Industry Market Trends
Little-Known Federal Legislation to Create Manufacturing Hubs Included in Spending Bill
December 12, 2014
While the federal budget and its more controversial riders are commanding the lion's share of attention, the American public may not have noticed a piece of little-known but highly bipartisan legislation called the "Revitalizing American Manufacturing and Innovation Act" (RAMI) that is present in the budget bill set to pass next week. RAMI, versions of which have passed both the House (HR 2996) and the Senate (S 1468), will create 15 "manufacturing innovation hubs" across the U.S. These manufacturing hubs will be public-private partnerships that include colleges, universities and manufacturers all dedicated to research and development, commercialization and production of a particular advanced manufacturing market sector. The goal is to create opportunities and brain trusts in those sectors and taking advantage of geographic proximity to further the markets. Neither the specific industry sectors nor the geographic locations have been identified yet (or...if they have, it hasn't been revealed), so bidding for the federal funds set aside to create the hubs is expected to be very lively. In its present form, RAMI will set aside $30 million a year for 10 years to set up and operate the hubs. RAMI passed the House in September with bipartisan support and was cosponsored by Congressman Tom Reed (R-New York) and Congressman Joe Kennedy (D-MA). At the time the House bill was passed, Kennedy noted that it would create "a network of regional institutes across the country, each focused on a unique technology, material or process relevant to advanced manufacturing." Co-sponsors of the Senate version of the bill Sherrod Brown (D-OH) and Roy Blunt (R-OH) fought hard to ensure that the legislation was included in the must-pass spending bill for 2015 since it was never brought to the Senate floor for a vote. The bill first passed out of Senate committee in April of this year, though the Senate Commerce, Science and Transportation Committee trimmed it to $300 million from the initially proposed $600 million over 10 years and added a sunset period for the bill's funding authority. Once the bill passes, as it is expected to do, it will become the job of the National Institute of Standards and Technology (NIST) to sort through applications for the manufacturing hubs. Congressman Reed said he hopes that work will be completed within six to 12 months. "This innovation is going to spur a tremendous amount of economic activity," Reed said. "These are the jobs of today and tomorrow. We're going to be building it here to sell it there." Modeled on Four Existing Manufacturing Hubs The White House has expressed support for the legislation, which would expand on four hubs already created by the Obama administration. In 2012, Youngstown, Ohio became the first federally created manufacturing hub when it launched the National Additive Manufacturing Innovation Institute (now known as America Makes) to explore opportunities in the 3D printing industry. The Youngstown hub was established with an initial federal investment of $30 million under the authority of the Departments of Defense and Energy. Today, America Makes is a 94-member consortium comprised of manufacturers, universities, community colleges and non-profit organizations that collaborates in the areas of design, materials, technology and workforce. Since then, three other hubs have been established. The Next Generation Power Electronics Manufacturing Innovation Institute, headquartered at North Carolina State University, was launched in January of this year with 25 members. The Digital Manufacturing and Design Innovation Institute, headquartered in Chicago and helmed by UI Labs, is made up of 73 companies, universities, nonprofits, and research labs. It was funded with a $70 million federal investment and a comparable private industry fund, and operates under the umbrella of the Department of Defense. The Lightweight and Modern Metals Manufacturing Innovation Institute was created in the Detroit area in February of 2014 to scale up development and production of lightweight alloys for use in wind turbines, air frames, medical devices, combat vehicles, and other products. That group, led by EWI under the auspices of the DoD, is a 60-member consortium that includes manufacturers of aluminum and titanium as well as universities and labs. It also received $70 million from the federal government and was more than matched with funds from private industry. U.S. Still Lagging Despite these recent efforts, the U.S. is still somewhat behind the rest of the developed world in these public-private partnerships. Germany, China and the UK have all created significant public-private partnerships to focus on research in advanced manufacturing sectors. Today, Germany has 60 such public-private manufacturing innovation hubs. "If we scale by economy size, compared to Germany, our economy is three times larger, so we should have 180 of these," Notre Dame professor Steven Schmid told the Chicago Tribune. "If their investment is two billion euros annually, then we need to invest $3 billion annually. When you look at Chicago, which is about the population of Singapore, Chicago would need to invest $400 million annually in such research efforts. If you step back and think, what if our nation had that kind of investment in manufacturing and research, it transforms the entire country," he said. Good for the Economy The bill's supporters - and it doesn't seem to have any visible detractors - say this type of legislation is good for the economy, and research backs this up. According to the U.S Bureau of Economic Analysis, every $1 spent in manufacturing generates another $1.35 in additional economic activity. No other market sector returns that level of benefits to the economy. The Milken Institute has estimated that for every job created in manufacturing, 2.5 jobs are created in other sectors. In some manufacturing industry sub-sectors, most notably electronics and computer manufacturing, the multiplier effect is 16 to 1. RAMI also has the support of a number of trade associations. John Mitchell, CEO of electronics association IPC, and Denny McGuirk, CEO of semiconductor and electronics association SEMI, jointly endorsed the legislation in an op-ed for Roll Call in late November before it became clear that the bill would be included in the spending bill. "To remain a global technology leader, the U.S. public and private sectors must better appreciate the importance of domestic manufacturing capabilities to innovation," wrote Mitchell and McGuirk. "Enactment of the RAMI Act would be a great step for the United States to demonstrate its long-term commitment to innovation. The legislation also has many supporters among prominent U.S. manufacturers. "Lockheed Martin is proud to be a charter member at all four Institutes for Manufacturing Innovation established to date," said Steve Betza, Lockheed Martin's corporate director for Advanced Manufacturing & Development and a member of the IPC Board of Directors. "These centers represent an unprecedented collaboration between government, industry, and academia to accelerate manufacturing innovation. As such, we support the goal of the RAMI Act to expand the NNMI." RAMI, once passed, will not alter the operations of the four existing federal hubs, including the pilot program in Youngstown, Ohio. In fact, these hubs are expected to benefit from additional collaboration opportunities that will become available with the creation of new networks. The $1.1 trillion 2015 spending bill is expected to be brought to a vote next week, and both Democrats and Republicans have expressed confidence that it will pass.