1. DEFENSE SECTOR DIVERSIFICATION & IMPLEMENTATION STRATEGY ROBOTICS CLUSTER MEETING AUGUST 27, 2015

2. BACKGROUND  The Department of Defense Office of Economic Adjustment (OEA) awarded $1.4 to Mass Development Finance Agency (MDFA) in 2014 under their Defense Industry Adjustment program.  MDFA contracted with consulting firm TIP Strategies, supported by UMass Donahue Institute and Chmura Economics & Analytics. The project is also supported by Massachusetts Manufacturing Extension Partnership (MassMEP).  Deliverables for this grant (outlined in the following slides) are scheduled for completion by March 31, 2016.  Additional funding from OEA may be available to assist with implementation. 2

3. PROJECT MISSION & GOALS  Develop a response to mitigate the impact of federal defense budget cuts and sequestration. Support initiatives to lessen the impact on supply- chain/downstream defense companies. Provide business planning and market exploration services to defense contractors and subcontractors who may seek modernization and diversification assistance. Stimulate cooperation between statewide and local adjustment and diversification efforts. 3

4. PROJECT STEERING COMMITTEE  Defense Industry Strategic Steering Committee (DISSC) membership: Raytheon Textron General Dynamics BAE Systems SBANE Triton Systems SI2 Technologies MIT Industrial Performance Center 4

5. SPECIFIC TASKS 5  Conduct assessment of the existing defense-related economic base and identify industries at risk  Map regional assets (Massachusetts & New England States)  Evaluate opportunities for tech transfer, new applications for existing products, methods to accelerate commercialization, and ways to expand the customer base of defense industry  Integrate and coordinate response efforts with other defense-impacted areas where practicable  Formulate recommendations and implementation strategy

6. DELIVERABLES  Asset Map: Inventory of tools, services, organizations, expertise, and infrastructure that support defense-related companies in the New England region.  Strategic Blueprint: Action plan for enhancing the region’s competitive position. Direct assistance Talent Policy

7. STAKEHOLDER INPUT  Textron Systems  BAE Systems  Manufacturing Extension Partnership (MassMEP)  Defense Technology Initiative (DTI)  MIT; Regional Manufacturing Ecosystem  Springfield SME Manufacturers  MassVentures  Small Business Association of New England (SBANE)  Mass Tech Collaborative  Hanscom AFB  Natick Labs  Regional Employment Board of Hampden County  Procurement Technical Assistance Program (PTAC)  New England Innovation Alliance (NEIA) 7

8. SUMMARY FINDINGS: STRENGTHS 8  Concentration and diversity of defense contractors in the region  Massachusetts’ innovation ecosystem (installations, firms, R&D, higher education)  Highly-skilled workforce (from research to manufacturing)  Advanced manufacturing base  Massachusetts is #2 in the nation for SBIR/STTR awards (behind California) $223 million in 2014 (all agencies for Phases 1 & 2) $85 million in 2014 (DOD specific for Phases 1 & 2)

9. SUMMARY FINDINGS: CHALLENGES 9  Lack of awareness/appreciation of the defense sector’s contribution to the region’s economy  Attracting and retaining qualified personnel across all segments (e.g.: research scientists, mid-level engineers, machinists & technicians)  Transitioning from defense to commercial is difficult due to differing procurement practices, lead times, distribution channels, marketing, etc.  The state’s SBIR sector is under threat from federal spending reductions and grant delays.  DoD’s “lumpy” acquisition process is more harmful than sequestration.

10. SUPPORTING PROGRAMS 10  MassVentures S BIR TAR geted T echnologies (START) program. Investing $3 million per year to advance commercialization of technologies developed under the SBIR program.  Greentown Labs. Assist start-ups to ramp up manufacturing in Massachusetts. Provides facility, equipment, software, services, and network. Participating energy-related manufacturing companies enhance their technology offerings by working with the innovators from concept to steady state manufacturing.

11. SUPPORTING PROGRAMS (CONT.) 11  Manufacturing Matching Grant Program. Provides direct assistance (examples include: financial restructuring of bank debt, marketing or branding programs, lean manufacturing projects, government procurement, SBIR grants). Up to $7,500 per company in matching grant. Currently funded at $250,000 total.  MassDev Manufacturing Innovation Grants Program. Helps advance the growth of small-to-mid-sized Massachusetts manufacturers. Four Centers: Algonquin Industries, Inc.; Boston Engineering Corporation; Connecticut Center for Advanced Technology, Inc. (CCAT); and Worcester Polytechnic Institute (WPI) Program open to Massachusetts manufacturers with 100 or fewer employees in need of expertise and equipment to support product development, prototyping, scaling up, cost reduction, and other assistance.

12. BLUEPRINT FRAMEWORK  Vision: Capitalize on defense industry strengths to become more resilient against potential reduction in defense spending/contracting by focusing on other markets and products.  Target audience: Defense contractors, supporting organizations, and policymakers.  High level strategies: Direct assistance Talent Policy 12

13. PRELIMINARY CONSIDERATIONS  Tech transfer acceleration. Enhance tech transfer out of Natick & Hanscom. (Example: DOD Office Assistant Secretary of Defense for Research & Engineering is funding ASU Furnace Technology Transfer Accelerator.)  Enhance direct assistance tools. Provide support for financing, business planning, marketing, networking, and commercialization.  Software assistance. Support regional technical assistance to clusters of SME manufacturers regarding the adoption of technology to improve productivity with a focus on Enterprise Resource Planning, Computer Aided Design, and procurements systems.  Regional public awareness campaign. Launch initiative to promote the importance of the defense industries to the New England economy.  Match future D.O.D. investment priorities. Capture higher market share in an era of uncertain federal spending by matching future DOD investment priorities with regional capabilities (e.g. robotics & system autonomy, miniaturization, big data, advanced manufacturing). 13

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