The Obama Administration’s Proposal to
Establish a National Network for
Manufacturing Innovation
John F. Sargent Jr.
Specialist in Science and Technology Policy
August 28, 2012
Congressional Research Service
7-5700
www.crs.gov
R42625
CRS Report for Congress
Pr
epared for Members and Committees of Congress
The Proposed National Network for Manufacturing Innovation
Summary
Manufacturing plays an important role in the nation’s economy, employment, and national
defense. Accordingly, Congress has maintained a strong interest in the health of the U.S.
manufacturing sector. Some analysts have expressed concerns about a decades-long decline in
manufacturing employment punctuated by a steep drop from 2001 to 2010, as well as about the
offshore outsourcing of production and related functions, such as research and development, by
U.S. manufacturers. Others see the U.S. manufacturing sector as vibrant and healthy as evidenced
by growth in output and productivity.
The Obama Administration has undertaken a number of initiatives intended to support U.S.
manufacturing, including establishment of the Advanced Manufacturing Partnership, Advanced
Manufacturing National Program Office (AMNPO), Advanced Manufacturing Technology
Consortia program, National Robotics Initiative, and Materials Genome Initiative.
In his FY2013 budget, President Obama proposed the creation of a National Network for
Manufacturing Innovation (NNMI) to help accelerate innovation by investing in industrially
relevant manufacturing technologies with broad applications, and to support manufacturing
technology commercialization by bridging the gap between the laboratory and the market.
The NNMI proposal calls for the establishment of up to 15 Institutes for Manufacturing
Innovation (IMI) funded through a one-time infusion of $1 billion in mandatory funding to the
Department of Commerce’s National Institute for Standards and Technology (NIST) and carried
out over a period of 10 years. Each IMI would be comprised of stakeholders from industry
(including large companies and small- and medium-sized manufacturing enterprises), academia,
federal agencies, and state government entities. According to the proposal, each IMI is to be
competitively selected, serve as a regional hub for manufacturing innovation (as well as part of
the national network), and have a unique focus area (e.g., an advanced material, manufacturing
process, enabling technology, or industry sector). The NNMI would be managed collaboratively
by NIST, the Department of Defense, Department of Energy, National Science Foundation, and
other agencies.
An Administration official has testified that the NNMI program has not yet begun and that the
establishment of the NNMI will require congressional authorization and funding. No legislation
has been introduced to establish the NNMI. However, the President announced his intention to
establish a pilot institute using current year funding; in this regard, the Department of Defense
issued a Broad Agency Announcement (BAA) in May 2012 to award up to $30 million for an
institute focused on additive manufacturing. The pilot is described as “the first institute to be
launched within the National Network for Manufacturing Innovation” and “a proof-of-concept for
the potential subsequent institutes.” The BAA limits the types of organizations that can compete
for the award of this institute to universities and non-profit organizations. Universities must
incorporate in their proposals a partnership with a cluster of manufacturing firms and associated
institutes; non-profit industry consortia must incorporate a partnership with universities for
applied research.
The AMNPO has published a request for information seeking public comment on various aspects
of the NNMI to aid in the development of the institutes and the network. Topics included in the
RFI include technology focus areas, structure, governance, sustainability, and education and
workforce development.
Congressional Research Service
The Proposed National Network for Manufacturing Innovation
Contents
Overview.......................................................................................................................................... 1
Administration Proposal .................................................................................................................. 2
Funding...................................................................................................................................... 3
Structure and Guiding Principles............................................................................................... 4
Preliminary Activities ...................................................................................................................... 7
Pilot Institute ............................................................................................................................. 7
Outreach Efforts ........................................................................................................................ 9
Legislative Status........................................................................................................................... 10
Issues for Consideration................................................................................................................. 10
Tables
Table 1. Proposed Schedule of NNMI Expenditures ....................................................................... 4
Appendixes
Appendix. NIST Request for Information Questions .................................................................... 17
Contacts
Author Contact Information........................................................................................................... 18
Congressional Research Service
The Proposed National Network for Manufacturing Innovation
Overview
Congress maintains a strong interest in the health of the U.S. manufacturing sector due to its
central roles in the U.S. economy and national defense. With respect to the economy,
manufacturing accounts for about 12% of the nation’s gross domestic product (GDP) and nearly
two-thirds of U.S. exports. Manufacturing enterprises directly employ nearly 12 million U.S.
workers and indirectly support millions of additional jobs in other industries (e.g., banking,
shipping, insurance). Manufacturers also fund about two-thirds of the nation’s industrial research
and development (R&D), providing a foundation for technological innovation and continued U.S.
technological leadership. In addition, manufacturing workers earn higher annual pay and benefits
(an average of $77,186 in 2010) than their non-manufacturing counterparts (an average of
$56,436 annually).1 With respect to national defense, the United States depends heavily on its
manufacturing base to produce the weapons, aircraft, vehicles, ships, and other equipment needed
to protect the nation.
Analysts hold divergent views of the health of U.S. manufacturing. Some see the U.S.
manufacturing sector as vibrant and healthy. Those holding this view tend to point to, among
other things, the sector’s strong growth in output and productivity, as well as the United States’
world-leading share of global manufacturing output. In addition, some analysts note that between
January 2010 and June 2012 manufacturing employment added about half a million jobs, growing
to nearly 12.0 million.2,3
Other analysts believe that the U.S. manufacturing sector is at risk. Among the expressed
concerns of those holding this view, include:
• a “hollowing-out” of U.S. manufacturing resulting from the decision of many
U.S. manufacturers to offshore production activities and other corporate
functions (e.g., research and development, accounting, information technology,
tax planning, legal research);4
• focused efforts by other nations to grow the size, diversity, and technological
prowess of their manufacturing capabilities, and to attract manufacturing
operations of U.S.-headquartered multinational companies using a variety of
policy tools (e.g., tax holidays, worker training incentives, market access, access
to rare earth minerals); and
• a decades-long decline in U.S. manufacturing employment, punctuated by a
steeper drop from 2001 to 2010. In January 2010, U.S. manufacturing
employment fell to its lowest level (11.5 million) since March 1941, down more
than 41% from its peak of 19.6 million in June 1979.5
1 National Association of Manufacturers website, Facts About Manufacturing, http://www.nam.org/Statistics-And-
Data/Facts-About-Manufacturing/Landing.aspx
2 For more information, see CRS Report R41898, Job Creation in the Manufacturing Revival, by Marc Levinson.
3 Bureau of Labor Statistics, U.S. Department of Labor, Current Employment Statistics survey database, data for
manufacturing employment, all employees, seasonally-adjusted, http://data.bls.gov/cgi-bin/dsrv.
4 For more information, see CRS Report R41712, “Hollowing Out” in U.S. Manufacturing: Analysis and Issues for
Congress, by Marc Levinson.
5 See footnote 2.
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The Proposed National Network for Manufacturing Innovation
The recent recession, relatively slow pace of recovery, and concerns about the prospects for
double-dip recession6 have contributed to increased concerns about the health of U.S.
manufacturing. Some stakeholders and policymakers advocate for macro-level changes to
improve the business environment, including reducing tax and regulatory burdens on
manufacturers and reforming the nation’s tort laws.
Others—including President Obama—support more direct and focused efforts funded by the
federal government. In particular, President Obama has undertaken and proposed a variety of
initiatives (e.g., the Advanced Manufacturing Partnership, the National Robotics Initiative,
Materials Genome Initiative) to help address concerns about U.S. manufacturing. One of the
President’s key proposals to help U.S. manufacturers is the establishment of a National Network
for Manufacturing Innovation.
In February 2012, the Obama Administration released A National Strategic Plan for Advanced
Manufacturing, a report by the President’s National Science and Technology Council, putting
forth a strategy to guide federal advanced manufacturing R&D investments. The report notes
The acceleration of innovation for advanced manufacturing requires bridging a number of
gaps in the present U.S. innovation system, particularly the gap between R&D activities and
the deployment of technological innovations in domestic production of goods.7
The proposed NNMI seeks, in part, to bridge the innovation gap asserted in this report.
Administration Proposal
President Obama proposed the establishment of a National Network for Manufacturing
Innovation (NNMI) in his FY2013 budget, and formally introduced the concept on March 9,
2012, in a speech at the Rolls-Royce Crosspointe jet engine disc manufacturing facility in Prince
George County, VA.
According to the proposal, the purpose of the NNMI is to bring together industry, universities and
community colleges, federal agencies, and regional and state organizations
to accelerate innovation by investing in industrially relevant manufacturing technologies
with broad applications, and to support manufacturing technology commercialization by
bridging the gap between the laboratory and the market.8
In particular, the NNMI seeks to “advance technological innovation at a pace much faster than
any one company could on its own,”9 integrate innovation resources, improve the competitiveness
of U.S. manufacturing, and encourage investment in the United States.10
6 For additional information about the recession and the subsequent pace of economic growth, see CRS Report R41444,
Double-Dip Recession: Previous Experience and Current Prospect, by Craig K. Elwell.
7 National Science and Technology Council, Executive Office of the President, The White House, A National Strategic
Plan for Advanced Manufacturing, February 2012, p. 1, http://www.whitehouse.gov/sites/default/files/microsites/ostp/
iam_advancedmanufacturing_strategicplan_2012.pdf.
8 National Network for Manufacturing Innovation, http://www.manufacturing.gov/amp/nnmi.html.
9 Testimony of Patrick D. Gallagher, Under Secretary for Standards and Technology, U.S. Department of Commerce,
before the U.S. Congress, House Committee on Science, Space, and Technology, Subcommittee on Technology and
(continued...)
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The Proposed National Network for Manufacturing Innovation
The NNMI would consist of
a network of institutes where researchers, companies, and entrepreneurs can come together to
develop new manufacturing technologies with broad applications. Each institute would have
a unique technology focus. These institutes will help support an ecosystem of manufacturing
activity in local areas. The Manufacturing Innovation Institutes would support manufacturing
technology commercialization by helping to bridge the gap from the laboratory to the market
and address core gaps in scaling manufacturing process technologies.11
The NNMI would be managed collaboratively by the Department of Commerce’s (DOC’s)
National Institute of Standards and Technology (NIST), the Department of Defense (DOD), the
Department of Energy (DOE), the National Science Foundation (NSF), and other agencies.12
Funding
As proposed in the President’s FY2013 budget, NIST would receive a one-time infusion of
$1 billion in mandatory funding in FY2013 to be spent over 10 years (FY2013-FY2022, see
Table 1).13 Federal funds would be used to help establish and support up to 15 Institutes for
Manufacturing Innovation (IMIs, which collectively would form the NNMI) on a cost-shared
basis with industrial, academic, and state and local organization partners. Each IMI is expected to
become financially sustainable within seven years.14 Funding for the program would be front-
loaded with $206 million in spending projected for FY2013, and a total of $839 million in
spending in the first five years.15
(...continued)
Innovation, Assembling the Facts: Examining the Proposed National Network for Manufacturing Innovation, 112th
Cong., 2nd sess., May 31, 2012.
10 National Institute of Standards and Technology, “Request for Information on Proposed New Program: National
Network for Manufacturing Innovation (NNMI),” Federal Register, Vol. 77, No. 87, pp. 26509-26511, May 4, 2012,
https://federalregister.gov/a/2012-10809.
11 U.S. Department of Commerce, FY2013 Budget in Brief, February 2012, p. 123, http://www.osec.doc.gov/bmi/
budget/FY13BIB/fy2013bib_final.pdf.
12 Federal Register, Vol. 77, No. 87, pp. 26509-26511, May 4, 2012, https://federalregister.gov/a/2012-10809.
13 In a telephone conversation on July 6, 2012, NIST indicated that the funding horizon may be reduced to seven years.
In addition, the hearing charter for the House Committee on Science, Space, and Technology, Subcommittee on
Technology and Innovation’s hearing on Assembling the Facts: Examining the Proposed National Network for
Manufacturing Innovation, May 31, 2012, stated that federal support for the institutes would span a period of five to
seven years.
14 Testimony of Patrick D. Gallagher, Under Secretary for Standards and Technology, U.S. Department of Commerce,
before the U.S. Congress. See footnote 2.
15 Office of Management and Budget, Executive Office of the President, Fiscal Year 2013 Budget of the U.S.
Government, February 2012, Table S-9, p. 217.
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Table 1. Proposed Schedule of NNMI Expenditures
in millions of dollars
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022
$206 $131
$174 $189 $139 $69 $44 $28 $16 $4
Source: Office of Management and Budget, Executive Office of the President, Fiscal Year 2013 Budget of the U.S.
Government, February 2012, Table S-9, p. 217.
Structure and Guiding Principles
The National Network for Manufacturing Innovation would be composed of competitively
selected, independently managed Institutes for Manufacturing Innovation. Each IMI would have a
specific focus area and serve as a regional innovation hub. Focus areas could include an advanced
material (e.g., carbon nanotubes), manufacturing process (e.g., additive manufacturing), enabling
technology (e.g., nanotechnology), or industry sector (e.g., medical devices).
The institutes would bring together large companies, small and medium-sized enterprises,
academia, federal agencies, and state governments to accelerate innovation through co-investment
in industrially relevant manufacturing technologies with broad applications. The institutes would
be focused on helping to bridge the gap between basic research and product development, provide
companies with access to cutting edge capabilities and equipment, and an environment for
educating students and training workers in advanced manufacturing skills. The institutes would
seek to reduce the costs and risks of commercializing new technologies and to address relevant
manufacturing challenges on a production-level scale.16 While the IMIs are intended to serve as
regional hubs for manufacturing innovation in specific focus areas, collectively the institutes
would also function as a network for the sharing of knowledge and best practices.
Patrick Gallagher, Under Secretary of Commerce for Standards and Technology/Director of
NIST, testifying before the House Committee on Science, Space, and Technology, Subcommittee
on Technology and Innovation, articulated a number of key principles that would guide the
governance and work of the NNMI:
• An interagency program management team would define the NNMI’s and IMIs’
organizational design, manage an open and competitive selection process, and
execute the awards process. The team would also define the selection criteria to
be used, incorporating public input (see “Outreach Efforts”).
• Each IMI would integrate capabilities and facilities needed to address cross-
cutting manufacturing challenges that, if met, have the potential to retain or
expand domestic manufacturing on an economically sound basis.
• IMIs would conduct applied R&D and development projects to reduce the cost
and risk of commercializing new technologies or solve generic industrial
problems, conduct education and training efforts at all levels, develop
methodologies and practices for supply chain integration, and engage with small
and medium-sized enterprises.
16 Federal Register, Vol. 77, No. 87, pp. 26509-26511, May 4, 2012, https://federalregister.gov/a/2012-10809.
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• Each IMI would have a core of two or more companies, incorporate industry in
agenda development, and have direct involvement of industry scientists and
engineers in institute projects.
• IMI awards would be made in the form of grants, contracts, and cooperative
agreements, possibly over multiple rounds of competitions.
• IMI proposers would be expected to show how federal investments would
stimulate investments by the organizations comprising the partnership and/or
from other non-federal sources.
• Subsequent federal support for an IMI would be contingent on demonstration of
this additional investment, on progress to self-sustainability, and on progress
toward meeting the goals of the NNMI.17
The following additional IMI principles were included in a Request for Information (RFI)
published by the Advanced Manufacturing National Program Office (AMNPO) in the Federal
Register:18
• Long-term partnership between industry (including small, medium, and large
firms); educational institutions; non-government organizations; and state, regional,
and local economic development authorities;
• Flexibility to form integrated teams of industrial and academic experts from
multiple disciplines to solve difficult problems and to develop the future
workforce;
• Adaptability for education and workforce development at multiple levels,
including K-12, professional credentialing, undergraduate and graduate education,
and mentoring and professional development;
• Involvement of industry associations, professional societies, and economic
development organizations for validation and linkages to broader industry and
regional activities;
• Analytical capability to identify critical emerging technologies with
transformational impact and operational capacity in translating these technologies
into products and businesses for the market;
• Ability to engage and assist SMEs to effectively deploy technologies; and
• A sustained focus on innovation with a strong reputation for quality and success.19
The NNMI is said to be modeled after the German Fraunhofer Institutes (see “The Fraunhofer-
Gesellschaft Model” box below), which some consider to be a key facet of Germany’s high-tech
manufacturing success.20 The Council on Competitiveness,21 Information Technology and
17 Testimony of Patrick D. Gallagher, Under Secretary for Standards and Technology, U.S. Department of Commerce,
before the U.S. Congress. See footnote 2.
18 The AMNPO is an interagency body hosted by the DOC’s NIST, and includes DOD, DOE, NSF, the National
Aeronautics and Space Administration, and other agencies. http://www.nist.gov/director/nnmi-050412.cfm
19 Federal Register, Vol. 77, No. 87, pp. 26509-26511, May 4, 2012, https://federalregister.gov/a/2012-10809.
20 U.S. Congress, House Committee on Science, Space, and Technology, Subcommittee on Technology and Innovation,
Assembling the Facts: Examining the Proposed National Network for Manufacturing Innovation, 112th Cong., 2nd sess.,
May 31, 2012.
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The Proposed National Network for Manufacturing Innovation
Innovation Foundation,22 and President’s Council of Advisors on Science and Technology23 and
other organizations have endorsed the NNMI concept or proposed a network of U.S.-based
public-private manufacturing centers similar to the NNMI.
(...continued)
21 Council on Competitiveness, Make: An American Manufacturing Movement, Washington, DC, December 2011, pp.
63-64, http://www.compete.org/images/uploads/File/PDF%20Files/USMCI_Make.pdf. “
22 The Information Technology and Innovation Foundation, A Charter for Revitalizing American Manufacturing,
Washington, DC, 2011, p. 2; and “ITIF Welcomes President Obama’s Proposal on Manufacturing Innovation,” press
release, March 9, 2012, http://www.itif.org/pressrelease/itif-welcomes-president-obamas-proposal-manufacturing-
innovation.
23 President’s Council of Advisors on Science and Technology, Report to the President on Ensuring American
Leadership in Advanced Manufacturing, Washington, DC, June 2011, http://www.whitehouse.gov/sites/default/files/
microsites/ostp/pcast-advanced-manufacturing-june2011.pdf.
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Preliminary Activities
The Obama Administration has undertaken efforts to lay a foundation for the NNMI in advance
of possible congressional authorization and funding. In particular, the Administration is
proceeding with the establishment of a pilot institute and has initiated an outreach effort to
incorporate the perspectives of industry, academia, and non-profit organizations. In particular, the
outreach effort is intended to identify a wide-ranging set of technology focus areas for the IMIs,
and ideas on IMI and NNMI institutional design and governance to include issues such as
treatment of intellectual property and management structure.24
Pilot Institute
In his announcement of the NNMI in March 2012, President Obama also committed to the
establishment of a pilot institute using existing resources from the Department of Defense and
other federal agencies.25 In May 2012, DOD published a broad agency announcement (BAA, a
tool used for contracting) soliciting technical and cost proposals for an Additive Manufacturing
Innovation Institute, describing it as “the first institute to be launched within the National
Network for Manufacturing Innovation” and “a proof-of-concept for the potential subsequent
institutes.”26 (The BAA described additive manufacturing as “a revolutionary suite of
manufacturing technologies for building up parts, and potentially entire systems, in a layer-by-
layer fashion, placing material precisely as directed by a 3D digital file.”)
On August 16, 2012, the White House announced the winning proposal, the National Additive
Manufacturing Innovation Institute (NAMII), a partnership led by the National Center for
Defense Manufacturing and Machining (NCDMM), based in Youngstown, OH. NAMII partners
include 40 companies, 9 research universities, 5 community colleges, and 11 non-profit
organizations. NAMII partners are located primarily in the Western Pennsylvania, Northeast
Ohio, and Northern West Virginia region. Under the award, NAMII will receive $30 million in
initial federal funding.27 According to NDCMM, NAMII is committed to providing an additional
$39 million as a cost share with funds provide mostly by industry and the states of Ohio,
Pennsylvania, and West Virginia. In addition, once the institute is established it would be a “likely
candidate for additional funds on a competitive basis”—up to $15 million in federal funding for
specific projects.28 These additional funds bring total potential federal funding to $45 million.
24 Ibid.
25 President Barack Obama, Remarks by the President on Manufacturing and the Economy, The White House,
Petersburg, VA, March 9, 2012, http://www.whitehouse.gov/the-press-office/2012/03/09/remarks-president-
manufacturing-and-economy.
26 A Pilot Institute for the National Network for Manufacturing Innovation (NNMI), Solicitation Number BAA-12-17-
PKM, Department of the Air Force, Air Force Materiel Command, May 8, 2012, https://www.fbo.gov/?s=opportunity&
mode=form&id=2bbada5cae4ab97438dc3f57fed050d0.
27 The BAA restricts the use of federal funding to direct support of the goals of the institute, for applied research,
education and training, and infrastructure development, and explicitly prohibits the use of government funds to build
buildings or to buy land or facilities.
28 Testimony of Patrick D. Gallagher, Under Secretary for Standards and Technology, U.S. Department of Commerce,
before the U.S. Congress, May 31, 2012.
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The lead agency for this institute is the Office of the Secretary of Defense (OSD), Manufacturing
and Industrial Base Policy, through OSD Manufacturing Technology. The pilot institute
administration will be a cross-agency effort, primarily led by the Defense-wide Manufacturing
Science and Technology Program Office, executed through the Air Force Research Laboratory.
Other agencies providing funding and partnering with DOD to support NAMII include the
Department of Energy (DOE), National Aeronautics and Space Administration (NASA), National
Science Foundation (NSF), and the Department of Commerce’s National Institute of Standards
and Technology (NIST).
According to the BAA, the pilot initiative is intended to
bridge the gap between basic research and product development, provide shared assets to help
companies access cutting-edge capabilities and equipment, and create an unparalleled
environment to educate and train students and workers in advanced manufacturing skills. The
pilot Institute will serve as a technical center of excellence, providing the innovation
infrastructure to support manufacturing enterprises of all sizes.... The goal of the pilot Institute is
to increase the successful transition of additive manufacturing technology through advanced
manufacturing innovation, create an adaptive workforce capable of meeting industry needs,
further increasing domestic competitiveness, and meet DOD, DOE, and other participating
civilian agency requirements.29
A number of the proposal requirements articulated in the BAA may provide insight into future
NNMI competitions. The BAA limited the competition for the pilot institute to universities and
non-profit organizations (offerors) that are registered as a U.S. organization.30 University offerors
were required to propose a partnership with a cluster of manufacturing firms and associated
institutes. Non-profit industry consortium offerors were required to propose a partnership with
universities for applied research. The BAA encouraged the inclusion of small businesses in all
offers as part of a teaming arrangement. Federally funded Research and Development Centers
(FFRDCs) were deemed eligible offerors, subject to Federal Acquisition Regulation provisions
governing FFRDCs, as well as to other conditions.
Offerors were required to provide:
• an outline of a comprehensive financial plan to achieve sustainability of the
institute within five years;
• a detailed business plan that included appropriate roles for resources from the
federal government, state government(s), local government(s), industry,
academia, and other formal partners; and
• a plan for how other federal programs (such as the Small Business Innovation
Research program31 and Manufacturing Extension Partnership)32 could be
leveraged and used to supplement the institute.
29 Ibid.
30 According to the BAA, non-U.S. organizations may be allowed to use the Institute, subject to the sensitivity of the
applied research.
31 For additional information on the Small Business Innovation Research Program, see CRS Report 96-402, Small
Business Innovation Research (SBIR) Program, by Wendy H. Schacht.
32 For additional information on the Manufacturing Extension Partnership program, see CRS Report 97-104,
Manufacturing Extension Partnership Program: An Overview, by Wendy H. Schacht.
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Offerors were also required to demonstrate that their proposal had the potential to advance
manufacturing within the United States.33
The NNMI interagency team hosted a proposers’ day to share its views of the pilot institute,
answer questions, and provide an opportunity for networking among potential team partners.
Nearly 300 people from industry, academia, government, and other organizations attended this
event.34
Outreach Efforts
The Advanced Manufacturing National Program Office has initiated efforts to engage
manufacturing innovation stakeholders in industry, academia, and regional and state
communities. On May 4, 2012, AMNPO issued a Request for Information (RFI) in the Federal
Register seeking public comment on various aspects of the NNMI, including technology focus
areas, structure, governance, sustainability, and education and workforce development.35
In addition, the AMNPO, in cooperation with stakeholders and local organizations, is hosting a
series of workshops around the country seeking public comments on the NNMI from SMEs, large
manufacturers, universities and community colleges, state and local governments, economic
development organizations, and other stakeholders. The first of these workshops was held on
April 25, 2012, at Rensselear Polytechnic Institute (RPI) in Troy, NY. NIST advertised the
workshop on its website as an “opportunity to help design the National Network for
Manufacturing Innovation.”36 A second workshop was held on July 9, 2012, at the Cuyahoga
Community College in Warrensville Heights, OH. Both workshops were organized around the
four broad topic areas (and associated questions) published in the NNMI RFI, namely
technologies with a broad impact, institute structure and governance, strategies for sustainable
institute operations, and education and workforce development.
Over 250 participants attended the first workshop at RPI (approximately 44% from academia;
34% from industry; 10% from economic development organizations; and 12% from local, state,
and federal government), offering 1,600 individual ideas. A report, Designing for Impact I:
Workshop on Building the National Network for Manufacturing Innovation: Summary of Results,
summarizing the ideas put forth by stakeholders at the workshop was published in June 2012 and
is available on the manufacturing.gov website.37
33 A Pilot Institute for the National Network for Manufacturing Innovation (NNMI), Solicitation Number BAA-12-17-
PKM, Department of the Air Force.
34 Testimony of Patrick D. Gallagher, Under Secretary for Standards and Technology, U.S. Department of Commerce,
before the U.S. Congress, May 31, 2012.
35 Federal Register, Vol. 77, No. 87, pp. 26509-26511, May 4, 2012, https://federalregister.gov/a/2012-10809.
36 NIST website, http://www.nist.gov/director/nnmi-050412.cfm.
37 Designing for Impact I: Workshop on Building the National Network for Manufacturing Innovation: Summary of
Results, Energetics Incorporated, as prepared for the Advanced Manufacturing National Program Office, National
Institute of Standards and Technology, June 12, 2012, http://manufacturing.gov/amp/rpi-summary-of-results.pdf.
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Legislative Status
The creation of the NNMI depends on congressional authorization and funding. The
Administration is currently seeking one or more Members in each legislative chamber to work
with to develop, sponsor, and champion legislation to authorize and fund this effort.38 According
to the President’s proposal, funding for the NNMI would be made through one-time mandatory
funding of $1 billion. The use of mandatory funding for the NNMI would allow funding to be
provided by a law other than an appropriations bill, removing the funding decision from the
regular appropriations process.39 To date no legislation has been introduced in either chamber.
Issues for Consideration
The proposed National Network for Manufacturing Innovation raises a variety of issues for
Congress, some of which were raised in a hearing on the proposal held by the House Committee
on Science, Space, and Technology’s Subcommittee on Technology and Innovation in May 2012.
Among the questions Congress may wish to consider as it takes up legislation to establish and
fund the NNMI:
• Is the U.S. global competitive position in manufacturing in decline? If so, what
factors are contributing to the decline? What are the potential implications of
U.S. manufacturing competitiveness decline?
Some assert that U.S. manufacturing is healthy and growing, pointing to indicators such as
increased output and productivity; others assert that U.S. manufacturing is in decline,
pointing to decreased manufacturing employment and the movement of production and
related functions to other countries.
Those that see U.S. manufacturing as healthy generally assert that increased globalization and
efforts to facilitate trade naturally lead companies seeking to maximize profits, open new
markets, increase global market share, and better serve their customers to locate some of their
production and related activities outside the United States. They also argue that, in competing
against other multinational corporations, they must undertake such efforts to remain
competitive. Some also argue that a variety of factors in the U.S. market (e.g., tax rates,
regulations, tort law) place a heavy burden on U.S. manufacturing; in contrast, other nations
may have much lower labor costs and their governments may offer a variety of incentives
(e.g., tax holidays, worker training, rapid permitting) to attract and retain the manufacturing
and related activities of U.S.-based companies.
Many who see U.S. manufacturing in decline assert that U.S. manufacturing capacity is being
“hollowed” out as production facilities and supporting functions (such as R&D, information
38 Testimony of Patrick D. Gallagher, Under Secretary for Standards and Technology, U.S. Department of Commerce,
before the U.S. Congress, May 31, 2012.
39 Mandatory spending is controlled by laws other than appropriations acts, often through authorizing legislation.
Authorizing legislation establishes or continues the operation of a federal program or agency, either indefinitely or for a
specified period. In contrast, discretionary spending is provided and controlled through the annual appropriations
process. For additional information on mandatory funding, see CRS Report RL33074, Mandatory Spending Since 1962,
by D. Andrew Austin and Mindy R. Levit.
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technology, and accounting) are sited overseas, leaving only a shell of a corporation located
physically in the United States. Some experts assert that a nation’s (or a state’s or a region’s)
manufacturing strength depends on a “critical mass” of companies that are engaged in similar
and supporting activities, creating a synergy that increases the overall strength of the firms in
the cluster due to a number of positive reinforcing factors (e.g., knowledge sharing, attraction
of workforce talent, new start-ups, establishment of new plants, co-location of supply chains,
improvements in infrastructure). As U.S.-based firms move production and related activities
outside the United States, some believe that this “critical mass” may be lost, starting a
downward spiral in which the synergies are lost and firms opt to move operations outside the
United States where such clusters have developed.
Accordingly, many who subscribe to this view believe that manufacturing employment will
decline, R&D activities will relocate to be near production facilities, and service firms that
support manufacturing will be lost. In addition, some assert that the “hollowing out” will
result in the loss of manufacturing capabilities needed to support the nation’s military and
increase the manufacturing know-how of potential adversaries.
• Should the federal government directly or indirectly support the competitive
position of the U.S. manufacturing sector? Which federal policies and programs
should be prioritized? Why should the NNMI be prioritized over other
approaches? Is the NNMI duplicative of other federal efforts?
There are many views as to what the federal government can and should do to support the
competitive position of the U.S. manufacturing sector. In general, some prefer an approach
that reduces costs and other burdens on manufacturers, such as reducing taxes, regulations,
and frivolous lawsuits. Others prefer an expanded direct role for the federal government, such
as increasing federal support for manufacturing R&D, providing grants and loan guarantees
for domestic manufacturing, and, in some cases, subsidizing production of products for which
there are deemed positive benefits for the nation that cannot be captured by the manufacturer
(economists refer to such benefits as positive externalities). With a range of options that
might be pursued to improve the competitive position and strength of U.S. manufacturing,
some may believe that the NNMI should be given high priority due to its perceived benefits
(e.g., advancing research discoveries toward market-ready technologies).
Others may believe that the role envisioned for the NNMI should be performed by the private
sector; that the federal government should not favor or subsidize particular companies,
industries, or technologies; that the NNMI would be ineffective or counterproductive; that the
funds that would go to the NNMI should be used to support manufacturing in other ways; that
the funds should be used for different federal functions altogether; or that the funds should be
directed toward deficit reduction. Some may believe that the NNMI is, in part or in whole,
duplicative of other federal programs, such as the Manufacturing Extension Partnership; or,
as a new and separate program, represents an increasing fragmentation of federal efforts to
help manufacturers.
• How would the “national network” aspect of the NNMI operate? What role
would the federal government have in the national network?
Implicit in the title of the National Network for Manufacturing Innovation is the notion that
there would be a national network. The Administration’s proposal does not discuss how the
individual institutes would function as a network. Congress may want to explore what form
the network would take (e.g., a national network office with staff, a database of information),
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what functions it would perform (e.g., sharing of lessons learned, referrals of companies to
centers with specific expertise), who would perform the functions (e.g., NIST, AMNPO,
IMIs), and how the performance of these functions would be paid for (e.g., federal funding,
private funding from the IMIs).
• Should the NNMI be funded on a mandatory or discretionary funding basis?
Should a one-time advance appropriation be provided for the proposed 10-year
life of the program, or should the NNMI be subject to annual review, oversight,
and consideration in the regular annual appropriations process? Which
programs would be cut or eliminated as offsets for the NNMI’s proposed $1
billion mandatory appropriation?
The NNMI could be supported through either mandatory40 or discretionary funding. The
Obama Administration has proposed one-time mandatory funding of $1 billion to be used
over the course of 10 years. This approach may provide a higher degree of certainty about the
availability of out-year funding for the NNMI (though Congress could opt later to rescind all
or part of such funding). Such an approach would require offsets from other mandatory
funding. Alternatively, providing funding through annual appropriations might allow
Congress greater oversight opportunities and flexibility in modifying the program and its
funding levels. If the NNMI were to be supported through discretionary funding, cuts would
need to be made from other discretionary spending. The Obama Administration’s FY2013
budget request specified a number of cuts in mandatory spending, but did not specify which
cuts would be used to offset proposed funding for the NNMI.
• What is the appropriate role of the federal government in manufacturing-
related innovation? Should the federal government’s role end with basic
research funding, or include funding for applied research, development efforts
focused on cost reduction and technical feasibility, or demonstration projects?
There are many views regarding the appropriate role of the federal government in the
innovation process. While there has been a general consensus on the federal government’s
support for basic research, congressional efforts to provide later stage support for innovation
(aside from meeting government mission requirements, such as national defense) have been
met with opposition from different quarters.
Among the arguments put forth by supporters of later-stage federal investments (e.g., applied
research, development efforts, and demonstration projects):
• In some cases, important benefits—e.g., economic, social, national security—
may be achieved that would not otherwise be achieved due to factors such as the
absence of market incentives (e.g., development of drugs for diseases or
conditions that only affect a small number of people) or the inability of a single
company or group of companies to undertake such efforts due to high cost, high
risk, and/or a long time horizon for achieving a return on investment. Benefits
that cannot be captured by a company (or group of companies working together)
that brings a product or service to market are referred to by economists as
“positive externalities.” Unable to capture these benefits, a company is not likely
to consider them in its decision-making regarding whether to pursue the
40 See footnote 39 for information on mandatory funding and how it differs from discretionary funding.
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development of such a technology or product. Accordingly, economists assert
that the result may be private sector underinvestment in beneficial R&D. Some
analysts argue that, in such cases, public investment may be justified to induce
the development of these technologies (and the realization of these benefits) by
sharing costs and risks.
• Such efforts are needed to ensure U.S. leadership in technologies and industries
critical to U.S. national security and economic security.
• Such efforts are needed to offset the industrial policies of other nations that make
the business environment in the United States comparatively less attractive.
Among the arguments put forward by opponents of such efforts:
• Such efforts constitute an “industrial policy,” resulting in distortions in markets
and flows of capital by substituting governmental preferences for market forces.
• Government is not able to make better decisions than markets, therefore federal
funding for such activities is generally inefficient or wasted.
• Such efforts constitute “corporate welfare” as they provide direct or indirect
public subsidies to for-profit corporations, enriching shareholders and others at
the expense of taxpayers.
• Government funding and tax, regulatory, or policy decisions may be used for
“crony capitalism,” i.e., to explicitly reward political supporters or punish
opponents.
• The ability to provide direct federal funding to companies or industries can lead
to governmental corruption, fraud, and graft.
• The absence of express authority in the Constitution to engage in such activities
makes such efforts unconstitutional.
• The current economic condition of the United States with respect to the budget
deficit, national debt, and future financial liabilities does not allow for such
expenditures, irrespective of merit and efficacy.
• How can the NNMI contribute to the retention of manufacturing-related
activities in the United States, both broadly as well as with respect to the R&D
that the IMIs advance toward commercialization?
The innovation process can be extremely challenging. Even good ideas can fail due to a
number of reasons (e.g., technical, cost, and risk barriers; disconnection from market needs;
absence of standards; regulatory hurdles). A major thrust of U.S. science and technology
policy has focused on how to move new ideas and insights from the laboratory into the
marketplace.
In the past, the strength of the U.S. economy and its position in the global economy largely
meant that the success of U.S.-based companies in overcoming the obstacles to innovation
and moving a process or product into the market resulted in production-related activities and
jobs in the United States. Today, however, companies have increased options (and sometimes
incentives) to establish production facilities outside the United States. If a primary goal of the
NNMI is to stimulate domestic production activities and to capture the associated jobs,
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Congress may wish to explore whether and how the NNMI would serve to encourage
domestic production based on the technologies it advances through the innovation process.
• Which agency/agencies should lead and manage the NNMI?
President Obama has proposed that funding for the NNMI be given to the National Institute
of Standards and Technology, an agency of the U.S. Department of Commerce, through one-
time mandatory funding of $1 billion to be spent over 10 years. The NNMI would be
managed collaboratively by the Department of Commerce’s (DOC’s) National Institute of
Standards and Technology (NIST), the Department of Defense (DOD), the Department of
Energy (DOE), the National Science Foundation (NSF), and other agencies.
As the recipient of the funds, NIST appears to be the de facto lead on the initiative. In
addition, the Under Secretary for Standards and Technology and Director of NIST was the
only Administration official to testify at a House hearing on the NNMI.
NIST has played an important role in the federal government’s efforts to support U.S.
manufacturing since its establishment as the National Bureau of Standards in 1901. Beyond
its core mission in measurement science (i.e., metrology) and standards, NIST took on its
current name and was given additional authorities and programs by Congress in the late
1980s. Among these new programs were several programs focused on supporting U.S. firms,
including the Advanced Technology Program (ATP, a program to accelerate the development
of generic, pre-competitive, high-risk, high-payoff technologies; ATP was eliminated in 2007
and replaced by the Technology Innovation Program (TIP), which was subsequently
eliminated);41 the Malcolm Baldrige National Quality Award (a program to encourage the
adoption of quality management principles by private companies and non-profit
organizations); and the Manufacturing Extension Partnership (MEP, a program to enhance
productivity, technological performance, and strengthen the global competitiveness of small
and medium-sized U.S.-based manufacturing firms).42
The Department of Defense is also playing a key role in the NNMI. In particular, DOD has
issued a solicitation to establish a pilot institute focused on additive manufacturing,
describing it as “the first institute to be launched within the National Network for
Manufacturing Innovation” and “a proof-of-concept for the potential subsequent institutes.”43
Congress may wish to consider whether to designate a lead agency for the NNMI and to
provide that agency with governance authorities and responsibilities, or whether to parse
NNMI authorities and responsibilities among several agencies. Alternatively, Congress might
opt to provide the Administration with flexibility to assign agency roles and responsibilities.
• What requirements must be met for an IMI to be considered self-sustaining?
With respect to federal policy, what would be the consequences for an IMI that
does not become self-sustaining?
41 For additional information see CRS Report 95-36, The Advanced Technology Program, by Wendy H. Schacht.
42 For additional information, see CRS Report 97-104, Manufacturing Extension Partnership Program: An Overview,
by Wendy H. Schacht.
43 See footnote 19.
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As articulated by the Obama Administration, an IMI is to become self-sustaining no later than
seven years from its award date. However, no definition of self-sustaining has been put
forward by the Administration, nor is there any indication of consequences for failure to
become self-sustaining. In addition, the Administration has stated that it expects that IMIs
would be eligible to compete for funds for project specific activities under other (i.e., non-
NNMI) federal programs.44 How would such funding be considered with respect to the
requirement for self-sustainability?
Federal requirements that organizations become self-sufficient have not always met with
success. For example, the Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418),
which established the NIST Manufacturing Extension Partnership program,45 required centers
to become self-sufficient within six years:
In no event shall funding for a Center be provided by the Department of Commerce after the
sixth year of the operation of a Center.46
Congress later amended the MEP authorities in the Technology Administration Act of 1998
(P.L. 105-309) to allow centers to continue receiving federal funds if the center “has received
a positive evaluation through an independent review,” though it restricted funding after the
sixth year to be no more than “one third of the capital and annual operating and maintenance
costs of the Center.”47
Congress may wish to consider whether to legislatively require that IMIs become self-
sufficient, the time period within which self-sufficiency would need to be achieved, and the
consequences of failing to do so.
• What will be the role of the federal government, if any, in the NNMI after the
end of the 10-year funding period?
As proposed, the NNMI would receive a one-time appropriation to be spent over 10 years.
The Administration has not articulated its vision for the NNMI past the end of this period.
Congress may wish to consider what role, if any, the federal government would play in
coordinating or sustaining the network after the end of this period.
• What role, if any, should the federal government play in advancing technologies
that can contribute to manufacturing competitiveness?
Rapid technological advances may bring revolutionary changes to the manufacturing sector in
the United States and abroad. Currently technologies such as grid computing, multi-core
processors, massively parallel supercomputers, and new modeling software allow for more
expansive, less expensive, and faster testing of designs. For example, automobile
manufacturers are using these technologies to supplement physical crash testing of vehicles,
44 Testimony of Patrick D. Gallagher, Under Secretary for Standards and Technology, U.S. Department of Commerce,
before the U.S. Congress. See footnote 2.
45 P.L. 100-418 uses the term “Regional Centers for the Transfer of Manufacturing Technology” to what is now called
the Manufacturing Extension Partnership program.
46 P.L. 100-418.
47 P.L. 105-309. For further discussion, see CRS Report 97-104, Manufacturing Extension Partnership Program: An
Overview, by Wendy H. Schacht.
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thereby reducing costs, increasing passenger safety, and allowing for design considerations
that might not otherwise have been possible.48 According to Ford Motor Company:
Prior to the first XJ prototype crashing into a barrier, Jaguar engineers performed more than
500 computer-simulated crash events using sophisticated crash-modeling software and this
was followed up by physical tests.49
Further, new technologies, materials, processes, and design tools may allow for low-cost,
high-customization, small lot-size production. In addition, new collaborative innovation
models may open the possibility of making once-proprietary product design processes
available to external creators.
These new technologies and processes—and others that are likely to emerge from global
research and development efforts—may displace existing industries, companies, and workers;
shift value-added in the innovation process; and affect the competitive position of nations in
manufacturing. In deciding whether to authorize and fund the NNMI, Congress may also
wish to consider what the appropriate role of the federal government should be, if any, in
advancing the U.S. position in manufacturing broadly (i.e., what boundaries should be set, if
any, to define the appropriate roles of government and the private sector).
The Administration is currently seeking input from the stakeholder community with respect to a
number of questions related to the foci, structure, governance, sustainability, education, and
workforce development efforts of the NNMI and the individual IMIs. Congress may wish to
explore these questions (see Appendix) and to hold hearings on what the Administration has
learned from stakeholders in the course of its outreach activities.
48 Deborah Wince-Smith, “High Performance Computing for All,” Issues in Science and Technology, Summer 2009.
49 Ford Motor Company website, http://media.ford.com/article_download.cfm?article_id=14028.
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Appendix. NIST Request for Information Questions
The National Institute of Standards and Technology posed the following questions in a Request
for Information published in the Federal Register (77 FR 26509) on May 4, 2012, seeking public
input on the proposed National Network for Manufacturing Innovation. Commenters were
advised that the questions were intended to assist in the formulation of comments, and were not to
be construed as a limitation on the number of comments that interested persons may submit or as
a limitation on the issues that may be addressed in such comments.
Technologies with Broad Impact
What criteria should be used to select technology focus areas?
What technology focus areas that meet these criteria would you be willing to co-invest in?
What measures could demonstrate that Institute technology activities assist U.S. manufacturing?
What measures could assess the performance and impact of Institutes?
Institute Structure and Governance
What business models would be effective for the Institutes to manage business decisions?
What governance models would be effective for the Institutes to manage governance decisions?
What membership and participation structure would be effective for the Institutes, such as
financial and intellectual property obligations, access and licensing?
How should a network of Institutes optimally operate?
What measures could assess effectiveness of Network structure and governance?
Strategies for Sustainable Institute Operations
How should initial funding co-investments of the Federal government and others be organized by
types and proportions?
What arrangements for co-investment proportions and types could help an Institute become self-
sustaining?
What measures could assess progress of an Institute towards being self-sustaining?
What actions or conditions could improve how Institute operations support domestic
manufacturing facilities while maintaining consistency with our international obligations?
How should Institutes engage other manufacturing related programs and networks?
How should Institutes interact with state and local economic development authorities?
What measures could assess Institute contributions to long term national security and
competitiveness?
Education and Workforce Development
How could Institutes support advanced manufacturing workforce development at all educational
levels?
How could Institutes ensure that advanced manufacturing workforce development activities
address industry needs?
How could Institutes and the NNMI leverage and complement other education and workforce
development programs?
What measures could assess Institute performance and impact on education and workforce
development?
How might institutes integrate R&D activities and education to best prepare the current and future
workforce?
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Author Contact Information
John F. Sargent Jr.
Specialist in Science and Technology Policy
jsargent@crs.loc.gov, 7-9147
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