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ASSEMBLING THE FACTS: 

EXAMINING THE PROPOSED 

NATIONAL NETWORK FOR 

MANUFACTURING INNOVATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION 

COMMITTEE ON SCIENCE, SPACE, AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

THURSDAY, MAY 31, 2012 

Serial No. 112–86 

Printed for the use of the Committee on Science, Space, and Technology 

( 

Available via the World Wide Web: http://science.house.gov 
(II) 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HON. RALPH M. HALL, Texas, Chair 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

PAUL C. BROUN, Georgia 

SANDY ADAMS, Florida 

BENJAMIN QUAYLE, Arizona 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

E. SCOTT RIGELL, Virginia 

STEVEN M. PALAZZO, Mississippi 

MO BROOKS, Alabama 

ANDY HARRIS, Maryland 

RANDY HULTGREN, Illinois 

CHIP CRAVAACK, Minnesota 

LARRY BUCSHON, Indiana 

DAN BENISHEK, Michigan 

VACANCY 

EDDIE BERNICE JOHNSON, Texas 

JERRY F. COSTELLO, Illinois 

LYNN C. WOOLSEY, California 

ZOE LOFGREN, California 

BRAD MILLER, North Carolina 

DANIEL LIPINSKI, Illinois 

DONNA F. EDWARDS, Maryland 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

JERRY MCNERNEY, California 

TERRI A. SEWELL, Alabama 

FREDERICA S. WILSON, Florida 

HANSEN CLARKE, Michigan 

SUZANNE BONAMICI, Oregon 

VACANCY 

VACANCY 

VACANCY 

SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION

HON. BENJAMIN QUAYLE, Arizona, Chair 

LAMAR S. SMITH, Texas 

JUDY BIGGERT, Illinois 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

E. SCOTT RIGELL, Virginia 

RANDY HULTGREN, Illinois 

CHIP CRAVAACK, Minnesota 

RALPH M. HALL, Texas 

DONNA F. EDWARDS, Maryland 

FREDERICA S. WILSON, Florida 

DANIEL LIPINSKI, Illinois 

BEN R. LUJA ́ N, New Mexico 

SUZANNE BONAMICI, Oregon 

VACANCY 

EDDIE BERNICE JOHNSON, Texas 
(III) 

C O N T E N T S 

Hearing Date 

Page 

Witness List ............................................................................................................. 2 

Hearing Charter ...................................................................................................... 3 

Opening Statements 

Statement by Representative Benjamin Quayle, Chairman, Subcommittee on 

Technology and Innovation, Committee on Science, Space, and Technology, 

U.S. House of Representatives ............................................................................ 8 

Written Statement ............................................................................................ 9 

Statement by Representative Donna F Edwards, Ranking Minority Member, 

Subcommittee on Technology and Innovation, Committee on Science, Space, 

and Technology, U.S. House of Representatives ............................................... 9 

Written Statement ............................................................................................ 11 

Witnesses: 

Dr. Patrick Gallagher, Under Secretary of Commerce for Standards and Technology and Director, National Institute of Standards and Technology 

Oral Statement ................................................................................................. 12 

Written Statement ............................................................................................ 15 

Discussion 23 

Appendix 1: Answers to Post-Hearing Questions 

Dr. Patrick Gallagher, Under Secretary of Commerce for Standards and Technology and Director, National Institute of Standards and Technology ........... 39 

Appendix 2: Additional Material for the Record 

Materials Submitted by Subcommittee Ranking Member Donna F. Edwards ... 44 

Article Submitted by Subcommittee Chairman Benjamin Quayle ...................... 72 

(1) 

ASSEMBLING THE FACTS: 

EXAMINING THE PROPOSED 

NATIONAL NETWORK FOR 

MANUFACTURING INNOVATION 

THURSDAY, MAY 31, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION, 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:03 a.m., in Room 

2318 of the Rayburn House Office Building, Hon. Benjamin Quayle 

[Chairman of the Subcommittee] presiding. 
2 

HALPII M HALL TEXAS 

CIIAIRMAN 

U.S. HOUSE OF REPRESENTATIVES 

EDDIE BERNICE JOHNSOt\:, TLXAS 

RANKING MEMBErl 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

2321 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON. DC 20515~6301 

(202) 225-6371 

Subcommittee on Technology and Innovation Hearing 

Assembling the Facts: 

Examining the Proposed National Network for Manufacturing 

Innovation 

Thursday, May 31,2012 

10:00 a.m. 12:00 p.m. 

2318 Rayburn House Office Building 

Dr. Patrick Gallagher, Under Secretary of Commerce for Standards and Technology and Director, National 

Institute of Standards and Technology 
3 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION 

HEARING CHARTER 

Assembling the Facts: 

Examining the Proposed National Network for Manufacturing Innovation 

I. Purpose 

Thursday, May 31, 2012 

10:00 a.m. - 12:00 p.m. 

2318 Rayburn House Office Building 

On Thursday, May 31,2012, the Committee on Science, Space, and Technology Subcommittee 

on Technology and Innovation will hold a hearing to examine the proposed National Network for 

Manufacturing Innovation (NNMI). The Administration requested $1 billion in mandatory 

spending for the NNMI in the fiscal year 2013 budget request for the National Institute of 

Standards and Technology (NIST). The NNMI is designed to promote the development of 

manufacturing technologies with broad applications through collaboration between the Federal 

Government and public and private sector stakeholders. 

II. Witness 

Dr. Patrick Gallagher, Under Secretary of Commerce for Standards and Technology and 

Director, National Institute of Standards and Technology 

III. Background 

Manufacturing has been a significant part of American productivity since the industrial 

revolution. Although not as dominant as in the past, manufacturing's share of gross domestic 

product remains around 11 percent, and manufacturing output has risen by 13 percent in the last 

several years. Nevertheless, manufacturing employment has faltered I. Many recent reports have 

cited declines in manufacturing employment as an indicator of surrendering leadership to other 

nations, but others suggest that declines are overblown and job losses can, in part, be attributed 

to increases in productivity. Also, some of the manufacturing that moved to other countries in 

the early part of the decade may be returning to the U.S. due to increasingly competitive labor 

rates overseas as well as other factors3.4. 

I Federal Reserve Board Industrial Production Indexes; 

http://www.federalreserve.gov/releases/gI7/Current/default.htm; Bureau of Labor Statistics' monthly Current 

Employment Stati1.1ics database, http://www.bls.gov/datal. 

2 Council on Competitiveness Report, Make: An American Manufacturing Movement, December 2011, 

http://www.compete.orglpublications!detail!2064/make! 

J Made in America, Again, August 2011, Boston Consulting Group. 

1 
4 

Manufacturing has changed and continues to change, making comparative data difficult to obtain 

and analyze. Because the future of manufacturing is likely to focus on more personalized, 

single-production widgets as opposed to mass manufacturing, the number of jobs in this sector 

may continue to be relatively high-skilled but will drop in overall number ofjobs5

. 

Because manufacturing is research and development intensive6 and often tied to new 

innovations, any decline in the domestic manufacturing sector raises concerns that changes may 

ultimately limit the capacity for American innovation. 

Though most stakeholders agree that manufacturing continues to be an important part of our 

economy, the opinions on the appropriate prescription to maintain or strengthen the 

manufacturing sector are diverse. Efforts to maintain manufacturing leadership have largely 

focused on "advanced manufacturing", or manufacturing processes and products resulting from 

new technologies. 

Across the globe, many nations have developed specific manufacturing strategies that guide both 

government investment and private sector focus in manufacturing. In order to keep the U.S. 

competitive and ensure that new technologies are created domestically, some advocate that the 

U.S. should have a defined manufacturing strategy7,8. 

Administration Efforts in Advanced Manufacturing 

The President's advisors have recently elevated manufacturing policy as a priority in improving 

the national economy9,1O,11. In response to their recommendations, the President created an 

Advanced Manufacturing Partnership (AMP) and a National Program Office for Advanced 

Manufacturing (AMNPO), housed at the Department of Commerce's National Institute for 

Standards and Technology (NIST). 

The AMP was launched by the President in June, 2011 to bring together industry, universities, 

and the Federal Government to invest in emerging technologies that have the potential to create 

high quality manufacturing jobs and to enhance the United States' global competitiveness. The 

mission of the AMP is to identify opportunities for investments in research and development, 

4 Manufacturing's Secret Shift: Gaining Competitive Advantage by Getting Closer to the Customer; March 2011, 

Accenture 

5 Economist special report: Manufacturing and Innovation, Solid print, http://www.economist.com/node/21552892 

'OECD Science, Technology and R&D Statistics htlp:llwww.oecd-ilibrary.org/content/data/data-00183-en 

'New America Foundation report, Value Added: America's Manufacturing Future, April 2012, 

http://newamerica.netlpublications/policy/value added americas manufacturing future 

8 ITIF The Case for a National Manufacturing Strategy, April 2011, http://www.itif.org/files/2011-nationalmanufacturing-strategy.pdf 

9 The President's Council of Advisors on Science and Technology (PCAST), Report to the President on Ensuring 

American Leadership in Advanced Manufacturing, June 20 II. 

10 National Science and Technology Council, A National Strategic Plan for Advanced Manufacturing, Feb. 2012. 

II The President's Jobs Council Report to the President: Road Map to Renewal, 2011 Year-end report. 

2 
5 

precompetitive collaboration, and shared facilities and infrastructure that have the potential to 

transform advanced manufacturing in the United States. 

The AMNPO is an interagency office designed to further coordinate federal advanced 

manufacturing activities. The office builds links through establishing technology and innovation 

partnerships involving U.S. manufacturers, universities, state and local governments, and other 

organizations. The AMNPO (hosted at NIST) is staffed by representatives from the Departments 

of Commerce, Energy, and Defense; the National Science Foundation; and other agencies as well 

as fellows from industry. 

The National Network for Manufacturing Innovation (NNMI) 

The President's FY13 budget request included a proposal for a one-time mandatory fund of$l 

billion to establish a public-private partnership to revitalize U.S. manufacturing. In remarks 

given on March 9, 2012, President Obama described the NNMI as a network of institutes for 

manufacturing innovation around the country. According to background information provided 

by the Administration, the goal of the institutes is to "bring together industry, universities and 

community colleges, federal agencies, and regional and state organizations to accelerate 

innovation by investing in industrially relevant manufacturing technologies with broad 

applications, and to support manufacturing technology commercialization by bridging the gap 

between the laboratory and the market.,,12 The NNMI also includes an emphasis on education 

and workforce development in advanced manufacturing skills. Up to 15 institutes are proposed 

across the country, with the federal support to last 5-7 years. 

The NNMI is intended to close the gap between research and development activities and the 

deployment of technological innovations in domestic production of goods. The Administration 

envisions the NNMI to be the foundation of a U.S. innovation infrastructure of linked regional 

hubs of manufacturing excellence. Each institute is to be competitively selected, cost-shared, 

and each would concentrate on a particular area of technology development. 

The focus of the NNMI lies squarely in the applied research region, after basic research has been 

conducted but prior to full commercialization of a technology. Technologies for further 

development by the NNMI are targeted at Manufacturing or Technology Readiness Levels of 4-

713 according to Administration background documents. 

The NNMI is a collaboration involving the Departments of Commerce, Defense, Energy, the 

National Science Foundation, and possibly other federal partners. The AMNPO, housed at 

NIST, is the interagency body tasked with coordinating federal resources and programs related to 

manufacturing, including the NNMI. On May 4, the AMNPO published a Request for 

Information (RFI) on how each institute and the NNMI as a whole will integrate capabilities and 

facilities required to reduce the cost and risk of commercializing new technologies 14. In addition 

"National Network for Manufacturing Innovation http://www.manufacturing.gov/amplnnmi.html 

I} DOD Manufacturing Readiness Levels; http://www.dodmrl.com/ 

14 NIST Request for Information on Proposed New Program: National Network 

for Manufacturing Innovation (NNMI), http://www.gpo.gov/fdsys/pkg/FR-2012-05-04/pdf/20 12-1 Og09.pdf 

3 
6 

to the RFI, the AMNPO is holding a series of workshops across the country during the remainder 

of fiscal year 2012 to facilitate input from stakeholders, and to identify a set of technology focus 

areas for the institutes. The RFI and workshops are intended to address design and governance 

issues, and the management of the NNMI as a whole. 

Each institute will have a focus area, which could be an advanced material, a manufacturing 

process, an enabling technology, or an industry sector. Institutes will be selected based upon 

criteria such as technology focus, research, development, and demonstration plan, impacts, 

partner resource and investments, and self sustainability. 

Legislation to authorize the NNMI has not been introduced. 

NNMI Pilot Institute in Fiscal Year 2012 

This information-gathering effort for the NNMI is proceeding in parallel with steps to establish a 

pilot institute for manufacturing innovation during the current fiscal year (FY12). This pilot 

institute will focus on a specific manufacturing process known as "additive manufacturing", and 

it is intended to serve as a proof-of-concept for the proposed network of institutes to be funded 

starting in FY13. 

The pilot institute will involve an initial federal investment of approximately $45 million, and 

will draw on existing resources and authorities of the Departments of Defense (Office of 

Manufacturing and Industrial Base Policy), Energy (Advanced Manufacturing Office), 

Commerce (NIST), NSF (Engineering Directorate and Advanced Technological Education 

program) and, potentially, other civilian agencies. A broad agency announcement of solicitation 

for the "Additive Manufacturing Innovation Institute" pilot was released by the Department of 

Defense on May 8, 201215 with anticipated funding of$18.8 million in FYI2. Proposals are due 

June 14,2012. At this time it is unclear if the other federal agencies participating in the pilot 

will also release fiscal year 2012 solicitations for their contributions to the pilot. 

Issues for Examination 

Since the NIST fiscal year 2013 budget hearing in early March, the Administration has moved 

forward with establishing the pilot institute as well as the planning process for the greater NNMI. 

At the time of the hearing, Under Secretary Gallagher was unable to provide substantial details 

about the program. This hearing will seek to learn more about the proposed network and status 

ofFY12 activities related to the pilot institute. 

Goals of Program and Focus Areas 

As described, the NNMI is an ambitious endeavor bringing together all types of companies, 

educational institutions, and non-profit entities as partners to advance manufacturing. Will the 

15https:llwww.fbo.govl?s~opp0\1unity&mode~form&tab~core&id~2bbada5cae4ab97438dc3f57fed050dO& cview-" 

Q 

4 
7 

institutes be stretched too thin to attempt to partner with so many different entities and achieve 

results in a relatively short period of time? How will success of an institute be defined? 

The intention of the Administration is to have each institute focused on a particular 

manufacturing process, technology, or material. This may favor one area over another and 

inadvertently provide an unfair advantage or attention to one area that is not justified by market 

forces. Is it appropriate for each institute to pick a certain subject area? 

The proposed ]\INMI represents a new, $1 billion program. Though subject to PA YGO, it is 

unclear what revenues would be used to offset the mandatory funding, and when legislation 

authorizing the NNMI will be available to Congress. 

The amount of funding going toward the pilot institute from participating agencies in fiscal year 

2012 as well as what other activities those funds will be diverted from to support the NNMI pilot 

is also unclear. Finally, is it uncertain how both the pilot and the proposed institutes will 

demonstrate a path towards becoming financially self-sustaining within five years from initiation 

when federal funds will no longer support the NNMI. 

Duplication 

The Administration has devoted significant resources to manufacturing activities at many 

different federal agencies. How will it ensure that the NNMI will not duplicate other efforts 

underway in the Federal Government to support advanced manufacturing? 

Federal Role 

The goals of the NNMI, while diverse, appear to focus on advancing certain types of technology 

through applied research and demonstration. Though still considered "pre-competitive" in 

nature, some question whether government support at this point in the innovation process alters 

normal market forces which would determine the best available technology and processes 

instead. Does the NNMI overstep the role of government and wade into areas which would be 

more appropriately handled by the private sector? 

5 
8 

Chairman QUAYLE. The Subcommittee on Technology and Innovation will come to order. 

Good morning. Welcome to today’s hearing entitled ‘‘Assembling 

the Facts: Examining the Proposed National Network for Manufacturing Innovation.’’ 

In front of you are packets containing the written testimony, biographies and Truth in Testimony disclosures for today’s witness. 

I will now recognize myself for five minutes for an opening statement. 

U.S. manufacturing’s global market share has held steady at 

around 20 percent for nearly the last 30 years and still represents 

the largest manufacturing sector in the world. In my home State 

of Arizona, manufacturing contributes approximately $20 billion to 

our economy. Almost 60 percent of all U.S. exports are in manufactured goods. Though there are some areas in decline, contrary to 

popular belief, the manufacturing sector is far from vanishing. 

Technology has the potential to continue dramatically changing the 

sector. Both the skills needed by workers, and the number of workers necessary could look very different from the assembly lines of 

the past. Innovative processes such as additive manufacturing, 

which enable low-volume, adaptable production, are transforming 

the future of manufacturing. 

We don’t make it easy for manufacturers in the United States. 

While all of our major global competitors have been lowering their 

corporate tax rates, ours has been essentially unchanged for the 

past 20 years, and is now the highest in the industrialized world. 

Rising costs in health care, environmental compliance, and litigation all discourage manufacturing from thriving domestically. According to the Manufacturing Institute, ‘‘U.S. industry is faced with 

the highest pollution abatement costs compared to its major trading partners, even higher than the so-called green economies of 

Western Europe.’’ 

In the first three years of the Obama Administration, the Federal 

Government has imposed 106 new regulations with annual costs of 

more than $46 billion. When we are discussing manufacturing and 

innovation, the conversation is really about the conditions that create a better business environment. Yet rather than focusing on 

these issues, the Administration has again chosen to create a new 

$1 billion dollar program, the details of which have yet to be provided to Congress. 

Today we will examine the proposed National Network for Manufacturing Innovation. The proposed network would create up to 15 

centers around the country focused on different areas of advanced 

manufacturing. During the current fiscal year, the Administration 

has also moved forward with a pilot institute, supported by up to 

$45 million in fiscal year 2012 funds from multiple agencies, including three within this Committee’s jurisdiction: NIST, NSF, and 

the Department of Energy. 

I firmly believe that manufacturing is important to our economy 

and innovation, but I am troubled by the continued reliance on politically driven research and development. I think that the best 

thing we can do to help domestic manufacturers is to trust our 

markets and reduce the costs of doing business in the United 

States. I look forward to hearing more about the proposed NNMI, 
9 

and I hope that today’s conversation helps to provide more detail 

for Members of this Subcommittee as to why the Administration 

believes this initiative is necessary. 

We thank Under Secretary Gallagher for being here today and 

we look forward to your testimony. 

[The prepared statement of Mr. Quayle follows:] 

PREPARED STATEMENT OF SUBCOMMITTEE CHAIRMAN BENJAMIN QUAYLE

Good morning. I would like to welcome everyone to today’s hearing. 

U.S. manufacturing’s global market share has held steady at around 20 percent 

for nearly the last 30 years and still represents the largest manufacturing sector 

in the world. In my home state of Arizona, manufacturing contributes approximately 

$20 billion to our economy. Almost 60 percent of all U.S. exports are in manufactured goods. Though there are some areas in decline, contrary to popular belief, the 

manufacturing sector is far from vanishing. Technology has the potential to continue 

dramatically changing the sector—both the skills needed by workers and the number of workers necessary could look very different from the assembly lines of manufacturing’s past. Innovative processes such as additive manufacturing, which enables low-volume, adaptable production, is transforming the future of manufacturing. 

We don’t make it easy for manufacturers in the United States. While all of our 

major global competitors have been lowering their corporate tax rates, ours has been 

essentially unchanged for the past 20 years. Rising costs in health care, environmental compliance and torts all discourage manufacturing from thriving domestically. According to the Manufacturing Institute, ‘‘U.S. industry is faced with the 

highest pollution abatement costs compared to its major trading partners—even 

higher than the so-called ‘green economies’ of Western Europe.’’ In the first three 

years of the Obama Administration, the Federal Government has imposed 106 new 

major regulations with annual costs of more than $46 billion. When we are discussing manufacturing and innovation, the conversation is really about the conditions that create a better business environment. Yet, rather than focusing on these 

issues, the Administration has again chosen to create a new, $1 billion dollar program, the details of which have yet to be provided to Congress. 

Today we will examine the proposed National Network for Manufacturing Innovation. This initiative would create up to 15 centers around the country focused on 

different areas of advanced manufacturing. During the current fiscal year, the Administration has also moved forward with a pilot institute, supported by up to $45 

million in fiscal year 2012 funds from multiple agencies, including three within this 

Committee’s jurisdiction: NIST, NSF, and the Department of Energy. 

I firmly believe that manufacturing is important to our economy and innovation, 

but I am troubled by the continued reliance on politically driven research and development. I think that the best thing we can do to help domestic manufacturers is 

to trust our markets and reduce the burdens and costs of doing business in the U.S. 

I look forward to hearing more about the proposed NNMI, and I hope that today’s 

conversation helps to provide more detail for Members of this Subcommittee as to 

why the Administration believes this initiative is necessary. 

We thank Under Secretary Gallagher for being here today and we look forward 

to your testimony. 

Chairman QUAYLE. I want to now recognize the Ranking Member, Ms. Edwards, for her opening statement. 

Ms. EDWARDS. Thank you, Mr. Chairman, and thank you so 

much for holding today’s hearing to examine the proposed National 

Network for Manufacturing Innovation. I would like to thank Dr. 

Gallagher—it is good to see you again—for being here this morning 

and for your leadership both at NIST and as part of the Administration’s current efforts to revitalize American manufacturing. 

Although we have heard time and time again in this Committee 

about the crucial link between economic growth and a vibrant U.S. 

manufacturing sector, I think it bears repeating. American manufacturing employs more than 11 million Americans in high-paying 

jobs. As recently as 2010, manufacturing contributed $1.7 trillion 
10 

to the Nation’s economy and accounted for 60 percent of all U.S. 

exports. Manufacturers account for nearly two-thirds of U.S. investment in research and development. And for every manufacturing 

job we create, we add five additional jobs along the supply chain. 

And for every dollar in manufacturing value added, we create $1.40 

in new value in other sectors. 

Advanced manufacturing is also expected to create even more 

jobs. In fact, a study by the Milken Institute has shown that every 

job created in electronic computer manufacturing generated an additional 15 jobs. And, finally, innovation in U.S. manufacturing enables our companies to develop new technologies and new products 

and helps keep the United States competitive. Simply put, ‘‘Made 

in America’’ equals American jobs and a strong economy. 

Unfortunately, this Committee has also heard that the United 

States’ competitive edge in manufacturing has slipped. According to 

the Council on Competitiveness, the United States ranks fourth in 

global manufacturing competitiveness and is expected to fall to 

fifth place in five years. Countries such as Korea, Japan and Germany have a larger share of the advanced manufacturing sector 

than the United States. If we do nothing and settle for the status 

quo, our position will almost certainly decline further and our economy will continue to struggle. 

Thankfully, the Administration has renewed its commitment to 

American manufacturing and is focused on ensuring that the 

United States is the global leader in advanced manufacturing. The 

truth is that the perception of manufacturing as low-skilled, assembly-line work is outdated and no longer applies. The future of manufacturing is in fact advanced manufacturing, a high-tech endeavor 

that uses sensors, robotics, and cutting-edge modeling and simulation. Biomanufacturing and nanomanufacturing processes are, and 

will be, conducted by high-skilled and highly trained technicians in 

lab-like environments. 

If we want to create high-paying jobs and help this country keep 

its competitive edge, then we need to move forward with policies 

and programs that will expand and support the development of advanced manufacturing. One such proposal, the National Network 

for Manufacturing Innovation, or NNMI—we are all going to get 

confused about that—is the topic of today’s hearing. 

The purpose of the proposed NNMI program is to establish up to 

15 public-private manufacturing institutes across the country. 

These institutes will serve as centers of manufacturing excellence 

that will accelerate innovation in manufacturing and help transition cutting-edge manufacturing technologies from the lab to the 

marketplace. 

As I understand it, the NNMI is modeled after the successful 

Fraunhofer Institutes in Germany, and Germany has been able to 

withstand the global financial crisis in large part due to its focus 

on innovative technologies as a key driver to economic growth. The 

Fraunhofer Institutes are widely considered to be a central and key 

component of the country’s effective high-tech strategy. 

Based on Germany’s success, a number of organizations, including the Council on Competitiveness, the Manufacturing Institute at 

the National Association of Manufacturers, the President’s Council 

of Advisors on Science and Technology, and the Information Tech-
11 

nology and Innovation Foundation, have all called for the establishment of a similar network of public-private manufacturing centers 

in the United States to accelerate the development and deployment 

of advanced manufacturing technologies. 

I believe the concept has significant merit, and I am excited by 

the Administration’s proposal. I am eager to learn more today 

about how NIST and the Administration plan to execute this initiative, and I am specifically interested in learning how the proposed 

additive manufacturing pilot institute will be structured and how 

it will be coordinated with the broader network to ensure that lessons learned will be applied. I am also looking forward to learning 

more about how the interagency partners are working together to 

make this network a reality. 

Certainly, the challenges facing U.S. manufacturers are urgent. 

The truth is that we simply can’t afford to wait. If we are committed to a vibrant manufacturing sector and to improving our 

competitive position in advanced manufacturing, it is precisely the 

time for bold ideas and devoted leadership. I look forward to working with Dr. Gallagher, the Chairman, and my colleagues on implementing this initiative and ensuring that it is effective and successful. 

Thanks, again, Mr. Chairman, for calling this important oversight hearing, and I yield the balance of my time. 

[The prepared statement of Ms. Edwards follows:] 

PREPARED STATEMENT OF SUBCOMMITTEE RANKING MEMBER DONNA F. EDWARDS

Thank you, Mr. Chairman, for holding today’s hearing to examine the proposed 

National Network for Manufacturing Innovation. I’d like to thank Dr. Gallagher for 

being here this morning and for his leadership both at NIST and as part of the Administration’s current efforts to revitalize American manufacturing. 

Although we’ve heard time and time again in the Committee about the crucial 

link between economic growth and a vibrant U.S. manufacturing sector, I think it 

bears repeating. American manufacturing employs more that 11 million Americans 

in high-paying jobs; in 2010, manufacturing contributed $1.7 trillion to the Nation’s 

economy and accounted for 60 percent of all U.S. exports; manufacturers account for 

nearly two-thirds of U.S. investment in research and development. For every manufacturing job we create, we add five additional jobs along the supply chain. And for 

every dollar in manufacturing value added, we create $1.40 in new value in other 

sectors. Advanced manufacturing is expected to create even more jobs. In fact, a 

study by the Milken Institute has shown that every job created in electronic computer manufacturing generated an additional 15 jobs. And finally, innovation in 

U.S. manufacturing enables our companies to develop new technologies and new 

products and helps keep the U.S. competitive. 

Simply put, ‘‘Made in America’’ equals American jobs and a strong economy. 

Unfortunately, this Committee has also heard that the United States’ competitive 

edge in manufacturing has slipped. According to the Council on Competitiveness, 

the United States ranks fourth in globabl manufacturing competitiveness and is expected to fall to fifth place in five years. 

Countries such as Korea, Japan, and Germany have a larger share of the advanced manufacturing sector than the U.S. If we do nothing and settle for the status quo, our position will almost certainly decline further and our economy will continue to struggle. 

Thankfully, the Administration has renewed its commitment to American manufacturing and is focused on ensuring that the U.S. is the global leader in advanced 

manufacturing. The truth is that the perception of manufacturing as low-skilled, assembly line work is outdated and no longer applies. The future of manufacturing 

is advanced manufacturing, a high-tech endeavor that uses sensors, robotics, and 

cutting-edge modeling and simulation. Biomanufacturing and nanomanufacturing 

processes are, and will be, conducted by high-skilled and highly trained technicians 

in lab-like environments. 
12 

If we want to create high-paying jobs and help this country keep its competitive 

edge, then we need to move forward with policies and programs that will expand 

and support the development of advanced manufacturing. One such proposal, the 

National Network for Manufacturing Innovation (or NNMI), is the topic of today’s 

hearing. 

The purpose of the proposed NNMI program is to establish up to 15 public-private 

manufacturing institutes across the country. These institutes will serve as centers 

of manufacturing excellence that will accelerate innovation in manufacturing and 

help transition cutting-edge manufacturing technologies from the lab to the marketplace. 

As I understand it, the NNMI is modeled after the successful Fraunhofer Institutes in Germany. Germany has been able to withstand the global financial crisis 

in large part due to its focus on innovative technologies as a key driver to economic 

growth. The Fraunhofer Institutes are widely considered to be a central and key 

component of the country’s effective high-tech strategy. 

Based on Germany’s success, a number of organizations—including the Council on 

Competitiveness, the Manufacturing Institute at the National Association of Manufacturers, the President’s Council of Advisors on Science and Technology, and Information Technology and Innovation Foundation—have called for the establishment 

of a similar network of public-private manufacturing centers in the United States 

to accelerate the development and deployment of advanced manufacturing technologies. 

I believe that NNMI concept has significant merit and am excited by the Administration’s proposal. I am eager to learn more today about how NIST and the Administration plan to execute this initiative. 

I am specifically interested in learning how the proposed additive manufacturing 

pilot institute will be structured and how it will be coordinated with the broader 

Network to ensure that ‘‘lessons learned’’ will be applied. I am also looking forward 

to learning more about how the interagency partners are working together to make 

this Network a reality. 

Certainly, the challenges facing U.S. manufacturers are urgent. The truth is that 

we simply can’t afford to wait. If we are committed to a vibrant manufacturing sector and to improving our competitive position in advanced manufacturing, it is precisely the time for bold ideas and devoted leadership. I look forward to working with 

Dr. Gallagher, the Chairman, and my colleagues on implementing this initiative and 

ensuring that it is effective and successful. 

Thank you again, Mr. Chairman, for calling this important oversight hearing. I 

yield back the balance of my time. 

Chairman QUAYLE. Thank you, Ms. Edwards. 

If there are Members who wish to submit additional opening 

statements, your statements will be added to the record at this 

point. 

At this time I would like to introduce our witness. Dr. Patrick 

Gallagher is the Under Secretary of Commerce for Standards and 

Technology and the Director at the National Institute of Standards 

and Technology. Thanks for being here this morning. As our witness should know, spoken testimony is limited to five minutes. 

After presenting your spoken testimony, Members of the Committee will have five minutes each to ask questions. 

I now recognize our witness, Dr. Patrick Gallagher, for five minutes. 

STATEMENT OF DR. PATRICK GALLAGHER, 

UNDER SECRETARY OF COMMERCE FOR 

STANDARDS AND TECHNOLOGY AND DIRECTOR, 

NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY 

Dr. GALLAGHER. Thank you very much, Chairman Quayle and 

Ranking Member Edwards and Members of the Committee. It is a 

privilege for me to be here and have the opportunity to talk about 

the Administration’s proposed National Network for Manufacturing 
13 

Innovation. I appreciate this opportunity to update you because 

there has been a lot of progress on implementing the President and 

Secretary’s vision to ensure U.S. basic and applied research and development is optimally leveraged to benefit U.S. industry. Manufacturing matters, Mr. Chairman. As the President has said, an economy built to last demands that we keep doing everything we can 

to keep strengthening American manufacturing. 

‘‘A manufacturing strategy for the 21st century should focus on 

making the industry sector globally competitive.’’ That is a quote 

from the American Enterprise Institute, and we agree. A robust 

manufacturing sector is in everyone’s interest and of importance in 

everyone’s district. The Administration and NIST are critical partners in this effort and have been hard at work on this issue. 

The stage was set last summer in a report on advanced manufacturing by the President’s Council of Advisors on Science and Technology, PCAST, and it reminded us why manufacturing remains essential. Manufacturing that is based on new technologies can provide high-quality, good-paying jobs for American workers. It is critical to our balance of trade. It represents 60 percent of U.S. exports 

and it drives technological innovation, accounting for some 70 percent of private sector research and development activity in the 

economy. The report also made it clear that the government should 

play an important role through the development of an innovation 

policy as opposed to an industrial policy, and the difference is crucial. 

Given the breadth of manufacturing, the report looked at a broad 

range of approaches to help sustain and grow the sector. In addition to research and development, the report looked at areas such 

as taxes, trade, workforce, regulations, small business and education policies and how they either can help or hinder the health 

of the manufacturing sector. 

Another consequence of a focus on manufacturing is the importance of an effective interface between the public and private sectors, and because of this, when the PCAST report was released in 

June of last year, the President also announced the formation of 

the Advanced Manufacturing Partnership, whose purpose is to 

bring together industry, universities and the Federal Government 

to work together to invest in the emerging technologies that will 

create high-quality manufacturing jobs and enhance our global 

competitiveness. To complement the public-private partnership, the 

Administration also strengthened the interagency coordination on 

advanced manufacturing, and in that context, NIST was asked to 

play a key role. 

In February, the National Science and Technology Council had 

an interagency working group on advanced manufacturing and it 

issued a report that said that the acceleration of innovation for advanced manufacturing requires bridging a number of gaps in the 

present U.S. innovation system, particularly the gap between research and development activities and the deployment of technological innovations in the domestic production of goods, and other 

organizations ranging from the Information Technology Innovation 

Foundation to major U.S. companies such as Dow and GE have 

each expressed their support of an approach to address these gaps 

in a strategic and targeted way. 
14 

The NNMI is the Administration’s approach to meeting the challenges of addressing these gaps. The President’s proposed network 

would create up to 15 Institutes for Manufacturing Innovation, or 

IMIs, around the country, and these IMIs would bring together industry, universities, community colleges, federal agencies, regional 

and state organizations all working together to accelerate innovation by investing in industrially relevant manufacturing technologies with broad applications. 

The President also announced that the Administration will take 

immediate steps to launch a pilot demonstrating an Institute for 

Manufacturing Innovation but based on existing programs within 

the Department of Defense and potentially also including the Energy and Commerce Departments, NASA and the National Science 

Foundation. These are two distinct efforts but have an important 

relationship between them, and I would like to briefly expand on 

this. 

The NNMI program has not yet begun. It will require legislation 

enacted to fund and carry out this program, and currently the Administration is working under requirements and principles of that 

legislation to support Congressional efforts on a potential bill. I am 

looking forward to working with this Committee on that effort. 

The principles outline the basic features of the NNMI program 

that would be established under competitive grants through the 

program, and we are working on developing these principles with 

extensive input from our agency partners and from the private sector through a series of regional meetings and through a request for 

public information and, importantly, through the pilot. 

The pilot program that the President announced is a way for us 

to demonstrate the concept of multiple agencies, industrial, and 

academic consortia jointly executing a single program. That is the 

essence of these institutes. And it is really a demonstration effort 

based entirely on existing programs within the participating agencies. There is much we will learn through the process of standing 

up an institute with our federal partners and enable us to use 

those lessons to benefit the eventual design of the NNMI. It is an 

area that cuts across different agency missions, and each agency 

brings their own expertise. NIST has been asked to play a critical 

role in both its interagency capacity and because of its mission. 

Mr. Chairman, I want to thank you for the opportunity to testify 

today and I am looking forward to our discussion. 

[The prepared statement of Mr. Gallagher follows:] 
15 

Testimony of 

Patrick D. Gallagher, Ph.D. 

Under Secretary of Commerce for Standards and 

Technology 

United States Department of Commerce 

Before the 

United States House of Representatives 

Committee on Science, Space, and Technology 

Subcommittee on Technology and Innovation 

Assembling the Facts: Examining the Proposed National 

Network for Manufacturing Innovation 

May 31,2012 
16 

Chairman Quayle, Ranking Member Edwards, and Members of the Subcommittee, thank 

you for the opportunity to appear before you today to discuss the Administration's 

National Network for Manufacturing Innovation (NNMI) initiative. As the President has 

said, "[An] economy built to last demands that we keep doing everything we can to .... 

keep strengthening AmericanlllGnlifacturing. "I Secretary of Commerce John Bryson 

amplified that message when he told us that in order to create good paying jobs, we need 

to help more American businesses "build it here and sell it everywhere." As the Under 

Secretary of Commerce for Standards and Technology at NIST, 1 sec every day how 

critical the United States manufacturing base is to our economy. 

A report by the National Science and Technology Council, "A National Strategic Plan for 

Advanced Manufacturing," stated that advanced manufacturing is a matter of 

fundamental importance to the economic strength and national security of the United 

States.2 The President has articulated a plan to bolster the U.S. manufacturing base, 

outlining a blueprint for American manufacturing and supporting a number of 

manufacturing initiatives in the FY 2013 budget, including the NNMI. 

National Manufacturing Trends - Manufacturing is Key to a Strong li:conomy 

As President Obama said in his 2012 State oCthe Union address, "We have a huge 

opportunity, at this moment, to bring manufacturing back. But we have to seize it." "The 

blueprint for an economy built to last," he said, "begins with American manufacturing." 

By itsclf, if the U.S. manufacturing sector were a country, it would be the 9th largest 

economy in the world. 3 There arc nearly 12 million jobs in the manufacturing seetor.4 

These are high-quality jobs.s 

Manufacturing is also closely tied to our Nation's capacity to innovate. Manufacturing 

makes a disproportionately large contribution to U.S. innovation, accounting for 70% of 

private sector research and development (R&D) and developing capabilities that support 

the next generation of products and processes. 6 Manufacturing represents 60 percent of 

U.S. exports and must playa critical role in an expansion of our exports and a move 

toward more balanced trade.7 Manufacturing increases economic activity in other 

sectors, creates jobs up and down the supply chain, and anchors employment in 

communities around the country. Until recently, U.S. manufacturing had been losing 

ground in the face of global competition. China is edging closer to the United States in 

terms of total volume of manufacturing output, and the United States has slipped below 

Germany, Korea, and Japan in the rankings of R&D intensity in the manufacturing sector, 

a critical indicator of future innovationS More alarming for the long-term health of U.S. 

innovative capacity is the trade balance in advanced technology manufactured products, 

many of them invented in the U. S. The trade balance on these products turned negative 

1 Remarks by the President on the Budget, February 12. 2012: 1 hUp:!lwww.whitehouse.gov/the-pressoffice/2012/02/13/remarks-president-budget 

2The National Science and Technology Council," A National Strategic Plan of Advanced Manufacturing", 2012. 

3 Bureau of Economic Analysis Manufacturing Industry Data Tables 2010 

4 Bureau of Labor Statistics. April Employment Situation Summary, May 4. 2012. Table B-1. 

5 NSTC A National Strategic Plan for Advanced Manufacturing February 2012 pg 2. 

6 National Science Board, Science and Engineering Indicators 2012. Appendix Table 4-14 and Table 3-32. 

7 Bureau of Economic Analysis and Census, US. International Trade in Goods and Services. 

8 NSTC A National StrategiC Plan for Advanced Manufacturing February 2012 pg 5. 

2 
17 

in 2001, and the gap has widened in the decade since (a $99 billion deficit in 2011 as 

measured by the U.S. Census Bureau9

). 

The President recognizes that these trends threaten the long-term economic security of 

the country and is committed to putting in place the programs and policy that will help 

reverse these trends and strengthen the U.S. manufacturing base in the long term. 

Progress is being made. During the past two years, we have begun to sec positive signs 

in American manufacturing, and more companies arc making the decision to "in-source" 

- bringing jobs back and making their products here. The Administration is working in 

elose partnership with community colleges, apprenticeship programs and other training 

providers to ensure the United States has a technical workforce with the industrially 

rclevant training and expcricnce required by industry. 

Even so, we must do more. Today's challenges require stepping up efforts to enhance 

and strengthen the Nation's underlying technical infrastructure, which is integral to our 

innovation and advanced manufacturing capabilities. 

To reap the economic benefits of our ability to innovate, our Nation's manufacturing 

sector must be able to renew itself by adopting new technologies and developing new 

markets. The Nation's manufacturers must respond quickly and effectively to an everchanging mix of requirements, risks, and opportunities, such as emerging technologies 

and markets. 

Revitalizing American Manufacturing 

Building on the work of the President's Council of Advisors on Science and Technology 

(PCAST) and as part of the Administration's comprehensive effort to secure the future of 

the Nation's global competitiveness in advanced manufacturing, the Departments of 

Commerce, Defense, and Energy worked together to lead an interagency effort under the 

National Science and Technology Council's (NSTC) Committee on Technology to assess 

the patterns and trends in U.S. Advanced Manufacturing. Through this work, it became 

elear that the acceleration of innovation for advanced manufacturing requires bridging a 

number of gaps in the present U.S. innovation system, particularly the gap between R&D 

activities and the deployment oftechnologieal innovations in domestic manufacturing 

production. To guide the Federal government's efforts to address these gaps, the NSTC 

developed and made public the "National Strategic Plan for Advanced Manufacturing." 

The strategic plan lays out a robust innovation policy that would help to close these gaps 

and address the fulllifecycle of technology. It also calls for intensive engagement 

among industry, labor, academia, and government at the national, state, and regional 

levels. Partnerships among diverse stakeholders, varying by location and objective, arc a 

keystone of the strategy, and part of the requirements to support increased private sector 

9 The Census Bureau defines Advanced Technology Products using about 500 of some 22.000 commodity classification 

codes used in reporting U.S. merchandise trade. Each of the 500 codes meets the following three criteria - (1) the code 

contains products whose technology is from a recognized high technology field. (2) these products represent leading edge 

technology in that field. and (3) such products constitute a significant part of all items covered in the selected classification 

code. 

3 
18 

investment in both manufacturing tcchnology development and advanced manufacturing 

production capacity. 

This new advanced manufacturing plan provides a solid foundation on which to erect a 

Federal policy that will enable the United States to fulfill Commerce Secretary John 

Bryson's vision to "build it here, and sell it everywhere." 

The Administration is taking steps to enhance the integration and coordination of 

manufacturing policy and programs across the Federal government through 

organizational efforts such as: 

• The White House Office o/Manufacturing Policy. To improve the coordination of 

manufacturing policy across the Federal government, President Obama 

announced on December 12,2011 10 that Commerce Secretary John Bryson and 

National Economic Council Director Gene Sperling would co-chair the White 

House Office of Manufacturing Policy. That office has begun to convene cabinetIevcl meetings to implement and coordinate priority manufacturing initiativcs. 

• The Advanced Manufacturing Partnership (A MP). Launched in Junc 2011 11 , 

AMP identifies opportunities for industry, academia, and govcrnment to 

collaboratc in order to accelcrate the development and deployment of emerging 

techno logics with the potential to transform and reinvigorate advanced 

manufacturing in the United States. The AMP Steering Committee, working 

through the PCAST framework, is bringing together leading experts from industry 

and academia, including CEOs of major manufacturing firms and presidents of 

leading universities, who arc working to develop recommendations for catalyzing 

manufacturing innovation in the United States. Those recommendations are 

expected very soon. 

• The Advanced Manufacturing National Program Office (AM-NPO). To 

effectively coordinate resources targeting advanced manufacturing across the 

Fcdcral governmcnt, NIST is hosting the Advanced Manufacturing National 

Program Office (AM-NPO). The AM-NPO is intended to strengthen interactions 

with the private sector, to enable the private-public partnerships that arc 

fundamental to improving the U.S. manufacturing sector's competitivcness and 

innovation, and to link these partnerships to rclevant Federal rcsources. A critical 

aspect ofthe AM-NPO is its "whole of government approach." A diverse staff, 

consisting of representatives from Federal government agencies including the 

Department of Energy (DOE), the Department of Defense (DOD), the Department 

of Education (ED), NASA, the National Science Foundation (NSF), and NIST, as 

well as fellows from industry and academia, will coordinatc activities across 

agencies that have a stake in advanced manufacturing. The AM-NPO will also 

work closely with the NSTC to coordinate policy. 

10 htlp://www.whitehouse.gov/the-press-office/2011/12/12/president-obama-names-commercesecretary-john-brvson-nec-chair-gene-sper 

11 http://www. whitehouse.gov/the-press-office/2011/06/24/president-obama-Iaunches-advancedmanufacturing-partnership 

4 
19 

National Network for Manufacturing Innovation 

A centerpiece of the President's efforts to strengthen U.S. manufacturing is the 

establishment ofthe National Network for Manufacturing Innovation (NNMI). In his 

remarks on March 9, 2012 in Virginia, the President announced his proposal to create the 

NNMI made up of a number of Institutes for Manufacturing Innovation (1M Is) around the 

country. 

The IMls are designed to bring together industry, universities and community colleges, 

federal agencies, such as the Departments of Commerce, Defense, Energy, and the 

National Science Foundation, and U.S. statc, tribal and local governments to accelerate 

manufacturing innovation. Specifically, the Institutes will invest in industrially-relevant 

manufacturing technologies with broad applications to bridge the gap between basic 

research and product development, provide shared assets to help companies - particularly 

small and medium-size manufacturing enterprises access cutting-edge capabilities and 

equipment, and create an unparalleled environment to educate and train students and 

workers in advanced manufacturing skills. Each Institute will serve as a regional hub of 

manufacturing excellence, providing the innovation infrastructure to support regional 

manufacturing and ensuring that our manufacturing sector is a key pillar in an economy 

that is built to last. 

This model has been successfully deployed in other countries and would address a gap in 

the U.S. manufacturing innovation infrastructure. We look forward to working with 

Congress on the legislation related to the establishment of this initiative. 

To facilitate input from key stakeholders, the participating agcncics, led by NIST, have 

issued a Request for Information specific to the NNMI and have begun a series of 

workshops across the country to gain insight from academia, industry, other public sector 

agencies at the state and locallcvel, and private citizens on some of the technical issues 

regarding the design and structure of a National Network of such Institutes. The first one 

was held in April at Rensselaer Polytechnic Institute in Troy, NY, with thc second 

schcdulcd on July 9th in the Clcveland arca. Others arc still to be scheduled. 

This consultative process for the NNMI will have similarities to the consultative process 

for the pilot Institute (which 1 will discuss in a minute) but will be broader in scope. 

Through these outreach efforts, the U.S. Government will seck to identify a wide-ranging 

set of technology focus areas for the IMIs. The RFI and workshops also will explore 

institutional design and governance issues, such as the ownership and handling of 

intellectual property generated by the NNMI and management of the NNMI as a whole to 

amplify the impact of its member Institutes. All of these clements, if constructed and 

organized well, will greatly enhance the contribution that these Institutes can make to 

U.S. manufacturing competitiveness. 

5 
20 

Key Principles of the NNMI 

In parallel with the RFI and public workshops, an interagcncy tcam has becn working to 

define a series ofhigh-Ievcl principles that will help guide the progmmmatie design of 

the NNMI, focusing especially on the activities and governance of the IMls and the 

process of setting up the Institutes in the first place. They arc specifically set forth in the 

following description: 

Activities and Governance of the [MIs: 

As currently envisioned, each Institute would integrate capabilities and facilities required 

to address cross-cutting manufacturing challenges that have the potential to retain or 

expand industrial production in the U.S. on an economically rational basis. IMI activities 

arc envisioned to include: applied research and development and demonstration projects 

that reduce the cost and risk of commercializing new technologies or solve generic 

industrial problems, education and tmining at aIllevcls, development of innovative 

methodologies and practices for supply chain integration, and cngagement with small and 

medium-sizc manufacturing entcrpriscs (SMEs). 

As currently cnvisioned, the IMIs would optimally involve a core team of two or morc 

companies, and have significant industrial involvement in the agenda setting of the IMI 

and direct participation by industry scientists and technologists in IMI projects. 

Imtitllte Formation 

An inter-agency program management team would be responsible for defining the NNMI 

and IMIs' organizational dcsign, managing an opcn, competitivc selection process and 

executing the awards process. 

The inter-agency team would define the selection criteria, and identify criteria to add or 

modify as a result of input received from the public input process, including the RFI 

noted above. 

The Administmtion anticipates that awards would be in the form of gmnts, contracts, and 

cooperative agreements, and could be executed in multiple rounds of awards. Awardees 

would be expected to show how the federal investment stimulates co-investment from the 

organizations and institutions making up the partnership entity or from other non-federal 

sources. Subsequent federal support would be contingent on demonstrating coinvestment and progress to sustainable operations as well as progress toward and impact 

on NNMI goals. IMfs arc expected to become financially sustainable within seven years. 

Pilot Institute 

The NNMJ is an exciting opportunity to catalyze our companies, large and small, to work 

synergistically with one another and with academic and other partners to advance 

technological innovation at a pace much faster than anyone company could on its own. 

While the process of engaging with industry, academia and other potential stakeholders, 

and working with Congress, takes time, the President challenged a group of agencies to 

6 
21 

do what we could to work together within existing resourccs and within existing 

authorities to demonstrate the NNMI conccpt. To that end, at a March 9th event in 

Virginia, the President announced the impending creation of a collaborative intcragency 

effort. In April, an interagcncy team Icd by the Departmcnt of Defense announced that 

the collaborative effort would focus on additive manufacturing. Additive manufacturing 

(including "3-D printing") is a game-changing set of techno logics with enormous 

implications for national security, energy and resource use, and process and product 

innovation in many sectors of the manufacturing economy. 

Thc technology focus of the pilot was selected in part based on a determined national 

security nccd to field unique specialty parts, on-demand, in relatively low volumes. 

While several agencies already support programs in the area of "additive 

manufacturing,,12, the pilot affords the opportunity to bring agencies together to make a 

concerted push towards developing manufacturing tools that will both address an 

essential national security need and potentially revolutionize the way we mass-customize 

products. 

Broadly speaking, the Department of Defense-led competition is designed to usc 

collaboration among educational and research organizations, and companies - big and 

small- to convert promising new technology into repeatable manufacturing processes 

and tools and promote workforce development through unique educational opportunities. 

This effort will demonstrate the value of problem-solving and asset-building that could 

also occur on a broader scale with an cntire network of Institutes for Manufacturing 

Innovation. 

On May 16, the interagency team hosted an Industry Day to share our ideas about the 

pilot institute and to answer questions from interested parties. The response was 

overwhelming - nearly 300 leaders from academia, industiy, government, and other 

organizations attended, prompting us to set up two overflow rooms to handle the crowd. 

The Industry Day provided an opportunity for networking among potential team partners, 

and many brought posterboards to show their strengths. We feel confident that we will 

receive a number of excellent proposals for the pilot institute, again demonstrating the 

strong demand from industry for the collaborative innovation model envisioned by the 

President's NNMI proposal. 

Conclusion 

The President recognizes that we must do more to enhance innovation in the 

manufacturing sector, support R&D investments that provide the foundation for new 

products, processes, and industries, and invest in the cross-cutting technologies that can 

improve the competitiveness of U.S. manufacturing. 

The NNMI is a critical piece of innovation infrastructure that can help U.S.-based 

manufacturing to remain globally competitive by fostering cutting-edge technological 

advances, solving problems of interest to a wide range of manufacturing sectors, 

12 Additive manufacturing is defined in ASMT 2792 as a process of joining materials to make 

objects from three dimensional model data, usually layer upon layer, as opposed to subtractive 

manufacturing methodologies. 

7 
22 

supporting small and medium-size manufacturing enterprises, and strengthening the skills 

of workers, managers, and entrepreneurs. 

I look forward to working with you, Mr. Chairman and members of the Committee, and 

would be happy to answer any questions. 

8 
23 

Chairman QUAYLE. Thank you very much, Dr. Gallagher. 

I want to remind Members that Committee rules limit questioning to five minutes. The Chair will at this point open the round 

of questions and I recognize myself for five minutes. 

Dr. Gallagher, I agree with you in terms of the importance of 

manufacturing to our economy, to our exports, to providing good, 

high-paying jobs here in the United States, but one of my concerns 

is, with the focus, especially on a policy basis, addressed specifically to the manufacturing sector, why shouldn’t we just be focusing on broader applications, broader policy decisions that affect all 

businesses? I don’t think I am alone in this. I think Christina 

Romer in a recent article stated that, you know, not seeing any 

specific market failures within the manufacturing sector, we should 

be focusing on policy decisions that affect all businesses so they can 

be successful and they can grow and they can expand. 

What do you see that is different that is a special need for the 

manufacturing sector, especially seeing that we haven’t lost out 

and we have been holding steady in manufacturing since 1980? 

Dr. GALLAGHER. So that is a great question, and it is actually 

central to almost every policy discussion we end up having about 

manufacturing. In fact, recently Gene Sperling, the President’s lead 

economic advisor within the White House, had a speech about this, 

talking about the role of government in manufacturing-related activities, and actually made the observation, this is a place where 

otherwise like-minded economists can even disagree, and I think it 

comes from—it stems from a natural discomfort in talking about 

any one sector in the economy and the issue of broad-based policy. 

But the PCAST report actually laid out a compelling reason why 

we need to actually take a look at manufacturing, even if we don’t 

have manufacturing-specific policy solutions. And I agree with you, 

a big part of this is laying out the general conditions for business 

of which manufacturing is part of and making sure that in that 

context we have a business climate, whether that is through taxes, 

trade, regulations and so forth, is as supportive as possible because 

these businesses are competing in very robust globally competitive 

markets, and that is clearly part of the Administration’s policy 

focus as well and it was outlined in the NSTC report. 

The interesting thing about manufacturing, though, is it plays a 

couple of unique roles as a sector. Some of them have been longstanding policy areas. One is how it supports our national defense 

capabilities and the need for domestic manufacturing capacities in 

fact entwine with our ability to secure and protect our country. Additionally, the manufacturing sector is rather unique in how it 

interfaces with our Nation’s capacity to innovate. Most of the R&D 

investments and performance in this country are not done by the 

Federal Government, they are done by the private sector. And 70 

percent of that private sector activity is in manufacturing-based activities, so it plays a disproportionate role. And in fact, that is one 

of the reasons these public-private partnership issues are automatically brought up in manufacturing, because on one end, as a country, we support through public investments basic research, even 

applied research. In some areas where there is an overriding mission need, like in defense or energy and others, we go farther. But 

there has to be an effective transition of this know-how to the pri-
24 

vate sector if it is going to reap the full economic benefit to the 

country. 

Chairman QUAYLE. You bring up some interesting points. In 

looking at what the Administration did, they devoted a significant 

amount of resources to manufacturing activities at many different 

federal agencies. For example, just this week, the Administration 

announced that the Advanced Manufacturing Jobs and Innovation 

Accelerator Challenge, which is a multi-agency, $26 million effort 

to assist the development and implementation of regionally driven 

economic development strategies that support advanced manufacturing in cluster developing. So I am trying to figure out what I 

am missing here, because this sounds really similar to NN—it is 

difficult, Ms. Edwards—NNMI. So what am I missing? How is this 

different? Are we having—putting just more redundancy, more 

overlapping programs that are trying to actually have the same 

goals and accomplish the same goals? 

Dr. GALLAGHER. Only to the extent that there are a number of 

programs that touch on manufacturing but the programs themselves are quite different. So the interesting thing about manufacturing from a federal policy perspective is that it is a big enough 

and diverse enough set of activities that it touches federal programs in a number of ways. It will touch workforce, it touches 

training and education, it touches innovation, it touches economic 

development, small business support. One of the focus points has 

been, how do you bring disparate different federal efforts into 

alignment so that you can have greater synergy, and that was certainly the focus of the announcement this week, to look at a regional manufacturing strategy, another theme that came up as we 

talked to industries across the country. That is the point of integration. That is where everything comes together. That is where a 

company and its supply chains and the educational infrastructure 

and the small business support, the banking industry, the VC funding, everything needs to be in place to have this whole-greaterthan-the-sum-of-the-parts effect. 

And so the announcement in that context was, how do you bring 

different programs into alignment so you have that larger effect. 

The NNMI is basically, very simply, about creating shared R&D infrastructure. It is a place where different companies can work together alongside national lab and university researchers to effectively bridge this gap between one part of the research community 

that is largely operating on public funding and one set of institutes 

and a set of organizations that are all private sector funded that 

are working in different businesses, so that is basically what the 

NNMI is. It is shared R&D infrastructure. 

Chairman QUAYLE. Okay. Thank you very much. 

I now recognize Ms. Edwards for five minutes. 

Ms. EDWARDS. Thank you very much, Mr. Chairman, and I would 

note that I guess Dr. Gallagher has been saying NNMI for a long 

time because you seem—it seems to roll off your tongue. 

Before I begin my questions, Mr. Chairman, I would like to ask 

unanimous consent to include a few items in today’s hearing 

record. The first is a statement from the Council on Competitiveness outlining some of its recommendations for revitalizing manu-
25 

facturing in the United States and expressing support for the National Network for Manufacturing Innovation Proposal. 

The second: as you may be aware, late last year the Manufacturing Institute, that is the educational and services arm of the 

National Association of Manufacturers, and EWI jointly developed 

a proposal to establish a network of advanced manufacturing application centers across the country, similar actually to what is being 

proposed in NNMI, and I would like to submit the PowerPoint 

presentation that was delivered by EWI and the Manufacturing Institute just this past December that clearly articulates the need for 

these centers and outlines a critical role for the Federal Government in providing support for the network. In fact, in the submission, the manufacturing application centers point specifically to 

capital equipment and core capabilities funded by the Federal Government, essentially recommending 20 percent of that kind of funding balanced by competitively bid programs, and I would like to 

note that yesterday, EWI’s CEO specifically encouraged its member 

companies to get behind the Obama Administration’s NNMI proposal. 

And the third item I would like to introduce for the record is a 

press release from the Information Technology and Innovation 

Foundation applauding the NNMI, and in the press release, the 

foundation’s president, Rob Atkinson, claims that the NNMI is ‘‘one 

of the most important steps this or any Administration has taken 

in recent years to revitalize American manufacturing.’’ 

Mr. Chairman, I would like to add those to the record. 

Chairman QUAYLE. Without objection. 

[The information may be found in Appendix 2.] 

Ms. EDWARDS. Thank you. 

And then to Dr. Gallagher, in your testimony, as we have heard 

time and time again, manufacturing is closely tied to competitive 

and innovative capacity of our Nation. Undoubtedly, manufacturing 

creates well-paying jobs and is key to our economic growth. What 

is less clear is what gap or need NIST is trying to fill through the 

establishment of the National Network for Manufacturing Innovation, and so I wonder if you could describe the need that the network will attempt to address. 

Dr. GALLAGHER. Thank you very much. So the gap in the R&D 

cycle that is being looked at is basically between an area where we 

are quite comfortable with public investment, largely at universities or national labs, where we are looking at basic or early applied research very clearly pre-competitive and it is performed and 

funded in very different ways than another sector, which is very 

late-stage technological development performed by individual companies through their own funds. What we are concerned about is 

that there is both almost no programs in the middle bridging those 

two, and the degree of segregation between those two groups of 

participants has in fact grown wider. It has grown wider by shifts 

in funding both on the federal side in terms of the balance between 

applied and basic R&D, and it has also become a larger gap in 

terms of the nature of what private industry funds. And so the answer appears to be creating a vehicle where companies can leverage each other, in other words, create—pool the risk and address— 

because we want to move the private sector into the earlier stage 
26 

research to begin to perform that, and we also want to put it in 

a place where the folks doing the early-stage research have access. 

So you are creating a mixing zone. 

So it is really trying to address this very important gap between 

two different communities, and that is one of the reasons I believe 

that we are hearing such broad support from across industry, from 

across academia, and from across all these associations that this 

type of entity is really quite important. 

Ms. EDWARDS. Thank you, Dr. Gallagher, and I wonder if you 

could share with us (because I think a lot of us have questions 

about this, given that NIST has historically focused mostly on intramural research): in addition to the funding level that is proposed for the program, it really dwarves NIST’s entire current annual budget. Can you explain why NIST is the best equipped to 

oversee the implementation of the network? 

Dr. GALLAGHER. So it is a great question. You know, since prior 

to the late 1980s NIST research funding was all intramural. You 

are correct. And the addition of intermural programs largely came 

in the late 1980s. So NIST does have some experience running 

these programs. One thing to emphasize, though, is that the NNMI 

is envisioned as a multi-agency effort. This is really not about giving NIST a unique program. This is designed to support, because 

manufacturing supports a wide variety of agencies. This ability to 

act in concert to bring a spectrum of efforts and looking at manufacturing from the Defense Department, from the Energy Department, from NASA, from National Science Foundation and NIST is 

critically important. 

That being said, from a clear accountability perspective, it was 

viewed as, while we will build in strong interagency vehicles to 

make this work as a multi-agency effort, somebody has to basically 

be on the hot seat for making sure this is done right; and in particular, since the idea is to have a network, something that links 

these different entities together so that again there is a whole 

greater than the sum of the parts, an ability to disseminate best 

practice. NIST has tremendous experience in networking manufacturing-related activities together. That is really what MEP is, and 

we have had experience at running these types of programs, and 

I think the consensus from the interagency community was that it 

really made the most sense for NIST because of its broad mission 

to support the competitiveness of U.S. manufacturing was the natural sort of home, but this really is done through a multi-agency 

effort. 

Ms. EDWARDS. Thank you. 

My time is expired. Thank you, Mr. Chairman. 

Chairman QUAYLE. Thank you, Ms. Edwards. 

I now recognize the gentleman from Texas, Mr. Smith, for five 

minutes. 

Mr. SMITH. Thank you, Mr. Chairman. 

Dr. Gallagher, first of all, let me thank you for the good work you 

have been doing, particularly in regard to scientific research and 

developing standards. I think NIST has done an outstanding job in 

those areas, and you get the credit. 

However, in regard to NNMI, I wish the Administration were 

more interested in creating jobs the old-fashioned way, which is to 
27 

say, either lowering taxes or keep taxes low. That encourages businesses to invest and produce and create jobs that way, and also in 

reducing the burden of regulations on small business, or any business as far as that goes. As you know, this Administration has broken all kind of records with its proposed regulations, I think over 

200 in 2011 alone, each of which would cost businesses over $100 

million, and here we have President Obama twice publicly, I think 

first in his State of the Union address and the second during an 

address to a joint session of Congress, talking about the need to reduce the burden of these stifling regulations on businesses. We 

have heard the words and yet his actions contradict those words. 

And so like I said, I wish this Administration were more committed 

to creating jobs by reducing regulations and keeping taxes low. 

I hope this NNMI initiative is not just another example of—or a smaller version, for instance, of the stimulus plan, $800 billion 

there, which we saw did not work, did not keep unemployment 

below eight percent, and in fact, even the President admitted there 

were very few shovel-ready jobs created and very few jobs created 

as a result. 

In this case, you have come out with a one-time-only one-year mandatory spending of $1 billion. I don’t know why we expect this 

to be any better or to perform any better than other stimulus bills 

that the Administration has advanced that have not particularly 

worked. And I think this follows up on a question you were asked 

earlier. Why is it that we haven’t seen any specific legislation, legislative language in regard to the NNMI program? And when are 

we going to see that language? 

Dr. GALLAGHER. Thank you very much. So let me focus on the 

why is this one time and what is the path forward. 

Mr. SMITH. Well, actually if you will answer that last question 

first, and then you can go back to that. But why haven’t we seen 

language and when are we going to see language specifically proposed by the Administration? 

Dr. GALLAGHER. Very good. So the Administration did not intend 

to send over a ready-to-enact piece of legislation. The reason being 

for that is we believe that the best vehicle to do this would be to 

come up with a legislative proposal that can have broad bipartisan 

support. 

Mr. SMITH. Okay. Who is going to write that, or who are the people working on that? 

Dr. GALLAGHER. Well, I think we are hoping that that effort 

would be led from the Hill and that we would work with any interested committees that would be willing to do that including—— 

Mr. SMITH. Has the Administration approached any Congressional leaders yet, and if so, who have they approached? 

Dr. GALLAGHER. The approach—the Administrative strategy has 

been led by the White House, and I am sure they have had discussion with manufacturing caucus-related groups. I don’t have a list 

of who they have specifically talked to at this point. From my perspective, we have been talking with everyone who has expressed an 

interest and has wanted to talk about the proposals. And the NIST 

focus has been to try to outline those parts of the program that 

would be required to be defined in legislation that would make 

these institutions function effectively. The issues of how to identify 
28 

the costs, the outlays and the offsets is not something within NIST 

we have been specifically focused on. 

Mr. SMITH. Okay. Not specifically focused on worries me a little 

bit. When you had the Administration propose a new program and 

you can’t say who they talked to in Congress and you can’t say specifically where the money is going to come from, that begins to look 

more and more like a political election-year-eve initiative that is 

not really serious or is not conceived to be a piece of legislation 

that will actually pass. Do you understand why we might think 

that when you can’t say who you have approached and you can’t 

give us any specifics? 

Dr. GALLAGHER. I can see why, but I have to say, it is my failure 

to communicate effectively, not a signal of the Administration’s intent and priority to this program. I think our goal would be to find 

a vehicle, a piece of legislation with as broad as support as possible. I don’t think this is being done for any political—— 

Mr. SMITH. I am sure the Congressional leaders would welcome 

that approach when and if it occurs, and can you tell us again 

where that likely source of the $1 billion might be since it is going 

to be redirected from other programs? What other specific programs will be cut? 

Dr. GALLAGHER. So my understanding is that the Administration’s 2013 budget has identified a number of potential offsets. 

Mr. SMITH. You mentioned that a while ago, but you can’t tell 

us specifically where those offsets are? 

Dr. GALLAGHER. No. I think there were several hundred million 

dollars worth of offsets that were identified, was my understanding, and I at this point could not do that, but I would be 

happy to follow up with you. 

Mr. SMITH. Okay. I hope you will follow up where the specific offsets might occur, what language—surely the Administration’s legislative shop has some specific ideas, but until they come up with the 

specifics, I think I am slightly skeptical about how serious the Administration is. 

Thank you, Dr. Gallagher. 

Dr. GALLAGHER. Thank you. 

Chairman QUAYLE. Thank you, Mr. Smith. 

At this point, I would actually like to ask unanimous consent to 

put into the record the recent article in USA Today by Dan 

Ikenson regarding various policies to help the manufacturing sector 

and the broad business sector. Without objection, it will be included 

as part of the record. 

[The information may be found in Appendix 2.] 

Chairman QUAYLE. I now would like to go to—recognize Ms. 

Bonamici from Oregon for five minutes. 

Ms. BONAMICI. Thank you, Mr. Chair. 

Dr. Gallagher, thank you so much for being here today to talk 

about the importance of manufacturing and the critical role that 

we can play at the federal level to support innovation in manufacturing. I know last week was Small Business Week, and I spent 

the district work period touring small businesses across northwest 

Oregon, and the topic of manufacturing and innovation naturally 

came up often, as it is directly related to small business job growth 

and job creation in my district. I was in Astoria, Oregon. I had a 
29 

great discussion with a small business that was recently able to 

start canning their own product, allowing them to sell their product 

throughout the Northwest. I am proud to share this example with 

my colleagues here today. There are a number of efforts and opportunities in place that seek to leverage federal resources through 

partnerships with State and private sector stakeholders to boost 

manufacturing. 

Dr. Gallagher, can you share with us how the proposed National 

Network for Manufacturing Innovation as part of the comprehensive manufacturing innovation strategy will help small businesses 

like the one in my district continue to grow? 

Dr. GALLAGHER. I am delighted to, and I appreciate your comments and observations about the MEP program in Oregon. That 

is great to hear. 

So there are a couple of overlaps between interactions the existing MEP program and the NNMI. The NNMI, as I said, is really 

about creating shared research capacity. One of the interesting developments is that we tend to think of industrial R&D as largely 

based out of big companies. That is not true anymore. The small 

and midsized manufacturers have become centerpieces of innovation and manufacturing technology, process, new materials, and 

that is particularly true in emerging technology areas. So one of 

the things that we envision is that the NNMIs, the Institutes created under this program would be specifically designed to foster 

and incorporate small business participation, small manufacturing 

participation, and one of the ways that they can provide that outreach is by creating partnerships with the local MEP programs, 

which are already networks to tens of thousands of local manufacturers from across the country. So you have an existing network 

that is working with existing small businesses and supporting their 

competitiveness including looking at, you know, diversification, introduction of new technologies supporting trade, and we are talking 

about a network of research capacity which brings together companies and academia to work on enabling technology. These two networks, of course, can feed off each other, and that is probably the 

biggest synergy between these two programs. 

In fact, the concept of a network to disseminate not only best 

practice between the institutes, but to have sort of shared metrics 

so that as these institutes evolve, you know, they grow and they 

develop in a way that is most supportive of their goals, something 

we learn from MEP. 

Ms. BONAMICI. Thank you very much. And also we know that in 

order to maintain a strong manufacturing base in this country, we 

need to develop advanced manufacturing technologies, processes 

and materials—but we also need to develop a highly skilled workforce that is capable of filling the high-technology and manufacturing jobs of the future. Can you explain how workforce development will be incorporated into the National Network for Manufacturing Innovation Programs? 

Dr. GALLAGHER. Yes, I can. So I think the interaction with workforce, which, as you point out, is one of the key things that comes 

up when we talk to every manufacturing entity, really has sort of 

two aspects to it. As a shared R&D infrastructure, you know, and 

manufacturing employs some 70 percent of the private sector re-
30 

searchers, engineers and scientists in the United States, there is a 

direct tie with that type of workforce development. This is a venue 

for bringing in top research talent working on industrially identified and relevant programs and it creates clear pathways to that 

workforce need. 

But the other interaction is a more indirect one, that these institutes are expected to be magnets for co-location for synergies between the manufacturer activity itself and the R&D activities including technical scale-up. So, you know, we envision, you know, 

technical and vocational training programs including community 

colleges, that there will be opportunities, the knowledge creation 

that is happening to these institutes to support broader workforce 

training programs in these regions that would be around these institutes. 

Ms. BONAMICI. Thank you very much. 

I yield back. 

Chairman QUAYLE. Thank you, Ms. Bonamici. 

The Chair now recognizes the gentleman from Illinois, Mr. 

Hultgren, for fve minutes. 

Mr. HULTGREN. Thank you, Mr. Chairman. Thank you, Dr. Gallagher. 

I am confused about the purpose of the institutes. The Administration Website states that they may conduct basic and applied research, but other documentation suggests that the institutes will 

focus on applied research in order to scale up new technologies in 

the United States. This definitely would squarely place such work 

outside the basic research domain. Which is it? 

Dr. GALLAGHER. Both. So the intent is to have—the institute program is designed to stand up and form these institutes where you 

can have mixed—you can bridge this gap between basic and applied and between much more developmental activities. So the institutes themselves need to support a broad range of research activities. I think one of the key questions you are raising is, where 

is the federal funding going? The federal funding for those research 

activities would be done on a project-by-project basis. So it would 

certainly be appropriate for some project being done maybe at the 

institute to be supported by federal funding if it was in basic—in 

appropriate basic or applied window, but if it is really out in an 

area that is getting closer to technology development for a particular company, we do not envision that to be something that 

would be publicly funded. In fact, one of the major objectives of 

these institutes is that they create a venue, a vehicle that is attractive for increasing investment in R&D by companies. 

Mr. HULTGREN. Would there be a check on that? Because I really 

do think at a time like this, when resources are so tight, I am a 

strong proponent of supporting basic scientific research, but it is 

really that application where the private sector has shown an ability and a willingness to do it. How are we going to make sure that 

we are not spending federal dollars in an area that we shouldn’t 

be? 

Dr. GALLAGHER. So there are two tensions here. The way I think 

this will play out in practice is through the actual cooperative 

agreements that cover project-specific activities, and that is how we 

will ensure that, you know, federal funding doesn’t go for some-
31 

thing that is inappropriate. There is going to be a mixture of activities in these institutes, and that can’t be a recipe for inappropriately mixing funding against what it was purposed for. 

That being said, you know, you are raising this important issue, 

which is in tight times, we focus to mission unique, and the government provides basic research, and that is part of what has been 

driving this strong segregation of participation. So we are fighting—you are exactly right. You don’t want inappropriate funding, 

but you also still need to create a vehicle where that proximity and 

that technical interaction can continue to occur, and that is kind 

of the key question. 

Mr. HULTGREN. I do wonder, and I can go on to the next point, 

you know, would we really need such direct support for manufacturing applied research and development? Would it even be necessary, you know, if government intervention was directed instead 

at reducing general taxes, regulatory burdens that really are hindering American companies? I wonder if there is another way at 

getting this accomplished rather than some of the direct support? 

Dr. GALLAGHER. So I am going to—you know, my take on that 

would be, there are two issues here. One is, I would agree with you 

entirely that for manufacturing to be competitive, we have to do all 

these things. It is not enough to simply have access to good ideas 

and technology if you can’t compete and sell it in a global market. 

No question. The institutes are a piece of a larger puzzle and the 

piece that they are after is making sure that the transfer of knowledge is as efficient as possible between the investments we do 

make as a country in basic and applied research and what we hope 

to be a commercial use in manufacturing. 

That gap is real, and I think even doing things like lowering 

R&D—increasing the R&D tax credit and things of that type, while 

it supports efforts by individual companies to enhance and grow 

their research investments, the missing issue is how to get them 

to work in longer intermediate-range research where individual 

companies have been reluctant to make those longer-term commitments, and we believe that by working together in these type of 

shared research institutes and this type of shared research infrastructure that you facilitate that because they leverage each other’s 

investment, and that is really the idea both behind consortia and 

behind the call for this type of infrastructure. 

Mr. HULTGREN. My time is running low, but if I can try and get 

one more very specific funding question. Information on the fiscal 

year 2012 funding for the pilot institute has been unclear as to the 

total amount of funding available and which agencies are supporting the pilot financially. In some cases, at least $45 million has 

been posted while another up to $45 million. I wonder if you could 

please clarify briefly the amount that has already or will be spent 

from fiscal year 2012 funds on the pilot and which agency funds 

are being used. 

Dr. GALLAGHER. So the quickest way for me to give you the full 

breakdown will be to share a table with you afterwards, which I 

am happy to do. 

Mr. HULTGREN. Thank you. 

Dr. GALLAGHER. But it is up to 45. The amount that is part of 

the joint call, which is part of a joint solicitation that is being car-
32 

ried out by the Defense Department, NSF, NASA and DOE is 30, 

and then what we have identified is once the institute is established, it would be a likely candidate for additional funds on a competitive basis, and that is where the ‘‘up to’’ comes from, but I 

think the table will answer your question most succinctly. 

Mr. HULTGREN. Okay. Good. Thanks, Dr. Gallagher. 

Thank you, Mr. Chairman. I yield back. 

Chairman QUAYLE. Thank you, Mr. Hultgren. 

The Chair now recognizes the gentleman from Illinois, Mr. Lipinski, for five minutes. 

Mr. LIPINSKI. Thank you, Mr. Chairman. 

I want to thank Dr. Gallagher for your work and for your testimony. I certainly think the NNMI is a very good and important 

concept, and I think you have been doing a good job of explaining 

why that is. I think one of the things that we really have to look 

at is: we invest a tremendous amount in research. The Federal 

Government invests a lot in research. And right now, one of the 

biggest barriers to advanced manufacturing commercialization is 

that the development of new technologies are sometimes too risky 

or too long-term for industry to develop on its own, and that is 

what it sounds like to me what you are aiming at doing here. 

I have pushed the Federal Government to develop a national 

manufacturing strategy. We are actually having a hearing in Energy and Commerce tomorrow on a bill I have to implement a national manufacturing strategy. I have also championed programs 

like one that just began at the NSF called the Innovation Corps, 

which helps to teach researchers how to commercialize research 

that they have had funded already by the Federal Government. 

So I think the NNMI certainly can help, but obviously we need 

to work through these things. I am looking forward to working 

with you to figure out how exactly we are going to implement the 

NNMI. It is my understanding from your written testimony that 

this model has been successfully deployed on other countries. You 

have looked at that. I know the Fraunhofer Institute in Germany 

is one example. I know a lot of their funding, much of their funding 

comes from doing contract research. This is not something that you 

had mentioned, or at least I hadn’t noted it. Do you anticipate that 

that will be part of this initiative? 

Dr. GALLAGHER. I think the answer is yes. You know, the development of a stable business model for these institutes is going to 

be something that will need to be played out in the solicitation review and award process for this program. We envision this as a 

one-time investment with the government playing this convening 

and coordination role and allowing some time for the private sector 

entities that are going to work together in these institutes to develop the vehicles for a sustainable business model. The way it has 

played out in many countries is a combination between support to 

the institute, what I would call base funding to keep the institute’s 

overall functions working, and the research activities that are covered on a project-by-project basis. You can call that contract or 

grant or cooperative agreement, but there would be, you know, specific funding. And I think that is probably going to be the case here 

just because of the diversity of types of research that are going to 

be done there and addressing the need to make sure that federal 
33 

funding is used for the purposes of federal funding, and private-sector funding that is brought in is for used for the companies that 

want to use it for. 

So I think you are right. This is a shared infrastructure and 

there will have to be some base funding of some type, probably 

through some collective action on the part of the key participants. 

Whether it is consortia-type program, I don’t know. We envision no 

long-term role for the Federal Government supporting that, and 

then a collection of project-specific or contract-type work that would 

cover the different types of research efforts underneath the institute. That seems like a realistic assumption to make on how a possible business model would go. This is, by the way, the subject of 

questions under the request for information that is ongoing now. 

Mr. LIPINSKI. Well, obviously, there are a lot of things that we 

have to work on. I want to take the last minute to ask one other 

question. 

What can be done as we develop this initiative to ensure that we 

are not just helping the Chinese to build better iPads? How do 

we—what steps can we take to make sure that products that are 

developed from work at the NNMI are commercialized here in 

America? 

Dr. GALLAGHER. So one part of my answer would be, we should 

build these institutes because to not do it is actually enabling foreign competition to reap the very open and diverse output that we 

have from our basic and applied research simply because we are 

not taking steps to nurture that next stage, which is the translation of that know-how and knowledge into the commercial sector. 

So I would argue right now, we actually do disadvantage ourselves 

by basically doing one part of it, publishing it wide open and then 

stopping and not providing vehicles for the efficient translation into 

companies. 

Mr. LIPINSKI. I agree with that, but the iPad was really developed here but now it is all being manufactured overseas. 

Dr. GALLAGHER. And so this points to the synergy that happens 

between the actual manufacturing activity and the innovation. The 

reason these are physical institutes for research and development 

around manufacturing is to support and drive this collocation synergy. We would want to see manufacturing and their suppliers and 

this ecosystem being built around these activities. That is the best 

thing we can do to ensure that the know-how that we generate in 

this country is translated into the actual maximum economic benefit by producing, selling and making these commercial products. A 

good example of that is what is happening in Albany, New York, 

in the nanotechnology arena where this shared research capacity 

looking at this emerging area of nanomanufacturing is driving very 

strong attraction by other companies to want to be located near 

that to reap the benefits of both the knowledge that is being created and the talented researchers in that area, and so I think we 

are doing a lot in that case. That region is doing a lot to capture 

as much as possible that knowledge and ensure that we benefit 

from it. 

Mr. LIPINSKI. Thank you. I yield back. 

Chairman QUAYLE. Thank you, Mr. Lipinski. 
34 

The Chair now recognizes the gentleman from Minnesota, Mr. 

Cravaack, for five minutes. 

Mr. CRAVAACK. Thank you, Mr. Chair. I appreciate being recognized, but since I just came in from another committee meeting, I 

would like to yield my time to Mr. Palazzo. 

Mr. PALAZZO. Well, thank you, Mr. Chairman. Thank you, Mr. 

Cravaack, for doing so. 

Dr. Gallagher, thank you for being here today. As I see it, you are coming in, or the Administration is requesting $1 billion, and 

I have tried to review everything, and what I keep coming back to 

is, I would much rather spend $1 billion on roads and bridges or 

possibly even $1 billion into the NASA Heavy Lift program. 

But with all that being said, I would like to say a couple—provide a statement for you, and I think it will be pretty clear. You 

may have heard some of these questions earlier. But Thomas D. 

Hopkins, a researcher for the Small Business Administration, said 

in his report, a Survey of Regulatory Burdens, ‘‘Compliance with 

regulation imposes burdens on businesses for which they receive no 

explicit benefits or compensation.’’ The National Association of 

Manufacturers asserts that their industry is at a significant competitive disadvantage in the global marketplace as a result of the 

corporate tax rate in America, which is the highest among developed nations. Also, a recent Small Business Administration study 

showed that U.S. manufacturers bear $162 billion annual burden 

to comply with federal regulations. These are dollars manufacturers are not spending on capital investment or hiring new workers. 

So you are asking for a one-time investment of $1 billion, but as 

a former small business owner and a CPA, I would be trying to remove these hurdles to job creation and American competitiveness 

before I invested $1 billion. 

And so with that, in the face of the uncertain future of taxation 

and the regulatory environment on manufacturers in America, 

what is the NNMI going to do to reduce these burdens on U.S. 

manufacturers? 

Dr. GALLAGHER. So I would agree with you that in manufacturing, we have what I call a chain of performance problem, that 

all of these things have to work in concert, and I am actually in 

agreement with you that we have to look at the business condition 

that these companies are operating in including the tax rate. We 

agree. We have to lower the corporate tax rate for these businesses. 

We want to provide incentives for them to do research and development. We have to address trade promotion, make sure the barriers 

are down so they can sell into global markets. We have to make 

sure they have access. 

So one of the challenges we will face in working together on manufacturing is that it always brings up a very broad spectrum of 

issues and they really have to work in concert. The NNMI is really 

about one type of barrier that they face and the barrier is access 

to the ideas and the talent that are the new products that they are 

going to make, and we have seen this. It is quite compelling that 

the manufacturing sector’s competitiveness is tied to being at the 

cutting edge of these emerging technology areas, and if there are 

barriers there and our companies are at a disadvantage in harnessing the know-how that is being created by our scientists, by 
35 

our engineers, by innovators and entrepreneurs, then that is a different type of barrier. It may play out on a different time scale 

than immediate barriers like, you know, certain types of tax issues 

or regulation, but it is a barrier nonetheless. 

And that is going to be a challenge, and I think that is why we 

want to work with you across a portfolio of programs, but this 

NNMI won’t solve all of these different issues and it is not intended to. It is designed to address this one barrier that we are 

concerned about, which is this growing valley of death, if you will, 

between basic public sector-funded research and the private sector 

development. 

Mr. PALAZZO. So basically you agreed with me, being overtaxed 

and overregulated, and again, it just comes back. If I had, you 

know, a billion dollars and I was going to invest in a company and 

they had internal control problems, fiscal problems, I would want 

them to clean those problems up before I took that kind of an 

American investment, which is not my money to give, it is the 

America taxpayers’, it is the people who get up every day, go to 

work to put food on their table, to provide the best education for 

their children and provide a home, safe transportation, and I would 

expect if they were in here, they would be demanding some governmental reforms, you know, like a lower corporate tax rate. Removing these obstacles to job creation and possibly addressing just the 

frivolous litigation in our society that three of the greatest things, 

many of them generated from former Congresses that are basically 

providing that wet blanket in our economy because I do believe 

that manufacturers free, if we just unshackle them, they would be 

able to go out and compete globally and they will fill any need that 

we need them to fill. So thank you for your time. 

Mr. Chairman, thank you. I yield back. 

Mr. CRAVAACK. Reclaiming my time, and I will yield back to the 

Chair. 

Chairman QUAYLE. Mr. Cravaack, do you have any questions? 

Are you ready? 

Mr. CRAVAACK. If there are no more questions and my time allows, I will be glad to. 

Chairman QUAYLE. Mr. Palazzo, I recognize you for five minutes. 

Do you want to yield to Mr. Cravaack? 

Mr. PALAZZO. Thank you, Mr. Chairman. I have to leave, so I 

would love to yield my five minutes to Mr. Cravaack. 

Mr. CRAVAACK. I just love parliamentary procedures. 

Thank you, Dr. Gallagher, for being here today, and thank you 

for addressing so many very important issues. We are a manufacturing giant. We just have to unleash the entrepreneurial spirit in 

this great country and has always been in this country, and Mr. 

Palazzo hit it right on the head in regards to—there are two things 

when I talk to manufacturers. There are two things they talk 

about: taxation and regulation. Those are the two main components 

that they talk about. 

So with that said, you know, I want to invest in making sure 

that we have a return on this investment. I understand you are 

getting a billion dollars, but I want to make sure at the end of the 

five years, we have a result of that investment. So can you tell me 
36 

how you are planning to move this forward after five years so we 

don’t see you again in five years asking for another billion dollars? 

Dr. GALLAGHER. Yes. I think the way we would like to do this 

is make the development of a sustainable business model for these 

institutes. This is really about the private sector being able to work 

together to cover this gap. 

Mr. CRAVAACK. When you—sorry. When you say a sustainable 

business model, and you have said that a couple of times, how can 

you produce a sustainable business model without—with innovation, of course, making more efficient, better productivity, understand that, but until we get to the true root cause of why companies go overseas, which is taxation and regulation, is that going to 

be part of your paradigm? 

Dr. GALLAGHER. Well, look, as I said, we agree that the taxation 

and regulation is part of creating a competitive business environment. There is no disagreement there. But the reasons companies 

go overseas, and there have been a number of recent surveys that 

have looked at this, are actually broader than just the taxation and 

regulation or labor cost issues. Those are clearly drivers, but one 

of them is that they are following capacity. In other words, if you 

look at what is happening in R&D investment by companies overseas, it is growing much faster overseas than it is growing in this 

country and it is growing specifically in those areas where the 

manufacturing sector is growing, so it is Asia, the Asia Eight or the 

Asia Ten or where all the R&D growth is occurring. So what is 

happening in Asia is, they are actually using the synergy between 

manufacturing and research to build their research capacity. They 

are working it the other way. They first come in with, you know, 

the advantage of relatively cheap labor and they build their way 

and move up the value chain and so they are building research capacity, and then what happens is, you get the synergy effect where 

it is easier for a company or they make a decision just because we 

have hollowed out a capacity in the United States that for those 

reasons access to talent, access to—that they move there, and that 

is really what these are about addressing because we don’t want 

to lose that capacity to translate the knowledge that we are creating into U.S.-based companies and let them profit from that. And 

what will happen of course is, you are right, and from a business 

perspective, you are looking at short-term cost and those conditions 

matter. I don’t disagree with you. But there is also strong evidence 

that you can make a decision that makes sense on the short term 

where you decide to offshore something because it is cheaper to 

make that product, and what we find now is that you have actually 

lost the capacity to generate the next generation of product. And 

that is a long-term tradeoff that we are trying to address here. 

Mr. CRAVAACK. Thank you. We have talked a little bit about the 

public-private partnerships and the co-investment from participating entities. Is it expected there is going to be funding of an inkind match? Is there a minimum investment? Who is going to invest? How much are they going to invest as part of this partnership? 

Dr. GALLAGHER. So our goal in doing these is to maximize the 

private sector investment in the institutes, and that would be both 

in evaluative criteria in evaluating these proposals. It is even true 
37 

in the pilot that there has been stated an expectation, they would 

like to see at least 50 percent match in terms of the participants. 

And in addition, we want to see that match change over time. In 

other words, we would like the Federal Government to not have a 

mortgage, a long-term role in supporting these. We are trying to 

support the creation of these institutes where you can have shared 

activity among companies and then be able to get out, and that has 

happened before. The semiconductor industry and the auto industry where the government played a very important convening role 

to set these up has been able to back out over time and those companies and sectors continue to enjoy very strong interactions across 

companies and have very strong applied research activities, so that 

is the goal here. 

Mr. CRAVAACK. If the Chairman would indulge me a little bit, do 

we have—these private-sector entities, have they been identified 

and have they had a commitment? 

Dr. GALLAGHER. For the pilot? 

Mr. CRAVAACK. For the pilot. 

Dr. GALLAGHER. So the pilot right now is basically undergoing a 

call. There was an industry day or proposer’s day that was hosted 

by the Defense Department a couple weeks ago. I understand there 

were at least 20 potential groups that were looking at forming 

these, and that is under a very abbreviated call. I think it was only 

30 or 40 days or something of that type. So the interest appears 

to be exceedingly high. That would be my early read. 

Mr. CRAVAACK. Thank you, Dr. Gallagher. I appreciate your time, 

and I will yield back. 

Chairman QUAYLE. Thank you very much, Mr. Cravaack. 

I thank Dr. Gallagher for his valuable testimony today and the 

Members for their questions. The Members of the Subcommittee 

might have additional questions for the witness, and we will ask 

you to respond to those in writing. The record will remain open for 

two weeks for additional comments and statements from Members. 

The witness is excused. 

Thank you all for coming. This hearing is now adjourned. 

[Whereupon, at 11:06 a.m., the Subcommittee was adjourned.] 
38 

ANSWERS TO POST-HEARING QUESTIONS
39 

ANSWERS TO POST-HEARING QUESTIONS

Responses from Dr. Patrick Gallagher were not submitted. 
40 

QUESTIONS FOR THE RECORD 

THE HONORABLE LAMAR SMITH (R-TX) 

U.S. House Committee on Science, Space, and Technology 

Subcommittee on Technology and Innovation 

Assembling the Facts: Examining the Proposed National Networkfor Manufacturing 

Innovation. 

Thursday, May 31,2012 

1. Regarding the pilot, will the agencies participating in fiscal year 2012 also commit 

resources to the pilot in fiscal years 2013 and 20l4? If so, what amount do you anticipate 

to be contributed from NIST? Furthermore, please provide detail on other agency 

contributions to the additive manufacturing pilot in FY13-FY14. 

2. How much extramural funding is NIST currently sending out the door to support 

advanced manufacturing? How is the National Network for Manufacturing Innovation 

(NNMI) different from the Advanced Manufacturing Technology Consortia (AMTech) 

program? Will recipients of one program be able to receive funding for the other? 
41 

QUESTIONS FOR THE RECORD 

THE HONORABLE RANDY NEUGEBAUER (R-TX) 

U.S. House Committee on Science, Space, and Technology 

Subcommittee on Technology & Innovation 

Assembling the Facts: Examining the Proposed National Networkfor Manufacturing 

Innovation 

Thursday, May 31, 2012 

1. The proposed National Network for Manufacturing Innovation (NNMI) represents a 

new, $1 billion program. How did the Administration decide that $1 billion was the 

appropriate amount to spend? Why does the funding need to be mandatory and not 

discretionary? The legislation authorizing the NNMI would be subject to PAYGO. What 

revenues would be proposed to offset the mandatory funding? 

2. How many awards would you anticipate making in fiscal year 2013, provided the $1 

billion is available? What amount will be available to each grant recipient? 

3. The goals of the National Network for Manufacturing Innovation (NNMI), while 

diverse, appear to focus on advancing certain types of technology through applied 

research and demonstration. Though still considered "pre-competitive" in nature, some 

question whether government support at this point in the innovation process alters normal 

market forces which would determine the best available technology and processes 

instead. Does the NNMI overstep the role of government and wade into areas which 

would be more appropriately handled by the private sector? 
42 

QUESTIONS FOR THE RECORD 

THE HONORABLE RANDY HULTGREN (R-IL) 

U.S. House Committee on Science, Space, and Technology 

Subcommittee on Technology and Innovation 

Assembling the Facts: Examining the Proposed National Networkfor Manufacturing 

Innovation. 

Thursday, May 31, 2012 

1. In the hearing you drew a distinction between what type of research federal funds 

under the NNMI would support, versus the type of research that private funds under the 

NNMI would support. If I understood correctly, any given project may have both basic 

and applied components, but that anything that veered into technology development 

would not be supported by federal funding? I appreciate the desire to ensure that federal 

funds are supporting work that would not otherwise be supported by the private sector, 

but how would this differentiation actually be carried out? It seems like it might be very 

complicated to distribute funding in this manner, so I would appreciate more information 

about how you see this distinction being both determined and implemented. 

2. At this point in time, do you have any commitment from the private sector to match 

any of the federal funding provided to the NNMI? Will there be a match requirement 

prior to awarding an institute award? 

3. Will National Network for Manufacturing Innovation (NNMI) funds be available for 

new buildings? Equipment? Will there be a limit on the amonnt of a grant that can be 

used for administrative/maintenance fees? 
(43) 

Appendix 2 

ADDITIONAL MATERIAL FOR THE RECORD
44 

MATERIALS SUBMITTED BY SUBCOMMITTEE RANKING MEMBER DONNA F. EDWARDS, 

HOUSE COMMITTEE ON SCIENCE, SPACE AND TECHNOLOGY
45 

Council on Competitiveness 

Written Comments Regarding 

"The National Network for Manufacturing Innovation" 

May 31, 2012 

Opening and Summary 

Compote, 

Council on 

Competitiveness 

The National Network for Manufacturing Innovation (NNMI) begins to address the current 

problem of under investment in critical pre-competitive advanced manufacturing research and 

development (R&D). This investment promises to drive industry-wide transformations needed to 

ensure that the United States maintains essential advanced manufacturing capabilities to meet 

national economic and security requirements. The government must playa role since the scope of 

these economy-wide efforts prevents any single firm from capturing a disproportionate share of the 

economic benefits generated. Further, the time-horizons required for such R&D are typically 

longer than private sector investments can justifY. As a result, the market is not responding to this 

critical national need. 

Collaborative NNMI efforts will improve the system-wide benefits of developing and deploying 

next-generation disruptive manufacturing technologies, processes and linked supply networks. A 

number of national economies in Europe and Asia are pursuing aggressive manufacturing growth 

strategies. In these economies, government, industry, labor and academia are establishing 

increasingly effective full life-cycle innovation and production ecosystems. U.S-based 

manufacturing will find it increasingly difficult to compete with these national economies. There 

are numerous actions that America should take to accelerate manufacturing innovation. Particularly 

important are expanding R&D incentives such as a permanent 15-20 percent R&D tax credit that 

also covers applied manufacturing research. Also important are cross-sector research 

collaborations and public-private partnerships to develop and deploy breakthrough advanced 

manufacturing tools, processes and applications. 

American Manufacturing 

Manufacturing is a cornerstone of American independence, economic prosperity and national 

security. It remains a driver of innovation, job creation and economic growth. The United States 

must implement sound policies to sustain and expand the manufacturing sector. 

Manufacturing is broader; more deeply integrated with services and has a higher multiplier effect 

on the economy than at any time in history. Manufacturing includes all facets of research, 

development, production, sales, distribution, logistics, customer service, marketing, and support. 

It extends from the making of physical products to the delivery of services -- an increasingly 

important component integrated across the manufacturing spectrum. Properly understanding the 

breadth oftoday's manufacturing and its multiplier effect on the domestic economy is essential 

to enacting public policy that ensures the United States will improve its standard of living and be 

competitive in the long-term. 
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Page 2 of II 

American manufacturing added $1.8 trillion to GDP, or nearly 12 percent of the nation's total 

economic output, in 2011. Manufacturing firms pay highcr wages than those in other sectors and 

employ 11.5 million U.S. workers. Manufacturing also supports nearly 7 million jobs in other 

industries. Due to substantially larger supply chains than other sectors, manufacturing firms have 

the highest multiplier effect on the U.S. economy of any industry. For every dollar of value 

created in manufacturing, $1.40 is created in other sectors of the economy. 

Many U.S. manufacturing firms remain at the technology frontier, especially in computers, 

medical devices, chemicals, machinery, aerospace and military equipment-though this 

advantage is narrowing. The U.S. has had a trade deficit in manufactured goods for some time, 

and in 20 I 0 the country ran an $81 billion deficit in so-called high-tech manufactured products 

alone. Also within the past ten years, the U.S. has lost 687,000 high-tech manufacturing jobs-a 

28 percent decrease. Manufacturers account for roughly two-thirds of U.S. R&D expenditures 

and employ more engineers and scientists than any other private sector industry. Manufactured 

goods also represent over half of U.S. exports and drive more net wealth creation than any other 

sector. 

The Right Policies Needed for Manufacturing 

America's future requires a dramatically improved business environment in which to build an 

integrated national ecosystem for high-performance production with new technologies, designs, 

processes and materials. More effective collaboration will be essential between managers, 

employees, suppliers, researchers and educators. Government and regional support organizations 

also have crucial roles as conveners, connectors and policymakers-supporting conditions for a 

dynamic manufacturing base. 

There are enormous opportunities to increase production and grow exports. The digital, 

biotechnology and nanotechnology revolutions are unleashing vast opportunities for innovation, 

manufacturing and services. They will enable new business formation, product development and 

job creation. In some cases they will serve as platforms for entirely new industries and markets. 

Supporting American manufacturing does not mean advocating an industrial policy of selecting 

favored sectors or firms, subsidizing decaying industries, or protection from fair competition. 

These tactics, while used at times, rarely prove effective over the long-term. Instead, the 

government should focus on creating the right conditions for manufacturing to thrive, especially 

given the changing dynamic of global competition and the steady rise of state-supported 

capitalism. Doing so will allow the United States to capture a much greater share of the benefits 

resulting from its innovation enterprise. 

The Council has outlined a comprehensive and integrated set of actions to support American 

manufacturing excellence in its report: Make - An American Manufacturing Movement. 

Implementing this strategy will require changing the national conversation, embracing new 

competitive realities and resolving to take meaningful action to unleash America's production 

potential. The high-level actions Make recommends include the following: 

1. The United States needs to quickly enact fiscal reform, transform tax laws and reduce 

regulatory and other structural costs to fuel the innovation and production economy from 
47 

Page 3 of II 

start-up to scale-up. These policies must improve the rule of law, reduce uncertainty in 

the business climate, encourage risk-taking and ease access to investment capitaL 

2. The United States must utilize multilateral fora, forge new agreements, advance 

intellectual property protection, standards and export control regimes to grow high-value 

investment, expand exports, reduce the trade deficit, increase market access and 

aggressively respond to foreign governments protecting domestic producers. 

3. The United States needs to prepare the next generation of innovators, researchers and 

skilled workers at every level to harness the power and potential of American talent to 

win the future skills race. Production work today is knowledge work. Support for career 

and technical education and community college programs is vital to making America an 

ideal place to scale manufacturing. We must also encourage entrepreneurs and risk 

taking, and make it attractive for the best and the brightest to come and stay in this 

country. 

4. The United States must create national advanced manufacturing clusters, networks and 

partnerships, prioritize R&D investments, deploy new tools, technologies and facilities, 

and accelerate commercialization of novel products and services to achieving nextgeneration productivity through smart innovation and manufacturing. Funding is needed 

for basic and applied scientific research in advanced manufacturing technologies. Such a 

model of government funding has been extremely effective in creating world-class 

Information Technology and biomedical sectors in the U.S. 

5. The United States needs to develop and deploy smart, sustainable, secure and resilient 

energy, transportation, production and cyber infrastructures to create competitive 

advantage through next generation supply networks and advanced logistics and systems. 

The adoption of comprehensive, pre-competitive policies - i.e. policies that do not provide undue 

advantage or disadvantage to a particular industry or sector are of great importance to the longterm strength of our nation's manufacturing base. The recommendations above address some of 

the most pressing challenges facing U.S. manufacturers today, and while useful if implemented 

individually, these reforms would have a far greater impact if implemented as a suite of 

solutions, geared to support organic growth of the American industrial base while strengthening 

and deepening critical domestic supply networks. 

Manufacturing is Innovation 

Manufacturing is central to the life-cycle process that brings solutions (0 customers. This 

involves cutting- edge science and technology, design, modeling and simulation through 

advanced computing, systems engineering, testing and verification and the contributions of 

complex supply networks. It also involves a wide range of services and transactions, 

transportation, maintenance and energy, plus the talent of many occupations-all of which is in 

addition to "bending metal." Finns that commercialize new technologies and scale production 

grow faster, are more profitable and create more jobs than other firms do. 

Unfortunately, government policies and programs tend to focus almost exclusively on product 

R&D, technology transfer and, in some ways, early stage commercialization. These phases are 
48 

Page 4 of II 

all critically important, but manufacturing at scale and manufacturing technologies are often not 

considered a part of the innovation ecosystem. In fact, they are often discounted, creating a 

negative ripple throughout the manufacturing value chain. 

In recent history, manufacturing business models evolved to a point where production and 

innovation became separate. Manufacturing was viewed as a cost to be minimized rather than a 

process to be optimized for competitive advantage. Conventional wisdom emerged that as long 

as high-value added work-e.g. engineering and design-remained in the United States then the 

economy would grow and large-scale production could be left to its own devices. 

This model, however, is not sustainable. A broad array of government polices, both foreign and 

domestic, have important impacts on the innovation and production process, from research 

funding to taxes to market access. Presently, U.S. policies are not aligned with the full life-cycle 

perspective of innovation that includes production at scale. 

Without strong public and private support for the complete life-cycle innovation and production 

process, the United States cannot maximize the return on its innovation investments-a return 

measured in jobs, growth and tax revenue. Today, foreign investors-especially through 

sovereign wealth funds-acquire production of U.S.-developed technologies and innovations. 

Even domestic investors typically condition their investment in new technologies on a business 

plan that directs manufacturing abroad. 

The policies, programs, strategies and business models that worked in the past are inadequate to 

secure America's future. Government, business, labor and academic leaders must rethink and 

retool the nation's business environment to seize arising opportunities and address several 

shortcomings. The leveling effects of globalization are diminishing the low cost advantages 

offered in emerging economies and potentially opening the door to increased manufacturing in 

the United States. 

Structural Changes in the Global Economy Create Opportunities and Challenges 

Manufacturing is global and the forces coloring America's manufacturing future are highly 

complex. Structural changes are reshaping the global economy, and firms are becoming more 

sophisticated in adapting and contributing to that change. Tectonic shifts in technology and talent 

are augmenting what, how and where products are manufachlred-and the dynamics vary by 

sector. America's edge in innovation and entrepreneurship is narrowing, and another valley of 

death has opened where startups struggle to find capital for domestic production at scale. Further 

complicating the environment is the promise of an energy boom in natural gas, the dark shadow 

of America's struggle to curb its debt and the need to invest in people and infrastructure. 

The global migration toward free enterprise and open markets is driving growth in emerging 

economies. Several nations have rapidly developed into fonnidable manufacturing competitors. 

China's manufacturing output, for example, is now approaching that of the United States. As 

development spreads, with it comes a burgeoning consumer class in economies around the 

world. About 1.8 billion people occupy the consumer class today. By 2030, this number could 

reach 5 billion, with 95 percent of the growth occurring in emerging and developing 

economies-creating large new demands for manufactured goods. 

Global companies see significant sales and investment opportunities in emerging economies. 
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Page 5 of 11 

Emerging markets' share of global foreign direct investment (FDI) inflows has grown from 

about 20 percent in 2000 to more than half today. In the 2011 "World Investment Prospects 

Survey," global companies saw China, the United States, India, Brazil, Russia and the United 

Kingdom as top prospects for future foreign investment. 

U.S.-based operations must also compete with aggressive mercantilist policies from foreign 

governments. Many countries have put in place policies and financial incentives to attract 

investment, manufacturing facilities, foreign intellectual property and talent while protecting 

domestic business interests. China for example, is suspected of keeping the Renminbi weak to 

spur exports and often acts outside of international protocols to gain control of foreign 

technologies. China also uses indigenous innovation policy, forced technology transfer and 

government procurement without adherences to World Trade Organization principles to keep 

their market closed and build national industrial champions. 

The digital revolution and the pace of technological change also profoundly impact the way that 

business and production are organized. Digital technologies have made many facets of the glohal 

economy nearly borderless. In an earlier era, the location of natural resources often determined 

where manufacturing would take place. In today's economy, knowledge, know-how, technology, 

creativity and capital are the most important resources for production, and they are highly 

mobile. 

The pace of technological change is transforming not only product life-cycles and time-to-market 

pressure; it is also pushing firms to compete by using technology to improve their manufacturing 

processes and business models. Companies like NanoMech are transforn1ing the face of modern 

manufacturing. Founded in 2002, the company offers breakthrough nano innovations in 

machining and manufacturing, lubrication and energy, packaging for fresh produce, biomedical 

implant coatings and strategic military applications. 

Put together, these trends-emerging manufacturing nations, growing consumer class, neomercantilist policies and revolutions in digital and other technologies--create a hypercompetitive manufacturing environment. Not snrprisingly, firms are growing more sophisticated 

in their ability to react to these changes and, where possible, leverage them to their advantage in 

the marketplace. But they can't do everything. 

Technology and Innovation Capacity 

America's technology and innovation capacity remains among the greatest in the world. In 

crucial fields like biotechnology, bio-mimicry, nanotechnology, materials science and 

computing, U.S. researchers and entrepreneurs define the leading edge. American universities 

and research laboratories are unparalleled, pushing the boundaries of knowledge in life, physical 

and social sciences. Despite the nation's budget woes, Congress has thus far been reluctant to 

impose drastic cuts to scientific research funding that is viewed correctly as an engine of 

economic growth. America remains the world's largest investor in R&D and is among the upper 

ranks in R&D investment as a share ofGDP. 

At the same time, other nations are making rapid progress relative to the United States in 

developing the talent, investment and infrastructure needed to foster innovation. On several 

education perfonnance metrics, the United States trails its global competitors. Furthennore, a 
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number of policies and practices limit American innovation today. Licensing practices, export 

controls and immigration policy, for example, were designed for a different era. Removing those 

impediments could generate greater levels of innovation and commercialization from today's 

assets and investments. 

In addition, the United States, which in the 1980s offered the world's most generous R&D tax 

credit, today trails 23 other nations for R&D incentives. Plus, the uncertainty surrounding 

extension of U.S. R&D tax credits does not instill confidence in firms developing cutting-edge 

technologies and world-class innovation in the United States. Given this uncertainty and the 

fierce global competition for R&D investment dollars, it is no surprise that the U.S. share of 

global R&D has fallen by eight percentage points, from 38 percent to 31 percent since 1999. 

In 1960, the United States accounted for morc than two-thirds of global R&D. Today, two-thirds 

of global R&D is performed somewhere other than the United States. Although a more 

prosperous and innovative world is a welcome trend, the shift has significant implications for 

U.S. manufacturing, economic and security interests. America has long been the global leader in 

creating new, high value-added goods and services. In time, this lead will undoubtedly continue 

to narrow, and graver concerns will emerge around America's ability to develop and produce 

sufficient numbers of the high-margin products that sustain and improve living standards. 

Smart Manufacturing 

The potential for manufacturing process innovation is enonnous. Smart manufacturing is an 

ongoing effort to integrate many key technology trends-such as high perfonnance computing 

(HPC), robotics, optics and sensors, additive manufacturing, cloud computing, nano engineering, 

data mining and user-driven customization-across global production enterprises and supply 

networks. By marrying these and other technological capabilities with human insight, smart 

manufacturing promises to revolutionize the way production is organized and delivered. As 

manufacturing intelligence of this kind grows, it will inspire innovations in processes and 

products that will unleash new, disruptive capabilities-such as a micro-manufacturing 

megatrend that will put the tools of production into the hands of consumers. Imagine the 

possibilities for rapid innovation and value creation with a "micro-factory" in every home. 

Smart manufacturing enables a coordinated and performance-oriented enterprise that responds 

quickly to the customer, minimizes energy and material use, maximizes health and safety and 

generates innovation. Today, smart tools and systems that generate and analyze greater amounts 

of data are being used to plan, design, build, operate and manage industrial facilities and 

networks. 

Smart manufacturing is a growth engine for jobs and a sustainable economy. A $50 billion 

investment in retooling factories would generate up to $120 billion in revenue resulting from 

increased demand for products, according to a study by the Apollo Alliance, a business-labor 

coalition. Manufacturers would achieve higher levels of business perfonnance, turn resources 

iuto assets and discover unique opportunities for competitiveness. 

Though industry is adopting components of smart manufacturing, the infrastructure, capabilities 

and investments needed to deliver the full potential of this knowledge-based environment have 

yet to be developed. Because ofthe tremendous scale of these investments, U.S. private and 
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public sector leaders will need to partner in order to capitalize on this potential advantage. Small 

and medium sized manufacturing fim1s (SMEs) will be especially hard pressed to absorb the 

costs and time required to integrate smart manufacturing tools and techniques. 

Manufacturing R&D 

Competing economies like the European Union, China, South Korea and others are making 

significant advanced manufacturing technology investments to benefit their own companies. The 

European Union has already approved 1.2 billion Euros for a new "Factories of the Future" 

research program as part of their economic recovery plan, putting the E.u. ahead of the U.S. in 

the race to re-industrialize their manufacturing base with smart, safe and sustainable 

manufacturing. 

Conversely, the development and deployment of advanced manufacturing technologies in the 

U.S. is being constrained by a number of stmctural barriers that no single, private firm can solve. 

For example: 

Research Barriers: R&D can be prohibitively expensive, and hard to capture profits, for large 

companies and SMEs alike. Both public and private sector R&D sponsors have experienced 

constraints brought on by economic uncertainty, which have driven renewed interest in 

measurable returns on R&D investments. In the pharmaceutical industry, which has come under 

increased pressure to justify high R&D spending and limited productivity, companies are 

slashing their R&D budgets by $1 billion or more over the next few years. 

Risk Barriers: Research is inherently risky, costly, and time consuming and a typical R&D 

project in the manufacturing sector spans five to 10 years. U.S. manufacturing firms have also 

progressively shifted the composition of their R&D portfolios toward shorter-term, less risky 

objectives. 

Platform Barriers: No single finn could coordinate national projects like the internet or smart 

electrical grid. Interoperability across multiple production platforms, for example, must be 

addressed through various means, including collaborative-based standards setting. 

innovation Barriers: Firms need help translating new discoveries into the production process, 

especially across supply networks; manufacturers are increasingly investing in mission-specific 

R&D that will provide benefit to their company and few others. 

Current underinvestment in advanced manufacturing R&D requires government involvement. 

There are a lack of economic incentives in these areas, as companies would not be maximizing 

profits from R&D investments. The needed technology platforms will be derived from a 

combination of public and private assets. These new policies must tackle head on early-phase 

R&D investment inefficiencies and subsequent supply-chain integration and technology lifecycle management requirements. 

Government Role in Manufacturing R&D 

The government can address the market inefficiencies incumhent in advanced manufacturing 

R&D through two primary mechanisms: 
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I. Improving incentives for company-funded basic and applied R&D 

2. Providing funding and technical expertise for public private partnerships to develop and 

deploy breakthrough technologies and platforms. The NNMI would playa role in this 

broader effort. 

The United States should leverage R&D investments across the federal research enterprise to 

solve challenges in sustainable smart manufacturing systems and to ensure a dynamic discovery 

and innovation pipeline. It is equally important to sustain federal investment in key agencies that 

support basic research, infrastructure and STEM education. Agencies include the National 

Science Foundation, the National Institute of Standards and Technology, the National 

Aeronautics and Space Administration, the Department of Defense, the Department of Energy 

Office of Science and the National Institutes of Health. 

There is growing evidence that cross-sector research collaborations and public-private 

partnerships are more able to accelerate the development and commercialization of breakthrough 

advanced manufacturing tools, processes and applications. These include "materials by design," 

automation and intelligent robotics, modeling and simulation, complexity and data analytics, 

sub-atomic to extreme systems engineering, cyber security and operation logistics and business 

management. 

These partnerships should also be leveraged to create a national network of advanced 

manufacturing clusters and smart factory ecosystems. The U.S. needs blueprints for smarter 

factories and industrial communities; and plans to modernize the aging industrial base with 

information technology-enabled smart manufacturing processes. 

Incentives should be used to establish multi-user advanced manufacturing facilities, capable of 

rapid reconfiguration to support fabrication ofa wide range of products. These facilities would 

provide broad access to cost-effective prototyping, testing and low volume manufacturing for 

small businesses, entrepreneurs and small innovators. 

Cross-sector consortia with industry, academic, national laboratory and federal agency partners 

should be used to identify and solve critical technical challenges in developing advanced 

manufacturing tools, technologies and processes. Such consortia would be well positioned to 

apply agile manufacturing techniques to transition all levels of U.S. industries from one 

technology generation to the next faster and more efficiently than competitors. 

As manufacturing continues to become more data driven, especially given the growing 

accumulation of production feedback from automated systems, the U.S. must sustain federal 

investment in moving the nation's computational capabilities to the exascale level, and incent the 

necessary private investment to ensure that the United States maintains global leadership in HPC. 

Production is becoming more sophisticated and companies will need increased access to 

simplified, cost-effective design and engineering tools, visualization technologies, modeling and 

simulation and collaborative platforms that can be used more widely by U.S. innovators and 

manufacturers through open and virtual campus facilities. The U. S. Department of Commerce 

through the Economic Development Administration, in partnership with the Council on 
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Competitiveness should expand the Midwest Project for SME-OEM Use of Modeling and 

Simulation through the National Digital Engineering and Manufacturing Consortium (NDEMC), 

Technology transfer is often lamented as a significant barrier. Increased efforts are needed to 

accelerate innovation from universities and national laboratories by facilitating greater sharing of 

intellectual property and incentivizing commercialization, Part of the solution includes shifting a 

greater percentage of investments at national laboratories and research universities to end-use 

inspired basic research, Also, the missions of federal R&D agencies should be amended to 

support U.s, industry as stipulated in the National Competitiveness Technology Transfer Act and 

associated legislation, More can be done to facilitate and incentivize access to labs and 

universities to encourage research partnerships and greater commercialization opportunities, 

National Network for Manufacturing Innovation (NNMI) 

The NNMI presents an opportunity to develop and deploy at scale the next generation of 

disruptive manufacturing technologies, processes and integrated supply networks. Given the 

complexity and long-term nature of many of these challenges, it is unlikely that the private sector 

alone can address these critical challenges. The network must provide an effective platform to 

explore and resolve key challenges facing future U.S. advanced manufacturing tools and 

technologies. 

The NNMI should rely on public-private partnerships, collaborative dialogues, research and 

demonstration projects to provide knowledge-based platforms, tools, methodologies, business 

models and policies for lifecycle product development, production and end-life, There must be 

clear investment criteria to determine the NNMI is not funding projects that the private sector 

should be funding on its own. The strategic scope for NNMI exploration should be to: 

I. Facilitate smart manufacturing at scale in the United States, emphasizing more long-term, 

breakthrough research for a diversified portfolio of emerging technologies with broad 

application, 

2, Improve the economic impact and benefits of demand-driven research and development 

of new manufacturing and energy related technologies and processes. 

3, Foster broader and deeper collaborations and knowledge sharing across industrial sectors 

and with government, universities and national laboratories to improve collective R&D 

returns, 

4, Address full life cycle manufacturing including concept modeling, simulation and 

evaluation to reduce commercialization times, ensure greater pre-competitive knowledge, 

improve risk management and lower uncertainty for better-infonned manufacturing 

decisions, investments, policies and strategies, 

5, Leverage existing and create new regional innovation and manufacturing clusters. 

Manufacturing legacy systems and infrastructures in the United States need to be propelled 

forward in a global context, which requires an overhaul of government policies and programs as 

well as business strategies and processes, Policy makers, manufacturing executives and other key 

players need to change the view of manufacturing from a cost-center to a knowledge-based value 

creation center, in order to achieve sustainable, competitive and long-term growth. 
54 

Page 10 of II 

The NNMI provides a vehicle for conducting collaborative research and demonstration projects 

to facilitate this game-changing transition. Learning under this initiative will make a significant 

contribution to the long-term viability of U.S. based manufacturing. 

Success requires the NNMI to represent a broad range of pre-competitive interests and 

perspectives in order to accelerate and leverage the knowledge of the entire manufacturing 

ecosystem. To the extent possible and practical, the NNMI should work with and utilize existing 

facilities and resources. Key areas of focus for the NNMI should be: 

I. Lifecycle Management and Total Cost of Production 

2. Transforming Manufacturing Facilities and Processes 

3. High Performance Manufacturing Tools and Technologies 

4. Sustainable Resource Optimization and Advanced Materials 

Lifecycle Management and Total Cost of Production 

The NNMI must adhere to a shared baseline understanding of product lifecycle management to 

better understand the fully burdened cost of production. These assessments will include 

economic, energy and environmental issues, along with traditional production Iifecycle analysis. 

Policy makers must be able to more fully evaluate environmental and economic impacts against 

each other along the complete product lifecycle in ways that are not currently available. 

Transforming Manufacturing Facilities and Processes 

The NNMI should focus on the transformation of current factories and the creation of new 

factories, looking at capabilities ranging from flexible and modular to affordable and easy-to-use. 

Expanding the productivity and useful life of production assets requires new approaches. 

Emerging information technologies including cloud computing are expected to improve 

efficiencies, product capabilities, product authentication, intellectual property rights protection, 

facilitate new business models and improved effectiveness of global networks. 

High Performance Manufacturing Tools and Technologies 

NNMI investments should create knowledge-based platforms, tools, technologies and processes 

to simulate and improve full-lifecycle product development and manufacturing. Complex 

manufacturing ecosystems will increasingly rely on high-skilled, high-performing workers 

collaborating with advanced tools and technologies. One goal of the NNMI should be to develop 

faster transitions from early stage commercialization to at-scale manufacturing, thereby 

minimizing the effects of multiple valleys of death. Flexible adaptive production tools, systems 

and facilities are needed for rapid deployments optimal resource use and energy effectiveness. 

Sustainable Resource Optimization and Advanced Materials 

NNMI investments should result in new applieations in different technologies, diseiplines and 

materials to improve energy efficiency, reduce resource consumption and ensure profitability. 

"Re-manufacturing" of products and production processes will be a strategic driver. NNMI 

should work towards solutions with significant cost reduction through optimization of resources, 

equipment and facilities in order to maximize overall manufacturing effectiveness. 
55 

Page II of II 

Conclusion 

Government supported long-term goals and investments have been catalysts for innovation and 

advancement in science, technology, and the competitiveness of the United States. From breaking 

the sound barrier, to landing a man on the moon, to nuclear energy, to the advent of the internet age 

- advancements have been achieved through cutting edge research and development, often spurred 

by bold goals set by the U.S. government. Moreover, the federal government has supported these 

goals with assertive science and technology policies, and the requisite long term funding to achieve 

success. 

The U.S. government should once again take a strong leadership role and establish significant 

manufacturing R&D programs, enabled by policy, which could drive meaningfnl advancement and 

innovation. These programs and investments would spur the competitive U.S. spirit, inspiring 

additional investment in innovation and promoting the cultivation of highly skilled scientists, 

engineers and workers, as well as the manufacturing capabilities required to advance U.S. 

competiveness for decades to come. 

About the Council 

Begun in 1986, the Council is a community of U.S. leaders who work together to ensure 

economic growth, national security and a better quality of life for all Americans. Our unique 

membership corporate CEOs, university presidents, labor leaders and national lab directors 

collaborate to establish action agendas and deliver strategic, operational and innovative solutions 

that drive our nation's competitiveness in the global economic arena. 

By maintaining our reputation as an established and forward thinking non-partisan organization, 

the Council has worked successfully with every Administration in its 25-year history. 

Policymakers listen to and adopt our recommendations because they understand that our only 

special interest is America's enduring prosperity. 

Recognizing the many and varied challenges facing American manufacturers, the Council 

formally launched the U.S. Manufacturing Competitiveness Initiative (USMCI) in June 0[20]0 

and in December 20J], the Council released its national manufacturing strategy Make: An 

American Manufacturing Movement. The USMCI is led by Sam Allen, the Chairman & CEO of 

Deere & Company; Michael Splinter, the Chairman, President & CEO of Applied Materials; 

Shirley Ann Jackson, the President ofRPI; William Rite, the General President of the United 

Association of Plumbers and Pipefitters; and Paul Rommert, Director of Sandia National 

Laboratory. 
56 
57 
58 

until now ... 
59 
60 
61 

4 

3 

~"r'""\1,·<;<;n responses) 
62 
63 
64 

programs 
65 

member 
66 
67 

Reviewed other innovation models 

Confirmed need for an 

to mature 

Consensus behind Dr()D()SE~d 

framework 

De,velo[)ed recommendations to 

refine and the model 

20% 
68 
69 

70 years ago this morning, the U.S. 

found itself at war 

Despite the depression, "the 

greatest generation" rose to the 

occasion to simultaneously win 

wars in Europe and the Pacific 

Their sacrifice established 

America as the dominant power for 

over 60 years 

What will be said of our 

generation? 

Questions or Comments? 

Dennis Harwig, PhD 

614,688,5149 

dharwlg@ewi,org 
70 

across 
71 

lTlF WC]cOnK'<. Presidt:nt Obmna's Proposal on Mannfucturing Innovation 

Published on TiIf.! information Technology & Innovation Foundation (b:!ll1lL~~} 

ITIP Welcomes President Obama's Proposal on Manufacturing Innovation 

March 9,2012 

hllp:' w"'w.itiL,,,'om,t"9 

manufacturjng President Obama is annQuncing today, 

111e future Df manufacturing transcends party identification, We hope this is an initiative that can be implememed as soon as possible " 

BQYL\1JlgJ?rlJ~liS!m;t Mld-S!ze(LM9DJ!f?s;:turing W!1h.ThchDQ.I9.9.Y;'" !,.Sl!;1.!Ilirl9.,fD2:m .. ~stP!.;;LG1L.CJb'" Around the~Q!Ql25': 

m 
72 

MATERIALS SUBMITTED BY SUBCOMMITTEE CHAIRMAN BENJAMIN QUAYLE, HOUSE

COMMITTEE ON SCIENCE, SPACE AND TECHNOLOGY
73 

Æ 

US. doesn't need industrial policy - USATODAYcom http://www.usatoday.comlnews/opinion/storyi20 12M05~ 15!manutactur 

:::: of4 

What do you thil1k of this 

commel1tarypiece? 

by reducing the cost of superfluous regula!iol1s, fnvolous 

laWSUits and runaway health care costs 

S!rof1gtyagm~ 

Dan Ikenson 1$ director ofthe C8to Insbtute's Herbert A 

Stiefel Center for Trade Policy Studies 

O.sagree 

Stronglyd,sag,ee 

USATODAY OPINION 

ar9umentra(hertt1anjusl the Ed1tonalBoards 

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