cooperative-research-centres-programme-review

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cooperative-research-centres-programme-review

SUBMISSION TO THE

Cooperative Research Centres

Programme Review

NOVEMBER 2014

AUSTRALIAN ACADEMY OF TECHNOLOGICAL SCIENCES AND ENGINEERING (ATSE)


Introduction and General Comments

The CRC Programme has been running for over 20 years. Its original objectives were to encourage research

excellence, foster effective collaboration, create new educational opportunities, and translate research outputs

into economic, social and environmental benefits to Australia 1 2 .

Past reviews have demonstrated that the Programme’s economic return on taxpayer funds has been impressive,

generating a net benefit to the economy of $7.5 billion since its inception 3 and increasing gross domestic product 4 .

However, the results extend beyond economic measures, with widespread benefits to the environment and the

community, and spill-overs to nearly every industry and sector. Over the lifetime of the Programme, many of its

notable successes and benefits have been a result, in part, of significant long-term support from the government.

Reduced funding to the Programme jeopardises these benefits. Making targeted modifications offers the potential

to increase them. ATSE recommends a number of actions in this submission that will help to strengthen and

improve the CRC Programme.

Internationally, there are approaches to driving industry growth and competitiveness that have some similarities

with Australian CRCs, such as the United Kingdom’s Catapult Centres (as noted in the CRC Review Discussion

paper). The Catapult Centres are central to bringing together the UK’s businesses, scientists and engineers to work

side by side on late-stage research and development, to unlock opportunities and speed innovative products and

services towards commercial reality. A recent review 5 into the UK Catapult Centres highlights that government

must maintain its scale of funding if the initiative is to provide a long lasting impact to the UK’s economic

performance. Similarly, the scale of government funding given to the CRC Programme must be maintained to

replicate long lasting economic performance in Australia.

The CRC Programme has been complimented internationally. In particular, the OECD has commended numerous

aspects of the Programme, notably that its longevity has provided the credibility and security to tackle long-term

projects, the amount of and length of funding, and the encouragement of networking to meet the demands of end

users 1 .

Recommendations

1) The CRC Programme must be retained, with funding at least doubled from present reduced levels. In

light of the Government's strategy for lifting Australia's competitiveness and innovation by increasing

collaboration between researchers and business, the CRC Programme has been highly successful in

supporting research partnerships and providing economic returns.

While acknowledging that there are challenges in collaboration 6 , there is great value in pooling and sharing

resources and ideas. CRCs offer a mechanism for undertaking collaborative, pre-competitive research and

development (i.e. research that can be applied to the development of multiple products/services with value to all

participants). CRCs are one of the most important mechanisms for fostering collaboration and building industry-

1 Organisation for Economic Co-operation and Development, Public-private Partnerships for Research and Innovation: An

Evaluation of the Australian Experience, 2004.

2 Productivity Commission Research Report, Public Support for Science and Innovation, Productivity Commission, Australian

Government, 2007.

3 Allen Consulting Group, The economic, social and environmental impacts of the Cooperative Research Centres Program. Final

report to the Department of Industry, Innovation, Science, Research and Tertiary Education, Allen Consulting Group, 2012.

4 Insight Economics, Economic Impact Study of the CRC Program. Prepared for the Australian Government

Department of Education, Science and Training, 2006.

5 Hauser, H, Review of the Catapult Network. Recommendations on the future shape, scope and ambition of the programme, for

The Rt Hon Dr Vince Cable MP, Secretary of State, Department for Business, Innovation and Skills and The Rt Hon Greg Clark

MP, Minister of State for Universities, Science and Cities, 2014.

6 The Australian Academy of Technological Sciences and Engineering, Translating Research into Economic Benefit for Australia:

Rethinking linkages, 2013.

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esearch networks in Australia, and are a means to build critical mass in well-defined areas. It is important to note

that funding for CRCs constitutes a relatively small proportion of overall government investment in research and

innovation (only 1.6 per cent in 2014-15) 7 , so criticising CRCs for failing to solve Australia’s poor rates of

collaboration between business and industry is unfair.

CRCs have encouraged new ways to collaborate that go well beyond the traditional contract research

purchaser/provider model. There are frequent exchanges of personnel between research organisations and

industry; there is training (and often co-supervision) of post-graduates in industry, sharing of equipment, site

access for running trials, co-authoring of papers and presentations, and networking opportunities through

publications and conferences. The number of research students trained and research managers developed in a

business setting, as well as the number of domestic and international collaborations formed, are significant

measures of a successful program.

Undertaking a PhD through a CRC is widely considered to provide better employment prospects, opportunities for

travel and site experiences, and offers a higher stipend than solely university based doctorates. Training graduate

students in this setting also enhances the level of interaction between industry and academia. In light of Australia

being ranked at the bottom of OECD measures of business-researcher collaboration, the continued outcomes of

the CRC Programme provide opportunities to improve on this poor performance.

Although the Programme was not designed to assist small to medium enterprises (SMEs), its engagement with

SMEs is one of its greatest strengths. This has particularly been the case where a large firm has been the customer

for technologies developed by SMEs, offering a test platform to trial new technologies with relative financial

security. In the absence of the Programme, these linkages would not have occurred. Participation in a CRC reduces

risk for SMEs and allows them to more efficiently develop and market their new technology to industry more

broadly.

2) A simpler, cheaper and quicker process for processing CRC proposals should be implemented. This

would reduce the resources allocated to the bid process and would encourage the involvement of

organisations (especially in industry) currently deterred from becoming involved by the onerous

application requirements. Ideally, the time from private sector companies submitting a signed

declaration of their proposed cash contribution to a final decision should be less than one month.

The application process for CRC funding can be seen as complex and burdensome by some potential participants

due to the requirements for multiple participants, an education programme, a long term commitment and at least

two inter-related research programmes. These applications can cost well over $100,000 to prepare, and often

requires the hiring of consultants and lawyers, adding to compliance costs for applications.

3) Reporting and administrative requirements should be streamlined to the minimum required to ensure

accountability for use of public money. While a mid-term review should be retained, the primary

accountability measures should be a comprehensive annual report and the imposition of

technical/commercial audits on Centres identified as underperforming, with auditors able to

recommend variations to the funding agreement (including closure). Oversight by the Commonwealth

should be kept to a minimum and limited to approval of a qualified Board and monitoring of periodic

reporting.

There are benefits from, at an early stage, defining the plans for each of the research projects, the milestones

involved and plans for commercialisation, alongside an assessment of the risks at each stage. But the current

system has excessive and onerous reporting requirements 2 , including the need to report on every milestone, every

change in the Board or senior management and whenever there is a minor change in direction. In addition to

organising and hosting visits and other interactions with the Programme bureaucracy, such excessive reporting

7 2014-15 Science, Research and Innovation Budget Tables, Australian Government.

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equirements are a significant burden on personnel time and therefore an added cost. A detailed study of what

the minimum requirements should be needs to be undertaken, with the aim of greatly reducing the administrative

burden, making decision making faster and increasing flexibility. Ideally, an annual report with audited accounts

and a mid-term review should be sufficient. A mid-term review provides an avenue to ensure issues other than

financial performance and research milestone achievements that are covered in annual reports can be clearly

identified. These might include governance and participant problems, satisfaction levels of post-graduates and

their supervisors, and early indications of changes of plans where Departmental or other assistance could be

beneficial.

Current CRC governance requirements in terms of structures and Board composition have served the programme

well, but more power should be given to the CRC Boards and management to act on the outcomes of the annual

report and mid-term review and reduce the amount of control exercised by the government.

4) The Impact Tool should be simplified and streamlined. It is of limited value when it attempts to assign

costs, risks and returns to each project, and should be restricted to defining planned research

programmes, outputs and uptakes. The tool requires professional IT attention so that it is easy to use

and keep current.

The Impact Tool was introduced to CRCs with the intention of, over time, capturing and quantifying the economic

outcomes of individual CRCs. The Impact Tool assists in choosing the best project that will provide the greatest

economic benefit and identify the potential impact of a CRC proposal on the end user and/or the broader

community. To estimate the probability of returns on a project requires lengthy and frequent data input and is

generally a complex and poorly understood process. The principle of the Impact Tool is invaluable, from defining

the plans for each of the research projects, the milestones involved and the plans for commercialisation, alongside

risk assessments at each stage and risk mitigation strategies. An upgraded version based on simple cash flow

forecasts would benefit the Programme.

5) The CRC Programme should be broadened and supplemented by additional funding to allow for the

creation of new types of Centres that are essentially smaller and simpler CRCs. This would assist

technology companies (usually SMEs) to undertake a specific research program or collaborative project

operating under the CRC Programme but with a lower level of funding, a shorter time frame and less

complex application, establishment, administrative and reporting requirements.

Australia should extract the most value it can from government funding of research. No OECD country relies on a

single measure to bring research users and performers together and nor should Australia. There are situations

where a much more agile approach is needed, and the UK and US both have such arrangements.

ATSE has identified a gap in government support programmes between the competitive Australian Research

Council (ARC) Linkage or National Health and Medical Research Council (NHMRC) Development Grants and the

CRC Programme, and proposes the addition of a smaller, more focussed programme offered under the CRC

structure. This would provide more user input and security than the Linkage or Development Grants but avoid the

necessity of having to develop multiple inter-related research programmes and the complex application and

reporting requirement imposed on current CRCs. Overall, it would have minimal regulatory oversight and a tight

focus on a commercial outcome and end-user management and would be designed to complement existing

collaborative initiatives. The two programmes offered should operate under the same broad rules, which would

limit and simplify governance, reporting and training requirements.

Additional benefits from offering smaller CRCs with varying timeframes and funding levels would include

encouraging greater involvement from SMEs and offering the opportunity to increase the diversity of individual

CRCs that may be better aligned with participants’ long term goals and aspirations. Engaging in a CRC with the

current rigid and over-regulated structure may not fulfil the objectives for many researchers and industry

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participants. Flexibility in the rules and regulations is required. The O’Kane Review 8 recommended that changes to

the Programme be made to allow for flexibility in CRC structure, size and longevity.

6) All future CRCs must have a clear end user or users and a commercial outcome (broadly defined),

ranging from new products to the development of process improvements (e.g. preventing losses in

agriculture or health care).

In the past there have been a number of applications that have not have had a clearly defined end user. The

increasing number of such CRCs was exacerbated in part by the cessation of numerous other government funding

programmes, leaving the CRC Programme a target for a number of applications that did not exactly meet the

Programme’s guidelines. This situation should be rectified.

7) Intellectual property (IP) management arrangements for CRCs need to be flexible as requirements

differ widely. Large company partners are often more interested in accessing technology from an SME

rather than owning the IP, although some industry participants would prefer a model where they have

exclusive ownership. SMEs often do not have the financial resources to register and protect IP so would

prefer the costs be shared between all CRC participants. Importantly, all aspects of IP management

must be agreed when the CRC is set up so that issues do not arise if and when the CRC is to be wound

up.

There are generally fewer problems surrounding IP for CRCs that have sound but flexible participant agreements

based on the specific outcomes and needs of the CRC, rather than being subjected to an overarching IP agreement

for all CRCs. IP arrangements should be structured from the beginning to allow all participants to make best use of

the research outcomes at the earliest stage.

Issues relating to IP ownership within CRCs are generally based on factors such as market availability and

competition, funding, user risk aversion and regulatory provisions, and not specifically on the structure of the

Programme. There are expectations from some public-sector research organisations that the IP created within a

CRC will generate financial dividends to the institution. This is an inhibitor to reaching easy IP arrangements. The

reality is that net economic benefits often accrue through end-user application of research within a CRC rather

than direct commercialisation 9 .

8) Industry Growth Centres should be complimented by CRCs to provide a mechanism for businesses to

develop proprietary technologies by individually collaborating with CRCs. This would be an appropriate

approach in sectors where businesses will not share technologies with competitors (e.g. advanced

manufacturing), rather than those where advantage is gained by the resource owned (e.g. oil and gas,

mineral resources).

Industry Growth Centres (IGC) are part of the Government’s new industry policy and Industry Innovation and

Competitiveness Agenda, with roles that include industry-wide initiatives related to deregulation, skills

development, and accessing global supply chains and markets. They are also intended to improve collaboration

between businesses, scientists and researchers, enabling the adoption of new processes and development of new

products, and increase the commercialisation of new ideas. This implies that the collaborative research and

commercialisation activities undertaken by IGCs will provide benefits to a broad cross section of the given industry

sector, i.e. they will be developing and commercialising generic technologies that can be used by many businesses.

8 O’Kane, M, Collaborating to a purpose: Review of the Cooperative Research Centres Program, Department

of Innovation, Industry, Science and Research, 2008.

9 Allen Consulting Group, The Economic Impact of Cooperative Research Centres in Australia: Delivering benefits for Australia. A

report for the Cooperative Research Centres Association Inc by The Allen Consulting Group, 2005.

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These types of collaborative projects work well in certain sectors, for example the mining sector, where the core

asset of the participating businesses is their specific mineral deposit and the companies are prepared to share

processing technologies developed in joint projects. But these projects do not work well in all sectors, particularly

the manufacturing sector, where the key asset of businesses is their technology and processes, which they will not

share with competitors. Thus, CRCs are well placed to complement the collaborative research and

commercialisation activities undertaken by Industry Growth Centres, providing a mechanism for businesses to

develop proprietary technologies by individually collaborating with CRCs and accessing the CRCs’ technologyspecific

research provider networks. Some CRCs are also well placed to be a research resource for companies

operating in more than one growth sector, such as the CRC for Polymers, which has collaborated with individual

companies from all the identified growth sectors to develop polymer materials tailored to their specific needs.

CRCs offer a way of establishing future industries in a way that all IGCs are not likely to achieve.

9) CRCs should be required to have an exit or transition plan (developed after three years of operation)

rather than being expected to transition to another structure that must be continued. An exit plan

needs to specify how the return on the investment made during the life of the CRC will continue to be

maximised.

The CRC Committee currently demands almost from the outset that CRCs prepare a Transition Plan, based on the

expectation that each CRC become a privately funded research company servicing the needs of their participants

and undertaking contract research once government funding has finished. The emphasis on a Transition Plan to

direct CRCs to become stand-alone functional centres is based on the premise that it is a potential waste of

taxpayer funds if a CRC ceases to exist. This view is erroneous. CRC staff take to their next job the skills, experience

and networks that they have acquired during time at a CRC. Transition Plans are rarely executed and many CRCs

that have ended have not left much of a legacy. Transition Plans divert valuable resources from the core activities

of the CRC, which is to develop usable outcomes. If provisions are made to capitalise on public investment made in

a CRC, a well-executed exit plan should also be an option.

10) A measure of impact, engagement and collaboration that can complement the Excellence in Research

Australia (ERA) exercise and reward the highest achieving institutions with similar amounts of funding

is required, as the presence of the ERA alone is having a negative impact on universities’ engagement

with CRCs. ATSE has proposed an Impact and Engagement for Australia (IEA) metric (currently under

development), which could encourage greater university participation in CRCs and collaboration with

businesses. In addition, CRC programme funding, like ARC Linkage funding, should be treated as

Category 1 – Australian competitive grants research income – by the Government to encourage greater

university participation in CRCs.

Data shows that Australian researchers are less engaged in collaboration with industry than their OECD

counterparts and a greater focus and encouragement towards collaboration between CRCs and universities is

needed 10 . The ERA initiative encourages university researchers to publish quality research and rewards this

behaviour by allocating significant block grants based on the outcomes. The funding that is based on ERA results

has an unintended effect of discouraging university researcher engagement with business. This should be

addressed by introducing a counterbalancing measure to ensure that collaboration is appropriately recognised and

rewarded.

10 Bell, J, Frater, B, Butterfield, L, Cunningham, S, Dodgson, M, Fox, K, Spurling, T and Webster, E, The role of science, research

and technology in lifting Australian productivity. A report for the Australian Council of Learned Academies, 2014.

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ATSE is developing an initiative 11 that will lead to increased collaboration between Australia’s public sector

researchers and business, in science, technology, engineering and maths (STEM), as well as humanities and social

sciences (HASS) fields.

11) The Commission of Audit recommendation that CRC Programme funding be rolled into the ARC Linkage

programme should not be adopted, so that CRC research funding remains directed towards industrydriven

research and outcomes.

ARC Linkage Grants and Centres of Excellence programs are successful and highly regarded but are essentially

university and research driven. Although Linkage grants require a non-university partner, only a minority are with

technology companies. Linkage projects are typically managed by the researchers, and the external partner

frequently playing only a passive role. Typically these grants only extend for three years, which is often not

sufficient to achieve significant outcomes, and they do not require multi-partner collaboration. The CRC

Programme and the ARC Linkage programme are the only two programs that require cooperation 3 . Rolling the CRC

program funding into the ARC Linkage programme will lose the only national funding measure to encourage

private-public research collaboration and therefore weaken the national innovation system.

12) Greater flexibility should be provided regarding the duration of a CRC. Applicants should be required to

provide material to justify their requested funding period, up to a maximum of eight years. An existing

CRC should be eligible to reapply if they can demonstrate they have been successful and can define

new research programmes and additional participants, but would require a higher contribution from

non-government sources.

Renewal applications are almost always more persuasive and rate higher than new applications as they already

have their governance, management and partner agreements in place, and they have a lower risk profile for

investing public funds. The objectives of a CRC should normally be completed and the milestones reached during

the initial funding period. If so, then continued funding is no longer necessary for those sets of objectives.

However, CRCs that have been operating for a long time should be able to be renewed if there is a case for new

and additional research programmes and objectives, and opportunities are available for additional participants to

be involved. The involvement of new participants in an extension provides the opportunity for increased share of

funding.

11 http://www.atse.org.au/atse/content/activity/innovation-content/developing-impact-engagement-australia-metric.aspx

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