Los Alamos and Sandia: R&D Treasures

How the famous weapons labs, Los Alamos and Sandia, are aiding corporations and spinning off startups

For decades, Procter & Gamble (PG) has been creating petroleum-derived materials that are engineering marvels. Tide bottles that don't explode if dropped from a high shelf onto a Wal-Mart (WMT) floor. Shampoo emulsions that don't separate, whether they're shipped by plane at 30,000 feet or warehoused at temperatures of 120F. Billions of disposable diapers that absorb, breathe, and stretch exactly the same way—wrapped in packages that never fade.

Now P&G is joining the "go green" bandwagon. The problem, says Thomas J. Lange, the company's director of modeling and simulation: "Natural materials may not be as pure, as strong, or as stable over time" as petro-plastics. And developing replacements for them takes deep science that is beyond the ken of most companies.

Enter Los Alamos National Laboratory and Sandia National Laboratories. That's right, the fabled weapons-research centers in New Mexico that spawned America's nuclear arsenal. In a partnership that has lasted 14 years, P&G is tapping the labs' supercomputers and immense brain trusts to create new eco-friendly materials for consumer products. "These are the only places I can go in the world that have such a range of world-class physicists, chemists, biologists, production engineers, and computational scientists," says Lange. "These labs are national treasures."

Public-private collaborations such as P&G's are earning praise in many quarters. They're just what Congress had in mind two decades ago when it began pushing the nation's hundreds of national labs to transfer more of their knowhow to U.S. companies. Many of the facilities, which are dedicated to security, space, health, and energy research, jumped at the challenge. For one, they were eager to earn contract-research fees from corporations. And it was a chance to test their world-beating computer systems and software in some of the most demanding business settings.

After a burst of deals in the late 1990s, however, the number of new research collaborations and commercial spin-offs declined. Scientists say the joint ventures and startups suffered from too much red tape. They also faced a drop in federal subsidies, the bursting of the tech bubble, and the task of coaxing scientists to think in business terms. "Without market signals, the labs have shown a predictable capacity to be overtaken by bureaucracy," says Carl J. Schramm, president of the Ewing Marion Kauffman Foundation, which focuses on entrepreneurship. The casualties, Schramm says, are "speed, effectiveness, and inventiveness."

Now, as the idea of "innovation economics" gains currency in Washington, executives are once again turning to the national labs, especially those such as Sandia, Los Alamos, Lawrence Livermore, and others that belong to the Energy Dept. These centers are still committed to national security. But at a time when U.S. industries are under pressure to address America's energy crisis while facing ever-tougher competition abroad, the labs understand they have an important role to play.

Companies, for their part, know they can save on research costs when they partner with the labs. Together, Sandia and Los Alamos employ about 4,000 PhD scientists and thousands of engineers, and they have a long legacy of innovation in everything from biofuels and microelectronics to medical devices. P&G's collaboration with Los Alamos in computer simulation has saved the company upwards of $1 billion. Goodyear Tire & Rubber (GT) says Sandia helped radically speed up product launches, a key to its recent financial turnaround.

The labs aren't simply collaborating. They're spinning off new tech companies amid the mesas and deserts of New Mexico. An industrial park on 240 acres abutting Sandia's sprawling Albuquerque compound boasts 27 startups that employ 2,184 people and have attracted $234 million in investment capital.

All of these companies were founded by former Sandia scientists or rely on technology licensed from the lab. Los Alamos has helped spawn 54 spin-offs since 1997. A recent one, APJeT, is trying to commercialize an ionized gas known as atmospheric plasma, which was first developed by Los Alamos to kill anthrax spores. The company now uses the process to make fabrics water-resistant. Another of Los Alamos' affiliate, CNT Technologies of Seattle, is turning tiny carbon nanotubes into strong yarns that can be woven into sporting goods, aircraft parts, and artificial limbs.

Goodyear and Sandia have been working together since 1993, when the Akron company enlisted the lab to help design and test new car tires. At the time, the company was running through at least four physical prototypes for each model of tire, which then would have to be tested over thousands of miles—a process that took three years on average. In exchange for fees that can run several million dollars a year, Sandia gave Goodyear access to supercomputers and software code it had developed to simulate explosions, design weapons systems components, or model the stresses on a bridge. Over the next decade more than a dozen Sandia scientists worked on software to assist Goodyear engineers. The code helped them to accurately predict how each design tweak would affect traction, pressure, and rubber wear under a range of road conditions and speeds. "It all adds up to a fairly nasty problem you have to solve," says Benjamin Spencer, a Sandia software developer who works with Goodyear. But there's a side benefit, Spencer says: The collaboration is "making our code more robust."

The Goodyear project culminated in the Assurance TripleTred, which launched in 2005. It's a tire with three different treads for driving on icy, wet, and dry pavement. The program also enabled Goodyear designers to make use of such materials as volcanic pumice and glass microfibers, which aid the tire in gripping slick surfaces. The Assurance became one of Goodyear's best-selling tires, and the company has adopted virtual design for each of the several hundred new tires it develops every year for vehicles ranging from sports cars to garbage trucks to earth movers. The development cycle, which now often requires just a single prototype, has shrunk to as little as eight months, says Surendra Chawla, Goodyear's head of commercial tire research. The portion of the company's annual R&D budget consumed by testing and building molds for tire manufacturing has dropped from 40% to 15% since 2001, he says.

Despite the obvious benefits that have flowed to Goodyear and P&G, however, only a handful of corporations have forged this sort of long-term collaboration. Companies complain that it takes too long—up to a year—to negotiate a joint R&D project or license technology from a federal lab. Officials at the labs have their own complaints: They say U.S. companies mainly want off-the-shelf technology they can use immediately, as opposed to investing in research that won't pay off for three to five years.

Bureaucracy also is slowing the spin-off of startups. Unlike at universities, scientists at federal labs are barred from serving as paid consultants. And as long as they're on the government payroll, they can't hold equity stakes in companies that license their research. Moreover, few hard-core scientists want to trade secure posts at premier labs for risky jobs in industry. This is a stark contrast to Silicon Valley, where "people are spring-loaded to leave and begin their next startup," says Gary Ebersole, a serial entrepreneur from the San Francisco Bay area who moved to Santa Fe and licensed software from Los Alamos to start a social networking company.

The National Labs want to lower the hurdles to entrepreneurship. They're offering staff two-year "entrepreneurial leaves" to give them a taste of life outside. They also understand that Congress wants to see scientists and their spin-offs succeed. So Los Alamos set up a fund that doles out $350,000 a year in seed capital to startups. Both Sandia and Los Alamos are experimenting with ways to let departing scientists maintain access to their facilities while working at startups. They even offer courses to familiarize their staff with entrepreneurship. "We don't yet have a model that is tuned to the nation's needs," says Sandia Chief Technology Officer Richard H. Stulen. "But we're getting better."

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