A Progress Report from the National Institute of Standards and Technology
A process that slashes the cost of advanced materials by a factor of 10 ... A partnership that helps a high-tech start up to develop novel technology with potential to increase the information-carrying capacity of telecommunications networks ... Timely technical assistance that enables an automotive parts supplier to reduce scrap and improve its on-time delivery rate ... A quality management tool that a small business credits with helping it increase sales by 35 percent in 1994.
These examples of real benefits from the programs of the National Institute of Standards and Technology (NIST) represent the kinds of initial returns that federal taxpayers will earn on the dollars they are investing in the agency this year. Allocating funds among its four industry-driven programs, NIST aims to deliver the biggest economic bang for the buck out of the entire $70 billion of the federal R&D budget.
Ultimately, returns will be realized in new jobs and companies, productivity growth, increases in sales, new markets, gains in market share, and other economic benefits that, together, are the reasons for NIST's existence. These are the kinds of impacts expected from an agency that has the straightforward and unique mission of promoting economic growth by providing part of the basic technical infrastructure needed by U.S. industry.
To satisfy taxpayers' expectations of economic benefits, NIST first must deliver useful results to its primary customers: U.S. companies. After all, U.S. industry, not government, drives economic growth by transforming technology into the products and services that generate jobs and profits -- returns that improve the nation's standard of living. In tackling with industry key tasks that companies cannot accomplish on their own, NIST provides timely, indispensable support that companies themselves fashion into competitive advantages -- new or more reliable processes, innovative products and services, new R&D capabilities, shorter product-development cycles, and improvements in quality.
NIST and its parent organization, the Commerce Department's Technology Administration, know that by being a strong partner to U.S. industry, we can leverage the taxpayers' investment and make the most of NIST's one percent share of federal R&D expenditures. To be sure, many factors determine a nation's industrial competitiveness, from the business climate and international trade practices to the skill levels of the workforce. But of all these factors, technology is the most dynamic -- and volatile. Each new technology creates an opportunity to change the terms of competition. By helping industry surmount technical risks and obstacles as it pioneers, develops, and implements new technologies, NIST improves the prospects that our nation will be both the source and beneficiary of technological opportunities.
This report describes how NIST delivers results that translate into competitive advantages for individual companies and entire industrial sectors -- and, ultimately, into benefits for the U.S. economy. It relates representative examples of realized and anticipated returns on activities in each NIST program. For our newer and longer-term efforts, early-stage indicators of progress toward economic benefits are presented. his document follows our earlier report that described how U.S. industry's priorities drive the content of NIST's programs and how the agency evaluates its efforts. We welcome your ideas on how we can deliver even greater value to our customers and even better returns to our investors.
Arati Prabhakar
Director, NIST
Mary Good
Under Secretary for Technology, DOC
No more essential aid could be given to manufacturing, commerce, the makers of scientific apparatus, the scientific work of Government, of schools, colleges, and universities than by the establishment of the institution proposed in this bill.
H.R. 1452, 56th Congress, 1st Session, May 14, 1900
Nearly a century after its founding, the National Institute of Standards and Technology continues to fulfill the terms of its creation: Providing science and technical support fundamental to the success of U.S. industry and of the entire technical community. Over the last several years, however, changing, ever more competitive global economic conditions and the ceaseless advance of technology have added significantly to the importance of the agency's activities, and NIST's programs have evolved in response.
The agency's unique core mission -- promoting U.S. economic growth by working with industry to develop technology, measurements, and standards -- marks a clear path for all of its programs. NIST focuses on jobs vital to the technology infrastructure. With partners in industry, government, and academia, it concentrates on developing the tools and bedrock capabilities essential to the nation's scientific and technological competitiveness -- a cornerstone of the country's economic future. These are technology jobs that neither government nor industry can accomplish separately. Companies do not undertake these tasks on their own because they cannot capture the broad-based benefits that will accrue to the larger ecnomy or because the time frame is too long and the risks are too great. While industry's priorities guide NIST's work, the agency makes certain that its efforts will yield results that constitute necessary -- and otherwise unattainable -- contributions to the nation's technology infrastructure. These efforts enable, extend, or complement private-sector efforts. They do not replace or substitute for work best done by industry.
This report is an update on how NIST is carrying out its mission. Examples are illustrative, intended to allow readers to assess the roles, objectives, and progress of the agency's four major programs. Striving to achieve the maximum return on taxpayer dollars, NIST recognizes that there is always room -- and opportunity -- for improvement and welcomes suggestions.
A competitive, cost-shared program, the Advanced Technology Program provides a mechanism for extending U.S. industry's technological reach and pushing the envelope of what can be accomplished in today's fiercely competitive global marketplace. For U.S. citizens, the real payoff -- and the young program's primary objective -- is the economic growth fueled by the introduction of future products and industrial processes based on ATP-sponsored research. The ATP invests only in pre-product technology development, requiring companies to invest additional resources and effort in refining and commercializing the technology.
Because the program is only a few years old, full economic impacts will not be realized for several years. Already, however, there is encouraging evidence that the ATP is fostering research efforts with the potential to deliver a sizable return on the federal investment. For example, the ATP is:
In 1994, the ATP initiated a new, focused-program strategy. Focused programs concentrate on specific, industry-identified technical and business goals achievable through interdependent R&D projects carried out over several years. The approach creates a critical mass of collaboration, encouraging industrial cooperation to overcome early-stage technical obstacles common to prospective competitors in a young, but commercially promising technology area. Eleven focused programs have been established to date.
ATP
HAS A DIVERSE PORTFOLIO
177 ATP Awards by technology area as a percentage of the $556 million awarded
The ATP portfolio is highly diversified. The 177 projects selected in the first 10 competitions span a broad array of critical technologies. More than 400 organizations, including companies, univer-sities, independent non-profit research organizations, and government laboratories, have participated directly in these projects. Several hundred additional organizations have participated as subcontractors and strategic partners. This effort is managed by an ATP staff of about 60, who carry out a vigorous outreach program to make firms and economic development organizations in states and localities across the country more aware of the ATP, its potential, and its procedures.
Begun in 1989 with the establishment of three extension centers, the MEP is now making the transition from a modest pilot program to a nationwide network leveraged to achieve substantial impact. By May 1995, 42 MEP centers were operating (with one additional center preparing to open) and sending engineers and other specialists with manufacturing or business experience into the field to work with firms. When completed, the 100-center network will put hard-to-find technical assistance within reach of all of the nation's 381,000 small and medium-sized manufacturing establishments.
Many of these firms continue to use decades-old technologies and manufacturing methods. Not surprisingly, the productivity gap between smaller manufacturers and large U.S. producers has been widening. One consequence is that the nation's large manufacturers look increasingly to off-shore suppliers. Early evaluations suggest that by making technical assistance accessible to smaller manufacturers in all regions of the country, the MEP will deliver sizable benefits, reaped on scales ranging from individual factories to the national economy. Results of surveys of a subset of smaller manufacturers that received technical assistance from MEP centers in 1994 are illustrative and consistent with previous surveys:
Personnel from 28 MEP centers that operated during at least part of 1994 provided services or made initial visits to more than 30,000 com-panies during the year. The centers offered training and education to employees and managers from more than 5,000 manufacturing firms. And the MEP and its affiliated centers built partnerships with hundreds of organizations, increasing the breadth and depth of capabilities of individual centers and the entire network.
Supported with federal dollars matched by states, all MEP centers are chosen and funded through a rigorous, merit-based competition. The MEP builds on the foundation of existing state and local industrial extension services. It focuses on needed services that the private sector either does not provide or cannot deliver economically to smaller manufacturers. Emphasis is on grassroots delivery of service, facilitated by a small NIST staff of fewer than 60 people.
PROGRESS TOWARD BUILDING A NATIONWIDE
MANUFACTURING EXTENSION NETWORK.
The ultimate U.S. reference point for measurements with counterpart organizations throughout the world, the NIST laboratori provide companies, entire industries, and the whole science and technology community with the equivalent of a common language needed in nearly every stage of technical activity. In furthering the technical aims and capabilities of U.S. industry, the NIST laboratory program serves as an impartial source of expertise, developing highly leveraged measurement capabilities and other infrastructural technologies that are:
Studies of the economic impact of specific NIST laboratory services and research projects indicate that significant benefits flow back to U.S. society and the economy. In the eight economic impact studies completed to date, the median aggregate -- or "spillover" -- rate of return ranges from 63 percent to 428 percent. These rates compare favorably with those reported in studies of returns on other public investments in technology and on private-sector R&D investments.
AGGREGATE ECONOMIC RATES OF RETURN FROM
TECHNOLOGY INVESTMENT
NIST laboratories' R&D and services have yielded high returns.
Large and small firms tap the laboratories' technical expertise in many ways. For example, in 1994, the laboratories:
The NIST laboratories plan and carry out their research in collaboration with industry. As a result, modest federal investments are yielding critically needed measurement methods and other infrastructural technologies that open the way to advances in research, improvements in processes and products, efficiencies in the marketplace, and other benefits reaped by companies and industries, and, through them, the economy.
A commitment to quality is no longer an option for American business. It has become a necessity for doing business in today's competitive, customer-oriented world market. Many in the manufacturing and service sectors believe the Malcolm Baldrige National Quality Award has had a tremendous influence in making quality part of America's corporate culture because the award criteria capture better than anything else what organizations need to do to improve the way they do business.
The award's stature and industry's rapid adoption of the award criteria as a guide to quality improvement attest to the strong success of the team effort between industry and government. From 1988 to 1994, the award program has received 546 applications from U.S. companies. Twenty-two companies, including 11 large manufacturers, five service companies, and six small businesses -- in a wide variety of industries -- have won the award. Award-winning companies have taken seriously the charge to be quality advocates, educating others on the benefits of using the Baldrige framework and criteria. To date, the winners have given over 15,000 presentations, reaching hundreds of thousands of organizations.
QUALITY AWARENESS AIDED BY BROAD
DISTRIBUTION OF QUALITY GUIDELINES
Other examples of the Baldrige Award's role in raising quality awareness:
Moreover, a recent report by The Conference Board, a global business membership organization, says, "A majority of large U.S. firms have used the criteria of the Malcolm Baldrige National Quality Award for self-improvement, and the evidence suggests a long-term link between use of the Baldrige criteria and improved business performance."
The National Institute of Standards and Technology promotes economic growth by working with industry to develop and apply technology, measurements, and standards. Unique among federal agencies, NIST's focused mission has its roots in the agency's 94-year history of working with U.S. companies on measurements and standards. Since 1988, this productive tradition of partnership between government and industry has branched out into new domains. In all our efforts with industry, we focus on areas beyond the capabilities of either partner alone but vital to both.
NIST concentrates on building the basic technical infrastructure essential to U.S. industry and commerce. Working with U.S. companies, it provides capabilities that industry needs to develop technology and transform it into successful products, services, and processes that ultimately drive national economic growth. By agency design and by the very nature of infrastructural and leapfrog technologies, NIST's programs generate benefits that "spill over" to many science and technology pursuits and to many parts of industry and the economy.
To make the most of the federal investment addressing civilian technology needs, NIST:
NIST's direct connection to industry distinguishes its role in federal research and development. Long focused on basic research and the missions of national security, space, health, and energy, federal R&D has yielded spin-off benefits to the economy. Steps toward realizing those derivative benefits, however, often have been slow and inefficient. Today's fierce competitive environment necessitates entirely new ways of doing business -- more effective approaches to capturing the economic benefits of new technology.
With the growing complexity and economic significance of technology, NIST's programs have become increasingly important ingredients in the changing mix of resources, capabilities, and approaches that U.S. industry needs to create and realize technological opportunities -- opportunities that lead to economic growth.
NIST's clientele includes businesses and industries of nearly every variety. Customers range from large companies to small ones and from established firms to start-ups. Some partner firms come from the steel industry and other sectors that arose during the last industrial revolution. Others come from new manufacturing and service sectors spawned by the revolutionary technologies emerging today. Services are delivered to parts suppliers as well as to original equipment manufacturers, to niche suppliers of specialty materials as well as to commodity producers, and to makers of advanced production and information technologies as well as to users trying to achieve the tools' performance advantages.
NIST's customized programs help companies accomplish technology and quality objectives more efficiently -- and more rapidly -- than they could on their own, if at all. Firms and entire industries can -- and do -- benefit from an array of NIST activities and services. Among the top 50 U.S. firms in terms of R&D spending, for example, 90 percent participated in or used the services of at least one NIST program or activity in 1994. More than 75 percent used two or more, and more than half used three or more.
In addition to being the principal customers of NIST's Manufacturing Extension Partnership, small businesses also make heavy use of the Institute's other programs. Small and medium-sized businesses accounted for nearly three-fourths of the 2,348 industrial customers who purchased NIST Standard Reference Materials (SRMs) in 1994, and they were involved in more than one-third of the Cooperative Research and Development Agreements (CRADAs) with the Institute's laboratories. In the ATP, about half of the awards have gone to small companies or to joint ventures led by small companies.
In 1994, about 400 organizations were pursuing leapfrog technologies in cost-shared projects sponsored by the NIST Advanced Technology Program; several hundred more were participating as contractors and strategic partners. About 7,000 U.S. companies and trade and professional organizations directly used the services of the NIST laboratories or were engaged in collaborative work with agency researchers. Some 30,000 companies tapped the technical services and resources of the NIST Manufacturing Extension Partnership. In addition, several thousand industry representatives attended more than 120 planning, priority-setting, or technical conferences and workshops sponsored by NIST last year. With U.S. industry or on its behalf, NIST specialists served on 800 national or international standards committees, and they stepped up efforts to eliminate non-tariff barriers to U.S. exports in several parts of the world.
The breadth and strategic and practical importance of NIST's assistance to U.S. industry are illustrated by examples from two of the many industrial sectors --
and electronics 
(as represented by a personal computer). Planned and carried out with the active involvement of these industries, including their diverse subsectors, NIST's support helps companies work more efficiently and productively as they develop, manufacture, market, and support their products.
NIST's four major programs are designed to help U.S. companies achieve their own success, each one providing appropriate assistance or incentives to overcoming obstacles that can undermine industrial competitiveness.
Advanced Technology Program (ATP) -- provides cost-shared awards to companies and company-led consortia for competitively selected projects to develop high-risk, enabling technologies during the pre-product phases of research and development.
Manufacturing Extension Partnership (MEP) -- a growing nationwide network of extension centers, co-funded by state and local governments, that provides small and medium-sized manufacturers access to technical assistance as they upgrade their operations to boost performance and competitiveness.
Laboratory Research and Services -- develops and delivers measurement techniques, test methods, standards, and other types of infrastructural technologies and services that provide a common language needed by industry in all stages of commerce -- research, development, production, and marketing.
Baldrige National Quality Program -- with industry, manages the Malcolm Baldrige National Quality Award, which may be awarded annually to companies in the categories of small business, manufacturing, and service and provides U.S. industry with comprehensive -- and extensively used -- guides to quality improvement.
The federal investment in NIST yields multiple returns. Some can be tabulated in terms of jobs created or saved, productivity growth, increases in sales and market share, and other economic or "bottom line" impacts. Ultimately these impacts are the reason for NIST's existence. Indeed, all four programs track the economic benefits derived from their work with U.S. industry.
Commissioning its first economic impact study 15 years ago, NIST long has focused on methodologies for assessing the broad economic benefits attributable to technical activities. NIST investments pay off on different timescales. Since the ATP funds research that precedes the product-development stage, even the handful of projects that have been completed require substantial additional privately funded work before the technologies under development can deliver economic impacts. For firms that have used the services of the Manufacturing Extension Partnership and the Baldrige National Quality Program, returns are quicker to materialize. Because the NIST laboratories respond both to immediate and anticipated infrastructural technology needs, payback horizons span from short to long term.
Many NIST customers already are realizing tangible benefits and competitive advantages. Customer-realized returns are translating into benefits at several levels -- from the economies of client companies' states and communities to these firms' customers and suppliers.
NIST's evaluations and industry feedback reveal that the agency's programs are generating a variety of important benefits. Ranging from acceler-ated progress in company laboratories and less duplicative R&D within industry, to improved product quality, to industry agreement on standards, these impacts often are not readily quantifiable. Yet, such benefits clearly contribute to the nation's industrial competitiveness, a crucial component of its economic health and the welfare of U.S. citizens.
The following sections summarize some of the results and impacts achieved by NIST's four programs over the last few years. They draw on information gathered in formal economic impact studies, surveys, progress reports, and anecdotal accounts from industry.
This report describes the goals of each program, the types of results and impacts they aim for, and the kinds of returns generated by the taxpayers' investment in NIST.
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