The Government Entrepreneur’s Dilemma   

Image Source: Deposit Photos.

I got the news that EPA’s Water Technology Innovation Cluster was dead during the webcast of the final public meeting of the Administration’s ROI Initiative. About two hours into the program a speaker mentioned it during his three-minute statement. The two of us may have been the only ones listening that knew about this project.  Just a few years ago I’d called it a “model technology transfer program.”  Now it was gone, taking down several public-sector entrepreneurs with it.

The broadcast presented a series of thoughtful recommendations on how to improve the taxpayer’s return on investment in federally supported R&D.  But the news underscores a critical question. Despite all the laws, presidential statements, departmental orders, speeches, etc. is the commercialization of technology really a priority in government agencies?  Many times, the answer is “No, that’s not our mission.” And those who believe otherwise often pay a price.

So, if you’re a taxpayer or think protecting water is a demonstrable public good, take a second to mourn the passing of a program with a shoestring budget that punched well above its weight. It died because it was viewed as more of a threat than a benefit to its agency.

When we think of government/industry collaborations, the Environmental Protection Agency probably doesn’t come to mind.  Known chiefly for its regulatory responsibilities and industry oversight, it’s not what many companies view as an ally.  But there’s another side that’s largely hidden from view.  Despite its small budget, EPA’s Office of Research and Development performs cutting edge basic and applied R&D in its national centers and laboratories.  That’s particularly true when it comes to clean water.  Much of this expertise resides at the Andrew W. Breidenback Environmental Research Center in Cincinnati, Ohio.

Cincinnati is a natural innovation hub because of its geography. Hundreds of miles of rivers and streams meet there forming a 1.5 trillion-gallon aquifer.  The region has more than 6,000 scientists conducting nearly $4 billion in water related research.  Protecting global water supplies is one of the most pressing needs of humanity so developing effective technologies is a tremendous opportunity for innovative companies. The EPA test and evaluation laboratories and facilities can mimic conditions new water technologies face anywhere in the world to see how they perform.  Combining these assets through industry partnerships would spur regional economic development while helping EPA fulfill its mission.

Recognizing the potential, one EPA lab director commissioned a study to look at the possibility of forming the “Water Technology Innovation Cluster.” The plan was promising and worked its way up the chain of command. Eventually $5 million was scraped together from the agency research budget. Complimented with a contribution from the Small Business Administration, the project launched. Both the EPA and SBA Administrators attended the opening ceremony.

A few years later I was asked to review the program.  Several days were spent interviewing stakeholders for candid assessments on how things were working.  That was a real eye opener. I’d worked with EPA before while leading the National Technology Transfer Center. We’d done an analysis of their patents and research capabilities and came away impressed. However, getting licenses or cooperative R&D agreements (CRADAS) through the agency process was difficult.

After the first few interviews it was evident that something significant was happening.  The Cluster helped form an association of local companies and water utilities to get an industry driven list of needed technologies and potential partnerships with EPA.  Part of the Cluster’s budget was then used as a small gap fund to bring several promising lab inventions a little further down the pipeline.

In just a year and a half, the Cluster had:

• Formed 13 CRADAS;
• Completed 2 licensing agreements;
• Filed 6 patent applications and 3 provisional patents; and
• In just one-year, increased industry in-kind CRADA contributions 250%– from $1.500,000 to $4,000,000.

While these numbers may not seem like a big deal at NIH, for the Environmental Protection Agency they are impressive.

While I talked with lab managers, the interviews which really hit home were with EPA’s scientists. Their names were not revealed so they could say what they really thought. Everyone cared passionately about their research and strongly believed in EPA’s mission.  But they were frustrated it was so hard to get their discoveries out of the lab, so they could be utilized.  Other than the Cluster, there was little encouragement to patent their inventions or commercialize the technology. Tech transfer had been a tax on their time and budgets with little benefit.

Several said they’d heard many speeches, but nothing ever changed.  For the first time they felt hope that things were finally getting better and asked if I thought it would last.  All I could say was that I would honestly report my findings.

The input from industry was equally blunt. One small company owner said that in his prior attempts to work with the lab he encountered a “slow, inflexible and very passive approach” to tech transfer, but when he approached the Water Cluster their immediate reaction was: “Let’s make it happen.”  An executive from a large municipal water utility said his partnership helped find a smart water technology which was “one of the best products I’ve ever seen.”

The Cluster also gained national attention. The Federal Laboratory Consortium presented it with the State and Local Economic Development Award and gave its leader TheLaboratory Director of the Year Award, the first time these prestigious awards had been given to one program.

My report said the Cluster was precisely the type of initiative that Congress, the President and the EPA envisioned through the various technology transfer laws, policies and directives and it should be supported.

EPA had centralized its technology transfer office in Washington to save money.  No matter how well intentioned, you can’t effectively broker deals from 1,000 miles away. I recommended that the Cluster be strengthened by giving it deal making authorities as envisioned by the Federal Technology Transfer Act. I also suggested that the program be funded to pay patenting costs as they were currently deducted from the research budgets. Both ideas were geared toward making the project a service to the other labs rather than a cost.

But the Cluster’s fate was already sealed.

In “have not” agencies like EPA, budgeting is a zero-sum game.  The Cluster’s money had been scraped together from other research programs.  As soon as its headquarters champion left, the knives came out.  The opportunity to strike came during the transition between administrations.  The Cluster was stripped of its funding.  Its leaders were buried deep in the bureaucracy. An unmistakable message had been sent.

To learn this while listening to a public meeting on improving the return on investment from our federal laboratories was stunning. I can’t be angry with the middle managers who killed the Cluster. To them it was a threat, taking dollars away from their research agenda in an agency with a constantly shrinking budget.  No one seems to have thought that the way to turn this around is to show that their R&D creates new technologies that grow the economy while protecting the planet.

Ironically, now that the Trump Administration’s prioritizing economic as well as scientific returns on investment from federal research, one of EPA’s best examples is gone.  It brings to mind the cry of Napoleon’s minister on learning a long-term benefit was thrown away for short term expediency: “This is worse than a crime, it’s a blunder.”  But so far, the price was paid by those who believed that technology commercialization really was an agency priority.

Others who share this faith are waiting to see what becomes of the Administration’s ROI initiative. One thing’s for certain, it’s going to take more than lofty pronouncements to steer this ship in a new direction. Until there are meaningful rewards for transforming federal laboratory discoveries into useful products and penalties for those blocking the way, tech transfer will remain little more than window dressing.  With the Chinese right on our heels, that’s a luxury we can no longer afford.

It’s time to end the government entrepreneur’s dilemma so they can get to work.