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Supplement 2 Federal Funds for R&D ant! FS&T Distribution of Federal Funds for R&D as Currently Reported At present, the fecleral government invests about $70 billion annually to f~- nance the conduct of R&D in industry, federal laboratories, academia, and inclepen- dent research organizations. Of the nearly $70 billion spent on R&D in FiscalYear 1994, federal science and technology (Fame, as defined by the committee (BoxTT.3), received between $35 billion anti $40 billion, while the remaining por- tion was devoted to demonstration, testing, and evaluation of major systems. In FiscalYear 1994, about 45 percent of the federal R&D funds went to indus- try, 25 percent to the fecleral government's own laboratories (not including FFRDCs), 17 percent to institutions of higher education, ~ percent to FFRDCs, ant! about 5 percent to other nonprofit or nonfecleral research institutions. Based on standarc! current definitions, the federal government funds about 36 percent of all R&D in the Uniter! states.2 Tn recent years, the federal government has supplied about 60 percent of the funcis that support R&D in eclucational institu- lions, almost 20 percent of the funds for R&D in industry, and essentially all of the support for R&D in fecleral laboratories.3 Thus, it is apparent that fecleral funding has been essential to R&D performance in all three sectors. The Usefulness of Thinking About a Federal R&D "Portfolio" The federal government invests in a highly diversif~ecI portfolio of R&D in many disciplines and for many purposes. This portfolio includes programs and projects with wiclely different expected risks ant! pay-off horizons, is the responsibil- ity of many fecleral departments ant! agencies, and is pursued in a variety of institu- tions. No single clecision-making mocle] is appropriate to investments in all ele- ments of the portfolio; in fact, the different elements in the portfolio are established in quite different ways and at different levels. The federal government has not worker with a federal "budget" as such; instead, total annual spending on R&D by the fecleral government has resulted from the aggregation of the results of decisions made by separately compiling the budgets of the diverse departments and agencies. The Nature of the Contemporary Federal R&D ant! FS&T Portfolios In this section, the committee summarizes its unclerstanding of the salient features of the contemporary federal R&D and FS&T portfolios. The R&D data are taken largely from standard statistical sources, and, unless otherwise noted, are presented using the categories and clef~nitions employocl by the Division of Science Resources Studies of the National Science Foundation. The FS&T data were devel- opec! by the committee, and their derivation is discussed in Box IT.3. Several ques- tions about the FS&T budget concept are adciressed in Box TI.4. 51

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52 / SUPPlEMENT 2 BOX IT.3 THE FEDERAL SCIENCE AND TECHNOLOGY (FS&T) BUDGET CONCEPT For policymaking purposes, the key feature of research and development activities is their investment nature. Increasing the stock of knowledge and devising new ways to apply that knowledge are major sources of future growth and security. Research and development in the federal budget are not current-consumption items; decisions on federal support for research and development should take into account their future contributions to better health, greater military and economic security, quality of life, and human knowledge. It is especially impor- tant to factor in the future investment nature of research and development when budgets are being determined. Federal policymakers will want to sustain future economic growth, in part because it is an important way to address budget deficits in the long term. The committee understands fully that there is great uncertainty in research and develop- ment investments. The processes leading to commercially viable and socially useful technolo- gies are complex and involve substantial non-A&D factors. That makes investments in research and development necessary but not sufficient for technological progress. The uncertainty of where discoveries will be made and which of them will have practical uses underlies the committee's recommendation that the United States perform at the world-class level, if not lead the world outright, in all areas of science and technology (see Recommendation 4 in Part I of this report. As currently reported, federal spending for research and development totals approximately $70 billion a year. However, nearly half of traditional federal research and development spend- ing involves initial production, maintenance, and upgrading of large-scale weapons and space systems at the Department of Defense, Department of Energy, and National Aeronautics and Space Administration. Those activities are neither long-term investments in new knowledge nor investments in creating substantially new applications. If they were excluded, the re- search and development investment budget-called thefederal science arid technology (TS&T) budget in this report would be between $35 billion and $40 billion annually. The Department of Defense, which has by far the largest budget for research and develop- ment (nearly half of the $69.6 billion obligated by all federal agencies for research and develop- ment in FiscalYear 1994), has already begun to distinguish bet~veen"science and technology" and "systems development" in its research and development budget (see Table II. 11. The De- partment of Defense's definition of science and technology, which is essentially the same as that used for FS&T in this report, includes the first three of the seven research and develop- ment categories that the Department of Defense uses; systems development corresponds to the other four Department of Defense categories for research and development (see Table II. 11. In Fiscal Year 1994, approximately $24.6 billion in research and development activities sup- ported by the Department of Defense fell outside what this report identifies as federal science and technology (FS&13.2 Unlike the Department of Defense, the Department of Energy and the National Aeronau- tics and Space Administration do not break out the development portions of their research and development budgets by subcategories, and it is more difficult to determine how much of the research and development at those agencies should be classified as FS&T and how much ex- cluded.3 The Office of the Director of Defense Research and Engineering at the Department of Defense estimated that in FiscalYear 1993, about $5.1 billion of NASA's research and develop- ment budget of $8.0 billion-and about $5.0 billion o[DOE,s research and development bud- get of $6.3 billion-was equivalent to DOD R&D categories 6.1 through 6.3A and thus should be included in FS&T.4

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SUPPLEMENT 2 / 53 If the ES&T estimates for FiscalYear 1994 for DOD ($8 billion), DOE ($5 billion), and NASA ($6 billion) are added to the research and development totals for the other agencies ($19 billion), the approximate total for FS&T is $37.6 billion. Because that number incorporates some rough estimates, especially for DOE and NASA, the text of this report uses the range estimate of $35 billion to $40 billion for FS&T. See also COSEPUP (National Academy of Sciences, National Academy of Engineering, Institute of Medi- cine), Science, Technology, arid the Federal Government: National Goals for a New Era Washington, D.C.: National Academy Press, 1993); Ralph E. Gomory,"The Known, the Unknown, and the Unknow- able,"Scie~ztifcAmerican 272 June 1995):120. ~ DOD is currently working with the Division of Science Resources Studies at the National Science Foun- dation to report its R&D spending in two categories,~science and technology" and~systems develop- ment." That exercise should result in more precise estimates of FS&T spending by DOD and how it is distributed among performing institutions. 3It is possible that some ROD activities in agencies other than DOD, DOE, and NASA would not qualify to be FS&T, but the amount is probably negligible. In any case, the other agencies account for a very small portion of federal expenditures on development- less than 6 percent {$2.4 billion) in FiscalYear 1994. 4The figures were presented by Dr. Anita K.Jones, director of Defense Research and Engineering, at the January 1995 meeting of the committee. They were rough "guesstimates" made on the basis of telephone calls from Office of the Director of Defense Research and Engineering staff to contacts at DOE and NASA. TABLE IT. ~ Department of Defense R&D Budget (dollars in thousands) FY 1994 FY 1995 FY 1996 Science end technology R&D Category 6.1 Basic Research $ 1,167,211 $ 1,227,021 $ 1,213,918 6.2 Exploratory Development 2,760,676 3,069,940 2,816,061 6.3A Advanced Development 3,898,100 4,339,424 3,796,157 TOTAL SOT Systems Development R&D Category 6.3B DemonstrationlValidation 6.4 Engineering & Manufacturing Development 6.5 $7,825,987 $ 2,696,592 7,334,269 Management Support 3,367,685 Operational System Development 11,241,890 TOTAL Systems Development $24,640,436 TOTAL DOD R&D $32,466,423 $8,636,385 $7,826,136 $ 4,324,990 $ 4,229,027 8,930,372 3,435,590 10,187,818 $26,878,770 8,759,104 3,305,088 10,212,598 $26,505,817 $35,515,155 $34,331,953 NOTE: Adapted from Department of Defense data provided by R. Tuohy through private correspondence.

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54 / SUPPLEMENT 2 BOX IT.4 USING THE FS&T BUDGET CONCEPT: QUESTIONS AND ANSWERS WE adopt a new budgeting conceptfor R&D policymaking? In a period of severe constraints on the federal budget and reduced allocations for R&D, it is especially important to focus on the investment aspects of federal science and technology. The part of the R&D budget that supports science and key enabling technologies must be identified and considered in overall terms by Congress and Executive Branch policymakers It is FS&T that expands the stock of knowledge about the physical, biological, and social world and finds new ways to use that knowledge productively. Decision making on the rest of the R&D budget concerns testing and evaluation of large technical systems prior to production, and their subsequent modernization, and thus rests on different and shorter-term consider- ations than do the criteria for allocating funds for FS&T as defined in this report. Will the new FSST concept confuse peoplefamiliar with the conventional RED numbers that have been used since the early 1960s? Although continuity and comparability in data series are useful for policy analysts, it is more important for those making allocation decisions to have data that measure the right things. The usefulness of FS&T data and the increased effectiveness of budgeting based on them will more than outweigh the costs of implementing and learning how to interpret the new data series. In any case, OMB and NSF can continue to collect and report the traditional R&D totals, of which FS&T data are a subset. That approach is similar to the one now being taken by NSF and DOD in collecting data on the science and technology and the systems development parts of R&D at DOD (see Table II. 11. Do available data allow for departments, agencies, OSTP; OMB, and Congress to use the FSST budgeting concep~practically and ?~nambiguo?vsly? To implement the FS&T budget concept fully, some new data will have to be collected and some new interpretations of existing data must be made by some agencies. However, the agency most affected by the new approach DOD already tracks its R&D activities in a way that feeds directly into FS&T estimates. Making such determinations in DOE, NASA and per- haps other agencies should be relatively straightforward after experimentation with one or two years' budgets. Some funding in higher categories may support the science and technol- ogy base. Independent R&`D funds in federal procurement contracts (which are no longer reported fully) and some facilities and infrastructure elements may contain items that intu- itively belong in FS&T. The Internet grew out of one such account, for example. Over time, the FS&T concept and the data it generates will become a normal part of the budget process, and the current imprecision signified by the committee's range estimate of $35 billion to $40 billion annually will narrow. WE not j?,cst use trends in the basic research or total research Basic and applied) subcategories as a budget indicatorfor the science arid engineering enterprise rather than invent a new category? The strength of the FS&T budget concept is that it corresponds to the set of research and technology development activities typically conducted in the science and engineering depart- ments of U.S. research universities, many of the federal laboratories and FFRDCs, and some priorate firms. Those institutions conduct a rich, interactive mix of investigations aimed at discovering new knowledge of fundamental phenomena and their applications. Just looking at basic research or even basic and applied research is too narrow for federal policymaking.

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suppLEMExr 2 / 55 : :~If:developmer~t zs~ a ~con~m:uz~m, Isn't excZu~ng a part G!f items being~too~tied Stop the ~ : acquisition or upgrading of specific systems merely arbitrary? ~ ~ :: : it:: ::: :: : : : ~ : : : ~ : : ~ :: ~ : : :: : :: :: : : : : : I: ~ dapple g~arly~:d:efinitiox~al categories,~whether~the familiar R&D or new:FS&~ones,:to~ complex reality involves: some Contrariness. The oryx advantage of retaining: the old~definition : :: : : : ~ : : : : : : : :: : : ~ of development for DOD,~DOE,~and NASA is that~long usage has probably made~categoriza:ti:on ~: :: ~ :: : ; ~ : :: ~ decisions more consistent debut not~:necessari~y more valid). ~:~e~committee: believes Mat :FS&T~ :: I: corresponds more :cdosel;y~to:;the ~con~m:on-sense~ definition:~of R&D that moist people hold, arid: :: : : ~ : : . ~ : ~ : I::: : :: ~ :~ ~ :: at: : A: ~ : ~ : A:: ~:~ :: : : : ~ ~ Am: : : : ~ ~ ~ : ~ : : :: ~ ~ :: ~ :: A: : ~ :~ts~adoption::will;~not lead to serious~or:long-term Consistencies or cor~s~on.~R&D~activities :: ~ ~ : : : ~ : ~ ~ :~ ~ : :: : : : :: : :: ~ :: : : ~ ~ : : : :; : : ::~ beyond PS&T typicaRy spend most of their financial a~i~human~resources~ on ~systems~pera- ~ ~tion-tYD~e~ activities~:~:~her than~:t~: Pursuits of: new:kriowledae~ and~novel:anolic~ons.~ ~ : : : : ~ : ~ ~ : i: ~ ~ i: i: :~ ~ :~: : : ~ :: :: ~ ~ : Am:: : ~ : ~ :~ ~ ~ at: i: :: :: i: if: : ~ ~ i:: : :~ ~ : : :: : ~ i: i: : : ::: : i: i: ::::: I: : :;:: Does:usifzg~t~smallerbasegive~those::who~:wanttoprotect:thefunaing~of~ damental science and~technolo~v~less~to::trade o~in;a:~per~odofser~ious~:bu~cutti:n~.~::~ ~ ~:~:~ ~ :: : ~ :: : : :: : : : :: if: :: :: ~:~ :~ ::: :: i: :: :: :~::::~ : ~ :: :~: :: :: : Em:: i: : :: :::::: : :: : : ~ ~ :: : : : :~:;: : : : :~ ~:~:~ :: : of: I:: :~ : By: : :::; : :: : :: : ~ :: i:: : :: ::: ::: :: : :: a: ;:: hi: : ::: :: : ~ : : age:: ::::::: ~ ~ i: ~ ~ : : ~ : :: : ~ : ~ ~ ~ :: ~: I: The~r~ort:~points out~at~such trade-fissure not-cannot~be-made under the current: i: :: budget :structure ~ because~the~current R$D~ budget~is;~not~actuaity used~for~Wgeting purposes. ~ i: , ~ ; ; ~ ~ i; ~ ~ ~ ~ ~ ~ ~ : ~ ~It: is;to~led Wafter thereat and is ~based~on a: series of trade offs mater att::the~:agengy: {ever or:~Iower.: : : ~ . ~ . ; ~ ~ ~ ~ ~ ~ I...; ~:~;Spec~ilScaBy,~the~ $25~biRion;:~DOD 11&I3~ that is ~separate:: - m ~FS&:I cannot be:~reaBocated to :: ~ ~ ~ ~ i ~ ~ ~ ~ ~ ~ ; ~ ~ ~ ~ ~ :~: other~:areas~even~within DOD,: let aJone::~tc>~ other pats 0 f federal budget. ~ After lengthy : :~: ~ ::: :: ~ i: i: ~ :: :: :: :; :: :~ :: : : :: :: :~: ~ ~ :: i: : ~ :: : i: : :: : : ~ : : ~ ~ i:::: ~ ~ i: : it:: : ~ : :: : ~ : : : :~debate~on:this~issue~,~the committee conclu(led~:~at~:supporters~ofa~stro~scie~nce~and techbol-: ~ : : :ogy~ enterprise~::~the~:United States; areas better :off defen~,:i:~e:~:~smaBer FS8iT~:~budget than :;: : ~ ~ ~ : ~ ~ : ~ ~ :: ~ ; ~ : ~ ~ ~ ~ ~ :: :: : : ~ : ~ : :: :~ ::: ~ : ~ : : :: : i:: :retaining~e larger~tradition~R&kD: n,mnber in::~h~pes oicaph:~nng some :of me fund:ing~for such i: ~ ~ ~ : : : :: : : : :: ~ Systems We gineenag and: operational support as u~ding~the~Navy's~;:~14s. The greater prob-:: :~lem~may be protecti~g~the~:FS&~se~hom the major;~cutback~s:in:systems approaching the filll : :: ~procurement~stage~. ~ ; ~ it: ~ ~ ~ ~ . ~ ~ ~ ~ ~ . ~ ~ ~ ~ : Mill serf the:PS&T~budget~:concept throw ~Fzr'~ternational~comparisoris? ~ ~ ~ : ~ ~ i :~ : ~ : ~ :: ~ :: : :: ~ : ~ ~ : : : : : : ::: :: : ~ : ~ : : : : : i: : : : : ~ ~ ~ ~ ~ All: Ibe con~mittee~:~did noti~stu~y the issue ~ any: Kept bhm~has:~the impression that only a few: : other countries' budgets :for science add: technology include systems Development for national defense: of : the kind that DOD does, Wands so me FS&T number: is a more accurate basis ~ for : ::: :: :: : ~ : A: : : : :: :: : : : : ~ : : :i~ernatiodal ~compansons: than is:~the city reported Snubber :for ~fedeiali~R&D. The:impor tent thin": is to use:~the:right~number one: that truly:measures~:R&D:andiis:~consistent~:wi~ the: : , : numbers: reported~by over Platens:.: More work :wiB :be: needed to clarify the meaning of : :: ; :: ~ ~ I: ~ : ~ : ~ ~ ~ ~ ~ ~ ~ : : :: : :: : : : : ~ : ~ : : : ~ :internatio~l:science an:d technology buclget::comparisons.; i: :~: :~:: : :~ ~ ~ of: ~ : : ~ ~ : ::: : : ~ ~ :: . ~ ~ ~ ~ ~ ~ :~ ~ :: : ; :: ~ : ~ ~ :~ ~:~ WbatfT'elds~ofscience:andAecl~nolo~vareinclucted~in:tbeFS&Tbase? ~ : ~: ~ ~::: :: :: : ~ I: :~ : a: :~: ~ a: ~ ::: :: :: ;:::;: :: ::~: :::: :::::: I:: :: :::: :: ~ A: ether FS~T~b~e:: is :defined as work idte~ed~ :mairdy~ to :prodLce: new: ikno~ie~ige or new ~technology,: Wand so Alit Eludes the ~filll range of ~ fields in Scene and engineering:: the: life : sciences,ph~cal~sciences,~environmentalor~geosciences,:~mathemancal;andcomputersct-~;~ :ences, psychology,~social: sciences,: end engineering. ~These~:are>~the :same fields~included~by~NSF :=d::~OMB~;in~ calculadng~fe:deral R&D.~;~The:~ FS&T:base~so contributes~to~a :broad~:range :of A:: : : ~ :: I: :~ : :: :: : ~ ~ : ~ : ; : :::: : : : ~ : : ~ : :: : : :: :: ~ i: it: : :: :: :: : : ~ :: : : : I: : national programs beyond : the well-h~own ones o f health, clefense, Culture, energy,:~space, ~ end:: fundamental~disciplinary:research.: work in me FS&:I : tease is~also conducted to improvers : : ~ A: ~ : : ~ : :: : ~ ~ : : :: ~ : : ; : : : : transportation systems and other: types of public~:works:~infrastructure, environmental : ~ : : : : : : : :: : : : ;: : :: : : : : : : : : remediation,work education programs, criniinaI justice, standaicls a~l:measures,~research:back : ~ : ~ ground for regulat~actions~,: and many other arose public concern.: ~ ~ :: : : : ~ ~ ~ : ~ :: : : :~: : : ~: ~ ~ : it: ~ :: i: ~ Am: ~ ~ ~ ~ : ~ i: ~ ~ ;: : : ~ ~ i: : ~ ~ : i: At:: ~ ~ ~ : : : ~ Gil:: ~BoxIL4:continues~on~next:page. ::: : :~::~ ~:: : :

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56/ SUPPLEMENT 2 :::: i: I::: :: : A: ::~::::;~: :: ~ ~ :~:: :; :: ~a:;:::: : :~ ~ ~ :~ :: ::~: :~: : ::;::::::: ~ ~ i: a:::::: ~:~::~ ~:~ ~:~:~::~:~;~:~: : :: ~ ~ ~ ~ ~ ~ ,,, ~ ~ ~ ~ ~ ~ ~ ~ ~ :~ ~ ~ ~ ~ ~ ~ ~ ~ ~ hi; ~ ~ ~:~ ~ ~ BOX H~;~:CO~ED~:~ ~I: ; ~ ~ ~:; ~ ; ~ :~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ::: ~:~ ~:~ ;~ ~:~ Hi: ~;~ ~ ~:~: Aft: :~: ~ ~:~:~:~:~:~: ::::::: ~ :~::~:~:~a~t~method;~:?ans~used to:estimate~tk)e~levels~o~ ~(ndi~gJ¢r~e~FS&TbasesbouJn Ant :~:: ~ If; ~res:'n~ - :::: ~ ~:~ ~ i: ~::~ ;: ~ ~:~:~;~: ~ ~ ~:~ ~ :~ ~ ~ ~ ~ : : ::: ~ : : : : :: : ~; ~ :: a: : : i: ~ A: ~ ~ : :~ ~ :: ~ I: I; :: :: i: ~ ~ :: :~ : : :; : : : : :: ~ : ~ I: : ~ : ~ ~ I: ~ ~ ~ : : ~ : :: ~ : : ; : : ::::: ::: ::::: : :: ~ : : go:: :: ~ : ~ ::: : I:: ~ a: : ~ ~ : ::: : : :: : A::: ::: ::: : ;: : ~ :::: : : : : ~ : :: ~ : A number~assumpe~ions and~sources~of~data~were;used~to appt~xIinate~th;e levels~of funding~for the ~FS&T~base~;0hey;~are~(letailed~in~the~caption Acre eath~figure).~ Me general ~ap- ~proach was~to subtract the~advarced~systems~ileve~opmem - ~ng~of DOD, NASA, and DOE from totalfederal~R&D spending as~curremly:~reported:~ ~ ~ ~ ~ ~ ~ ~ ~ ~ if; :: ~ : : :~: : : : ::: A: ~ ::~ :: ~::~ i::: :::: :~:::: :: ~ ~ : ~ ~ : Ad::;: :::: :: : ~ i::: : i: : :::: : :: : :: : ~: : : :: ~ :: : :: : : : : : : : : : : : ~ :: : : ~ ~ :~ : :: I:: :: ~ : ~ : ::: i:: :: ~ :~ ~ :: : : : : FurI~ng~of research byall~federal;agencieswasinduded; ~ ~ · ~ Funding of development~by all federal ::agencies:~except the Department elf Defense, ~ a: NationalA~eronautics and Space~Administratior', and Department of Energy was Included; Funding~of what~DOD~calls Research Category 6.3A was included, as reported by the Office~ofthe~Directorof~DeftnseRtsearchand~Engineeri~(ODDR&E). l~us,fundingof categories 6.3B through 6.6 was not ~included; and FmaDy, and~most roughly, funding of the equivate~c of 6.3A-type activities by NASA and DOE was mduded (based on estimates for FY 1993 made by ODDR&E). ~: : : : ~ : ~ : ~ : : : ~ : ~ : :: ~ The procedure outlined above yields an estimate of $37.6 billion for the FS&T base in FiscalYear 1994.~Because mat number Is based on a series of approximations and extrapola- tions, the range of $35 billion to $40 billion is used ~ this report. The point estimate of $37.6 billion is used for illustration in the accompanying fifes, with similar estimates for other years (see Box II.31. ..... ~ These fields are listecl: and defined in National Science Foundation Fe`leral Princes for Researek and , Development: FY 1992, 1993, and 1994, NSP 94-328 (Arlington,Va.: National Science Foundation 1995), pp. 6-9. : ~ : : Federal RED supports hot* a core of FAST and a set of activities closer to production or application. Most federal departments and agencies report their total investments in R&D within three categories: basic research, applied research, and clevelopment. How- ever, for some agencies in particular DOD, DOE, and NASA-R&D expenditures include the costs of activities that in other agencies or in the priorate sector might be consiclerec! as outside the scope of R&D, inclucling engineering development, up- gracies and modernization, testing and evaluation, ant! the like. As discusser! in Part ~ of this report, the committee focuses on the FS&T investments of the federal departments and agencies. For most of them, FS&T is identical to R&D. For DOD, DOE, and NASA, however, the committee excludes (demonstration, testing, and evaluation of existing technologies from FS&T. For FiscalYear 1994, the committee estimates that total fecleral R&D funding was approximately $70 billion, while FS&T binding was between $35 billion and $40 billion.

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SUPPLEMENT 2 / 5 7 70 60 cn 0 40 = . _ Q . _ 30 10 O- 1 1 1 1 1 985 1 986 1 987 1 988 1 989 1 990 1 991 1 992 1 993 1 994 1 995 ----- R&D in Current Dollars R&D in Constant 1987 Dollars -FS&T in Current Dollars - - - - - FS&T in Constant 1987 Dollars FIGURE II.1 Trends in federal support of R&D and FS&T, Fiscal Year 1994. SOURCE: Data on federal R&D from Table C-93a, NSF, Federal Funds for Research and Develop- ment: Fiscal Years 1993, 1994, and 1995, NSF 95-334 (Arlington,Va.: NSF/Division of Science Resources Studies, forthcoming). The data for FY 1985 through FY 1993 are actual obligations; those for FY 1994 and FY 1995 were estimated by the R&D agencies. The GDP implicit price deflators (1987 = 100) were taken from Table B-1, NSF, National Patterns of R&D Resources: 1994 (NSF/ Division of Science Resources Studies, 1995), p.8. FS&T numbers were derived from agency ROD budgets by subtracting spending for DOD research categories 6.3b through 6.6 and spending for equivalent activities at NASA and DOE in 1993, as estimated by the Office of the Director of Defense Research and Engineering, and extrapolated to 1994. The fed;era! RED (and INSET) portfolio is complex and diverse. Figure A. ~ shows the trencts over the :last clecade in fecleral R&D and FS&T funding in both current- and constant-dollar terms.4 While the current-dollar curve suggests a slow, steady rise in fecleral R&D spending up until FiscalYear 1994, the constant-clollar curve shows that total fecleral R&D spending peaked in FiscalYear 1990. The downturn from 1994 to 1995 is actually larger than indicated in the figure, because nearly $2 billion in FiscalYear 1995 budget authority has been subsequently rescindecI. The Presiclent's budget for FiscalYear 1996 calls for cuts of about 20 percent in real terms over the period from 1996 to 2000, and congres- sional spending plans call for even larger reductions in R&D 33 percent in real terms by FiscalYear 2002, according to the budget resolution of Tune Igg5.s FS&T has shown a somewhat different pattern, owing to the subtraction from R&D of the very rapidly changing and large amounts of spending in non-FS&T programs. in FiscalYear 1987 clollars, FS&T funding grew steadily from 1985 through 1993 and has been essentially constant in 1994 anti 1995. Figure TI.2 shows trencis in the ratios of federal support for R&D and FS&T to gross domestic product (GDP). The fecleral government has recently investec! the equivalent of about ~ percent of the GDP in R&D, although the ratio has been slowly cleclining for some time, from nearly I.5 percent 25 years ago. The propor- tion of GDP corresponding to FS&T has been growing slowly and is now in the neighborhood of 0.5 to 0.6 percent.

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58 / SUPPLEMENT 2 1.60 -I 1.40 -ark '.20 - 1.00 ° 0.80- a 020- ·-- Fort RR n 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 FIGURE II.2 Trends in federal R&D and FS&T spending as a percentage of GDP, Fiscal Year 1994. SOURCE: Federal R&D and FS&T figures are from the sources cited for Figure II.1, GDP data are from Table B-1, National Science Foundation, National Patterns of R&D Resources: 19961 (Arlington,Va.: NSF/Division of Science Resources Studies, 1995), p. 8. Federal R&D Environment Agriculture Other 3% \ 2% 2% Transportation \ / 3% ~\ _ Energy General Science Health 16% FS&T Defense 55% Agriculture Other Environment 3% 4% 5% 1 Transportation \' 5% ` - ~;: ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~: ~: ~ / , ~ _ ~, Space / ~ [_ , 15°/ O Health 28% Energy 6% ~] General Science 7% Defense _ 27% ~: : ail_ _ ~_1 _ ~: , _ _ _ ~, _ l _ l _ ~ ~it: . _ . a: . . . : : ~ ~: : :: , FINLIKE II.3 Federal R&D and FS&T funding by national goal, Fiscal Year 1994. SOURCE: Data on federal R&D are from Table 4, National Science Foundation, Federal Fundirzg by Budget Fz~r~ctior': Fiscal Years 1993-95 (Arlington,Va.: NSF/Division of Science Resources Studies, forthcoming). FS&T data were derived by substituting FS&T funding by DOD, DOE, and NASA from Figure II.1 for National Defense, Energy, and Space Research and Technology R&D totals (this exer- cise involves making a somewhat arbitrary division of DOE FS&T between national defense activities (atomic energy) and energy activities).

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SUPPLEMENT 2 / 59 DOE 9% NASA 13% DOE 14% - NSF 3% \ i: Others 8% DHHS 16% NSF 5%~' - - NASA 15% DOD FIGURE II.4 Distribution of R&D funds 51% among the agencies. SOURCE: Data are from the American Associa- tion for the Advancement of Science, unpub- lished tables of federal R&D funding by budget function and agency, Fiscal Years 1994 through 1996, provided by Kei Koizumi, Directorate for Science and Policy Programs, ALAS, September 26, 1995. Others 14% 1 DOD 22% ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Aft. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~/ rig FIGURE II.5 Distribution of FS&T funds among the agencies. SOURCE: Data as for Figure II.4, modified as noted in Figure II. 1. The federal government supports R&D in the pursuit of diverse national goals and objectives. Federal spending for R&D is heavily focused on defense, health, space, ant! energy, as indicated in Figure [~.3. FS&T funding is less heavily focuses! on defense, and a greater portion is clevotect to health and other topics. Reflecting the diverse goals of fecieral R&D spending, most federal departments ant! agencies support at least some R&D, as illustratecl in Figure IT.4. Figure TT.5 shows FS&T funding as allocated among the agencies. Federally supported R&D is performed in diverse institutions, including gov- ernment laboratories, industry, academic institutions, and independent R&D organi- zations (see Boxes TT.5 and [~:.61. Figure TI.6 shows the breakdown of fecleral R&D spending among the different categories of performing institutions for FiscalYear 1994. Note that industry is by far the largest performer of federally funded R&D, followed by government laboratories and then academia, with other nonprofit institutions playing the smallest role. As Figure TT.7 indicates, the largest proportion of FS&T is performed by government-owned, government-operated laboratories; academic institutions are the seconct largest performers; and industry is in third place.

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60 / SUPPLEMENT 2 : ::: BoxH.5:~ GA~GoRn~s OF R&D PERFORMERS Thousands of institutions in fee fruited Instates conduct R&D, funded by ~govern~nent, m ; dustry,~state and local govemments, private foundations,~funds from colleges aids universities :: ~ ~ ~ : : , end othetsollrces. If: ~:~ i:: : ~ i: ::::: :::: :~:: :: ~ ~ :: ~ ~ ~ ~ : : : of: : i: :::: : : : ~ : :~ : : : :: : : : : ~ Indus~ial research: is earned ~out~;b~r thousands of firms,~large Wanda small, Though some ~100 large firms account~for more~than 50~ percent of ~all~industrial R&D spending. The largest performers of industrial R&D are the aircraft, communications eauinment,~chemical,;and com puler: ana :oruce ::equlpment :irldustries.~: : : : lithe-lair Or Or_ ~ ^__~·~_.~·~_~ Lily ~:V:~1~ ~rrt`~ ~It?~-~QllQU~b bOU1~ research. ;; However, about 100~ ~ver sities~accouxlt forte than 80 percent Foxhall academic~R&`D spendir1 . ~ ~ ~ ~ It is estimated that there: are more than 700federal :1aboratories~iinclud^~FFRDCs. How ever, ~ a much ~smaller~number of these are of substantial size. wish: a few dozen conducting most of therm) done ~ such facilities (see Box: II.6 .1 ~ ~ ~ ~, ~w _ ~ ~ ~ : : :: i: Other nonprofit ~institutions: also Make important contributions Pro national R&D perform mance. These Include medical research institutions not associated w~th~academ~c mstitutions~ nonprofit research orb tions such~as~Battelle Memorial Institute and Southwest Researcher Institute, and others. ~ ~ ~ ~ ~ ~ . ~ 'Federal: Coordmating~Council for Science, Engineering, end technology, Trends in the Structure of Feed eral Science 52'pport QWash~ngton,:D.C.:: Office of Science and Technology~Policy, 19921.: Box: II:.6 : TYPES OF FEDERAL [ABORATO~ · Govemment-owned,governmentvperated laboratory, or GOGO-:a laboratox y owned operated, and funded by the federal government and staffed by federal employees. Examples include GIST laboratories, NIH intramural laboratories, the National Institute of Occupational Safety and Health, and the USDA Peoria Regional Laboratory. : · Government~wned, contractor-operated laboratory, or GOC:O-a laboratory owned and fimded by the federal government and operated and staffed bye private contractor. The contractor may be a profit-making firm, a nonprofit organization, or one or more academic institutions. Examples include all of the DOE national laboratones mentioned below :. : National laboratory-a large,multipurpose~laboratory of the Department of Energy, including the major weapons laboratories-Los Alamos, Sandia, and Livermore-as well as Argonne, Brookhaven, Oak Ridge, Lawrence Berkelev and 1)ther.s (Nat;on~1 T.~h~rnt~ri,~c one type of FFRDC-see next item.) · Federally funded research and development center, or FFRDC-a particular form of long-term government contract with a nongovernmental organization to staff and operate a laboratory or other research center that is funded ~ whole or in substantial part by the federal government. Some FFRDCs are agreements to operate GOCOs,while others are contracts that support contractor-owned and cor~tractor-staffed organizations. PFRDCs are Operated by aca- demic institutions (e.g., the Lincoln Laboratory by Massachusetts Institute of Technology) or nonprofit organizations (e.g., Project Air Force at RAND), acting alone or in consortia, as well as by profit-making firms OCR for page 51
SUPPLEMENT 2 / 61 FFRDCs 8% Other Nonprofits \ Federal Intramural Laboratories . / 25% Universities/colleges 17% - :~ ~ ~ ~ ~.~ ~ ~ ~ ~: ~ ~ ~ :~ ~ ~ ~ ~ ~ ~ ~ ~ ~ it, ~ .~ ~ ~ : ~: ~, ~ ~ ~ ~ ~ ~, I, it, , it, ~ ~ , , I, , i, ~, , ~ ~:~ / Industry 45% FIGURE II.6 Allocation of federal R&D funds among categories of performers, Fiscal Year 1994. SOURCE: Data calculated from Table C-8, National Science Foundation, Federal Funds for Research and Development: Fiscal Years 1992, 1993, and 1994 (Arlington,Va.: NSF/Division of Science Resources Studies, 19951. Universities/colleges 31% Nonprofits 8% FFRDCs ~ 1 Oslo ~1 ~ ~ - 1 _ _ _ Other 1% Federal Intramural Laboratories `9% , ~ , a, ,, ~ ~, \ Industry 21% FIGURE II.7 Allocation of FS&T fiends among categories of performers, Fiscal Year 1994. SOURCE: Derived as follows: (1) R&D obligations by performer (for all federal agencies except DOD, DOE, and NASA) were taken from Table C-8, NSF, Federal Funds for Research and Develop- ment: Fiscal Years 1993, 1994, and 1995, forthcoming. (2) DOD, DOE, and NASA obligations for research, by performer, were taken from the same source. (3) Obligations for 6.3A by DOD were allocated among performers in the same proportions as reported in Appendix A, DOD, DOD Re- sponse to NSTC/PRD #1, Presidential Review Directive on an Interagency Review of Federal laboratories (February 24,19951. (4) Obligations for the equivalent to 6.3A by DOE in FY 1994 ($ 1.5 billion), as estimated by the Office of the Director of Defense Research and Engineering (see Box II.3, footnote 4), were allocated among performers in the same proportions as DOE obligations for all development in FY 1993, as reported in Table C-9, NSF, Federal Funds for Research and Development: FY 1992, 1993, and 1994, 1995. (5) The same approach used in 4 above was also used to allocate 6.3A-equivalent obligations by NASA in FY 1993 ($1.4 billion) among performers. (6) The funding by type of performer in 1-5 was summed and the overall percentages determined.