Methods to ensure capital resources are optimally allocated are of interest to Research and Development (R&D) organisations. In large organisations that are scientifically diverse, resource allocation is further complicated because there are differences in capital resource requirements between science areas. Allocation approaches used by institutions are often limited because they are largely retrospective and are based on current operating performance and/or what was allocated in previous years. In addition they do not examine trends in expenditure levels across different disciplines.
Funding, buildings, researchers and support staff, equipment, consumables and operating items are examples of R&D inputs and these inputs are suitable for benchmarking against other organisations. Research equipment expenditures are studied in this paper as they are more suited to benchmarking than some other inputs because similar items are purchased by research organisations worldwide and the equipment market is international (Georghiou, Halfpenny, and Flanagan 2001). In addition, laboratory equipment expenditure levels across different research areas are available for academic institutions in the USA from the National Science Board (2012, 2014). Examination of these data sets shows that expenditure levels differ between disciplines. For example, in the Biological Sciences equipment expenditure is 3% of total R&D expenditure, whereas in Physics it is 3-fold higher. Georghiou et al (2001) also highlights that different science areas will have different levels of infrastructure, including equipment, and labour for optimal outputs.
Georghiou and Halfpenny (1996) noted that despite equipment being a critical component to research progress, there is little information available on how to fund and manage it. We have also noted that there is very little information available on this topic. This study describes an approach to allow more optimal allocation of research equipment and is useful to large diverse organisations because it considers the equipment needs across different disciplines. It is based on benchmarking our organisation, CSIRO, against US academic institutions and is the foundation of the allocation process described and discussed.
R&D Expenditure Levels
R&D expenditure levels are considered to be indicative of innovative capacity because technological progress is dependent upon R&D effort. Expenditure levels are widely reported as a science and technology indicator and a common example is a country's gross domestic expenditures on R&D as a percentage of total gross domestic product. This is considered to be an indicator of a country's degree of R&D intensity and is often used as a summary statistic for international comparisons.
There are several types of input required for successful R&D outputs and outcomes and these include funding, buildings, researchers and support staff, equipment, consumables and operating items. The allocation of these resources at optimal levels, particularly capital resources, is obviously crucial to R&D organisations. The allocation process should ideally consider the needs of different organisational units and consider future requirements which may not necessarily reflect those of the past. The extent of change within the different units may also be dissimilar. Resource allocations should ideally anticipate these changes to some degree or at the very least reflect them as they occur.
Resource allocation in large diversified companies and R&D organisations is often based on current operating performance and/or allocations in previous years (Bower, 1986; Scholefield, 1994). Allocating resources for research equipment using these approaches is not optimal. Ideally, resources would be allocated based on the potential for creating value in the future rather than past or current needs. This, however, can be difficult to assess and requires a good understanding of both the relative potential for value creation across all application areas and the organisation's competitive position in each area, as well as anticipating future changes in requirements.
The study outlined in this paper describes an alternative approach to research equipment expenditure allocations. It describes a method that is applicable to diverse R&D organisations that span many disciplines and application areas. Levels of equipment expenditure in other organisations are also examined as they provide a competitive benchmark for comparison. Whilst the method does not consider the future potential for creating value and anticipating future needs, it does take into account differences in the types and equipment requirements across an organisation.
R&D Equipment Expenditures across Disciplines
The availability of current and sufficient equipment is a key component to a successful R&D organisation. Current and state-of-the-art equipment is necessary to maintain competitiveness and to attract high calibre researchers into the organisation. The relative importance of R&D equipment as an input is highlighted in the recommendations for external peer review of research organisations. The National Research Council (2012) recommends that equipment and facilities be considered as part of an assessment of ongoing research, together with evaluating the technical projects and the quality of research staff and management.
Equipment is more suited to benchmarking than some other R&D inputs because similar items are purchased by research organisations worldwide and the equipment market is international (Georghiou, Halfpenny, and Flanagan 2001). Collins, Couper and Record (1990) examined research expenditure in UK institutions across three sectors--industry, research council institutes and higher education institutions. Four disciplines were studied--biochemistry/pharmacology, chemistry, electrical engineering and electronics, and plant sciences. Whilst R&D equipment was not specifically examined, expenditure per researcher on non-pay items, including equipment, was measured. Overheads were excluded from this category. In universities, expenditure on non-pay items was the same for the three science disciplines and 2.6-fold higher for electrical engineering and electronics. Industry non-pay item expenditure levels on biochemistry/pharmacology were 3.2 times greater than electrical engineering and electronics levels. This study highlighted that R&D expenditure on non-pay items, including equipment, is dependent on the field of research and the sector in which the research is being conducted. Other studies in the open literature on equipment management, including expenditures by research field, are scarce.
Comprehensive R&D equipment expenditure data by research field is readily available from the National Science Foundation (NSF), which conducts an annual survey of US academic institutions on R&D funding sources and expenditures. Aggregated results from this survey are summarised in the Science and Engineering Indicators (2012, 2014) and provides a high level analysis of equipment expenditure trends in the US. The data behind this analysis is publically available making it possible to analyse equipment expenditure as a proportion of total R&D expenditure by research field. This enables an organisation or country to apply its research profile according to research field and compare itself to expenditure levels in US academic institutions. This comparison was undertaken for our organisation, CSIRO, to provide a greater appreciation of its current equipment situation and needs.
CSIRO and its Research Equipment Funding Allocations
CSIRO (Commonwealth Scientific and Industrial Research Organisation), is Australia's national science agency and is one of the world's largest and most diverse Research and Development (R&D) organisations. It employs approximately 5,300 people and has an annual budget of AUD 1.2 billion. CSIRO conducts research in a wide range of disciplines within the following science and engineering areas--Energy; Environment; Manufacturing, Materials and Mining; Information Sciences; Food, Health and Life Sciences Industries. Its research results are used in a wide range of market sectors, including food and agribusiness, energy sector (solar, oil and gas), mining equipment technology and services, advanced manufacturing and medical devices, and materials. In 2012-13, CSIRO was broadly organised into 5 Groups and its constituent 12 Divisions are allocated to one of these.
CSIRO's annual capital budgeting process, which includes allocations for research equipment, is run centrally in two stages. Firstly a decision on the total amount for research equipment for the whole organisation is made; followed by...