An Economic Analysis of FRDC Investment in R&D and Industry Strategic Planning (Cluster 26)

Background

Strategic Planning is a process whereby goals and objectives are articulated and the strategies defined as to how the goals and objective will be achieved. R&D plans usually include something about the expected environment ahead, the perceived current strengths and weaknesses of the organisation or industry and the direction, strategies and priorities for the organisation.

This provides a framework for the R&D organisation’s funding priorities as well as, in the case of the Research and Development Corporations, a signal to researchers as to where to focus proposals.

It is generally considered best practice for industry strategic planning that might include strategies other then R&D activities to be driven by the industry itself so that ownership is obtained so maximising relevance and subsequent adoption of policies and R&D outputs.

The projects in this cluster addressed planning at different levels and aggregations. Most investment has been associated with R&D planning but a few projects have been associated with industry organisation and policy.

Lessons Learnt for Future Investment

Lessons learnt from this analysis include:

• It would be helpful to future evaluations if the FRDC project management system were able to more easily extract funding information by financial year across a range of individual R&D areas. While some capacity to do this does exist, it could be made more friendly by requiring project managers to provide a wider range of category inputs at the time of contracting or final report assessment. Such an initiative may prove valuable not only in evaluation but also in planning and reporting.
• Also, if leverage factors for projects in different R&D areas were available at an R&D area level (for both FRDC project funding and for the national context), they may be important in assessing the FRDC current and prospective roles in different areas and where public benefits are manifest but where funding is difficult to attract.
• A third observation noted is that the projects in this cluster do not necessarily address any of the Key Performance Indicators in the current R&D plan.
• In the interests of addressing the marginality issue and assessing the value of strategic planning, it could be of interest for FRDC to assess strategic planning exercises by setting a baseline of existing gaps and priorities at the beginning of each exercise, as well as following up on how perceptions may have changed at the end of the exercise.

Conclusions

Investment was made in a total of 19 projects within the cluster with the FRDC contribution approximating 45% of the total costs of investment.

Eight benefits associated with this investment were identified. On the basis of equal weighting for each benefit, it could be concluded that public benefits to Australia could make up half of the total benefits, the remainder being industry benefits. If benefits were subjectively weighted, then public benefits would still contribute 50% of the total.

The principal benefit valued from this cluster of projects is the improved resource allocation of research resources derived from the planning investments. Of the 19 projects in the cluster, at least 13 projects would have captured such resource allocation benefits.

Overall, the investment criteria estimated for the total investment of $4.7 million (present value of costs) in the cluster were positive with a present value of benefits of $13.6 million, a net present value estimated at $8.8 million, and a benefit-cost ratio of nearly 3 to 1, all estimated using a discount rate of 5% (benefits estimated over 30 years from the final year of investment).

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