advantages in

the mass transit business. First, they know how to

compete for government contracts. While bidding

for mass transit means responding to calls from

local governments, not the Department of Defense, there is at least some similarity in marketing methods. Second, some of the manufacturing

skills a defense a.ir-framer must have are also

required in building a rail car. In both cases,

manufacture means integrating components supplied by subcontractors. Like the airframe integrator, the prime contractor for rail cars usually

builds the structural frame and the shell, but

subcontractors generally furnish the powertrain

components, the electronic controls, and the other

major systems. Fabrication is completed by

skilled craftsmen. In neither case are mass production techniques employed.

On the other hand, there are major differences

between aircraft and rail car manufacture. Some

are technical; for example, aircraft are made of

riveted aluminum, lightweight steel alloys, and

composites, while subway car bodies are generally constructed of welded stainless steel or

welded aluminum. More important are differences in approach to cost. In military orders, the

paramount consideration is performance; costs,

while important, are secondary. With rail cars, as

in any civilian market, cost is a primary issue.

Furthermore, manufacturers of aircraft are used to

operating at a very large scale in programs worth

billions of dollars. The market for rail cars is

limited and diffuse, with many competitors battling for small contracts that follow no predictable

timetable.

Some observers believe that an infusion of new

technologies from aerospace fro-for example,

in advanced materials and microelectronic controls-could improve mass transit manufacture. The

negative factors are stronger, however. As noted,

a most important factor is the small size and

unpredictable nature of the market for rail cars.

The absence of uniform standards for transit cars

makes it hard to achieve economies of scale. Past

experience does not provide much evidence for

the practicality of conversion. The 1970s ventures

by defense companies into mass transit car

production were not a total fiasco; some were

spectacular failures, financially and technically,

but a few eventually achieved modest technical

success. Boeing-Vertol, after a rocky start with an

order for subway cars in Boston, later improved

enough that cars delivered to Chicago and San

Francisco gave years of reliable service. Allied

Signal developed electronic “chopper” switches

so successfully that at one point in the 1970s it

supplied electronic controls for every U.S. and

Canadian light rail program.48

None of these ventures lasted, not even those

that achieved technological success. Boeing

closed out its light rail car operation in the early

1980s, and in 1988 Allied Signal sold its transit

control business to the Swedish-Swiss firm Asea

Brown Boveri. Shifting government policy on

mass transit was responsible in part, but probably

a greater factor was a defense buildup that offered

46 fibli~~W 91453.

47 ~bfi~~~ 91453, sec. 100

48 For~amout~f defe comp~es’ ven~~ ~to -s-it~~act~, se U.S. Covess, Office of Technolo~Assessmen~ Afier

the Cold War: Living With Lower Dqfense Spenu?ng, OTA-ITE-524 (Wash@toq DC: U.S. Government Printing Office, Febrwuy 1992), pp.

206-210.
8-Energy-Efficient Transportation: Public Systems 1223

far more rewards than any available in transit.

Difficulties also stemmed from the different

demands on managers in commercial business—

especially in cost control, attention to reliability,

and marketing ability.

OTA’s analysis finds that the market for mass

transit rail cars is generally less than $750 million

per year, is highly variable, and is divided among

many firms that are, with one exception, foreignowned. Possibly, the Federal Government might

take actions to make the market more hospitable

by encouraging standardization of mass transit

cars, supporting larger numbers of purchases, and

working with local transit authorities to create a

more orderly pattern of purchases. Even so, the

market would not approach the size of declines in

defense aerospace purchases, and foreign firms

still have a big lead over novice U.S. fins. It is

not clear that defense firms are particularly well

situated for or interested in entering the mass

transit market. While there may be sound arguments for more government support of mass

transit than already exists, on grounds of public

benefits to energy independence and protection of

the environment, the opportunities for conversion

and for growth of a sophisticated, dynamic

domestic industry appear to be limited.

9 The Products

The mass transit rail car market comprises

three basic categories: rapid rail transit (sometimes called heavy rail or metro rail), light rail

vehicles (contemporary descendant of the trolley

car), and commuter rail. Because each of these

markets is quite small, most builders are involved

in all three.

Rapid Rail Transit (RRT)--These are the

cars typically used in subway and elevated transit

systems. They are self-propelled and electricpowered, either from a third rail or overhead

wires, and they can be strung together in trains of

up to 10 or more cars. Only 12 RRT systems are

in operation in the United States, but RRT

comprised 66 percent of all transit cars delivered

Table 8-l-Total New Transit Cars Delivered,

1981-91

Type Number Percent of total

Rapid transit . . . . . . . . . , . 3,781 66%

Light rail . . . . . . . . . . . . . . . 696 12

Commuter rail . . . . . . . . . . 1,281 22

Unspecified. . . . . . . . . . . . 8 0

Total . . . . . . . . . . . . . . . 5,766 100%

SOURCE: “Passenger Car Market at a Glance,” RaikayAge, January

annual, 1982-92.

between 1981 and 1991 (table 8-l). RRT cars are

typically priced from $800,000 to $1.5 million,

depending on size, technological sophistication,

and the size of the order.

The RRT market is dominated by New York

City’s Transit Authority (NYCTA), the Nation’s

largest system; it operates 59 percent of all RRT

rolling stock and accounted for 45 percent of new

RRT of purchases in the last decade (table 8-2).

Other major buyers of RRT cars are the Chicago,

San Francisco, Boston, and Philadelphia systems,

plus newer systems in Washington and Atlanta.

Los Angeles, Houston, and Honolulu are all

planning to begin operating RRT systems by the

year 2000, but even in combination these systems

will not add significantly to the total demand for

rail cars. None of the planned systems has

contracted for more than 150 cars. Altogether,

RRT sales averaged about 350 a year between

1981 and 1991.

Light Rail Transit (LRT)--These cars, the

offspring of the traditional trolley car, are simpler

and less expensive than those used in RRT

systems, and are designed to serve areas with

lower population density. LRTs can be connected

into trains of two or three cars, are often articulated to accommodate tight turns, and are generally powered by overhead wires. The guideways

can be at street level, elevated, or underground.

There are 17 light rail systems in operation in the

United States, 7 of which opened between 1981

and 1991, but only 12 percent of transit cars

delivered during the decade were of this type.
224 I Defense Conversion: Redirecting R&D

Table 8-2—U.S. Rapid Rail Car Fleets

Fleet Percent Average Percent over

Transit operator size of total age 25 years old

New York-MTA . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,089 59.0% 18.-I 37.7%

Chicago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,214 11.8 13.6 23.0

Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 6.4 8.7 0,0

San Francisco. . . . . . . . . . . . . . . . . . . . . . . . . . . . 579 5.6 12.9 0.0

Boston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 3.9 14.6 20.3

Philadelphia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 3.7 23.3 66.9

New York-PATH . . . . . . . . . . . . . . . . . . . . . . . . . . 342 3.3 17.8 0.0

Atlanta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 2.3 6.9 0.0

Miami . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 1.3 8.0 0.0

New Jersey-PATCO . . . . . . . . . . . . . . . . . . . . . . . 121 1.2 17.4 0.0

Baltimore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 1.0 5.4 0.0

Cleveland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 0.6 7.0 0.0

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,325 100.O% 18.1 28.2%

KEY: MTA-MetmpoHtanTranspRationAuthodty;PATH=podAuthod~yTrans.Hud=n; PATCO-PortAuthorityTrwAtCorporation (PennsylvaniaNewJersey),

SOURCE: DepartrnentofTransportation, Urban MassTransportationAdministration, Washington,DC, DataTab/esforthe 1990Sectior) 75/?eDort

Yeac Deeember 1991.

Small order sizes make light rail cars a particularly difficult segment for manufacturers.

Commuter Rail Transit--These systems, designed to bring large numbers of commuters into

downtown from more distant suburbs, operate

between more widely spaced stations on fixed

schedules. Commuter rail cars may be pulled by

locomotive or may be self-propelled. They represent a growing sector of the market, accounting

for 22 percent of the transit cars delivered from

1981 to 1991. In 1990, 13 systems were in

operation with at least two more scheduled to

begin operation in the 1990s.

1 The U.S. Market

Deliveries of transit cars surged in the 1980s

(table 8-l), largely due to increased purchases by

New York City and the demand created by new or

expanding systems in Washington, Atlanta, San

Diego, and Sacramento. The average for the

period 1981-91 was 525 cars of all types per year.

Even in this time of relative plenty there were

great variations in deliveries from year to year. In

1986, the best year, 1,152 cars were delivered,

while only 148 cars were delivered in the worst

year, 1990.49 Among some car types the variation

was greater; 854 RRTs were delivered in 1986

compared with only 6 in 1991.

New York was by far the largest purchaser

during the decade, buying some 1,713 of the total

5,766 new cars delivered, and dominated the

rapid rail market (45 percent of all purchases).

Only one other system, Chicago’s elevated transit, purchased more than 200 cars, and two

others--San Francisco and Washington-bought

more than 100 cars from 1981 to 1991.

Although the 1991 Intermodal Surface Transportation Efficiency Act authorized a large infusion of new Federal money into mass transit,

industry analysts expect that the next several

years will not generate as much demand for new

rolling stock as the 1980s brought. A backlog of

914 unfilled car orders existed at the end of 1991;

orders for 761 cars were expected in 1992, and

between 820 and 1,640 more from 1993 to 1997.

Orders of more than 175 commuter rail cars were

projected for the 5-year period, but only three

cities were expected to order more than 150 RRT

49 Au dab on rail car sales are fium “Passenger Car Market at a Glance, ” Railway Age, January annual, 1982-92,
8—Energy-Efficient Transportation: Public Systems 1225

cars. In light rail, only Boston was expected to

order as many as 100 cars and no other order was

expected to exceed 50.50

Additional Federal Government funding might

increase demand but probably not by very much.

Many systems are already operating new rolling

stock. New York took delivery on 2,350 new and

remanufactured cars in the 1980s and its average

fleet age is down to 18.1 years; the average life

expectancy for RRT cars is 40 years .51 New

demand might arise from construction of new

systems and the expansion of existing systems

but, as happened with projects started in the 1970s

(e.g., Atlanta, Washington), car purchases would

not get underway until the next decade. Prospective locations for large new systems are limited.

Dallas, Houston and Honolulu are building RRT

systems, but there are few other locations that

would be likely to require orders of more than 100

cars.

Los Angeles is one place where large-scale

growth in the rail car purchases can be expected.

Because of its air pollution and traffic congestion

problems, Los Angeles has committed to spend

$185 billion between 1990 and 2020 on transit

improvements. A major element will be rail. Two

light rail lines were operating in 1992; one section

of a short RRT opened in early 1993, to be

completed later in the decade; and other commuter and light rail developments are also

planned. Los Angeles expects to procure a total

600 cars including RRT, LRT, and commuter rail

cars over the 30 years.

52 Of these 600, 250 are

either currently under requests for proposals or

have already been contracted for. Altogether,

even with its huge investment in mass transit, Los

Angeles will probably add only about 20 cars a

year, on average, to the total U.S. demand.

B The Competitive Environment

The U.S. rail car manufacturing market is

nothing if not crowded (table 8-3). More than 25

firms supplied cars to U.S. transit systems in the

1980s. Until the entrance of Morrison Knudsen in

1991, no rail transit car had been manufactured by

a U.S. firm since 1984, when Boeing-Vertol

delivered its last car to San Francisco Municipal

Railway. The Budd company, the last major U.S.

rail car builder, was bought by a German company in the late 1970s and delivered the last car

under the Budd nameplate in 1984. Budd continued U.S. operations under the name Transit

America until 1987 when its backlog and facilities were purchased by Bombardier of Canada.

The large number of companies competing for

orders in the 1980s led to variation in deliveries

by individual firms even more drastic than those

seen at the market level. Only Kawasaki delivered

cars in every year from 1981 to 1991. Bombardier, which held 23 percent of the total market in

the period, made 948 of its 1,366 deliveries in just

2 years; 825 of these cars were bought under a

single contract. Even its position as market leader

does not give Bombardier a consistent ability to

win major contracts. Budd controlled 21 percent

of the 1981-91 market even though it disappeared

as a company in 1987.53 Kawasaki delivered 970

cars, 17 percent of the market.54 Some firms

50 Ibid,

51 us, Dep~ment of Tr~po~tio~ F~er~ Tr~it AMtIzItio~ Data Tables DC:

U.S. Department of Transportation, December 1991), table 2.17.

52 me ~on~act for tie ~s @eles Gr~ L~e cm w~ Ori@y aw~d~ tO Sumitomo of JapaU the contractor for the city’s Blue Line

cars. Sumitomo was selected over Morrison Knudsen of the United States despite the latter’s lower bid. Los Angeles transit operators felt that

Morrison Knudsen’s engineering skills were not thoroughly tested, casting doubt on their ability to deliver high-quality cars on schedule.

Morrison Knudsen launched a campaign to reopen the bid. Their campaign was framed in terms of U.S. jobs lost and Japanese economic

domina tion. As public sentiment against Sumitomo increased, the transit authority canceled the contract. Sumitomo was later awarded a smaller

contract.

w ~cludes ~es ~de by Transit America in 1985 and 1986.

~ kcludes all s~es where the trading company Nissho Iwai is listed as the ptie cOn~ctor.
226 I Defense Conversion: Redirecting R&D

Table 8-3--U.S. Rail Transit Car Deliveries, 1981-91

Total

1981-85 1986-91 1981-91

Country of origin Number 0

/0 of total Number % of total Number % of total

United States . . . . . . . . . . . . . . . . . . . . 1,004 40% 316 10% 1,320 23%

Canada . . . . . . . . . . . . . . . . . . . . . . . . . 301 12 1,320 40 1,621 28

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . 863 34 674 21 1,537 27

Europe . . . . . . . . . . . . . . . . . . . . . . . . . 335 13 953 29 1,299 22

Total . . . . . . . . . . . . . . . . . . . . . . . . . 2,503 100 3,263 100 5,766 100

SOURCE: ’’PassengerCarMarket at aGlance; RdhvayAge,January annua~ 1982-92.

supplied cars only to a single system, often under

a single order. Hitachi of Japan supplied 90 cars

to Atlanta from 1984 to 1987. Westinghouse

Amrail, a consortium of European companies,

provided 419 RRT cars to New York. Breda of

Italy had two customers, supplying 356 cars to

Washington after selling 59 to Cleveland in the

early 1980s. The remaining firms delivered fewer

than 250 cars each and did not make deliveries in

more than 4 of the 11 years.

Some Japanese manufacturers have arrangements with trading companies that allow them an

extra measure of flexibility in this highly unstable

market. While some trading companies such as

Nissho Iwai have longstanding relationships with

a single builder (Kawasaki), others subcontract

with various builders and may even divide the

work from a single contract among builders. This

arrangement allows Japanese firms to bid on

contracts that would otherwise be beyond their

capacity. In contrast, U.S. firms--those still

operating in the 1970s and early 1980s—were

either fully loaded with work or had no contracts

at all.

Only one U.S. firm has entered the transit

industry in the last 15 years-Morrison Knudsen.

The company has a strong tradition of rail work,

including locomotive and freight car rebuilding.

It moved into the transit market slowly, first

rebuilding older cars and only then designing and

building new cars. Its investment has been at a

cautious pace. It does not yet have a plant to build

car shells, instead importing them from overseas.

Even with this cautious incremental strategy the

company has invested around $70 million in plant

and equipment to build transit cars. Morrison

Knudsen had advantages that future U.S. entrants

are unlikely to have, that is, rail experience and

large rebuilding projects that gave its people

some learning experience before entering fullscale engineering of a new car. Even with these

advantages-and even with the further benefit of

preference by transit authorities for domestic

builders, as discussed below—the company may

not be a viable long-term competitor in the new

rail car market.

9 Preference for National and

Local Manufacturers

Most countries with a transit car manufacturing

industry provide some form of protection for

domestic producers. Under GATT, the international agreement governing trade among most of

the world’s nations, many areas of government

procurement cannot offer explicit preference for

domestic fins. However, transportation remains

a so-called ‘‘excluded’ sector in the GATT

procurement code; governments may use various

devices (such as price preferences) to favor

domestic firms. Informal barriers, such as failure

to provide information to foreign bidders about

technical specifications and contract procedures

(“lack of transparency’ can be an even stronger

form of protection, as they are in Japan and

Europe.
8-Energy-Efficient Transportation: Public Systems 1227

Besides their arrangements for work sharing

and collaboration, the car builders in Japan

benefit from a large, protected domestic market.

The benefit shows up in sales and export figures

for rail cars made in Japan from 1971 to 1990

(figure 8-l). Exports are a small share of total

output. But it is striking that, in nearly every year

when total output (comprising mostly domestic

sales) fell below average, exports rose above

average. Conversely, when total sales were above

average, exports fell below average. This record

suggests that the Japanese producers were able to

use exports to the United States and other

countries to sop up some excess capacity during

slack times in domestic demand.

The strategy of using exports to compensate for

lower domestic demand rests partly on a predictable procurement system. In Japan, rail car producers get enough warning of planned lower purchases that they can bid on foreign contracts to

smooth out production. Interestingly, despite the

apparent coordination in the Japanese market, the

Japanese Rolling Stock Manufacturers Association pleads for more cooperation among firms and

railway operators.55

The United States has its own form of protection--

one that is more explicit but probably easier to

evade than informal barriers. The idea that

government spending should benefit American

firms underlies a series of Buy America requirements in the Federal Acquisition Regulations.56

For the most part, Federal Buy America provisions apply only to goods purchased directly by

the Federal Government. 57 However, under the

Surface Transportation Act of 1978, the Federal

Transit Administration (then the Urban Mass

Transit Administration) was authorized to require

that rolling stock purchases made fully or in part

50

40

30

20

Figure 8-l-Japanese Rail Car Industry

Japanese rail car output

(in freight car equivalents)

Thousands

I m

o~

1971 1974 1977 198 0 1983 1986 1989

Japanese rail car exports

(in freight car equivalents)

Thousands

10 I

I

L

OJ: , ,

, , r

1971 1974 1977 1980 1983 1986 1989

SOURCE: “Paesenger Car Market at a Glance,” F?ti/wayAge, January

annual, 1982-92.

with the Agency’s grants have Buy America

preferences. 58 Firms not qualifying as U.S. firms

must bid at least 25 percent lower than competing

“domestic’ bids to win a contract. However, in

order to be considered a U.S. firm, a manufacturer

need only have 60 percent of the content of the car

produced in the United States and complete final

assembly in the United States. In practice, Buy

55 Japme~ R~~g StoCk ~~aC~~~S AssN~tio~ Fy ]990 Rolling Stock ]~usf~Annwl (Japan: The ASSOCi.atiOU 1991) (in

Japanese).

56 For ~ brief disC~sion of B~~ Amtica prov~iom ~d Fede~ Gove~ent pr~~ment, sw U.S. cOn&S, OffiCe Of TdlIIoIo~

Assessment, Competing Economies, ITE!-OTA-498 (WMingtoq DC: U.S. Government Printing OffIce, 1991), ch. 4.

57 my Sutes ~ve &eir own Buy America requirements for their prOCur-~W.

58 ~bfic ~w 95-509, Swtion 4Q2, 1978.
228 I Defense Conversion: Redirecting R&D

America as applied to rail is not a price preference

but rather a content requirement. All contracts

awarded in the 1980s that were required to meet

Buy America did so by having sufficient U.S.

content. By leaving the market open to foreign

carbuilders, the requirement promotes competition while at the same time attempting to assure

that companies manufacturing in the United

States capture at least 60 percent of the value of

the car.

In the Uruguay round of negotiations over

GATT, some U.S. trading partners proposed a

new procurement code, in which transportation

could no longer be an excluded sector, and

therefore able to offer domestic industries national preference. U.S. negotiators were unwilling

to accept this change in the code without firm

assurance that European and Japanese informal

barriers to the purchase of U.S.-manufactured

transit cars would be removed if transportation

were no longer an excluded sector.59

H State or Local Content Requirements

In some cases where transit authorities have not

received any Federal funding for their rolling

stock purchases, the logic of Buy America has

been extended to the State or local level. Such

State or local content requirements are not

allowable if Federal funds are used.60 While few

if any rail cars were purchased in the 1970s

without Federal funding, only about 55 percent of

those built in the 1980s used Federal money .61

Many of the largest transit agencies selffinanced in the 1980s. In its enormous Statefunded 1981 order, the New York City Transit

Authority considered New York content as one

factor in the selection process but did not require

State offsets per se. State content was easy to

include because many suppliers are located in

New York. In its 1990 order for 173 commuter

rail cars, Chicago required final assembly in the

five-county area surrounding the city. This forced

Chicago’s contractor, Morrison Knudsen, to set

up an entirely new facility in the area. The benefit

to Chicago area workers may be temporary.

While Morrison Knudsen is hoping to continue

operation of the Chicago facility by converting it

to a rail car body plant (currently the company

imports car bodies from Japan and Switzerland),

officials admit that the long-term viability of the

facility will hinge on receiving enough new

orders to justify the company’s construction of its

own car bodies.62 Morrison Knudsen is also

building a facility in California as part of its

contract for the so-called ‘California’ commuter

car.

63 All of this investment in excess capacity has

fueled speculation that Morrison Knudsen will

not be able to survive in the transit car market.64

Rising demands for local content are seen by

some in the industry as a threat to the fragile

domestic supplier base. This applies to components suppliers at least as much as to final

integrators. As with many products involving

large-scale systems integration, a sizable share of

the value of a rail car resides with component

59 U.S. Trade Representative officiai, p-~@-catiou June 1992.

60 Urbm ~s Tr~it Administration “Third Party Contracting Guidelines, ” circuiar UMTA C 422D.lB, May 8, 1988, paragraph 4,

subparagraph b.

61B- on Raj/~ay Age -et dam ~d telephone interviews witb transit operatcm. onereasonfor the incr=e in IwA f~cing w~ ~

Federal Government support declined in the 1980s, both in number of grants given and the share of the purchase covered. Also, many transit

authorities believed that they could get more car for less money without Federal assistance that imposed procurement regulations covering such

things as minority f~ participation labor-surplus area fm participation and sealed-bid selection.

62 Momson ~ud=n cl- t. ~ve capaci~ in a New York facility to b~d ~cm a yea, far more than the number likely to be built

there currently. Therefore, it is unlikely that the company wouid have bailt a facility in Chicago if not for the contract requimmcnt. Information

provided by Morrison Knudsen company ofilcial, JuIy 1992.

63 Don Phillips, “Getting the U.S. Back on Traclq” Wa.rhingron Post, May 24, 1992, p. H-1.

~ Ricbd L. Stem and Red Abel.som ‘‘The Imperial Agees, ” Forbes, June 8, 1992, p.88.
8—Energy-Efficient Transportation: Public Systems 1229

suppliers. Los Angeles Transit Authority estimates that about 45 percent of the price of the car

is components or work done by component

makers or suppliers.

Because of Buy America national preferences,

U.S. parts suppliers have a considerably better

market position than U.S. carmakers. However,

the growing use of all-local financing has allowed

States and localities to both circumvent Buy

America requirements and require State or local

content. Because the market for transit car components is already quite small any loss of sales

can have a significant impact. If foreign builders

are not required to meet Buy America content

requirements, U.S. suppliers lose sales. More

subtly, local offsets can increase firm costs by

forcing them to set up gypsy manufacturing

facilities in the State or locality offering the

contract, thereby limiting what few economies of

scale or scope might exist.

9 American Manufacture of

Rail Cars for Mass Transit

The focus of this chapter

conversion opportunities, and

is on the jobs,

technology advances that new transportation systems might

offer. Through this lens, mass transit does not

look like a big winner.

If manufacture of mass transit cars experienced

a revival in the United States, it probably would

not generate many jobs. The issue is relevant to

defense conversion, since transit car production is

often mentioned as a candidate industry to absorb

some of the job losses in the defense industry .65

Most large defense contractors are extremely

wary of getting into the transit business because

of the well-known failures some defense companies suffered in the 1970s in their transit ventures.

One of these efforts--Boeing-Vertol’s production of light rail cars in the 1970s and early

1980s—was modestly successful. Even so, it

yielded fewer than 500 jobs, compared with more

than 5,000 jobs lost at Vertol in the post-Vietnam

War build-down.66 A Kawasaki-Nissho Iwai plant

in Yonkers, New York, which builds car bodies

and does final assembly, would employ only

about 300 people at its full output of about 120

cars per year.

67

Because subcontracted components make up as

much as 50 to 60 percent of a car’s value, the jobs

generated by parts suppliers are at least as

important as those in the integrator’s plants. Buy

America requires foreign producers to generate

60 percent of the car’s value in the United States,

and in most cases transit authorities that do not

use Federal money impose similar requirements;

therefore, most of the extra jobs in a domestic

industry would be at the final integrator level.

Assuming that 550 cars (the yearly average of

purchases in the 1980s) were built entirely in the

United States, transit car manufacture might

create as many as 1,400 new jobs.

As matters stand, there is not much prospect of

growth in the U.S. market. Replacement sales are

occurring at a steady rate and few systems expect

large increases in demand for cars. New systems

could and perhaps should be built. If government

policy were to support mass transit more strongly,

they might be. However, most recently built

systems have been small. Currently, only Los

Angeles seems likely to be a large new source of

future demand and only over the long term. The

addition of some 20 cars a year from Los Angeles

6s No&op,~ficip~ con~ctor for the B-2 bomber, faces a large loss of business when the much tIUIW~ ~ of the B-2 ends (the ProfT~

was cut to 20 planes from what was once envisioned as several hundred). Reportedly, Northrop approached the Japanese fm Sumitomo as

a possible subcontractor for manufacturing transit vehicles for Im Angeles. In late 1992, however, company ofllcials said prospects for the

deal were dead.

66 Boe~g.J7@ol offlc@paso~~omm~catioq J~e 1992. To~ ~ployment in helicopter btiding at Vertol in Phihdelphia dropped

from about 12,000 at the peak of war production to 6,700 in the later 1970s.

67 Union Rail Car, Yonkers, NY, promotional litera~e.
230 I Defense Conversion: Redirecting R&D

orders over 30 years does not make a big

difference in the U.S. market, or in job prospects.

The assumption that domestic manufacturers

could displace foreign producers is itself an

unlikely one. The U.S. transit car market is

crowded with fierce competitors, most of whom

are foreign. It also seems unlikely that U.S.

companies entering the field could profit much

from exports. It would be hard to best experienced

foreign competitors in their own markets, where

most have the added advantage of protection via

both formal and informal barriers.

Another issue is the place of advanced technology in mass transit. Could new U.S. firms enter

the market on the basis of new technology? Or

could technologies developed for transit cars be

more broadly applied in other sectors? Any

answer has to be rather speculative. U.S. transit

operators are typically very conservative about

employing new technologies. Difficulties in implementing new technologies in the early 1970s

that led to costly delays and embarrassment

continue to influence decisions on employing

new and unproven technologies. Reliability, longevity, and safety are the key ingredients operators look for in new rail cars. Moreover, transit

budgets are very limited. Operators want assurance that extra dollars spend on new technologies

will lead directly and obviously to lower operating costs or greater ridership.

On the other hand, some foreign transit systems

do have advanced technical capabilities that

operators there were willing to pay for. Completely driverless systems, microelectronic train

control using ‘fuzzy logic’ algorithms, and other

technologies not yet used in the United States

have been installed in foreign transit systems.

Some of these technologies are broadly applicable; a mass transit market for them here might

provide support for their further development and

spillover to other fields. Still, U.S. firms wishing

to compete on the basis of technology would have

to leapfrog the substantial advantage held by

European and Japanese firms that are already in

the business of supplying high-tech components

and services, and that have done more R&D in

mass transit over the last 25 years than U.S. firms.

The potential for a contribution from U.S. high

technology firms cannot be written off. Some may

be able to make inroads in the transit business at

the component or subsystems level. Although the

U.S. markets would likely be small, there might

be possibilities for export. In its request for

proposals to build 87 light rail vehicles, Los

Angeles tried to encourage U.S. defense firms to

investigate the transit component market. It

included a requirement that bidders team with a

high-tech firm to apply a new technology in two

prototype advanced vehicles, and then evaluate

the results.68 The first 40 cars built under the

contract would use more conventional technologies, but the second 45 would incorporate the

advanced technology if it were found useful and

cost effective. The goal of the Los Angeles

program is not to create new car building companies but to encourage the formation of a new

components industry that all of the world’s

manufacturers could draw on.

Mass transit may be judged an important

element in meeting environmental and infrastructure challenges; this report does not assess transit

systems from that point of view. The possibilities

for new job creation in a domestic mass transit car

industry are probably still less than the limited

potential offered by highspeed intercity ground

transportation systems. As for technology opportunities, there may be some scope for selling

advanced components for transit systems in the

world market. So far, Japanese and European

components suppliers have the advantage of

working with domestic car manufacturers, and are

ahead of potential American competitors.
Index

Advanced Lead Acid Battery Consortium, 186

Advanced Research Projects Agency

cooperative technology development, 62

dual-use technology, 122-131

electric vehicle R&D, 187, 188

future, 131-139

as Nation’s technology agency, 27, 38,46, 69-70

RDT&E funding, 122, 125, 131

responsibilities, 28-29, 121-122, 142-143

technology transfer from, 139-142

Advanced technology development, 216-217,222,229-230

Advanced traffic management systems, 200, 202

Advanced traveler information systems, 200,202

Advanced vehicle control systems, 200-201

Advisory Commission on Consolidation and Conversion of

the Defense Research and Development Laboratories,

150

AEC. See Atomic Energy Commission

Aerospace industry, 198. See also specific manufacturers

After the Cold War: Living With Lower Defense Spending, 3,

198

Air Force research facilities, 133, 147-148, 150-158

Allied-Signal Aerospace, 186, 194,222

Alternative energy research, 89-90

Alternative fuels, 170, 182, 183

Alternative research and development institutions, 27-29,

37-38,67-70, 159-164

American Automobile Association, 204

Amerigon, 193-194, 194

Amtrak, 210,214

Applied research. See Technology base

Argonne National Laboratory

changing mission, 84-86

civilian-military activity mix, 81

cooperative projects, 87, 100-101

fuel-cell R&D, 190

HTS applications, 102

national initiatives, 67

technology transfer, 87

Army research facilities, 147, 150-158

ARPA. See Advanced Research Projects Agency

ATIS. See Advanced traveler information systems

ATMS. See Advanced traffic management systems

Atomic Energy Act of 1946, 81

Atomic Energy Commission, 81,85-86

Atomic energy defense weapons account, 78

Authority delegations, 31-33,53-54,92, 106, 107

Automobile emissions, 39-40, 182, 184-186

Automobile industry

electric vehicle production, 195-196

employment projections, 197, 198

international cooperative research, 119

technology quest, 169-170

AVCS. See Advanced vehicle control systems

Base Closure Commission, 150, 151

Basic research. See Technology base

Batteries

electric vehicles, 176-177

Japanese development program, 197

research, 187-190

technology policy, 39-40,66

Bayh-Dole Act of 1980,98, 152

Bechtel, 209

Bloch, Erich, 92

BMFT. See Federal Ministry for Research and Technology

(Germany)

Boeing-Vertol, 222, 229

Bombardier, 225

Breda (Italy), 226

Brookhaven National Laboratory, 81,84,213

Brown, George E., Jr., 25,91

231
232 I Defense Conversion: Redirecting R&D

Budd company, 225

Budget concerns

ARPA future, 130-131, 133

ARPA programs, 28-29, 121-122, 125-127, 140-142

CRADA funding bottleneck, 110-111

DoD labs, 145-149, 153-158

DOE weapons labs, 11-15, 18,25-26,4648,91-92

electric vehicle R&D, 186-187

Federal labs, 11-12,75-78

fuel-cell R&D, 190-191

German R&D institutions, 159-164

Microelectronics Manufacturing Science and Technology

program, 133-135

nuclear weapons labs, 73-75, 78-84, 88-89

policy issues and options, 4-7,4345

Regional Technology Alliances program, 164

technology transfer allocations, 33, 54,55-56

transportation systems, 201, 203, 210-211, 220-221,

224-225

Bus Industries of America, 186

Buses, 190-191

Bush administration

lab budgets, 84, 149

lab missions, 87-88, 145

technology development, 129

technology transfer, 18, 140

Buy America, 227-229

California

automobile emission standards, 39-40, 182, 184-186

electric vehicle market, 199

high-speed ground transportation, 208-209

mass transit program, 223-225, 228-229

California Clean Air Act Amendments of 1990,66

Calstart, 40, 186, 194-195, 198

Carter administration, 12,84,86

Chernock, Warren, 61, 107, 114

Chesapeake consortium, 186

China, 199

Chrysler Corporation, 40, 174, 176, 188, 195-196

Civilian applications, 25-27, 81-84,92-95. See also

Technology transfer

Clean Air Act of 1963, 182, 191

Clean Air Act of 1990,39

Clean air requirements, 182, 184-186

Clinton administration

DoD labs future, 149-150

policy issues and options, 30,33, 131

technology transfer, 15, 142, 145

Closure or consolidation of laboratories, 150-152

Commercial competitiveness. See Competitiveness

Commuter rail transit, 224,225

Competitiveness. See also Council on Competitiveness;

Semiconductor Manufacturingg Technology

consortium

ARPA and dual-use technologies, 122, 142-143

CRADAs and U.S. preference, 117-119

DoD labs, 145-146, 150, 152, 154, 158

dual-use technology, 75

electric vehicle industry, 197-199

high-speed ground transportation, 208-209

intelligent vehicle and highway systems, 203-205, 206

manufacturing technology, 13.3

mass transit rail cars, 225-226

policy issues and options, 3-7, 29-30,44,62

research resources, 74, 89-90, 93-96

transportation technology, 167-171

Composites Automation Consortium, 194

Computer-integrated manufa cturing software, 135, 136-138

Computer Systems Policy Project

CRADA negotiations, 56-57, 107-109, 111

National Technology Initiative, 103

U.S. preference, 22,58, 118

Computer technology research, 16, 123-124

Conservation and Renewable Energy Program, 39,66,78,

186-187

Cooperative research

ARPA legal authorities, 122, 140, 142

DoD labs, 145-146

DOE labs, 2

German R&D institutions, 27-28, 159-164

Cooperative research and development agreements

background, 103-105

DoD labs, 152-158

DOE weapons labs, 17-18,86,87-88,99-103, 105-110

DP selection of proposals, 111-114

funding bottleneck, 20-21, 110-111

improving technology transfer, 31-36,45, 48-56, 67

intellectual property disposition, 58-59, 114-117

legal bottlenecks, 21-23

liability issue, 120

measuring the value of, 36, 60-61

national interest and technology transfer, 56-59

strategic direction of development, 50, 61-64

technology transfer legislation, 98-99

technology transfer roadblocks, 19-23

transportation systems, 175, 189, 190

U.S. preference, 117-119

Coordinating Committee for Multilateral Export Controls,

58

Copyright issues, 116-117

Core competencies of DOE weapons labs, 15-17,26,92-95

Council on Competitiveness, 15-16,53,54,92-93, 163

CRADAs. See Cooperative research and development

agreements

Critical industries and technologies
Index I 233

dual-use critical technology partnerships, 140-142

national initiatives, 64-70

nuclear weapons labs, 91, 94

policy issues and options, 62,63-64

CSPP. See Computer Systems Policy Project

DARPA. See Defense Advanced Research Projects Agency

Defense Advanced Research Projects Agency, 29, 124, 142.

See also Advanced Research Projects Agency

Defense Appropriations Act of 1993, 130

Defense Authorization Act of 1991, 150

Defense Authorization Act of 1993, 142

Defense Authorization Bill of 1970, 123-124

Defense Dual-Use Extension Assistance program, 69

Defense Manufacturing Extension program, 69

Defense Programs

CRADA finding bottleneck, 20-21, 110-111

CRADA process, 32-33,36, 105-110

DOE weapons labs budget, 12-15, 18, 81,83-84,87-89

policy issues and options, 4647,49,52,58,61

proposal selection, 111-114

RTA program, 27-28

Defense Programs Technology Transfer office, 57

Defense Technology Conversion Council, 129, 143

Deficit reduction, 30, 37,43-44,64

Department of Agriculture, 76

Department of Commerce, 57,76

Department of Defense. See also Advanced Research

Projects Agency

acquisition strategy, 148-149, 152

conversion of military technologies, 9

cooperation with DOE, 187

as customer of new technologies, 4, 73-74

DOE weapons lab funding, 12-15,78,81,84,86,91

Federal lab funding, 77

Laboratory Rationalization Commission, 48

national initiatives, 64-65

national technology agencies, 69-70

RTA funding, 164

strategic direction of technology development, 20, 61-62,

63

Department of Defense Authorization Act for Fiscal Years

1992 and 1993,99

Department of Defense laboratories

budget, 11-12, 145-149, 153-158

competitiveness, 145-146

downsizing, 150

RDT&E and the peace dividend, 148-152

RDT&E in DoD facilities, 146-148

technology transfer from, 152-158

Department of Energy

background, 86

battery research, 187-189

budget, 77

cooperative R&D value measurement, 36, 60-61

electric vehicle technologies, 175, 186

energy labs, 12, 78-79

fuel cell research, 190-191

manufacturing expenditures, 133

national interest and technology transfer, 56-59

SEAB Task Force on the DOE National Laboratories, 45,

46,48

Site Operator Program, 191-192

superconductivity pilot centers, 101-103

Department of Energy Laboratory Technology Partnership

Act of 1992,94

Department of Energy weapons laboratories

alternative R&D institutions, 27-29

budget concerns, 7, 12-15,20-21,25-26,43-46, 78-81

changing mission, 1-2, 24-27, 67-68, 75, 84-89, 152

civilian-military activities mix, 81-84

coordinating institutions for new missions, 29-30

CRADAs and the national technology initiative, 18,

103-120

downsizing, 24,30-31,45,4648, 104

environmental restoration, 65

future, 23-27,36-38, 89-96

German research institutions compared with, 160-162

technology transfer, 15-23,31-36,48-56,97-99, 99-103

Department of the Interior, 76

Department of Transportation, 39, 186

DoD, See Department of Defense

DOE. See Department of Energy

Domestic producer protection. See United States preference

DOT. See Department of Transportation

Downsizing

DoD labs, 150

DOE weapons labs, 24,30-31, 104

nuclear weapons labs, 45,46-48, 89, 90

Driver assistance technology, 200-201

Dual-use critical technology partnerships, 140-142

Dual-use technologies

ARPA and dual-use technology, 122-131

ARPA future and responsibilities, 29, 121-122, 131-139,

142-143, 187

ARPA technology transfer, 139-142

DoD labs, 152, 156-157

DOE weapons labs, 24,78-96

Federal labs, 11-12,75-78

policy options, 69

RTA funding, 164

Electric and Hybrid Vehicle Research program, 186-187

Electric vehicles

advantages, 173-175

alternative fuels, 182
234 I Defense Conversion: Redirecting R&D

batteries, 176-177

considerations, 170

employment and competitiveness, 197-199

existing and near-term EVs, 193-197

fuel cells, 177, 179, 181

history, 175

legislative efforts, 182, 184-186

markets, 191-193

policy issues and options, 3940,66

research and development, 182-191

technology, 175-182

Electronics industry, 131-132

Emissions standards, 39-40, 182, 184-186

Employment issues

DoD labs, 150-152

electric vehicle industry, 197-199, 206

high-speed ground transportation, 41,209,215-216

intelligent vehicle and highway systems, 206

mass transit, 228-230

national initiatives, 3, 64-66

research personnel, 74

service R&D labs, 148

transportation systems, 167-171

Energy Act of 1992, 187

Energy-efficient transportation, 38-39

Energy issues

changing missions of DOE labs, 24-25, 89

policy issues and options, 3,38-41

transportation systems, 168

Energy Research and Development Administration, 85

Energy Research programs, 78

Energy Science and Technology Software Center, 116

English Channel tunnel project, 218

Environmental issues. See also Emissions standards; Waste

management

automobiles, 169-170

environmental protection, 38

environmental restoration, 25, 65, 78, 84, 90

fuel cell vehicles, 177

mass transit, 229-230

Environmental Restoration and Waste Management

program, 78

ERDA. See Energy Research and Development

Administration

Europe

high-speed ground transportation, 211,214

intelligent vehicle and highway systems programs, 199-

200,204,206

manufacturers, 196, 198-199

rail systems, 209-211

European Community, 218

Executive Order 12591,98,99, 152

Export markets, 218

Fairchild Manufacturing, 186, 194

FCEVs. See Fuel cell electric vehicles

Federal Acquisition Regulations, 140

Federal Coordinating Council on Science, Engineering, and

Technology, 29,37, 127

Federal Highway Administration, 203

Federal Lab Consortium for Technology Transfer, 98-99

Federal laboratories. See also Department of Energy

weapons laboratories; Federally Funded Research and

Development Centers; Gove.rnment-owned, contractoroperated laboratories; Government-owned, governmentoperated laboratories

budget concerns, 11-12

cooperative research with industry, 103-104

defense to dual use conversion, 8-12,75-78

RDT&E facilities, 8, 11

technology transfer, 97-99

Federal Laboratory Consortium for technology transfer, 86

Federal Ministry for Research and Technology (Germany) ,

27,29-30,68, 160, 164

Federal Railroad Administration, 219-220

Federal Technology Transfer Act of 1986,19,22,98-99,117,

152-153

Federally Funded Research and Development Centers, 8-11,

75, 146-148

FFRDCs. See Federally Funded Research and Development

Centers

FHWA. See Federal Highway Administration

Fleet vehicles, 191-193

Flywheels, 177-179

Ford Motor Company, 176, 188, 195-196

Foreign manufacturers. See specific countries aria’

manufacturers

Fossil Energy programs, 78

FRA. See Federal Railroad Administration

France, transportation system, 41,207,211,215-216

Fraunhofer Society (Germany), 27-28,46,68, 161-164

Freedom of Information Act

CRADA process and, 32

intellectual property disposition, 21-22

proprietary infommtion, 52-53,99, 102, 114

FITA. See Federal Technology Transfer Act of 1986

Fuel cell electric vehicles, 3940, 174, 177, 181, 190-191,

199

GAIT See General Agreement on Tariffs and Trade

General Agreement on Tariffs anti Trade, 218,226

General Electric, 186

General Motors Corporation, 103, 111, 176, 188, 195-196

General Services Administration, 193

Germany. See also specific instittitions by name

public R&D institutions, 27-28, 159-164
Index I 235

spending on R&D, 44

technology policy, 68

transportation system, 211, 213-215

GFEs. See Grossforschungseinrichtungen (Germany)

Global Warmin g, 168

GOCOS. See Government-owned, contractor-operated

laboratories

GOGOS. See Government-owned, government-operated

laboratones

Government-owned, contractor-operated laboratories

budget, 75, 77

CRADA process, 19,31-35,46, 104, 106

DoD lab conversions, 152

structure, 8-11

technology transfer, 48-51, 53-55, 99-100

Government-owned, government-operated laboratories

budget, 75, 86

CRADA process, 19,22, 106

RDT&E facilities, 146

structure, 8

technology transfer, 48-51, 53-55, 98-100, 152

Grossforschungseinrichtungen (Germany), 160, 161-163

Grumman Corporation, 219

GSA. See General Services Administration

Hazardous waste, 65

High Performance Computing Act of 1991,63, 127

High Performance Computing and Communications

Initiative

ARPA role, 126-127, 143

budget, 43

goals, 26-27,45

technology policy, 62-64

High Pe@ormance Computing Strategy, 63

High-risk, high-payoff commercial technologies, 27,46,69,

143

High-speed ground transportation

conversion possibilities, 209, 219

employment, 209, 215-216

export markets, 218

federal government involvement, 219-221

foreign systems, 211-214

government subsidy, 208-209

policy issues and options, 4041,66-67

political support, 208

rail system comparison, 209-211

slow advancement of, 207-208

state efforts, 221

technology development, 214-217

High-temperature superconductivity

cooperative projects, 41, 87, 101-103, 139

policy options, 67

transportation systems comection, 217

Highway Trust Fund, 220-221

Hitachi (Japan), 226

House Committee on Science, Space, and Technology, 25,

91

HPCCI. See High Performance Computing and

Communications Initiative

HSGT. See High-speed ground transportation

HI’S, See High-temperature superconductivity

Hughes Aircraft, 174-175, 186, 194

Hybrid vehicles, 66

ICEVS. See Internal combustion engine vehicles

ICF Kaiser Engineers, 209

Idaho National Engineering Laboratory, 81, 85, 179, 192

Incentives for technology transfer, 33-34,54-56

Industrial competitiveness. See Competitiveness

INEL. See Idaho National Engineering Laboratory

Institutes of the Blue List (Germany), 160-161, 162-163

Institutional responsibility for policy, 37-38,67-70, 159-164

Integrated circuits. See Microelectronics Manufacturing

Science and Technology program; Microelectronics

technology

Intel, 194

Intellectual property rights. See also Patents and licenses

CRADA bottlenecks, 21-22, 35,58-59, 114-117

technology transfer from DoD labs, 99, 152

Intelligent vehicle and highway systems

applications, 201

employment and competitiveness, 203-204

federal fimding, 201,203

foreign IVHS, 204, 206

IVHS America, 199,203-204

obstacles to development, 199-200

technology, 170-171, 200-201

TravTek program, 202-203

Intennodal Surface Transportation Efficiency Act of 1991,

186,220-221,224

Internal combustion engine vehicles

alternative fuels, 170, 176, 187, 192

electric vehicles compared with, 173

production jobs, 197

International Association of Machinists and Aerospace

Workers, 194-195

International partnerships, 34-35,56-57, 117-119

Intracity mass transit. See Mass transit

ISTEA. See Intermodal Surface Transportation Efficiency

Act of 1991

IVHS. See Intelligent vehicle and highway systems

Japan. See also Ministry of International Trade and Industry

(Japan); specific manufacturers

battery development program, 197

competitiveness, 7, 128, 133
236 I Defense Conversion: Redirecting R&D

electric vehicle production, 170, 176-177, 196-197

high-speed ground transportation, 41,211,214,216

HTS technology, 101-102

intelligent vehicle and highway systems, 199-200, 204,

206

protected domestic market, 227

rail systems, 169, 209-211

Southeast Asia markets, 199

spending on R&D, 44

technology policy, 68

U.S. preference issue, 119

Joint work statements, 51-52,53, 106, 107, 111-113

Kawasaki, 225,226

Korean rail system, 218

Laboratory Rationalization Commission, 31, 48

Laboratory Technology Transfer Coordination Board, 61-62,

112-114

Lawrence Berkeley National Laboratory, 81,84,85

Lawrence Livermore National Laboratory

budget, 11-12, 81, 84

changing mission, 1-2, 75, 77-78, 85

civilian-military activities mix, 81-83

core competencies, 15-17, 93

future of weapons labs, 91,95-96

transpotiation systems technology, 178-179

LCB. See Laboratory Technology Transfer Coordination

Board

kga.1 issues

intellectual property disposition, 21-22, 35, 58-59, 99,

114-117, 152

liability, 23,35-36,59, 120

proprietary information, 32,52-53,99, 114, 115

U.S. preference, 22-23, 34-35,56-58, 117-119

Liability issues, 23, 35-36,59, 120

Light rail transit, 223-224,225

Long-range, high-risk research and development, 121-122,

142

I.ms Alamos National Laboratory

budget, 11-12,81,84

changing mission, 1-2, 75, 77-78, 85, 86

civilian-military activities mix, 81-83

cooperative projects, 87

core competencies, 15-17, 94

fuel-cell R&D, 190, 191

future of weapons labs, 91

HTS technology, 102

transportation projects, 67

LRT. See Light rail transit

Maglev systems. See also High-speed ground transportation

background, 207-208,213

developing technologies, 217,219-220

policy issues and options, 41,66

Magnetic levitation systems. See Maglev systems

Mansfield amendment to Defense Authorization Bill of

1970, 123-124, 142

Manufacturing technology

ARPA responsibilities, 28, 126, 128, 132-133, 142

legal bottlenecks, 22

service labs, 157

Market considerations

electric vehicles, 191-193, 198-199

Federal labs, 76

mass transit rail cars, 223-225

national initiatives, 37, 64-66

private defense products, 75

semiconductor manufacturing, 137-138

transportation systems, 169, 170, 218

U.S. preference, 118-119

Mass transit. See also High-speed ground transportation;

Rail systems

commuter rail, 224, 225

competitive environment, 225-226

conversion potential, 221-222, 229-230

domestic producer protection, 226-227

employment possibilities, 229-230

light rail, 223-224

rapid rail, 223, 224-225

state or local content requirements, 227-228

technology, 222-223, 229-230

Materials science research, 123-124

Max Planc:k Society (Germany), 160

Medical laboratories, 146-147, 1S0-151, 154-156

Microelectronics Manufacturing Science and Technology

program, 133-135, 141

Microelectronics technology, 132!

Ministry of International Trade and Industry (Japan), 29-30,

68, 170, 177, 196-198

MMST See Microelectronics Manufacturing Science and

Technology program

Morrison Knudsen, 209, 225, 226

Narath, Albert, 53

NARPA. See National Advanced Research Projects Agency

NASA. See National Aeronautics and Space Administration

National Advanced Research Projects Agency, 69, 142. See

also Advanced Research Projects Agency

National Aeronautics and Space ,4dministration

budget, 43,76

CRADA process, 50, 106

creation, 122

Defense Technology Conversion Council, 129

intellectual property disposition, 114

RTA program, 27-28
Index I 237

technology policy, 64

technology transfer, 57,77, 98

National Center for Manufacturing Sciences, 22, 103, 107,

109, 115-118

National Competitiveness Technology Transfer Act of 1989

CRADA process, 19-20,51-53,87-88, 103, 106-107

intellectual property disposition, 21-22

proprietary information, 115-116

technology transfer background, 17-18, 99-100

National Critical Technologies Laboratory, 91

National Defense Authorization Act of 1991, 140

National Environmental Protection Act, 175

National initiatives, 2-3,26-27,37-41,45,64-70

National Institute of Standards and Technology

budget, 25-26,76

CRADA funding, 110

CRADA model, 116

CRADA process, 19,50, 106

Defense Technology Conversion Council, 129

intellectual property disposition, 114

as Nation’s technology agency, 38, 46, 68

RTA program, 27-28

technology transfer, 49, 53, 98

National Institutes of Health, 76, 110, 114-115, 116

National interest, 34-36,56-59, 85, 89

National laboratories. See Department of Defense

laboratories; Department of Energy, energy labs;

Department of Energy weapons laboratories; specific

laboratories by name

National Maglev Initiative, 219, 220

National Magnetic hvitation Prototype Program, 220

National Research Council, 208

National Science Foundation, 27-28, 129

National Technology Initiative, 18,45, 88, 103-120

Naval research facilities, 146-147, 150-158

NCMS. See National Center for Manufacturing Sciences

NCITA. See National Competitiveness Technology

Transfer Act of 1989

New York transportation systems, 186,223,229

NIST. See National Institute of Standards and Technology

Nixon administration, 84, 85-86

Nondefense needs, 167-168

Nonpolluting cars, 39-40,66, 173-174

Nuclear Energy programs, 78

Nuclear Regulatory Commission, 85-86

Nuclear weapons laboratories

budget, 11-12,43-45,73-75,78-84, 88-89,91-92

changing missions, 84-89, 152

civilian-military activities mix, 81-84

DOE weapons labs, 78-96

downsizing, 45,46-48,89,90

Federal labs, 75-78

technology transfer from, 48-56

visibility, 19, 106

Oak Ridge National Laboratory

budget, 81

changing mission, 85, 86

cooperative projects, 87

DP selection of proposals, 112-114

future of weapons labs, 96

HTS technology, 102

technology transfer, 87

transportation projects, 67

Office of Management and Budget, 48

Offices of Research and Technology Applications

at DoD labs, 153

DP selection of proposals, 112-114

technology transfer, 55, 86, 97-98

Office of Science and Technology Policy

HPCCI program, 127

policy issues and options, 29,36,37-38,61,63,64

U.S. preference, 57

Office of the Secretary of Defense, 140, 152

Organization of Petroleum Exporting Countries, 85, 175

Orlando maglev system, 212, 218

ORTAS. See Offices of Research and Technology

Applications

OSTP. See OffIce of Science and Technology Policy

Pacific Northwest National Laboratory, 81, 85

Patents and licenses

CRADAS and intellectual property, 115-117

DOE weapons labs, 87, 88

policy issues and options, 55,59

technology transfer, 34, 98, 103, 153

U.S. preference, 118-119

Peace dividend, 37, 148-152

Personal transport. See Electric vehicles; Intelligent vehicle

and highway systems

Policy issues and options

changing missions of weapons labs, 84-89

cooperative R&D value, 60-61

cooperative technology development, 61-64

downsizing weapons labs, 45,46-48

improving technology transfer, 48-56

national initiatives, 26-27, 3741, 64-70

national interest and technology transfer, 56-59

SUIIIIllary of O@OllS, 30-38, 43-46, 47

transportation, 3, 26, 38-41,65-67

Postal Service vehicles, 192-193

Preference Review Board, 57-58

Private industry. See also Cooperative research; Cooperative

research and development agreements; Governmentowned, contractor-operated laboratories; Technology

transfer
238 I Defense Conversion: Redirecting R&D

ARPA connection, 132, 139-142

competitiveness, 3-7, 122

defense company conversion of military technologies,

9-1o

HTS agreements, 102-103

lab/industry partnerships, 90-92,96, 100-101, 103-104,

139-142

R&D funding, 7-8,75

RDT&E in DoD facilities, 146

Private institutions. See also Government-owned, contractoroperated laboratories

ARPA programs, 123-124, 129

German R&D institutions, 164

R&D budget issues, 46,75,77

R&D cost comparison, 60

R&D funding, 7-8

RDT&E in DoD facilities, 146

technology transfer, 48-49, 139, 154-156

Product liability, 59

Proposal process, 49-50,51-53, 111-114

Proprietary information, 32,52-53,99, 114, 115

Proton exchange membrane fuel cell, 181

Public missions. See Civilian applications

Public transportation systems

high-speed ground transportation, 207-221

mass transit, 221-230

Radioactive waste, 65

Rail systems, 169, 209-211. See also High-speed ground

transportation; Mass transit

Rapid rail transit, 223-225

Raytheon, 209

RDT&E facilities. See Advanced Research Projects Agency;

Department of Defense laboratories; Federal

laboratories; Government-owned, governmentoperated laboratories

Reagan administration, 37,84,86-87, 102, 129

Regional Technology Alliances program, 27-28,69, 164

Replacing Gasoline: Alternative Fuels for Light Duty

Vehicles, 182

Road vehicles. See Electric vehicles; Intelligent vehicle and

highway systems

RRT. See Rapid rail transit

Sandia National Laboratory

authority delegations, 53, 106

budget, 11-12,81,84

changing mission, 1-2, 75, 77-78

civilian-military activities mix, 81-83

cooperative R&D, 61, 100-101

core competencies, 15-17,95-96

future of weapons labs, 91

technology transfer, 40,55, 87

SEAB. See Secretary of Energy Advisory Board report on the

DOE National laboratories

Secretary of Energy, 61

Secretary of Energy Advisoxy Board report on the DOE

National laboratories

future of DOE weapons labs, 90-91

policy issues and options, 24-25,45,46,48,67

SEMATECH. See Semiconductor Manufacturing

Technology consortium

Semiconductor manufacturing technology, 134-139, 141

Semiconductor Manufacturing Technology consortium

ARPA cooperation with, 28, 126, 128, 133, 137

founding of, 121, 126

MMST compared with, 141

technology policy, 62, 64

Single-wafer processing, 135-138

Site Operator Program, 191-192

Small Business Innovation Development Act of 1982,98

Small Business Innovative Research projects, 110

Small businesses, 189

“Smart cars, ” See Intelligent vehicle and highway systems

Software protection, 116-117

Space Act Agreements, 98, 114

Space Act of 1958,98

Specialty Metals Processing Consortium, 61, 100-101

State government transportation systems, 221,227-229

Stevenson-Wydler Act of 1980,21,77,97-98, 152, 153

Strategic Defense Initiative, 77,84

Strategic direction of technology development, 20,29-30,

50, 61-64, 106-107

Superconductivity pilot centers, 101-103

Surface Transportation Act of 1970,222

Surface Transportation Act of 1978,227

TACT’S. See Technology Area Ccmdinating Teams

Technology Area Coordinating Teams, 52, 112-114

Technology base, 124-126, 129, 149

Technology transfer. See also Cooperative research and

development agreements

accessibility of labs to industry, 2, 45

from ARPA, 139-142

automobile industry, 169

changing missions of labs, 77, 84, 86-89

from DoD labs, 152-158

DOE labs, 15-18,33,92,99-103

Federal labs, 97-99

HSGT vehicles, 209

improving transfer from weapons labs, 19-23, 31-36,

48-56

incentives, 33-34, 54-56

national interest and, 34-36, 56-59

Testing anci evaluation centers, 1 :[, 77, 145-148, 153, 157

Texas Instruments, 133, 136-137
Index 1239

Texas TGV system,211, 212,216,218,221

Toll collection systems, 201

Trademarks-State Justice Institute-Semiconductor ChipsCourts Patents Act of 1984,98

Tra.ftlc management centens, 200

Transportation. See ‘High-speed ground transportation; Mass

transit; Policy issues and options

Transportation Research Board, 208

Traveler information, 200

TravTek program, 202-203

Ultracapacitors, 179

United States preference, 22-23,34-35,56-58, 116-119,

226-227

Universities. See Private institutions

U.S. Advanced Battery Consortium, 40,66, 119, 175,

187-190

U.S. Council for Automotive Research, 186

USABC. See U.S. Advanced Battery Consortium

USCAR. See U.S. Council for Automotive Research

Vehicle tracking technology, 200-201

Wafer fabrication technology, 134-139

Warfare centers, 146-147, 151-152, 153, 156

Waste management

DOE labs, 25,81, 84,90

policy issues and options, 38,65

Watkins, James E., 24-25,90, 108-109

Weapons laboratories. See Department of Defense

laboratories; Department of Energy weapons

laboratories; Nuclear weapons laboratories; spec~ic

laboratories by name

Weinberg, Alvin, 85

Westinghouse Arnrail, 226

Westinghouse Electric, 40, 174

White House Office of Science and Technology Policy. See

OffIce of Science and Technology Policy

Zero emission vehicles, 184-185

ZEVS. See Zero emission vehicles