ARCHIVED - Evaluation of Central and Western Cluster Initiatives - NRC Canadian Photonics Fabrication Centre (NRC-CPFC)

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Executive Summary

In 2001, NRC was allocated resources to target a number of emerging research and technology fields that were identified by local partners in consultations with NRC. Under the central and western technology cluster initiatives (CWI) six initiatives were funded, each with an identified technology focus. These included:

  • aluminum transformation in the Saguenay;
  • photonics fabrication in Ottawa;
  • biomedical in Winnipeg;
  • nutraceuticals and functional foods in Saskatoon;
  • nanotechnology in Edmonton; and
  • fuel cells in Vancouver.

In 2005, an evaluation of these Round II technology cluster initiatives was launched and this report presents the key findings, conclusions and recommendations related to the evaluation of the initiative in support of photonics in the Ottawa area, namely the NRC Canadian Photonics Fabrication Centre (NRC-CPFC).

The primary reasons for conducting an evaluation of the initiative at this time are as follows:

  • to collect information on the progress of the initiative to date, including lessons learned and novel practices, as a means of supporting NRC's strategic direction in contributing to the socio-economic sustainability of Canada's communities, through technology clusters;
  • to provide an opportunity to communicate with initiative stakeholders in the communities; and
  • to provide information on NRC's performance to date, to be used to facilitate decision-making around funding renewal of the cluster initiatives, which expires at the end of a five year funding cycle (2006-2007).

NRC Senior Executive Committee approved the Terms of Reference for this evaluation in September 2005.

The evaluation covered the period 2002-2003 to 2005-2006 inclusive. It addressed issues related to relevance; early outcomes and impacts; design, delivery and cost-effectiveness; and lessons learned and novel practices. The federal government's Expenditure Review Committee questions were also taken into account in the development of the evaluation issues.

The key methodologies used to address the evaluation issues included a review of documents; a review of administrative and performance data; key informant interviews; and a cluster measurement study.

Photonics Initiative Overview

NRC launched the Canadian Photonics Fabrication Centre (NRC-CPFC) as part of a second round of federal funding to NRC dedicated to technology clustering. Footnote 1 Lead delivery of initiative, which is focused primarily on the construction and operationalization of NRC-CPFC, is the responsibility of NRC's Institute for Microstructural Sciences (NRC-IMS). NRC-IMS is located in Ottawa, Ontario.

The intent of the initiative was to establish a national technology centre offering commercial grade foundry, design, test, and fabrication services in both III-V semiconductor and silicon based materials. The facility would be used for prototyping and pilot production runs of customized optoelectronic and photonic devices. Through this work, the NRC-CPFC could provide next generation products for its customers through core competencies of integrated optics and commercial fabrication processes. Services would include single step foundry deliverables and integrated solutions, feasibility studies and small volume production.

In launching the NRC-CPFC, an additional training component was established via funding provided by the Ontario government to Carleton University. The training aspect would be funded by separate resources, and be driven out of Carleton, with NRC's involvement.

In its 2001 budget, the federal government allocated a total of $30M in federal government resources was allocated to the initiative. In addition, the Ontario Government, via Carleton University, supported the initiative with a one-time contribution of $10M to support construction and fit-up.

Based on the evaluation study conducted from October 2005 to June 2006, the following key evaluation findings and recommendations were identified.

General Conclusion

In 2000, NRC's overarching rationale for creating the NRC-CPFC was to support the then vibrant Information Communications and Technology (ICT) sector by providing access to prototyping and small-volume production runs of photonic devices and photonic integrated circuits. However, at the time of its launch, the sectors that it was being established to support were experiencing significant erosion with the burst of the dot.com bubble and the pull-out by previous large investors in related areas. Ironically, this downturn turned into opportunity for the NRC-CPFC.

As the large Ottawa-based foundries sought to divest of their equipment and HQP, NRC-CPFC saw the opportunity to acquire greater capacity than originally anticipated, through discounted equipment purchases, as well as the hiring of the talented skilled workers needed to maximize the use of the expanded infrastructure.

The initiative has maintained its original focus, although numerous iterations of NRC-CPFC technical plans have been necessary in order to respond to the changing conditions mentioned above. The construction and fit-up were generally executed according to plan, although the facility opened behind schedule. Resource planning has not been adequate, due to changing NRC allocation parameters, and the NRC-CPFC has had to deal with costs it had not originally planned for, including property tax and hydroelectric costs.

The photonic initiative has benefited particularly by $10M in contributions from the Ontario government via Carleton University for equipment purchases, as well as from relationships with CMC Microsystems and Carleton University, both of which support research and training activities in photonics. The impacts of the relationship with CMC have been more significant than perhaps originally envisaged while the training component to be delivered by Carleton has been late in getting off the ground, resulting in limited impact at the time of the evaluation. Sound linkages to NRC-IRAP have also been established.

Having been at least partially operational since the fall of 2004 and in full operation since the spring of 2005, the facility is building its client base and establishing a revenue stream. Clients are primarily Canadian, with some clients being Ottawa-based firms on the roster, while relationships are also being built with US and international firms.

NRC-CPFC is actively involved in cluster building networks, and is viewed as an important component of the Ottawa-based cluster.

The main findings of the report, and any associated recommendations, are outlined below.

Summary of Findings and Recommendations – Relevance

The evaluation found that the establishment of NRC-CPFC in support of a photonics technology cluster initiative was consistent with federal government and NRC priorities established in 2002 through the Innovation Strategy. The initiative continues to be aligned with federal priorities, and in particular, with NRC's new Strategy. The evaluation also found that there is a legitimate role for NRC in fostering the development of clusters, and in supporting the development of firms focused on secondary transformation in the Saguenay region.

The creation of NRC-CPFC is also aligned to the interests of the Ontario Government, a key collaborator in the initiative via Carleton University. The Government of Ontario chose to invest in the Carleton/NRC-CPFC project as a means of showing its ongoing support to what it considers to be an important enabling technology in support of Ontario's economy. The investment, it felt, would help to retain clustering activities in the province.

NRC-CPFC is being looked at as a model national facility by others, such as by the Photonics Microfabrication Network in Australia. The Network has begun lobbying for microfabrication capabilities in Australia, similar to those found in other countries such as Canada.

Summary of Findings and Recommendations – Early Outcomes and Impacts

Access to Facilities: The Centre was able to acquire significantly more equipment than initially planned on considered possible, due to the downturn in the Information Communications and Technology (ICT) sector around the time of the facility's fit-up. Ottawa-based firms such as Nortel and Bookham were divesting themselves of their fabrication infrastructure. NRC found itself in the opportune position of being able to purchase equipment at a fraction of the cost to obtain it new.

An agreement with CMC Microsystems allows access by Canadian academics and students to NRC-CPFC. CMC's arrangement with NRC-CPFC provides for two types of options for accessing photonics and opteoelectronics prototyping services including peer-review grant applications; and a 'Pay-for-fab' option.

NRC-CPFC partnership with Carleton was also expected to lead to some interaction with academia, in particular through projects that might require the Centre's facilities. Recent access has now been granted via the activities of Carleton's newly established Centre for Photonics Fabrication Research (CPFR).

NRC-CPFC has workstations available for approximately 20 students in the facility. Students who come on site participate in NRC-CPFC related activities, such as design and modification, at the front-end and back-end of the prototyping process.

Attraction and Development of Highly Qualified Personnel: NRC-CPFC's presence has retained HQP in the region, following the Information Communications and Technology (ICT) downturn. The training component of the initiative, being led by Carleton University, has only recently begun to fund research activities.

Access to NRC Technology and Industry Support Resources: NRC-IRAP activities are contributing to the extension of NRC-CPFC research and development capabilities to firms. NRC-IRAP has established linkages with photonics activities, both in Ontario and Quebec. NRC-IRAP has had an Industrial Technology Advisory (ITA) situated at the National Optics Institute (INO) in St. Foy, Quebec. In Ontario, the Centre and NRC-IRAP have sought to show their face jointly at some key events, such as Photonics North, in order to make it clear to industry that there is interaction between the two. NRC-IRAP has also given the Centre visibility among NRC-IRAP management and ITAs by inviting it to present at NRC-IRAP regional meetings.

Although linkages are established, and relationships sound, results from the evaluation suggest that the NRC-CPFC and NRC-IRAP linkages could be enhanced even further. It was suggested that more frequent presentations to NRC-IRAP ITAs, or to other groups of ITAs from other regions, could help to keep the facility's service offerings top-of-mind.

Recommendation 1: Seek out additional opportunities to inform, educate and build relationships with NRC-IRAP ITAs. Linkages are established, and relationships are sound. However, previous successes suggest further opportunities for linkage among a broader number of NRC-IRAP ITAs.

Management Response and Proposed Actions: Accepted.NRC-CPFC views NRC-IRAP as a critical partner in diffusing its business offering to the Canadian industrial sector – an extension to its 'sales and marketing force'. NRC-IMS management will meet with the Director General of NRC-IRAP to identify the best way of informing Industrial Technology Advisors of NRC-CPFC commercial programs and services.

Level of Research Activity: NRC-CPFC was not established as a research facility. Instead, the NRC-CPFC collaboration with Carleton University is meant to be the primary research and training aspect of the initiative. Analysis of the results of the agreement show that progress on the training component has been slow because of difficulties in getting the province to sign a contract allowing Carleton University to move forward.

Notwithstanding the above, NRC-CPFC's Memorandum of Understanding with CMC Microsystems represents a valid mechanism for extending the facility's capabilities out to the research community.

Cluster Networking: There is a plethora of groups working to support and maintain Canada's position as a world-leader in photonics research and exploitation. NRC-CPFC is linked to many of these. The Centre's offerings are available to support cluster development in the National Capital region and Ontario more generally, but as a service-provider, its potential support to cluster development can be seen much more broadly, as being pan-Canadian. It is also growing links to photonics R&D centres, and associated clusters situated throughout the US.

Industry Development: NRC-CPFC is contributing to industry development through the provision of foundry services. Beginning in July of 2004 and leading up to March of 2006, the NRC-CPFC has signed agreements with 22 separate private and public sector clients, Footnote 2 and established 61 separate Fee-for-service (FFS) and purchase order agreements with them. The total value of these agreements is approximately $1.734M.

The majority (34 agreements or 56%) have been with Canadian clients. A dozen have been with US clients and the remaining 15 agreements with four international customers in countries such as Australia, Chinaand the United Kingdom.

The evaluation found that one of the ways that the creation of the NRC-CPFC helps to support industry development is by 'de-risking' investment in companies. It does so by providing a service to firms that without which the firm would have to provide for itself. In other words, a start-up would have to find the means to invest in its own foundry if the NRC-CPFC were not in existence. Such an investment, suggested interviewees, might cost from $10M to $30M.

An important characteristic of NRC-CPFC that facilitates industry development is the ease with which partners feel they can interact with the facility. Being "user friendly", stated partners and firms, is an important part of wanting to maintain a relationship with NRC-CPFC. Clients noted that the Centre does an extremely good job of maintaining client confidentiality. Clients have high expectations with respect to the work that they engage the facility to undertake.

In terms of incubation activities in support of firm development, in the case of NRC-CPFC and its facility, it is not responsible for offering services in support of incubation. These activities are delivered by the parent institute, NRC-IMS, which houses an IPF on its premises. However, the services of NRC-CPFC are available to incubating firms, as they are to others.

Other Early Outcomes or Impacts: NRC-CPFC was recognized recently within the community as playing an important role in building partnerships. In April of 2006, NRC-CPFC was awarded the Technology Partnership of the Year Award by the Ottawa Centre for Research Innovation (OCRI), in recognition of the role that it has played in spearheading the creation of the Centre.

Incremental Benefits: The evaluation team was able to identify concrete examples of NRC-CPFC supporting firms locally. When asked what these firms would do in the absence of a fabrication facility such as NRC-CPFC, they suggested that they would likely not be at their current stage of development. They felt that investors might not have come forward to invest without the facility being available to support their development objectives.

Summary of Findings and Recommendations – Design, Delivery and Cost-Effectiveness

Initiative Implementation: The implementation of NRC-CPFC initiative unfolded slightly behind project timelines. A review of planning documents and project reports shows that construction of the facility began in November of 2002 with completion of the building scheduled for May of 2004. The installation of equipment and commissioning of tools was completed in 2004 but a few months later than anticipated. Actual operations commenced in September 2004, a few months behind the original projections. Once operational, the NRC-CPFC was able to deliver its first set of wafers to clients in a timely manner.

NRC-CPFC sought to minimize staffing risk by hiring staff into term positions until a client base could be established. As time progressed, the risk scenario changed, requiring the creation of permanent, full-time positions in order to retain critical HQP.

Another factor that had some, although minor, impact on planning, was the decision to add a third floor to the planned NRC-CPFC building in order to house staff from the Institute for Information Technology (IIT), who are also housed in M-50 (the building housing NRC-IMS and to which NRC-CPFC would adjoin). The incremental cost to do this, rather than build an entirely new wing or building for NRC-IIT was minimal, at around $1.5M. Costs to build added space for NRC-IIT had originally been estimated to be around $7M to $8M. NRC therefore realized significant cost-savings by adding a third floor to the planned NRC-CPFC building.

Effectiveness of Management Practices:

Governance: The evaluation found that NRC-CPFC did establish a temporary oversight mechanism early on in the initiative's implementation. An Interim Strategic Planning Committee was created as an assurance that there was dialogue and exchange among partners and stakeholders during the early phases of the initiative.

Interviewees did suggest that NRC-CPFC could benefit from increased participation in its governance by members of the private sector. In some manner, the evaluation revealed that the local private sector community feels somewhat distant from the NRC-CPFC, and does not feel familiar with its role or activities.

Recommendation 2: Continue to extend and link to the private sector as a means of making the services of NRC-CPFC known. Review the participation of the private sector in the governance of NRC-CPFC and engage in communications and direct liaison activities with firm representatives in Canadian photonics "clusters" to continue to make the Centre known.

Management Response and Proposed Actions: This is core to what NRC-CPFC must do – insuring diffusion of NRC-CPFC service offering to the industrial sector. NRC-CPFC will do so by making sure all of its business office staff members are fully integrated in the business practices of NRC-CPFC. NRC-CPFC will also continue to attend trade shows such as Photonics North and West as well as sit on committees of 'photonics industry associations' to inform potential industrial clients.

Facility Administration The administrative structure for NRC-CPFC appears to be working well and meeting the needs of the facility. The administration of NRC-CPFC is handled by six staff who are fully dedicated to the Centre (i.e., 100% of their time is paid for by the NRC-CPFC initiative, as opposed to NRC-IMS).

Performance Management: The evaluation showed that the Centre has been able to summarize its achievements. Up to now, this has tended to focus on achievements related to early implementation (e.g., status of equipment purchases, lists of presentations on the Centre). With the operationalization of the Centre, information on client activity (e.g., number of clients, value of agreements, revenues generated), is now being tracked, although perhaps not to the level of detail required as the evaluation found it difficult to ascertain annual client revenues, an important metric for the NRC-CPFC.

With respect to the broader list of metrics proposed, including metrics that relate to financial targets and that speak more generally to the impact of NRC-CPFC on photonics clusters, these are less developed.

Because of the collaborative nature of the photonics initiative (i.e., the training component is directed by Carleton University), the evaluation found it difficult to report on the performance of that component. Without a joint-accountability framework, it was difficult to request information and comment on the results of the training program component given that it is not led directly by NRC-CPFC.

Recommendation 3: Establish a joint Results Based Measurement and Accountability Framework (RMAF) that takes into account the contributions, of funding, or program delivery of collaborators. The evaluation revealed that Carleton University is charged with providing the formal training component of NRC-CPFC. However, without a joint-accountability framework, it is difficult, or perhaps less appropriate, to comment on the results of the training program component.

Management Response and Proposed Actions: This recommendation is not accepted. Carleton is responsible for the training program and has received funds from the province to do so. NRC has no jurisdiction or authority in this area, although the NRC-CPFC is represented on the formal training program of Carleton University.

Communications and Marketing: The evaluation of NRC-CPFC identified that communications between collaborators has been good throughout the implementation phase. However, the evaluation did reveal that communication parameters were not established between key collaborators (NRC and the Ontario Government and/or Carleton University) early on. As a result, some public announcements about the initiative were made, not always with the other collaborator knowing that it would occur. More recent announcements appear to have been done jointly by partners.

Another area that has remained unresolved has been how to refer to the Centre in public, non-NRC documents. NRC's Communications Branch directs that all NRC Institutes or programs be referred to using "NRC-" as a prefix to CPFC (as per the approach used throughout this report). However, the Ontario government refers to the Centre as "the CPFC at NRC".

Recommendation 4: Examine communication policies given the NRC-government of Ontario/Carleton University partnership. The intrinsic nature of partnerships is such that each contributor normally wishes to receive credit for their investment of resources. NRC needs to consider what communication guidelines will best support both the needs of NRC, as well as those of partners.

Management Response and Proposed Actions: Accepted. This will depend of course on the continued support of the province of Ontario and Carleton University moving forward. So far, no major communication problems have been encountered between the three stakeholders. Carleton University and the Province of Ontario are quite amiable to calling the Centre 'NRC's CPFC.

Recommendation 5: Continue to develop marketing and communication strategies, especially those directed directly at firms, including firms in Ottawa.

Management Response and Proposed Actions: Accepted. As stated previously, marketing and communication is key for a business unit such as the CPFC and a tool which needs to be exploited. CPFC will continue to obtain marketing and competitive intelligence using its internal BO forces and will try to integrate better with CISTI resources. As such, in its proposed business plan (2007-12), the CPFC anticipates partnering with CISTI to obtain competitive technical intelligence which will be distilled and analyzed to help identify CPFC's threats and opportunities – the results will be integrated in its business decision making process. On the communication front, the CPFC will continue to keep its website updated and disseminate its service offering to its stakeholders. A senior communication agent will be hired by the CPFC to perform these duties.

Contracting and Intellectual Property: On the matter of contracting and hence intellectual property (IP), which are significant aspects of the facility's dealings with clients, there was a lack of consistency among clients as to their experiences. Generally, contracting with NRC had gone well and was a timely process. On the other hand, areas of potential contention exist, especially around IP, and the evaluation did reveal that this could prove to make the contract negotiation process lengthy.

Role of NRC Institutes, Programs and Branches: NRC-CPFC is an integral component of NRC-IMS, both in terms of how it was built, how it is managed, and how it leverages expertise. It is one of 12 groups operating within the Institute. Given the relationship, there exist opportunities for leveraging the expertise of others which have been capitalized upon. For instance, the Institute's experience in developing hardware for information technology are available to NRC-CPFC engineers. It also capitalizes on equipment within the Institute, such as electron-beam apparatus (used for lithography), a secondary mass spectrometer, and various electron microscopes.

Joint Initiatives: NRC-CPFC has benefited by contributions from the Ontario Government, via CarletonUniversity. Viewed as a "pioneer" investment, it is considered to be a first-time example of the province supporting facilities that were to be built on federal grounds, rather than being placed on site, for instance, at a university (e.g., CarletonUniversity).

Program Complimentarity: By virtue of interview results with clients and researchers, as well as documents reviewed, it has been widely expressed that NRC-CPFC is a unique offering. In part, this is because its service delivery model combines consulting, modeling, engineering, testing and fabrication services in an integrated fashion. Further, its strong linkages to NRC-IMS allow it to leverage expertise and equipment that it otherwise could not afford.

Recommendation 6:Conduct a benchmarking study in approximately five years to gauge the position and strength of NRC-CPFC offering in relation to other centres. The findings from the evaluation attest to the fact that NRC-CPFC offers a unique set of services. To remain relevant, a benchmarking study that compares the Centre to other international organizations could prove useful.

Management Response and Proposed Actions: Accepted with changes.Although CPFC agrees that a benchmarking study would be needed in comparing the CPFC's strengths and weaknesses in relation to other Centres, it needs to be done before the five year mark. In fact, this exercise should be done on an on-going fashion as part of the marketing plan and concurrently with updating the CPFC technology roadmap - both set of data are needed in order to complete a comprehensive analysis of the competitive offering of the Centre.

Level of Resources: Resources have not been adequate to support early operations. Operational costs (property taxes and hydro) were first assessed to NRC-CPFC in 2005-2006. These had either not been attributed to NRC-CPFC by ASPM earlier on, or considered by the NRC-CPFC, in the early planning stages of the initiative. Further, funds had to be requested to cover the salaries of two staff needed for back-up roles.

Recommendation 7: Resolve attribution of property tax and hydro costs. The evaluation identified that there was a lack of clarity between NRC-CPFC and the Administrative Services and Property Management (ASPM) Branch about where responsibilities for payment of taxes and hydro lie.

Management Response and Proposed Actions: Accepted. NRC-IMS management will meet with the Director General of ASPM to estimate the true utilities cost and taxes of NRC-CPFC complex. Note, every day of service interruption affecting the NRC-CPFC results in a minimum of two days of shut down which cost NRC-CPFC $50k in lost opportunity. ASPM needs to be sensitive to such pressures.

Income Generation: The evaluation found that document content around income-generation and what costs would be offset by when was somewhat unclear. As a not-for-profit and fee-for-service entity, NRC-CPFC was launched under the premise that charges to clients would be made for services as a means of offsetting operational costs. No target was set in Treasury Board documents as to how much revenue would be generated, or how much of the operating costs would be offset. However, a number of documents suggest that NRC-CPFC was overly optimistic about the level of revenues it could generate.

Whether the NRC-CPFC will achieve full cost-recovery was not a question that the evaluation proposed to answer. However, the process revealed that there is an opportunity to improve clarity and messaging around what elements (if not all) would be conducted in a cost-recovery mode, what percentage would be recoverable, and timelines for achievement of cost-recovery targets. The costs to operate NRC-CPFC are not simply those of the 'fab'. Further, contingencies should be considered in the event that factors negatively influence projections.

Recommendation 8: Examine market potential and set cost-recovery expectations for NRC-CPFC. The evaluation found that messaging around cost-recovery was unclear. There is an opportunity to clarity the messaging around what aspects of NRC-CPFC's activities should be paid for as a result of the Centre's operating in a limited competitive, cost-recovery mode. This should include a definition of which activities (if not all) and what percentage of costs are recoverable, and timelines for achievement of cost-recovery targets. Further, contingencies should be considered in the event that factors negatively influence projections.

Management Response and Proposed Actions: Accepted. NRC-CPFC will continue to update its marketing plan on a regular basis and seek guidance from other international organizations (such as OIDA) in doing so. As established in the original Treasury Board submission, NRC-CPFC's cost recovery policy is meant to cover some but by no means all of the operational costs of NRC-CPFC. The impact of NRC-CPFC will be measured by its effectiveness in stimulating the Canadian economy (job growth, small and medium enterprise (SME) traction, venture capital investment, commercial product on the market, etc.). NRC-CPFC will continue to run its bi-weekly business/marketing meeting to look at NRC-CPFC forecasted revenues.

Lessons Learned and Novel Practices

The final area examined by the evaluation was lessons learned and novel practices. The findings highlight key lessons learned that could be applied or adopted by the central and western technology cluster initiatives as well as other initiatives launched by NRC. Those identified include the following:

  • The burst of the co-called 'dot com bubble' required flexibility and maneuverability on the part of NRC-CPFC in order to capitalize upon opportunities to acquire equipment. The ability to change plans was paramount.
  • By identifying the needs and interests of partners, appropriate communicationsstrategies and branding can be developed.

Footnotes

Footnote 1

NRC's first round of technology cluster funding was for the Atlantic Initiatives, a series of 5 initiatives launched in Atlantic Canada from 2000-01 to 2004-05.

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Footnote 2

Of NRC-CPFC's 22 clients, 20 are private sector and two are public sector.

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