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EXECUTIVE SUMMARY

This2019pilotstudyevaluatestheeconomicoutcomesandimpactsofDepartmentofDefense(DoD)cooperativeresearchanddevelopmentagreements(CRADAs).ThepurposewastoquantifytheextenttowhichDoDCRADAsarecontributingtoneweconomicactivityandjobcreationintheUnitedStatesandalsotothetransitionofnewtechnologytoU.S.militaryuse.

ThestudyfocusesonCRADAsestablishedbetween1996and2018bythree

representativeDoDlabs:theU.S.ArmyCombatCapabilitiesDevelopmentCommandAviation&MissileCenter,theNavalSurfaceWarfareCenterCraneDivision,andtheAirForceResearchLaboratory711thHumanPerformanceWing.

Theresearchteamsurveyedall413companiesandotherorganizationshavingCRADAs

withthethreeDoDlabsestablishedduringthe1996-2018period.CompanieswereaskedtodivulgethetotalsalesofnewproductsandservicesandothereconomicoutcomesdirectlyrelatedtothetechnologiesthattheydevelopedundertheirDoDCRADAs.Theyalsowereaskedaboutrelatedeconomicoutcomes,includingsalestotheU.S.military,follow-onresearchanddevelopmentcontracts,licensingrevenue,andsalesbylicenseesandspin-outcompanies.

Theresponseratewasveryhigh—97percentofthecompaniesandothernon-DoD

entitieswithDoDCRADAsparticipatedinthestudy.Theteamwasabletoobtainfullorpartialinformationontheeconomicoutcomesof628outofthe645totalCRADAs.IMPLANeconomicimpactassessmentsoftwarewasusedtoestimatetheeconomicimpactsrelatedtothesalesandothereconomicoutcomesfromtheseCRADAs.

Studyresultsarebelievedtosignificantlyunderstatetheactualeconomicimpacts

becauseofnon-respondingcompanies,theeffectsofinflation,andotherfactorsanalyzedinthereport.

Majorfindingsfromthestudyincludedthefollowing:

• $8.7billionintotalsalesofnewproductsandservicesresultingfromtheDoDCRADAs

• $4.9billioninsalesofnewproductstotheU.S.military• Over$23billionintotaleconomicimpactnationwide• Nearly$3billioninnewtaxrevenues(federal,state,andlocal)• 118,929jobs(6,607peryear)withaveragecompensationof$75,292

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PURPOSE OF STUDY

Thisstudyquantifiesthenationaleconomicimpactsfromasmallsampleofcooperativeresearchanddevelopmentagreements(CRADAs)establishedbetweentheDepartmentofDefense(DoD)andvariousnon-DoDorganizations,primarilyprivate-sectorcompaniesanduniversities.Itwasintendedasapilotproject,anditspurposewastoevaluatetheextenttowhichDoDCRADAsareresultinginnewproductsandservicesthatbenefitthenationaleconomyandU.S.defensemission. ThestudyfocusesontheCRADAsofthreerepresentativeDoDlabs—oneeachfromtheArmy,Navy,andAirForce.ThesethreelabsaretheU.S.ArmyCombatCapabilitiesDevelopmentCommandAviation&MissileCenter(CCDCAviation&MissileCenter,formerlyknownasAMRDEC),theNavalSurfaceWarfareCenterCraneDivision(NSWCCrane),andtheAirForceResearchLaboratory711thHumanPerformanceWing(711HPW).Together,thesethreelabsinitiatedover640CRADAsbetween1996and2018.ThisrepresentsapproximatelyfivepercentofthetotalCRADAsestablishedbyDoDduringthisperiod. Researchersfirstconductedasurveyofallnon-DoDCRADApartners,todeterminethetotalsalesofnewcommercializedproductsandservicesresultingfromtheseCRADAs.AnalyststhenusedIMPLANeconomicimpactassessmentsoftwaretoestimatetheresultingeconomicimpacts.Theseincludedeconomicoutput,valueadded,employment,laborincome,andtaxrevenuesgeneratedbythetotalsales.

CRADA OVERVIEW

TheFederalTechnologyTransferActof1986(PL99-502)establishingCRADAsgavefederallaboratoriestheauthoritytoenterintoresearchanddevelopment(R&D)collaborationswithpublic,private,andnonprofitorganizations.Congress’sintentwastopromotethedevelopmentofnewtechnologiesandtheirtransfertothemarketplacetohelpensurenationaltechnologicalcompetitiveness.CRADAsareauniquecontractualvehicleandaredistinctivelydifferentfromaprocurementcontract,grant,orcooperativeagreement.

CRADAsprovidemanybenefitstobothDoDandthecollaboratingnon-federalentities.

TheyenabletheCRADApartnerstoleverageeachother’sresourcesandcapabilitiesinordertoacceleratenewtechnologydevelopmentanddefraytheirR&Dcosts.TheyalsoallowcompaniestohavenewtechnologyevaluatedbyDoDandreceivefeedbackondesiredimprovementsforDoDapplications.Highlyimportantly,CRADAsprovideaprotectedenvironmentinwhichtheCRADApartnerscanshareideas,information,

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expertise,andtechnology.InformationisprotectedfromtheFreedomofInformationAct(FOIA)foruptofiveyears.CRADAsalsoprotecteachpartner’sexistinginventionsorintellectualproperty(IP),andprovideanequitablemechanismforprotectingandsharingnewinventions.

IPalreadybelongingtoDoDorthecollaboratorpriortotheCRADAinitiationdatecontinuestobelongexclusivelytotheexistingowner.CollaboratorinventionsundertheCRADAbelongexclusivelytothecollaborator—althoughthegovernmentretainsnon-exclusiverightstotheseinventionsforgovernmentuse.Thecollaboratorgetsanon-exclusive,paid-uplicensetoallDoDinventionsundertheCRADAandcanrequestanexclusivelicense,whichwillordinarilybegrantedonreasonableterms.DoDandthecollaboratorjointlyownnewjointinventions;however,DoDmaylicenseitssharetothecollaboratorforreasonablecompensation.TheopportunitytoacquirenewIPthroughparticipationinaCRADAisintendedtobeattractivetoindustry,asawaytoencourageR&DcollaborationswithDoD.

Overall,CRADAshavehelpedDoDreducethecostofnewtechnologydevelopmentandacquisition.Inaddition,theyhaveinfusedtheDoDlabsystemwithinnovationandspecializedexpertisefromtheprivatesector,andalsosignificantlyexpandedthedefenseindustrialbasetoincludemanyhighlyinnovativesmallcompaniesthatarenottraditionaldefensecontractors.Finally,asthisstudyshows,DoDCRADAshavecontributedsignificantlytothedefensemissionandhavehadasubstantialimpactonthenationaleconomy.

RESEARCH TEAM

ThiseconomicimpactstudywasconductedbyTechLinkincollaborationwiththeBusinessResearchDivision(BRD)oftheLeedsSchoolofBusinessattheUniversityofColoradoBoulder.TechLinkisafederallyfundedtechnologytransfercenterlocatedatMontanaStateUniversity.Since1999,ithasservedasDoD’sprimarynationalpartnershipintermediary,helpingtodeveloplicensingagreements,CRADAs,andotherpartnershipagreementsbetweenDoDlabsandU.S.industrynationwide.1Conductingeconomicimpactstudieshasbeenoneofitsimportantrelatedactivities.TechLinkhaspreviouslyconductedoveradozennationaleconomicimpactstudiesofDoDtechnologytransferandSmallBusinessInnovationResearchprograms.TheBRDhasbeenanalyzinglocal,state,andnationaleconomiesformorethan100yearsandspecializesineconomicimpactstudiesandcustomizedresearchprojectsthathelpcompanies,associations,nonprofits,andgovernmentagenciesmakeinformedbusinessandpolicydecisions.2 1Formoreinformation,seewww.techlinkcenter.org2Formoreinformation,seewww.colorado.edu/leeds/centers/business-research-division

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TheprincipalauthorsofthestudywereDr.MichaelWallner,JeffPeterson,andDr.WillSwearingenofTechLink,andBrianLewandowskioftheBRD.OthermembersoftheteamincludedMattRognlie,JoeHutton,andJessicaKaplinofTechLink,andDr.RichardWobbekindofBRD. METHODOLOGY

Thisstudywasundertakeninthreemajorphases:

1. DataGathering.Duringthedatagatheringphase,theresearchteamcontactedthenon-DoDorganizations(subsequentlyreferredtoas“companies”3)engagedinCRADAswiththethreeDoDlabsincludedinthestudy.CompanieswereaskedtodivulgethetotalsalesofnewproductsandservicesandothereconomicresultsdirectlyresultingfromnewtechnologiesdevelopedundertheseCRADAs.ThisphaselastedforsixmonthsandranfromFebruarythroughJuly2019.

2. DataAnalysis.Duringthisphase,theevaluationteamanalyzedtheinformationgatheredduringthefirstphaseandusedIMPLANeconomicimpactassessmentsoftwaretoestimatetheeconomicmultipliersandtotaleconomicimpactsresultingfromthesalesofnewproductsandservicesderivedfromtheCRADAs.ThissecondphasewasaccomplishedinJulyandAugust2019.

3. FinalReport.Also,inJulyandAugust2019,theauthorspreparedthefinalreport,drawingontheresultsfromtheprevioustwophases.Researchprocessesconductedduringthefirsttwophasesaredescribedinthefollowingsections.

Data Gathering

InFebruary2019,TechLinkinitiatedthispilotstudyoftheeconomicoutcomesandimpactsresultingfromCRADAsestablishedbytheCCDCAviation&MissileCenter,NSWCCrane,andthe711HPW.Toenablethestudy,theseDoDlabsprovidedessentialCRADAinformationonatotalof645CRADAs:237fromtheCCDCAviation&MissileCenter,207fromNSWCCrane,and201fromthe711HPW.WhileallthreelabsincludedCRADAsinitiatedaslateas2018,executiondatesoftheearliestCRADAsvariedsomewhatbylab:1996fortheCCDCAviation&MissileCenter;2000forthe711HPW;and2003fortheNSWCCrane.

3 Useoftheterm“companies”isnotonlyaconvenientwaytoabbreviatethetext;italsoisappropriatebecausewhentheCRADApartnerswereuniversities,theytypicallytransferredpromisingnewCRADA-relatedinventionstotheprivatesectorforcommercialization.

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UponreceiptoftheessentialCRADAinformationfromthelabs,threeTechLinkeconomicresearchspecialistssurveyedall413companiespartneredwithDoDintheseCRADAs.CompanieswereaskedaseriesofquestionsthatfocusedontheeconomicoutcomesrelatedtotheirCRADAs.Theywereinformedthattheirresponseswouldbetreatedasconfidentialinformationandaggregatedwiththoseofothercompanies.IdentifyinginformationwasremovedbeforesubmissiontotheDoDtoanonymizeresponses.Questionsaskedincludedthefollowing:

1. DidtheCRADAleadtothesaleofanynewproductsorservices?Ifso,whatwerethetotalcumulativesalesofthesenewproductsorservices?4

2. WhatwasthedollarvalueofthesesalestotheU.S.military,eitherdirectlyorthroughaprimecontractor?

3. DidtheCRADAprojectleadtoanyfollow-onR&DcontractsforfurtherdevelopmentoftheCRADA-developedtechnology?Ifso,whatwasthedollarvalueofthosecontracts?5

4. DidyoulicensetheCRADA-developedtechnologytoanothercompany?Ifso,whatwerethetotalroyaltiesreceivedfromthelicensee(s)?Whatwerethetotalsalesbythelicensee(s)ofthetechnologylicensed?

5. Didyoucreateaspin-outcompanytocommercializetheCRADA-developedtechnology?Ifso,whatwerethetotalsalesbythespin-outcompany?

6. Didyoureceiveanysubsequentoutsideinvestmentfunding,suchasventurecapitalorangelfunding,directlyrelatedtotheCRADA-developedtechnology?Ifso,whatwasthedollaramountoftheinvestment?

7. WasyourcompanyacquiredasadirectresultoftheCRADA-subjecttechnologythatyouweredevelopingorcommercializing?

8. Whatwasthesizeofyourcompanyatthetimeoftheagreement?(VerySmall,1-9employees;Small,10-99;Medium,100-499;Large,500andlarger).IfVerySmall,wereyouastart-upcompanyspecificallycreatedtoenterintotheCRADAagreementortocommercializethetechnology?

Thecompanyresponseratewasextremelyhigh—97percentofthecompaniesweresuccessfullycontactedandcompliedwiththesurvey.Inall,402companiesprovided

4 CompanieswerenotaskedwhethertheCRADA-subjecttechnologythattheysubsequentlycommercializedoriginatedwiththecompany,resultedfromjointdevelopment,orwasaDoDinventionthatwaslicensedunderCRADArights.TechLinkplanstoinquireaboutthesourceofthetechnologyinfutureCRADAstudies.5ContractsforfurtherdevelopmentoftheCRADA-developedtechnologyweretreatedassalesofR&Dservicesandwereincludedinthetotalsales.

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information,byemailandtelephone,aboutthefinancialoutcomesof628CRADAs.6Onlysevencompanies(with12CRADAs)eitheropenlyrefusedtoparticipateinthestudyorwerenon-cooperative.Anadditionalfourcompanies(withfiveCRADAs)werenotcontacteddespitepersistentefforts,possiblybecausetheyhadceasedtoexistascorporateentities.Altogether,theresearchteamwasabletoobtaindefinitiveinformationonthefinancialoutcomesof628of645CRADAs. ForeachCRADAwithsalesresults,TechLinkassignedanindustry-specific6-digitNorthAmericanIndustryClassificationSystem(NAICS)code.Thiswasanessentialstepforanalysisoftheoveralleconomicimpacts.NAICScodesareusedtoassignindustrysectorsusedbytheIMPLANmodel.Asthefederalgovernment’sstandardindustryclassificationsystem,NAICScodesallowcompaniestobeaggregatedaccordingtothespecificactivitiestheyundertake.NAICSrecognizes1,057differentindustriesintheUnitedStatesandassignsauniquecodetoeach. ToidentifytheappropriateNAICScodes,theresearchteamusedmultiplesources.TheseincludedtheU.S.CensusBureau’sNAICScodesite:https://www.census.gov/cgi-bin/sssd/naics/naicsrch/,thefederalSystemforAwardManagement(www.sam.gov),D&BHoovers(www.hoovers.com),andtheLexisNexisAcademicwebsite(www.lexisnexis.com).Researchersassignedcodesbasedondescriptionsofthetechnologiesprovidedduringinterviews.Duringthereviewprocess,TechLink’schiefdataanalystcheckedeachcodeforaccuracy.

TechLinksubsequentlysubmittedafinaldatasetofeconomicresultsfromitssurveytotheBRDattheUniversityofColoradoBoulder.Thedatasetincluded—foreachCRADAleadingtosales—acodenumbertoidentifytheagreementandconcealthecompany’sname,the6-digitNAICScodeforthecorrespondingproductorservice,andthetotalsalesfigures.Thesalescategoryincludedsalesofproductsandservices,follow-onR&Dcontracts,royaltiesorsalesbylicensees,andsalesbyspin-outcompanies.

Data Analysis

TheBRDemployedIMPLAN,awidelyusedinput-outputmodel,toestimatetheeconomiccontributionsresultingfromtheseCRADA-inducedsalesfigures.Morethan1,500entitiesinacademia,theprivatesector,andgovernmentuseIMPLANtoestimateeconomicimpacts.WhilethisstudyfocusedontheentireUnitedStates,estimatescanalsobespecifiedbystate,county,orZIPCode(www.implan.com). 6Eighty-eightcompanies(21percent)hadtwoormoreCRADAswithDoD.SomeofthelargerprimecontractorshadnumerousCRADAs—upto32inonecase.

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IMPLANdrawsonamathematicalinput-outputframeworkoriginallydevelopedbyWassilyLeontief,the1973Nobellaureateineconomics,tostudytheflowofmoneythrougharegionaleconomy.IMPLANassumesfixedrelationshipsbetweenproducersandtheirsuppliers,basedondemand,andthatinter-industryrelationshipswithinagivenregion’seconomylargelydeterminehowthateconomyrespondstochange.Increasesindemandforacertainproductorservicecausesamultipliereffect—acascadeofripplesthroughtheeconomy.Thisincreaseddemandaffectstheproduceroftheproduct,theproducer’semployees,theproducer’ssuppliers,thesuppliers’employees,andothers,ultimatelygeneratingatotalimpactontheeconomythatsignificantlyexceedstheinitialchangeindemand. Forexample,acompanydevelopsatimedomainreflectometer(TDR)todetectfaultsinaircraftelectronicsunderaCRADAwiththe711HPW.ItsubsequentlymanufacturestheseTDRsandsellsthemtotheAirForceandcommercialaviationcompanies.Thecompanyneedstoemployfactoryworkers,whospendtheirearningsongroceries,housing,andothergoods.Italsomustpurchasemachines,tools,components,andrawmaterialsfromothercompanies,whichalsoemployworkerswhopurchasegoods.Thisrippleofactivityextendsthroughtheeconomy. Inthisexample,directeffectsarethesalesofthenewTDR.Indirecteffectsaretheresultofinter-industrypurchasesofcomponentsandrawmaterialsneededtomanufacturetheTDR.Inducedeffectsaredrivenbyemployeesspendingtheirwagesacrossawidespectrumoftheeconomy.Totaleconomicimpactsarethesumofdirecteffects,indirecteffects,andinducedeffects. Multipliersareratiosoftheoveralleconomicimpactstothedirecteffectsandaretypicallyderivedfromthefollowingequation:(directeffect+indirecteffect+inducedeffect)/directeffect.Multipliersareveryspecifictoindustrysectorsandregions.TheIMPLANmodeldistinguishesbetween536industrysectorswhicharebasedonNAICScodes.Eachsectorhasanoutputmultiplierbasedonauniquepatternofpurchasesfromotherindustries,bothinsideandoutsideoftheregionaleconomy.IMPLANisupdatedannuallyusingdatacollectedbyvariousfederalagencies. UponreceivingtheCRADAsalesdatafromTechLink,theBRDconvertedeachNAICScodetoitscorrespondingIMPLANsector.Withallofthesalesfiguresproperlycategorized,themodelyieldedanestimateofthedirect,indirect,andinducedeffectsresultingfromtheCRADAs.Theoverallpurposeofthismodelingexercisewastoestimatethetotaleconomiccontributionofthesesalestothenation’seconomy,includingtotaleconomicoutput,valueadded,employment,laborincome,andtaxrevenues.

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Thedatapresentedareaggregatedthrough2019andexpressedin2019dollars.Nearlyallcompanysalesoccurredpriorto2019,withsomepossiblydatingbacktothelate1990s.However,thesurveydidnotaskwhensalesoccurred,sothestudyassumesaconstantyear.Using2019asthereferenceyearrepresentsaconservativeapproach,ignoringthehighervalueofearliersalesfiguresduetoinflation(forexample,$100in2000hadthesamepurchasingpoweras$147in2018.) RESULTS REPORTED BY COMPANIES

Sales from Agreements Thesurveyedcompaniesreportedthat168(26percent)ofthe645CRADAsincludedinthestudyhadsuccessfullygeneratedsalesofproductsorservices(seeTable1).Totalcumulativesalesandrevenuesreportedwerenearly$8.7billion.7The“totalsales”categoryinTable1encompassesnotonlythecompanies’cumulativesalesofproductsandservicesresultingfromtheCRADAs,butalsofollow-onR&Dcontracts,salesofdirectlyrelatedproductsbylicensees,andsalesbyspin-outorstart-upcompanies.

Table1.SalesresultingfromCRADAsestablishedbytheCCDCAviationandMissileCenter,NSWCCrane,andthe711HPW,1996-2018

Total Companies

Total CRADAs

Percent of CRADAs

Total Sales $ Millions

U.S. Military Sales

$ Millions

Included in Study 413 645 100% -- --

Achieving Sales 121 168 26% $8,694 $4,882

No Sales 281 460 71% -- --

Unknown 11 17 3% -- --

Source:TechLinksurvey,February-July2019

7 $8,693,977,000

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Atotalof460CRADAs(71percent)didnotgeneratesales.Thiscategoryincludedneweragreementsinvolvingtechnologiesthatcompanieswereactivelyworkingtocommercializeandagreementsthat,formanyreasons,hadnotresultedincommercialization.AsignificantportionofthelatterincludesCRADAsthatwereneverintendedtoproducecommercialoutcomesorthatwereunlikelytodoso.Asmallnumberofagreements,17(3percent),involvedcompaniesfromwhichtheresearchteamwasunabletoobtaininformation—eitherbecausetheinvolvedcompanieswereunwillingtoparticipate(12agreements)orbecausetheywereuncontactable(5agreements). MilitarySales.ThesurveyfoundthatsalestotheU.S.militaryamountedto$4.9billion,or56percentofthetotalfromallsources(seeTable1).ThesesalesinvolveCRADA-developedtechnologythatisbeingprocuredbyDoDandthathastransitionedtoDoDoperationaluse.Thishighpercentageisapositivefinding,demonstratingthevalueofCRADAstotheU.S.defensemission.

Table2.SalesbycompanysizeresultingfromestablishedbytheCCDCAviationandMissileCenter,NSWCCrane,andthe711HPW,1996-2018

Company Size

CRADAs with

Sales

Percent of

Total CRADAs

Total Direct

Impact $ Millions

U.S. Military

Sales $ Millions

Large 500+ Employees 90 54% $7,923 $4,592

Medium 100-499 Employees 13 8% $180 $37

Small 10-99 Employees 38 23% $299 $62

Very Small 1-9 Employees 27 16% $292 $191

TOTAL 168 100% $8,694 $4,882

Source:TechLinksurvey,February-July2019Note:Totalsmaynottallyduetorounding

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SalesbyCompanySize.Anotablesurveyfindingwasthatlargebusinesses(with500ormoreemployees),whichcomprisedaroundhalf(54percent)ofthecompaniesreportingsales,accountedforapproximately91percentofthetotalsalesand94percentofthesalestotheU.S.military(seeTable2).Bycontrast,smallbusinesses,whichrepresentedslightlylessthanhalfofthenon-DoDCRADApartners,accountedforonlyaround9percentofthetotalsalesandjust6percentofthemilitarysales.8

Other Economic Outcomes

Inadditiontosales,thecompaniesinthestudyreportedothersignificanteconomicoutcomes.Companiesreceivedtotaloutsideinvestmentfunding(includingventurecapitalandangelfunding)directlyattributabletotheCRADA-developedtechnologiesofslightlyover$75million.Inaddition,sevencompaniesreportedthattheywereacquiredprimarilybecauseofthetechnologiesdevelopedundertheseCRADAs.Companiesreportedthattheyhadlicensed13CRADA-developedtechnologiestoothercompaniesforcommercialization.Finally,companiesreportedthattheyhadcreatedatotalof9companiesspecificallytoundertaketheCRADAR&DortocommercializetheresultingCRADA-developedtechnologies.Theseothereconomicoutcomesandimpactsaresummarizedbelow:• Totaloutsideinvestmentfunding: $75,200,000

• Numberofcompaniesthatwereacquired: 7

• Numberoftechnologieslicensedtoothercompanies: 13

• Numberofnewcompaniescreated: 9

8 “Smallbusinesses”areconsideredtobethosewithfewerthan500employees,usingtheU.S.SmallBusinessAdministrationdefinition.

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ECONOMIC IMPACT ANALYSIS

UponreceivingtheanonymizedcompanydatafromTechLink,theBRDattheUniversityofColoradoBoulderemployedtheIMPLANmodeltoestimatetheeconomiccontributionsofthetotalsales.Resultsbelowarepresentedforoutput,valueadded,employment,laborincome,andtaxrevenues.Aspreviouslynoted,alldollarfiguresarereportedin2019dollars. Total Economic Impact (Output): $23.27 Billion

Outputrepresentsthetotaleconomicimpactandisthetotalvalueofpurchasesbyintermediateandfinalconsumers—thesumofdirect,indirect,andinducedsales.9Outputiscloselyassociatedwitheconomicimpactanalysisandisoneofthevaluesmostfrequentlycitedbyeconomicimpactstudies.AccordingtothenationalIMPLANmodel,the$8.69billionincompany-reportedsalesofnewCRADA-developedproductsorservicesgeneratedanadditional$14.58billioninsaleseconomy-wide.Ofthis,$5.56billionwastheindirecteffect,theresultofinter-industrypurchases,and$9.01billionwastheinducedeffect,orincreasedhouseholdspendingeconomy-wide(seeTable3).Thetotaleconomy-wideoutputwas$23.27billion. Dividingtotaleconomy-wideoutput($23.27billion)bythedirectsalesofproductsandservicesresultingfrompartnershipagreementswithDoD($8.69billion)yieldedanoutputmultiplierof2.68.Thatis,foreverydollarinsalesdirectlyattributabletotheDoDCRADAs,anadditional$1.68insaleswasgeneratedeconomy-wide.

Value Added: $13.35 Billion Valueaddedisthedifferencebetweenindustryorcompanyoutputandthecostofintermediateinputs.Expresseddifferently,itisthedifferencebetweenaproduct’ssalepriceanditsproductioncost(excludinglabor).Thismeasurerecognizesthatcompaniesbuygoodsandservicesfromothercompaniesandcreateproductsofgreatervaluethanthesumofthegoodsandservicesusedtomaketheseproducts.Thisincreaseinvalueresultingfromtheproductionprocessisthe“valueadded.”AsestimatedbyIMPLAN,valueaddedisequaltothetotalsales(plusorminusinventoryadjustments)minusthecostofthegoodsandservicespurchasedtoproducetheproductssold. AccordingtothenationalIMPLANmodel,the$8.69billionincompany-reportedsalesadded$13.35billiontothenationaleconomy.Ofthis,$5.07billionwasgeneratedbydirect

9 Technically,itisthetotalvalueofpurchases,plusorminusinventoryadjustments.

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sales,$3.19billioncamefromindirectsales,and$5.09billionresultedfromtheinducedeffect(seeTable3).Employment: 118,929 Jobs (6,607 annually) AccordingtothenationalIMPLANmodel,thesalesresultingfromtheDoDCRADAsandtheirrippleeffectseconomy-widesupportedapproximately118,929jobs.Thisincludes35,623jobsthroughthedirecteffect(thesalesofnewproductsandservicesreportedbythecompaniesinthestudy),29,584fromtheindirecteffect,and53,721fromtheinducedeffect(seeTable3).Intheseestimations,eachjobisdefinedasonejobsupportedoveroneyear.Thismeansthat,onaverage,6,607jobsweresupportedannuallybetween2000and2018.10Labor Income: $8.95 Billion Laborincomeconsistsofemployeecompensation(wageandsalarypayments,includingbenefits),andproprietorincome(incomereceivedbyself-employedindividuals).ThenationalIMPLANmodelestimatedthatlaborincomedirectlygeneratedfromthe$8.69billioninsaleswas$3.97billion,orapproximately$111,320perjob(seeTable3). Theindirectlaborincomewasestimatedat$2.10billion,orapproximately$70,882perjob.Theinducedlaborincomewasestimatedtobe$2.89billion,resultingincompensationof$53,829perjob.Averagecompensationforindirectandinducedjobswassubstantiallylowerthanfordirectjobsbecausemanywereinlower-paidmanufacturingandservicesectors. Thetotaleconomy-widelaborincomeresultingfromtheDoDCRADAswas$8.95billion.Theaveragecompensationfromthe118,929jobssupportedthroughtheseCRADAswas$75,292.Thiscompareswith2019mediannationalearningsof$47,216.11Thelaborincomemultiplierwas2.26,indicatingthatforeverydollarinwageandsalaryincomeattributabletoDoDtechnologypartnershipagreements,anadditional$1.26wasgeneratednationallyinemployeecompensationandproprietorincome.

10 TheoldestCRADAsinthestudy,fromtheCCDCAviation&MissileCenter,datebackto1996,whiletheoldestCRADAsfromthe711HPWdatebackto2000andthosefromtheNSWCCraneto2003.The2000-2018spanforcalculationoftheaveragejobsperyearfigureassumesthattheoldestCRADAswouldnothavegeneratedanysignificantcommercialresultsbefore2000—asafeassumptiongiventhatCRADAsfrequentlylastthreeyears.11Mediannationalearningswerecalculatedusingthemedianweeklyearningsforthesecondquarterof2019,fromtheBureauofLaborStatistics(BLS).Theaveragecompensation(laborincomeperjob)figuresincludetheearningsofbothemployeesandproprietors,throughbothworkandbusinessprofits.WeeklyearningsprovidedbytheBLSdonotincludeproprietorincome,butareprovidedhereasageneralcomparison.

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Tax Revenues: $2.96 Billion Taxrevenueswereestimatedforthe$8.69billioninsalesandtheireconomy-wideindirectandinducedeffects.ThesetaxrevenuesincludedsocialinsurancetaxessuchasSocialSecurityandMedicare(paidbyemployers,employees,andtheself-employed),personalincometaxes,motorvehiclelicenses,propertytaxes,corporateprofitstaxesanddividends,andindirectbusinesstaxes,consistingmainlyofexciseandpropertytaxes,fees,licenses,andsalestaxes.Totaltaxescollectedbyfederal,state,andlocalgovernmententitieswereestimatedat$2.96billion(seeTable3).Thisincluded$1.95billionintotalfederaltaxes,and$1.01billionintotalstateandlocaltaxrevenues.Insum,foreverydollarofdirectsalesgeneratedthroughtheCRADAs,$0.34wascollectedintaxesbyfederal,state,andlocalgovernments. SUMMARY Insummary,thisstudyquantifiesthecontributionstothenation’seconomyanddefensemissionmadebyCRADAsestablishedduringthe1996-2018periodbythreerepresentativeDoDlabs—theArmy’sCCDCAviation&MissileResearchCenter,theNavy’sNSWCCrane,andtheAirForce’s711HPW. ThestudyteamconductedarigoroussurveyofcompaniestodeterminethetotalsalesofnewproductsandservicesresultingfromtheseCRADAs.Companiesinthestudycollectivelyattributednearly$8.7billioninsalestotheseagreements.TheteamestimatedtheeconomicrippleeffectsofthesesalesusingtheIMPLANmodel.Theseestimatesdefinetheindirectandinducedeffectsofthesesalesonthenationaleconomyintermsoftotaleconomicoutput,valueadded,employment,laborincome,andtaxrevenue. Thetotaleconomy-wideoutputwasestimatedat$23.27billion.Valueaddedwasestimatedat$13.35billion,representingnewwealthcreationintheeconomy.Employmentimpactsincluded118,929jobswithaveragecompensationof$75,292,approximately45percenthigherthanthemedianU.S.wagein2019.Totallaborincomewasestimatedat$8.95billion.The$8.69billioninsalesanditseconomy-wideeffectsgeneratedapproximately$2.96billionintotaltaxrevenue,including$1.01billioninfederaltaxrevenuesand$1.95billioninstateandlocaltaxrevenues. Table3summarizesthenationaleconomicimpactsresultingfromCRADAsestablishedbytheCCDCAviation&MissileCenter,NSWCCrane,and711HPWduringthe1996to2018period.Appendix1summarizesthecontributionsofeachofthesethreelabstotheoverallimpacts.

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Table3.Nationwideeconomiccontributionresultingfrom CRADAsestablishedbytheCCDCAviation&MissileCenter,NSWCCrane,and711HPW,1996-2018

Output $ Billions

Employment Jobs Supported

Value Added

Labor Income $ Billions

Average Compensation12

Tax Revenue $ Billions

Direct Impact $8.69 35,623 $5.07 $3.97 $111,320 --

Indirect Impact $5.56 29,584 $3.19 $2.10 $70,882 --

Induced Impact $9.01 53,721 $5.09 $2.89 $53,829 --

Federal Tax Revenues

-- -- -- -- -- $1.01

State and Local Tax Revenues

-- -- -- -- -- $1.95

TOTAL NATIONAL ECONOMIC

IMPACT

$23.27

118,929

$13.35

$8.95

$75,292

$2.96

Sources:BRD,IMPLANNotes:Totalsmaynottallyduetorounding.Alldollarfiguresin2019dollars.

12AverageCompensationisameasureofLaborIncomeperJob

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APPENDIX 1 National Economic Impacts by DoD Laboratory

Thefollowingtablesprovideamoredetailedlookattheeconomicimpactsresulting

fromtheDoDCRADAsinthispilotstudy.ThesetablessummarizetheestimatedeconomicimpactsfromCRADAsateachofthethreeDoDlabsparticipatinginthisstudy:theCCDCAviation&MissileCenter(237CRADAs),NSWCCrane(207CRADAs),andthe711HPW(201CRADAs).Forexplanationsoftheeconomictermsusedintheappendices,pleaserefertothemaintextofthereport.

Tables1. U.S.ArmyCCDCAviation&MissileCenter2. NavalSurfaceWarfareCenterCraneDivision3. AirForceResearchLaboratory711thHumanPerformanceWing

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Table1.U.S.ArmyCCDCAviation&MissileCenter

Army

Impact Type Output $ Billions

Value Added $ Billions

Employment Jobs Supported

Labor Income $ Billions

Average Compensation

Direct Impact 5.048 2.726 19,076 2.054 $107,700

Indirect Impact 3.669 1.997 16,904 1.314 $77,727

Induced Impact 5.014 2.833 29,877 1.608 $53,833

TOTAL ECONOMY-WIDE IMPACT 13.730 7.556 65,857 4.977 $75,569

Table2.NavalSurfaceWarfareCenterCraneDivision

Army

Impact Type Output $ Billions

Value Added $ Billions

Employment Jobs Supported

Labor Income $ Billions

Average Compensation

Direct Impact 2.790 1.879 13,486 1.574 $116,746

Indirect Impact 1.350 0.873 9,683 0.578 $59,663

Induced Impact 3.196 1.805 19,046 1.025 $53,824

TOTAL ECONOMY-WIDE IMPACT 7.336 4.557 42,216 3.177 $75,265

17

Table3.AirForceResearchLaboratory711thHumanPerformanceWing

Army

Impact Type Output $ Billions

Value Added $ Billions

Employment Jobs Supported

Labor Income $ Billions

Average Compensation

Direct Impact 0.856 0.462 3,061 0.337 $109,976

Indirect Impact 0.543 0.319 2,997 0.205 $68,516

Induced Impact 0.805 0.455 4,799 0.258 $53,825

TOTAL ECONOMY-WIDE IMPACT 2.204 1.236 10,857 0.800 $73,712