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Part I Improving the Allocation Process for Fecleral Science anti Technology

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Determining Principles for Allocating Federal Funds The federal government has played a pivotal role in developing the world's most successful system of research and development. Over the past 5 decades the U.S. scientific and technical enterprise has expanded dramatically, and the federal investments in it have produced enormous benefits for the nation's economy, na- tional defense, health, and social well-being. Science and technology will be at least as important for our nation's future as they have been for our past, but further expansion of federal funding for research and development is unrealistic in the next several years. Both the current administration's 10-year budget plan and the 7-year plans passed by the House and Senate propose significant reductions in federal dis- cretionary spending. Maintaining the vigor of research and development is impor- tant indeed essential- to the nation's future and will require the ability to increase funding for new opportunities selectively, even while reducing the overall budget. The Committee on Criteria for Federal Support of Research and Development believes that it will be possible to sustain this country's scientific and technological preeminence and the strong federal role within current fiscal constraints if the recommendations in this report are adopted. Ensuring the nation's future health, however, may well require augmented investments later after the current period of reorganization and consolidation has helped control costs and sharpen focus. As we consider how to restructure federally funded research and development to meet today's budget realities, it is important to recognize the considerable strengths of the current system (see Supplement ~ for historical background). Those strengths should not be lost. "Top-down" mission-oriented management and "bottom-up" investigator-initiated research projects have combined to create a powerful research and development engine that is the envy of the world. Computer science, surface science, molecular biology, and other fields have emerged in re- sponse to new opportunities, and widely disparate fields have been combined to create entirely new applications. Competitively funded research and development projects subject to national merit review and conducted in every state of our nation have proven particularly effective. Federally funded university science and engi- neering, in addition to yielding new discoveries, has produced new generations of scientists and engineers who serve in academia, industry, and government and also fill critical management positions there. Investments in science have dramatically expanded our knowledge of ourselves and our universe, and new technologies have improved our daily lives. The fruits of federally funded research and development have been applied effectively by U.S. industry. Drawing on the support provided by many sponsoring agencies ano the results from a wide range of performing institu- tions, the American entrepreneurial spirit has tapped federally funded research and development to form entirely new industries in areas such as microelectronics, biotechnology, and communications and information technology, among others. The federal government invests in a portfolio of highly diversified activities in research and development in many disciplines but there has not been an actively managed federal "budget." With the exception of selected recent initiatives, the 3

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~ / IMPROVING THEAlLOCATION PROCESS federal R&D budget has been tallied up after the fact-it is the sum of R&D expendi- tures from federal departments and agencies used mainly for comparison with other federal expenditures or with the R&D budgets of other industrialized nations. Be- cause it is added together after the individual budget and appropriations decisions have been made, it has never been "managed" as a coherent whole. Yet there is a federal process-one that engages a broad range of issues, complex interactions, and conflicts-from which de facto priorities emerge. Those priorities reflect contending goals, different performers (public or private; university, industry, or federal laboratories), multiple funding sources (almost every federal department and agency), competing jurisdictions (executive and legislative branches; budget, appro- priations, and authorization committees within Congress), and international eco- nomic competition (proprietary national investment or international cooperation). The extraordinary success of U.S. research and development can be continued within current budget constraints. However, ensuring continuing success will require rigorous discipline and a coherent and comprehensive approach for decid- ing how resources are used. This report proposes a new process for allocating and monitoring federal spending for science and technology across disciplines and government agencies. With an integrated view and a coherent' federal science and technology budget, it will be possible to make selective reductions in some areas, so as to free badly needed resources for more productive investments and new oppor- tunities that arise. Defying a Federal Science ant! Technology Budget To obtain advice on an appropriate budget design, Congress asked this com- mittee to recommend criteria for federal support of research and development. Federal research and development expenditures are reported in current budget documents as being more than $70 billion annually. Almost half of this amount, however, is spent on such activities as testing and evaluation of new aircraft and weapons systems in the Department of Defense, nuclear weapons work in the Department of Energy, and missions operations and evaluation in the National Aeronautics and Space Administration. Those activities are very important, but they involve the demonstration, testing, and evaluation of current knowledge and exist- ing technologies. Even when they are technologically advanced, these functions do not involve the creation of new knowledge and the development of new technolo- gies. The federal research and development budget as currently reported is thus misleading, because it includes large items that do not conform to the usual mean- ing of research and development.2 In studying how to ensure the continuing vibrance of U.S. research and devel- opment, the committee focused on the $35 billion to $40 billion in federal research and development spent annually on expanding fundamental knowledge and creating new technologies (see Supplement 2). Those are the expenditures that constitute federal support for a national science and technology base that underlies not only defense and space programs, but also the advancement of scientific knowledge and new technology used in many fields and industries. To focus discussion and more clearly identify this investment component of the federal research and development budget, the committee developed the term federal science and technology (FS&T) and an accompanying budget index (for details, see Supplement 2, especially Boxes IT.3 and TT.41. FS&T is used throughout this report to describe federal funding for

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IMPROVING THE All OCATION PROCESS / 5 those science and technology activities that produce or expand the use of new knowlecige and new or enabling technologies (for examples, see Table T. I). The committee recommencts that, in the future, government support for basic and appliect science and technology be presented, analyzecI, and consiclered in terms of an FS&T budget. The current FS&T budget of $35 billion to $40 billion, inclucling both training and research ant! clevelopment, represents about 0.5 percent of the nation's gross domestic product (see Box Il.3 for background and definitions. The distribution of funcis for research ant! development as traditionally reported, compared to FS&T, illustrates the difference between the two concepts. Private industry performs the largest share of fecleraDy funclec! research and development as traditionally reported, but most of this work is downstream prociuct demonstration, testing, and evaluation that is excluciect from the committee's recommencled new measure. When the FS&T measure is user! instead, industry ctrops from first to third. Federal laboratories (both in-house ant! contractor-run) account for the largest share (39/0) of FS&T, follower! by academic institutions (31%), inciustry (21%), and non- profit ant! other institutions (9%~. (See Supplement 2 for acictitional cletails.) The committee's definition of FS&T deliberately blurs any ctistinction between basic anti applied science or between science anti technology (see Table I. I). A complex relationship has evolved between basic and applied science and technol- ogy. In most instances, the linear sequential view of innovation is simplistic and misleading. Basic and applieci science and technology are treated here as one inter- related enterprise, as they are concluctect in the science and engineering schools of our universities and in fecleral laboratories. For further explanation of why the com- mittee aggregates these activities within a single budget, see Supplements ~ and 4. Structure and Approach of This Report Part T of this report focuses on the committee's 13 recommendations for improving the process of allocating fecieral funds for science and technology. The conclusions, recommendations, and discussion are organized and presented to serve the following five purposes: I. Make the aDocation process more coherent, systematic, and comprehensive; 2. Determine total fecieral spending for fecleral science and technology, basest on a clear commitment to ensuring U.S. leaclership; 3. Allocate funds to the best projects and people; 4. Ensure that sound scientific and technical advice guides allocation deci- sions; and 5. Improve federal management of research and development activities. Part T! contains four supplements that provide critical background for and explain the rationale behind the committee's recommendations. Supplement ~ briefly surveys science policy and the impact of federal support since World War IT; Supplement 2 describes the derivation of the FS&T budget number; Supplement 3 outlines the existing process for allocating funds; and Supplement 4 treats the distinction between basic and applied research and the interplay between federal and industrial funding. Four appendixes give details that bear on committee pro- cess and background. A fifth lists the acronyms used in this report.

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6/ IMPROVING THEALl OCATION PROCESS TABLE T.! Fecleral Science ancITechnology: Examples of Work That Enables Continuing U.S. Innovation Characteristics Basic Research Applied Research Examples (Funding agencies) Creates new knowledge; is Characterizing the mechanism of generic, non-appropriable, and Alzheimer's disease- at many openly available; is often done universities and NIH (NIH) with no specific application in mind; requires a long-term commitment Uses research methods to address questions with a specific purpose; pays explicit attention to producing knowledge relevant to producing a technology or service; overlaps extensively with basic research; can be short- or long-term Studying the physics of cloud formation at universities and the National Center for atmospheric Research (NOAA, NSF) Exploring the chemistry of photo- synthesis at many universities and federal laboratories (USDA, NSF) Elucidating basic components of matter through particle physics- at Fermi Laboratory and many universities (DOE, NSF) Understanding how earthquakes and volcanoes are related to plate tectonics at universities and USGS laboratories (USGS, NSF) Exploring the changes in the universe over time through astronomy and cosmology- at universities, national laboratories, and NASA centers (NSF, NASA, DOE) Studying how language is acquired-at universities (NSF, NIH) Studying risk perception and methods of risk management- at universities and EPA, DOE, and DOD laboratories (EPA, DOE, DOD, NSF) Predicting ground motion and landslides caused by earthquakes at universities and federal laboratories (USGS) Discovering flexible, non-brittle, manufacturable, hightemperature superconducting wire at Los Alamos National Laboratory and universities (DOE, DOD) Conducting clinical research on cancer chemotherapy and clinical trial methodology at NIH, FDA, and academic health centers (NIH, FDA, CDC) Studying ethnography and sociology of drug abuse rituals related to AIDS transmission-at state health departments and universities (NIH, CDC) Studying econometric projection techniques in universities and various federal agencies (NSF, DlIHS, USDA,DOD)

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IMPROVING THE ALLOCATION PROCESS / 7 TABLE I. ~ Continued Characteristics Examples (Funding agencies) Applied Research (continued) Fundamental Technology Development Develops prototypes; uses research findings to develop practical applications; is of general interest to a sector or sectors, but full returns cannot be captured by any one company; is usually short-term, but can be long-term; is not developed for one identifiable commercial or military product; often makes use of new knowledge from basic or applied research Discovering diagnostics and vaccines to combat emerging infections-at universities, foreign research centers, and CDC, NIH, and DOD laboratories (DOD, CDC, NIH, USAID) Designing a new programming language- at universities and software companies (DOD, NSF) Building an optical computer- at uni- versities and computer firms (NSF, DOD) Developing new approaches to parallel processing, software, and hardware at FFRDCs, universities, and private firms (DOD, NSF) Building a prototype DNA sequencing machine at Caltech (NSF) Conducting clinical trials of a drug to treat heroin addiction- at VA hospitals, NIH, and academic health centers (DVA, NIH) Developing high-temperature ceramics for internal combustion engines-at universities and FFRDCs (NIST, DOD) Studying vitrification for storage of nuclear and hazardous waste at national laboratories and some university engineering departments (DOE, EPA) Identifying a specific laser for use in guided missiles (before use in any one missile) at DOD and university laboratories (DOD) Adapting cognitive science of language recognition for development of natural- language software at universities and national laboratories (NSF, NIH, DOD) Developing strong, high-temperature alloys for engines, but not for a jet engine for a particular aircraft at universities, NASA centers, DOD laboratories, and private firms (NASA, DOD) Breeding drought-resistant or saline-tolerant crop plants-at USDA centers and universities (USDA, USAID) Adapting fiber-optic laser surgery for prostate cancer at universities and national laboratories (DOE, DOD, NIH) Developing a prototype for a walking robot at FFRDCs, universities, and national laboratories (NASA, DOD, NSF, DOE)

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8 / IMPROVING THE All OCATION PROCESS Conclusions, Recommendations, and Discussion The committee believes that the following ~ 3 recommendations, as a set, will enable continuance of a strong federal research and clevelopment system at a time of change and stress. The United States Must Develop a More Coherent Budget Process for Science and Technology. Recommendations I-3) RECOMMENDATION I. The President should present an annual comprehensive FS&T budget, tnclud~ng areas of increased and reduced emphasis. The budget shouic' be sufficient to serve national priorities and foster a worId-ciass scientific and techni- cal enterprise. Currently, the federal research and development budget is typically defined as the sum of the research and clevelopment funds obligated or proposed by fecleral departments and agencies for programs and facilities classified as R&D. The re- search and development budget is never consiclered as an integrated whole during the development of the President's budget or given an overall review by Congress. Rather, the research and development budget is developecl in the context of indi- vidual agency missions and programs. Recent administrations have attempted to introduce more coherence in fed- eral policy for R&D by creating an intergovernmental committee structure to coordi- nate budgeting for high-priority programs that involve more than one agency, for example, research on global change and on hi~h-ne~rform~n~f~ cnmniltin~ ~n`1 hem_ ~2 ~_ ~. . . ~ _ _~_ _ ~ ~ _ ~ - A ~ ~ ^ ~ ~t ~-~ ~= ~ ~ ~ ~ if_ ~ ~ $ unions. ~ ~ rue Resent may even single out certain programs or facilities as presidential initiatives. However, it has been difficult to shape those initiatives into integrated efforts that are more than an aggregation of agency programs that already exist. When the budget reaches Congress, it is disaggregated into the various appro- priations bills and considered by many authorizing committees and appropriations subcommittees; efforts to achieve integrated initiatives can be quickly undone. The existing approach works reasonably well during periods of growth, when new opportunities and shifts in emohn.~i~ con he ~mm~A~t`>A ~`Tithim hl.A^~' _ ___ ~ An_ _ ~ ~^ ~ ^~ ~ ~ , ~ x ~A ~ ~w ~ increases-without cutting back or closing down older activities that no Conifer rely . . . . . . as non priorities. but the disaggregated approach is less suitable when major cutbacks must be made. For example, the Department of Defense budget for re- search and development historically has supported the majority of federal funding for academic research and training in electrical engineering, metallurgy and materi

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IMPROVING THE AlLOCATION PROCESS / 9 als, and computer science;4 the Department of Energy is the largest contributor to other fields such as materials science (when national laboratories are included). All science and engineering depend critically on those fields, and cuts in Department of Defense and Department of Energy programs made for other purposes might well have significant and inadvertent impacts on diverse research and development programs conducted in many other agencies and having clear importance to the country. U.S. leadership in science and technology depends on more than the basic research supported by the National Science Foundation and the National Institutes of Health. It also depends on the science and engineering funded by the Depart- ment of Energy, Department of Defense, National Aeronautics and Space Administra- tion, National Institute of Standards and Technology, and other mission agencies. Budget cuts require an integrated consideration of their effects. Only in this way can the President and Congress determine the levels of investment for impor- tant, high-priority areas of research and development (especially those involving multiple agencies or reallocations among agencies), make the trade-offs needed to ~ ~ ~ ~ . - . - . 1 . 1 ~ ~ ~ 1 ~ ~ 1 ~ 1_ ~1~ free up funds for new initiatives within the aim budget, and incorporate tne results of systematic program and agency evaluations. Achieving such coordination will require significant changes in how the executive and legislative branches deal with the budget for federal science and technology. The requisite changes are discussed in Recommendations 2 and 3. Questions to Consider in the Executive Office of the President The President, the Office of Management and Budget, and the Presioent's Science and technology Advisor should employ a process that explicitly and publicly auoresses pertinent questions, such as those listed below, as a means of providing budget guidance to agencies and a rationale to Congress and the public (see Box I. ~ . . . ~ ~ , ~ . . . tor a description or now tne process might work).5 Is the aggregate FS&T budget adequate to support the human and material resources that will maintain the United States as one of the leading nations in re- search and development in accord with the overarching national goals proposed in Recommendation 4 below? Does the FS&T budget recognize presidential initiatives, which might in- clude national security needs; technical training of personnel in areas of national need; promising scientific opportunities; human spaceflight; research and oevelop- ment of economic importance, such as materials science; emerging public health problems; environmental or disaster mitigation; international projects; or responses to policies of other countries? Does the FS&T budget reflect overall federal budget constraints? Does the FS&T budget maintain strength by reallocating funds effectively? Are resources for laboratories, centers, and projects with obsolete missions or of insufficient quality being phased out, reduced, or redirected? Are measures proposed for reducing costs and inefficiencies? Is the FS&T budget appropriately balanced, and noes it take account of the interuepenuencies of programs supported by different departments and agencies?

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10 / IMPROVING THEAlLOCATION PROCESS Box I. ~ PRIORS SETTING AN D DETERMINING FS&T BUDGETS AT THE PRESIDENTS LEVEL: HOW IT MIGHT WORK At the beginning of the budget cycle, the President, with advice from the Director of the Office of Management and Budget and the President's Science and Technology Advisor, de- cides on the aggregate level of finding for federal science and technology (FS&I) across the government that will maintain a leadership role for the United States and preserve the ability of agencies to perform their missions. Guidance is sent to agencies listing presidential priorities, including trade-offs and reallocations across agencies that reflect these priorities, as well as crises, opportunities, or evaluations. An extract of the President's budget message to Congress might read: "The federal science and technology budget is $XX billion dollars. Although this represents a reduction of $X billion, international comparisons show that it will enable us to maintain a world-class position in fundamental science and technology and a leadership posi- tion in the select fields of A, B. and C. The budget reduction was achieved by beginning to close and merge X federal laboratories and federally funded research and development centers (FFRDCs) as recommended by the laboratory losing commission, and shutting down other programs no longer necessary or of poor quality. Within this budget reduction, I am recom- mending increases in funding for the physical sciences at the National Science Foundation; material sciences at federal laboratories, FFRDCs, and university materials research centers; research on the causes of violence at the National Science Foundation and on interventions to prevent it at the National Institute of Mental Health; research on genetic origins of disease at the National Institutes of Health; and microelectronics and sensor development in the Depart- ment of Defense programs. These initiatives will meet mission needs and contribute to the nation's overall strength in science and technology.... " Age Science and Technology Advisor has a variety of mechanisms to learn about opportunities to in- crease or decrease program budgets: the President's Committee of Advisors on Science end Technology, the National Science end technology Council, and meetings with scientists and engineers from universi- ties, federal laboratories, and industry, as well as meetings with science ministers from other countries. RECOMMENDATION 2. Departments and agencies should make FS&T aBocation decisions based on clearly articulated criteria that are congruent with those used by the Executive Office of the President ant! by Congress. Examples of important questions to be considered by fecleral departments and agencies in allocating FIT funding include the following (see Box T.2 for a clescrip- tion of how the process might work): Does the program uncler consideration contribute significantly to the agency's mission? Are there major new opportunities for research and development within the purview of this agency that should be proposed?

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IMPROVING THE All OCATION PROCESS / I 1 Box I.2 EVALUATION OF FS&T PROGRAMS AT THE DEPARTMENT AND AGENCY IEVEL: HOW IT MIGHT WORK Cabinet secretaries or agency directors respond to presidential priorities and guidance. The National Science and Technology Council is a vehicle for coordinating cross-agency pro- grams and assessing the adequacy of the entire FS&T budget. Budgets reflect federal fiscal realities, the results of performance evaluations, and the recommendations of special labora- tory-review commissions, and they allow for trade-offs to support new opportunities and new missions by closing out projects and laboratories with outmoded missions or poor evaluations. A response to the President's stated priorities from the director of the National Institutes of Health and the secretary of Health and Human Services, for example, might look like the following: "Dear Mr. (or Ms.) President: "We recommend the termination of programs focused on A and the reduction of those focused on B. following an external review. The savings from those closings and reductions will total $X million this year, but savings in future fiscal years will be larger, as shown in the accompanying projection. We propose to reallocate $X of those savings to high-priority items and emerging opportunities and problems. In response to your national priorities,we propose to increase Finding for research by $X on the causes of violence and interventions to prevent it at the National Institute of Mental Health. In accord with your wishes to increase the na- tional investment in the genetic origins of disease, $X million has been allocated, with $X going to the National Center for Human Genome Research, and the remainder going to several relevant institutes of the National Institutes of Health OCR for page 1
28 / IMPROVING THEAll OCATION PROCESS lion. Public dissemination of the results of federally funded research and develop- ment is an ~rnportant element in achieving maximum return on public investment, and it also contributes to defining for the public the value of that investment. If there is no regulation, the risk of abuse will rise, but regulation imposes significant cost. In the past 2 decades, the trend has been toward increased paper- work to comply with procurement regulations, fair hiring practices, restrictions on drug use, and many other public concerns that are important but that impose con- straints on the conduct of federally funded research and development.48 Because procedures intended to enhance accountability have become increas- ingly burdensome, continued scrutiny of the purposes, effectiveness, costs, and alternatives to current practices would be welcome, beginning with a thorough overhaul of the regulations and followed by systematic, periodic reviews. The Office of Management and Budget and the Office of Science end technology Policy should work together to target one or a few areas of regulation and accountability assessment each year and should encourage agency innovation to streamline or replace current practices. The effect of regulations and social mandates can be quite severe for perform- ers of federally funded research and development. If regulations are reviewed and either reduced, streamlined, or eliminated by the OMB-OSTP effort recommended. the committee believes that the productivity of the research and development system can be improved and costs can be reduced. For their part, universities and other performers should review their own procedures and regulations. The Federal Demonstration Project sponsored by the Academies' Government-University-Indus- try Research Roundtable demonstrates that Improvements can be made without sacrificing important goals.49 RECOMMENDATION 13. The federal government should retain the capacity to perform research ant! clevelopment within agen- cies whose missions require it. The nation should maintain its resulting flexible and pluralistic system of support. The execu- tive and legislative branches should implement the procedures oudinec! In the committee's Recommendations ~ through 4 to ensure a more coherent FS&T budget process whether or not a Department of Science is established. Any changes in the structure of federal support for science and technology should take into account the linkage between research and development and agency missions and the benefits derived from a robust and pluralistic R&D system. Most federally funded research and development is conducted in pursuit of national goals such as a strong defense, better health, exploration of space, wiser use of natural resources, and greater agricultural production (see Supplements 1 and 2). This linkage to government agency missions is a strength of the lid. research enterprise and has produced a robust and pluralistic R&D support system. Other than basic research programs at the National Science Foundation, few federal science and

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IMPROVING THE ALLOCATION PROCESS / 29 technology programs have been set up to support research as an end in itself. Even the National Science Foundation has an eclucational mission in abolition to its sup- port of science and engineering. Given their purpose, agency programs are and should be evaluated first for their contribution to their departments' goals and only later for their place in a balanced national research and development system.s Current proposals for a Department of Science in part follow this principle by leaving most militarily relevant research ant! development in the Department of Defense, health research in the Department of Health and Human Services, and agricultural research ant! development in the Department of Agriculture. While wisely retaining research and clevelopment in mission agencies, this approach wouict limit a Department of Science to activities that fall outside existing mission agencies. Such a Department of Science would have a smaller research budget than the National institutes of Health ant! a significantly smaller development budget than the Department of Defense. Creating a Department of Science because cabinet departments are abolished or reconfigured, rather than as a result of applying criteria for allocating fecleral funds for research and clevelopment, involves considerations beyonc! the charge to this committee. Such a Department of Science, however, cannot fully aciciress the need for review, coordination, and FS&T buciget allocation among departments. The committee believes that its recommendations will contribute more to planning, coordinating, and evaluating federal science and technology than either the current system or a Department of Science. The growth of federal science and technology from multiple roots in mission agencies has resulted in a pluralistic research ant! development system. Although some may see needless overlap in such a system, in reality pluralism is a great source of strength, an advantage over the ways research and clevelopment are organized in many other countries. The diversity of performers fosters creativity anti innovation. it increases the number of perspectives on a problem. it makes competition among proposals richer, and it induces competition to support the best work among funclers, both public ant! private. At the same time, diverse funcling alternatives give original pleas a better chance to find support than wouict a more centralizeci system. A pluralistic research ant! development system thus enhances quality ant! our na- tional capacity to respond to new opportunities and changing national needs. The challenge in the current perioc! is to retain diversity and balance while cutting back in some areas to free resources for better or more important activities. As emphasizer! in Recommendation I, integrating the neecis of a pluralistic research and development system across multiple agencies and programs requires a comprehensive overview and careful planning. The fecleral budget process should take into account how interclepenclent different fields of science and technology have in fact become. The impact of cutbacks in one agency on major fields, on other agencies, ant! on national goals should be consiclered. Changing or scaling back an agency's mission (e.g., to reduce and reorient the post-Cold War defense establishment) generally has implications for the type and scale of research anti clevelopment it, and others, conduct. As noted above, for example, DOD provides most of the federal! funding for academic research in several engineering fields and computer science. Computer-intensive biological research supported by NIH and NSF, such as genome research or structural analysis for drug design, couIct thus be

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30 / IMPROVING THEAlLOCATION PROCESS affected by cuts in DOD computer science. Important advances and efficiencies enabled by increasingly powerful computation and by use of the Internet and global communications supported by many agencies could also be impeded by such cuts. Monitoring the impact of cuts in one part of the research and development system on another part is a function that the current budget process does not per- form systematically. Cross-program impacts are accommodated to some extent in the decentralized negotiations of budget line items in individual agencies, and special initiatives often identify items in multiple agencies. Cross-agency planning is not routine, however, even in the limited sense of"damage control" that is impor- tant when budget cuts are contemplated, and the FS&T budget is not monitored as a whole as the budget process unfolds. The committees Recommendnrion~ 1 thr~ll~h ~ . ~,. . . .. ~ . . . ~ . ~ in enect give the President's Science end technology advisor and the Office of Management and Budget a strong integrative role, with the authority to effect trans- fers across departments and agencies that no cabinet official can perform. The recommendations also entail monitoring the FS&T budget as a whole in Congress, beyond that fraction that might be included in a Department of Science. If the recommended process is used in tandem with the principle of retaining world leadership embodied in Recommendation 4, the federal government will have a more coherent and effective research and development system. Looking to the Future A robust national system of innovation lies at the heart of our economy, our health, and our national security. That system of innovation depends on federal investments. The committee believes that its recommendations address a crucial need: maintaining the strength and vigor of U.S. research and development despite the prospect of declining federal discretionary spending over the next several years. Seeing the science and technology enterprise through the lens of a unified FS&T budget can help leaders in government and the American public to gauge its fiscal health. A carefully constructed comprehensive budget offers a unitary view, not artificially balkanized into agency budgets, but sensitive to the complexities and relationships among government programs vital to maintaining the United States at the forefront of world-class science and technology. The corollary proposals provide the basis for continuing excellence emphasizing programs and people rather than institutions, subjecting all federal science and technology activities to competitive merit review, linking science and engineering research to education, and maintain- ing a pluralistic system of research and development tied to public missions. The committee's recommendations are designed to help root out obsolete or noncom- petitive activities, allowing good programs to be replaced by even better ones. Science and technology have utterly transformed our world over the past 50 years, touching almost every aspect of our daily lives from communication to transportation to health (Box T.51. They will be at least as important over the next half century. Preeminence in science and technology has become a national asset, at once a point of pride and an immensely practical investment. Prudent steward- ship of science and technology, as much as any other area of federal noliev will dictate how our children and our grandchildren live. ~,. . .

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IMPROVING THE All OCATION PROCESS / 31 Box I.5 LESSONS FROM WE PAST AND SOME OPPORTUNE FOR THE FUTURE Though enormously visionary, the scientists and political leaders who set the United States on its post-World War II research and development course could never have foreseen the ex- traordinary results. The computer was in its infancy in 1945 and seemed more a research tool than a revolutionary device that would profoundly affect industry, commerce, the financial world, government, science, education, communications, entertainment, and society as a whole. Accurate weather forecasting covered about a day in 1945; reliable 3- and today forecasts, and the Today outlooks now relied on by farmers and utility companies, came only with years of research and the advent of supercomputers. Microelectronics, with all its implications for space exploration and utilization, national security, consumer electronics, medicine, and do- mestic and international communications, did not exist nor did the equally revolutionary laser. Materials science, given a boost by the war, had yet to benefit from the studies that would yield the new metal alloys, high-strength steels, composite materials, silicon chips, glassy metals, optical fibers, and polymers so vital and so valued in 1995. Astronomy meant mostly optical telescopes at war's end, and astronomers could only dream of the striking images now provided daily by the Hubble Space Telescope; the great advances provided by radio, infrared, ultraviolet, X-ray, and gamma-ray astronomy would come only with time. Though an early cosmological vision of the universe's birth existed, it had yet to win its popular name,"The Big Bang," or to gain the theoretical underpinnings and experimental back- ing that now make it the standard model for the cosmos's origin. The Earth's crust was ac- cepted as a solid shell, not the giant, separate blocks of rock portrayed by the theory of plate tectonics, which came together in the 1950s and 1960s and provided earth scientists with a general framework to explain the cause of most giant earthquakes, why volcanoes exist where they do, the birth of new oceans, and the timeless drifting of the continents around the globe. Few paid attention to or realized the economic, health, and social implications of a deteriorat- ing environment, the loss of biodiversity, or the potential for adverse climate change vital world issues that researchers would identify, describe, and bring to public attention. The personal computer first appeared in the 1970s;the explosive growth of the Internet is a 1990s phenomenon. Electronic mail was until very recently the tool of a narrow slice of the scientific and technical community. Now, our national security depends heavily on the use of computers, networks, and telecommunications to assess, understand, and respond to poten- tial threats. Computer graphics provides the "vision" to design new materials and buildings, and to model, for example, the lethal process of an AIDS (H~ virus entering a cell and co- opting its functions. There is virtually no industry that is not being transformed by the informa- tion revolution. And yet, the information revolution is still young and hardly over. The remarkable advances enabled by science and technology during the past 50 years will surely be extended in the next 50. We can see some of the outlines. Information technology, for example, is already transforming the operations of many of our basic institutions, offering new ways to educate our children and contributing new approaches and tools for research in science and technology. Less obvious is how a quickly widening range of challenges facing our nation and the world will be addressed. If history is a guide, the work now under way in universities and in federal and industrial laboratories will play a vital role. The health challenges to the nation are apparent. The population is aging, and with that the problems of heart disease, cancer, and degenerative illnesses such as Alzheimer's disease appear in sharp relief. These illnesses require fundamental understanding not only of the un- derlying biology but also of effective prevention strategies to delay or block their onset. The problem of"emergent diseases" has gained Fill force in this decade, from the resurgence of tuberculosis to the appearance of "jet-age" scourges, such as AIDS and Ebola virus. We can rightly take comfort in the past victories over polio and smallpox and other infectious diseases. We should not forget, however, that the polio vaccine built on a century of microbiology, that continued on next page

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32 /IMPROVING THEAlLOCATION PROCESS biotechnology is only now becoming central to drug discovery, and that the biology underly- ing many of today7s dread diseases is still almost wholly unknown. Further, science and tech- nology are essential to building on the effective campaigns tO reduce infant mortality, smoking, and deaths and injuries from drunk driving. Perhaps less obvious but jUSt as promising is the future potential for science and technol- ogy to address diverse national needs in transportation, public infrastructure, agriculture, and the environment. New materials, propulsion systems, and imaginative use of information tech- nologies to create smart highways and cars will map onto currently obvious transportation needs-from reducing pollution to improving traffic flow and highway design. Research has contributed,aIbeit considerably below its potential,to development of the national~systems by which~we get our drinking water, remove our wastes, and obtain electrical power. As these systems become more complex and the pressures on public funds intensify, research that re- ~duces costs and improves safety, such as non-destructive testing of bridges, tunnels, railroad tracks, and the like will become even more urgent. , U.S. agriculture has been a ~triumph. Now the advent of biotechnology has created major new opportu ties to increase the quality of foods, raise the efficiency of crop production, and develop new industrial uses for crops, including biodegradable plastics and pharmaceutical products. The current U.S. export lead ~ agriculture builds on a century of public~and~private i nvestments in agricu~al research and development. ~ Future research win surely offer~ways tO sustain the productiv ty of U.S. agriculture while also making it more en~n~n~ally teen an. ; ~ Finally, resource pressures will inexorably increase as we enter the new millennium-as ;popuIations, industrialization, and demand for energy and other resources increase. These pressures~will increase debates about risks versus costs. Inform~g~that debate win require a base~of science~and technology so that the problems are well understood the impacts of alter , native remediation strategies are ~analyzed, risks~are adequately assessed, and effective preven ~tion ~strategies~are put into place. ~ ~ : ~ A:: : :: a: : ~ : : A strong research and development capacity win be integral to dealing with future chal lenges,~whe~r environmental problems, medical emergencies, or national security threats- : or crises that we cannot yet ~predict.; We~also know that solutions come in Unexpected ways ; ~ trom~what is the world s premier research ~enterprise. With wise management solutions to ~: : ~ if; ~ ~ ~ pressing problems-and innovations goring rise to now un~magined advances-win continue to~come~from~rnar~y directions,~for example,~from the work of astronomers trying to urlder- stand the large-stale structure of the universe, or Mom mathematicians studies On improving blithe ~cal~tions~6f properties of alloys, or from the efforts of social Scientists to devise new :~: ~ :~ :: ~ : ~ : ~ : ~ ~ ~ : ~ :: ways~for~mstitutions to manage public resources such~as fisheries, grazing grounds and water :supplies,~or from biologists investigations of the neural systems of invertebrates. New knowl ~ ~ me: ~ : ~ : : :: :: :: : ~ : : : : : : edge that erdarges our understanding win in time serve national needs. Science and technol ~ ~ ogy,~cor~tributing~a unique~national capability for problem solving and Creative discovery, will :~ continue~to;~be~key~m keeping the United States In its world~leadership position-economy focally militarily and intellectually. ~ ~ ~ ~ ~ ~ ~ at, ~ ~ ~ ~ ~ ~ ~ , ~ : ~ :: ~ ~ : ~ : : Em: ~ ~hi: : : : : : . Endnotes 1. The Budget of the United States Government, Fiscal Year 1996, Chapter 7, Investing in Science and Technology {Washington, D.C.: U.S. Government Printing Office, 1995), p. 94. 2. The phrases research and development and science and technology are often used interchangeably. The committee has chosen to use research and development, except when it is explicitly referring to its proposed budget index, federal science and technology (PS&T), and the work encompassed by it.

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IMPROVING THE ALlOCATION PROCESS / 33 3. The interdepartmental coordination mechanism was the Federal Coordinating Council for Science and Technology under Presidents Reagan and Bush, and now is the National Science and Technology Council under President Clinton. 4. Calculated from Tables C-61 and C~2 in National Science Foundation, Federal Funds for Research and Development, Fiscal Years 1993, 1994, and 1995, NSF 95-334 (Arlington,Va.: NSF/ Division of Science Resources Studies, forthcoming). In 1994, the Department of Defense funded 59 percent of academic research in electrical engineering, 69 percent in metallurgy and materials science, and 56 percent in computer science. 5. The Bush and Clinton administrations initiated structures and procedures that begin to implement several of the processes and criteria listed. The last budgets of the Bush administration included agency"cross-cuts" that took into account multiagency initiatives. The Clinton administra- tion continued this practice and also prepared a separate chapter on research and development as part of the President's budget (The Budget of the United States Government, Fiscal Year 1996, Chapter 7,"Investing in Science end technology," 19951. The many activities of the National Science end technology Council are summarized in its "Accomplishments Report, 1993-1995," Office of Science end technology Policy, Executive Office of the President, 1995. 6. Allen Schick, The Federal Budget: Politics, Policy, Process Washington, D.C.: The Brookings Institution, 19951;Willis H. Shapley, The Budget Process and RED (New York: Carnegie Commission on Science,Technology, and Government, 19921. 7. Carnegie Commission on Science,Technology, and Government, Science, Technology, and Congress: Organization and Procedural Reforms (New York: Carnegie Commission on Science, Technology, and Government, 19941. 8. These criteria are adapted from the Committee on Science, Engineering, and Public Policy (National Academy of Sciences, National Academy of Engineering, and Institute of Medicine), Science, Technology and the Federal Government: National Goals for a New Era Washington, D.C.: NationalAcademy Press, 19931. 9. Throughout this report, the term federal laboratories refers to laboratories owned and operated by the federal government (including intramural laboratories), laboratories owned by the federal government but operated by contractors (including the national laboratories administered by DOE), and other FFRDCs. See Box II.6 for an explanation. 10. Department of Defense, Department of Defense Response to NSTC/PRD 1, Presidential Review Directive on an Interagency Review of Federal Laboratories, February 24,1995; Depart- ment of Defense, Draft Interim Report to the National Science and Technology Council, Presiden- tial Review Directive 1, October 12,1994; Defense Science Board, laboratory Management Interim Report, background for the Base Closure and Realignment 1995 (BRAC 95 Addendum),April 3,1995. Collectively, these three reports are known as the Dorman Report. NASA Federal Laboratory Review Task Force, NASA Advisory Council, NASA Federal laboratory Review (Foster Report) (Washington, D.C.: NASA, February 1 9951. Task Force on Alternative Futures for the DOE National Laboratories, Alternative Futures for the Department of Energy National Laboratories (Galvin Report) (Washington, D.C.: Department of Energy, February 19951. Ad Hoc Working Group of the National Cancer Advisory Board, A Review of the Intramural Program of the National Cancer Institute ~ishop/Calabresi Report) (Bethesda, Md.: National Institutes of Health, June 26,19951; ExternalAdvisory Committee of the Director's Advisory Commit- tee, The Intramural Research Program (Cassell/Marks Report) (Bethesda, Md.: National Institutes of Health, April 11, 19941.

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34 / IMPROVING THEAll OCATION PROCESS National Science and Technology Council, Interagency Federal Laboratory Review, Final Report (NSTC Report) (Washington, D.C.: Office of Science end technology Policy, May 15,19951. 11. Federal Laboratory Review Panel, Report of the White House Science Council (Packard Report) (Washington, D.C.: Office of Science end technology Policy, May 19831; Bishop/Calabresi Report, 1995; Dorman Report, 1995. 12. Alan K. Campbell, Stephen J. Lukasik, and Michael G.H. McGeary, eds., Improving the Recruitment, Retention, and Utilization of Federal Scientists and Engineers (Washington, D.C.: National Academy Press, 19931; Foster Report, 1995; Dorman Report, 1995; Cassell/Marks Report, 1994; Alan L. Dean and Harold Seidman, Options for Organizational and Management Reform for the Intramural Research Program of the National Institutes of Health (Washington, D.C.: National Academy of Public Administration, July 19881; Institute of Medicine,A Healthy NIHIntramz~ral Program:Str?~cturalC6angeorAdministrativeRemedies? (Washington,D.C.: NationalAcademy Press, 19881. 13. Foster Report, 1995, p. 9. 14. Michael E. Davey, DOD's Federally Funded Research and Development Centers, CRS Report for Congress 95-489, Science Policy Research Division, Library of Congress (Washington, D.C.: Congressional Research Service,April 13,19951; Office of Technology Assessment, Department of Defense Federally Funded Research and Development Centers (Washington, D.C.: U.S. Government Printing Office, Tune 19951; Defense Science Board Task Force, Tbe Role of Federally Funded Re- search ~ Development Centers in the Mission of the Department of Defense (Washington, D.C.: Office of the Under Secretary of Defense for acquisition end technology, April 19951. 15. Dorman Report, 1995; Foster Report, 1995; Galvin Report, 1995; Packard Report, 1983; NSTC Report, 1995. 16. Calculated from Table C-154a in National Science Foundation, Federal F?~ndsforResearcD and Development: Fiscal Years 1992, 1993, and 1996, NSF 94-328 (Arlington,Va.: NSF/Division of Science Resources Studies, 19951. 17. Defense Science Board Task Force, The Role of Federally Funded Research ~ Development Centers in the Mission of the Department of Defense, 1995. 18. The Foster Report (1995) specifically recommends that NASA laboratories reduce their insularity, enhance ties with universities, and adopt the personnel and management practices of the only major NASA FFRDC, the [et Propulsion Laboratory, which is associated with the California Institute of Technology. 19. Galvin Report, 1995, p. 4. 20. Galvin Report, 1995. Other analyses of the DOE-supported national laboratories and their futures have concluded that carefully planned diversification could be useful if done well. Barry Bowman (Georgia Institute of Technology) and Michael Crow (Columbia University), who drew on a large body of past research in a report for the Department of Commerce on the role of all federal laboratories (Federal Laboratories in the National Innovation System: Policy Implications of the National Comparative Research and Development Project, May 1995), note that the purposes of various laboratories vary tremendously. Ann Markusen and colleagues at Rutgers University exam- ined Sandia and Los Alamos National Laboratories and concluded that there is a restricted stock of knowledge and technology that is no longer secret (Ann Markusen, lames Raffel, Michael Oden, and Marten Llanes, Coming in from the Cold: Tbe Future of LosAlamos and Sandia National Labora

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IMPROVING THE ALLOCATION PROCESS / 35 tories, Piscataway, N.~.: Center for Urban Policy Research, 19951. Both the Bozeman/Crow and Markusen et al. reports are more open to consideration of new mission areas than is the Galvin Report, although Markusen et al. specifically note that the two DOE laboratories in New Mexico should be reduced in size. Markusen is quite critical of the Galvin task force recommendation that laboratories engaged in weapons design and nuclear cleanup activities be delegated to autonomous "corporatized" units. However, the Bozeman/Crow and Markusen reports both support the main thrust of the Galvin task force that current methods of technology transfer are poorly understood and probably inefficient and concur with the notion that national laboratories should compete with universities and private performers, rather than have unique access to funds, and should strengthen their ties to one another, to academia, and to industry. 21. Galvin Report, 1995, pp. 8-10, 55. 22. Federally funded research and development centers have a long-term contractual relation- ship with the government and are operated by contractors- see Boxes II.5 and II.6, Supplement 2. See also U.S. Congress, Office of Technology Assessment,A History of the Department of Defense Federally Funded Research and Development Centers (Washington,D.C.: Government Printing Of lice, July 1 995 [GPO Stock No. 052-003-01420-3]). 23. National Science end technology Council, Interagency Federal Laboratory Review, Final Report (NSTC Report), 1995. See especially pp..9-19 and 21-22. 24. NSTC Report, 1995. Dorman Report, 1995. Foster Report, 1995; Galvin Report, 1995. Also, NSTC Report, 1995. Bishop/Calabresi Report, 1995. 28. In 1990, Congress passed and the President signed the Defense Base Closure and Realign- ment Act, which was intended to protect the base-closing process from electoral politics and to insulate the President and members of Congress from difficult decisions that affect important political constituencies, particularly local groups adversely affected by closures and shrinkage. The act established an independent commission to hold public hearings, take recommendations from the Secretary of Defense, and make a list of recommended closures and reconfigurations. Under terms of the act, the President then may accept or reject the entire list but cannot add or delete specific items on it, and Congress has 45 days to veto his action. In the absence of action by the President or Congress, the commission's list becomes the basis for closures and realignments by the Department of Defense. A total of 250 installations were closed or reduced through three rounds of closings in 1991 and 1993, plus another round conducted in 1988 under a previous law. The final round, which included some laboratory facilities, was completed in 1995. The currently established BRAC process is conducted by a single cabinet-level department, and the commission's sole responsibility is to make recommendations about closing and shrinking facilities, not about reallocation across departments. Depending on its purpose and scope, however, a laboratory closing commission might cut across departments and independent agencies, and might be asked to reallocate as well as close or reduce facilities, complicating its task and opening the question of the proper venue for organizing such actions. 29. Pursuant to the Bayh-Dole Act of 1980 and subsequent amendments and executive orders, academic centers retain patent rights and copyrights that result from federal funding, with certain restrictions. Those rights can be licensed to one or more firms, depending on the nature of the inventions or other results. Moreover, because they are held by universities, the licensing arrange

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36/ IMPROVING THE ALLOCATION PROCESS meets are subject to greater public scrutiny than is direct federal funding to private firms with patents held by those firms. 30. Computer Science and Telecommunications Board, National Research Council, Realizing the Information Future: The Internet and Beyond (Washington, D.C.: NationalAcademy Press, 19941. 31. Committee on Science, Engineering, and Public Policy (NationalAcademy of Sciences, National Academy of Engineering, and Institute of Medicine),"The Federal Role in the Development end adoption of Technology," Chapter 4 in Science, Technology and the Federal Government: National Goals for a New Era, 1993, pp. 31-44. 32. That principle is perhaps best exemplified in defense technologies developed with federal funding, which can now be more expensive and less advanced than commercial technologies. Recent attention to acquiring dual-use technologies from commercial sources and exploiting defense technologies in commercial markets stems from this reversal in the traditional flow of new technol- ogy. This circumstance is noted by the Committee for National Security of the National Science and Technology Council, in National Security Science and Technology Strategy (Washington, D.C.: Office of Science end technology Policy, 1995~. See also National Economic Council, National Security Council, and Office of Science and Technology Policy, Executive Office of the President, Second to None: Preservir~gAmerica's Military Advantage Through Dal-Use Technology, Doc. No. ADA 286-779 (Fort Belvoir,Va.: Defense Technical Information Center, February 19951. 33. Engineering Centers Division, Directorate for Engineering, National Science Foundation, Tbe ERCs: A Partnership for Competitiveness, NSF 991-9, 1991; Highlights of Engineering Research Centers Technology Transfer, NSF 92-6,1992; and Highlights of Engineering Research Centers Education Programs, NSF 95-56,1995 (Arlington,Va.: National Science Foundation). 34. The Foster Report (1995) at several points notes that NASA laboratories are "insular" and that in many areas private firms have raced ahead of parallel NASA programs. Other reports also cited above, most notably the Galvin Report (1995) and those by Bozeman and Crow and by Markusen et al. (note 20), also point to difficulties in technology transfer from federal laboratories. 35. Start-up of new firms, for example, has been a major source of innovation. The importance of a "culture" that nurtures innovation has been stressed in several recent works, including that of Ann Markusen et al. (note 201; Susan Rosegrant and David R. Lampe, Route 128: Lessons from Boston 's High-Tech Community (New York: Basic Books, 19921; AnnaLee Saxenian, Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (Cambridge, Mass.: Harvard University Press, 1994~; and Economics Department, Bank of Boston, MIT: Growing Businesses for the Fzlture (Boston: Bank of Boston, 19891. Markusen et al., in particular, suggest that policies to encourage movement of experts and technologies out of government laboratories might well be more effective than those, such as CRADAs, that retain talent and technology within laboratory walls. 36. The Calvin Report (1995) concludes that CRADAs may have distracted DOE's major multipurpose national laboratories from their central missions. The report by Markusen et al. (note 20) suggests that CRADAs may be less effective than less expensive and more historically important means of technology transfer, and points out that evaluation is hampered by poor access to data. Bowman and Crow (note 20) observe that 90 percent of CRADAs produce no jobs, and also note that a "one-size-fits-all" technology transfer policy for federal laboratories flies in the face of their diversity. The place of CRADAs in DOE national laboratories is an area of active controversy (see Colin Macilwain,"US Weapons Labs Face Curb on Civilian Role,"Nature 376 Ouly 13~: 106-107,19951.

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IMPROVING THE AlLOCATION PROCESS /3 7 37. Evaluation of investment programs to date has focused mainly on the question,Would this technology ever have developed or would it have been significantly delayed but for the federal funding? Most assessments have been based on queries to recipients and agency staff about judg- ments of success, and on limited measures of impact such as patent counts or financial measures that cannot answer the question. What is needed is rigorous assessment through comparison to appropri- ate control cases. Moreover, answering one question does not address several others that are equally important, such as: How effective is direct federal investment in specific firms or consortia com- pared to investment in R&D through other mechanisms, such as grants and contracts to do similar work at universities or federal laboratories? Would incentives to R&D performers to ease start-up of new firms or to encourage private investment through indirect means achieve the same ends at less cost or with less direct federal involvement? How can direct investments in firms or consortia confer proprietary advantage and yet ensure public accountability and fair access by other firms to data, results, and expertise? 38. NSF Advisory Committee on Merit Review, Final Report, NSF 8~93 Washington, D.C.: National Science Foundation, 19861. 39. Dorman Report, 1995; Galvin Report, 1995; Foster Report, 1995; Bishop/Calabresi Report, 1995; and Cassell/Marks Report, 1994. 40. Reviews of federal laboratories consistently conclude that procedures for judging the quality of research are not adequate and in practice do not have much effect on the allocation of research funding. See, for example, Defense Science Board, Laboratory Management Interim Report, 1995 (note 10~; Bishop/Calabresi Report, 1995; Foster Report, 1995; Cassell/Marks Report, 1994; National Research Council, Interim Report of the Committee on Research and Peer Review in EPA (Washington, D.C.: NationalAcademy Press, 1995~; Carnegie Commission on Science, Technology, and Government, Environmental Research and Development: Strengthening the Federal Infrastructure (New York: Carnegie Commission on Science,Technology, and Government, 1992~; U.S. Environmental Protection Agency, Safeguarding the Future: Credible Science, Credible Decisions, EPA/600/9-91/050, Expert Panel on the Role of Science at EPA (Washington, D.C.: U.S. Government Printing Office, 19941. 41. See, for example, National Research Council, Investing in the National Research Initia- tive: An Update of the Competitive Grants Program in the US. Department of Agriculture (Washington, D.C.: National Academy Press, 19941. 42. Susan E. Cozzens,"Assessment of Fundamental Science Programs in the Context of the Government Performance and Results Act (GPRA)," RAND Project Memorandum PM-417-OSTP (Washington, D.C.: Critical Technologies Institute, 1995~. 43. Thomas D. Cook and William R. Shadish, "Program Evaluation: The Worldly Science," Annual Reviews of Psychology 37: 193-232,1986; Robert K. Merton, The Sociology of Science: Theoretical and Empirical Investigations (Chicago: University of Chicago Press, 1973~; PH. Rossi, H.E. Freeman, and S. Rosenbaum, Evaluation: A Systematic Approach (Beverly Hills, Calif.: Sage Publications, 19821. 44. Cozzens,"Assessment of Fundamental Science Programs," 1995; Commission on Physical Sciences, Mathematics, and Applications of the National Research Council, Quantitative Assessments of the Physical and Mathematical Sciences: A Summary of Lessons Learned (Washington, D.C.: National Academy Press, 19941; Susan E. Cozzens, rapporteur, Evaluation of Fundamental Research Programs: A Review of the Issues, discussion draft, Office of Science end technology Policy,August 15,1994; and Susan Cozzens, Steven Popper, James Bonomo, Kei Koizumi, and Ann Flanagan,

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38 / IMPROVING THEAll OCATION PROCESS Methods for Evaluatirzg Fundamerztal Science, DRU-875/2-CTI, Critical Technologies Institute, RAND Corp., for the Office of Science end technology Policy, October 1994. 45. Cozzens,"Assessment of Fundamental Science Programs," 1995, p. 33. 46. Research programs should be evaluated at a fairly aggregate level by independent individu- als with the requisite scientific and technical expertise, who are capable of judging progress relative to resources invested. By"a fairly aggregate level," the committee means including a fairly large set of projects and over a sufficient period to capture benefits, which are often long delayed; the more basic the science, the longer the gestation period. Scientists must also be allowed to fail occasionally, although not indefinitely or consistently. Evaluation of some applied research and most fundamental technology programs is more straightforward because the objectives are clearer and the causal chains more direct, although even here there are often surprises. For both science and technology, it takes astute and expert observers, and not bean counters, to tell how reasonable the gambles have been and how great the rewards should be, over appropriate periods. Successful programs should be rewarded for achieving or sustaining world-class leadership. Unsuccessful ones should be eliminated, cut back, or reorganized. All programs should present compelling reasons for continuation or expansion. Criteria for success should suit the particular area of science or technology. Science intended only to advance understanding (e.g., archaeology or cosmology) will have different measures than mission-oriented fields (e.g., pharmacology or materi- als science) or fundamental technology (e.g., instrumentation or engineering). Individuals working in the fields are best able to judge value and craft appropriate measures. 47. Peter F. Drucker,"Really Reinventing Government," TbeAtlantic Monthly 275~21: 49,1995. 48. One persistent theme of most reports on federal laboratories (note 10) is a strong need to free laboratories from "micromanagement" by federal agencies in Washington, D.C., and by Congress. This was a major concern of the Packard Report of 1983 (note 111. The Foster Report (1995) documents the number of task orders and NASA employees that oversee the Jet Propulsion Labora- tory contract and judges them to be excessive. The Galvin Report (1995) cites this bureaucratic layering as among its top concerns. In the university setting, concerns have centered on the inter- pretation of Office of Management and Budget circulars A-110 and A-21, which set rules and account- ing practices and in the judgment of many universities impose rigidities and induce inefficiencies, a concern addressed in the Federal Demonstration Project (see note 481. 49. The Federal Demonstration Project is described in annual reports of the Government- University-Industry-Research Roundtable (Washington, D.C.: NationalAcademy of Sciences): 1993 Anr'~al Report (published April 1994), pp.12-14, and 1994Ar~n?~al Report (published 1995), pp.9-10; and in the brochure "What Is the Federal Demonstration Project?" (August 1991), available from the Roundtable offices. 50. If functions of programs are shifted from federal responsibility, for example through block grants to states, the necessary R&D capacity must still be sustained. In transportation, state funding is channeled through a private national organization, whereas in public health, drug abuse, and health services most research remains funded by the federal government, with outreach to the states.