EXCLUSIVE DETAILS ON CITY’S PRIZED NEW DIGITAL LAB

WASHINGTON — Chicago’s new national Digital Lab — to be officially announced Tuesday by President Barack Obama — will launch in a 50,000-square foot building on Goose Island to house software teams and a small demonstration factory where prototypes could be tested.

“It really puts us at the center of the universe when it comes to 21st Century manufacturing,” Gov. Pat Quinn said. “So all roads will lead to Illinois.”

“For the city, it is Olympic gold,” said Mayor Rahm Emanuel.

Quinn, Emanuel — both here on Monday on other business — plus Sen. Dick Durbin, D-Ill., and members of the Illinois congressional delegation, will be at the White House for the announcement of the Digital Manufacturing and Design Innovation Institute.

What is it? I’ve obtained a key portion of the Digital Lab proposal the Defense Department did not want to release, which provides a more detailed look at a project with enormous economic potential for the city, state and region. I also interviewed various players in the enterprise whose essential goal is making military and commercial products faster, cheaper and in the U.S. Here’s a briefing with exclusive details:

Starting up

According to the proposal, the Digital Lab, when it ramps up, will have 80 full-time employees and an annual operating budget of $22 million.

University of Illinois staffers at UI Labs — a U. of I. nonprofit spinoff — are the nucleus of the group, working out of Microsoft offices in the AON Building in Chicago until the Goose Island facility is open. The lease for the Goose Island structure has not been finalized.

Revenue streams

Obama will announce a $70-million, five-year grant on Tuesday. The partners in the Digital Lab pledged $250 million in cash and in-kind contributions. The State of Illinois put up $16 million in cash and made crucial “down payments” on the federal project with the launch last year of the Illinois Manufacturing Lab. The City of Chicago did not throw in upfront money, promising instead $10 million over five years, mainly, at this stage, consisting of in-kind contributions.

Corporate partners will pay fees over the next five years to participate. So will academic institutions, billed using a different formula. There are three “tiers” of partner benefits.

Other cash will come in from industry-sponsored projects, fees for the use of the demonstration factory, commissioned federal research projects, and technology licensing fees.

Governance

While the Defense Department will be at the top of the chain, the next level would be an executive board, with, according to the proposal, “a majority representing our industry partners.” The partners who contribute the most — called Tier One partners — would be guaranteed a board seat.

According to another document, the biggest Illinois cost-share corporate partners are Boeing, Caterpillar, Deere and ITW.

Other contribution partners — the academic institutions and the State of Illinois — will also get representation.

There will also be a Strategic Advisory Committee and a Technical Advisory Committee.

“This Board and Committees will provide active governance and direction to our management team,” the proposal said.

GE’s digital manufacturing commons

General Electric is donating the software platform at the heart of the project and made the key pledge, according to the proposal, that the software will be open source. This means that all the data will be in one place. Think of it as a filing system everyone can use.

“As a not-for-profit applied research institute, the Digital Lab’s mission will be to make the (GE) DMC accessible to America’s manufacturing companies,” the proposal said.

Military

The military wants Digital Lab technology to make aircraft, drones, satellites, tanks, jeeps, missiles, rockets, weapons systems, etc., cheaper. According to the proposal, the Defense Department is anticipating saving billions of dollars with a “more competitive and agile supply chain.”

Commercial sectors

Based on the Top Tier partners, the Digital Lab commercial priority projects will likely focus on the aviation, heavy equipment construction and automotive industries.

Spawning U.S. jobs

If it takes 25 low-skill, low-wage overseas worker to make a product for a U.S. company, the goal of the Digital Labs is to spur domestic jobs by making that product in the U.S. Yes, with fewer workers but ones with skills leveraging smarter, cheaper and faster digital tech.