Planning Report 02-5

Economic Impact Assessment

of the International Standard

for the Exchange of Product

Model Data (STEP) in Transportation

Equipment Industries

Prepared by:

RTI International

for

National Institute of

Standards & Technology

Program Office

Strategic Planning and

Economic Analysis Group

December 2002

U.S Department of Commerce

Technology Administration
December 2002 

Economic Impact Assessment 

of the International Standard for 

the Exchange of Product 

Model Data (STEP) in 

Transportation Equipment 

Industries

Final Report

Prepared for 

National Institute of Standards and Technology 

100 Bureau Drive 

Gaithersburg, MD 20899 

Prepared by 

Michael P. Gallaher, Ph.D. 

Alan C. O’Connor, B.A. 

RTI 

Health, Social, and Economics Research 

Research Triangle Park, NC 27709 

and 

Thomas Phelps, Ph.D. 

Altarum 

Ann Arbor, MI 

RTI Project Number 07007.016 
iii 

Contents 

 Executive Summary ES-1 

 1. Introduction 1-1 

1.1 The Role of Standards in the Exchange of Product Data...... 1-2

1.2 The STEP Development Process......................................... 1-5

1.3 NIST’s Role in the STEP Development and Adoption 

Process ............................................................................. 1-7

1.3.1 NIST’s Contributions as Infratechnologies............... 1-8

1.4 Industry Scope ................................................................ 1-10

1.4.1 Industries Included in this Study........................... 1-10

1.4.2 Other Industries Using STEP................................. 1-12

1.5 Report Organization........................................................ 1-12

 2. Technical History of STEP 2-1

2.1 Introduction to Product Data Exchange and 

Interoperability.................................................................. 2-1

2.1.1 Overview of Product Data Exchange...................... 2-2

2.1.2 CAx Interoperability Problems................................ 2-3

2.1.3 Potential Methods for Improving CAx 

Interoperability ...................................................... 2-5

2.2 Technical History of STEP and NIST’s Role ........................ 2-9

2.2.1 NIST’s Role in the STEP Development Process...... 2-10

 3. Current STEP Development and Implementation 3-1

3.1 Current Trends in the Development and 

Implementation of STEP..................................................... 3-1

3.1.1 Most Widely Implemented STEP APs...................... 3-1

3.1.2 Approved STEP APs ............................................... 3-4
iv 

3.1.3 STEP APs Under Development............................... 3-4

3.1.4 Infrastructure Tools to Support STEP 

Development and Adoption................................... 3-5

3.2 Barriers to Development and Adoption of STEP.................. 3-6

3.2.1 Evolving Structure of CAx Markets.......................... 3-7

3.2.2 Shift in STEP’s Support Structure............................. 3-8

3.2.3 Implementation by Software Developers .............. 3-10

3.2.4 Adoption and Use of STEP by End Users .............. 3-13

 4. STEP End Users 4-1 

4.1 The Automotive Industry ................................................... 4-1

4.1.1 The Automotive Design and Development 

Process.................................................................. 4-2

4.1.2 The U.S. Automotive Supply Chain ........................ 4-6

4.2 Aerospace Industry.......................................................... 4-11

4.2.1 Aerospace Design and Development.................... 4-12

4.2.2 The Role of CAx Systems in the Aerospace 

Industry ............................................................... 4-15

4.2.3 The Aerospace Industry Supply Chain .................. 4-16

4.3 Shipbuilding Industry ...................................................... 4-22

4.3.1 The Shipbuilding Design and Development 

Process................................................................ 4-24

4.3.2 CAx Systems in the Shipbuilding Design and 

Development Process .......................................... 4-27

4.3.3 Organization of the Shipbuilding Supply Chain .... 4-28

 5. Analysis Methodology 5-1

5.1 Conceptual Approach for Estimating Economic 

Impacts............................................................................. 5-1

5.1.1 Net Benefits from STEP .......................................... 5-1

5.1.2 NIST’s Contributions.............................................. 5-4

5.2 Technical and Economic Impact Metrics............................ 5-6

5.2.1 Metrics for Measuring the Benefits and Costs of 

STEP...................................................................... 5-7

5.2.2 Metrics for Estimating NIST’s Impacts................... 5-11

5.3 Calculating Measures of Social Return ............................. 5-14
v 

 6. Primary Data Collection 6-1

6.1 End-User Interviews .......................................................... 6-1

6.1.1 Case Study and Survey Topics................................ 6-3

6.1.2 Case Study and Survey Respondents....................... 6-4

6.2 Software Developer Interviews .......................................... 6-4

6.2.1 Software Developer Survey Topics ......................... 6-5

6.2.2 Software Developer Respondents ........................... 6-7

 7. Current Use and Future Directions for STEP 7-1

7.1 STEP’s Current Use............................................................ 7-1

7.1.1 Automotive Industry .............................................. 7-1

7.1.2 Aerospace Industry ................................................ 7-3

7.1.3 Shipbuilding Industry............................................. 7-4

7.1.4 Small-Company Issues ........................................... 7-5

7.2 STEP’s Potential Use.......................................................... 7-5

7.2.1 Automotive Industry .............................................. 7-6

7.2.2 Aerospace Industry ................................................ 7-8

7.2.3 Shipbuilding Industry............................................. 7-9

7.2.4 Small-Company Issues ........................................... 7-9

7.3 Future Product Data Exchange Needs .............................. 7-10

7.3.1 Automotive Industry ............................................ 7-10

7.3.2 Aerospace Industry .............................................. 7-11

7.3.3 Shipbuilding Industry........................................... 7-11

 8. The Potential and Current Economic Impact of 

STEP 8-1

8.1 Industry Employment and Wages....................................... 8-1

8.1.1 Industry Employment ............................................. 8-1

8.1.2 Industry Wage Estimates ........................................ 8-4

8.2 End-User CAx Interoperability Benefits .............................. 8-6

8.2.1 End-User Avoidance Benefits ................................. 8-6

8.2.2 End-User Mitigation Costs.................................... 8-15

8.2.3 End-User Delay Costs .......................................... 8-26

8.3 Social Costs of STEP ........................................................ 8-26

8.3.1 Categories of Social Costs .................................... 8-27

8.3.2 Software Developer Expenditures......................... 8-28
vi 

8.3.3 Transportation Equipment Industry 

Expenditures........................................................ 8-29

8.3.4 Public Sector Expenditures................................... 8-30

8.4 Measures of Economic Return from STEP ......................... 8-31

8.5 Return to NIST Contributions........................................... 8-35

8.5.1 Estimating NIST’s Impact...................................... 8-37

8.6 Summary of Impacts........................................................ 8-38

 References R-1

 Appendixes 

A Telephone Survey..............................................................A-1 

B Software Developer Survey................................................ B-1 
vii 

Figures 

 Figure 1-1 Alternative Data Exchange Scenarios.......................................... 1-4 

 Figure 1-2 Infratechnologies’ Impacts on Economic Activity ........................ 1-9

 Figure 2-1 Multiple CAx Systems Used in the Automobile Supply Chain...... 2-3

 Figure 4-1 The Automobile Design and Development Process..................... 4-4

 Figure 4-2 U.S. Automotive Supply Chain................................................... 4-8

 Figure 4-3 Aerospace Design and Manufacturing Schedule ....................... 4-13

 Figure 4-4 Ship Types............................................................................... 4-24

 Figure 4-5 Ship Design Spiral.................................................................... 4-26

 Figure 5-1 Flow of Costs and Benefits ......................................................... 5-4

 Figure 5-2 Impact of NIST’s Contribution to STEP........................................ 5-5

 Figure 6-1 STEP Estimation Methodology .................................................... 6-2

 Figure 8-1 Growth in Major CAx Software Packages with STEP 

Functionality............................................................................ 8-28

 Figure 8-2 Estimated Accrual of Potential Benefits (1994 though 2010)...... 8-34

 
viii 

Tables 

 Table 1-1 Comparison of Data Exchange Scenarios.................................... 1-5

 Table 3-1 Status of STEP Application Protocols as of November 2002......... 3-2

 Table 4-1 Employment in the Automotive Industry, 2001 ........................... 4-6

 Table 4-2 Major OEMs Operating in the U.S.............................................. 4-9

 Table 4-3 Characteristics of a Sample of Automotive First-Tier 

Suppliers.................................................................................. 4-11

 Table 4-4 Aerospace Product Categories.................................................. 4-12

 Table 4-5 Aerospace Original Equipment Manufacturers (OEMs).............. 4-18

 Table 4-6 Sampling of Aerospace Industry Suppliers................................. 4-20

 Table 4-7 U.S. Shipbuilding Companies................................................... 4-29

 Table 4-8 Sampling of the U.S. Shipbuilding Subcontractors..................... 4-32

 Table 5-1 Impact Metrics for Users ............................................................ 5-9

 Table 5-2 The Components of STEP’s Social Cost ..................................... 5-10

 Table 5-3 Summary of NIST’s Contributions to STEP................................. 5-13

 Table 5-4 NIST’s Impact .......................................................................... 5-14

 Table 6-1 Summary of Survey Respondents................................................ 6-5

 Table 6-2 NIST Impact Categories Included in the Survey Instrument.......... 6-6

 Table 8-1 Industry Employment and Survey Coverage Ratios...................... 8-3

 Table 8-2 Loaded Hourly Wage for Designers and Associated Support 

Staffers....................................................................................... 8-5

 Table 8-3 Summary of Potential Avoidance Benefits, 2001......................... 8-7

 Table 8-4 Potential Redundant CAx Systems Benefits, 2001........................ 8-8
ix 

 Table 8-5 Potential Benefits from Avoided Productivity Loss on 

Redundant CAx Systems, 2001................................................. 8-12

 Table 8-6 Potential Benefits on Redundant CAx Training, 2001 ................ 8-13

 Table 8-7 Sample Change in IT Staffing Associated with Redundant 

Systems, 2001.......................................................................... 8-14

 Table 8-8 Potential Redundant CAx IT Support Staff Benefits, 2001 .......... 8-16

 Table 8-9 Summary of Potential Mitigation Benefits, 2001........................ 8-18

 Table 8-10 Estimated Annual Number of Manual Reentry Jobs, 2001 ......... 8-19

 Table 8-11 Potential Labor Savings from Less Manual Reentry, 2001.......... 8-20

 Table 8-12 Estimated Volume of Neutral Format File Transfers, 2001 ......... 8-23

 Table 8-13 Potential Benefits from Employing STEP for Neutral-Format 

File Transfer, 2001................................................................... 8-25

 Table 8-14 Time Series of Software Developers Expenditures (1987 

through 2001).......................................................................... 8-30

 Table 8-15 Time Series of Industry Expenditures (1987 through 2001) ........ 8-31

 Table 8-16 Time Series of Public Sector Expenditures (1987 through 

2001)....................................................................................... 8-32

 Table 8-17 Time Series of STEP Benefits and Social Costs, Assuming 75 

Percent STEP Penetration Rate in 2010 ..................................... 8-35

 Table 8-18 Software Developers’ Impressions ............................................ 8-37

 Table 8-19 Time Series of NIST Expenditures and Acceleration Benefits...... 8-39

 Table 8-20 Potential Annual Benefits of STEP for CAx Applications 

(millions 2001$)....................................................................... 8-40

 Table 8-21 Measures of Economic Return .................................................. 8-40
x 

List of Acronyms 

AIAG Automotive Industry Action Group 

ANSI American National Standards Institute 

AP Application Protocol 

ARM Application Reference Model 

ASA American Shipbuilding Association 

BLS Bureau of Labor Statistics 

CAD Computer-aided design 

CAE Computer-aided engineering 

CAM Computer-aided manufacturing 

CAx A collective term that refers to CAD, CAM, CAE, and PDM 

CV Computervision 

DoD U.S. Departments of Defense 

ERIM Environmental Research Institute of Michigan 

EXPRESS An object-flavored information modeling language that has been 

standardized as an ISO language 

GPDM Generic Product Data Model 

IGES Initial Graphics Exchange Specification 

IPIM Integrated Product Information Model 

ISE Integrated Shipbuilding Environment 

ISO International Organization for Standards 

IT Information technology 

MEL Mechanical Engineering Lab 

MFG Manufacturing Feasibility Group 
xi 

NASA National Aeronautics and Space Administration 

NIST National Institute of Standards and Technology 

NPV Net present value 

NVH Noise-vibration-harshness 

OEM Original equipment manufacturer 

OMB Office of Management and Budget 

PDES Product Data Exchange Specification 

PDM Product data management 

RTI Research Triangle Institute 

STEP Standard for Exchange of Product model data 

TDP Technical data package 

U.S. Pro U.S. Product Data Association 

UG Unigraphics 

ES-1 

 

 Executive Summary 

The Standard for Exchange of Product model data (STEP) is an 

international standard designed to address interoperability problems 

encountered in the exchange of digital product information. STEP is 

a suite of standards enabling manufacturing companies to exchange 

digital representations of engineering and manufacturing data. The 

first 12 parts of STEP were formally approved as international 

standards in January 1995. Since then, an additional 18 parts have 

become international standards. Over 20 more are nearing 

international standard status, with many more in earlier 

development stages. 

The National Institute of Standards and Technology (NIST) has made 

significant contributions to STEP, beginning in the mid 1980s and 

continuing today. NIST has contributed to the development of the 

STEP standard, the integration of STEP functionality into 

applications, and the adoption of STEP functionality by end users. 

NIST also participated in several public-private partnerships 

involving demonstrations and development projects with software 

developers, industry, and other federal agencies. Many of these 

initiatives were designed to demonstrate STEP’s economic 

advantages relative to defender technologies and promote its 

deployment. 

The objective of this study is to conduct an economic impact 

assessment of STEP’s use by transportation equipment industries, 

namely the automotive, aerospace, shipbuilding, and specialty tool 

and die industries. Both the full potential and current realized 

benefits are quantified. In addition, the study investigates the 

impact of NIST’s administrative and technical contributions to STEP. 

STEP has the potential to 

save $928 million (2001$) 

per year by reducing 

interoperability problems in 

the automotive, aerospace, 

and shipbuilding industries 

alone. Many other 

industries could achieve 

similar savings. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

ES-2 

We estimate the economic value of the efficiency gains due to 

improved data exchange enabled by using STEP, and we quantify 

NIST’s contributions to those gains. 

Data collected from industry surveys and case studies are used to 

estimate the potential benefits of existing STEP capabilities. We 

estimate that STEP has the potential of save $928 million (2001$) 

per year by reducing interoperability problems in the automotive, 

aerospace, and shipbuilding industries. Currently approximately 17 

percent ($156 million) of the potential benefits of STEP quantified 

within the scope of this study are being realized. 

Table ES-1 presents the present value of benefit and costs, along 

with the ratio of benefits to costs and the social rate of return for 

domestic STEP activities. Benefits and costs were projected through 

2010 assuming a 75 percent penetration rate for STEP in 2010. 

STEP development costs include expenditures by government 

agencies, software vendors, and industry users, and were estimated 

to be approximately $17 million per year in the late 1990s. 

Table ES-1. Measures of Economic Return 

Economic Returns 

to STEP 

Returns to NIST 

Expenditures 

Present Value of Benefits (millions 2001$) b 1,186 206 

Present Value of Costs (millions 2001$)a,b (104) (26) 

Net Present Value (millions 2001$)b 1,082 180 

Benefit-to-Cost Ratio 11.4 7.9 

Social Rate of Return (percent)b 36.1 31.6 

aCosts are presented as negative numbers. 

bOMB-recommended social discount rate of 7 percent is used. 

Table ES-1 also estimates returns to NIST’s approximate $41.7 

million (present value $26 million 2001$) investment to support 

STEP development and software implementation. Industry indicated 

that NIST’s activities accelerated the development and adoption of 

STEP by about 1 year, yielding and an economic impact of $180 

million (NPV 2001$). 

Currently, 

approximately 17 

percent of the 

potential benefits of 

STEP quantified 

within the scope of 

this study are being 

realized. 
Executive Summary 

ES-3 

 ES.1 BENEFITS FROM STEP 

Benefits accrue to end users through increased interoperability of 

computer-aided design, engineering, and manufacturing and 

product data management systems (collectively referred to as CAx in 

this study) used in the product design supply chain. These benefits 

can be generally categorized as 

Z decreased avoidance costs, 

Z decreased mitigation costs, and 

Z decreased delay costs (RTI, 1999). 

The primary economic benefits are realized by end users of these 

systems in the automotive, aerospace, and shipbuilding industries. 

However, for these benefits to be realized by end users, resources 

must be invested to make STEP functionality available. These 

resource investments include 

Z government sector involvement in the standards 

development process and demonstration of STEP; 

Z software developers’ costs associated with the standards 

development and demonstration (referred to as R&D); and 

expenditures to integrate STEP functionality into commercial 

products; and 

Z end users’ costs associated with the standards development, 

demonstration, and implementation of STEP. 

Benefits and costs actually occur as flows over time. Figure ES-1 

illustrates the net benefits (benefits less costs) over time. The curve 

in Figure ES-1 represents the total change in economic welfare for 

all entities over the life-cycle a particular STEP functionality or 

application protocol. The costs of standards development, 

infrastructure tools, and software development are shown occurring 

early in the life-cycle of STEP functionality. Once commercial 

products are available with STEP functionality, aggregate 

manufacturers’ benefits increase as adoption occurs until the CAx 

markets are saturated.1 “Steady state” benefits (Z) continue to 

accrue until the STEP functionality incorporated with the software 

becomes obsolete. 

 

1In our context, net benefits to manufacturers include decreased interoperability 

expenditures less employee training costs. The cost of software purchases are 

not included because they have been netted out of the economic welfare by 

increased revenue for software developers. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

ES-4 

Figure ES-1. Flow of Costs and Benefits 

Time

Standards

Development

Z

Software

Development

Steady State

Benefits

Net Benefits

(Net Cash

Flow)

Benefits

Costs

Adoption by

Users

Users of CAx software in the supply chains incur several types of 

costs related to imperfect interoperability. Reducing these costs are 

the benefits of STEP. We focus on three types of interoperability 

costs. Manufacturers incur avoidance costs to prevent technical 

interoperability problems before they occur, mitigating costs to 

address interoperability problems after they have occurred, and 

delay costs that arise from interoperability problems that delay the 

introduction of a new product. 

Avoidance costs are primarily associated with maintaining 

redundant systems and include 

Z the cost of purchasing redundant CAx systems for the 

purpose of same format data exchange, 

Z training cost for maintain designers skills in redundant CAx 

systems, 

Z productivity loss due to designers working on systems they 

are less familiar with, 

Z IT staff to support redundant CAx systems, and 
Executive Summary 

ES-5 

Z outsourcing costs incurred when outside companies are 

hired to provide data exchange services. 

Mitigating costs include 

Z the cost of reworking models are part of the transfer process, 

and 

Z the cost of manually reentering data when methods of data 

exchange are unavailable or unsatisfactory. 

Delay costs include 

Z profits lost due to decline in market share caused by delays, 

and 

Z profits lost due to delay of revenues (discounts on the value 

of future profits). 

Interoperability problems in manufacturing industries affect society’s 

economic welfare in two ways: by increasing the cost of designing 

and producing final products and by delaying the introduction of 

new improved final products. An increase in the cost of designing 

and producing a new automobile or aircraft may lead to an increase 

in the equilibrium price of their respective markets. However, for 

the purpose of this study we measure all benefits of STEP at the 

manufacturers’ level of the supply chain in terms of decreased 

production costs and accelerated new product entry. We do not 

attempt to partition these impacts into producer and consumer 

surplus. 

 ES.2 SOCIAL COSTS OF STEP 

Participants throughout the supply chain contributed to the 

development, demonstration, and implementation of STEP. The 

social costs are mostly the staff time contributed to standards 

development, software development, and adoption by end users. 

These costs include labor hours, overhead, and dues and fees paid 

into industry standards bodies. From 1987 to 2001, society has 

incurred $198.4 million (2001$) in expenditures in STEP 

development. 

Public Sector Expenditures are segmented into NIST expenditures 

and non-NIST public expenditures, including defense-related 

funding. Using information supplied by NIST, we explicitly quantify 

all NIST expenditures on STEP-related activities. These include 

contributions to the standards development process, software tools, 

and testing services ($62.6 million). 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

ES-6 

Software developers’ expenditures related to STEP include 

expenditures on the three standards and tools development 

categories, plus expenditures for implementing STEP functionality 

into their CAx products. During the telephone interviews with 

software developers, we asked them to estimate the resources they 

invested in the standards development process, as well as their 

expenditures for integrating STEP into their products ($54.3 million). 

Users of CAx software have also been integrally involved in the 

STEP development process. For example, many manufacturers have 

participated in standards development and demonstration pilot 

programs ($81.5 million). 

 ES.3 ECONOMIC IMPACT ESTIMATES 

Table ES-2 presents an overview of the empirical findings. STEP has 

the potential to reduce interoperability costs in the three industries 

studied by approximately $928 million (2001$) annually. The 

automotive industry represents the largest share of potential benefits 

(51 percent), followed by aerospace (27 percent), and shipbuilding 

(16 percent). 

Table ES-2. Potential Annual Benefits of STEP (millions 2001$) 

 Potential Benefits of STEP Current Benefits 

Industry Avoidance Mitigation Total Total 

Automotive $253.1 $217.1 $470.2 $86.6 

Aerospace $108.4 $144.6 $253.0 $35.2 

Shipbuilding $76.4 $70.7 $147.1 $25.7 

Specialty Tool & Die $13.5 $44.4 $57.9 $9.1 

Total $451.4 $476.8 $928.2 $156.6 

Avoidance cost savings accounted for approximately half of the 

potential benefits of STEP. Eighty percent of avoidance costs were 

labor costs associated with the use and support of redundant CAx 

systems. Mitigation costs resulting from file transfer and data reentry 

accounted for the balance of benefits. No company interviewed 

indicated that they experienced delay costs associated with 

interoperability problems. 
Executive Summary 

ES-7 

The current benefits resulting from STEP use in 2001 are estimated 

to be approximately $156 million. Realized benefits represent 

approximately 17 percent of STEP’s estimated potential, with most 

current benefits again realized by the automotive industry. 

Although this analysis estimates that the potential annual benefit, 

based on 2001 data, of STEP is $928 million for these industries, it 

is unlikely that STEP will experience full adoption within a short 

time frame. 

To calculate measures of return, which are presented in Section 8, 

the STEP penetration rate is assumed to be 75 percent in 2010. This 

yields a projected annual benefit of STEP of about 697 million 

(2001$) in 2010. STEP penetration therefore moves from 0 percent 

in 1994 to 17 percent in 2001 to 75 percent in 2010. Forecasting 

STEP’s rate of diffusion is difficult because it is in the early stages of 

adoption. Its diffusion is a function of the number of current 

adopters, the number of potential adopters, and the rate at which 

information and knowledge pass from one agent to another. 

Anecdotal evidence collected during the surveys and case studies 

indicates that a 75 percent penetration rate is a reasonable 

expectation for 2010. 

STEP has the potential to 

reduce CAx interoperability 

costs in the three industries 

studied by approximately 

$928 million (2001$) 

annually. STEP 

development costs, were 

estimated to be 

approximately $17 million 

per year during the mid to 

late 1990s. 

1-1 

 1 Introduction 

Interoperability problems in the exchange of electronic product data 

represent a significant impediment to data exchange, as well as a 

source of economic inefficiency. For example, RTI (1999) estimated 

that interoperability problems in the product development stage 

alone cost the U.S. automotive industry approximately $1 billion 

annually. These costs are primarily due to supporting multiple 

computer-aided design (CAD)/computer-aided manufacturing 

(CAM) systems and correcting errors in product data exchange. The 

Environmental Research Institute of Michigan (ERIM, now called 

Altarum) (1997) found that by reducing the number of redundant 

CAD/CAM systems, design costs could be reduced by 

approximately $500,000 per year in each of the automotive 

companies studied. This reduction represented annual savings of 

approximately $52,000 per employee in the companies’ design and 

engineering departments. (Together, CAD, CAM, computer-aided 

engineering [CAE], and Product Data Management [PDM] systems 

are referred to as “CAx.”) 

The Standard for Exchange of Product model data (STEP) is an 

international standard designed to address interoperability problems 

encountered in the exchange of digital information. STEP is a suite 

of standards enabling manufacturing companies to exchange digital 

representations of engineering and manufacturing data. Such 

representations are known as product models, and the digital 

information they are composed of is known as product model data. 

Each CAx system—and there are many—has its own format for 

storing and writing data, making it nearly impossible for 

organizations using different systems to communicate product 

model data without translation. STEP is a robust neutral file format 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

1-2 

that has been developed by a global consortium of standards 

bodies, governments, and private firms. The first 12 parts of STEP 

were formally approved as international standards in January 1995. 

Since then, approximately 18 additional parts have become 

international standards. Over 20 additional parts are nearing 

international standard status, with many more in earlier 

development stages. Each part of STEP corresponds to a specific 

capability, such as sheet metal design or ship molded forms. 

The National Institute of Standards and Technology (NIST) has made 

significant contributions to STEP beginning in 1984 and continuing 

today. NIST has contributed to the development of the STEP 

standard, the integration of STEP functionality into applications, and 

the adoption of STEP functionality by end users. 

The objective of this study is to conduct an economic impact 

assessment of STEP in the automotive, aerospace, and shipbuilding 

industries. In addition, we also estimate the economic impact STEP 

has on the specialty tool and die industry that supplies them. Both 

the full potential and current realized benefits are quantified. In 

addition, the study investigates the impact of NIST’s administrative 

and technical contributions to STEP. We estimate the economic 

value of the efficiency gains due to data exchange enabled by using 

STEP, and we quantify NIST’s contributions to those gains. This 

analysis scope is limited to STEP’s potential for the automotive, 

aerospace, and shipbuilding industries because the majority of 

currently existing STEP APs were developed in response to needs in 

these industries. However, STEP has the potential to reduce 

interoperability costs in a wide range of industries. 

This introduction provides background on the general role of 

standards in the exchange of electronic product data and describes 

how STEP fits into this typology. We then describe NIST’s 

contributions to STEP in terms of infratechnologies in the economy. 

We conclude the section by providing an overview of the industry 

scope included in the analysis and organization of the report. 

 1.1 THE ROLE OF STANDARDS IN THE 

EXCHANGE OF PRODUCT DATA 

Standards in the information economy have become increasingly 

important as more complex information is electronically transferred 
Section 1 — Introduction 

1-3 

between users. The desire by organizations to increase the 

interoperability, scalability, and extensibility of their operations has 

highlighted the need to develop standards that will support the 

quality and flexibility of interorganization and intraorganization 

transactions. 

Standards frequently enable features or functionalities of individual 

products that they support. For example, STEP is a standard that 

supports the information exchange of three-dimensional solids and 

a variety of other technical information in CAx software. In this 

way, standards can be considered separately from the products they 

support. In addition, it is often useful to refer to a group of 

standards as a single technology or feature, even though a specific 

functionality is commonly represented as a suite of interrelated 

standards. 

In the discrete parts manufacturing industry, organizations need 

standards mainly because suppliers and demanders continually 

exchange electronic product data as part of the design and 

manufacturing processes. To facilitate the exchange of information, 

a common format is extremely efficient. Common formats increase 

the efficiency and flexibility of data exchange and data management 

activities. 

Standards are often defined with respect to their origin. They can 

emerge from any one of three standard setting groups within society: 

Z Competition standards emerge naturally from a market when 

leading suppliers or demanders are able to dictate the 

protocols used in electronic data transfer. 

Z Committee standards emerge from national or international 

organizations (e.g., trade associations, consortia, or the ISO), 

which provide the dimensions for the product. Committee 

standards emerge from discussions within the group setting 

the standard. 

Z Government standards are set by decree. However, they 

typically, if not always, incorporate advice and information 

from interested parties including industry groups. 

Standards for electronic data used to manage and control the flow 

of information generated in computer-aided manufacturing can be 

grouped into three categories. Figure 1-1 presents these data 

exchange scenarios. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

1-4 

Figure 1-1. Alternative Data Exchange Scenarios 

Format A Format A Format A

Format A Format A

Format B Format B

Format A Format B Format C

1.

2.

3.

Lower Tier

Supplier

Company X

First Tier

Supplier

Company Y

OEM

Company Z

STEP STEP

A : B Translator

Panel 1 shows the use of single-system standards. Single-system 

standards are situations where every participant within a market 

speaks the same language. Every supplier and demander uses the 

same data format to transfer information from one user to another. 

This approach maximizes interoperability and minimizes financial 

outlays by each organization because only one software package is 

needed. However, it prevents customization of software or other 

technology to maximize its usefulness to each individual participant 

in the market. When users in a supply chain are exchanging 

product model data that has been created using the same software 

package it is said that they are accomplishing native format file 

transfers. 

Panel 2 shows the use of custom translators. In this setting, each 

individual pair of suppliers and demanders purchases the 

technology that is best for their transactions. Translators directly 

convert files from one format to the other so that the users can 

access each other’s data. Interoperability is significantly lacking 

from this approach. Although multiple organizations within the 
Section 1 — Introduction 

1-5 

same industry may use the same software, there is no reason to 

expect that all will. In addition, each organization may customize 

their software based on their particular production function. If a 

supplier wants to interact with more than one customer, it must buy 

and install a completely different CAx package. 

The third approach to transferring data, Panel 3, is the use of neutral 

format exchange. This is the basis of STEP. Each organization can 

pick the software that most efficiently manages and controls the 

intraorganization or intradivision flow of information. When the 

organization conducts an interorganization or interdivision 

exchange, it first translates the data into a neutral format that is 

accessible to all software applications. This approach maximizes 

interoperability across and within organizations. However, the 

software development costs increase because a translating package 

is added to or incorporated into the software. Table 1-1 

summarizes the tradeoff between the three schemes in terms of 

interoperability, capital investment, and flexibility. 

Table 1-1. Comparison of Data Exchange Scenarios 

Interoperability Financial Outlays Flexibility 

Single System High Low Low 

Custom Translators High High Low 

Neutral Format Exchange Medium Low High 

 1.2 THE STEP DEVELOPMENT PROCESS 

Development of the suite of STEP standards began in 1983. STEP 

was developed as the next generation standard to replace the Initial 

Graphics Exchange Specification (IGES), which was the dominant 

neutral format translator of the time. A major shortcoming of IGES 

was that it was conceived as a mechanism for conveying twodimensional engineering information and therefore was limited in 

its ability to transmit data for three-dimensional solids. In addition, 

because of ambiguities in IGES definitions, many software vendors 

introduced different embodiments of IGES, creating interoperability 

problems. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

1-6 

The purpose of STEP is to allow for clear exchange of software 

engineering data among the wide variety of software systems in 

existence and to broaden the scope of the types of engineering data 

that can be translated. STEP offers the following advantages: 

Z neutral data exchange between dissimilar systems, both inhouse and with suppliers and customers; 

Z long-term archiving (due to STEP’s system-independent 

architecture); 

Z flexible migration policies; 

Z paperless product definition; 

Z enterprise integration via neutral product database; 

Z life-cycle maintenance support; 

Z concurrent or collaborative engineering; and 

Z worldwide networking communication of product data in 

open systems (Industry Canada, 2000). 

STEP is a suite of standards enabling manufacturing companies to 

exchange digital representations of engineering and manufacturing 

data. The International Organization for Standardization (ISO) has 

approved as international standards a number of STEP Application 

Protocols (APs). APs are the formal definition of the capabilities to 

be implemented by software developers in their systems for data 

exchange purposes. Each AP defines the specific content and how 

that content should be structured to fit the underlying STEP 

structure. Because they define exchangeable content, APs are the 

primary parts of STEP that both the software developer and the end 

user care about. The following is a sample of APs relevant to 

transportation equipment manufacturing that have been approved 

as international standards and are fully available for use by software 

system implementers. This list is not exhaustive; a comprehensive 

list of STEP APs can be found in Table 3-1. (Note: the last three 

digits of the ISO number are the AP numbers): 

Z ISO 10303-201: Explicit draughting1

Z ISO 10303-202: Associative draughting 

Z ISO 10303-203: Configuration controlled design 

Z ISO 10303-207: Sheet metal die planning and design 

 

1ISO standards use the traditional English spelling for all terms rather than the U.S. 

English spelling (e.g., draughting rather than drafting). 
Section 1 — Introduction 

1-7 

Z ISO 10303-210: Electronic assembly, interconnection, and 

packaging design 

Z ISO 10303-212: Electrotechnical design and installation 

Z ISO 10303-224: Mechanical parts definition for production 

planning using machining features 

Z ISO 10303-225: Building elements using explicit shape 

representation 

To benefit from STEP functionality, users of CAx systems must have 

software capable of translating files in their proprietary formats into 

the neutral format created by STEP and out of that format into their 

unique system formats. Leading manufacturers of CAx systems are 

adapting their products to work with STEP. A wide variety of STEP 

software tools and translators are now available for commercial use. 

STEP has application in a broad range of industries, including, 

shipbuilding, electronics, process plants, construction, and software. 

However, the aerospace and automobile industries have been 

affected most significantly due to Application Protocol 203 (AP203) 

of the STEP standard. This standard allows for the translation of 

three-dimensional design data for mechanical parts and assemblies. 

In addition, the U.S. government plays a major role by using STEP 

within Department of Defense weaponry and NASA engineering. 

 1.3 NIST’S ROLE IN THE STEP DEVELOPMENT 

AND ADOPTION PROCESS 

NIST has been involved in the development of STEP since 1984. 

NIST’s contributions fall into four general categories: 

Z administrative support of TC184/SC4, 

Z technical contributions to the development and testing of 

STEP standards, 

Z development of STEP-specific software tools, and 

Z implementation of a STEP testing service. 

NIST’s Manufacturing Systems Integration Division served as the 

home of the secretariat for ISO SC4 until 1999. NIST’s 

administrative role was primarily to set up standard meetings, 

distribute standard documents for review, administer official ballots, 

and facilitate industry and government interactions. NIST also 

maintained the SC4 On-Line Information Service (SOLIS), an 

electronic library of all SC4 working documents and standards. 

NIST’s technical 

contributions 

focused on 

development of 

experimental STEP 

applications used in 

establishing initial 

STEP standards. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

1-8 

In addition to NIST’s coordination role, its technical staff also served 

as regular members of STEP technical working groups. NIST’s 

technical contributions focused on developing STEP applications 

used in establishing initial STEP standards. NIST staff also served on 

PDES, Inc., where they worked full time on developing STEP 

standards. 

Software supporting STEP was not widely available until the mid1990s. NIST helped develop the EXPRESS language to meet the 

specifications of processing formal information models. NIST was 

one of the first organizations to undertake the development of 

software that could process EXPRESS-based information models. 

More significantly, the code NIST furnished was placed in the 

public domain, thus allowing companies to modify the code to their 

specific needs. NIST added several modules to its original EXPRESS 

tools to deliver a suite of tools that many companies adopted for 

various purposes. Other software contributions included EXPRESS 

tools and the STEP Data Probe. 

NIST staff members also made significant contributions to testing 

services to support STEP implementations. These efforts include 

developing methods to validate that the standards cover the desired 

range of engineering data requirements, developing the test suites 

associated with STEP parts, analyzing the characteristics of pilot 

implementations, and facilitating STEP certification services. More 

information on NIST’s involvement in STEP is presented in Section 2 

of this report. 

 1.3.1 NIST’s Contributions as Infratechnologies 

NIST’s contributions to the standards development process and 

tools, such as its contributions to STEP, can be viewed in a broader 

perspective: the contribution to the development and promulgation 

of infratechnologies. Infratechnologies are technical tools, 

including scientific and engineering data, measurement and test 

methods, and practices and techniques that are widely used in 

industry (Tassey, 1997). STEP and supporting software and testing 

tools can be called infratechnologies because they represent a 

technique that has broad application in a number of industries. 

Figure 1-2 illustrates STEP functionalities as an infratechnology and 

demonstrates the important role that infratechnologies play in 

several stages of the economy: 
Section 1 — Introduction 

1-9 

Figure 1-2. Infratechnologies’ Impacts on Economic Activity 

Infratechnologies can improve the efficiency of each stage of production. 

Technical Standards

Contributions Software Tools Testing Tools

R&D Production Marketing

Infratechnologies

Source: Adapted from Tassey (1997), p. 158. 

Z Infratechnologies improve the efficiency of R&D. The use 

of STEP functionalities can reduce interoperability costs of 

discrete parts manufacturers and reduce product design 

time, thus accelerating the time to market. 

Z Infratechnologies support the production process and can 

enhance product characteristics. The use of STEP 

functionalities in the design process can generate higher 

quality products and lower production costs by decreasing 

design errors and using concurrent engineering more 

efficiently. 

Z Infratechnologies promote technology adoption and reduce 

marketing costs. The recognition of STEP as an international 

standard and the development of testing tools accelerate the 

use of STEP functionalities throughout the industry supply 

chain. 

To varying degrees, infratechnologies have the characteristics of a 

public good. Such goods, unlike private goods, are characterized 

by consumption nonrivalry and by high costs of exclusion. 

Rationing such goods is undesirable because the consumption of a 

public good does not impose costs on society; it does not reduce 

the amount of the good available to others. Further, the costs of 

excluding those who do not pay for the infratechnologies are likely 

to be high because they are typically embodied in products and 

processes (techniques), rather than in products that can be sold. As 

a result of these characteristics, public goods are typically 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

1-10 

underprovided by private markets as compared to their socially 

optimal levels of provision (Stiglitz, 1988). The private sector might 

also underinvest in infratechnologies because their technology base 

is different from the core technology that industry draws on to 

develop its product or processes (Tassey, 1997). 

NIST responds to market failures in the provision of 

infratechnologies by investing public funds in infratechnologies 

when private funding is inadequate to meet important strategic 

technical goals. The NIST Manufacturing Engineering Laboratory’s 

(MEL’s) development of publicly available software tools to support 

the implementation of STEP functionality is an example of a group 

of technologies/tools that private-sector software developers were 

underproviding. Testing tools to objectively demonstrate the correct 

implementation of the STEP standard is also a good example of 

infratechnologies. In many instances, software developers have 

disincentives to provide these tools. 

 1.4 INDUSTRY SCOPE 

Product data exchange is common in almost all discrete parts 

manufacturing industries. But as the complexity of the design 

stages, production processes, and final products increase within 

integrated supply chains, the potential for interoperability problems 

increases as well. The three largest transportation equipment 

industries—automotive, aerospace, and shipbuilding—are among 

those most significantly affected by interoperability problems of 

product data exchange. Consequently, these mature industries have 

been particularly active in the development of STEP APs that 

address particular data exchange issues. 

 1.4.1 Industries Included in this Study 

Our scope is limited to the automotive, aerospace, and shipbuilding 

industries because these industries have the most widespread use of 

STEP technologies and consequently may reap the greatest benefits. 

We also estimate the impact for specialty tool and die firms that 

supply these three industries. 

Automotive Industry. The design and production of an automobile 

require interaction and coordination among many functions and 

industry participants; STEP facilitates these activities by providing a 

neutral format through which information is shared. An automobile 
Section 1 — Introduction 

1-11 

consists of a large number of components, parts, and accessories 

(cars and light trucks typically have roughly 8,000 to 12,000 

individual parts) that must function together as an integrated unit. 

Consequently, the design and development process is also complex, 

requiring a number of iterations among the design steps for different 

vehicle components. To further complicate the process, many 

companies that are part of a complex supply chain typically design 

and manufacture these components. These companies must 

coordinate their activities to ensure that the components they design 

and manufacture are compatible with other components. The 

diversity of companies in the supply chain is matched by the 

diversity of CAx systems in use, the STEP neutral format standard 

helps alleviate interoperability issues that may arise between users 

of different systems. 

Aerospace Industry. Similar to the automotive industry, the 

aerospace industry is under pressure from clients to produce more 

reliable and higher quality products at lower cost. Recently, 

European consortia have gained market share, becoming a sizable 

force in commercial and scientific aerospace markets that were 

traditionally American-dominated. Aerospace firms rely on CAx 

technologies to reduce design and development costs, which in turn 

makes the industry’s output more price-competitive. As in other 

transportation equipment industries, suppliers, original equipment 

manufacturers (OEMs), and tooling suppliers frequently exchange 

complicated dimensional and structural data that may have been 

produced via competing CAx technologies. Consequently, the 

aerospace industry has been very active in developing and 

implementing STEP.2 

Shipbuilding Industry. The final industry included in our analysis is 

the shipbuilding industry. The U.S. shipbuilding industry has 

leveraged new federal programs and advanced technologies to 

rebuild its commercial competitiveness in an era of fewer U.S. Navy 

contracts for warships. One way for the industry to remain 

competitive is to increase the range of ship types produced and to 

reduce the person-hours needed to produce these ships (Hays and 

McNatt, 1994). CAx systems have cut lead times for design and 

development, as well as the amount of time and number of 

 

2Note that the aerospace industry has become dominated by one CAD system—

CATIA, which is not exclusive, but dominant. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

1-12 

iterations needed to arrive at a working solution for the design of a 

new ship. But as in the automotive and aerospace industries, 

shipbuilding requires neutral format standards to reduce the 

occurrence of bottlenecks attributable to interoperability 

complications. 

 1.4.2 Other Industries Using STEP 

Although this analysis quantitatively examines the benefits of STEP 

for the three largest transportation industries, this industry list itself is 

by no means comprehensive. Any industry where parts and 

processes are designed using multiple CAx systems is a potential 

beneficiary of STEP technologies. STEP application protocols either 

exist and/or are being developed for the electronics industry and for 

plant engineering and design. The functionality STEP offers these 

industries is essentially the same as in the transportation industries: 

The ability to collaborate on a design in an extended enterprise with 

multiple technical disciplines. In the case of the electronics 

industry, product designs include those for semiconductors, 

subassemblies, packaging, and structures. For plant engineering, 

STEP can be used to help design physical layout for refineries, 

manufacturing plants, utilities, and other heavy industrial and 

commercial manufacturing facilities. 

 1.5 REPORT ORGANIZATION 

Section 2 provides a technical discussion of STEP’s capabilities and 

a history of its development. Current applications and barriers to 

the implementation and adoption of STEP are presented in 

Section 3. Industry profiles for the automotive, aerospace, and 

shipbuilding industries are provided in Section 5. The analysis 

methodology and data collection plan are presented in Section 6 

and Section 7, respectively. Impact estimates and measures of 

economic return are presented in Section 8. 
2-1 

 Technical History 2 of STEP 

CAx interoperability and electronic data exchange complications 

are felt throughout industries’ supply chains. This section describes 

existing interoperability and data exchange issues and presents 

several of the corrective actions that have been undertaken at the 

firm and industry level. This information provides the background 

for modeling the economic impact of STEP and for evaluating 

NIST’s contributions to the development and adoption of this 

emerging neutral format.1

 2.1 INTRODUCTION TO PRODUCT DATA 

EXCHANGE AND INTEROPERABILITY 

Prior to the 1800s, product description was typically achieved via 

tangible physical models. The invention of engineering drawings in 

the 1800s generated the need for sharing product information 

within and between companies. Mechanical drawings greatly 

increased the precision of product descriptions, enabled 

specialization, and eventually led to outsourcing and modern 

manufacturing assembly processes. 

The development of CAD tools further increased the precision of 

product description data and enabled manufacturing instructions to 

be derived directly from CAD drawings. CAD drawings also 

presented advantages over paper drawings in terms of the ease with 

which they could be revised and archived. However, along with 

the sizable productivity benefits CAD systems offered came 

 

1A portion of this section was previously included in Interoperability Cost Analysis 

of the U.S. Automotive Supply Chain, prepared for NIST in 1999 by RTI’s Sheila 

Martin and Smita Brunnermeier. 

Suppliers within a supply 

chain are typically 

categorized in a tier 

system. First-tier suppliers 

supply OEMs directly, 

second-tier suppliers 

supply the first tier, and so 

on. Second- and lower-tier 

suppliers are often referred 

to as “subtier suppliers.” 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

2-2 

interoperability problems that led to system inefficiencies and 

limited the potential supply chain savings. This section presents an 

overview of product data exchange and discusses the concept of 

interoperability and potential solutions. 

 2.1.1 Overview of Product Data Exchange 

Data from CAx systems are routinely exchanged within and among 

original equipment manufacturers (OEMs), first-tier suppliers, subtier 

suppliers, and tooling suppliers. One automotive OEM estimates that 

as many as 453,000 product data exchanges (PDEs) occur each year 

within the company and among the company and its suppliers. A 

second automotive OEM estimates that electronic exchange of CAx 

data alone occurs at least 7,000 times per month and may be as high 

as 16,000 transfers per month. This last estimate does not include 

transfers that take place using physical media such as tape and CDROM, nor does it include transfers of data besides CAx data. 

Concurrent engineering and design outsourcing are major factors 

driving the demand for data exchange. The responsibilities for the 

design of a major automobile, aircraft, or ship are typically 

distributed among many companies; thus, product data must be 

shared among a large number of people and organizations, both 

concurrently and sequentially. This demand implies that CAx 

interoperabilitythe ability to communicate data between different 

software systemsis essential to the productivity and 

competitiveness of supplier networks and industry as a whole. 

Many different computerized engineering, design and analysis, and 

manufacturing software and hardware systems are currently used 

throughout the discrete parts manufacturing supply chain. Not only 

do these systems differ among companies, but they can also differ 

among divisions within a company. Frequently, each system has its 

own proprietary data representation. Consequently, product data 

are created and stored in multiple, often incompatible formats. As a 

result, interoperability problems exist, whether files are being 

transferred between firms or within a firm. 

Figure 2-1, based on information from the Automotive Industry 

Action Group (AIAG) (1997a), identifies some of the different CAx 

platforms currently used by members of the U.S. automobile supply 

chain. The figure demonstrates that a first-tier supplier with several 

CAx interoperability is the 

ability to communicate 

data from one software 

system to another. 
Section 2 — Technical History of STEP 

2-3 

Figure 2-1. Multiple CAx Systems Used in the Automobile Supply Chain 

Multiple translators are required to exchange data between the various players in the U.S. automotive industry. 

CADKEY

ARIES

Applicon

ANVIL

AutoCAD

Pro/ENGINEER

I-DEAS

PDGS

CATIA

HP

Intergraph

EUCLID

CADDS

I-DEAS

Intergraph

Pro/ENGINEER

CATIA

Unigraphics

I-DEAS

Unigraphics

CATIA

CADDS

Subtier Suppliers

Original

Equipment

Manufacturers

First-Tier

Suppliers

Source: AIAG. 1997a. “Product Data Exchange in the Automobile Supply Chains: AutoSTEP at the Midpoint.” 

Southfield, MI: AIAG. 

OEM customers and subtier suppliers may have to purchase, learn, 

and maintain multiple, often redundant platforms or translation 

software. 

Given the many different formats in which product model data are 

developed and stored, each data transfer requires a decision about 

the type of data exchange that will be used. Members of a supply 

chain may exchange data electronically via a secure 

communications network, or they may exchange physical media, 

such as magnetic tape, CD-ROM, or diskettes. 

 2.1.2 CAx Interoperability Problems 

As the number of data exchanges has increased, the costs of 

imperfect interoperability has mounted. OEMs and their suppliers 

incur costs to maintain multiple CAx systems, to repair files that are 

translated incorrectly, to manually reenter data that cannot be 

translated, and to scrap designs and tooling that are defective 

because of imperfect interoperability. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

2-4 

CAx interoperability problems generally fall into two categories—

data exchange problems and data quality problems. Some of these 

problems are sufficiently serious to require repeating the data 

exchange or recreating the model. Other problems can be repaired 

more simply. Some of the more common problems that require 

repeating the transfer of a solid model or recreating the data include 

models that arrive with missing, collapsed, or inverted faces; models 

that do not form closed solids (surfaces and edges do not connect); 

and models with incorrect feature orientation (Frechette, 1997). 

Other common problems associated with the transfer of CAx data 

include 

Z lines that do not meet at corners; 

Z lines that cross at corners; 

Z curves or lines drawn as many short line segments; 

Z multiple occurrences of the same feature at the same 

location; 

Z lines or surfaces coincident with other lines or surfaces; 

Z surfaces that do not meet at lines; 

Z some or all of the geometry not translated; 

Z geometry, dimensions, and notes not correctly separated 

into different layers; 

Z planar features drawn out of plane; and 

Z geometry of features not drawn to scale (Fleischer, Phelps, 

and Ensing, 1991). 

Fleischer, Phelps, and Ensing (1991) surveyed members of the Detroit, 

Mid-Michigan, and Grand Rapids chapters of the National Tooling 

and Machining Association (NMTA) to determine the nature and 

frequency of problems incurred when tool and die shops received 

CAx data from their customers. The survey revealed that the data had 

to be repaired in about 51 percent of the jobs. The job shop had to 

completely recreate CAD data in an additional 25 percent of the 

cases. In about 15 percent of all cases, these errors were not 

discovered until after the part tooling had already been cut. These 

errors were costly and caused delays because the company had to 

scrap and recut the parts (Fleischer, Phelps, and Ensing, 1991). 

Even when data transfers are completely successful, data quality 

issues can lead to imperfect interoperability. A recent study by the 

AIAG (1997b) found that product data quality issues cause problems 

OEMs and their 

suppliers incur costs 

to maintain multiple 

CAx systems, to 

repair files that are 

translated 

incorrectly, to 

manually reenter 

data that cannot be 

translated, and to 

scrap designs and 

tooling that are 

defective because of 

imperfect 

interoperability. 
Section 2 — Technical History of STEP 

2-5 

for many members of the automotive supply chain. These issues 

exist even when product data are exchanged in native file formats. 

One OEM reported that downstream functions, such as rapid 

prototyping, finite element analysis, or CNC programming, spent a 

great deal of timeas much as 50 percentworking with CAD data 

files that were not constructed properly for use in these downstream 

purposes. 

These problems often stem from poor model construction 

techniques used during CAD data entry. Examples of CAD data 

problems cited by the AIAG study include 

Z lines that do not meet at corners as intended, 

Z curves supposed to be tangent that are not, 

Z duplicate entities, 

Z surface patches that do not match at their joining edges, and 

Z solid model faces that are incorrectly formed or have 

improper topology (AIAG, 1997b). 

These problems sometimes occur because different computational 

software and different operating systems develop product models 

with different scale and closure tolerances. Furthermore, different 

organizations use different conventions to organize their drawings 

or documents (Sawant and Nazemetz, 1998). 

While translation errors are usually obvious, many data quality 

problems are not easily detectable. The user may not realize that 

the data are of poor quality until a problem with a downstream 

software program occurs that leads to the discovery of the problem 

data. The further downstream these problems are detected, the 

more costly they are in terms of scrapped models, model rework, 

and project delay. 

 2.1.3 Potential Methods for Improving CAx Interoperability 

Discrete parts manufacturers generally acknowledge that imperfect 

CAx interoperability is an important and expensive problem. 

However, none of the solutions widely used in the past has been 

successful at significantly reducing these problems. This section 

briefly describes several approaches to improving interoperability 

and their technical and economic shortcomings. The following 

methods are currently used to share data between systems, but they 

have a number of drawbacks: 

Discrete parts 

manufacturers 

generally 

acknowledge that 

imperfect CAx 

interoperability is an 

important and 

expensive problem. 

However, none of 

the solutions widely 

used in the past has 

been successful at 

significantly 

reducing these 

problems. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

2-6 

Z standardization on a single system and sharing of files in 

native format, 

Z point-to-point translation, 

Z manual reentry of data, and 

Z neutral format translation (Doty, 1994). 

Single-System Standardization 

Standardization on a single system may appear to be the simplest 

way to ensure compatible data because an exchange of product 

data requires no translation. However, even within a single 

company, enforcing this standardization can be difficult because 

different parts of the organization have different needs, and a single 

system may not be capable of meeting all these needs. 

Furthermore, even when a single system is mandated, the use of 

different versions of the software may create translation problems. 

Enforcing a single-system standard across the members of a supply 

chain can be even more difficult and costly. It restricts the 

company’s collaborators to users of the same technology. 

Alternatively, the company with greater market power can force 

potential collaborators to adopt its system of choice. The three 

major U.S. automobile manufacturers require their first-tier suppliers 

to maintain specific systems for the purpose of sharing product data. 

Many suppliers work with more than one major customer, each of 

whom requires a different system. In addition, many of these 

suppliers have customers outside the auto industry. This situation 

creates significant extra cost because, as documented by AIAG 

(1997a), maintaining these multiple systems concurrently causes 

Z less than optimal use of the systems in place, because some 

systems are only used a small percentage of the time (e.g., 

used only to transmit data to a specific customer); 

Z decreased proficiency of CAx users in each of the multiple 

systems maintained and a resulting decrease in the flexibility 

with which the engineering staff can be used; 

Z increased cost for maintaining and administering the 

multiple systems; 

Z increased system administration problems and system down 

time; 

Z increased training costs because CAx users must be trained 

on multiple systems; 

Most large OEMs in the 

transportation equipment 

center dictate which CAD 

formats they will accept. 

With few exceptions, they 

require native formats. For 

example, the following 

OEMs require these 

formats: 

Z Ford—IDEAS 

Z DaimlerChrysler—

CATIA 

Z GM—Unigraphics 

Z Electric Boat—CATIA 
Section 2 — Technical History of STEP 

2-7 

Z more data transfers among multiple systems used 

concurrently for the same design project, along with the 

attendant accuracy problems and costs; 

Z increased costs of PDM, which becomes increasingly 

expensive because changes must be tracked through 

multiple design systems; and 

Z increased costs of maintaining quality and procedure 

standards for CAx data, which reduces the quality of the 

CAx data-entering systems. 

These costs may be especially burdensome to small companies that 

produce small volumes because some of the costs of purchasing, 

maintaining, and gaining expertise in these systems are fixed rather 

than variable costs. Small companies cannot spread the costs of 

investment in these systems across a large enough volume to make 

use of multiple systems cost-effective (Target, 1994). Thus, these 

requirements can function as barriers to market entry. 

Point-to-Point Translation 

A second approach to sharing data among applications is to 

develop and use a conversion program that transforms data from the 

form used by one system to the form used by another system. These 

translators work fairly well for some well-defined data translation 

tasks. However, the drawbacks of this approach include 

Z the need for a pair of translators for every combination of 

systems that require translation (Frechette, 1997), 

Z the need to update each translator when either of the two 

systems’ software is updated, and 

Z the lack of availability of translators for all software and 

tasks. 

In addition, a high degree of vendor cooperation is necessary for the 

development of direct translators. Sawant and Nazemetz (1998) 

point out that such cooperation is limited because the development 

of viable translators requires the disclosure of proprietary 

information about the software. Vendors are understandably 

reluctant to share such information with competitors. 

Manual Reentry 

When a satisfactory method of exchanging electronic data is not 

available, operators may manually reenter data into each system 

that requires it. Aside from the obvious problems of the cost and 

time required to manually reenter product data, this method may 

The ocean-going 

shipbuilding industry 

historically prepared its 

own point-to-point 

conversion software; 

however, over time, such 

converters became costprohibitive. By the time 

new U.S. naval contracts 

were awarded, the 

converters were outdated 

and new programs needed 

to be developed and 

written, tasks that added 

significantly to the cost of 

new shipbuilding 

programs. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

2-8 

also result in transcription errors. Nevertheless, data reentry is 

commonly used in some situations (Doty, 1994). 

Neutral Format Translation 

Another approach to sharing data between different systems is to 

develop a common neutral format for exchanging the data. 

Implementing the neutral format requires a pair of translators (read 

and write) between each application and the neutral format. Such 

translators are often called “half translators.” With a neutral format, 

only two translators are required for each application, regardless of 

the number of other systems used to exchange data. This method 

simplifies the maintenance of translators as each system evolves. 

Vendors are also more willing to develop half translators because 

they do not require the disclosure of proprietary code. A vendor 

can build a pair of half translators for its product without interacting 

with the competition (Sawant and Nazemetz, 1998). 

The two neutral format solutions that are of primary interest for this 

study are Initial Graphics Exchange Specification (IGES) and STEP. 

IGES, having been implemented in the 1980s, has gained 

acceptance as a reliable neutral format solution. However, as is 

discussed in the next section, it has several limitations. STEP 

provides superior functionality, but because of its recent availability, 

it is still in the process of gaining industry acceptance. 

IGES is a U.S. national standard and is supported by most CAx 

systems. Although IGES has been very successful in some limited 

applications, it has a number of weaknesses. IGES is limited 

because it was designed mainly to communicate design data. It 

does not support the many other types of data that are required for 

manufacturing, marketing, technical and cost analysis, and 

configuration management. The U.S. Product Data Association (US 

Pro) indicates that the IGES 6.0 release will be the last IGES upgrade 

and that U.S. Pro will focus its development efforts on STEP (U.S. 

Pro, 2002). 

STEP is a file format produced by each software package (McEwan, 

1995). The International Organization for Standards (ISO) adopted 

STEP as ISO 10303 to achieve the benefits of such an exchange 

standard. Rather than translating data from one software system into 

another, STEP provides a complete computer-interpretable product 

data format. STEP allows users to integrate business and technical 
Section 2 — Technical History of STEP 

2-9 

system data and covers all aspects of the business cycle, from design 

to analysis, manufacturing, sales, and service. 

STEP goes beyond previous neutral format translators, such as IGES, 

in several ways. First, it includes more of the data types required to 

develop, analyze, manufacture, document, and support many kinds 

of products. Second, rather than operating only on the elements 

common to two systems, STEP provides a base model that 

incorporates a superset of existing systems and extensions to support 

special application needs. Furthermore, because STEP is being 

developed by the ISO, it will enable U.S. companies to interact with 

suppliers and customers abroad. 

 2.2 TECHNICAL HISTORY OF STEP AND NIST’S 

ROLE 

With the emergence of global markets, there is an increasing trend 

toward the development and implementation of open international 

standards. The intent is for standards to no longer be an 

afterthought or residual outcome of market forces. Standards are 

increasingly providing a critical foundation in achieving effective 

and efficient communications within and among companies. 

The development and implementation of international standards 

require the integration of many research projects worldwide. 

Feedback from parallel implementation activities needs to be 

incorporated into the standard. In addition, there is a growing need 

for software tools to build and certify the standard and the 

implementations of the standard. 

STEP has developed through an international effort including 

representatives from industry and government. The STEP 

standardization initiative was unique in that it did not begin with an 

existing commercial application (or set of existing applications). 

Rather, this initiative first involved advancing the state of the art in 

product data technology and then built a standard to meet the 

emerging vendor capabilities in the new technology. 

The STEP initiative also contributed to standard-setting procedure by 

being the first ISO standard to 

Z use formal information modeling techniques in its 

development, 

Z publish a standard for an information modeling language, 

Standards are increasingly 

providing a critical 

foundation in achieving 

effective and efficient 

communications within 

and among companies. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

2-10 

Z include digital information in its normative form, and 

Z include a specification for conformance testing. 

NIST has played a significant leadership and technical role in the 

development of STEP. Throughout the STEP development process, 

NIST formed directives on how to develop and document the 

standards. NIST’s work on STEP infrastructure encompassed 

resource integration and the provision of editing directives and AP 

development guidelines. Further work includes the following: 

Z Tool development—NIST contributed heavily to the creation 

of tools to support the development of the STEP standard 

itself, implementations of the standard in software, and 

EXPRESS. 

Z Test system development—The support of the STEP test 

system developed in conjunction with ERIM (now Altarum) 

led to the formal conformance testing system and 

infrastructure. In addition, the test system’s development led 

to tools that support not only conformance testing, but also 

interoperability testing by software vendors and users. 

Z Hosting and staffing the ISO committee—For many years, 

NIST served as the host organization for the Secretariat of the 

ISO subcommittee (TC184/SC4) that oversees development of 

STEP. NIST provided the staff to operate the Secretariat and 

provided the home base for the Convener (Chair) of the 

committee. In the early stages of STEP development, NIST 

also took responsibility for organizing the regular meetings of 

the U.S. and international STEP working groups that actually 

did the STEP development work. 

The likely effects of NIST’s contributions include 

Z lowered cost of STEP development, 

Z lowered cost of STEP implementation, and 

Z reduced risk of STEP adoption by end users. 

 2.2.1 NIST’s Role in the STEP Development Process 

By assisting in the development of STEP as an industry standard, 

NIST reduced the uncertainty and risk associated with industry’s 

investment in STEP. NIST’s involvement resulted in the following 

positive outcomes: 

Z NIST’s activities in developing conformance testing practices 

help to improve the quality of the STEP software, reducing 

the technical risk to both the software industry and software 

users. 

Z NIST helped to demonstrate the benefits of STEP through 

programs such as the AutoSTEP pilot program, reducing 

NIST’s activities reduced 

the uncertainty and risk 

associated with industry’s 

investment in STEP. 
Section 2 — Technical History of STEP 

2-11 

industry’s perceived technical risk associated with 

investments in STEP. 

Z NIST participated in the development of STEP’s application 

protocols and implementation prototypes, lending expertise 

and credibility to the STEP development process and 

improving the process of standards implementation. 

Below is a chronological overview of the STEP development 

process, highlighting NIST’s role. Additional information on the 

STEP development process can be found in STEP: The Grand 

Experience (Kemmerer, 1999). 

Initiating the Development Process 

The first ISO TC 184/SC4 meeting was held at NIST on July 11, 

1984. Participating countries were Canada, France, Germany, 

Switzerland, the United Kingdom, and the United States. The 

purpose of the meeting was to initiate the development of an 

international standard that enables the capture of information 

comprising a computerized product model in neutral form, without 

the loss of completeness and integrity, throughout the lifecycle of a 

product (Kemmerer, 1999). Several resolutions describing the 

mission, goal and objectives were passed at this meeting. 

Resolution 5 established NIST as a leader in the effort as the SC4 

Chair. NIST also served as the SC4 Secretariat (on behalf of ANSI). 

NIST served as the Secretariat for first 15 years of the STEP 

development process. 

Initially, the new standard for external representation of product 

model data was to be based on existing data exchange in initiatives, 

including the U.S. IGES and PDDI, the French SET, the German 

VDA/BDM-FS, and the UK NEDO. However, consensus soon 

shifted toward developing a new Product Data Exchange 

Specification (PDES) from scratch, rather than continuing to 

enhance existing initiatives (such as IGES). The intent of such a 

philosophical shift was to use new state-of-the-art data modeling 

techniques. Eventually, PDES was proposed formally by the United 

States to the ISO to serve as the master draft of the ISO 10303. 

PDES 

The PDES initiation effort began in 1986 and was a “proof of 

concept” project begun within the IGES organization to validate the 

methodology by which PDES would develop into a product data 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

2-12 

exchange specification. The effort focused on information modeling 

to develop formal descriptive languages and a methodology for the 

description of product data. An important step in the process was 

recognizing that robust data modeling was necessary to support the 

complexity of STEP.2 As a result, the development of a new 

computation language was initiated that was to lead to the 

development of EXPRESS. 

NIST staff participated on two levels, supporting the development of 

modeling languages. Some NIST staff members were involved as 

technical “language development” experts contributing to the 

development of EXPRESS, a computer language designed to 

communicate information concerning data. Others were technical 

experts in information modeling whose focus was on ensuring the 

ability of a formal description language to facilitate the capture of 

the semantics of information requirements (Kemmerer, 1999). 

Information Models 

The information models developed within the PDES and STEP 

projects were assembled into a single model, called the Integrated 

Product Information Model (IPIM). IPIM was basically the 

summation of all models regardless of their level of abstraction. The 

intent was that all models would be translated into EXPRESS and 

then combined into a single entity pool from which implementers 

could draw for effective data exchange. However, it soon became 

clear that because the models in the IPIM varied along a continuum 

of generalization, the integration of very specific application models 

with more generic models was unclear and inconsistent. 

The varying degree to which models included generic concepts, 

rather than concepts specific to particular applications, led to the 

development of “application protocols” (APs). The purposes of APs 

are to 

Z state explicitly the information needs of a particular 

application, 

Z specify an unambiguous means by which information is to 

be exchanged for that application, and 

Z provide a basis for standardization conformance verification. 

 

2Programming languages such as Ada and C++ were also considered as the formal 

descriptive language. However, their very nature as implementation languages 

conflicted with their use for creating abstractions that omit nonessential details. 
Section 2 — Technical History of STEP 

2-13 

Each AP could potentially develop a unique way of achieving its 

Application Reference Model (ARM). Thus, ARMs are typically 

application-specific models with clearly defined scopes and 

functionality requirements. However, this development led to the 

undesirable potential that separate application protocols could be 

fundamentally incompatible. 

A top-down approach to STEP development was applied to address 

the potential problem of incompatible APs.3 The result was a 

framework built upon the Generic Product Data Model (GPDM) 

Integration Architecture. The GPDM captured common elements of 

product data in a single coherent representation. It provided an 

application context-independent description of a product in terms of 

generic product description facts. The GPDM served as the missing 

piece to the use of AP methodology in the basic STEP architecture. 

EXPRESS was the descriptive language used for GPDM. 

 

3This approach is in contrast to the collection of models contained within the IPIM 

that represented a bottom-up approach. 

3-1 

 Current STEP 

 Development and 3 Implementation 

This section describes the current and near future trends in the 

development and adoption of STEP. The past and ongoing 

standards development activities are discussed, and potential 

barriers to realizing economic benefits are identified. 

 3.1 CURRENT TRENDS IN THE DEVELOPMENT 

AND IMPLEMENTATION OF STEP 

STEP is still a work in progress with new parts nearing international 

standard status and many more in various stages of development. 

STEP development and implementation can be broadly grouped 

into three categories of STEP functionality. That is, STEP can be 

considered in terms of what is 

Z most widely implemented, 

Z approved, and 

Z under development but not yet international standards. 

Table 3-1 presents the status of STEP APs, as of November 2002. 

 3.1.1 Most Widely Implemented STEP APs 

STEP has potential applications in a broad range of industries, 

including transportation equipment, electronics, process plants, 

construction, and software. To date, the aerospace and automobile 

industries have been affected most significantly, primarily due to 

Application Protocol 203 (AP203) of the STEP standard. This 

standard allows the translation of three-dimensional design data for 

mechanical parts and assemblies. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

3-2 

Table 3-1. Status of STEP Application Protocols as of November 2002 

This table presents the application protocols with international standards status and those currently under consideration 

and/or development. Although not all are directly applicable for the transportation equipment industries, they are 

included here for informational purposes. 

APs with International Standard Status 

 AP201—Explicit draughting 

 AP202—Associative draughting 

 AP203—Configuration controlled 3D designs of mechanical parts and assemblies 

 AP207—Sheet metal die planning and design 

 AP209—Composite and metallic structural analysis and related design 

 AP210—Electronic assembly, interconnect, and packaging design 

 AP212—Electrotechnical design and installation 

 AP214—Core data for automotive mechanical design processes 

 AP224—Mechanical product definition for process planning using machining features 

 AP225—Building elements using explicit shape representation 

 AP227—Plant spatial configuration 

 AP232—Technical data packaging core information and exchange 

APs Under Consideration for International Standards Status and/or Under Development

 AP204—Mechanical design using boundary representation 

 AP213—Numerical control process plans for machined parts 

 AP215—Ship arrangement 

 AP216—Ship moulded forms 

 AP218—Ship structures 

 AP219—Manage dimensional inspection of solid parts or assemblies 

 AP220—Process planning, manufacturing, assembly of layered electrical products 

 AP221—Functional data and their schematic representation for process plants 

 AP223—Exchange of design and manufacturing product information for cast parts 

 AP226—Ship mechanical systems 

 AP229—Design and manufacturing product information for forged parts 

 AP230—Building structural frame: steelwork 

 AP231—Process design and process specifications of major equipment 

 AP233—Systems engineering data representation 

 AP234—Shop operational logs, records, and messages 

 AP235—Materials information for the design and verification of products 

 AP236—Furniture product data and project data 

 AP237—Computational fluid dynamics 

 AP238—Application interpreted for computerized numerical controllers 

 AP239—Product life cycle support 
Section 3 — Current STEP Development and Implementation 

3-3 

Large shipyards are also developing and testing new translators that 

employ specially tailored STEP APs, which will substantially 

increase that sector’s use of STEP. However, current use of STEP in 

shipbuilding design is limited. The U.S. government has also been 

aggressive in integrating AP203 STEP functionality within 

Department of Defense weaponry and NASA engineering. 

AP202 functionality is also commercially available in a very limited 

number of software products. AP202 supports associative 

draughting. However, because this standard is not perceived as 

providing a significant improvement over IGES, it has experienced 

limited implementation in software products and minimal adoption 

by industry. 

Early efforts by CAD vendors to create STEP translators resulted in 

products that did not meet industry expectations. One effort 

targeted at addressing implementation problems was the AutoSTEP 

project. The AutoSTEP project helped vendors identify where 

improvements were needed, and the result was a clear pattern of 

dramatic improvement, even over the course of the project. For 

example, early solid primitives were translated with only partial 

success. By the end of the project, many solids of significant 

complexity were translating with significant success. 

Recent examples of implementation and adoption of STEP 

functionality include the following (see also Table 3-1): 

Z Delphi Delco Electronic Systems uses STEP internally and 

externally with customers. 

Z Boeing Commercial Airplane Group has agreed with Pratt & 

Whitney, Rolls-Royce, and GE Aircraft Engines to use STEP 

as the production data exchange process in its design 

process. 

Z IBM/Dassault Systems recently certified its CATIA AP203 

STEP Interface product (Version 4, Release 2.2). The AP203 

Conformance Class 6a certification assures that these 

products conform to the ISO standard for the exchange 

and/or sharing of boundary representation shape models 

with associated product identification information. 

Z Lockheed Martin Aeronautics has recently initiated full 

production use of STEP for technical data exchange with its 

suppliers (AP232). STEP was implemented in a pilot 

program in 1996 on the F-16 program. The Company also 

plans to implement the standard across all new programs 

that use computer-aided design (F-22, F-2, T-50, JSF, etc.) 

and at all sites in the consolidated Lockheed Martin 

Large shipyards are 

developing and testing new 

CAx translators that employ 

specially developed STEP 

APs, which will 

substantially increase that 

sector’s use of STEP. To 

date, however, the 

aerospace and automobile 

industries have been most 

significantly affected by 

STEP. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

3-4 

Aeronautics Company. The company claims that in a recent 

major rebid of F-16 machined parts, involving about 2,300 

part numbers and about 50 potential suppliers, use of STEP 

provided a 95 percent reduction in material costs and a 52 

percent reduction in labor by the prime contractor, not 

counting similar savings by the suppliers. 

Z NASA has approved and released NASA-STD-2817, which 

requires CAx systems used by NASA to have interchange 

tools that support STEP. Areas covered are AP203, AP209, 

AP210, AP225, and AP227 for exchanging data among 

product data management systems; mechanical and 

electronic CAD/CAM systems; civil and facilities CAD 

systems; and computer-aided engineering/analysis systems. 

 3.1.2 Approved STEP APs 

Several other application protocols, or parts of application 

protocols, have been approved as international standards, but are 

not as widely implemented as the above mentioned parts. These 

application protocols include 

Z AP201—explicit draughting; 

Z AP207—sheet metal die planning and design; 

Z AP214—core data for automotive mechanical processes; 

Z AP224—mechanical parts definition for process planning 

using machine features; 

Z AP225—structural building elements using explicit shape 

representations; and 

Z AP232—technical data packing for core information and 

exchange (see also Table 3-1). 

For example, AP232 (technical data packaging core information and 

exchange) defines the structure to package, or relates groups of 

product information so that configuration controlled exchanges can 

be achieved among PDM systems. The AP232 emphasis is on 

information that is typically used for representing design disclosure 

of an item. The purpose of this AP is to provide an information 

structure where product information can be electronically captured 

and managed from both a document-based perspective and a 

product-item perspective. 

 3.1.3 STEP APs Under Development 

More than half of the APs exist in either draft or working draft form 

without full international standard status. For example, AP209 

(composite and metallic structural analysis and related design) 

provides a neutral data format representation of intelligent models 
Section 3 — Current STEP Development and Implementation 

3-5 

needed to conduct engineering analysis within an iterative designanalysis environment. In addition, several APs for the shipbuilding 

industry exist in draft form; these are AP226 (ship mechanical 

systems), AP218 (ship structures), AP216 (ship molded forms), and 

AP215 (ship arrangements). Once these APs are approved, the use 

of STEP by the shipbuilding industry should be greatly enhanced. 

Their approval will assist in the compliance with the Department of 

Defense (DoD) mandate that STEP be used in the exchange and 

cataloging of product model data on DoD contracts. 

Enhancements are also in development for the EXPRESS language. 

Two primary efforts are underway (Kemmerer, 1999). The first 

includes implementing several minor and major improvements to 

EXPRESS, such as extensions to allow EXPRESS to model new kinds 

of technical and business process information. The second likely 

improvement to EXPRESS is the implementation of a mapping 

language. The new version, called EXPRESS-X, will specify the 

relationships between structures in different models of application 

protocols. 

 3.1.4 Infrastructure Tools to Support STEP Development 

and Adoption 

A wide range of infrastructure tools support the standards 

development, implementation, and adoption. The availability of 

these tools is essential for realizing the benefits of STEP: 

Z STEP data-checking tools—For people who are using or 

want to use STEP to exchange product data, some tools are 

available to help ensure that the data in a STEP data file are 

valid STEP data. Examples of such tools include Expresso, a 

tool developed by NIST, and STEPCheckTM and STEPViewTM, 

which were created by ERIM (now called Altarum) as a part 

of work sponsored by NIST. Other tools that provide various 

aspects of STEP file checking also exist. These tools are 

being used by software developers to check the output of 

their systems during development and by software users to 

check and diagnose problems during translation. These 

tools are most useful to those who already understand the 

workings of STEP, so their potential market is probably 

limited. 

Z STEP standard development tools—Developing parts of the 

STEP standard is not a simple process; it requires substantial 

knowledge and effort. A few tools have been developed to 

facilitate this process. One example is the STEP RPG tool 

developed by ERIM and NIST that helps build one of the 

most STEP-knowledge intensive pieces of an AP, the 

Nineteen APs are nearing 

international standard 

status, with 20 protocols in 

various earlier stages of 

development. 

Enhancements are also in 

development for the 

EXPRESS language. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

3-6 

mapping table. Although this tool is very helpful to those 

who need it, there are fewer than 40 APs. In spite of its 

value for the development of STEP, there is no commercial 

market for the STEP standard development tool. 

Z STEP implementation tools—Software vendors implementing 

STEP in their CAD or other products can take advantage of 

software development tools produced by NIST and 

commercial firms. These software tools—such as NIST’s 

STEP Class Library, International TechneGroup, Inc.’s, 

PDE/Lib, and STEPTools, Inc.’s ST-Developer—are designed 

to ease various aspects of the software development process 

associated with using STEP. Because the number of STEP 

software developers is somewhat limited, this area is likely 

to remain a small part of the overall STEP business picture. 

Z STEP testing tools—There are two aspects of testing STEP 

implementations—conformance testing and interoperability 

testing. Conformance testing is the testing of 

implementations of STEP against a reference system. NIST 

and ERIM jointly developed a conformance testing system 

for implementations of STEP AP203. That system is 

operational and vendors of STEP products have submitted 

their products for conformance testing. A number of the 

systems have received certification as conforming to AP203. 

The conformance test system and the tools that comprise it 

are also available for vendors to purchase. While 

conformance testing is no guarantee of perfect operation of 

STEP implementations, it does provide a baseline of 

capability. While it is a useful confidence builder for 

potential users, conformance testing rarely earns enough to 

pay its own way. Software vendors are not willing to spend 

a large amount of time and money on conformance testing. 

Therefore, at least the development of the conformance 

testing system and support structure must be subsidized. 

Z Interoperability testing is testing between two different 

systems, rather than against a reference system. 

Interoperability testing is a necessary step in the successful 

use of neutral standards such as STEP between a particular 

pair of systems. Fortunately, most of the tools appropriate 

for conformance testing are also useful for interoperability 

testing. The potential market for those tools is much larger 

because it includes potential regular users of the standard, 

not just developers. 

 3.2 BARRIERS TO DEVELOPMENT AND 

ADOPTION OF STEP 

Industry’s interest and level of support for the development and 

adoption of STEP has varied over time as market incentives have 

evolved. To date, industry has been slow to invest the resources 

needed for the implementation and adoption of STEP, despite 
Section 3 — Current STEP Development and Implementation 

3-7 

industry-wide agreement that a neutral format holds the best 

potential solution to interoperability problems (McEwan, 1995). A 

number of issues have hampered industry’s commitment to STEP, 

including 

Z the significant investment required to develop a solution that 

will benefit all members of the industry, 

Z the market risk caused by competitive rivalries among the 

companies that develop CAx software and translators, 

Z the technical risk associated with developing STEP 

translators and related tools, and 

Z the need for an unbiased expert to negotiate, develop, and 

implement industry standards. (RTI, 1999). 

This section explores these impediments by addressing the 

competitive market factors and incentives influencing the 

development, implementation, and adoption of STEP functionality. 

 3.2.1 Evolving Structure of CAx Markets 

The CAD market changed substantially over the 10 years that the 

initial 12 parts of STEP took to develop. During the early 1980s, at 

the start of STEP development, most North American automotive 

and aerospace OEMs were using their own, in-house developed and 

supported CAD systems.1 Even McDonnell Douglas (now part of 

Boeing), which had a division that sold a commercial CAD software 

package, used its own (different) CAD system internally. 

By the early 1990s, virtually all North American automotive and 

aerospace OEMs had shifted or were in the process of shifting to 

external, commercially supported CAD systems. With that change, 

the large OEMs moved from being relatively uninterested in the 

commercial CAD market to significant players in the development 

process. Given their own proprietary CAD systems and the mix of 

supplier systems that existed in the early days of STEP development, 

 

1When focusing on historical issues, we look at CAD systems because most of the 

initial release of STEP focused on CAD geometry. While AP203 included 

configuration management data, only recently has any real implementation of 

that kind of capability become available. Further, the development focus has 

shifted to the so-called “PDM Schema,” a refined data model that is being 

implemented by some software vendors, especially in PDM systems. In spite of 

any vendor claims to the contrary, the PDM schema implementations are very 

much experimental, as evidenced by the massive amount of effort required to 

put on a basic proof-of-concept PDM data exchange demonstration at the 

AIAG’s Auto-Tech 2000 conference and exhibition in September 2000 in 

Detroit, Michigan. Just as important, the current policy from the automotive 

OEMs is, once again, that suppliers must use the same PDM system. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

3-8 

the OEMs were generally interested in developing a standard that 

would improve interoperability across their supply chains and were 

willing to put resources toward the development of STEP. 

Interest in STEP was also motivated by the increased trend of OEMs 

to outsource design responsibilities for parts and systems. 

Outsourcing of design responsibilities led to increased use of CAD 

systems by suppliers and the need to transfer sophisticated product 

data throughout the supply chain. At the start of STEP development, 

many suppliers had no CAD systems at all; if they did, they often 

had relatively less capable systems than their customers. By the 

initial release of STEP, the distribution of design responsibility across 

the supply chain was well underway and most first-tier suppliers 

were using the same or equally advanced CAD systems as their 

customers. However, this increased use of CAD systems throughout 

the supply chain resulted in increased interoperability problems. 

In search of interoperability solutions, OEMs required that all 

suppliers transfer product data in native formats. In the automotive 

and aerospace industries, each OEM is large enough as a customer 

to request specific CAD system use to their suppliers. However, the 

fact that Ford, GM, and DaimlerChrysler used different CAD systems 

placed a substantial burden on suppliers who must support multiple 

CAD systems if they supply more than one OEM. 

By the initial release of STEP, the use of native file transfers and the 

increased integration of OEMs with suppliers reduced the OEMs’ 

necessity for neutral file transfer standards. However, the first-tier 

suppliers had taken over as the companies with the greatest need for 

interoperability standards. They needed interoperability both 

internally and down the supply chain. Internally, they needed to be 

able to move data across the multiple systems their customers 

required. They also needed interoperability with their own lowertier suppliers, who often used less sophisticated CAD systems and 

were generally unable to support multiple systems. 

 3.2.2 Shift in STEP’s Support Structure 

Because of this change in the CAD market over the development of 

STEP, many of the companies most involved in the beginning have 

decreased their support. The North American automotive industry 

has reduced its participation in STEP development since the initial 

By the end of the STEP 

development process, 

virtually all North 

American automotive and 

aerospace OEMs had 

shifted or were in the 

process of shifting to 

external, commercially 

supported CAD systems. 

With that change, the 

OEMs moved from being 

uninterested in the 

commercial CAD market to 

dominating it from the 

customer side. 
Section 3 — Current STEP Development and Implementation 

3-9 

release. However, both the aerospace industry and the shipbuilding 

industry have maintained their level of involvement. 

Regardless of their continually increasing strength and 

responsibility, major automotive suppliers still tend to take the lead 

of their customers. Even as they continue to take greater 

responsibility for the design and manufacture of products, suppliers 

have not been able to influence OEM in addressing interoperability 

problems. 

As discussed in Section 2, STEP standard development and 

implementation in vendor software continues and significant 

capabilities exist. While adequate for many applications, the 

currently available STEP APs do not support all of the capabilities of 

CAx systems. As such, the automotive OEMs maintain their 

preference of receiving native format file transfers for all 

applications. 

Continuing STEP development has largely been driven by other 

industries in North America. In other discreet part industries, the 

OEM’s role continues to be much less significant. The OEMs are 

generally not large enough to dominate as they do in the 

automotive industry. The difference can be seen in relationships 

with suppliers. In the related heavy equipment industry, OEMs such 

as Caterpillar and Deere & Company do not have the purchasing 

power to require that their suppliers use a particular CAx system. 

In addition, the European automotive industry has continued to be 

very involved in STEP development, with substantial support for the 

massive development effort required to create the recently 

completed AP214, which is a comprehensive standard focused on 

mechanical design needs for the automotive industry. The North 

American auto industry has contributed to AP214 development, but 

primarily in a review and comment role. 

The development of STEP APs continues, but such work requires 

substantial effort by individuals with domain-specific knowledge. 

STEP AP development requires two sets of knowledge: one is the 

domain knowledge needed to define the information requirements 

for an AP; the other is the knowledge of how to build a STEP AP. 

Understandably, staff with this knowledge and experience are 

valuable resources, and it is a difficult decision for companies to 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

3-10 

remove them from other job responsibilities to focus their efforts on 

developing STEP APs. 

 3.2.3 Implementation by Software Developers 

As profit-maximizing entities, software vendors will add STEP 

capabilities to their software products if they generate additional 

revenue or maintain/increase market share. Software vendors must 

examine certain demand considerations: Will the customer pay 

more for a given capability? Will the customer turn to another 

vendor if the capability is not provided? If not, then there is little 

incentive to apply significant resources to developing new STEP 

capabilities. 

CAD Implementations 

While all the major workstation-based CAD systems and many PCbased systems claim to support STEP, the level of functionality 

varies and does not always realize the full benefits of STEP. One 

issue that arises with an open approach such as STEP is that the 

software vendor fears that providing the capability makes it easier 

for a customer to change to another system. In addition, vendors 

benefit from the need for redundant systems. A software vendor 

may conclude that the increased revenues from providing STEP 

capabilities do not offset the risk of losing customers. 

Currently in the North American market, most major workstationbased CAD systems are effectively driven by a very limited customer 

base. For example: 

Z Ford Motor Company is by far the largest customer of 

SDRC’s I-DEAS CAD software. 

Z General Motors is among the largest customers of 

Unigraphics Solutions CAD software. 

Z Boeing and DaimlerChrysler are the largest customers of 

Dassault Systemes’ CATIA CAD software. 

Vendors rely on the enormous cost of adopting new systems to 

maintain their customer base. The investment in stored data 

(“legacy data”), support systems, and user training generates 

significant customer lock-in effects. All three of the major North 

American automotive OEMs have gone through the process of 

changing primary CAD systems in the last decade. In all three 

cases, it was a massive undertaking that was costly in both time and 
Section 3 — Current STEP Development and Implementation 

3-11 

money. Software vendors with large captive shares of the market 

are reluctant to introduce capabilities that lower switching costs. 

Offsetting domestic barriers to the implementation of STEP in the 

major CAD systems is the effect of the global marketplace. Dassault 

Systemes is a French company that has captured the majority of the 

European automotive and aerospace CAD market. The European 

companies have shown great interest in effective data exchange 

between different systems using STEP. As long as vendors’ primary 

European customers demand that CAD systems support STEP, there 

is a strong business incentive to comply if they wish to compete in 

the European market. 

PDM Implementations 

PDM systems are far less established and have somewhat different 

characteristics from CAD systems. PDM systems are used to 

manage engineering information and support the product 

configuration and engineering process (Kemmerer, 1999). As noted 

above, the automotive OEMs have been putting PDM policies in 

place based on their CAD policies, requiring suppliers to use the 

same systems they do. Whether such policies are sustainable 

remains to be seen. Many PDM vendors appear to be working on 

implementing PDM data exchange using STEP. 

Some examples exist of successful STEP use to exchange PDM data. 

The best example is the use of STEP by Lockheed Martin to 

exchange PDM data between two of its proprietary PDM systems. 

While the effort has been successful, this is not a case of 

commercial implementation of STEP exchanging data. 

There are key fundamental differences in PDM and CAD data. 

Unlike CAD data, PDM data are not defined by a third party. CAD 

data comprise primarily mathematical representations of geometry. 

As such, CAD systems rely on mathematical approaches that are 

defined in textbooks. Therefore, different implementations of a 

given concept are based on the same mathematics. 

PDM data have no such commonly recognized external definition. 

Each company has its own structure and definitions of PDM data. 

Thus, every implementation of a PDM system is unique, even if the 

vender of the system is the same. In other words, two 

implementations of SDRC’s Metaphase PDM system will not 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

3-12 

inherently be able to exchange data because the data structures will 

be different. 

The OEMs are now beginning to require that suppliers use their own 

centralized PDM systems, not just the same brand. As with native 

file CAD transfers, this solves the interoperability problem from the 

OEM’s point of view, but still leaves the supplier with the costs of 

managing its own data and interfacing its PDM system with multiple 

customers. 

The very issue that different implementations of the same PDM 

system are substantively different may ultimately encourage the 

PDM software vendors to include STEP as an exchange method. 

The STEP PDM schema is the most widely accepted neutral format 

for PDM data. Rather than develop their own intermediate format 

to move data between different implementations of their own 

system, the software vendors may choose the STEP approach as 

being the most cost efficient. In this case, the effectiveness of their 

own product may be of greater value than any risk that the user 

might take advantage of it to shift to another brand of software. The 

costs of implementing a PDM system are substantial. As with CAD 

systems, changing from one system to another is a costly 

proposition. 

Other Software Implementations 

In addition to CAD and PDM, STEP has the potential to affect a 

wide variety of other systems that work with product data. These 

include CAM systems, computer-aided engineering (analysis) 

systems, and automated inspection systems. While some STEP APs 

have been created in these areas and others are under development, 

these capabilities have not yet seen significant implementation in 

software. 

One promising software application that is beginning to recognize 

STEP as a potentially useful exchange mechanism is that of CAD 

data viewers. In many cases, people need to look at the design 

information contained in a CAD or other file without any need to 

change it. Tools that allow someone to display the contents of a 

data file (usually CAD), particularly the geometry, allow the user to 

visualize the part. Many such tools are now on the market. Most of 

these tools allow the user to make notations on a view of the data, 

saving the combined result in a form that someone else can read 
Section 3 — Current STEP Development and Implementation 

3-13 

with the same viewer. Some of these viewer tools accept STEP data 

as one of the forms of input, usually along with native formats from 

a variety of popular CAD systems. These systems are much simpler 

than CAD systems and are therefore less expensive, are able to run 

on less powerful computers (especially PCs), and require much less 

training to use. There is a large potential market for these viewers, 

but because most of them already accept most native data formats, 

the market value of STEP capability is open to question. 

 3.2.4 Adoption and Use of STEP by End Users 

A number of elements affect whether a company uses STEP, 

including technical issues and market elements as described earlier. 

The most important technical element is whether the currently 

available STEP translator capability meets the user’s data exchange 

needs. There are two competing aspects of this element: perceived 

needs versus functional needs. Often, there is a perceived need for 

information that is not actually needed to accomplish the desired 

goal. A classic example is when a customer buying a sub-assembly 

wants to make sure the assembly fits properly into a larger assembly. 

All the customer needs is the envelope that marks the outside 

surface of the sub-assembly, yet the customer will often insist on a 

fully detailed model of the sub-assembly, requesting substantially 

more information than necessary. In the first case, STEP AP203 

would be adequate for the purpose; in the second case, it is not. 

Much of the potential for STEP is in the lower tiers of the supply 

chain, where the typical company does not have the resources to 

support multiple complex systems to meet the needs of different 

customers. Four major issues impede the use of STEP down the 

supply chain: 

1. the lack of capable STEP translators for AP203 and other 

formally approved STEP parts in PC-based CAD systems, 

2. the lack of STEP APs providing the capabilities needed for 

many applications, 

3. the lack of knowledge about STEP and what it provides in 

such companies, and 

4. customers do not necessarily advocate the use of STEP. 

The last issue is important because, although they have to use their 

customers’ CAD systems, first-tier automotive suppliers could 

choose to promote STEP in much of the communication with their 

own suppliers. 

4-1 

4 STEP End Users 

Product data exchange is common in almost all discrete parts 

manufacturing industries. However, due to the size and complexity 

of the final product, the automotive, aerospace, and shipbuilding 

industries are most significantly affected by interoperability 

problems of product data exchange. This section provides brief 

profiles of these three industries and describes their supply chain 

structure and product data exchange activities. 

Interoperability issues in the automotive, aerospace, and 

shipbuilding industries are important because of the complexity of 

the product, the design process, and the increasing trends of 

outsourcing design and production. This section describes product 

design and development complexity and why interoperability issues 

have become an important factor in the competitiveness of these 

industries. 

 4.1 THE AUTOMOTIVE INDUSTRY 

The design and production of automobiles, trucks, buses and other 

on-road motor vehicles require interaction and coordination among 

many functions and industry participants. A motor vehicle consists 

of a large number of components, parts, and accessories that must 

function together as an integrated unit. Consequently, the design 

and development process is also complex, requiring a number of 

iterations among the design steps for different vehicle components. 

To further complicate the process, these components are typically 

designed and manufactured by many companies that are part of a 

complex supply chain. These companies must coordinate their 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

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activities to ensure that the components they design and 

manufacture are compatible with other components.1

 4.1.1 The Automotive Design and Development Process 

The structure of an automobile is extremely complex. A typical 

motor vehicle consists of anywhere from 8,000 to 12,000 parts and 

accessories that must be designed to be compatible. An automobile 

comprises several major systems, each of which contains many 

subsystems, components, and interfacing parts (e.g., bearings, 

crankshafts, filters, gears, pistons, pumps, and valve trains make up 

the engine, and their design must be compatible). Similarly, other 

systems, such as axles, suspensions, transmissions, bodies, seats, 

and instrument panels, consist of many parts that must work 

together. Designers must coordinate these systems to enable the 

successful final assembly of the vehicle. 

Automotive design and development in the United States have 

changed significantly over the last few decades. These changes 

have contributed to design and development complexity while 

simultaneously shortening development timelines and improving 

product quality. Prior to these changes, U.S. automakers 

considered new product development a linear process that took 5 or 

more years to complete. Automakers proceeded sequentially from 

concept design through product design, product engineering, and 

component sourcing to final assembly (Womack, 1989). 

U.S. automakers were compelled to rethink this linear approach to 

the vehicle development process in the face of stiff competition 

from Japanese automakers. In the 1980s, Japanese auto companies 

completed the automotive design process, from initial conception to 

 

1Most motor vehicles are designed and built under the platform concept. A 

platform is typically defined as the vehicle’s basic mechanical structure. 

Different vehicles based on the same platform commonly share several 

structural elements, such as the floor plan and door pillar (Automotive News, 

1997). The platform concept is becoming increasingly important as automakers 

seek to reduce costs by designing and producing more vehicles from common 

platforms. The number of platforms is an important measure of the annual 

design and engineering effort of each company. Models built on common 

platforms share a large percentage of parts and production processes, and the 

engineering and tooling for the vehicle’s basic structure account for the majority 

of total product development and launch costs (Womack, 1989). Thus, the 

potential savings from using an existing platform for a new model are 

considerable. Ford estimates that when they develop a new model on an 

existing platform, development and engineering costs fall by 15 to 20 percent 

(Automotive News Europe, 1997). Other automakers estimate even higher 

savings. 
Section 4 — STEP End Users 

4-3 

delivery to consumers, in 43 months, on average; their U.S. 

counterparts took 63 months (Womack, 1989). Thus, Japanese 

automakers were able to introduce novel design changes that met 

customer demand more quickly and cheaply, which accounted, at 

least in part, for their rising market share. 

Concurrent engineering, which integrates design, manufacturing, 

and support processes to provide early manufacturing input into the 

design process, is a fairly recent phenomenon in the U.S. 

automotive industry. The design of the GMC CK pickup in the early 

1970s marked the first time in the U.S. auto industry that 

manufacturing engineers formally worked with design engineers. 

This early effort at concurrent engineering was very successful and 

eventually led to its further acceptance in the auto industry. By the 

early 1980s, Chrysler had formed its Manufacturing Feasibility 

Group (MFG). The MFG worked under the philosophy that onethird to one-half of quality problems stemmed from poor design and 

that by integrating manufacturing and design engineering these 

problems could be reduced much more cheaply than they could if 

discovered later in the process. An important result of concurrent 

engineering was a reduction in the number of operations required to 

manufacture many parts. This translated into less equipment (and 

the required capital expenditure), fewer breakdowns, less 

downtime, and a shorter time to market (Dauch, 1993). 

As a result of these efforts, lead times for U.S. automakers have been 

falling since the mid-1980s and continue to fall. Buchholz (1996) 

reports that Chrysler’s average lead time was 54 months in 1987 

and was about 29 months in 1996. The Dodge Durango was 

developed in 23 months; the shorter lead time was attributable to 

heavy borrowing from the Dakota pickup (Brooke, 1998). The 

Concorde and Intrepid redesigns took about 31 months (Jost, 1998). 

GM has recently reported that its cycle time has fallen from 

36 months in 1995 to about 24 months in 1998 (Martin, 1998). 

The revised vehicle development process, as described by Whitney 

(1995) and illustrated in Figure 4-1, includes three phases: concept 

design, product design, and process or factory design. The 

development process is no longer linear; concurrent design and 

engineering require multiple iterations between phases and among 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

4-4 

Figure 4-1. The Automobile Design and Development Process 

Automobile design consists of three major phases: concept design, product design, and process or factory design. 

Parallel design operations occur for the automobile body and the power train. Market Needs/Goals Price Target Handling Noise,Vibration Fuel Economy Emissions Crash Worthiness Cost Styling Decision Styling: • Image • Aerodynamics • Body Shape Packaging: • Power Train Options • Fitting People Inside • Safety Body Engineering & Chassis Power Train Engineering Decisions Body Manufacturing Feasibility Body Factory Design and Procurement

Stamping

Body Shop

Power Train Manufacturing Feasibility

Power Train Factory

Design & Procurement

Engine

Transmissions

Power Train

Purchased Items

Body

Purchased Items Assembly

Process

or

Concept

Design

Product

Design

Factory

Design

Source: Whitney, Daniel. 1995. State of the Art in the United States of CAD Methodologies for Product Development. 

Final report under grants from Office of Naval Research and the National Science Foundation. Cambridge, MA: MIT, 

Center for Technology, Policy and Industrial Development. 
Section 4 — STEP End Users 

4-5 

activities within each phase. Feedback loops, which are illustrated 

in Figure 4-1 by the circular arrows, require an efficient exchange of 

information within and between phases. Interoperability problems 

can interrupt this process causing delays and increasing cost. 

Concept Design 

Before designing a new product, automakers survey the market’s 

needs. If the automakers identify a niche or need, they consider 

whether they can generate a suitable design at a competitive price 

that will meet the demands of the target market. They develop the 

concept by preparing computer or clay models. The styling process 

determines the body shape, image, and aerodynamics of the 

vehicle. Engineers analyze space claims and conduct interference 

checking in a simultaneous process called “packaging” to ensure 

that all passengers and components fit inside the vehicle’s exterior. 

Decisionmakers also select the power train options at this stage. 

Product Design 

Once company decisionmakers have approved the concept and 

styling, engineers begin building and testing a prototype 

automobile. Engineers must develop detailed part and component 

specifications for the vehicle’s body and its power train. Body 

engineers design about 20 exterior panels and 300 to 400 interior 

panels of various sizes. Simultaneously, power train engineers 

select or design the power train and determine how to arrange its 

components under the hood. They conduct packaging checks to 

ensure that there are no rival space claims and that everything fits as 

intended. Engineers also test the crash worthiness of the prototype 

and its noise-vibration-harshness (NVH) at this stage. 

Process or Factory Design 

As the product design progresses, the automaker proceeds with 

production procurement and design decisions for the body and 

power train parts. The degree of design activity conducted by 

suppliers varies along a continuum. At one extreme, suppliers 

simply manufacture parts based on the specifications and designs 

provided by the automaker. At the other extreme, the supplier is 

responsible for the component or system design, responding only to 

high-level specifications from the OEM. Efficient data exchange is 

very important because data transfers are routinely made along the 

supply chain. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

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In parallel, a factory and process are designed for the parts that will 

be produced in-house. The plant floor layout is determined, and 

tooling and fixtures are designed or procured. The major segments 

of the factory are power train, body shop, and final assembly. 

 4.1.2 The U.S. Automotive Supply Chain 

The U.S. automotive supply chain is difficult to characterize. Motor 

vehicles consists of so many components that the sheer size of the 

industry is overwhelming. Total employment in the industry was 

2.4 million in 2001 (see Table 4-1). Shipments amounted to 

$472 billion in 2000, or approximately 11 percent of the value of 

all manufactured goods produced in the U.S., according to the 2000 

Annual Survey of Manufacturers prepared by the U.S. Census 

Bureau (2002). 

Industry Subsector Employment 

Automotive OEMs 631,000 

First-Tier Suppliers 738,000 

Subtier Suppliers 1,029,600 

Total 2,399,000 

Source: RTI employment estimates are based on Center for Automotive Research at 

the Environmental Research Institute of Michigan (ERIM), now called Altarum, 

and the Institute for Labor Relations at the University of Michigan. “Contribution 

of the Automotive Industry to the U.S. Economy in 1998: The Nation and Its 

Fifty States.” Prepared for the Alliance of Automobile Manufacturers, Inc., and 

the Associations of International Automobile Manufacturers, Inc. Winter 2001. 

Further complicating an analysis of the automotive supply chain is 

the complexity of the relationships between customers and 

suppliers. OEMs design and produce only some of the parts and 

accessories that make up a vehicle; they procure others from firsttier suppliers. The first-tier suppliers can in turn outsource to subtier 

suppliers. A company’s position in the supply chain may differ 

depending on the part and the customer. Thus, a company that is a 

first-tier supplier of transmissions to one OEM may be a subtier 

supplier of other parts to the same or other OEMs. Furthermore, 

these companies, especially the subtier suppliers, often supply parts 

to customers outside the auto industry. 

Table 4-1. Employment 

in the Automotive 

Industry, 2001 

The automotive industry 

employs nearly 2.4 million 

Americans. 
Section 4 — STEP End Users 

4-7 

Production infrastructure, such as hardware, tooling, robots, and 

software, is also an important part of the supply chain (Fine and 

Whitney, 1996). The supply chain in the automobile market, 

therefore, comprises a long, dynamic, and complex network that 

involves the OEMs, first-tier suppliers, subtier suppliers, and 

companies that provide infrastructure. 

Finally, the relationships between the customers and suppliers are 

changing over time as competitive pressures force changes on the 

industry. In response to Japanese competition, U.S. automakers are 

reducing the time it takes to develop a concept into a final product 

by adopting the philosophies of core competence and concurrent 

design. The adoption of these philosophies is forcing significant 

changes in the relationships between the OEMs and their suppliers 

(Flynn et al., 1996). 

All of these factors complicate the task of clearly identifying and 

describing the different components of the automotive supply chain. 

Analysts have proposed two competing characterizations of the 

supply chain. The first identifies a company’s position in the supply 

chain based on its customers. If a company directly supplies the 

OEMs, it is a first-tier supplier; a subtier company supplies the first 

tier, and so on. However, this definition is difficult to 

operationalize in today’s business scenario because a supplier can 

simultaneously serve multiple customers. As noted earlier, the same 

company can act as a first-tier supplier on one project and as a 

subtier supplier on another project. 

An alternative characterization identifies a company’s position in 

the supply chain based on its products and its role in production. 

The first-tier suppliers are responsible for integrating systems, while 

the subtier supplies modules or subsets of systems, and the next 

subtier contributes components and basic material (Phelan, 1997; 

Flynn et al., 1996). 

Despite the limitations of both characterizations, it is useful to 

choose one to facilitate a discussion of the industry’s structure. We 

use the first method for characterizing the industry. Figure 4-2 

provides a simplified view of the overall industry structure. The 

OEM market is highly concentrated: a few large firms dominate the 

The supply chain in 

the automobile 

market comprises a 

long, dynamic, and 

complex network 

that involves the 

OEMs, first-tier 

suppliers, subtier 

suppliers, and 

companies that 

provide 

infrastructure. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

4-8 

Figure 4-2. U.S. Automotive Supply Chain 

The U.S. automotive industry is less concentrated and more competitive in downstream segments of the supply chain. 

Original Equipment Manufacturers

• highly concentrated

• “Big Three” (Chrysler, Ford, and GM)

First Tier

• hundreds of companies

• some large and some small

Subtier

• thousands of companies

• mostly small

Infrastructure

Suppliers

market. The first-tier market is more competitive. There are 

hundreds of first-tier suppliers, some of which are very large with 

sales of billions of dollars. 

The subtier market is even more competitive and consists of 

thousands of smaller companies in addition to a few large 

companies. Some first-tier suppliers also operate on the subtier by 

either vertically integrating or by supplying parts to their rivals on 

the first tier. Infrastructure suppliers often supply software, 

hardware, tooling, and robots to all levels of the supply chain. 

Some of the major players at each level of the automobile supply 

chain are characterized below. 

Original Equipment Manufacturers 

Fifteen major automotive OEMs operate in the United States. The 

“Big Three”—DaimlerChrysler, Ford Motor Company, and General 

Motors Corporation (GM)—are the major U.S. automobile OEMs, but 

they also own subsidiaries that produce other products, such as 

heavy- and light-duty trucks and school buses. In addition to the Big 

Three, several domestic truck manufacturers and foreign automobile 

producers have U.S. manufacturing plants either through joint 

ventures with other manufacturers or as wholly owned subsidiaries. 

These foreign manufacturers are included in this analysis because they 

are supplied by, and therefore exchange product model data with, 

U.S. firms and most have design teams based in the U.S. Therefore, 

we use OEMs in the broadest sense of the term to cover all firms 
Section 4 — STEP End Users 

4-9 

producing motor vehicles in the United States. Table 4-2 lists the 

major OEMs with manufacturing establishments in the U.S. This list is 

not comprehensive as several specialty manufacturers are not 

included therein, however the list gives a sense of the scope of motor 

vehicle production in the U.S. 

Table 4-2. Major OEMs Operating in the U.S. 

Fifteen major OEMs operate manufacturing facilities in the United States, employing nearly 587,000 people. 

OEM 

2001 Number of U.S. Employees 

(persons) 

Auto Alliance International Inc. 3,200 

BMW Manufacturing of North America, Inc. 4,000 

DaimlerChrysler Corp.a 123,600 

Ford Motor Company 163,200 

General Motors Corporation 212,000 

Honda of America Manufacturing, Inc. 13,200 

Mack Trucks, Inc. 5,700 

Mitsubishi Motor Manufacturing of America 4,000 

Navistar International Corp. 16,000 

New United Motor Manufacturing, Inc. 4,800 

Nissan Motor Manufacturing Corp USA 5,900 

PACCAR, Inc.b 18,000 

Suburu-Isuzu Automotive, Inc. 2,300 

Toyota Motor Manufacturing of USA, Inc. 7,600 

Volvo Trucks North America, Inc. 3,200 

aIncludes Chrysler Group, Mercedes-Benz, Freightliner, Sterling, and Western Star. 

bIncludes Kenworth and Peterbuilt. 

Source: Individual company 10-K reports and web sites. 

First-Tier Suppliers 

The first tier of the supply chain consists of several hundred 

companies. Each supplier, depending on its size and diversity, can 

produce anything as minor as a part for a major system (fasteners for 

the brake system) or as integral as the entire axle assembly. Many of 

the larger companies have several divisions and sites and are 

responsible for producing several parts, systems, components, and 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

4-10 

accessories. Many suppliers are also increasing their input into 

designing and manufacturing complete modules or systems rather 

than just building simple component parts based on OEM 

specifications. Therefore, sharing data throughout the product life 

cycle has become an important feature of a first-tier supplier’s 

operations. 

First-tier suppliers often work for multiple OEMs. For example, 

TRW conducts 23 percent of its business with Ford and 10 percent 

with GM. Johnson Controls earns 11 percent of its revenues from 

Chrysler and 10 percent from Ford (NIST, 1997). To varying 

degrees, each OEM requires its suppliers to use a specific CAx 

design system. For example, Chrysler requires all of its first-tier 

suppliers to use CATIA on their work for Chrysler (AIAG, 1997a). 

Ford has mostly shifted from Computervision (CV) to I-DEAS in 

power train design work and from PDGS to I-DEAS in body design 

work. GM uses Unigraphics (UG) but has become increasingly less 

stringent about “requiring” suppliers to use UG. The use of multiple 

CAx systems by the different OEMs forces many suppliers of 

multiple OEMs to purchase and maintain multiple design systems or 

invest in expensive translation software. Furthermore, many 

suppliers have customers outside the auto industry that require 

similar CAx data. This mixed-customer base exacerbates the data 

exchange problem by bringing even more CAx systems into the mix. 

Table 4-3 lists several of the largest members of the first tier of the 

automotive supply chain and their primary products. 

Subtier Suppliers 

The subtiers of suppliers consist of thousands of smaller companies 

that work with OEMs only indirectly via other suppliers. An 

exception would be some of the first-tier suppliers that also operate 

on the subtier by supplying parts to their rivals on the first tier. An 

example is Dana Corporation, which directly supplies Ford 

(18 percent of its revenue) and Chrysler (11 percent of its revenue). 

Dana also acts as a subtier supplier to Eaton, which, in turn, 

supplies Ford. The subtier companies that have no direct OEM 

business are relatively smaller companies that supply integral 

components or modules to the first tier without having much 

interaction with the OEMs. 

The use of multiple 

CAx systems by the 

different OEMs 

forces many 

suppliers of multiple 

OEMs to purchase 

and maintain 

multiple design 

systems or invest in 

expensive 

translation software. 

Business consolidation and 

the desire of the OEMs to 

reduce their direct supplier 

base is leading to fewer, 

larger first-tier suppliers. 

Many former first-tier 

suppliers are now 

becoming second-tier 

suppliers as first-tiers take 

on greater responsibilities 

for designing and 

producing major 

components. 
Section 4 — STEP End Users 

4-11 

Table 4-3. Characteristics of a Sample of Automotive First-Tier Suppliers 

First-tier suppliers vary in terms of their size and the range of parts and components they produce. 

Company 

2001 U.S. Automotive 

Employment Primary Products 

Delphi Automotive Systems 69,916 Brakes, steering, suspension, cockpit 

components, wire harness 

Visteon Automotive Systems 45,000 Steering, chassis, electrical, energy and engine 

management, interior, electronic components 

Dana Corporation 57,000 Structural, engine, chassis, sealing, brake and 

fluid system products 

Johnson Controls, Inc. 23,550 Seats, interior trim, batteries 

Robert Bosch Corporation 10,900 Safety systems, break systems, fuel injection 

systems, electrical and electronic equipment 

TRW, Inc. 32,800 Steering suspension, braking, engine 

components, fasteners, occupant restraint 

systems, electronic safety and security 

Denso International America, 

Inc. 

10,069 HVAC, electrical and electronic components, 

filters, fuel management systems 

Eaton Corporation 15,607 Powertrain system components, electrical and 

electronic controls 

ThyssenKrupp Automotive AG 17,800 Body systems, chassis modules, powertrains, 

suspensions, steering systems, drivetrains 

American Axle & 

Manufacturing Holding, Inc. 

9,629 Chassis and driveline systems, forged products 

Yazaki North America, Inc. 1,000 Electrical distribution systems, electronics, 

instrumentation, connectors and components 

Cummins Engine Co. 15,000 Diesel engines 

Valeo, Inc. 11,200 Electronic/electronics, thermal systems, 

transmissions 

Source: Individual company 10-K reports and web sites. 

 4.2 AEROSPACE INDUSTRY 

The U.S. aerospace industry is the largest in the world. U.S. 

aerospace manufacturers shipped $126.6 billion in products in 

2000 (U.S. Census Bureau, 2002), and employed 800,100 people, 

according to the Aerospace Industries Association (2001). The 

largest share of sales and employment is accounted for by a small 

number of firms that compete with Europe in the global market. 

Like many global markets, the aerospace industry is under pressure 

from commercial and government clients to produce more effective 

and efficient products at a reasonable cost (see Table 4-4). 

Recently, European consortia have gained market share and have 

become a force in commercial and scientific markets that were 

traditionally American dominated. 

The U.S. aerospace 

industry is the largest in the 

world. U.S. aerospace 

manufacturers shipped 

$126.6 billion in products 

in 2000, and employed 

800,100 people. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

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Table 4-4. Aerospace Product Categories 

In addition to commercial aviation aircraft, the U.S. aerospace industry manufactures satellites and missile systems, 

among other products. 

Large Transports Space-Launch Vehicles 

General Aviation Aircraft Satellites 

Rotorcraft Missile Systems 

Regional Jets Defense Aviation 

Aerospace firms rely on CAx technologies to reduce design and 

development costs, which in turn make the industry’s output more 

price competitive. The aerospace industry has been very active in 

the development and implementation of STEP. 

In this section, we discuss the types of aircraft and other aerospace 

products produced in the U.S. and describe the design and 

development process. We focus on the methods used to design 

commercial aircraft and the roles CAx systems play in the design 

process, including information on current aerospace trends, the 

major manufacturers, and their suppliers. 

 4.2.1 Aerospace Design and Development 

This section provides an overview of the aerospace design and 

development process and the methods used in commercial aircraft 

design. The same basic methods are used to design most other 

aerospace products. Where appropriate, differences in CAx and 

PDM requirements among commercial aircraft, military aircraft, and 

other aerospace products are highlighted. 

Aircraft design is a compromise among many competing factors and 

constraints. Designers must balance aerodynamics and geometry, 

propulsion, and airworthiness with fuel efficiency, end-use 

application, and cost. The process is labor-intensive and the design 

and development process requires the participation of many 

specialist departments. These specialty departments make their 

contributions and then present the designs to technical and 

economic evaluators, who coordinate a systematic search for the 

optimum configuration. 

The design process itself typically begins with the identification of a 

“need.” This need may come from customers, market analysis, or 
Section 4 — STEP End Users 

4-13 

the further development of an existing product line (e.g., Boeing’s 

737 line). New designs may also be initiated because of new 

technologies or innovations that show potential for enhancing enduse opportunities and/or economizing on costs (Jenkinson, Simpkin, 

and Rhodes, 1999). Designers work with customers, technical 

teams, and financial teams throughout the design and development 

process to determine and meet project specifications and regulatory 

and economic criteria. 

Project design in the aerospace industry typically involves three 

stages: concept, preliminary, and detail design studies. These 

stages tend to overlap. Figure 4-3 illustrates the design and 

development phase for commercial aircraft, and includes the criteria 

that are taken into account during each step. The process is similar 

for military aircraft, rockets, and rotorcraft, although the criteria 

evaluated at each step may differ. 

Figure 4-3. Aerospace Design and Manufacturing Schedule 

Preliminary design phase

Conceptual phase

Detail design phase

Project studies start

Configuration fixed

Testing

Project design Detail design

Drawings released for manufacture

Manufacture

Cost escalation
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Concept Design 

Concept design studies incorporate conventional and novel 

configurations to determine layouts that are technically feasible and 

economically viable. All options and aspects are considered. 

During this phase, each alternative must be investigated as 

completely as the level of time and detail allow. The quantity of 

data generated on each design is relatively limited and the amount 

of manpower expended is small. A detailed analysis of each design 

at this stage is not economically feasible and may be of limited 

value because most of the concepts are discarded (Jenkinson, 

Simpkin, and Rhodes, 1999). For designs that are either 

redevelopments or based on conventional/historical designs, 

experience from previous designs provides a base of knowledge 

about size, layout, and operating parameters. 

Preliminary Design Studies 

Preliminary design studies advance concepts that were not 

eliminated as too risky or unfeasible. Concepts are more rigorously 

studied and evaluated during this stage, and all parameters remain 

variable. The primary objective during this stage is to determine the 

optimum geometry. 

Designers determine a “baseline” design, and then develop several 

variations. At the same time, the design team also studies its 

competitors’ products, performs trade-off studies in detailed 

technical areas, and tests the sensitivity of the baseline design to 

changes in design constraints (Jenkinson, Simpkin, and Rhodes, 

1999). Key issues to be explored during this phase include 

aerodynamics, propulsion, weights, and structures. 

Detailed Design Studies 

Detailed design studies begin at the end of the parametric analyses 

of the baseline design. The distinction between the preliminary and 

detail design phases is somewhat blurred due to the individualistic 

definition of detail design in the project stage. The two parts are 

sometimes linked and termed the “preliminary design phase.” The 

project design activity ends when the configuration is determined 

and a decision is made to proceed to the detail design phase. 

Designers then determine the project’s layout in greater detail, 

beginning to finalize the new design. External shapes and the 
Section 4 — STEP End Users 

4-15 

structural framework are fixed. Few radical changes to layout and 

geometry are made because any major changes may invalidate 

analyses already conducted by other departments and may return 

the design to earlier design stages. Detailed optimization studies 

are limited to the parts and systems to be incorporated into the 

overall design. Detailed component geometry is specified and the 

manufacturing processes are planned in this phase (Jenkinson, 

Simpkin, and Rhodes, 1999). At the end of this process, the design 

is released for manufacture and testing. 

 4.2.2 The Role of CAx Systems in the Aerospace Industry 

As in the automotive industry, the aerospace industry adopted CAx 

technologies primarily to support concurrent engineering. 

Aerospace manufacturers accrue the same categories of benefits as 

the other two industries covered in this report. The discussion that 

follows explores the ways in which the aerospace industry has 

benefited and continues to benefit, including two examples at 

Boeing and Lockheed Martin. 

Aerospace firms rapidly incorporate new technologies into their 

design and production processes to enhance their competitiveness. 

This is particularly true of the larger firms, whose products are 

becoming more expensive as they become more sophisticated. The 

benefits of new, cost-saving technologies help offset the research 

and development costs, making end-products more viable. This is 

particularly true during an area of reduced U.S. and foreign 

government defense spending and invigorated foreign competition 

(Beckert, 1999). 

Prior to CAx adoption, aerospace firms (particularly aircraft 

producers) moved concepts and designs through specialist 

departments sequentially. Each department would conduct its 

analysis and make its contributions before routing the design to 

other departments. CAx systems today allow departments to access 

designs concurrently, reducing the time necessary to analyze and 

develop new designs. CAx technologies also allow more detailed 

investigations, such as dynamic flight simulation and structural finite 

element analysis, at earlier stages in the design process (Jenkinson, 

Simpkin, and Rhodes, 1999). 
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CAx systems enable virtual prototyping, in which various design 

concepts are explored in a virtual environment before costly 

physical prototypes are built (Beckert, 1999). Engineers can 

optimize their designs, contributing to better quality products. 

Boeing’s 777 aircraft is the first completely new large transport 

design developed without a physical mock-up. The plane has 

85,000 components and over 4 million parts. 

Boeing’s goal is to achieve the same number of manufacturing hours 

as the 767 for an aircraft with 57 percent greater empty weight. 

Boeing reported a 93 percent reduction in design changes 

compared with earlier aircraft at similar stages of development 

(Kaminski, 1996). 

Similarly, Lockheed Martin was able to meet its production 

schedule for the Atlas III rocket with significant cost savings because 

of these new technologies, which showed how 17,000 unique parts 

and assemblies would fit together in a virtual prototype (Beckert, 

1999). 

CAx technologies also permit supplier integration in the design and 

development process. Suppliers can receive electronically 

submitted component specifications, and begin to design 

components and prepare the tooling needed to manufacture them. 

Suppliers can then transmit data back to the OEM, informing the 

OEM of the component’s operating parameters, geometry, and 

feasibility. CAx enables a more seamless chain between suppliers 

and OEMs. 

The design process is still iterative, however, requiring months (if 

not years) to develop a final production design (NRC, 1998). 

Delays caused by the data exchange problems from one department 

to another can potentially be costly, although manufacturers may 

hedge against the latter by uniformly adopting one CAD suite. 

 4.2.3 The Aerospace Industry Supply Chain 

The market for aerospace products is highly competitive even 

though there are relatively few major players; an OEM competes 

against one or two other domestic firms and a handful of foreign 

firms for contracts. The industry is capital, intellectual, and 

technology intensive, and is relatively concentrated because of the 

resources needed to design and bring products to market. 

Boeing’s 777 aircraft is the 

first completely new large 

transport design developed 

without a physical mockup. 
Section 4 — STEP End Users 

4-17 

In many respects, the relationship between OEMs, first-tier 

suppliers, and subtier suppliers mimics that of the automotive 

industry: large OEMs, such as Boeing, Pratt & Whitney, and GE 

Aircraft Engines, are serviced by a series of major suppliers, which 

to a certain extent share design and engineering responsibilities for 

component systems and subassemblies. But the aerospace industry 

also has a number of high-profile market players that manufacture 

highly engineered products for specific applications, such as 

satellites, missile systems, and rockets. Consequently, these players 

consequently maintain nearly all design and engineering activities 

in-house, and send out detailed designs for contract manufacture. 

The remainder of this section discusses supply chain participants 

and reviews some of the industry trends affecting the health of the 

sector. 

Original Equipment Manufacturers 

The largest U.S. aerospace firms have operations in at least three of 

the four major market segments; aircraft, missile systems, spacelaunched vehicles, and satellite systems. These firms experience 

economies of scale as research in one segment generates 

opportunities and technical know-how that spills over into its other 

product lines. The push for greater opportunities and synergies in 

R&D and manufacturing techniques has recently led to a period of 

consolidation. 

Consolidation among major aerospace and defense companies has 

proceeded rapidly in the United States. This trend has enhanced 

U.S. competitiveness as whole in this industry (Wells, 2000). Three 

large companies currently dominate the industry: Boeing, Lockheed 

Martin, and Raytheon. These firms provide the bulk of the 

commercial and military aircraft, space-launch vehicles, and missile 

systems in operation in the United States today, and are the 

worldwide leaders in select product markets. 

Although the markets for large transports, satellites, and defense 

products are dominated by large companies, niche markets 

supported by smaller firms exist and continue to be profitable. 

Niche markets, such as rotorcraft and general aviation, include 

companies such as Textron (which owns Bell Helicopter and 

Cessna), Robinson Helicopter, Mooney, and New Piper Aircraft. 

Table 4-5 provides information about several leading OEMs. 
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Table 4-5. Aerospace Original Equipment Manufacturers (OEMs) 

Company 

2001 U.S. 

Employment Aircraft 

Missile 

Systems 

Space 

Launch 

Vehicles 

Satellite 

Systems 

Alliant Techsystems, Inc. 11,600 X 

Boeing Co. 188,000 X X X X 

Fairchild Dornier 2,884 X 

General Dynamics Corp. (including Gulfstream 

Aerospace Corp.) 

43,400 X X 

Kaman Corp. 3,780 X 

Lockheed Martin Corp. 125,000 X X X X 

Mooney Aircraft Corp. 60 X 

Motorola, Inc. 111,000 X 

Northrop Grumman Corp. 44,600 

Orbital Sciences Corp. 1,800 X X 

New Piper Aircraft, Inc. 1,000 x 

Raytheon Company 87,200 X X X X 

Robinson Helicopter Co. 600 X 

Sikorsky Aircraft Corp. (a unit of United 

Technologies) 

9,000 X 

Loral Space and Communications Ltd. 3,400 X 

Spectrum Astro, Inc. 250 X 

Textron, Inc. (Incl. Cessna and Bell Hilcopter) 51,000 X 

TRW, Inc. 93,700 X 

United Defense 5,300 X 

Source: Individual company 10-K reports and web sites. 

Suppliers 

The aerospace supply chain consists of several hundred companies. 

A supplier, depending on its size and diversity, can produce 

anything as minor as a part for a major system (fasteners for the 

brake system) or as integral as the aerostructures (frames that 

comprise a vehicle’s exterior and wings). Many of the larger 

companies have several divisions and sites and are responsible for 

producing several parts, systems, components, and accessories. 
Section 4 — STEP End Users 

4-19 

Many suppliers are also increasing their input into designing and 

manufacturing complete modules or systems rather than just 

building simple component parts based on OEM specifications. 

Therefore, sharing data throughout the product life cycle has 

become an important feature of a supplier’s operations. 

OEMs are becoming more vertically integrated and demanding, and 

many suppliers are reacting by purchasing other suppliers to 

become more vertically integrated, to lower costs, and to enhance 

economies of scale. OEMs may also subcontract to one another. 

For example, Northrop Grumman supplies the aft fuselage of the 

F-18 E/F fighter to Boeing. 

Table 4-6 lists a sampling of some of the largest and smallest 

suppliers in the aerospace industry that do not also manufacture 

aircraft. Many of these companies are involved in multiple lines of 

business; all the sales and employment listed with each company 

are necessarily directly associated with their aerospace products. 

Table 4-6 also includes the major U.S. engines suppliers, such as 

General Electric and United Technologies’s Pratt & Whitney. It 

should be noted that for certain types of aircraft, usually commercial 

airlines and large military transport, engines are purchased 

separately from the aircraft. However, for other types of aircraft, the 

engines are part of the original equipment. 

Industry Trends 

Large Transports. The market for large transports is closely tied to 

economic growth, with a lag of about 3 or 4 years (Wells, 2000). 

As economies grow, passenger travel increases, which fuels demand 

for these aircraft. The 2000 U.S. value of shipments for this segment 

is anticipated to be $26.6 billion on 480 units. 

Modifications to U.S.-built large transports are expected to be based 

on variations of existing designs for the near future. Boeing has no 

plans to introduce a new aircraft, having just launched the 777. 

Boeing’s objectives are to enhance existing designs with the goal of 

building aircraft that fly faster, higher, and farther on less fuel. Both 

Boeing and its rival, Airbus, aim to reduce production costs, 

pollutants, and noise, while adding more seats. 
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Table 4-6. Sampling of Aerospace Industry Suppliers 

Company 

2001 

Employment Sample Business Area(s) 

Aerostructures Corp. 2,800 Aerostructures 

Argo-Tech Corp. 696 Fuels systems and pumps 

Ball Aerospace & Technologies Corp. 2,238 Satellite and communications components 

Barnes Group 5,150 Machined and fabricated components and 

assemblies 

Goodrich Co. 19,020 Aerostructures, landing systems, maintenance, 

repair, and overhaul, sensors and integrated 

systems, mechanical systems 

Crane Co. 9,600 Braking systems 

Curtiss-Wright Corp. 2,625 Motion control systems 

DRS Technologies, Inc. 2,780 Electronic and communications systems 

EDO Corporation 1,603 Mechanical systems 

Esterline Technologies Corp. 4,100 Components, lighting, cable assemblies 

General Electric Co. 310,000 Engines and engine components 

Harris Corp. 10,100 Communications systems and electronic 

components 

Heico Corp. 1,102 Space and aircraft parts 

Hexcel Corp. 5,376 Structural materials 

Honeywell International, Inc. 115,000 Engines, flight and landing systems, avionics, 

lighting 

LMI Aerospace, Inc. 748 Framed aluminum parts 

Pacific Aerospace, Inc. 1,041 Electronics and metal components and 

subassemblies 

Parker Hannifin Corp. 46,300 Hydraulic systems 

Hamilton Sundstrand 17,200 Mechanical systems 

Woodward Governor Co. 3,654 Fuel systems 

Pratt & Whitney 30,000 Engines 

Source: Individual company 10-K reports and web sites. 

Like Boeing, Airbus intends to continue the redevelopment of 

existing lines, but also plans to continue its development of super 

carriers meant to seat 500 or more passengers on two decks. The 

designs of both firms will incorporate new technologies and 

materials, including advanced composites and alloys. 
Section 4 — STEP End Users 

4-21 

Defense Aviation. The largest defense contractors, Boeing and 

Lockheed Martin have been awarded contracts amounting to over 

$20 billion per year in the late 1990s for the development of new 

fighter aircraft. These companies have various projects under 

development, all of which are expected to have high export 

potential (Wells, 2000). Current projects include the Joint Strike 

Fighter to replace aging F-16s, F-22 Raptors to replace F-15s, large 

transports to replace C-130s, and new bombers, helicopters, and 

refuelers. The health of this market is directly related to U.S. 

defense spending and is subject to political uncertainty. However, 

total U.S. defense spending has been increasing moderately after 

cuts that brought totals from $163.7 billion in 1985 to $128.8 

billion in 1998. The 2000 U.S. value of shipments for the defense 

aviation segment is anticipated to be $15 billion for 515 units. 

General Aviation and Regional Jets. New federal programs and 

healthier domestic and foreign economies have fueled the market 

for general aviation aircraft. The Advanced General Aviation 

Transport Experiment, a cost-sharing industry-university-government 

partnership, is intended to develop new and more affordable 

technologies and standards. The demand for pleasure aircraft, 

business jets, and regional jets is up because of increased business 

travel, increased willingness for companies to operate their own 

aircraft, the rapid growth of shared ownership programs, and 

airlines’ increased use of regional jets to connect hub airports with 

smaller markets (Wells, 2000). The 2000 U.S. value of shipments 

for this segment is anticipated to be $6.26 billion for 2,240 units. 

Rotorcraft. The helicopter industry faces a number of problems, 

namely access to heliports, high operating costs, release of surplus 

military helicopters to the marketplace, and a shortage of realistic 

access to airspace. However, Kim Wells, an analyst at the U.S. 

Department of Commerce, expects the market to grow because of 

these crafts’ outstanding safety record, the variety of missions 

unique to helicopters, and new models (Wells, 2000). U.S. 

manufacturers are expected to ship 339 units in 2000, accounting 

for $197 million in sales. 

Missile Systems and Space Launch Vehicles. Many standard U.S. 

missile systems are aging, and the U.S. government is reacting by 

replacing these systems to maintain its capabilities and to deter 

potential threats from new missile programs in emerging markets. A 
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key trend is to improve targeting and guidance, which has translated 

into the incorporation of Global Positioning System technologies. 

U.S. manufacturers have $6.3 billion in orders in process (AIA, 

2000). 

The international commercial launch services market is expected to 

thrive over the next 5 years because providers of satellite services 

have been waiting to place new satellites into orbit (Wells, 2000). 

The world leader in this market is Europe’s Arianespace consortium, 

although Russia and the United States have competitive launch 

programs. Facing stiff foreign competition, most U.S. efforts have 

focused on the development of reusable launch vehicles, with 

varying degrees of success. U.S. manufacturers are also pursuing 

other avenues to enhance their competitiveness, including 

international government partnerships and joint ventures with 

European, Japanese, and Russian firms. 

Recent years have proved to be disappointing for U.S. launch 

vehicle firms because of Europe’s continued dominance and a string 

of U.S. launch failures. Launch failures in 1999 alone cost U.S. 

taxpayers over $3 billion. The 2000 forecasted value of shipments 

for missile systems and space launch vehicles is $21.9 billion. 

Space propulsion units are expected to be worth $3.8 billion to U.S. 

manufacturers. 

Satellite Systems. U.S. firms control 65 percent of the global 

satellite manufacturing industry (about $11.5 billion). The industry 

is under pressure from commercial and government clients to 

reduce the time needed to manufacture new satellites. New 

production efficiencies and design changes have reduced that time 

from 30 months to 18 to 24 months, with further reductions 

expected in the near future. However, overall quality has declined 

(Wells, 2000). The industry has recently recommitted itself to 

quality control and quality assurance, but it faces the dilemma of 

producing more complex, longer-lasting satellites in short time 

frames. 

 4.3 SHIPBUILDING INDUSTRY 

The U.S. shipbuilding industry is a mature industry in a state of 

change. The industry is enlisting new federal programs and 

technologies to rebuild its competitiveness in global commercial 
Section 4 — STEP End Users 

4-23 

ship markets in an era of fewer U.S. Navy contracts for warships. 

The use of CAD/CAM systems in the shipbuilding industry has cut 

lead times for design and development, as well as the amount of 

time and number of iterations needed to arrive at a working solution 

for the design of a new ship. 

The term “ship” typically refers to large ocean-going vessels 

intended for some purpose other than personal use or recreation. 

(Recreational watercraft are referred to as “boats.”) Typical 

shipyards are fixed facilities with drydocks and the fabrication 

equipment capable of building a large ship. In addition to ship 

construction, shipyards are engaged in many related activities, most 

importantly repair and maintenance of existing ships, conversion 

and alteration, and specialized services, such as ship scaling. 

Ship types fall into one of several categories (see Figure 4-4), 

including 

Z fishing vessels, such as trawlers and factory ships; 

Z harbor and work craft, such as tugboats and cable layers; 

Z dry and liquid cargo ships, such as cargo liners and oil 

tankers; 

Z passenger ships, such as cruise ships and ferries; and 

Z warships, such as aircraft carriers and submarines. 

U.S. firms have the capability to produce each ship type, although 

the largest shipyards specialize in warships, oil tankers, and cargo 

liners. There are currently 11 commercial vessels and 88 naval 

vessels either under construction or under contract. The total value 

of these projects is approximately $18.6 billion (U.S. Census 

Bureau, 2000). The U.S. ranks 12th in terms of the gross tonnage of 

ships built per year, behind South Korea, Japan, Poland, Spain, and 

Finland, among other countries. 

This section discusses the type of ships produced in the United 

States and the ship design and development process, focusing on 

the methods used to design ships and the roles played by CAD/CAM 

and PDM systems. The section concludes with information on 

current shipbuilding trends, the major shipbuilders, and their 

suppliers. 
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Figure 4-4. Ship Types 

Miscellaneous Offshore

 oil vessels

Fishing

vessels

Harbor/ocean

work craft

Dry cargo

ships

Liquid cargo

ships

Passenger

ships Warships

Hydrofoil craft Supply ship

Hovercraft Pipe layers

Submersibles Crane

barges

Semi-submersible

drill rigs

Drill ships

Accommodation

barges

Production

platforms and ships

Trawlers

purse

seiners, etc.

Factory

ships

Cable layers

Tugs

Floating dry

docks

Dredgers

Floating

cranes

Salvage/

buoy vessels

Lightships

Tenders

Pilot craft

Tramps

Cruise

ships

Cargo liners

Container

vessels

Barge

carriers

Ro-Ro ships

Refrigerated

cargo ships

Timber

carriers

Livestock

carriers

Car carriers

Oil tankers

Coastal

ferries

Chemical

carriers

Liners Cross-channel

ferries

Emigrant

and pilgrim

ships

(S.T.P.’s)

Harbor

ferries

Liquefied

gas

carriers

Bulk

carriers

 4.3.1 The Shipbuilding Design and Development Process 

Developing a concept for a new ship is a highly iterative process; 

many alternative solutions are considered before determining the 

most cost-effective design capable of meeting a customer’s 

requirements. Frequently, the ship design process is a matter of 

improving existing ship concepts, rather than developing 

completely new designs (Wijnolst, 1995). The basics of ship design 

are longstanding: the potential for innovation rests in the realm of 

optimization of known parameters and techniques, and the 

development and incorporation of emerging technologies and 

processes. 
Section 4 — STEP End Users 

4-25 

Ship Design Methods 

Ship design methods are divided into two general categories: 

comparison and iterative design. The comparison method replicates 

an existing design whereas the iterative method entails developing 

an entirely new ship design that is not based on previous designs. 

A substantial number of design cycles may be included in the 

comparison method; however, most of the basic parameters, ratios, 

and production techniques are predetermined. Design cycles are 

used to finalize the ship design’s particulars, not to rethink the ship 

design as a whole. 

The advantage of the comparison method is that the ship can be 

built relatively quickly and inexpensively, because most costs, 

weights, and measurements are based on an existing designs. 

However, this method can only be used when there is extensive 

information available on a preexisting ship. Shipbuilders seeking to 

reproduce an earlier design may use this method, but it is unlikely 

that a competing shipyard would have access to the specifics of that 

design. This method is generally used for cargo ships, ferries, and 

heavy-lift ships (Eyres, 1994). Furthermore, any flaws in the original 

design may also be incorporated in the replicated ship. Typically, 

once the first in a class of military ships has been designed, the 

follow-on ships of that class are modifications of the original. The 

CVN76 (Ronald Reagan) currently under construction at Newport 

News is basically the same design as the original ship in its class, 

the Nimitz, commissioned over 25 years ago. The same is true of 

the DDG-51 series of destroyers, of which over 25 have been 

produced at Ingalls and Bath, and most large commercial ships. 

However, most very large commercial and military ships are 

designed using the iterative method because they are more likely to 

have unique specifications for which existing designs are not 

available (Wijnolst, 1995). The iterative design method develops 

completely new designs, incorporating new dimensions, powering, 

and hull structures. Designers balance the dimensions and 

characteristics of the ship until the best design is developed to meet 

customer requirements. This process is frequently depicted as a 

spiral, where the outer circles represent early design iterations (see 

Figure 4-5). As the design is reworked and its characteristics are 

finalized, the designer moves toward the center of the spiral. The 
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Vessel

objectives

Ship Construction

Proportions

Lines

Hydrostatics

Freeboard

and subdivision

General

arrangements

Structure

Powering

Weight

estimate

Concept design

Capacities

Stability

Cost

estimate

Preliminary design

Contract design

designer works toward the next solution, adjusting and balancing 

the interrelated parameters as he/she goes (Eyres, 1994). 

There are three basic steps in the ship design and development 

phase: concept design, preliminary design, and contract design. 

Throughout the design process, designers are working with the 

shipowners, third-party consultants and naval architects, and 

subcontractors to finalize the new ship’s design (Eyres, 1994; 

Wijnolst, 1995). 

The concept design stage is the initial part of the design phase 

where the shipowner’s specifications are translated into naval 

architectural and engineering characteristics. The objective of 

concept design is to define a ship in sufficient detail to 

Z demonstrate that a customer’s key requirements (capacity, 

speed, regulatory approval, etc.) can be met; 

Z identify areas of high technical or operational risk; and 

Z establish a basis for the completed ship (Fuller, 1994). 

At the end of the concept design phase, enough information is 

available to perform a basic technical and economic assessment of 

Figure 4-5. Ship Design 

Spiral 
Section 4 — STEP End Users 

4-27 

the new ship. If the design sufficiently meets basic contractual 

details, the design process progresses. 

The preliminary design stage refines and analyzes the concept 

design. Major ship characteristics are determined that affect cost 

and performance, such the particulars concerning powering, 

structure, and proportions. This stage consists of several “loops” 

around the design spiral, with the goal being to optimize ship 

performance with respect to customer specifications. Designers 

ultimately arrive at a precise definition of a vessel that includes 

sufficient details to facilitate final contract negotiations. 

The contract design stage yields a set of plans and specifications 

that form an integral part of the final contract (Wijnolst, 1995). 

During this stage, designers develop detailed working plans 

covering the hull form, structural detail, powering, and the spacing 

of the ship’s frames. These plans also describe the installation and 

construction instructions for welders, ship fitters, outfitters, and the 

various subcontractors working on the project. 

 4.3.2 CAx Systems in the Shipbuilding Design and 

Development Process 

Computers have been applied in the shipbuilding industry for over 

30 years, first to automate repetitive manufacturing processes and 

later to streamline the design and development process. In the 

1960s and 1970s, computer models of hull structures were 

developed to connect and optimize the various “points” of the 

design. These models were first assembled in 2-D, but 3-D designs 

emerged as the technology advanced. CAD systems offered 

significant time and labor savings as well as a higher level of 

accuracy over the detailed drawing and drafting methods. 

Before CAD, shipbuilders relied on visualization and physical 

prototyping in the design process and would spend months building 

scale models to make sure all the key components connected 

properly and fit the space available. Now, the data are generated 

and presented on-screen, with the most appropriate materials and 

shapes chosen by the software program. Alternative designs that 

meet the requirements can be more quickly devised, giving builders 

the ability choose the design that is most durable and efficient 

(Freedman, 1994). 
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Currently, CAx and other IT systems help builders bring designs 

from concept to fabrication more quickly than before. 

Comprehensive information systems can be used to generate 

designs, share information with design contributors, order parts from 

subcontractors, and program machinery. It is estimated that the use 

of CAx systems has cut time needed to design and assemble a new 

ship by 30 percent (Loates, 2000). 

With CAx, engineers share designs with planning groups much 

earlier. Designers can electronically transmit plans to other parties 

for review and additions (Hays and McNatt, 1994). 

As in the automobile industry, production design in shipbuilding 

has evolved to incorporate the concept of concurrent engineering. 

Concurrent engineering allows the shipbuilder to advance the 

various aspects of a ship design and production in parallel rather 

than sequentially. This concept has the potential to greatly reduce 

lead times and production costs. The difficulty, however, lies in the 

need to precisely define and rapidly exchange large quantities of 

information among large numbers of people (Fuller, 1994). 

 4.3.3 Organization of the Shipbuilding Supply Chain 

The U.S. shipbuilding and repair industry is a mature industry 

centered on a small number of large shipbuilding companies and a 

loosely organized chain of suppliers. Although many firms operate 

in this industry, six large shipyards (indicated in bold print in 

Table 3-7) account for the bulk of the industry’s revenues and 

employment. According to the American Shipbuilding Association, 

these six shipyards employ 90 percent of the labor force involved in 

ship construction (2000a). As will be discussed in the Shipbuilding 

Suppliers section, the supply chain is loosely organized with 

suppliers providing raw materials that shipbuilders engineer to suit 

their specific purposes. With some noted exceptions, there is very 

little design and engineering interaction between OEMs and 

suppliers. 

Shipbuilders 

Two companies own the six largest U.S. shipyards: General 

Dynamics (NASSCO, Electric Boat, Bath Iron Works); and Northrop 

Grumman (Avondale, Ingalls, and Newport News Shipbuilding). 

These companies build aircraft carriers, destroyers, and submarines, 

among other naval vessels, and less frequently, commercial vessels 

It is estimated that 

the use of CAx 

systems has cut time 

needed to design 

and assemble a new 

ship by 30 percent 

(Loates, 2000). 
Section 4 — STEP End Users 

4-29 

(e.g., cargo ships and oil tankers). These two companies compete 

between one another for domestic and, when congressionally 

approved, foreign defense contracts. They are vertically integrated, 

producing many ship components in-house, and horizontally 

integrated, engaging in other defense industries such as missile 

systems and aerospace. 

The other shipyards listed in Table 4-7 engage primarily in ship 

repair firms (building an occasional new ship) or are niche-market 

producers that distinguish themselves from the larger builders. 

Todd Pacific Shipyard, Inc., and Alabama Shipyard, Inc., are 

examples of ship repair firms. Gunderson, Inc., and Halter Marine, 

Inc., are niche-market producers. Gunderson, Inc., specializes in 

producing large, ocean-going barges but has also built oil tankers. 

Halter Marine, Inc., produces tugboats, ferries, fishing boats, supply 

ships, and other mid-sized commercial ships. 

Table 4-7. U.S. Shipbuilding Companies 

There are eleven major shipbuilding companies in the U.S. Six, indicated in bold print, dominate the industry. 

Company Location Employment 

General Dynamics Corp. 

 Bath Iron Works, Inc. Bath, ME 8,000 

 Electric Boat Corp. Groton, CT 9,500 

 National Steel and Shipbuilding, Co. (NASSCO) San Diego, CA 4,000 

Alabama Shipyard, Inc., a unit of Atlantic Marine, Inc. Mobile, AL 900 

Halter Marine, a unit of Friede Goldman Halter, Inc. Pascagoula, MS 9,510 

Northrop Grumman 

 Avondale Operations Avondale, LA 5,500 

 Ingalls Operations Pascagoula, MS 10,000 

 Newport News Shipbuilding Newport News, VA 18,200 

Gunderson, Inc., a unit of Greenbrier Companies, Inc. Portland, OR 1,400 

Todd Pacific Shipyard, Inc. Seattle, WA 900 

Sources: Dun & Bradstreet via CompaniesOnline, http://www.companiesonline.com, a service of Terra Lycos, S.A., 

Barcelona, Spain, as obtained on December 11, 2000. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

4-30 

Shipbuilding Industry Trends 

The U.S. shipbuilding and repair industry has declined over the past 

3 decades, compelling the federal government to launch revival 

efforts. In 1981, 22 shipyards held ship construction contracts for 

the federal government, commercial customers, or both. Since that 

time, the number of active new construction shipyards building 

large ocean-going vessels has since fallen to six (ASA, 2000b). 

Numerous factors contributed to the industry’s decline, including 

Z the end of federal subsidies for commercial shipbuilding in 

1981, 

Z U.S. Department of Defense budget cutbacks, 

Z fierce international competition for commercial contracts, 

particularly from East Asia and Northern Europe, and 

Z rising labor and materials expenses relative to eastern 

Europe and Asia. 

Statistics from the 1997 Economic Census conducted by the U.S. 

Census Bureau (1999) indicate that the U.S. shipbuilding and 

repairs (NAICS 336611) 1997 revenues were $10.6 billion and 

industry employment was 97,385 (1999). Total employment 

actually engaged in ship construction was estimated to be 60,000 in 

1999, a 30 percent decline from 1990’s level. By way of 

comparison, during World War II, shipyards employed 1.2 million 

Americans (ASA, 2000b). 

The six remaining new-construction yards actively building ships 

are large production centers that survive mostly on U.S. Navy 

contracts. However, recent defense-spending cutbacks have 

compelled builders to reenter the commercial market. Because the 

rate of new U.S. Navy contracts has dwindled to eight ships per 

year, commercial contracts are quickly becoming an important 

source of revenue. Facilitating this return to commercial contracts 

are two federal programs: 

Z the Federal Ship Financing Guarantee Program (Title XI), 

which provides federal guarantees of private sector financing 

and refinancing of construction or refurbishment of U.S.-flag 

or export vessels; and 

Z the MARITECH program, which provides matching 

government funds to encourage the industry’s development 

and adoption of advanced technologies aimed at increasing 

competitiveness and improving the U.S. industrial base. 
Section 4 — STEP End Users 

4-31 

Although these federal programs do not fully compensate for the 

commercial shipbuilding subsidies canceled under the Reagan 

administration, they do help the industry’s competitive position 

relative to foreign suppliers. In recent years, new U.S. construction 

has included two new cruise ships (the first in 40 years), doublehulled oil tankers, and cargo ships. 

International competitiveness is a key issue among large 

shipbuilders. The ability to increase and maintain competitiveness 

rests with adopting productivity-enhancing technologies and 

improving relationships with suppliers. The market for large cargo, 

passenger, and heavy-lift ships is global. U.S. firms are competing 

with Asia and Europe, whose large industrial conglomerates 

frequently benefit from more wide-spread application of robotics, 

government subsidies, lower wage rates, and better supply chain 

management (Thurston, 1996; Fleischer, 1999).

Shipbuilding Suppliers 

The shipbuilding supply chain is not as complex or structured as the 

automotive supply chain, although its dynamics are fundamentally 

the same. The primary reason why the industry’s supply chain is so 

“loosely” organized is the small number of producers and 

consumers and because shipbuilders do not outsource as much of 

their production as the automobile industry. The large shipbuilders 

keep most activities “in-house.” Large companies typically only 

subcontract for propulsion and powering systems, navigation 

systems, heating/air-conditioning and ventilation systems, and 

interiors, for example. However, design and engineering 

consultants, such as John J. McMullen Associates and Gibbs & Cox, 

are increasingly becoming an integral part of the design and 

development phase. Table 4-8 lists a sampling of the U.S. 

shipbuilding subcontractors. 

However, DoD is increasingly promoting competition between 

shipbuilders and distributing contracts for ship components among 

several companies. These factors increase the need for 

interoperability of CAD/CAM data between different systems. 

Accurate estimates on the total employment at shipbuilding 

suppliers are difficult to obtain. The industry is supplied by a 

diverse supplier base, many firms supply a wide variety of 

industries, such as piping providers. As a result, employment 

Shipbuilders do not 

outsource as much of their 

production as the 

automotive or aerospace 

industry. As a result a 

larger share of their design 

activities are conducted 

“in-house.” 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

4-32 

Table 4-8. Sampling of the U.S. Shipbuilding Subcontractors 

Organization Location Line of Business Employment 

John J. McMullen Associates, Inc. Arlington, VA Naval architecture and marine 

engineering 

700 

Bird-Johnson Co., a unit of 

Ulstein Group (Norway) 

Walpole, MA Propellers, water jets, and thrusters 353 

Goodrich Charlotte, NC Components and Assemblies 27,044 

BWX Technologies, a McDermott 

International 

Arlington, VA Nuclear technologies 1,800 

Dresser-Rand, a unit of IngersollRand Corp. The 

Woodlands, TX 

Energy conversion 669 

Lockheed Martin Government 

Electronic Systems, a unit of 

Lockheed Martin Corp. 

Moorestown, NJ Defense and navigation systems 149,000 

Northrop Grumman Corp. Arlington, VA Information and defense systems 44,600 

Sperry Marine Inc., a unit of 

Lockheed Martin Corp. 

Charlottesville, 

VA 

Navigation systems 750 

Tribon Solutions (Sweden) Annapolis, MD Shipbuilding software NA 

Fairbanks Morse, a unit of Enpro 

Industries 

Beloit, WI Marine engines 9,000 

GE Marine Engines, a unit of 

General Electric Corp. 

Cincinnati, OH Marine engines 44,000 

Gibbs & Cox, Inc. Arlington, VA Naval architecture and marine 

engineering 

NA 

Hopeman Brothers Marine 

Interiors, LLC 

Waynesboro, 

VA 

Marine accommodations outfitters NA 

Jamestown Metal Marine Sales, 

Inc. 

Boca Raton, FL Marine interiors outfitters NA 

Triumph Controls, Inc. North Wales, 

PA 

Remote valve operators 275 

United Defense Industries, Inc., a 

unit of the Carlyle Group 

Arlington, VA Defense Systems 6,300 

Raytheon Company Lexington, MA Defense Systems; Electronic Systems 105,300 

York International Corp. York, PA HVAC 25,000 

Sources: Dun & Bradstreet via CompaniesOnline, http://www.companiesonline.com, a service of Terra Lycos, S.A., 

Barcelona, Spain, as obtained on December 11, 2000. Information Access Corporation. 2000. Business & Company 

ProFile [computer file]. Foster City, CA: Information Access Corporation. 

estimates of the shipbuilding industry range from 150,000 

(estimated by RTI) to about 880,000 employees, estimated by the 

American Shipbuilding Association (2001). For the purpose of 

extrapolating shipbuilding estimates to industry-wide in Section 8, 

we use the conservative estimate of 150,000 employees. 
5-1 

 Analysis 5 Methodology 

This section presents our approach to estimating the potential 

economic impact of STEP and the share that can be attributed to 

NIST’s contributions. We begin with a conceptual model for 

estimating economic impacts. From this model, technical and 

economic impact metrics are developed, along with an approach 

for weighting firm-level costs and benefit estimates to obtain 

industry-level economic impacts. 

 5.1 CONCEPTUAL APPROACH FOR ESTIMATING 

ECONOMIC IMPACTS 

Economic impact is defined as the net benefits over time associated 

with developing and adopting STEP functionality. Net benefits 

comprise decreased interoperability costs to industry (benefits) and 

less public and private resources needed to develop and implement 

STEP functionality (costs). A time series of benefits and costs is used 

to calculate the net present value (NPV) of economic impacts 

resulting from society’s investment in STEP. 

 5.1.1 Net Benefits from STEP 

Benefits accrue to end users through increased interoperability of 

CAx systems used in the product design supply chain. These 

benefits can be generally categorized as 

Z decreased avoidance costs, 

Z decreased mitigation costs, and 

Z decreased delay costs (RTI, 1999). 

The primary economic benefits are realized by end users of these 

systems in the automotive, aerospace, and shipbuilding industries. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

5-2 

However, for these benefits to be realized by end users, resources 

must be invested to make STEP functionality available. These 

resource investments include 

Z government sector involvement in the standards 

development process and demonstration of STEP; 

Z software developers’ costs associated with the standards 

development and demonstration (referred to as R&D), and 

expenditures to integrate STEP functionality into commercial 

products; and 

Z end users’ costs associated with the standards development, 

demonstration, and implementation of STEP. 

Conceptually, the change in economic welfare associated with STEP 

can be expressed in terms of the change in government expenditure, 

the change in software developer profits, and the change in 

manufacturers’ profits. This is referred to as “economic” welfare, as 

opposed to “social” welfare, because it does not include changes in 

the consumer surplus for purchasers of final products, due to 

changes in product quality or acceleration of product availability. 

A time series of changes in economic welfare is obtained by 

summing the incremental government expenditures and the change 

in profits for software developers (j) and manufacturers (I) over time. 

∆ economic welfaret = ∆ government expenditurest + 

Σ ∆ developers’ profitsit + 

Σ ∆ end users’ profitsjt. 

where 

∆ developers’ profitsit = ∆ software revenuesit – ∆ R&D costsit – 

∆ production/support costsit 

and 

∆ end users’ profitsjt = ∆ interoperability benefitsjt – 

∆ software expendituresjt – 

∆ standards development and 

implementation costsjt. 
Section 5 — Analysis Methodology 

5-3 

But, because 

a) ∆ software revenuesit =∆ software expendituresjt, and 

b) ∆ software production/support costsit ≈ 0 in the software 

industry, 

these terms drop out and STEP’s impact on economic welfare can 

be expressed as 

∆ economic welfaret = ∆ government expenditurest + 

Σ ∆ software R&D costsit + 

Σ (∆ end users’ standards development 

and implementation costsjt + ∆ users’ 

interoperability benefitsjt). 

Government expenditures include NIST and other government and 

academic entities that participated in the standards development 

process and in the creation of infrastructure tools to support the 

development and adoption of STEP. Software developers’ costs 

primarily include expenditures to implement STEP functionality into 

their products. However, both software developers and 

transportation equipment manufacturers contribute resources to the 

standards development and demonstration process, and for this 

conceptual illustration these expenditures are referred to as R&D 

costs. 

Benefits and costs actually occur as flows over time. Figure 5-1 

illustrates the net benefits (benefits less costs) over time. The curve 

in Figure 5-1 represents the total change in economic welfare for all 

entities over the life-cycle of a particular STEP functionality or 

application protocol. The costs of standards development, 

infrastructure tools, and software development are shown occurring 

early in the life-cycle of STEP functionality. Once commercial 

products are available with STEP functionality, aggregate 

manufacturers’ benefits increase as adoption occurs until the CAx 

markets are saturated.1 “Steady state” benefits (Z) continue to 

accrue until the STEP functionality incorporated with the software 

becomes obsolete. 

 

1In our context, net benefits to manufacturers include decreased interoperability 

expenditures less employee training costs. The cost of software purchases are 

not included because they have been netted out of the economic welfare by 

increased revenue for software developers. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

5-4 

Figure 5-1. Flow of Costs and Benefits 

Net Cash

Flow

Time

Standards

Development

Z

Software

Development

Steady State

Benefits

Benefits

–Expenditures

Benefits

Costs

Adoption by

Users

 5.1.2 NIST’s Contributions 

To model NIST’s contributions to the development and adoption of 

STEP, we will begin by investigating the traditional impact 

categories of “better-faster-cheaper.” Our preliminary hypotheses 

are that NIST’s contributions led to 

Z quality improvements and enhanced STEP functionality 

available to end users (better); 

Z acceleration of availability and adoption of CAX software 

products incorporating STEP (faster); and 

Z cost reductions in the development of the STEP standard, 

implementation of STEP into commercial software products, 

and adoption/implementation by end users (cheaper). 

Figure 5-2 provides a graphical representation of the impact of NIST 

contributions on the time series of benefits and costs. As illustrated 

in Figure 5-2, the core of our approach is to first develop a time 

profile of total net benefits associated with STEP. The total net 

benefits are defined as the difference in the value of net efficiency 

gains associated with STEP (i.e., decreased interoperability costs less 
Section 5 — Analysis Methodology 

5-5 

Figure 5-2. Impact of NIST’s Contribution to STEP 

Shaded area represents the approximate benefits from NIST. 

Without NIST

(b)

(c)

Without NIST

Net

Benefits

Time

(a)

Without NIST

standards development, software development, and adoption costs). 

The impact of NIST’s contributions are then evaluated relative to the 

total benefits of STEP. The dashed line in Figure 5-2 illustrates the 

counterfactual world without NIST and the shaded area represents 

the value of NIST’s contributions. 

The shift in the time profile of net benefits represented by the 

dashed line reflects the change in government expenditures, 

software developer costs, user costs (a), and user benefits (c) 

resulting from NIST’s contributions. The shift also reflects the 

acceleration effect (b) from NIST’s contributions. 

Following the better-faster-cheaper analysis, we asked industry 

representatives during the case studies and telephone/Internet 

interviews to qualitatively assess the impacts associated with 

specific NIST activities, investigating how NIST’s contributions 

influenced STEP development and adoption in terms of quality 

improvements, acceleration, and cost reductions. For example, the 

NIST STEP Class Library may have significantly lowered the cost of 

implementing STEP functionality into CAx software products and 

also moderately accelerated the implementation of certain STEP 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

5-6 

functionalities in these products. However, the STEP Class Library 

may have had minimal impact on the quality or efficiency of STEP 

functionalities available to end users. 

Underlying NIST’s impact on the timing of development and 

adoption decisions are structural market changes resulting from 

NIST’s impact on market failures. Potential market hypotheses that 

reflect NIST’s impacts on the supply and demand of CAx systems 

with STEP functionality include the following: 

Z NIST increased competition in the CAx software 

development market by lowering R&D costs of 

implementing STEP functionality for software developers. 

Lower R&D costs for software developers reduce barriers to 

entry and entice more developers to incorporate STEP 

functionality. This weakens individual vendor’s market 

power over “captive” customers as different systems become 

more compatible. 

Z NIST increased demand for CAx products with STEP 

functionality by providing testing programs and certification 

services that increased end users’ acceptances and lowered 

uncertainty over adoption costs. 

These market changes are indirectly captured in the acceleration and 

increased long-run market potential of STEP illustrated in Figure 5-2. 

In general, our conceptual approach is not to estimate shifts in 

supply and demand curves resulting from NIST’s contributions but to 

trace out changes in the diffusion of STEP functionality resulting from 

these shifts. However, it will be important to investigate structural 

changes when describing NIST’s role in mitigating market barriers to 

the development and adoption of STEP. 

 5.2 TECHNICAL AND ECONOMIC IMPACT 

METRICS 

As outlined above, investigating NIST’s contributions is a two-stage 

process. The first stage is to estimate the total costs and benefits 

associated with STEP for the different segments of the STEP supply 

chain (i.e., government expenditures, software developers’ 

expenditures, and end users’ adoption costs and resulting benefits). 

The second stage is to develop a counterfactual scenario describing 

the development and adoption of STEP in the absence of NIST’s 

contributions. The difference between the flow of net benefits in 

the realized (with NIST) and counterfactual (without NIST) scenarios 

will be the value of NIST’s contributions. This section presents the 
Section 5 — Analysis Methodology 

5-7 

impact metrics that we will use to estimate the benefits and costs of 

STEP for each of these two stages. 

Quantifying the economic impacts requires appropriate metrics that 

capture the most important benefits and costs. We developed two 

kinds of impact metrics: 

Z Technical impacts describe the effects of imperfect 

interoperability on the accuracy and usability of exchanged 

product data and the resources required (including time) for 

data exchange and product development. 

Z Economic impacts describe how technical impacts translate 

into changes in cost and economic activity. These measures 

can be either quantitative or qualitative. 

The technical and economic metrics will inform the surveys and 

guide our data collection activities. 

 5.2.1 Metrics for Measuring the Benefits and Costs of STEP 

In this section, we describe our approach for measuring the total 

benefits and costs associated with STEP. To support our data 

collection activities, we identify impact metrics for three distinct 

segments of the STEP supply chain: 

Z government and academic entities, 

Z software developers, and 

Z CAx end users. 

Economic Benefits of STEP 

Users of CAx software in the supply chains incur several types of 

costs related to imperfect interoperability. Reducing these costs are 

the benefits of STEP. Thus, we begin our taxonomy of the benefits 

of STEP with a discussion of the costs of interoperability. 

We focus on three types of interoperability costs. Manufacturers incur 

avoidance costs to prevent technical interoperability problems before 

they occur, mitigating costs to address interoperability problems after 

they have occurred, and delay costs that arise from interoperability 

problems that delay the introduction of a new product. 

Avoidance costs are primarily associated with maintaining 

redundant systems and include 

Z the cost of purchasing redundant CAx systems for the 

purpose of native format translation; 

Z the cost of purchasing for point-to-point translation software; 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

5-8 

Z training costs for maintaining designers’ skills in redundant 

CAx systems; 

Z productivity loss due to designers’ working on systems they 

are less familiar with; 

Z IT staff to support redundant CAx systems; and 

Z outsourcing costs incurred when outside companies are 

hired to provide data exchange services. 

Mitigating costs include 

Z the cost of reworking models that are part of the transfer 

process, and 

Z the cost of manually reentering data when methods of data 

exchange are unavailable or unsatisfactory. 

Delay costs include 

Z profits lost due to decline in market share caused by delays, 

and 

Z profits lost due to delay of revenues (discounts on the value 

of future profits). 

Table 5-1 provides the technical and economic impact metrics for 

end users that reflect these cost categories. RTI found in its 1998 

study of interoperability costs that mitigation costs were by far the 

largest portion of interoperability costs, accounting for approximately 

85 percent of costs. Most mitigation costs resulted from incorrect or 

incomplete data files that had to be reworked or reentered manually. 

Avoidance costs, such as supporting redundant CAx systems, 

accounted for 5 percent and delay costs accounted for 9 percent of 

interoperability costs (RTI, 1999). The objective of this study is to 

determine the impact of STEP on these interoperability costs. 

Interoperability problems in manufacturing industries affect society’s 

economic welfare in two ways: by increasing the cost of designing 

and producing final products and by delaying the introduction of 

new improved final products. An increase in the cost of designing 

and producing a new automobile or aircraft may lead to an increase 

in the equilibrium price of their respective markets. However, for 

the purpose of this study we measure all benefits of STEP at the 

manufacturers’ level of the supply chain in terms of decreased 

production costs and accelerated new product entry. We do not 

attempt to partition these impacts into producer and consumer 

surplus. 
Section 5 — Analysis Methodology 

5-9 

Table 5-1. Impact Metrics for Users 

We measured interoperability costs from several different sources. 

Source of Cost Components Technical Metric Economic Metric 

Avoidance Costs 

Redundant CAx 

systems 

Software licenses Number of software licenses 

required by type 

Investment in software 

licenses 

 Productivity loss Lost productivity and time 

spent on secondary systems 

Value of labor resources lost 

 System training Labor hours devoted to 

training and gaining 

competence with redundant 

systems 

Cost of labor time for 

redundant training 

 IT staff support Number of network 

administrators and software 

support specialists needed 

for redundant systems 

Cost of labor time spent 

supporting redundant 

systems 

Outsourcing data 

translation 

Third-party suppliers Jobs outsourced to thirdparty suppliers of data 

exchange services 

Cost of outsourced work 

Mitigating Costs 

Poor quality CAx 

files 

File transfer costs Staff time spent preparing 

and recreating transfer files 

using methods such as IGES 

and DXF 

Cost of labor on the sending 

and receiving side of the 

transfers 

 Manual data reentry Number of jobs that required 

reentry and labor cost per 

reentry job 

Total cost of manual data 

reentry 

Delay Costs 

Delays Sales forfeited Length of delay and the 

number of sales forfeited per 

period of delay 

Length of delay times the 

profits lost per period of 

delay 

Delayed profits Length of delay and the 

number of units that would 

have been sold per period of 

delay 

Value of profits with no 

delayvalue of profits 

discounted over period of 

delay 

Social Costs of STEP 

Participants throughout the supply chain contributed to the 

development, demonstration, and implementation of STEP. 

Table 5-2 presents the technical and economic impact metrics 

describing the costs for government, software developers, and end 

users in the transportation equipment industry. The technical 

metrics are mostly the staff time (hours) contributed to the standards 

development, demonstration, and implementation process. The 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

5-10 

Table 5-2. The Components of STEP’s Social Cost 

Industry 

Groups Standards Development Technical Metric Economic Metric 

Participation in STEP 

standards development 

organizations 

Labor expenses associated 

with participation in 

development of STEP 

functionality 

Annual hours times the labor 

rate times the number of 

years of STEP-related work 

Software development tools 

and testing tools 

Annual labor costs 

associated with developing 

and testing tools to support 

STEP’s integration into 

products 

Annual hours times the labor 

rate times the number of 

years of STEP-related work 

Software demonstration and 

certification services 

Annual labor costs 

associated with participating 

in STEP demonstration and 

certification proceedings 

Annual hours times the labor 

rate times the number of 

years of STEP-related work 

Software 

Developers 

Costs 

Expenditures to integrate 

STEP into products 

Annual labor costs 

associated with 

incorporating STEP 

functionality into software 

releases 

Annual hours times the labor 

rate times the number of 

years of STEP-related work 

Participation in STEP 

standards development 

organizations 

Dues and labor expenses 

associated with participation 

in STEP standards 

development organizations 

Dues plus average annual 

hours times the labor rate 

times the number of years of 

STEP-related work 

End-User 

Industry Costs 

Participation in STEP 

demonstration services (e.g., 

AutoSTEP, AeroSTEP, 

MariSTEP) 

Labor expenses and other 

costs associated with 

participation in 

demonstration services 

Fees incurred plus average 

annual hours times the labor 

rate times the number of 

years of STEP-related work 

NIST’s Expenses Labor hours and capital 

equipment 

Non-NIST government 

participation in STEP 

standards development 

organizations 

Dues and labor expenses 

associated with participation 

in STEP standards 

development organizations 

Dues plus average annual 

hours times the labor rate 

times the number of years of 

STEP-related work 

Public Sector 

Costs 

Non-NIST government 

participation in STEP 

demonstration services (e.g., 

AutoSTEP, AeroSTEP, 

MariSTEP) 

Labor expenses associated 

with participation in 

demonstration services 

Fees incurred plus average 

annual hours times the labor 

rate times the number of 

years of STEP-related work 
Section 5 — Analysis Methodology 

5-11 

economic metrics are the corresponding value of the labor efforts 

(wage rate times the number of labor hours) and other dues and fees 

paid to standards development organizations (such as PDES). 

Government expenditures are segmented into NIST expenditures 

and non-NIST public expenditures, including defense-related 

funding. Using information supplied by NIST, we explicitly quantify 

all NIST expenditures on STEP-related activities. These activities 

include contributions to the standards development process, 

software tools, and testing services. 

Expenditures by other government agencies and academic 

organizations are approximated based on information from PDES, 

Inc., and publicly available expenditure records; hence, they are 

estimated with less precision compared to NIST’s expenditures. As 

described in STEP: The Grand Experience (Kemmerer, 1999), the 

development (and continued development) of STEP standards 

represents a significant investment by a large number of government 

and academic entities. It is not within the scope of this project to 

conduct a complete cost accounting of the STEP development 

process. 

Software developers’ costs related to STEP include expenditures on 

the several standards and tools development categories (described 

in Table 5-2), plus expenditures for implementing STEP functionality 

into their CAx products. During the telephone interviews with 

software developers, we asked them to estimate the resources they 

invested in the standards development process as well as their 

expenditures for integrating STEP into their products. 

Users of CAx software have also been integrally involved in the 

STEP development process. For example, many manufacturers have 

participated in standards development and demonstration pilot 

programs. Table 5-2 describes the technical and economic cost 

metrics we will use to estimate user costs. 

 5.2.2 Metrics for Estimating NIST’s Impacts 

Above, we described our approach for estimating the benefits and 

costs associated with the development and adoption of STEP. In 

this section, we describe how NIST influenced these benefits and 

costs. Estimating the impact of NIST’s contributions on the 

development and adoption of STEP is not as straightforward as 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

5-12 

estimating the total impact of STEP. As discussed in STEP: The 

Grand Experiment (Kemmerer, 1999), STEP was a collaborative 

effort involving a wide range of government agencies, software 

vendors, and discrete parts manufacturing firms. 

Table 5-3 shows NIST’s contributions segmented into standards 

development, software development tools and testing tools, and 

demonstration and certification services. Our hypotheses are that 

NIST’s contribution improved the “quality” of STEP application 

protocols, accelerated the development/adoption of STEP 

functionality, and reduced the cost of development/adoption for 

software vendors/users. In each instance we consider a STEP world 

with NIST’s contributions and one without NIST’s contributions. 

For example, quality improvements capture the difference in STEP 

functionality and interoperability with and without NIST, and cost 

reductions include the difference in private and public expenditures 

needed to develop STEP with and without NIST. 

NIST’s Impact on Government and Academic Entities 

NIST’s participation in the STEP standards development process 

most likely reduced expenditures by other government agencies and 

academic institutions. At a minimum, NIST’s expenditures on 

administrative activities offset expenditures that would have been 

made by other government and academic entities. 

However, we hypothesize that in the absence of NIST other 

government and academic entities may not have been able to 

replicate NIST’s contributions as efficiently. NIST’s specialized 

technical capabilities positioned it to lead the development of 

generic technologies such as EXPRESS. In addition, NIST’s industry 

contacts claim that its reputation as an impartial/independent entity 

helped enabled NIST to build consensus for standardization. 

NIST’s Impact on Software Developers 

Software vendors of CAx products are the most knowledgeable 

about how NIST’s contributions influenced the development and 

adoption of STEP. For example, software developers will not only 

be able to provide information on NIST’s impact on their own R&D 

expenditures and time to market, but also on how NIST’s 

demonstration and certification services affected users’ adoption of 
Section 5 — Analysis Methodology 

5-13 

Standards Development 

 Administrative contributions 

 Editing directives 

 Resource integration 

 AP development guidelines 

 Technical contributions 

 EXPRESS (ISO 10303-11) 

 AP203 (ISO 10303-203) 

 Mapping Table Generator 

 PDM schema 

Software Development Tools and Testing Tools 

 NIST EXPRESS Toolkit 

 STEP Class Library 

 Expresso 

 STEP File Checker 

 STEP Geometry Analyzer 

Demonstration and Certification Services 

 AutoSTEP testing project 

 CAx and PDM implementor forums 

 STEP certification services 

STEP. The technical and economic metrics to support the 

development of the software developer survey instruments are 

presented in Table 5-4. 

NIST’s Impact on Users 

The benefits of STEP are realized by users of CAx software. 

However, because users are at the end of the STEP supply chain it 

will be difficult to quantify the impact of many of NIST’s 

contributions on this population.2 The impact metrics are described 

in Table 5-4. 

 

2If users were not actively involved in STEP development themselves, they may 

not know the extent of NIST’s contributions in the development process. 

Table 5-3. Summary of 

NIST’s Contributions to 

STEP 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

5-14 

Table 5-4. NIST’s Impact 

Impact Category Hypothesis Technical Metric Economic Metric 

Costs NIST’s leadership and 

administrative contributions 

improved the efficiency of 

the standards development 

process 

Change in resources 

dedicated to the 

standards development 

process 

Change in labor 

expenditures, travel, and 

other ODCs 

 NIST’s software tools 

reduced the cost of 

implementing STEP 

functionality into CAx 

systems 

Change in R&D 

resources for software 

developers 

Change in software R&D 

costs 

Acceleration NIST’s contributions 

accelerated the 

development of STEP, its 

implementation by vendors, 

and adoption by industry 

Change in time of the 

release of standards 

supporting different 

STEP functionality 

Value to end users of 

accelerating the availability 

of different STEP 

functionalities 

Quality NIST’s contributions resulted 

in “better” STEP standards 

Lower cost of 

interoperability 

Value to end users of 

enhanced STEP 

functionalities 

We asked users about NIST’s demonstration and certification 

services and how these influenced their adoption expenditures and 

time table. In addition, we asked used about quality enhancements 

(i.e., increased STEP functionality) attributed to NIST’s activities. 

 5.3 CALCULATING MEASURES OF SOCIAL 

RETURN 

Based on the technical and economic metrics described above we 

will develop time series of benefits and costs associated with STEP. 

The timeline of social costs and economic benefits will be used to 

develop three summary measures of the potential economic impact 

of STEP: the benefit-cost ratio, the NPV, and the social rate of 

return. These measures are described below. 

Benefit-to-Cost Ratio. If Bt is incremental net benefits accrued to all 

beneficiaries (net of any non-NIST development and adoption costs) 

in year t, and Ct is the cost to NIST of the program in year t, then the 

benefit-cost ratio for the program is given by 
Section 5 — Analysis Methodology 

5-15 

 (B/C) = 

∑

i=0

n B(t+i)

(1+r)i

∑

i=0

n C(t+i)

(1+r)i

 (5.1) 

where t is the first year in which benefits or NIST costs occur, n is 

the number of years the benefits or costs occur, and r is the social 

rate of discount. Because benefits and program costs may occur at 

different time periods, both are expressed in present-value terms 

before the ratio is calculated. 

The Net Present Value (NPV) of STEP is 

 NPV = ∑

i=0

n









 B(t+i  )

(1+r)i

 – Ct+i

(1+r)i . (5.2) 

The social rate of return is the value of r that sets NPV equal to 0 in 

Eq. (5.2). 

In addition, we calculate measures of economic return associated 

with NIST’s expenditures. To estimate the impact associated with 

NIST’s contributions we compare the time series of benefits with 

and without NIST. For example, as shown in Figure 5-2, an 

acceleration effect (shown as shift b) leads to benefits being realized 

sooner. By comparing the NPV of shaded are in Figure 5-2 to the 

NPV of NIST’s expenditures we can estimate measures of economic 

return to NIST’s contributions. 

6-1 

 Primary Data 6 Collection 

To estimate the economic impact of STEP as hypothesized in 

Section 5, we interviewed STEP end users and CAx software 

developers. Figure 6-1 provides an overview of our approach to 

estimating industry-level impacts. The approach begins with 

informal interviews conducted to identify the activities and types of 

information exchange for which STEP is applicable in each of the 

three industry sectors being studied: automotive, aerospace, and 

shipbuilding. Case studies and surveys are then used to quantify the 

technical and economic impact metrics. Finally, secondary data 

were collected to extrapolate per-employee impact estimates to the 

industry sectors as a whole. This section describes the data 

collection processes 

 6.1 END-USER INTERVIEWS 

The end-user survey component of this research project comprised a 

significant percentage of the project’s total effort. Over a 5-month 

period nearly 70 companies participated, either through on-site 

interviews, telephone interviews, or electronic mail surveys. The 

interviews and surveys investigated their exchange of product model 

data between internal divisions and with suppliers, teaming 

partners, and customers. The data collected from these surveys 

informed the counterfactual scenario and the economic model that 

quantifies the economic impact of using STEP to mitigate and avoid 

interoperability problems. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

6-2 

Figure 6-1. STEP Estimation Methodology 

ERIM/RTI Informal

Interviews

Case

Studies

Telephone/Internet

Interviews

Secondary

Data

Applicability of

STEP

Cell Level

Impact

Estimates

Firm Level Input

Estimates

Industry Impact

Estimates

STEP Estimation Methodology

Secondary Data List

• Industry

Employment by

Industry and

Market Segment

• Wage Rates, by

Employment

Category

• Software Costs

Telephone Interviews List

• Number of Employees, by

Employment Category

• Mitigation Activities

• Avoidance Activities

• Number of Data Exchanges,

by File Type

Cell Level Cost Analysis

• Avoidance Costs

(Firm Level)

• Mitigation Costs

(Exchange Level)

Data Exchange

Matrix

Activity

Nature of Data Exchange

Figure 6-1 describes the type of information collected as part of the 

informal interviews, case studies, and telephone/internet interviews. 

The rationale underlying the decision to employ three interview 

methods was to use the informal scoping interviews and case 

studies as a means for gathering in-depth information on how STEP 

may be deployed within an organization and how different 

operations may be impacted by that deployment. The case studies 

involved a series of intensive, 1- to 2-day interviews with 

representatives employed throughout a firm’s organizational 

hierarchy. Seven case studies were conducted. Each case study 

involved interviews with the firm’s data exchange team, CAD 

designers, technical systems managers, and operations executives. 

Information was collected on how STEP is currently used within 

their organization and on how it may be used in the near future. 

The case studies provided the foundation for developing an 

accurate picture of the benefits of STEP versus an alternate method 

of data exchange (primarily IGES). 
Section 6 — Primary Data Collection 

6-3 

The experience and knowledge gained from the case studies were 

leveraged to develop an efficient survey instrument to be used 

during the telephone interview process. For the most part, 

respondents to the telephone survey were technical systems 

managers or data exchange managers, depending on who the firm 

felt was the most appropriate individual to respond to our request 

for an interview. The remainder of this section discusses the topics 

covered by the survey and further explores the respondent 

identification, selection, and population. 

 6.1.1 Case Study and Survey Topics 

During the case studies and telephone interviews, we asked 

respondents to reflect on the role STEP currently plays and may 

potentially play within their organizations. The case studies were 

conversational using a question and answer format in an informal 

setting. The telephone survey was more structured and consisted of 

a series of short answer and tabular format questions. Appendix A 

contains a copy of the telephone survey, which is also summarized 

below. 

The survey’s first section asked for some background information on 

the respondent and his or her function within the firm. The 

remaining sections asked for the following information: 

Z Data Exchange Activity: This section explored the current 

methods employed by the firm to exchange product model 

data with customers, teaming partners, and suppliers. 

Z Software Systems and Support: We next asked questions 

about the number of CAx systems maintained by the firm 

and the number of licenses held for each system. We also 

asked for data on the number of users working in each 

system and whether some users worked in more than one 

system. 

Z Data Transfers: This section asked about the different 

neutral formats, including STEP, and point-to-point 

translators the firm may use to exchange data both internally 

and externally. It also asked the firm to approximate file 

transfer volumes. 

Z Manual Reentry: This section asked whether there are 

instances when the firm manually reenters data because of a 

data exchange failure. If the firm currently uses STEP, they 

were asked whether STEP has reduced the prevalence of 

manual reentry jobs. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

6-4 

Z NIST’s Role in the Development of STEP: The final section 

asked the firm whether they were familiar with NIST’s STEP 

activities. If they were, then they were asked to comment on 

the activities with which they were familiar and whether 

NIST had an impact on the timing of their adoption of STEP. 

The survey instrument contained in Appendix A was used primarily 

as a discussion guide. It was shared with respondents prior to the 

interviews and served as the general structure for the discussions. 

However, in many cases it was the unanticipated information and 

comments obtained during the interviews that proved most 

insightful. In some cases respondents were not available for 

telephone interviews but did agree to complete the survey 

electronically and return the survey to us via electronic mail. 

 6.1.2 Case Study and Survey Respondents 

Table 6-1 provides a summary of the 66 firms that participated in 

the project. Six of the firms, encompassing OEMs, first-tier 

suppliers, and a tool and die company, agreed to partner with us to 

conduct comprehensive case studies of their data exchange 

operations. The remaining 60 firms that participated in the 

telephone interviews were from a randomly selected sample of 100 

firms drawn from a larger database of manufacturing firms listed by 

NAICS-code. Therefore, the survey response rate is 60 percent. 

In addition to the firms that supplied data and are therefore included 

in our survey response statistics, a large number of industry experts 

representing trade associations and research outfits also contributed 

to this body of research. 

 6.2 SOFTWARE DEVELOPER INTERVIEWS 

Whereas the end-user interviews sought to quantify the impacts of 

STEP on operations, the software developer interviews focused on 

(1) identifying and quantifying the cost of integrating STEP 

functionality into CAx systems and (2) the impact NIST has had on 

the development and deployment of STEP. 

Software developers are actively involved in the development and 

testing of STEP APs and routinely participate in standards 

conferences and workshops. We conducted telephone interviews 

with several software developers to gather information on 
Section 6 — Primary Data Collection 

6-5 

Industry Number of Firms 

Automotive 36 

 Automotive OEMs 

 First-tier suppliers 

 Subtier suppliers 

Aerospace 19 

 Aircraft OEMs 

 Aircraft parts 

 Aircraft engines and engine parts 

 Missile and space systems 

Shipbuilding 4 

 Shipbuilders 

 Shipbuilding systems suppliers 

Specialty Tool and Die 7 

Total 66 

Z standards development activities, 

Z software development tools and testing tools, 

Z software demonstration and certification, and 

Z expenditures to integrate STEP into their products. 

 6.2.1 Software Developer Survey Topics 

The software developer survey gathered information on the impact 

NIST has had on the development and incorporation of STEP 

functionality. The survey instrument included in Appendix B 

contains three main sections: 

Z Product Information: This section asked the developer to 

indicate which of its software products includes STEP 

functionality. 

Z Cost of Developing STEP Functionality: Next, the survey 

asked the developer to estimate its costs for including STEP 

in its products, including those costs associated with AP 

writing and participation in demonstration and certification 

services. 

Table 6-1. Summary of 

Survey Respondents 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

6-6 

Z NIST’s Contributions: This section asked the developer to 

reflect on whether any of NIST’s activities enhanced the 

quality of STEP, accelerated STEP’s deployment, and/or 

reduced their development costs (see Table 6-2). The 

developer was also asked whether they would have 

implemented STEP within the same time frame or later in the 

absence of NIST’s contributions. 

Table 6-2. NIST Impact Categories Included in the Survey Instrument 

 NIST’s Impacts 

Quality 

Improvements Acceleration 

Cost 

Reductions 

Standards Development 

 Administrative contributions 

 EXPRESS (ISO 10303-11) 

 AP203 (ISO 10303-203) 

 Mapping Table Generator 

 PDM schema 

Software Development Tools and Testing Tools 

 NIST EXPRESS Toolkit 

 STEP Class Library 

 Expresso 

 STEP File Checker 

 STEP Geometry Analyzer 

Demonstration and Certification Services 

 AutoSTEP testing project 

 CAx and PDM implementor forums 

 STEP certification services 

As in the case of the end-user survey, the software developer survey 

instrument served as the general structure for the telephone 

interview. The actual conversations held with the developers 

provided responses to all the questions included on the survey form 

and also provided us with additional information on the role of 

NIST and the STEP development process. 
Section 6 — Primary Data Collection 

6-7 

 6.2.2 Software Developer Respondents 

At the time of this report, it was estimated that approximately 50 

software products with significant user bases include some level of 

STEP functionality. The software vendors we surveyed produce 

nine of those software packages. Because of confidentiality 

concerns, we are unable to disclose the names of the vendors 

participating in the survey, the number of vendors participating, or 

the combined market share of the products included in this analysis. 

However, the products represent some of the most widely used 

products on the market as well as niche products for applications 

within specific industries. 

7-1 

 Current Use and 

 Future Directions 7 for STEP 

During the interviews and surveys, we investigated the current 

availability and use of STEP as well as the potential impact of 

currently existing APs. We also investigated enhancements users 

would like to see integrated into future STEP standards. 

 7.1 STEP’S CURRENT USE 

STEP’s current penetration and use by industry is a function of the 

capabilities supported by existing APs, the level of implementation 

by vendors in product data systems, and the resources used to 

integrate STEP into the design process. Current penetration varies 

greatly by industry and across companies within industries. 

 7.1.1 Automotive Industry 

The major U.S. automotive OEMs—Ford, General Motors, and 

DaimlerChrysler—still have formal policies that, for all practical 

purposes, prohibit the use of neutral formats to exchange product 

data with suppliers. Such companies’ market position permits them 

to request native format data from their suppliers. Foreign OEMs 

with operations in the U.S. have similar policies. Smaller, more 

specialized OEMs, such as heavy-duty truck or rescue vehicle 

manufacturers, make more extensive use of STEP and other neutral 

formats. However, the relative volume of data exchange among 

these OEMs and their suppliers is small when compared to that of 

major automotive OEMs. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

7-2 

STEP and other neutral format standards are, however, used by the 

automotive industry. Major first-tier suppliers use STEP on a daily 

basis, although they generally keep the translation outside their 

customers’ view. STEP is primarily used to move geometric design 

data between the different CAD systems customers require using the 

portion of STEP referred to as AP203 (“Configuration Controlled 

Design”). 

First-Tier Suppliers 

Suppliers use STEP to accomplish robust neutral format file transfer. 

The suppliers may perform their design work using one single 

system and then translate the data via STEP to whichever system the 

customer requires. The reverse is also true: suppliers translate files 

received from customers via STEP for use with their systems. In this 

fashion, design work can be performed using in-house systems and 

yet be exchanged in the required format. 

It is important to note that even within companies, STEP’s use 

varies. Different divisions may have different approaches and 

policies. Thus, one product line at a major supplier may be using a 

single system internally for design and regularly using STEP to 

translate data into the customer’s system before sending it to the 

customer, while another product line may not use STEP at all. 

Subtier Suppliers 

Other than first-tier suppliers, we found that few automotive 

suppliers currently use STEP. Smaller suppliers, whether lower-tier 

parts or tooling suppliers, rarely use solid models even though many 

of their customers do. Although some subtier suppliers are 

becoming more aware of STEP’s capabilities, most continue to 

maintain redundant systems and exchange native format data or use 

IGES or DXF as neutral formats. STEP’s slow penetration of subtier 

suppliers is generally a result of a reluctance to change the 

established practice of using IGES as a neutral format and a lack of 

information about STEP’s capabilities and advantages. 

In addition, many subtier suppliers indicated that there is little 

incentive to use STEP, given their needs. IGES is quite acceptable 

and, after many years of use, subtier suppliers are comfortable with 

it. In fact, IGES has the capability to exchange drawing information 

and, while many in the industry want to eliminate drawings, they 

Major first-tier 

suppliers use STEP 

on a daily basis, 

although they 

generally keep the 

translation outside 

their customers’ 

view. 
Section 7 — Current Use and Future Directions for STEP 

7-3 

are as yet the only reasonable way to transfer the rich information 

needed to actually manufacture parts. 

One of the issues raised by automotive users of STEP is the need for 

more reliable exchanges. That is, they believe that the error rates 

are higher than they should be, especially for some combinations of 

CAD systems. One company that had tracked such problems 

explained that, for certain CAD system combinations, they saw 90 

to 95 percent problem-free exchanges. For others, however, they 

saw problems in one-third or even one-half of the exchanges. 

 7.1.2 Aerospace Industry 

In the aerospace industry, the use of STEP is somewhat more 

widespread than in the automotive industry.1 The aerospace 

equivalents of the automotive OEMs, the prime contractors 

(“primes”) are using STEP to exchange data with at least some types 

of first-tier suppliers. This use of STEP is typically based on a formal 

agreement between the trading partners and is automated and 

regular. 

In particular, STEP is being used for the exchange of envelope 

geometry, the geometry that describes the outside of a component, 

whether an individual part or an assembly. This type of information 

is needed to check whether parts will fit together properly when 

assembled, without interfering with other, nearby parts. This is a 

use for which STEP AP203, the part of STEP widely available in 

commercial software, is well suited. It does not require the level of 

detailed information required for actual part manufacturing, which 

AP203 does not support. 

The aerospace industry has also demonstrated effective use of STEP 

in the exchange of configuration management data. AP203 

supports the exchange of configuration management data along 

with the nominal geometry data. In fact, configuration management 

was AP203’s principal purpose as originally created. Configuration 

management requires the exchange of information that describes 

aspects of other data items relevant to their use. Examples of 

configuration management data include 

 

1Because of the relative sizes of the industries, however, current STEP benefits in 

the aerospace industry account for about 40 percent of the benefits being 

realized in the automotive industry. 

In the Aerospace 

industry, STEP is 

being used for the 

exchange of 

envelope geometry, 

the geometry that 

describes the 

outside of a 

component, whether 

an individual part or 

an assembly. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

7-4 

Z bills of material, 

Z information that specifies when design information is 

effective, 

Z relationships between two collections of data, and 

Z ownership and approvals of data (especially design data). 

A common example of this form of data is the information included 

in the title block of a traditional paper engineering drawing. The part 

of Boeing that was formerly McDonnell Douglas has been using 

AP203 for several years as the method for exchanging configuration 

management data between PDM systems at two different locations 

(St. Louis and Long Beach). This use demonstrates that daily 

exchange of production data is possible using STEP. 

 7.1.3 Shipbuilding Industry 

The shipbuilding industry’s use of STEP is mostly at the prime 

contractor level. The nature of government contracting with regard 

to shipbuilding for the Navy is that there is a great deal of shared 

and parallel work. That is, two shipyards might build the same class 

of ship or cooperatively develop and then build a common class of 

ship. Therefore, there is considerable data exchange among the 

shipbuilding primes. The primes are ahead of the rest of their 

industry in using sophisticated solid modeling tools, and STEP is the 

only reasonable method for neutral-format exchange of solid 

models. The major shipyards are developing converter programs 

based on STEP to increase the amount of neutral-format file sharing 

and reduce redundant CAx system costs. 

However, some shipbuilding suppliers that provide large, complex 

components of the ship have limited knowledge of STEP’s 

capabilities. They tend to use PC-based CAD software such as 

AutoCAD and therefore use AutoDesk’s proprietary file formats 

(.DWG and .DXF) as de facto standards for data exchange. This 

software limits them to two-dimensional drawing data and threedimensional wireframe data, but these suppliers see no real reason 

to change. They have not yet seriously considered moving to solid 

models, even though there might be advantages to do so, especially 

due to the fact that capable solid modeling systems are now 

available on PC platforms. 

In the shipbuilding world, the exchange of configuration 

management data is still almost totally conducted using paper 

The shipbuilding’s prime 

contractors are ahead of 

the rest of their industry in 

using sophisticated solid 

modeling tools, and STEP is 

the only reasonable 

method for neutral-format 

exchange of solid models. 
Section 7 — Current Use and Future Directions for STEP 

7-5 

methods, typically by the exchange of traditional drawings. There 

are a few limited implementations of PDM systems at the primes, 

and hardly any at their suppliers. 

 7.1.4 Small-Company Issues 

We consider small companies as a group here for several reasons: 

Z They tend to have customers from multiple industries. 

Z They generally have limited electronic product data 

capabilities. 

Z Their issues are generally not industry specific. 

These companies typically cannot support the expense of complex 

CAx software systems used by their larger customers. Whether 

supplying parts, tooling, or services (e.g., machining, heat treating), 

small companies rarely have the internal infrastructure for complex 

software systems. Small suppliers generally use PC-based CAD 

systems such as AutoCAD and Cadkey. They know and understand 

this software as well as the underlying Windows operating systems 

and hardware. Just as important, small companies typically have a 

mix of customers with different systems and sometimes different 

systems within the same customer. No matter what system they 

select, it will not meet the requirements for many of their customers. 

Some of the PC-based software systems accept STEP files, but small 

companies rarely work with solid models and are more comfortable 

with IGES. They see little reason to risk change. 

For PDM systems, no good solutions exist for small companies. The 

PDM systems currently available are focused on highly customized 

applications at very large firms. These systems are too costly for 

mid-sized companies, much less small companies. There may 

actually be a market for a low-cost, off-the-shelf PDM solution in 

many of these companies. As yet, however, there is little, if 

anything, available in this arena. 

 7.2 STEP’S POTENTIAL USE 

STEP’s potential use goes beyond its current level of application and 

replaces the prominence IGES once realized. In this section, we 

describe the potential use of STEP based on current STEP standards 

and the expressed needs of users, whether currently addressed by 

software vendors or not. Essentially, this information comprises a 

Some of the PC-based 

software systems accept 

STEP files, but users of 

these systems rarely work 

with solid models and are 

more comfortable with 

IGES. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

7-6 

wish list for future STEP implementations, the availability of which 

may depend on appropriate development tools. 

 7.2.1 Automotive Industry 

Significant potential exists for additional use of STEP in the 

automotive industry. If the automotive OEM’s insistence on 

exchanging native format files with their suppliers can be overcome, 

many suppliers could realize benefits by eliminating multiple CAD 

systems and internal translators. 

A major development has been the recent approval of the part of 

STEP known as AP214, which focuses on the auto industry. This 

new standard covers far more types of product data than AP203, 

though there is substantial overlap in the Geometry and 

Specification/Configuration areas. A legitimate factor currently 

limiting adoption is that available implementations of STEP can only 

support nominal geometric models. Implementations of AP214 

address this limitation. 

It is important to recognize that while STEP does not yet define the 

exchange mechanism for every kind of product data, some longstanding parts of STEP have not been widely implemented in 

commercial software products. A notable example is STEP AP202 

(titled “Associative Draughting”2), which supports the exchange of 

drawing information in a manner richer than in IGES. At present, 

only one major CAD system vendor has chosen to implement this 

STEP AP. However, this implementation does represent a 

significant growth area for the effective use of STEP. 

There is a strong movement within the auto industry OEMs and 

major first-tier suppliers to move away from drawing content 

altogether. To realize this through STEP will require the 

implementation of manufacturing information, particularly 

intelligent geometric dimensioning and tolerancing capabilities to 

STEP. AP214 supports “Technology Data,” which includes the type 

of information previously written as notes on a drawing, whether 

paper or electronic. Thus, the standard now supports this type of 

information without having to rely on a drawing format, although 

AP214 also supports drawings, if needed. When software vendors 

 

2Note that all the language that appears in STEP standards uses British English 

spelling and word use. 
Section 7 — Current Use and Future Directions for STEP 

7-7 

implement this nongeometry capability, this will help address many 

of the reservations still held about STEP. 

Few, if any, current CAD or related systems have the capability to 

capture Technology Data in an intelligent form. Because this 

information is always on the drawing, it has been maintained in the 

form of a notation or a graphical entity that may have been 

associated with a specific part of the geometry. Such entities are 

strictly graphical to the CAD system, with the content being 

unknown to the program. For the proper use of AP214’s 

capabilities, software vendors must build new nongraphical entities 

into their systems. Vendors will also need to establish and maintain 

within their systems the proper logical relationships of these new 

entities to their related graphical entities. While not yet available in 

the major CAD systems, at least some developers are working on 

adding those capabilities. These enhanced capabilities should both 

help eliminate drawings and improve the value of the CAD data 

sent from one company to another. 

AP207 is another AP that was developed under the direction of the 

automotive industry. This AP defines the exchange of data related 

to sheet metal dies. Recently approved as a standard, AP207 is 

intended to support the large amount of data related to sheet metal 

dies that moves across the auto industry. Other than fasteners, most 

of the metal parts in a car’s body are stamped from sheet metal. To 

date, however, there are no commercial implementations of AP207. 

Implementation of this AP in the major automotive CAD and PDM 

systems could realize a high potential for savings. 

Configuration management data is typically created and managed in 

PDM systems at larger companies, particularly at OEMs. While the 

capability of exchanging configuration management data exists in 

STEP (in AP203 and in some other APs), the use of this capability in 

industry has been very limited to date. The vendors of PDM 

software have been considering how best to implement STEP, but 

the work has taken substantial time. In part, the delay is due to the 

lack of need within the industry, as there are few first-tier suppliers 

with fully implemented PDM systems. 

In addition, there are no “standard” PDM implementations. Every 

PDM implementation within a given company is specific to that 

company. Hence, setting up data exchange, even using STEP, 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

7-8 

requires significant mapping of configuration management data 

elements into and out of STEP. This mapping, although feasible, is 

not simple and cannot be automated because of the heavy 

customization involved in PDM system application. However, if 

the vendors built the mapping process into their implementation 

practices, the process would become standardized, greatly reducing 

the resources required. 

 7.2.2 Aerospace Industry 

The potential use of current STEP standards in the aerospace 

industry is essentially the same as in the automotive industry 

because the data exchange opportunities and needs are 

fundamentally the same. That is, use of STEP through the supply 

chain could be expanded for the kind of virtual assembly work 

OEMs are currently doing with engine suppliers and with a wide 

variety of other suppliers. 

Even though AP214 is nominally for the automotive industry, it will 

likely meet many needs of the aerospace industry. The STEP 

community has decreed that the APs are to use the same underlying 

data models where they overlap in content. Hence, the underlying 

AP203 geometry and configuration management capabilities are 

also contained within AP214. The biggest difference tends to be 

terminology at the user level. Even there, the differences are likely 

to be minimal and easily addressed. For example, AP203 

development was driven primarily by the aerospace industry and 

the automotive industry has had little problem understanding the 

content. 

Further supporting the likelihood of common use is that the 

aerospace and automotive industries use the same major CAD 

systems. Therefore, AP214 capabilities will automatically become 

available to the aerospace industry when implemented for the 

automotive industry (and vice versa for any APs the aerospace 

industry develops). 

AP209 is a new standard for which the aerospace industry led the 

development. AP209 is designed to support the exchange of data 

related to finite element analysis, particularly for structures, 

including composite structures. While the automotive and 

shipbuilding industries also make extensive use of finite element 

analysis, the aerospace industry uses it at a much higher level. The 
Section 7 — Current Use and Future Directions for STEP 

7-9 

need to make aircraft as light as possible while still strong requires 

very careful analysis before any prototypes are built. The use of 

composite materials in aircraft has been steadily increasing as well, 

and AP209 has the needed ability to describe composite structures. 

Initial implementations of AP209 have been made by one vendor, 

but as with AP202, more users are needed before its real value will 

become apparent. 

As in the auto industry, PDM data exchange will become both 

possible and useful as more suppliers adopt PDM systems and as 

vendors build data exchange capabilities into their systems. The 

STEP capability exists, but the software implementations are yet to 

be fully developed. 

 7.2.3 Shipbuilding Industry 

Several of the approved APs have the potential to be useful for 

shipbuilding. Of the three industries under consideration, the 

shipbuilding supply chain as a whole is the least sophisticated in its 

current use of CAD and PDM systems. As a result, there is limited 

demand for the STEP capabilities outside the major shipbuilders. 

One of the major reasons is that new ship design is actually quite 

rare; most shipbuilding design is repetitive over years. The current 

series of nuclear aircraft carriers is a good example. While each 

ship has some changes from its predecessor, the vast majority of the 

design is still on paper drawings, the original versions of which 

were created in the late 1960s and early 1970s. The latest nuclear 

aircraft carrier (to be put in service in 2003), the Ronald Reagan

(CVN-76), is fundamentally the same design that was established for 

the Nimitz (CVN-68), the first of the class. The differences between 

the Reagan and its immediate predecessor, the Harry S. Truman

(CVN 75), are quite small. Because the cost of replacing drawings 

with rich CAD files is prohibitive, the migration of the shipbuilding 

industry to solid models and sophisticated CAD and PDM systems 

naturally lags behind that of other industries. 

 7.2.4 Small-Company Issues 

Even though small companies have been content with PC-based 

CAD systems, the power of such systems is consistently increasing. 

Capable solid modeling systems are now available on PC platforms. 

At least some of the small companies interviewed expressed an 

interest in exploring the use of solid models. If they do make that 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

7-10 

leap, then the value of STEP to them and their customers will 

increase, as the exchange of more complex information will 

become much more common. 

 7.3 FUTURE PRODUCT DATA EXCHANGE NEEDS 

In this section, we describe the longer-term potential for the use of 

STEP based on ongoing STEP development and the expressed needs 

of the users we interviewed within each of the three industries. 

Future benefits from the capabilities discussed below are included 

in the empirical benefits estimates presented in Section 8. 

 7.3.1 Automotive Industry 

The consistent message conveyed by the automotive industry is that 

STEP needs to be able to support the exchange of model “history” 

data with solid models. Also referred to as the “history tree” or 

“construction tree,” this information is captured by major CAD 

systems as the solid model is constructed. The history data tracks 

the sequence of modeling steps the user went through to create the 

solid model. The history data is very important if modifications 

need to be made to the solid model. It is often much better to back 

up a number of steps in the model construction and then make the 

change as opposed to trying to graft the change onto a completed 

model. 

On the other hand, a supplier that provides history data to the 

customer can give away trade secrets or details that are not needed 

by the customer. Suppliers are understandably reluctant to provide 

such proprietary information because they have seen their ideas 

passed on to competing suppliers without recompense. 

Nonetheless, there was a common message that history data would 

be widely useful. 

Another type of data requested by automotive users is tessellated 

data. These are models built up from a large collection of triangles 

with common edges. Tessellated data underlies most CAD model 

visualization tools (“visualizers”). The use of visualizers is rapidly 

increasing in the auto industry. Many people need to look at or 

review a design, but do not need to modify it. Tessellated files can 

be viewed, but they are normally much smaller than full CAD 

models. In most visualizers, comments can be added to the file for 

the use of others. Visualizers avoid the need for many people to 
Section 7 — Current Use and Future Directions for STEP 

7-11 

invest in a full CAD system and the associated training. The 

potential role for STEP comes in standardizing the tessellated file. If 

a STEP format for tessellated files existed, then a CAD system could 

output a generic tessellated file that could be viewed on any viewer 

that could read such STEP files. 

 7.3.2 Aerospace Industry 

In the aerospace industry, there was interest in using XML as a STEP 

data transfer mechanism. The aerospace industry sees XML as 

having the potential to carry more information more efficiently than 

traditional STEP files. Fortunately, interest in XML has already been 

recognized within the STEP community and that work is under way. 

Another request from the aerospace industry is completion and 

implementation of AP232 (“Technical Data Packaging”), which is a 

considerably broader version of the configuration management 

concept. The basic concept is that a technical data package (TDP) 

contains all the necessary pieces and collections of data necessary 

for a given business transaction. Thus, in addition to the usual 

configuration management data, a TDP might contain other STEP 

files that define the geometry of a product or the process to be used 

to make the part with a numerically controlled machine tool. The 

automotive industry is beginning to show interest in this AP as well. 

Both in the U.S. and internationally, automotive organizations have 

formed work groups to look at the potential of AP232 in their 

industry. 

 7.3.3 Shipbuilding Industry 

The shipbuilding industry, with strong support from the Navy, was 

heavily involved in the early development of STEP. Several APs 

appropriate to the industry’s needs were proposed and have been 

worked on. However, the development of these APs has languished 

recently. One of the four proposed APs was dropped; the others 

have substantial work to be done before completion. Because these 

focused APs are intended to deal with specific aspects of large-scale 

ship structures, they would provide capabilities not seen in the other 

existing APs. The shipbuilding industry also indicated that history 

data would be useful to incorporate into STEP. In addition, one 

company mentioned that manufacturing process data (process steps) 

would be a useful enhancement for STEP. 

8-1 

 The Potential and 

 Current Economic 8 Impact of STEP 

This section estimates the economic impact of STEP on the U.S. 

automotive, aerospace, and shipbuilding industries and presents 

measures of economic return for STEP development, as well as 

separate measures of return for NIST’s contributions. The section 

describes the data and methods used to estimate the economic 

impact of STEP, beginning with a discussion of the employment and 

wage information used in the analysis. The estimation of STEP’s 

benefits to end users and the social costs of STEP development and 

implementation follow. The final sections present the time series of 

benefits and costs and calculate measures of economic return. 

 8.1 INDUSTRY EMPLOYMENT AND WAGES 

The calculation of the economic impact of STEP is partially rooted 

in the industry employment and wage rates used to extrapolate firmlevel results from the survey to industry-level estimates. Because the 

technical metric for many of the benefit-cost categories are in terms 

of hourly labor savings, such as redundant labor costs and labor 

productivity losses, this section begins with a review of the 

employment statistics and wage rates used. 

 8.1.1 Industry Employment 

To calculate national economic impacts using the results from the 

surveys and case studies, firm-level results were extrapolated using 

industry employment estimates. Ideally, the analysis would have 

used the number of CAx users and support professionals employed 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-2 

in each of the three industries. However, reliable estimates for these 

specialized labor categories were not available. 

The Bureau of Labor Statistics (BLS) collects employment data by 

job position at the industry level. However, CAx users and support 

professionals are distributed across an array of positions and are not 

a distinct category in the BLS’s definitions. As a result, peremployee impact estimates were developed based on the total 

company employment of the firms included in the analysis. These 

per-employee estimates were then applied to the industry 

employment figures to estimate the economic potential of STEP. 

The automotive, aerospace, shipbuilding, and specialty tool and die 

industries employed a total of 3.5 million people in 2001, of whom 

nearly 450,000 were employed by firms that participated in the 

survey. Table 8-1 breaks out the industry employment figures by 

subsector as well as the total number of employees in each industry 

represented by survey respondents.1 The survey covered about 

13 percent of industry employment. The highest coverage on an 

industry basis was the aerospace sector at 23.6 percent. The two 

highest coverage ratios for subsectors were also within the 

aerospace industry: We conducted case studies and interviews with 

firms that represented 58.5 percent of aircraft OEM employment and 

30.2 percent of aircraft engine employment. The lowest coverage 

ratio was for shipbuilding suppliers: our survey was only able to 

capture firms representing 800 employees, or 0.5 percent of the 

estimated industry employment. 

Smaller suppliers dominate the lower rungs of the American 

industrial supply chain. Although these firms perform a vital 

function as providers of essential components to larger first-tier 

suppliers and OEMs, on a firm-by-firm basis, they are very small and 

account for little industry output. This reality is represented by the 

coverage ratios for supplier subsectors in Table 8-1. The coverage 

ratio for subtier automotive suppliers was 3.1 percent; for aircraft 

parts suppliers, 4.8 percent; and for specialty tool and die, 

3.6 percent. While many small firms in these subsectors 

participated in this analysis, they were only able to account for a 

 

1To maintain the confidentiality of survey respondents, the number of responding 

firms by industry subsector was withheld. 

The industries 

included in this 

analysis employ a 

total of 3.5 million 

Americans, of whom 

nearly 450,000 were 

employed by firms 

that participated in 

the survey. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-3 

Table 8-1. Industry Employment and Survey Coverage Ratios 

Number 

of Firms 

Employment of 

Firms Sampled 

Industry 

Employment 

Coverage Ratio 

(Percent) 

Automotive 36 238,749 2,399,000 10 

 Automotive OEMs 94,086 631,000 15 

 First-tier suppliers 112,271 738,000 15 

 Subtier suppliers 32,392 1,029,600 3 

Aerospace 19 189,125 800,100 24 

 Aircraft OEMs 136,000 232,500 58 

 Aircraft parts suppliers 18,210 380,300 5 

 Aircraft engines and engine parts 30,600 101,300 30 

 Missile and space systems 4,315 86,000 5 

Shipbuilding 4 20,300 244,700 8 

 Shipbuilders 19,500 94,700 21 

 Shipbuilding systems suppliersa 815 150,000 1 

Specialty Tool and Die 7 1,207 33,500 4 

Total 66 449,381 3,477,800 13 

aAccurate estimates on the total employment at shipbuilding suppliers are difficult to obtain. The industry is supplied by 

a diverse supplier base, many firms of which are only loosely affiliated with the industry, such as piping providers. In 

addition, shipyards frequently purchase large volumes of raw materials and standardized components and perform 

fitting and assembly themselves. It is therefore unlikely that shipyards would exchange data with many of their 

suppliers. Thus, this analysis uses the estimate of 150,000 employees for our calculations, about one-sixth of the 

882,314 employees estimated by the American Shipbuilding Association (2001). 

Sources: Automotive data: RTI estimates based on Center for Automotive Research at Altarum and the Institute for 

Labor Relations at the University of Michigan. “Contribution of the Automotive Industry to the U.S. Economy in 1998: 

The Nation and Its Fifty States.” Prepared for the Alliance of Automobile Manufacturers, Inc. and the Associations of 

International Automobile Manufacturers, Inc. Winter 2001. Aerospace data: Aerospace Industries Association (AIA). 

2001. Aerospace Facts and Figures 2001/2002. Washington, DC: Aerospace Industries Association. Shipbuilding 

data: RTI Estimates and U.S. Census Bureau. 1999. 1997 Economic Census Industry Series: Ship Building and 

Repairing. EC97M-3366A. Washington, DC: U.S. Government Printing Office. Specialty tool and die data: RTI 

Estimates based on membership data available from the National Tooling and Machining Association, as obtained on 

January 25,2002 at http://www.ntma.org, and compared with Information Access Corporation. 2002. General 

Business File [computer file]. Foster City, CA: Information Access Corporation. 

small percentage of their respective industry employment estimates. 

Yet, conversations with industry experts and first-tier suppliers as 

well as review of industry literature indicate that the survey 

responses from these firms are highly representative of all firms in 

their supply-chain position. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-4 

 8.1.2 Industry Wage Estimates 

BLS wage rates were used to quantify the hourly productivity 

benefits and labor savings. To monetize these benefits categories, 

we multiplied those labor hour savings by the appropriate wage rate 

for the employee functioning in that position. To simplify 

discussions in later sections, the employment categories and wage 

rates used in these calculations are presented and discussed here. 

Several employment categories, or job positions, are directly 

involved in the electronic exchange of product model data. The 

direct employee productivity benefits identified through the case 

studies and surveys affect four job positions: 

Z CAx Designers and Users. Referred to generally as the CAx 

user population or designers, this employment category 

comprises employees who directly employ CAD/CAM/CAE 

and PDM in their work. CAx users are directly responsible 

for accomplishing data exchange with customers, partners, 

and suppliers. 

Z CAx Design Support Specialists. CAx design support 

specialists troubleshoot CAx users’ design problems when 

they arise, including those related to preparing files for 

exchange. Design support specialists may be advanced CAx 

users that support other designers or, as is usually the case in 

larger organizations, a separate team charged with assisting 

a large CAx user base as needed. 

Z Network and Computer Systems Administrators. Systems 

administrators maintain the information technology (IT) 

infrastructure that supports networked environments and 

house software. 

Z Software Support Specialists. Software support specialists 

troubleshoot CAx software problems. For example, if a 

program is functioning improperly on a CAx user’s machine, 

a software support specialist is dispatched to rectify the 

problem. 

The BLS does not collect wage data for CAx users as an employment 

category; therefore, we used the employment category and wage 

that best matched the complete job description of individuals using 

this software. For the automotive industry, the closest matching job 

category was commercial and industrial designers, which the BLS 

describes as the occupation that develops and designs products for 

the industry. Industry-specific job categories were used for CAx 

users in the aerospace and shipbuilding industries—aerospace 

engineers, and naval architects and marine engineers, respectively. 

The materials engineers category was used for the tooling industry. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-5 

The same job categories were used to represent design support 

staff.2 The other two IT support staff categories, network and 

computer systems administrators and software support specialists, 

are common functions. The BLS does collect data for these 

categories for all industries. 

The wage estimates for the four job categories by industry are 

presented in Table 8-2. The original BLS data have been multiplied 

by a factor of 2.0 to estimate the fully loaded wage rates that 

include employee benefits, such as employer-sponsored health and 

dental insurance and 401(k) contributions, as well as administrative 

and overhead costs. As is the case for most positions, wage rates for 

similar positions vary by industry according to each industry’s 

supply and demand for that labor. Thus, the wage rates used for 

systems administrators and software support specialists are different 

for each industry. For example, administrators earn a loaded wage 

of $48.20 per hour in the automotive industry, but only $43.40 in 

the tooling industry. 

Table 8-2. Loaded Hourly Wage for Designers and Associated Support Staffers 

CAx 

Designera

Design Support 

Specialistb

Network and 

Computer Systems 

Administrator 

Software and 

Computer Support 

Specialist 

Automotive $61.44 $61.44 $48.20 $43.66 

Aerospace $65.92 $65.92 $56.66 $45.48 

Shipbuilding $59.14 $59.14 $48.62 $35.40 

Tooling $48.66 $48.66 $44.34 $37.20 

aThe BLS does not collect statistics specifically for designers working in CAx systems, therefore this analysis uses the 

positions that are most closely related to CAx designers to estimate wage rates. These positions are: for automotive, 

commercial and industrial designers; for aerospace, aerospace engineers; for shipbuilding, naval architects and marine 

engineers; and for tooling, mechanical engineers. 

bDesign support specialists assist CAx designers with design issues and troubleshoots complications in the design 

process. They may or may not be an experienced CAx designer who specializes in supporting a design team or a 

design team member assisting other designers. This analysis assumes that the loaded wage for this position is similar 

to that of a CAx designer. 

Source: Bureau of Labor Statistics. “2000 OES Industry-Specific Occupational Employment and Wage Estimates.” 

<http://www.bls.gov/oes/2000/oessrci.html>. As obtained on February 2, 2000. 

 

2As with CAx users, no BLS category existed for CAx design support staff. 

However, because individuals in this job category are similar to CAx users 

themselves in that they work with the design tools and help CAx designers 

troubleshoot logistical issues related to their work, we decided to use the same 

wage rate for design support as for the CAx users. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-6 

 8.2 END-USER CAx INTEROPERABILITY 

BENEFITS 

The economic benefit of STEP is equivalent to the sum of the costs 

firms would otherwise incur without STEP. In this section, we 

identify expenditures at firms that broad use of STEP would either 

eliminate or reduce. These expenditures fall into three categories: 

avoidance costs, mitigation costs, and delay costs. The sum of the 

findings in these cost categories is the potential benefit of STEP. 

 8.2.1 End-User Avoidance Benefits 

Avoidance costs amount to nearly two-thirds of the annual cost 

savings STEP could yield for OEMs and suppliers: about $451 

million. Manufacturers incur avoidance costs to prevent technical 

interoperability problems before they occur. Avoidance costs are 

pervasive in these industries because the cost of and complications 

associated with imperfect data exchange are high. Most large firms 

invest in several software systems, as well as the staff that uses and 

maintain them, to facilitate the communication of product model 

data. With the exception of direct costs of the redundant CAx 

systems themselves, most avoidance costs are either direct or 

indirect labor expenses. These include the extra staffing, training, 

and support needed to maintain multiple CAx systems instead of 

one. 

Of the $451 million in annual avoidance cost savings, $253 million 

could be saved in the automotive industry alone. Its complex 

system of OEMs and tiered suppliers reinforce interoperability 

problems because of the number of companies through which data 

is shared electronically. 

Table 8-3 summarizes STEP’s potential for reducing avoidance 

costs. On a per-employee basis, the tooling industry is the largest 

victim of these costs. Specialty tool and die shops contracting for 

transportation equipment industries incur over $1,728 of avoidance 

costs per employee each year. 

The following sections describe the methods used to calculate the 

avoidance cost categories summarized in Table 8-4. The cost 

categories include the following: 

Z Investment in redundant CAx systems. Secondary CAx 

systems maintained primarily for data exchange services or 

to maintain a specific client relationship. 

Of the $451 million 

in annual avoidance 

cost savings, $253 

million could be 

saved in the 

automotive industry 

alone. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-7 

Table 8-3. Summary of Potential Avoidance Benefits, 2001 

Automotive 

Industry 

(million $) 

Aerospace 

Industry 

(million $) 

Shipbuilding 

Industry 

(million $) 

Tooling 

Industry 

(million $) 

Total 

(million $) 

Potential Benefits 

Investment in 

Redundant CAx Systems 15.1 6.9 7.6 2.1 31.7 

Productivity Loss on 

Redundant CAx Systems 61.7 20.9 15.3 3.6 101.6 

Investment in 

Redundant CAx Training 3.3 1.3 1.1 0.2 6.0 

Design Support Staff 68.5 30.5 20.8 2.8 122.6 

Network and Computer 

Systems Administrators 75.3 36.2 24.0 3.5 138.9 

Software Support 

Specialists 29.2 12.7 7.5 1.3 50.6 

Total Potential Benefits $253.1 $108.4 $76.4 $13.5 $451.4 

Source: RTI estimates. 

Z Productivity loss on redundant CAx systems. Productivity 

loss of having CAx users work in their secondary systems. 

Z Investment in redundant CAx training. Training costs 

incurred from maintaining competency in CAx users’ 

secondary systems. 

Z Redundant CAx systems IT support staff. Includes design 

support staff, network and computer systems administrators, 

and software support specialists employed in the 

maintenance and support of redundant CAx systems and 

their users. 

Investment in Redundant CAx Systems 

The incidence of redundant CAx systems in transportation 

equipment industries is widespread. Firms often maintain software 

licenses for CAx systems that are not their in-house or primary 

design tools to accomplish data exchange or review incoming or 

outgoing electronic files. They also invest in alternate CAx systems 

if they are awarded a contract that stipulates the use of a different 

system than that currently used. The largest OEMs are able to use 

their market power to stipulate the use of a specific software 

product and version. Consequently, the majority of redundant CAx 

systems costs fall on suppliers. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-8 

Table 8-4. Potential Redundant CAx Systems Benefits, 2001 

Industry 

Potential Annual Savings per 

Employee ($) 

Potential Annual Savings 

Industry-wide (million $) 

Automotive 15.1 

 Automotive OEMs 0.61 0.4 

 First-tier suppliers 9.81 7.2 

 Subtier suppliers 7.21 7.4 

Aerospace 6.9 

 Aircraft OEMs — — 

 Aircraft parts suppliers 12.67 4.8 

 Aircraft engines and engine parts 2.84 0.3 

 Missile and space systems 20.51 1.8 

Shipbuilding 7.6 

 Shipbuilders 19.20 1.8 

 Shipbuilding systems suppliers 38.88 5.8 

Specialty Tool and Die 62.73 2.1 

Total $31.7 

Source: RTI estimates. 

During the interview phase of this project, firms were asked about 

their present IT investment and how that investment would be 

altered given the use of a widely accepted, robust neutral format. 

Information was collected on both the number of CAx systems they 

would not otherwise maintain and the number of licenses, or seats, 

associated with each system.3 The results yielded the number of 

licenses of various CAx systems that each firm considered 

redundant.4

Each firm’s redundant CAx system cost was calculated by 

multiplying the number of redundant licenses by the annual 

maintenance fee charged by software vendors for those licenses. 

Using a combination of publicly available pricing schedules and 

informal interviews with software vendors, we obtained the 

approximate annual maintenance fees for a large number of CAx 

system configurations. It is a common practice for vendors to offer 

 

3For some firms, cost savings were offset by the probable decision to purchase a 

number of additional licenses of their primary CAx system. 

4To maintain confidentiality, data on the number of redundant licenses, CAx 

systems, and the annual maintenance fee pricing schedules for those systems 

and licenses are withheld. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-9 

discounts to customers based on the volume of licenses purchased. 

We took this practice into account by associating each firm’s 

number of licenses with the correct price for that volume of 

licenses. The average annual maintenance fee per license was 

$2,440. 

The primary beneficiaries of STEP in this cost category are suppliers 

who maintain multiple systems to support their many customers that 

generally require native format data exchange (see Table 8-4). One 

exception, however, is the shipbuilding industry. Shipbuilders often 

collaborate on U.S. Navy contracts in a lead/follow relationship. In 

such cases, the follow yard adopts the lead yard’s design systems to 

facilitate collaboration. This usually entails the follow yard’s 

adoption of a competing software package that mimics the 

functionality of its existing software. Thus, shipbuilders would 

benefit from a more widespread application of STEP. 

The $32 million estimate (Table 8-4) is considered to be 

conservative because two components of this cost were unable to 

be captured. For example, we were unable to capture future new 

investments in version updates or entire systems purchases. The 

cost of updating most major CAx systems when new versions are 

available is significantly more expensive than maintaining software 

licenses. We could not capture this component of the cost because 

Z future release schedules of new versions are unavailable; 

Z the cost of the update varies according to the extent of the 

version update, which is also unknown; 

Z version update costs may be included as part of annual 

maintenance agreements and therefore may be doublecounted costs; and 

Z not all firms would opt to upgrade to the new version. 

In addition, this estimate also excludes instances where systems are 

housed on separate servers and require additional networking 

technology and labor. Such information could not be accurately 

estimated across different firms and industries. 

Productivity Loss on Redundant CAx Systems 

It is estimated that industry could save $138 million annually in 

productivity losses stemming from designers working in CAx 

systems other than their primary systems. According to 

interviewees, employees are on average 70 percent as productive 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-10 

when using secondary CAx systems as when using the system on 

which they have expertise.5 

Each CAx system has unique features that require substantial 

training and hands-on experience to achieve a level of competency. 

Most CAx users are hired partially because their CAx skill set 

matches the firms’ in-house systems. When using programs that are 

not in their primary skill set, users are not as skilled and therefore 

they require more time to accomplish tasks. 

It follows then that if STEP could reduce redundant CAx systems 

costs, then it could also eliminate the productivity loss associated 

with employees working with secondary systems. To estimate this 

cost, we gathered the following information from each firm: 

Z the number of CAx users at each firm, 

Z the percentage of CAx users who use multiple CAx systems, 

and 

Z the average percentage of time those CAx users spend 

working with secondary CAx systems. 

By multiplying these figures together along with the appropriate 

average wage rate for the firms’ industry and work hours, we 

calculated the productivity loss benefit. 

For example, suppose an automotive subtier supplier had a CAx 

user population of 100, and that 50 percent of those users spent 

10 percent of their time working in redundant systems. Recall from 

Section 7.1 that the loaded hourly wage for CAx users in the 

automotive sector is $61.44 and that there are 2,080 work hours in 

a calendar year. Multiplying these six pieces of information 

together yields the following: 

100 CAx users 

x 0.50 (percentage using redundant systems) 

x 0.10 (percentage of time working in those systems) 

x 0.30 (percentage of productivity loss) 

x $61.44 (average loaded hourly wage) 

x 2,080 (number of work hours in a year) 

= $191,693 (productivity benefit) 

 

5This is similar to the productivity loss estimates developed by the Automotive 

Industry Action Group (1997a). 

It is estimated that industry 

could save $138 million 

annually in productivity 

losses stemming from 

designers working in CAx 

systems other than their 

primary systems. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-11 

By eliminating redundant systems, this hypothetical supplier could 

stem nearly $192,000 annually in productivity losses. 

In this analysis, the productivity losses amounted to nearly $138 

million annually, the bulk of which is borne by the automotive 

industry (see Table 8-5). At current wage rates and employment 

levels, widespread application of STEP in the automotive industry 

has the potential to reduce productivity losses by $62 million 

annually. On a per-employee basis, the specialty tool and die firms 

that contract with automotive and aerospace firms could save 

$107.42 per industry employee ($3.6 million industry-wide). 

Similarly, STEP could save the shipbuilding industry $97.46 per 

employee. 

Investment in Redundant CAx Training 

Transportation equipment industries spend a combined $8.4 million 

each year training employees on redundant systems. To maintain 

competency in using those systems, CAx users undergo periodic 

training. Total training costs, however, are difficult to estimate 

because formal training is less common than “on the job” training. 

It is therefore difficult to distinguish between lost productivity and 

training-related costs. 

However, several of the firms estimated that each user receives on 

average about 160 hours of formal training on their secondary 

systems. Although this figure may be an underestimate, 

interviewees thought this was the best possible figure they were able 

to provide, given that they more rigorously track training-related 

expenses for their in-house or preferred systems. We were also 

unable to obtain estimates on the tuition and fees paid to third-party 

training centers. However, generally, course fees are minimal 

compared to the labor expense of sending an employee for training. 

Training benefits are calculated using CAx user work life, redundant 

CAx systems user population, wage rates, and the amount of time 

spent training. The method for estimating annual training cost is 

illustrated below: 

1. Each CAx user’s work life is estimated to be 25 years. 

2. Over the course of that work life it is estimated the user will 

receive 160 hours of formal training on redundant systems. 

Thus, if a firm has 25 CAx users, then about 1 employee per 

year will be new to the industry. 

Transportation equipment 

industries spend a 

combined $8.4 million 

each year training 

employees on redundant 

systems. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-12 

Table 8-5. Potential Benefits from Avoided Productivity Loss on Redundant CAx Systems, 

2001 

Industry 

Potential Annual Savings per 

Employee ($) 

Potential Annual Savings 

Industry-wide (million $) 

Automotive 61.7 

 Automotive OEMs 9.17 5.8 

 First-tier suppliers 39.03 28.8 

 Subtier suppliers 26.33 27.1 

Aerospace 20.9 

 Aircraft OEMs — — 

 Aircraft parts suppliers 34.32 13.1 

 Aircraft engines and engine parts 37.17 3.8 

 Missile and space systems 47.66 4.1 

Shipbuilding 15.3 

 Shipbuilders 97.46 9.2 

 Shipbuilding systems suppliers 40.75 6.1 

Specialty Tool and Die 107.42 3.6 

Total $137.8 

Source: RTI estimates. 

3. Not all new employees are trained on a redundant system. 

Therefore, it is necessary to multiply employee turnover by 

the percentage of users who work on redundant systems. If 

33 percent of users work in redundant CAx systems, then the 

annualized number of employees receiving this training 

would be 0.33. 

4. If the user was an aerospace engineer, then the 0.33 

estimate would be multiplied by the training hours (160) and 

the wage rate ($65.92). 

5. As a result, the firm’s annualized saving on training would 

be $3,480. 

Table 8-6 presents the benefit estimates by each industry 

subcategory. The annual cost of training users on redundant CAx 

systems for the three industries is estimated to be $8.4 million, 

which is the smallest of the avoidance cost categories in the 

analysis. Per-employee average benefits ranged from zero for 

aircraft OEMs that indicated that they do not train users on 

secondary systems to $7.12 for specialty tool and die firms that are 

forced to maintain competencies in several systems because of their 

diverse supplier base. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-13 

Table 8-6. Potential Benefits on Redundant CAx Training, 2001 

Industry 

Potential Annual Savings per 

Employee ($) 

Potential Annual Savings 

Industry-wide (thousand $) 

Automotive 3,339.4 

 Automotive OEMs 0.54 343.0 

 First-tier suppliers 1.74 1,288.0 

 Subtier suppliers 1.66 1,708.4 

Aerospace 1,306.4 

 Aircraft OEMs — — 

 Aircraft parts suppliers 2.34 891.8 

 Aircraft engines and engine parts 0.77 78.2 

 Missile and space systems 3.91 336.3 

Shipbuilding 1,118.6 

 Shipbuilders 5.19 491.7 

 Shipbuilding systems suppliers 4.18 627.0 

Specialty Tool and Die 7.12 238.8 

Total $8,428.2 

Source: RTI estimates. 

Redundant CAx Systems IT Staff 

IT staffing needed to support industry’s investment in redundant 

CAx systems is the single largest avoidance cost incurred. To 

maintain their software investment and to support employees using 

that software, firms employ computer network and systems 

administrators, software support specialists, and design support 

specialists. These employees maintain smooth operation of 

networks and troubleshoot technical problems. Although IT 

infrastructure and software is expensive, firms told us that these 

costs are minimal compared to the labor needed to support them. 

Based on the survey findings, it is estimated that the three industries 

could save over $312 million in annual direct and indirect labor 

costs associated with these employees. 

The relationship between a firm’s number of CAx systems and its IT 

staff employment is not linear; staffing would not be cut in half if the 

firm reduced its number of systems from two to one. For most firms, 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-14 

there is a base number of employees for one system and some 

incremental number of employees for each additional system. 

During the onsite interviews, respondents provided detailed 

information on the support staffing they currently retain and how 

that staffing would change if they could eliminate their redundant 

CAx system. 

For example, one firm told us that it has 300 CAx users. 

Approximately 31 IT staff would need to support the CAx users if 

they were all working on a single system. This would increase to 46 

IT staffing (about a 50 percent increase) if two systems were being 

supported.6 This data, averaged across all on-site interviewees, was 

used to estimate the approximate increase in IT staff for all three 

positions relative to the number of CAx users. Table 8-7 lists the 

firm’s present CAx IT staffing and how the staffing would change 

with the addition of another system. 

Table 8-7. Sample Change in IT Staffing Associated with Redundant Systems, 2001 

IT Positions Current Staffing Level 

Potential Staffing Level with 

an Additional CAx System 

Computer and Network Systems Administrators 15 22 

Design Support Specialists 10 15 

Software Support Specialists 6 9 

Total 31 46 

Several variables were taken into account when calculating 

redundant IT staffing costs, in addition to incremental increase 

coefficients explained in the preceding paragraph. The large 

number of variables included in the calculation is attributable to the 

complex formula needed to estimate, for each respondent, how IT 

staffing would change if STEP were fully implemented and the 

number of CAx systems dropped. 

 

6If an additional system were added, but with only a small number of users, then 

the impact would not be as great. As part of the analysis, the ratio of in-house 

systems to total seats was used in the firm-level calculations to adjust the IT 

staffing increases accordingly. 

Based on the survey 

findings, it is estimated that 

the three industries could 

save over $312 million in 

annual direct and indirect 

labor costs associated with 

redundant CAx IT staff. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-15 

The IT staffing calculations were based on the following 

information: 

Z Number of CAx users 

Z Existing number of CAx systems 

Z Potential number of CAx systems 

Z Ratio of in-house system seats to total seats 

Z Annual work hours 

Z Wage rates for each position 

Z Incremental staffing coefficients 

The calculations took into account the number of system reductions 

and calculated the difference between the estimated current number 

of IT professionals in each position and the with-STEP number. The 

resulting staff reduction was then multiplied by the annual number 

of work hours and by the appropriate wage rate for each position 

and industry. 

Extrapolating the firm level results to industry-level results yields 

over $312 million in potential cost savings (see Table 8-8). The 

greatest costs savings would be for computer and network system 

administrators at over $139 million a year. On an industry basis, 

automotive is again the largest beneficiary overall with potential 

annual savings of $173 million. 

 8.2.2 End-User Mitigation Costs 

Whereas avoidance costs are incurred before interoperability 

problems occur, mitigation costs are incurred as a firm corrects 

them. Mitigation costs are primarily labor costs and consist of the 

wages paid to an employee for alleviating or mitigating losses 

associated with imperfect data exchange. The two largest categories 

of mitigation costs are manual reentry costs and file transfer costs. 

We also discuss a third cost category, inefficient PDM systems; 

however, few of our respondents had PDM administrations and, 

except for first-tier automotive suppliers, we were therefore unable 

to estimate PDM interoperability costs. 

Manual reentry costs are the labor charges associated with 

correcting data after a failed transfer or an incomplete transfer. 

STEP is less error-prone than other neutral formats; therefore, there 

are fewer manual reentry jobs overall. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-16 Table 8-8. Potential Redundant CAx IT Support Staff Benefits, 2001 

 Design Support Staff 

Computer Network and 

Systems Administrators Software Support Specialists 

Industry 

Per 

Employee 

($) 

Industrywide 

(million $) 

Per 

Employee 

($) 

Industrywide 

(million $) 

Per 

Employee 

($) 

Industrywide 

(million $) 

Total 

(million $) 

Automotive 68.5 75.3 29.2 173.0  Automotive OEMs 3.97 2.5 4.36 2.8 1.69 1.1 6.3  First-tier suppliers 69.98 51.7 76.86 56.8 29.84 22.0 130.5  Subtier suppliers 13.92 14.3 15.29 15.7 5.94 6.1 36.2 Aerospace 30.5 36.2 12.7 79.3  Aircraft OEMs — — — — — — —  Aircraft parts suppliers 27.95 10.6 32.29 12.3 11.73 4.5 27.4  Aircraft engines and engine parts 7.91 0.8 9.52 1.0 3.27 0.3 2.1  Missile and space systems 221.41 19.0 266.43 22.9 91.65 7.9 49.8 Shipbuilding 20.8 24.0 7.5 52.3  Shipbuilders 180.89 17.1 208.19 19.7 64.97 6.2 43.0  Shipbuilding systems suppliers 24.64 3.7 28.36 4.3 8.85 1.3 9.3 Specialty Tool and Die 82.33 2.8 105.03 3.5 37.76 1.3 7.5 Total 122.6 138.9 50.6 312.1 Source: RTI estimates. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-17 

File transfer costs are the labor costs associated with transferring 

data from native formats to neutral formats and vice versa. STEP is 

more efficient than other formats and permits the transfer of a larger 

array of data layers than does IGES or DXF. In addition, 

constructing a STEP file from a native file takes less time and 

involves fewer manipulations than IGES, yielding a productivity 

gain. 

The extent of STEP’s ability to reduce mitigation costs depends on 

the amount of neutral format data exchange within and between 

firms. Nearly all firms incur some level of mitigation cost from file 

transfer errors or other problems, and STEP will not alleviate 100 

percent of these problems due to human error and other 

complications. 

Even firms with significant avoidance costs from redundant CAx 

systems can benefit from STEP through its use for internal transfers 

between two competing systems. Firms that work with many 

customers and suppliers, and consequently with a large number of 

systems, receive and exchange a large number of files in an array of 

formats. Therefore, these firms are more likely to have high 

mitigation costs as well as avoidance costs. 

For the three industries, it is estimated that STEP could save $476 

million in annual mitigation costs (see Table 8-9). The bulk of the 

potential annual savings would be accrued through more efficient 

preparation of files for neutral format transfer. The STEP format is 

more robust than IGES and also saves time for designers during the 

conversion to and from the native format file. Based on 2001 data, 

we estimate that using STEP instead of IGES or DXF for data exchange 

would yield almost $376 million in productivity benefits a year. The 

calculations to estimate mitigation costs are described below. 

Manual Reentry Costs 

Each electronic file is mostly made up of a drawing based on a 

database containing the measurements and geometries of a discrete 

component. As implied by the differing formats among CAx 

systems, each system compiles this information differently. 

Whereas exchanging files among common CAx systems is not a 

problem, sharing files between competing systems can lead to 

significant problems, even when files have been converted into a 

neutral format. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-18 

Table 8-9. Summary of Potential Mitigation Benefits, 2001 

Manual Reentry 

(million $) 

File Transfer 

Costs (million $) 

Less Efficient 

PDM Systems 

(million $) 

Savings 

(million $) 

Automotive Industry 38.8 152.3 26.0 217.1 

Aerospace Industry 11.6 133.0 — 144.6 

Shipbuilding Industry 5.0 65.7 — 70.7 

Tooling Industry 19.6 24.9 — 44.4 

Total Potential Benefits $74.9 $375.9 $26.0 $476.8 

Source: RTI estimates. 

Using CAx converter programs and most neutral formats still leads 

to instances of manual reentry among firms. IGES and DXF files are 

simplified renditions of complex files. When IGES and DXF files are 

themselves converted into a third format, not only do they lack the 

richness of the original file but they may require substantial 

“tweaking” or even reconstruction because of lines that no longer 

meet or other complications (as described in Section 3.1.2). 

However, not all manual reentry jobs are attributable to poor 

conversion; other factors lead to manual reentry jobs. According to 

interviewees, the translated file may not be usable if the file was 

originally poorly constructed. 

Paying an employee to manually reenter data into a CAx system due 

to data exchange failures of unreadable or incompatible files is 

inefficient. That employee’s time would be better spent 

accomplishing some other task of greater value to the firm. In 

instances of manual reentry, the employee is replicating work that 

had already been completed by another, either within the firm or at 

a different company. 

The quality of STEP translations is substantially greater than other 

neutral formats; consequently, fewer reentry jobs are required. 

Interviewees who currently use STEP indicated that it has reduced 

manual reentry jobs by about 80 percent over IGES, DXF, and other 

methods. Human and computer error will always cause instances 

of manual reentry, but the amount of that reentry attributable to 

low-quality neutral format transfers will be significantly less. 

Based on information collected during industry interviews, 

widespread application of STEP could have reduced the number of 

manual reentry jobs by over 277,000 in 2001 (see Table 8-10). 

The quality of STEP 

translations is substantially 

greater than other neutral 

formats; consequently, 

fewer reentry jobs are 

required. Interviewees that 

currently use STEP 

indicated that it has 

reduced manual reentry 

jobs by about 80 percent 

over IGES, DXF, and other 

methods. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-19 

Table 8-10. Estimated Annual Number of Manual Reentry Jobs, 2001 

Industry 

Hours Per Reentry 

Job 

Reentry Jobs per 

Employee 

Industry-wide 

Number of Reentry 

Jobs 

Automotive 189,059 

 Automotive OEMs 4.5 0.003 1,611 

 First-tier suppliers 1.2 0.214 157,696 

 Subtier suppliers 5.7 0.029 29,753 

Aerospace 16,386 

 Aircraft OEMs — — — 

 Aircraft parts suppliers 4.4 0.042 15,788 

 Aircraft engines and engine parts 8.0 0.001 119 

 Missile and space systems 8.0 0.006 478 

Shipbuilding 17,180 

 Shipbuilders 5.0 0.059 5,585 

 Shipbuilding systems suppliers 5.7 0.077 11,595 

Specialty Tool and Die 23.7 0.633 21,222 

Total 277,414 

Source: RTI estimates. 

Although the number of manual reentry jobs is fairly small on a peremployee basis, excluding specialty tool and die, each reentry job 

takes an average of 4.2 hours. At current wage rates, the total value 

of those hours is $75 million – (the number of hours per job) x (the 

estimated number of jobs industry-wide) x (the wage rate for CAx 

designers for each industry) (see Table 8-11).7 

The complexity of manual reentry jobs, and hence the hours per 

job, vary greatly across industry and position in the supply chain. 

As shown in Table 8-10, the manual reentry time burden is greater 

for aerospace and shipbuilding than for automotive firms. The level 

of effort involved with each manual reentry job varies according to 

the complexity of the part, the level of analytical tolerance, and the 

 

7The number of reentry jobs per industry was estimated by multiplying the number 

of reentry jobs per employee by the sum of the employment in each industry 

subsector. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-20 

Table 8-11. Potential Labor Savings from Less Manual Reentry, 2001 

Industry 

Potential Annual Savings per 

Employee ($) 

Potential Annual Savings 

Industry-wide (thousand $) 

Automotive 

 Automotive OEMs 0.84 530.4 

 First-tier suppliers 24.90 18,384.6 

 Subtier suppliers 19.28 19,855.0 

Aerospace 

 Aircraft OEMs — — 

 Aircraft parts suppliers 28.25 10,745.1 

 Aircraft engines and engine parts 0.50 50.3 

 Missile and space systems 9.39 807.2 

Shipbuilding 

 Shipbuilders 19.41 1,838.1 

 Shipbuilding systems suppliers 20.90 3,134.8 

Specialty Tool and Die 583.37 19,559.3 

Total $74,904.8 

Source: RTI estimates. 

size of those parts. The automotive suppliers exchange files that are 

relatively smaller in size, less complex in detail, and have looser 

tolerances compared to submarine or rocket manufacturers. In 

particular, tool and die shops that produce the molds used to stamp 

and form components generally require tighter tolerances leading to 

greater reentry costs per job. 

The subtier automotive suppliers have higher manual reentry costs 

due to a lower level of technical sophistication; the stratum is 

dominated by small firms that generally do have the resources to 

invest in advanced systems as first-tier suppliers, for example. 

Similarly, tool and die manufacturing, which has the highest 

average of labor input per job at 23.7 hours, works with a large 

number of firms and several different types of formats. They are the 

extreme in this cost category because all the factors that increase 

this particular cost burden in other sectors converge in this industry. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-21 

File Transfer Costs 

It is well documented that STEP is a more robust neutral format than 

IGES and DXF, but what is less well known is that it is less time 

consuming to accomplish neutral format file transfers via STEP than 

the alternative formats. File transfers occur when firms exchange 

product model data either internally between two CAx systems or 

externally with suppliers, customers, and teaming partners. Based 

on 2001 data, we estimate that STEP could save nearly $400 million 

annually when used in place of IGES and DXF. 

When a file is transferred via STEP, IGES, or DXF, it is converted 

from a native format, exchanged, and then reconverted into a native 

format. Neutral formats are frequently used as an intermediate 

translation solution: for example, a CATIA file may be translated 

into Unigraphics via STEP or IGES. Converting a file into a neutral 

format using IGES can be a time-consuming operation. In addition, 

if the file is not properly prepared the transfer is more likely to fail. 

Automotive and aerospace companies said that STEP reduces the 

file preparation time by 1 hour on average. That means that if a 

designer used STEP to exchange a file instead of IGES, he or she 

would save 1 labor hour when preparing the file to be exchanged 

and 1 labor hour reconstructing the file on the receiving end. Thus, 

the total benefit per transfer would be 2 hours shared between the 

transferring and receiving parties. 

Several of the data exchange experts interviewed in the automotive 

and aerospace industries employ STEP as a tool to communicate 

product model data between systems. In the shipbuilding industry, 

however, file exchanges are substantially larger and more intricate 

than those transferred by the aerospace and automotive industries. 

Internal transfers within shipbuilding firms and external transfers 

between shipbuilders can be enormous subassemblies and ship 

components. Because many shipbuilders work in lead yard/follow 

yard relationships, teaming partners frequently share complete 

product model data for end products such as destroyers and 

submarines. 

Shipbuilders said that it takes them on average 4 hours to construct 

a STEP file and 32 hours to construct an equivalent IGES file. This 

yields an incremental benefit for STEP versus IGES of 28 hours for 

large transfers within and between shipbuilders. 

Based on 2001 data, 

we estimate that 

STEP could save 

nearly $400 million 

annually when used 

in place of IGES and 

DXF. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-22 

Whereas we use the 28-hour estimate for transfers among 

shipbuilders, we a use 1-hour estimate for transfers between 

shipbuilders and their suppliers. Exchanges between shipbuilders 

and suppliers are less involved and similar in complexity as transfers 

in the aerospace and automotive industries. 

Volume of Transfers 

Based on survey responses, it is estimated that 2.8 million neutral 

format file transfers were conducted in 2001.8 A transfer may 

include anything from one discrete part to a collection of parts in a 

subassembly. It is unlikely that an entire assembled end product 

would be exchanged electronically; however, it is possible. Thus, 

information on estimated neutral-format transfers in Table 8-12 does 

not reflect the number of parts exchanged; rather, the information 

reflects the number of transfers that are estimated to have occurred. 

We did not collect information on the number of native-format file 

transfers conducted. However, companies indicated that the 

number of native-file transfers was much higher than the number of 

neutral-format file transfers. 

The estimated number of neutral format file transfers illustrates the 

nature of data exchange in these industries. As hypothesized, 

suppliers would benefit most from greater usage of STEP. The 

information in Table 8-13 indicates that STEP could yield significant 

organizational productivity benefits for suppliers. 

For example, of the more than 767,000 transfers performed by 

subtier automotive suppliers, only slightly more than 40,000 of 

them were performed via STEP. Perhaps more significant, however, 

is the case of the first-tier automotive suppliers. These suppliers, 

long considered the bearer of interoperability costs, are shown to 

transfer large numbers of neutral-format files externally, but very few 

of those were with automotive OEMs. The number of neutralformat transfers performed internally is outnumbered more than 

three to one by external transfers, with the bulk of them being nonSTEP external transfers. The data indicate that first-tier suppliers are 

 

8The number of neutral format file transfers per industry was estimated by summing 

the number of reported transfers for the companies in the sample and dividing 

the result by the sum of their employment. 
Section 8 — The Potential and Current Economic Impact of STE

P

8-23 

Table 8-12. Estimated Volume of Neutral Format File Transfers, 2001 

 Internal File Transfers External File Transfers 

Industry STEP Non-STEP Subtotal STEP Non-STEP Subtotal 

Total File 

Transfers 

Automotive 67,634 354,006 421,641 61,003 732,091 793,094 1,214,735  Automotive OEMs 4,896 17,475 22,371 5,218 18,683 23,901  First-tier suppliers 52,210 43,962 96,172 25,730 279,322 305,053  Subtier suppliers 10,528 292,569 303,097 30,054 434,086 464,140 Aerospace 137,809 271,401 409,210 42,003 547,663 589,665 998,875  Aircraft OEMs — — — 23,900 41,973 65,873  Aircraft parts suppliers 127,059 211,013 338,072 7,957 492,698 500,655  Aircraft engines and engine parts 3,575 596 4,171 5,363 1,033 6,396  Missile and space systems 7,175 59,791 66,966 4,783 11,958 16,742 Shipbuilding 14,132 242,760 256,892 13,841 55,797 69,638 326,531  Shipbuilders 14,132 3,497 17,629 13,841 583 14,424  Shipbuilding systems suppliers — 239,264 239,264 — 55,215 55,215 Specialty Tool and Die 32,334 90,334 122,667 60,834 59,667 120,501 243,168 Total 251,909 958,501 1,210,411 177,680 1,395,218 1,572,898 2,783,309 Source: RTI estimates. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-24 

providing large numbers of IGES, DXF, and other types of files to 

subtier suppliers but are exchanging native-format files with their 

customers. 

Similarly, aircraft parts suppliers used STEP heavily internally, but 

exchanged few STEP files externally. The larger suppliers we 

interviewed, which are akin to first-tier suppliers in the automotive 

industry, said that they may use STEP internally, but use IGES with 

smaller contract suppliers. Some aircraft parts suppliers exchange 

STEP files with OEMs. A number of high-profile projects, such as 

the Boeing 777 and the Joint Strike Fighter, have made extensive 

use of STEP transfer between OEMs and subassembly suppliers. In 

contrast, shipbuilding OEMs and suppliers have no measurable use 

of STEP at this time. However, this trend may change as 

shipbuilders become more amenable to the use of STEP with the 

introduction of a suite of APs developed specifically for that 

industry. 

The potential annual benefit of STEP versus other neutral formats is 

about $376 million (see Table 8-13). On a per-employee basis, the 

tooling industry is again the greatest potential beneficiary: it could 

realize as much as $742.29 of benefit per employee. After specialty 

tool and die, the largest beneficiaries are the shipbuilding industry 

and aircraft parts suppliers. The potential benefits were estimated 

by multiplying, for each industry, the number of transfers, the CAx 

wage rate, and the time benefit per transfer for internal and external 

transfers. 

The automotive and aerospace OEMs that rely heavily on nativeformat transfers show the smallest benefits for this category. 

Automotive OEMs would experience $9.01 of benefit per 

employee; aircraft engines, $13.75; and aircraft OEMs, $37.35. 

However, a share of the benefits subsumed in the supply chain 

would likely accrue to those firms through reduced cycle times and 

lower prices over time. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-25 

Table 8-13. Potential Benefits from Employing STEP for Neutral-Format File Transfer, 2001 

Industry 

Potential Annual Savings per 

Employee ($) 

Potential Annual Savings 

Industry-wide (million $) 

Automotive 152.3 

 Automotive OEMs 9.01 5.7 

 First-tier suppliers 66.77 49.3 

 Subtier suppliers 94.52 97.3 

Aerospace 133.0 

 Aircraft OEMs 37.35 8.7 

 Aircraft parts suppliers 294.25 111.9 

 Aircraft engines and engine parts 13.75 1.4 

 Missile and space systems 128.33 11.0 

Shipbuilding 65.7 

 Shipbuilders 326.27 30.9 

 Shipbuilding systems suppliers 232.21 34.8 

Specialty Tool and Die 742.29 24.9 

Total $375.9 

Source: RTI estimates. 

Inefficient PDM Administration 

Only a small number of the firms interviewed had installed PDM 

systems at the time of the analysis, although several had plans to do 

so in the near future. Therefore, we were able to calculate this 

benefit category only for first-tier automotive suppliers. Several firsttier suppliers indicated that STEP’s use for PDM data exchange 

would save on PDM reentry costs. Their responses allowed us to 

estimate $26 million in potential annual STEP benefits for the 

subsector. This amount is very likely an underestimate, because it 

only includes potential benefits of STEP associated with supporting 

existing PDM systems. In many ways, STEP may serve as an 

enabling technology that will increase the penetration of PDM 

systems overall. These enabling benefits are not captured in this 

analysis. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-26 

 8.2.3 End-User Delay Costs 

The third end-user cost category is delay costs: the costs associated 

with the delay in the production or delivery of manufactured goods 

caused by imperfect data exchange. An example of a delay cost 

would be a 3-day delay in the shipment of brake assemblies to an 

OEM because a key component had to be manually reentered into 

CAx systems. Delay costs have the potential to account for a 

significant percentage of the total benefit of STEP. 

However, all the firms we spoke with told us that they do not incur 

delay costs because they incorporate interoperability problems into 

their design schedules. According to our respondents, mitigation 

costs are to be expected, and firms react by incorporating buffers 

into their project milestones. Because of this and the fact that CAx 

activities are relatively far up stream in the production process, no 

company indicated that it had ever missed a delivery date due to 

interoperability problems. However, the fact that interoperability 

problems influence scheduling indicates that these issues do tacitly 

delay product development. In addition, late-night and weekend 

work may resulting from mitigation activities may not show up on 

cost reports, but they do represent a social cost. 

Because respondents were unable to provide information on these 

issues, however, we were unable to quantify this third cost category. 

 8.3 SOCIAL COSTS OF STEP 

The various APs that comprise STEP are the result of efforts supplied 

by an array of private companies, government and independent 

research bodies, and public-private consortia. RTI has documented 

over an estimated $198.4 million (in real-term 2001$) spent since 

1987 in the United States on developing STEP, incorporating it into 

software products, and promoting its use. This cost estimate is very 

likely to be conservative because many of the costs of STEP 

development activities were could not be obtained. 

These expenditures essentially represent the social costs of STEP—

the cost society has incurred to develop this new technology. But 

STEP’s developers view the costs they have incurred as investments 

that will provide them future economic return. In their view, that 

return will be in the form of reduced avoidance and mitigation 
Section 8 — The Potential and Current Economic Impact of STEP 

8-27 

costs, improvements in cycle times, a partial solution to legacy data 

issues, and an improvement in supply chain management.9 

The social costs of STEP began to accrue in 1987. We selected 

1987 as our first year because that year was the first in which NIST 

identified costs directly attributable to STEP development. Industry 

and software development costs begin with the founding in late 

1988 of PDES, Inc., the public-private organization tasked with 

STEP deployment and coordination in the United States. Although 

costs were likely incurred for a short time before 1987, information 

on those activities is vague and unable to be accurately quantified. 

This section develops a preliminary estimate of the domestic 

resources expended to develop STEP. The task of estimating all U.S. 

expenses is exceedingly difficult because many developers and 

several standards bodies have entered and exited the STEP arena 

over time. This analysis also attempts to differentiate between 

domestic and foreign expenditures because the scope of the benefit 

analysis is limited to the U.S. automotive, aerospace, and 

shipbuilding industries. 

In summary, the social cost estimates focus only on STEP-related 

expenditures that support these three U.S. industries. These 

estimates are admittedly incomplete, because a detailed cost 

accounting was beyond the scope and resources of this study. 

However, when paired with the end-user benefits developed in 

Section 8.2, the social cost estimates allow us to calculate 

approximate measures of economic return from investments in 

STEP. 

 8.3.1 Categories of Social Costs 

STEP’s developers fall into three general categories: software 

developers, industry, and government. This section investigates the 

STEP development costs by category. Based on the information 

available, a total of $198.4 million has been invested in STEP 

development related to the automotive, aerospace, and shipbuilding 

industries. Of these expenses, software developers (including CAx 

 

9Theoretically, more efficient data exchange should reduce the amount of time 

needed to develop and ready a prospective product for production. It could be 

said, then, that “cycle times” would be reduced, which also implies an 

improvement in supply chain management. However, because these potential 

benefits are speculative and difficult to quantify due to variability among firms’ 

business decisions, they are not quantified in this analysis. 

The social costs of STEP 

began to accrue in 1987. 

We selected 1987 as our 

first year because that year 

was the first in which NIST 

was able to identify costs 

directly attributable to STEP 

development. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-28 

vendors and contractors) incurred 27 percent; industry, 42 percent; 

and federal agencies, including DoD and NIST, 31 percent. 

 8.3.2 Software Developer Expenditures 

At the end of 2001, at least 51 major software suites offered STEP 

functionality. The first software vendors began the process of 

developing STEP functionality for inclusion in products in 1993 (see 

Figure 8-1). Using the data from the software developers survey, we 

estimate that the inclusion of STEP in software products involved an 

ongoing average annual expense of $179,113 excluding costs for 

participation in a number of public-private demonstration services 

and projects, which were limited to a small number of major 

vendors. It was also learned that there was approximately a 2-year 

lag between the decision to support STEP and the product’s 

release.10

Figure 8-1. Growth in Major CAx Software Packages with STEP Functionality 

0

10

20

30

40

50

60

1993 1994 1995 1996 1997 1998 1999 2000 2001

Year

Number of Software Packages

 

10In this analysis, a software developer is defined as a software vendor or large 

contracting firm working to design and implement STEP. Individuals working as 

developers on specific APs and not also incorporating STEP in products are 

grouped with industry. According to individuals functioning in this capacity, 

the funds they receive to perform this work are from industry standards-setting 

bodies or companies themselves. Thus, this analysis assumes they are the 

employees of or contractors to such bodies and therefore a part of industry’s 

expenditures. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-29 

The costs developers incur range from internal standards 

development work, to integrating STEP in their CAx software, to 

demonstration and certification activities. Table 8-14 presents a 

time series of software developers’ costs from 1987 through 2001. 

As shown in the table software developers’ costs since 1991 are 

divided into five categories: 

Z Standards development costs are labor costs associated with 

writing and developing STEP APs. Standards development 

costs were approximately $6.3 million. 

Z Software development tools and testing tools costs are labor 

costs associated with developing and testing tools to support 

STEP’s integration in products. These costs equaled $9.3 

million. 

Z Software demonstration and certification services costs are 

predominantly labor costs associated with participating in 

STEP demonstration and certification proceedings. These 

costs amounted to about $5.4 million. 

Z Expenditures to integrate STEP into products captures labor 

costs associated with programming and other activities 

associated with incorporating STEP functionality into 

software releases. Integrating STEP into products cost about 

$33.3 million. 

 8.3.3 Transportation Equipment Industry Expenditures 

The transportation equipment industries have contributed the largest 

share of resources to STEP development. Table 8-15 shows the 

stream of $81.5 million, in real terms, of labor and fiduciary 

contributions industry has expended on STEP development since 

1989. The costs include internal or intrasupply-chain projects 

funded to test and develop STEP. Industry also took on the task of 

preparing some of the early STEP APs and demonstrated their 

effectiveness in a series of demonstration projects. Often, such 

demonstration projects were public-private ventures funded by an 

array of entities representing several industries and disciplines. 

Although STEP’s development is the fruit of the combined labor of 

industry, software developers, and the public sector alike, industry 

provided much of the early initiative and labor resources that made 

STEP’s development possible (Kemmerer, 1999). 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-30 

Table 8-14. Time Series of Software Developers Expenditures (1987 through 2001) 

Year 

Standards 

Development 

(thousand $) 

Standards 

Development 

Tools and Testing 

Tools 

(thousand $) 

Software 

Demonstration 

and Certification 

Services 

(thousand $) 

Expenditures to 

Integrate STEP 

Into Products 

(thousand $) 

Total 

(thousand $) 

1987 — — — — — 

1988 — — — — — 

1989 — — — — — 

1990 — — — — — 

1991 122.4 — 122.4 — 244.7 

1992 185.5 — 185.5 — 371.0 

1993 204.1 111.0 193.9 395.6 904.6 

1994 400.3 195.4 382.3 696.5 1,674.4 

1995 698.2 269.4 673.3 960.2 2,601.1 

1996 912.2 582.5 858.4 2,076.5 4,429.7 

1997 922.8 1,068.6 824.2 3,809.4 6,624.9 

1998 925.0 1,660.5 771.7 5,919.4 9,276.6 

1999 760.9 1,744.9 599.9 6,220.2 9,325.9 

2000 564.7 1,855.8 393.4 6,615.8 9,429.9 

2001 563.7 1,855.8 392.4 6,615.8 9,427.7 

Total $6,259.9 $9,343.8 $5,397.4 $33,309.5 $54,310.5 

Source: RTI estimates. 

 8.3.4 Public Sector Expenditures 

The public sector’s expenditures to develop STEP fall into the same 

categories as industry’s. The National Aeronautics and Space 

Administration (NASA), DoD, and NIST have contributed a 

combined $62.6 million since 1987, including overhead expenses. 

All three agencies funded and helped coordinate STEP AP writing 

and demonstration services, often in 50-50 partnership with 

industry. The projects noted in the previous section, AutoSTEP and 

the ISE, were funded in part by these agencies. Federal employees 

assisted in writing and editing STEP APs and assumed coordinating 

roles to forward STEP’s momentum. NIST, DoD, and NASA are 

members of PDES, Inc. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-31 

Year STEP-Related Expenditures (thousand $) 

1987 — 

1988 — 

1989 3,987.7 

1990 6,137.7 

1991 6,706.8 

1992 7,323.9 

1993 8,398.7 

1994 8,917.2 

1995 6,068.1 

1996 5,504.0 

1997 4,644.5 

1998 4,474.7 

1999 4,371.1 

2000 4,677.0 

2001 10,329.0 

Total $81,540.4 

Source: RTI estimates. 

NIST contributed nearly half the amount of funds allocated to STEP 

development and deployment by federal agencies. In addition to 

the aforementioned activities, NIST coordinated and ran the CAx 

and PDM implementations or forums to assist software vendors. 

Software developers cited these forums as being particularly helpful 

throughout the implementation process. NIST also provided a suite 

of software tools, schema, and other resources. NIST’s impacts are 

further discussed in Section 8.5 (see Table 8-16). 

 8.4 MEASURES OF ECONOMIC RETURN FROM 

STEP 

To calculate the economic return on the development of STEP, a 

timeline of the benefits and the social costs are needed. Section 8.2 

calculated the potential annual benefits of STEP to be approximately 

$928 million in 2001: the sum of the avoidance and mitigation 

benefits calculated in Section 8.2. However, only a fraction of 

these benefits are currently being realized. The current benefits of 

Table 8-15. Time Series 

of Industry Expenditures 

(1987 through 2001) 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-32 

Table 8-16. Time Series of Public Sector Expenditures (1987 through 2001) 

Year 

NIST’s Expenditures 

(thousand $) 

Other Public-Sector 

Expenditures (thousand $) Total (thousand $) 

1987 788.8 — 788.8 

1988 1,029.2 — 1,029.2 

1989 3,510.3 — 3,510.3 

1990 4,236.0 — 4,236.0 

1991 4,918.6 — 4,918.6 

1992 4,129.2 — 4,129.2 

1993 3,305.7 293.7 3,599.4 

1994 4,519.5 1,289.6 5,809.1 

1995 4,309.0 1,555.9 5,864.9 

1996 2,837.8 1,528.1 4,365.9 

1997 2,249.7 1,047.2 3,296.9 

1998 2,067.5 1,333.8 3,401.3 

1999 1,786.3 2,475.6 4,262.0 

2000 1,035.0 2,312.6 3,347.7 

2001 1,006.4 9,004.9 10,011.3 

Total $41,728.9 $20,841.4 $69,031.7 

Source: NIST, NASA, DoD, and RTI estimates. 

STEP that are actually being realized are estimated to be $156 

million. This reflects about 17 percent of the estimated potential. 

The case studies and surveys investigated not only the full potential 

of STEP, but also the current penetration of STEP. For example, 

Table 8-13 provides estimates for the number of STEP and non-STEP 

neutral format file transfers in 2001. The number of STEP transfers 

represents current benefits and the total number of transfers reflects 

the full potential benefits of STEP. 

Although this analysis estimates that the potential annual benefit, 

based on 2001 data, for STEP is $928 million, it is unlikely that 

STEP would experience rapid adoption within a short time frame. 

This also means that the annual accrual of benefits would not be 

$928 million instantaneously. To calculate measures of return, the 

Section 8.2 calculated the 

potential benefits of STEP 

to be approximately $928 

million. However, only a 

fraction of these benefits 

are currently being 

realized. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-33 

STEP penetration rate is assumed to be 75 percent in 2010. Put 

another way, in 2010 the annual STEP benefit, all things held the 

same, would be about $697 million. STEP penetration therefore 

moves from 0 percent in 1994 to 17 percent in 2001 to 75 percent 

in 2010. 

The adoption and use of STEP is modeled as a continuous diffusion 

curve. The S-shaped diffusion curve approaches the full industry 

potential asymptotically. The net present value of those benefits is 

their sum discounted back to 2001 using the 7 percent social 

discount rate recommended by the Office of Management and 

Budget (OMB). 

Forecasting STEP’s rate of diffusion is difficult because it is in the 

early stages of adoption. It is a function of the number of current 

adopters, the number of potential adopters, and the rate at which 

information and knowledge pass from one agent to another. This 

study forecasts diffusion using the Bass two-parameter diffusion 

model (Mahajan, Muller, and Bass, 1990; Mahajan and Peterson, 

1985). The Bass model generates a common S-shaped causal 

diffusion curve and is presented in Eq. (8.1), 

 Bt = Bt-1 + p (M – Bt-1) + q (Bt-1/M)(M – Bt-1) (8.1) 

Bt is the benefits realized in year t, and reflects the cumulative 

number of STEP adopters through year t; p is the external influence 

coefficient; q is the internal influence coefficient; and M is the total 

(market) potential of STEP’s impact on interoperability costs. 

An S-shaped diffusion curve is theoretically consistent with most 

empirical studies of technology adoption (Geroski, 2000; Mahajan 

and Peterson, 1985; RTI, 1999). Originally, only a small number of 

firms adopt this technology. As more firms observe the benefits 

realized by initial adopters, they too adopt the technology. 

Thus, the benefit diffusion curve is fitted based on the following 

information: 

Z Benefits begin in 1995, the first year STEP functionality was 

commercially available. 

Z Current benefits in 2001 are estimated to be $156 million. 

Z Maximum potential benefits are $928 million. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-34 

Z 75 percent of potential benefits are realized by 2010. This 

percentage was selected because IGES, at the time of this 

writing, will have one more release and will remain popular 

among small suppliers in the near term. Also, uncertainty 

over when OEMs will begin to accept STEP files from firsttier suppliers means that STEP’s full potential may not be 

realized by 2010. 

This analysis projects the benefits of STEP through 2010, depicted in 

Figure 8-2 (see also Table 8-17). However, future STEP 

development and implementation costs (past 2001) are not 

included. This is because the benefits are based on currently 

existing APs and currently available software functionality. Future 

development of STEP and software products is ongoing; however, 

the benefits of these new APs and new products are not captured in 

the benefits stream. 

As shown in Table 8-17, the Net Present Value (NPV) of STEP’s net 

benefits, given a 75 percent penetration rate through 2010, is $1.1 

billion, expressed in 2001$. The benefit-to-cost ratio is 11.4. The 

social rate of return is estimated to be 36 percent.11

Figure 8-2. Estimated Accrual of Potential Benefits (1994 though 2010) 

0

100

200

300

400

500

600

700

800

900

199419951996199719981999200020012002200320042005200620072008200920102011201220132014

Year

2001$

(million dollars)

 

11The social rate of return is calculated using the recommended OMB 7 percent 

inflation-adjusted social discount rate. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-35 

Table 8-17. Time Series of STEP Benefits and Social Costs, Assuming 75 Percent STEP 

Penetration Rate in 2010 

Year Benefits (million $) Social Costs (million $) Net Benefits (million $) 

1987 — 0.8 –0.8 

1988 — 1.0 –1.0 

1989 — 7.5 –7.5 

1990 — 10.4 –10.4 

1991 — 11.9 –11.9 

1992 — 11.8 –11.8 

1993 — 12.9 –12.9 

1994 — 16.4 –16.4 

1995 10.7 14.5 –3.8 

1996 24.2 14.3 9.9 

1997 41.1 14.6 26.5 

1998 62.0 17.2 44.8 

1999 87.7 18.0 69.7 

2000 119.0 17.5 101.6 

2001 156.6 29.8 126.8 

2002 200.9 — 200.9 

2003 252.1 — 252.1 

2004 309.9 — 309.9 

2005 373.2 — 373.2 

2006 440.3 — 440.3 

2007 508.9 — 508.9 

2008 576.2 — 576.2 

2009 639.7 — 639.7 

2010 697.1 — 697.1 

NPV $1,186.3 $104.3 $1,082.0 

Source: RTI estimates. 

 8.5 RETURN TO NIST CONTRIBUTIONS 

NIST’s role has had a positive effect on the quality, timing, and cost 

of the development and deployment of STEP, according to the 

software developers interviewed for this analysis. During the 

interview phase, software developers were asked about their general 

impressions of NIST’s STEP-related offerings and activities to assess 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-36 

the impact that NIST has had on STEP’s development. Interviewees 

indicated that NIST has had a significant impact on the 

development of STEP APs and STEP’s implementation into their 

products. Most frequently cited was NIST’s role as a resource, 

supplying knowledgeable staff to support PDES, attend meetings, 

and provide the expertise needed to facilitate the standardsdevelopment process. They also cited coordination activities 

between international standard organizations as important 

contributions. 

Vendors stated that NIST improved the overall quality of standards 

being developed, accelerated the availability of STEP in commercial 

products, and lowered the cost of development through their 

contributions to 

Z EXPRESS (SIO 10303-11), 

Z AP203 (ISO 10303-203), 

Z Mapping Table Generators, 

Z NIST EXPRESS Toolkit, 

Z STEP File Checker, 

Z STEP certification process, 

Z PDM schema, and 

Z General administrative activities. 

Interviewees supplemented their anecdotal comments by completing 

a matrix that asked whether a variety of NIST activities yielded quality 

improvements, development acceleration, and cost reductions for 

their own operations. Table 8-18 summarizes software developers’ 

impressions with open circles symbolizing “some impact” and dark 

circles representing “great impact.” Their responses indicate that 

almost all of NIST’s contributions had an impact on the overall quality 

of STEP, and slightly fewer helped accelerate STEP’s development and 

introduction. Those that yielded cost reductions numbered five: the 

Mapping Table Generator, PDM Schema, NIST EXPRESS Toolkit, STEP 

File Checker, and STEP certification services. 

Although they were able to determine whether NIST’s contributions 

affected their product development cycles, vendors were not able to 

quantify either quality improvements or cost reductions. However, 

they did indicate that NIST’s contributions accelerated the 

implementation of STEP functionality into their products by about 1 

year. 

Developers indicate that 

almost all of NIST’s 

contributions had an 

impact on the overall 

quality of STEP, and slightly 

fewer helped accelerate 

STEP’s development and 

introduction. Those that 

yielded cost reductions 

numbered five: the 

Mapping Table Generator, 

PDM Schema, NIST 

EXPRESS Toolkit, STEP File 

Checker, and STEP 

certification services. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-37 

Table 8-18. Software Developers’ Impressions 

 NIST’s Impacts 

Quality 

Improvements Acceleration 

Cost 

Reductions 

Standards Development 

 Administrative contributions X X 

 EXPRESS (ISO 10303-11) X X 

 AP203 (ISO 10303-203) X 

 Mapping Table Generator X X X

 PDM schema X X X

Software Development Tools and Testing Tools 

 NIST EXPRESS Toolkit X X X

 STEP Class Library 

 Expresso 

 STEP File Checker X X X

 STEP Geometry Analyzer 

Demonstration and Certification Services 

 AutoSTEP testing project 

 CAx and PDM implementor forums X X X

 STEP certification services X X X

Note: X = Significant Impact 

X = Moderate Impact 

Not surprisingly, industry end users of STEP were less aware of 

NIST’s role in its development. The CAx engineers and IT staff 

interviews were generally removed from the standards-development 

process and were typically not aware of who had supported the 

development of the testing tools and demonstration and certification 

services available for STEP. In addition, industry staff who had been 

involved in the development of STEP were frequently no longer with 

the company or had been reassigned. As a result, few end-user 

companies were aware of NIST’s role in the development of STEP. 

 8.5.1 Estimating NIST’s Impact 

The 1-year acceleration effect is used as a partial indicator of the 

economic impact resulting from NIST’s activities. Admittedly, this 

does not capture NIST’s full impact because missing are quality 

improvements and cost reductions. However, the acceleration 

effect does provide a conservative metric to assess NIST’s 

contributions. 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-38 

Table 8-19 provides the time series of NIST expenditures along with 

the incremental benefits resulting from NIST’s acceleration effect. 

As shown in Table 8-20, the NPV of NIST’s expenditures through 

2001 is $26.0 million and the NPV of NIST acceleration benefit is 

206.1 million. As with the total social costs of STEP, future NIST 

expenditures are not included because benefits are based on 

existing STEP capabilities. 

Subtracting the incremental acceleration benefits and NIST’s 

expenditures yields a NPV of $180.1 million. The benefit-to-cost 

ratio is 7.9 and the social rate of return is 32 percent. 

 8.6 SUMMARY OF IMPACTS 

Table 8-20 presents an overview of the empirical findings. STEP has 

the potential to reduce CAx interoperability costs in the three 

industries studied by approximately $928 million (2001$) annually. 

The automotive industry represents the largest share of potential 

benefits (51 percent), followed by aerospace (27 percent), and 

shipbuilding (16 percent). 

Avoidance cost savings accounted for approximately half of the 

potential benefits of STEP. Eighty percent of avoidance costs were 

labor costs associated with the use and support of redundant CAx 

systems. Mitigation costs resulting from file transfer and data reentry 

accounted for the balance of benefits. No company interviewed 

indicated that they experienced delay costs associated with CAx 

interoperability problems. 

The current benefits resulting from STEP use in 2001 are estimated 

to be approximate $156 million. Realized benefits represent 

approximately 14 percent of STEP’s estimated potential, with most 

current benefits again realized by the automotive industry. 

Table 8-21 presents the present value of benefit and costs, along 

with the ratio of benefits to costs and the social rate of return for 

domestic STEP activities. Benefits and costs were projected through 

2010 assuming a 75 percent penetration rate for STEP in 2010. 

STEP development costs include expenditures by government 

agencies, software vendors, and industry users, and were estimated 

to be approximately $17 million in the late 1990s. 

STEP has the potential to 

reduce interoperability 

costs in the three industries 

studied by approximately 

$928 million annually. 

STEP development costs, 

on the other hand, were 

estimated to be 

approximately $17 million 

per year during the mid to 

late 1990s. 
Section 8 — The Potential and Current Economic Impact of STEP 

8-39 

Table 8-19. Time Series of NIST Expenditures and Acceleration Benefits 

Year 

NIST Expenditures 

(million $) 

STEP Benefit with 

NIST (million $) 

(a) 

STEP Benefits without 

NIST (million $) 

(lagged 1 year) 

(b) 

NIST’s Acceleration 

Impact on Benefits 

(million $) 

(a – b) 

1987 0.8 — — — 

1988 1.0 — — — 

1989 3.5 — — — 

1990 4.2 — — — 

1991 4.9 — — — 

1992 4.1 — — — 

1993 3.3 — — — 

1994 4.5 — — — 

1995 4.3 10.7 — 10.7 

1996 2.8 24.2 10.7 13.5 

1997 2.2 41.1 24.2 16.9 

1998 2.1 62.0 41.1 20.9 

1999 1.8 87.7 62.0 25.7 

2000 1.0 119.0 87.7 31.3 

2001 1.0 156.6 119.0 37.6 

2001 — 200.9 156.6 44.3 

2003 — 252.1 200.9 51.2 

2004 — 309.9 252.1 57.8 

2005 — 373.2 309.9 63.3 

2006 — 440.3 373.2 67.1 

2007 — 508.9 440.3 68.6 

2008 — 576.2 508.9 67.4 

2009 — 639.7 576.2 63.5 

2010 — 697.1 639.7 57.4 

NPV $26.0 $1,186.3 $980.3 $206.1 
Economic Impact Assessment of the International Standard for the 

Exchange of Product Model Data (STEP) in Transportation Equipment Industries 

8-40 

Table 8-20. Potential Annual Benefits of STEP for CAx Applications (millions 2001$) 

 Potential Benefits of STEP 

Industry Avoidance Mitigation Total 

Current Benefits 

Total 

Automotive $253.1 $217.1 $470.2 $86.6 

Aerospace $108.4 $144.6 $253.0 $35.2 

Shipbuilding $76.4 $70.7 $147.1 $25.7 

Specialty Tool & Die $13.5 $44.4 $57.9 $9.1 

Total $451.4 $476.8 $928.2 $156.6 

Table 8-21. Measures of Economic Return 

Economic Returns 

to STEP 

Returns to NIST 

Expenditures 

Present Value of Benefits (millions 2001$) b 1,186 206 

Present Value of Costs (millions 2001$)a,b –104 –26 

Net Present Value (millions 2001$)b 1,082 180 

Benefit-to-Cost Ratio 11.4 7.9 

Social Rate of Return (percent)b 36.1 31.6 

aCosts are presented as negative numbers. 

bOMB-recommended social discount rate of 7 percent is used. 

Table 8-21 also estimates returns to NIST’s approximate $41.7 

million (present value $26 million 2001$) investment to support 

STEP development and software implementation. Industry indicated 

that NIST’s activities accelerated the development and adoption of 

STEP by about 1 year, yielding and an economic impact of $180 

million (NPV 2001$). 
R-1 

 

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Incompatibility in the Automotive Industry.” NIST 

presentation. 

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Meet Future Air and Space Transportation Needs and Goals. 

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Phelan, M. 1997. “Sprechen Sie Megasupplier.” Automotive 

Industries June:71-75. 

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Analysis of the U.S. Automotive Supply Chain. Report 

prepared for the National Institute of Standards and 

Technology. Research Triangle Park, NC: Research 

Triangle Institute. 

Sawant, A.V., and J.N. Nazemetz. 1998. “Impediments to Data 

Exchange and Use of STEP for Data Exchange.” Paper 

developed under the Computer Assisted Technology 

Transfer (CATT) research program. Contract number 

F34601-95-D-00376. Oklahoma State University working 

paper. 

Stiglitz, J.E. 1988. Economics of the Public Sector. New York: 

W.W. Norton & Company. 

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Manufacturers’ Costs.” Journal of Commerce and 

Commercial. 408(28713):7a. 

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Series: Ship Building and Repairing. EC97M-3366A. 

Washington, DC: U.S. Government Printing Office. 

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R-6 

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paper. 
 Appendix A: 

 Telephone Survey 

A-1 

Questionnaire: First-Tier Suppliers 

Introduction 

On behalf of the National Institute of Standards and Technology (NIST), Research Triangle Institute 

(RTI) is evaluating the potential benefits of STEP in reducing interoperability costs for the exchange 

of product data. Interoperability problems arise when members of the supply chain create 

technical data using different design, manufacturing, engineering, or product data management 

(PDM) software applications. As a member of an industry that is actively involved in product 

design and engineering, you have unique insights into the product data exchange problem. The 

information you provide will help NIST better assess the benefits of STEP and the needs of this 

portion of the manufacturing sector, thereby allowing NIST to channel future investments towards 

projects that best meet those needs. 

Please answer the questions in the attached questionnaire with reference to your work on design 

and development of components and systems for projects with OEMs and second-tier suppliers in 

2000. If information for 2000 is not available, please record your most recent data and indicate its 

year. Please feel free to collaborate with your colleagues when answering these questions. The 

data you provide will only be used in aggregate with other companies and will not be disclosed to 

third parties. 

A staff member from RTI will contact you in the next few days to answer any questions you may 

have. At that time you can respond to the questionnaire over the phone, or you can complete the 

questionnaire and fax it to us at (919) 541-6683. If you have any questions prior to the interview, 

please feel free to contact Mike Gallaher at (919) 541-5935 or Alan O’Connor at (919) 541-7186. 

Thank you for participating in this survey. 
A-2 

OMB NO: 0693-0031 Expires 10/31/2002 

This survey is authorized under Executive Order 12862, “Setting Customer Service Standards.” 

Your response is voluntary and all data collected will be considered confidential. Public 

reportings for this collection of information is estimated to average 25 minutes per response, 

including the time of reviewing instructions, searching existing data sources, gathering and 

maintaining the data needed, and completing and reviewing the collection of information. Send 

comments regarding this estimate or any other aspects of this collection of information, including 

suggestions for reducing the length of this questionnaire, to the National Institute of Standards and 

Technology, 100 Bureau Drive, Stop 3220, Gaithersburg, MD, 20899-3220 and the Office of 

Management and Budget Information and Regulatory Affairs, Office of Management and Budget, 

Washington, DC 20503. 
A-3 

1. Company Identification 

Company Name: 

Mailing Address: 

Contact Name: 

Title: 

Phone Number: 

E-mail 

Is the information in this questionnaire specific to your division, or is it for the entire company? 

 Division Company 

If it is specific to your division, approximately what percentage of your company’s 

total design work or product exchange is associated with your division? % 

All your questionnaire responses are confidential. 

2. Product Data Exchange Activity 

2.1 In general, how does your firm accomplish product data exchange with customers? 

2.2 In general, how does your firm accomplish product data exchange with other suppliers? 
A-4 

3. Software Systems and Support 

This section explores your firm or division’s investments in software systems to support your 

business relationships with customers and other suppliers. 

3.1 CAD/CAM/CAE Systems 

If your company maintains multiple software systems (such as Metaphase, UG, CGS, CATIA, 

Wavefront, Ansys, Tecnomatix/Part, MasterCAM, CIMstation) to exchange product data with 

customers and/or suppliers, please complete the table below:

CAD/CAM/CAE System Name 

Number of Licenses 

(or Seats) Comments 

 

 

 

 

 

 

 

 
A-5 

3.2 Design Staff 

How many CAD users are on staff at your company (or division)? 

What percentage of these users use more than one system? % 

Of these users, what is the average amount of time they spend using 

their secondary system? % 

3.3 PDM Systems 

Does your company have a formal PDM system? 

If so, does your company maintain its own PDM systems? 

 No 

 On the average, how much time is spent verifying the data accompanying media 

files and drawings? 

 hours per designer per month 

 Yes 

 If so, are data ever manually reentered from your customer’s system? 

 No 

 Don’t know 

 Yes, requiring about hours per month 

4. Data Transfers 

Approximately, how many single files does your firm transfer as part of internal and external data 

exchanges each month? We are interested in exchanges with both customers and suppliers. Your 

best estimate will suffice. 

Translation Method Internally Externally 

STEP 

IGES 

Point-to-Point Translators 

Other: 

What percentage of STEP translations fail? % 
A-6 

5. Manual Reentry 

If you manually reentered data from one CAD/CAM system to another to exchange product data 

with OEMs and/or suppliers, please help us calculate the cost of manual re-entry by estimating the 

a. Total number of re-entry jobs per years needed to resolve 

translation problems: 

 

c. Average labor hours per re-entry job: 

Has STEP reduced the amount of manual re-entries associated with product data exchange? Why 

or why not? 

 Yes, by % 

 No 

 Don’t know 

6. NIST’s Role in the Development of STEP 

NIST has been active in the development and promotion of STEP. The following questions are 

designed to elicit your understanding of the impact of NIST’s activities. 

6.1 Are you familiar with the following projects? 

 AutoSTEP 

 AeroSTEP 

 MariSTEP 

 CAx and PMD Implementor Forums 

 STEP Certification Services 

6.2 Has NIST made contributions to the development of STEP that influenced the timing of 

your decision to adopt STEP or lowered the cost of adopting STEP? 
A-7 

7. Comments 

Would you like to share other comments about data exchange or your use of STEP? 

 Appendix B: 

 Software Developer 

 Survey 

B-1 

Questionnaire: 

CAD/CAM/CAE/PDM Vendors 

Introduction 

On behalf of the National Institute of Standards and Technology (NIST), Research Triangle Institute 

(RTI) is evaluating the potential benefits of STEP in reducing interoperability costs for the exchange 

of product data. Interoperability problems arise when members of the supply chain create 

technical data using different design, manufacturing, engineering, or product data management 

(PDM) software applications. As a member of the industry who produces the software used in the 

design operations of the industries we are investigating (automobiles, aerospace, shipbuilding), 

you have unique insights into the state of STEP incorporation in CAD/CAM/CAE or PDM software. 

The information you provide will help NIST better assess the benefits of STEP and the needs of this 

portion of the manufacturing sector, thereby allowing NIST to channel future investments towards 

projects that best meet those needs. 

Please answer the questions in the attached questionnaire with reference to your CAD/CAM/CAE 

or PDM software products. Please feel free to collaborate with your colleagues when answering 

these questions. The data you provide will only be used in aggregate with other companies and 

will not be disclosed to third parties. 

An RTI staff member will contact you in the next few days to answer any questions you may have. 

At that time you may respond to the questionnaire over the phone, or alternatively you may 

complete the questionnaire and fax it to us at (919) 541-6683. If you have any questions prior to 

the interview, please feel free to contact Mike Gallaher at (919) 541-5935 or Alan O’Connor at 

(919) 541-7186. 

Thank you for participating in this survey. 
B-2 

OMB NO: 0693-0031 Expires 10/31/2002 

This survey is authorized under Executive Order 12862, “Setting Customer Service Standards.” 

Your response is voluntary and all data collected will be considered confidential. Public 

reportings for this collection of information is estimated to average 25 minutes per response, 

including the time of reviewing instructions, searching existing data sources, gathering and 

maintaining the data needed, and completing and reviewing the collection of information. Send 

comments regarding this estimate or any other aspects of this collection of information, including 

suggestions for reducing the length of this questionnaire, to the National Institute of Standards and 

Technology, 100 Bureau Drive, Stop 3220, Gaithersburg, MD, 20899-3220 and the Office of 

Management and Budget Information and Regulatory Affairs, Office of Management and Budget, 

Washington, DC 20503. 
B-3 

1. Company Identification 

Company Name: 

Mailing Address: 

 

Contact Name: 

Title: 

Phone Number: 

E-mail 

2. CAD/CAM/CAE or PDM Product information 

2.1 Please list your company’s CAD/CAM/CAE or PDM software packages and specialty 

products below that are used by the transportation equipment industry (automobiles, planes, 

ships, etc). 

2.2 Do the CAD/CAM/CAE or PDM software programs your firm markets offer STEP neutral 

format functionality? 

 Yes. In which year did these programs first include STEP? (Continue to Section 3)

 No. Do you plan on including STEP in the future? (End survey) 
B-4 

3. The Cost of Developing STEP Functionality 

3.1 Was your company involved in the administrative process to develop the ISO standards for 

STEP, in developing new technologies and tools, or in supporting demonstrations or 

certification testing? 

 Yes. Over what time frame did you participate and what were your approximate annual 

expenditures in terms of person-months? 

Activities 

Time Period Involved 

(example: from 1995 

to 2001) 

Average Annual 

Expenditures 

(person-months/year) 

Standards development process 

(For example: attended meeting or 

reviewed draft standards)

 

Software development tools and testing tools 

(For example: supported the development 

of languages or libraries) 

 

Demonstration and certification services 

(For example: participated in the AutoSTEP 

project or other implementation forums)

 

 No. Our company was not involved in these activities. 

3.2 What was your company’s total expenditures to integrate STEP into your CAD/CAM/CAE or 

PDM systems? (Choose one)

 Dollars 

or 

 Labor (person-months) 
B-5 

4. NIST’s Activities 

NIST has been active in the development and promotion of STEP in several ways: 

• participation in the standards development process 

• development of software libraries and testing tools 

• demonstration of STEP capabilities and provision of certification services 

4.1 Are you aware of NIST and its activities in the development of STEP? 

 Yes 

 No (Skip to end)

4.2 If so, how did you learn about NIST’s contributions? In your view, what are NIST’s most 

beneficial activities, if any? 
B-6 

4.3 To the best of your knowledge, which of the NIST contributions listed in the following table 

had an impact on the development of STEP? Please check in the table below if NIST’s 

contributions led to 

• a broader or more versatile STEP standard (quality improvements), 

• acceleration of the development or adoption of STEP, and 

• reductions in the cost of developing or adopting STEP. 

 NIST’s Impacts 

Quality 

Improvements Acceleration 

Cost 

Reductions 

Standards Development 

 Administrative contributions 

 EXPRESS (ISO 10303-11) 

 AP203 (ISO 10303-203) 

 Mapping Table Generator 

 PDM schema 

Software Development Tools and Testing Tools 

 NIST EXPRESS Toolkit 

 STEP Class Library 

 Expresso 

 STEP File Checker 

 STEP Geometry Analyzer 

Demonstration and Certification Services 

 AutoSTEP testing project 

 CAx and PDM implementor forums 

 STEP certification services 

4.4 Do you think that your company would have implemented STEP in your CAD/CAM/CAE or 

PDM products at the same time in the absence of NIST’s contributions? 

 Yes, same time 

 No, approximately _____ years later 
B-7 

4.5 If you indicated that one or more of NIST’s activities led to cost reductions for your firms, 

what percentage do you estimate those reductions to be? 

 Percent 

4.6 Has STEP helped your products penetrate foreign markets? 

 Yes 

 No 

5. Comments 

5.1 Please provide any additional comments that would help us evaluate the cost of integrating 

STEP into your CAD/CAM/CAE or PDM software products. 

We thank you for your participation. 

Please indicate below if you would like to receive a copy of the final report. 

 Yes, please send a copy 

 No