President's Private Sector Survey on Cost Control: Report on Research and Development

President's Private Sector Survey on Cost Control, Washington, DC

1983

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PRESIDENT'S

PRIVATE SECTOR SURVEY ON COST CONTROL

REPORT ON

RESEARCH AND DEVELOPMENT

APPROVED BY THE SUBCOMMITTEE FOR THE FULL EXECUTIVE COMMITTEE, WINTER 1983

BIBLIOGRAPHIC INFORMATION

PBS 4-17 3269

President's Private Sector Survey on Cost Control: Report on Research and Development.

1983

PERFORMER: President's Private Sector Survey on Cost

Control, Washington, DC.

The report represents the results of the Research and Development Task Force of the President's Private Sector Survey on Cost Control in the Federal Government. The Report on Research and Development contains major recommendations which, when fully implemented, could result in three-year, cost sav.ings of $45,07 4 billion, including $32,984 billion in savings and revenue opportunities contained in other PPSSCC Reports. It should be noted, however, that some of the recommendations may require several years for the savings to be realized. While all facets of Research and Development could not be surveyed in the time allotted, areas selected for review were considered to offer significant potential for cost control and improved efficiency.

KEYWORDS: *Cost control, *National government.

Available from the National Technical Information Service, Springfield, Va. 22161

PRICE CODE: PC E05/^F AOl

i

PRESIDENT’S PRIVATE SECTOR SURVEY ON COST CONTROL

REPORT ON

RESEARCH AND DEVELOPMENT

APPROVED BY THE SUBCOMMITTEE FOR THE PULL EXECUTIVE COMMITTEE, WINTER 1983

For sale b,v the Superintendent of Documents, U.S. Government Printing Office Wnshlngton, D.C. 20402

THE PRESIDENTS PRIVATE SECTOR SURVEY ON

January 20, 1984

The Honorable Ronald Reagan President of the United States The White House Washington, D.C.

Dear Mr. President:

The following Report represents the results of the Research and Development Task Force of the President's Private Sector Survey on Cost Control in the Federal Government. The Task Force was chaired by William F. Ballhaus, President, Beckman Instru- ments, Inc.; Karl D. Bays, Chairman and CEO, American Hospital Supply Corp.; James L. Ferguson, Chairman and CEO, General Foods Corp.; David Packard, Chairman, Hewlett-Packard Co., and Edson W. Spencer, Chairman and CEO, Honeywell, Inc., with Eugene E. Yore serving as Project Manager. The report culminates the combined efforts of 30 individuals who devoted extensive pro bono work to the PPSSCC initiative. A list of all Task Force members is enclosed with this letter.

The Report on Research and Development contains major recom- mendations which, when fully implemented, could result in three- year cost savings of $45,074 billion, including $32,984 billion in savings and revenue opportunities contained in other PPSSCC Reports. It should be noted, however, that some of the recom- mendations may require several years for the savings to be realized. While all facets of Research and Development could not be surveyed in the time allotted, areas selected for review were considered to offer significant potential for cost control and improved efficiency. The importance of the accompanying recom- mendations rests on the fact that they represent the potential for better utilizing finite resources available to the Federal Government .

Clearly, other opportunities for cost savings and revenue generation exist but, due to limited time and personnel re- sources, they could not be pursued. Several are suggested for further review because they offer future potential savings and revenue opportunities.

On behalf of the Co-chairs and Task Force members, I would like to express our deep appreciation for the opportunity to have been of service to you and the members of your Administration.

Respectpjlly ,

J. Peter; Grace

Chairman, Executive Committee

1330 K Street. N.W. • Suite 1150 » Washington, D.C. 20C06 (202) 466-5170 - »

FORCE MEMBERSHIP

CO-CHAIRS

William F. Ballhaus president

Beckman Instruments ^ Inc.

James L. Ferguson Chairman and Chief Executive Officer General Foods Corp.

Edson W. Spencer Chairman and Chief Executive Officer Honeywell, Inc.

PROJECT MANAGER

Dr. Eugene E. Yore Corporate Director, Design Automation Honeywell, Inc.

DEPUTY PROJECT MANAGER

Steven Malevich Manager, Emerging Issues Program Beckman Instruments, Inc.

TASK FORCE MEMBERS Ronald H. Abrahams R. Glenn Affleck Dr. Walter R. Beam John L. Bilangi Sarah Messengale Billock

Karl D. Bays Chairman and Chief Executive Officer American Hospital Supply Corp.

David Packard Chairman of the Board Hewlett-Packard Co.

American Hospital Supply Corp Hewlett-Packard Co.

Sperry Electronic Systems American Hospital Supply Corp American Hospital Supply Corp Hewlett-Packard Co.

Clyde F. coombs, Jr.

TASK FORCE MEMBERS (CONT'D)

James L. Copenhaver

Stuart N, Davidson

Walter Donner

Maurice E. Esch

Stephen P. Hirshfeld

Grace M. Holden

Linda K. Holt

George A. issac. III

John W. James

Virginia L. Jamison

Donald A, Klein

Ralph E. Lee

Edward j. Marteka

Thomas H. Morton

Oksana Orel

William T. Ryan

August Schellhammer

William G. Schmick

Roger N. Schmidt

Stephen S. Thaxton

Sam D. Walker

Florence M. Zeller

Honeywell, Inc.

Beckman Instruments, Inc. Beckman Instruments, Inc. Honeywell, Inc.

Honeywell, inc.

Independent

Common Sense Management Inc. Touche Ross & Co.

Beckman Instruments, Inc. Independent General Foods Corp. Hewlett-Packard Co.

American Hospital Supply Corp. General Foods Corp.

Beckman Instruments, inc, Beckman Instruments, Inc. Vought Corporation Hewlett-Packard Co.

Honeywell, Inc.

American Hospital Supply Corp. General Foods Corp.

Independent

PRESIDENT’S PRIVATE SECTOR SURVEY ON COST CONTROL

REPORT ON

RESEARCH AND DEVELOPMENT

APPROVED BY THE SUBCOMMITTEE FOR THE FULL EXECUTIVE COMMITTEE, WINTER 1983

PREFACE

. On June 30 r 1982, President Reagan signed Executive Order 12369 formally establishing the President's Private Sector Survey on Cost Control (PPSSCC) in the Executive Branch of the Federal Government. An Executive Committee under the chairmanship of J. Peter Grace was established, consisting of 161 high-level private sector executives--roostly chairmen and chief executive of f icers--f rom many of the nation's leading corporations.

Briefly stated, the President directed the PPSSCC to:

o Identify opportunities for increased efficiency and reduced costs achievable by executive action or legislation.

o Determine areas where managerial accountability can be enhanced and administrative controls improved.

o Suggest short- and long-term managerial operating improvements.

o Specify areas where further study can be justified by potential savings.

o Provide information and data relating to governmental expenditures, indebtedness, and personnel management.

The Executive Order also provided that "the Committee is to be funded, staffed and equipped ... by the private sector without cost to the Federal Government." To implement this objective, the Foundation for the President's Private Sector Survey, on Cost Control was established. It formed a Management Office which organized thirty-six "task forces," each co-chaired by two or more members of the Executive Committee, to do the "preliminary reports."

Twenty-two of these task forces were assigned to study specific departments and agencies, and the remaining fourteen studied functions cutting across Government such as personnel, data processing and procurement. In addition to individual task force reports, the Survey Management Office has issued a series of reports on selected issues. Apart from the Executive Committee, in its official capacity, none of the task force members had any authority to make recommendations to departments and agencies or to the President.

A listing of the thirty-six task forces follows:

Agriculture . Air Force

Autmeted Data Procesaing/Office Automation

Boardi/Cononissiona-Banking Boarda/Coianiasiona-Buaineaa Related

Commerce

Oefenae-Office of Secretary Education

Eneroy (including F*d«r*l Enurgy Regulatory CoBBtiiaiion and Nuclear Regulatory Cosdnission)

Environaiental Protection Agency/Small Buaineaa Adminiatration/Federal Boergency Hanagememt Agency federal Construction Management Federal Feeding Federal Hospital Management Federal Management Systems Financial Asset Management

Health & Human Services-Department Management/ Human Development Services /ACTION

Health a Human Services-Public Health Service/Health Care Financing Administration . , «

Health a Human Services-Soexal Securxty Administration Housing a urban Development Interior Justice l#abor

Land, Facilities and Personal Property Low Income Standards and Benefits Havy

Personnel Management Privatisation

Procurement /Con tract s / Inventory Management

Real Property Management

Research and Development

State/AID/USIA

Transportation

Treasury

User Charges

Veterans Administration

Each of the 36 task forces prepared a draft report and, with a few exceptions, an appendix, supporting the recommendations contained in the task force report. Those appendices at the Department of Commerce's Central Reference and Records inspection Facility. It should be noted that recommendations relating to any one federal agency may be included not only i the appropriate agency task force report but also in the repor s of the functional cross-cutting task forces.

It is important to note that cost savings, revenue, and cash

acceleration opportunities in this report may (.r"' ThL

dollar opportunities reported in other task ^®^ce report . '

there may be instances of double counting of dollar opportunities between task force reports. These duplications will be netted- out in the Final Summary Report to the President. Additionally, dollar estimates in this report are based on reasonable and _ defensible assumptions, including standard three-year projections based on when first, second, and third year partial or ful implementation will occur and not specific fiscal years. Accordingly, estimated savings or revenue opportunities are^ understandably .of a "planning" quality and not of a budget Quality. Therefore, the reader should guard against drawing conclusions or making dollar projections based on the disclosures contsin^d .only in this rsport*

A glossary of terms used in categorizing PPSSCC-identif ied opportunities follows.

o Cost Savings include:

Cost Reduction - reduction of budget

expenditures, generally ongoing

Cost Avoidance - avoidance of cost for

anticipated but unbudgeted expenditures, generally ongoing

0 Revenues include;

Revenue Enhancement -

Revenue Acceleration -

increased receipt of existing or new revenues, generally ongoing

sale of fixed asset for cash, generally one-time

o Cash Acceleration includes :

improvement of the cashflow, generally by accelerating the cash inflows and/or decelerating the cash outflows. Generally ongoing, but may be a one-time occurrence.

The standard three-year projections of cost savings and revenues include 10% inflation in Years 2 and 3. On revenue accelerations and cash accelerations, savings are claimed on the interest avoided which is estimated at 10%. These rates reflect generally prevailing rates at the time the Task Force reports were prepared and may be adjusted, as necessary, in the Final Summary Report to the President.

In addition to identifying specific opportunities for cost control and improved efficiency, PPSSCC sought to identify the appropriate implementation authority for each recommendation. Because of the complexities of the appropriations process, as well as historical precedents, however, further data could result in a change in the PPSSCC-identif ied authority.

All of the PPSSCC reports were considered and acted upon in a meeting open to the public by a Subcommittee of the Executive Committee of PPSSCC r along with other statements and recommenda- tions. Written comments submitted by the public, if any, have been forwarded to the White House along with the final PPSSCC reports. In addition to individual reports, the PPSSCC Executive Committee will adopt a Final Summary Report to the President, summarizing the scope of its individual task force recommenda- tions and offering general conclusions and advice. This Summary Report is tentatively scheduled for release in late Fall.

TABLE OF CONTENTS

Page

Number

EXECUTIVE SUMMARY

THE REPORT RECOMMENDATIONS — A PERSPECTIVE I. INTRODUCTION

II. ISSUE AND RECOMMENDATION SUMMARIES

R&D 1:	Strategic Planning	14
R&D 2:	R&D Management and the Budget Process	38
R&D 3:	Privatization	59
R&D 4:	Improved Management of Resources in Federal Research Laboratories	67
R&D 5:	Administration of Research Grants to Universities	81
R&D 6:	Research Program Reporting	103
R&D 7:	NASA Cost Reporting	113
R&D 8:	Compendium of Selected R&D Issues	118
SUMMARY	LIST OF RECOMMENDATIONS AND SAVINGS	127
COST CONTROL OPPORTUNITIES FOR FURTHER STUDY	130

IV.

TABLE OF EXHIBITS

Exhibit	Title	Page Number
I-l	Intersectoral Transfers of Funds Used for Performance of Research and Development, 1982	2
1-2	Total R&D Budget; Percent Distribution	4
1-3	Federally Funded R&D by Performer, FY 1983	6
1-4	Federal Obligations for Basic and Applied Research by Category, FY 1983	7
1-5	DOD R&D Budget by Service; Percent Distribution	8
II-l	Strategic Planning	15
II-2	Summary Table; Five Federal Goals Compared to Basic Industry Criteria for Establishing Effective Goals	24
II-3	FY 1983 Budget Process	40
II-4	FY 1983 R&D Federal Budget Detail	43
II-5	Congressional Staff Size 1947-1980 (Personal and Committee Staff)	46
II-6	Congressional Staff Size (R&D Oversight Committees )	47
II-7	Federal Employment Compared to Congres- sional Staff Size	49
II-8	Relative Percentage of Scientists and Engineers Employed in R&D by Sector; Nature of R&D by Sector	68
II-9	Number of Federal Research Labs and Percent of Total Operating Costs; Percent of Total Research Lab Operating Costs, by Agency	75
II-IO	Trends in Total Federal R&D Budgets and Federally Supported University Research	83
II-ll	Source of R&D Funding and Type of R&D Performed at Universities	84

' Jj '' K

T&RT.R OP EXHIBITS (CONT*D)

Page

Exhibit	Title	Number
11-12	Federal Obligations for Research & Development to the 100 Universities and Colleges Receiving the Largest Amounts, by Agency: FY 1980	85
11-13	Distribution of University RiD Support Among Major Federal Agencies	89
11-14	Differences Resulting from NSF's Redefinition of Grant Procedures	96
11-15	R&D Issues Covered in Other Reports	120
IV- 1	Institutions Having the Greatest Number of Publications in Coal Gasification	140
IV-2	Sonv Corp. Technology (Patent Activity) Lofile for Years 1971 to 1980 Using U^S. Patent Office Classification System	142
IV-3	Number of Scientific Papers Produced by Federal Laboratories	143
IV-4	Quantitative Comparison of Two Multi- Disciplinary Programs	145
Table	Title	Page Number
II-l	History of Indirect Cost Rates Paid by NIH	92 •
II-2	Trends in Average Amount Awarded for NIH Traditional Research Project Grants; Fiscal Years 1970-1982 in Terms of 1970 Dollars	94
II-3	Federal Obligations for Research in the Physical and Environmental Sciences by Agency and Detailed Field of Science: FY 1983	104
II-4	National Marine Pollution Program Funding by Agency and Categories in FY 19bi	108

TABLE OF EXHIBITS (CONT*D)

Figure

II-l

II-2

Title

DOD (Army) Organization Chart $2 Billion Industrial R&D Firm

Page

Number

51

52

EXECUTIVE SUMMARY AND

PERSPECTIVE

EXECUTIVE SUMMARY

FEDERAL RESEARCH AND DEVELOPMENT

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RESEARCH AND DEVELOPMENT OVERVIEW

Research and development (R&D) in the Federal Govern- ment is conducted primarily by five =

account for 93.2 percent of the total FY 1983 R&D budget of $44.3 billion. These agencies are the Department of De- fense (DOD)» National Aeronautics and Space Administr (NASA), Department of Energy (DOE), Department of Health and Human Services (HHS), and National Science Foundation (NSF). The R&D funded by these agencies is conducted by industrial firms (52 percent), Government laboratories (24 percent), universities (11 percent), ^e'^erally funded re- search and development centers (9 percent), and others (4 percent). There are over 700 laboratories employing more than 206,000 personnel which conduct the 24 percent of R&D performed in-house.

OVERALL PERSPECTIVE

The Task Force was favorably impressed with the high quality of R&D managers in the Federal Government . e

NOT REPRODUCIBLE i ” o

Presidential appointees, senior executives and R&D civil servants. They are skilled and work very hard at RiD man- agement. Open and cooperative attitudes with interest in improvement were prevalent. Yet within this overall en- vironment, some very important problems were found and a great deal of room for improvement was identified. Speci- fically, the Task Force identified the need for agency top management to become much more actively involved in es- tablishing the specific goals for R&D in terms which are clear, precise, and measurable. Also, this lack of di- rection to substantive aspects of R&D and a budget process which severely inhibits the management process combine to create a system which cannot establish program priorities and which results in a great deal of program instability.

ISSUES AND RECOMMENDATIONS

The Task Force selected eight issue areas to survey and formulated recommendations which, when fully imple- mented, could result in three-year cost savings and revenue generation opportunities of ^45.1 billion. One of the eight is a compendium of R&D issues from 14 other task force reports. This compendium issue incorporates 97 rec- ommendations with $33 billion in three-year cost savings and revenue generation opportunities. In the other seven issue areas surveyed, the Task Force formulated 25 recom- mendations which, when implemented, could result in three- year savings opportunities of $12.1 billion.

It should be noted, however, that some of, the recom- mendations may require several years for the savings and revenue to be realized. While all facets of R&D management could not be surveyed in the time allotted, areas selected for review were considered to offer significant potential for , cost control and improved efficiency. The importance of the accompanying recommendations rest on the fact that they represent the potential for better utilizing finite resources available to the Federal Government.

Strategic Planning — R&D management suffers from a lack of clearly defined goals. Existing planning efforts do not establish priorities for R&D programs, cannot elim- inate marginal programs, and do not serve as a base for operational management. Most existing plans are com- • pendiums of pet projects derived from lower levels in the organization and do not reflect a coherent approach to meeting specified goals within the constraints of available resources. Specific Task Force recommendations to al- leviate the above findings would result in three-year cost savings of $7,300 million. These recommendations include;

ii

O focusing efforts by top management on the devel opment of clear, measurable' statements of R&D goals in their respective agencies;

o developing systems necessary to translate the goal s?atlmeiits into complete plans; and

o committing to the use of the strategic plans to guide the operations of each agency.

RSD management and the Budget Process — ~ The budget orocess^seS trobtain funding for the "kTu programs is too

?Smbersome and time consuming. . ^'?^®®;^®^^t^growth^ex-

ninq period is a factor in the significant Jtowth ex

perienced in R40 .programs. For example, i^ual

KMrinoh for DOD. NASA and DOE in terms of 1,822 individual projects creates tremendous burdens on ^he agencies and LeLes a situation which invites micromanagement. To

?emldy these deficiencies, the Task

following actions, which wou-ld account for $3,670 milli in savings opportunities over three years:

o Implement multiyear budgeting specifically for

R&D activities.

o use a budget activity structure that signifi- cantly reduces the current level of detail required for R&D programs.

o Shorten the budget cycle.

o Reduce technical staff positions in R&D agencies.

Prii^zation — in its review of R&D activities, the Task Force was that there

fo orivatize Federal. R&D efforts. Other task forces sug g«?erptiJate funding for the fifth shuttle, Pti^tising ?hrNational Fertiliter Development Center, and setting DOD labs out of advanced development work on weapon systems- The DOE Task Force recommended that the Government cease finding I«ivUies that do not fiV^^^in the framework of Federal responsibilities for R4D, including the Clinch River Breeder Reactor. In the view of the Task Force, a iiiiiotined analysis of privatization opportunities would ii the iiiiiificatlon of billions of dollars in potential savings.

Management of federal R4D Laboratori« — oraMirA cites the *over ^UU Federal Ki.u labs,, whicn are

integral part of the Government R&D program. This .

integral oercent of the operating costs are used

b^the^l^e^labs with^more than 100 employees. The other

600 "labs" are small facilities, two-thirds of which have fewer than 25 employees. In reviewing some of the major labs, the Task Force found some with outdated facilities and equipment, all with personnel problems, and no formal system for evaluating the laboratories' contribution to the agency's program(s). The Task Force makes seven recommen- dations to improve the labs' performance, including greater use of "centers of excellence," a concept which concen- trates research resources to achieve a critical mass in selected areas. Savings opportunities of $506.4 million over three years were identified.

Administration of Research Grants to Universities —

An increasing percentage of the money going to universities to conduct research for the Federal Government is used to cover the indirect costs of the research. The largest ele- ments of these indirect costs are the three administrative components (departmental administration, general and admin- istration, and sponsored project administration). Past efforts to negotiate an approach to handling these cost elements have not been entirely successful and have result- ed in a system which is a major burden to the universities and a major area of contention between the two parties.

The Task Force recommends that the Government and the universities negotiate a fixed rate beneficial to both parties to reimburse these costs. Because of the reduced burden this would place on the universities and because of a fixed limit on this element, the Task Force estimates savings opportunities of $387.9 million over a three-year period.

Research Program Reporting — The Task Force found that current efforts at reporting ongoing research efforts were incomplete and that the system which processes the data, the National Technical Information Service, did not have the tools to expand the reporting. Three-year savings opportunities of $225 million would occur if:

o use of the data base were made mandatory, and

o requirements were implemented to ensure research performers supplied the information.

NASA Cost Reporting — Space project cost data reported by NASA was found to be significantly understated since NASA does not include Civil Service and other es- sential cost elements in its reporting. Recommendations have been made for over ten years to expand the project management and reporting systems to cover these costs. The Task Force believes that NASA's reasons for these omis- sions are inadequate and recommends that all project costs be managed and reported in the same system. No specific savings opportunities were identified with this management improvement recommendation.

iv

IMPLEMENTATION

Of the 25 major recommendations formulated by the Task Force, 18 (72 percent) are entirely within the purview of the Executive Branch and 7 (28 percent) sional approval. (Implementation authority for the 97 recommendations covered by the compendium issue is eluded in the individual Task Force reports.) All of the recommendations dealing with strategic planning can be implemented within Executive Branch authority. Because of the nature of the recommendations dealing with ment and the budget process, Congressional approval required. Most of the other recommendations can be imple- mented within the Executive Branch.

SUMMARY

Task Force's recommendations focus on overall management rather than its detail. Economic benefits associated with those recommendations are believed to be a conservative evaluation of what the nation might gain i Federal R&D management assumed a more businesslike approach. If all of the people involved concentrate their efforts on overcoming the problems that have been identified^ other benefits, whose value is hard to quantify but which surely must be measured in additional billions, will accrue to the American economy and society.

V

THE REPORT RECOMMENDATIONS — A PERSPECTIVE

As the product of an unprecedented and wide-ranging survey performed in a political atmosphere by private sector executives and specialists, the recommendations in this Task Force report must be placed in perspective. Our volunteer staff had the formidable task of bringing its expertise to bear on complex Federal operations in the short span of a few months while holding down other full- or part-time employment.

Despite these challenges -- most of which were antici- pated at the outset — valuable analysis and isisue develop- ment were achieved. The recommendations contained in this report will result, if implemented, in real and significant savings and other benefits to American taxpayers whose hard work and personal sacrifices financially support these Federal programs and operations.

We believe that the majority of our recommendations are fully substantiated* However, it would be misleading to allege that each and every recommendation is rooted in a uniformly high level of research, analysis and substantia- tion. Various time limitations, business resources, and other constraints did not permit achievement of the desired uniformity objective.

We have evaluated, therefore, the "supportability" of the recommendations on their management merits and have grouped them into the following three categories.

o Category I -- Fully substantiated and defensible.

Recommendations in this category are, in the opinion of the Task Force, convincing and deserving of prompt implementation.

o Category II — Substantially documented and support- able . Recommendations in this cate- gory may not be fully rationalized or documented in the report, but all indications point to the desirability and defensibility of proceeding with their implementation.

Vi

o Category III — Potentially justifiable and support*

able. Recominendations in this cate- gory» while meritoriouSf are not regarded as fully supported in the report^ due to tiitie» personnel resources# and other constraints# but are deemed worthy of further analysis to determine the full extent of their merit.

These category descriptions do not take into account pQ^^^ical# social or economic conditions whicph may alter the supportability of these recommendations for implementation. Accordingly# it is possible# by grouping the recommendations along the above categories# to assess more effectively the cost savings that can be expected. This analysis permits summary estimates of firm# probable and potential savings.

The Report Recommendations -- An Assessment

Based on the above perspective and categorization, an assessment of the reported recommendations is contained in the matrix on the following page.

vii

•nirw-YMr Cost Saviixjs iSI/Revenue |R)/ CiKh Accvl«*ration.(CM Onwrlunitios 1/ ($ millitmsl

viii

I. JNTRODUCTION

I, INTRODUCTION

Federal Research and Development

Total research and development (R&D) in the United States is approaching the $80 billion level. As shown in Exhibit I-lr the funding level in 1982 was $77.3 billion with $74.6 billion coming from industry and Government in almost equal proportions (industry-funded, 49.8 percent; Government-funded, 46.7 percent). A substantial amount of the Government funding of R&D is transferred to industry ($17.8 billion) and universities ($6.95 billion) actual conduct of the R&D. Thus, while industry funded an estimated 49.8 percent of the national R&D effort in 19o2, it performed 72.1 percent of the total R&D. Government, in contrast, funded 46.7 percent of the 1982 effort, but only performed 12.9 percent.

Federal Government efforts in R&D have three broad objectives :

o to perform R&D for the Government’s own use, i.e., to achieve the mission of the various Federal agencies;

o to provide a strong science and technology base for the nation, its development and educational programs; and

o to expedite commercial exploitation of tech- nology and ensure a strong economy.

<jhe Federal Government has two major responsibilities with respect to meeting national needs through R&D:

to provide a climate for technological innova- tion that encourages private sector R&D invest- ment, and

to focus R&D support on areas with significant potential benefit to the nation, but where the private sector is unlikely to invest adequately.

(Exhibit I-l on the following page]

lnU«rscctuidt T>aw5>crs of fXimts Used hw IVttormance ol ttesearch aiid Devclutwiunt. i9Bj test.. iwilTionsot donars)

2

The Federal Government will spend approximately $44.3 billion for the conduct of R&D in FY 1983. 1/ Exhibit 1-2, on the following page, shows the breakdown of that amount by principal agencies. The Department of Defense

(DOD) accounted for more than half (56 percent) of the Government funding for R&D. The National Aeronautics and Space Administration (NASA) and the Department of Energy

(DOE) account for another 25.7 percent. The remainder of the R&D budget (18.3 percent) comes from the Department of Health and Human Services (HHS), the National Science Foundation (NSF), and the other agencies.

The Office of Science and Technology Policy (OSTP), established within the Executive Office of the President in 1976, is involved in overall Government R&D. This Office had a budget in FY 1983 of $1.84 million and 12 full-time permanent positions. OSTP's responsibilities include;

o advising the President on science and technology considerations related to the economy, national security, foreign relations, health, energy, environment, resources and other related matters;

o evaluating the Federal effort in science and

technology and recommending appropriate action on it;

o advising the President on science and technology considerations in the Federal budget and working with the Office of Management and Budget (0MB) on the review and analysis of R&D items in the budgets of all Federal agencies; and

o assisting the President in coordinating the R&D programs of the Federal Government.

As such it is primarily involved in macro-policy matters and does not, in 'general, get actively involved in the direction of the individual R&D programs. Its primary concerns focus on the supply of engineering and scientific manpower to support technology development; cooperation between the basic research efforts of the Government, universities and industry; and the basic thrusts of over- all science and technology efforts.

(Exhibit 1-2 on the following page)

1/ The estimate of $44.3 billion for Federal R&D is

“ derived from the official FY 1983 budget documents.

This figure differs with the figure shown in Exhibit I-l ($36,125 million), which came from an NSF publi- cation (NSF Report 82-319). Although the discrepan- cies cannot be fully reconciled, they are probably due to definitional and reporting inconsistencies.

3

Exhibit 1-2

TOTAL R&D BUDGET

$3.0

L.O

TOTAL « $44.

B9I $4.1

S4.S

Billion

$6.6

The Government has mote than '’00 laboratortes^

under e^enrSf airFedetaUy'funded RSD is

S";d°;iLam;ra?ly (wi^in

Fe5e?illi%Snded"L««c!; ^fJ^f^J'SKStions^ucfL

remainder IS performed gov«nmentl and by

universities, by . .. , 5^ on the following page,

‘?ni??s'?hr5fsrrtiut?fn1f%^di;a?;y^5unded PSD by performer .

„„

ences

(e.g., biology) ^ $13.3 bil-

35.7 percent Of research in FY 1983. About $3.2

billion" of 2^rpercent, -ences (f f !^piysics )

rur"==ouSrror$2‘8 biiuon, or 21.5 percent of the total budget. “U

The following is a more detailed overview of each of the principal agencies expending RSD funds:

n.p.rtment of Befense - f “ '“"ftioMl^def ense“l«ces « support the "?^“»if^°neS's««egU and «ctical ^ ‘ra°po^^ -d T "s stem.^^

rerenfe’Rt^ <rnc5S^?ig^^^srLr ^a ^ ^-3

Representing a 19 ^,-,rrervi?: ("mR!°Ur Force and

SIR?5r-nRfmUtRR^If -e , research agency

Defense R&D budget by Service.

[Exhibits 1-3, 1-4 and 1-5 on the following pages]

President’s Budget, FY 1984, Appendix.

5

Exhibit 1-3

FEDERALLY FUNDED R&D BY PERFORMER, FY 1983 (estimated)

($ billions)

Total = $43.0, Excluding $1,3 for R&D Facilities

Source;' National Science Foundation, Federal Funds for

Research and Development, Fiscal Years 1981, 1982 and 1983.

♦Federally Funded Research and Development Centers (FFRDCs)

♦♦Other: FFRDCS Run by Industrial Firms 3.0% ($1.4)

Other Non-Profit Institutions 3.0% ($1.2)

FFRDCS Run by Non-Profit Institutions 1.0% ($0.6)

Foreign Governments 0.6% ($0.3)

State and Local Governments 0.4% ($0.2)

Exhibit t-4

FEDERAL OBLIGATIONS FOR BASIC JWD APPLIED RESEARCH BY CATEGORY^ — FY 1983 (estimated;

($ millions)

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7

Exhibit T-«;

POD FY 1983 R&D BUDGET BY SERVICE ($ billions)

SOURCE: Office of Management and Budget, FY 1983 Budget.

8

Defense R&D program areas tions are as follows:

and FY 1983 budget obliga- ($ millions)

Technology Base

Advance Technology Development Strategic Programs Tactical Programs Intelligence and Communications Program Management and Support Other Appropriations R&D Facilities

$ 3,288 928 6,520 7,524 2,675 2,849 685 366

Total obligations

^24.835

The R&D expenditures of DOD, in addition to providing for the defense of the country, have many impacts in the private sector. The work on the very high speed integrated circuits (VHSIC), which is included in several of these R&D 'Categories, will have direct impacts on civilian technology products. In the past, the Government-funded B-52 R&D was in part responsible for the commercial Boeing 707 airplane.

National Aeronautics and Space Administration — Government investment in R&D through NASA has the objective of yielding new space technologies to improve the long-term scientific and technological strength of the nation. Over $6.6 billion, or 14.9 percent of the Federal R&D budget, is obligated for FY 1983 to meet that objective. This repre- sents about an 11 percent increase over FY 1982 obliga- tions. Over 52 percent of NASA's R&D budget will go to the Space Transportation Systems (STS) program. The main com- ponents of that program are the development, testing and procurement of the Space Shuttle fleet and continued pro- curement of the second Space-lab. STS and other NASA R&D programs are funded as follows:

($ millions)

Program

1983 Estimate

Space transportation system Space science

Space and terrestrial applications Aeronautical research and technology Space research and technology Energy technology Tracking and data acquisition Research and program management

$ 3,468 682 320 232 123

509

1,179

Total conduct of R&D R&D facilities

Total obligations

116

9

Department of Energy — DOE R&D has the objectives of (a) developing new energy technologies, (b) improving existing technologies, and (c) developing a better under- standing of high energy physics and nuclear sciences.

About $4.8 billion, or 10.8 percent of the total Federal R&D budget, will go toward achieving these -

This includes $220 million for R&D sponsored by the Nuclear Regulatory Commission. V

Health and Human Services — R&D funding for HHS in FY 1983 is projected at $4.1 billion, or 9.3 percent o e Federal R&D budget. This represents about a 3 percent increase over FY 1982 obligations. Over 85 percent of hhs R&D funds are obligated by the National Institutes of Health (NIH), which conducts R&D in the following areas.

o life processes in health and disease,

o clinical research,

o antiviral drugs,

o diabetes,

o epidemiology, and

o toxicology.

FY 1983 obligations by HHS major R&p activities are as follows:

Health:

millions)

National Institutes of Health Alcohol, Drug Abuse and Mental Health Administration

Food and Drug Administration

Centers for Disease Control

Health Care Financing Administration

Office of Assistant Secretary for Health

Health Services Administration

Special Foreign Currency Program

$ 3,533 289

75

74

30

20

1

1

Subtotal

$ 4,023

\/ DOE R&D functions were proposed for transfer to the " Department of Commerce (DOC) under the name of the

EnerQy Research and Technology Administration (ERTA). This has not yet occurred. Therefore, DOE R&D figures in this Report include those attributed to the Depart- ment of Commerce, ERTA, in budget literature for FY 1983

10

Human Services:

Office of Human Development Services Social Security Administration Departmental Managemertt

Subtotal

Total conduct of RSD

R&D facilities

Total obligations

$ 59

25 16

1.	100
ii	,123
	20
U.	Jdl

National Science Foundation — NSF's share of the FY 1983 R&D budget is $1.0 billion, or 2.2 percent of the total R&D budget, which represents a 7.5 percent increase over FY 1982.

NSF obligations are primarily used to support basic research in all scientific disciplines through grants to scientists and engineers associated with academic insti- tutions. The NSF R&D objective is to complement basic research programs of agencies such as DOD and NIH.

Task Force Methodology

During its review of the Federal R&D process, the Task Force addressed seven major issues:

o Strategic Planning,

o R&D Management and Budget Process,

o Privatization,

o Management of Federal R&D Laboratories,

0 Administration of Research Grants to Universities, o Research Program Reporting, and

o NASA Cost Reporting.

These issues were selected for study because:

o They represent the largest potential cost savings

of all issues surfaced.

11

o They require the highest level support to obtain resolution.

o They are fundamental or underlying causes of many problems identified but not resolved by past studies.

In addition to these seven issues, the Task Force prepared a compendium of R&D issues included in the other PPSS Task Force reports.

The nature and extent of the problems related to R&D management were substantiated during personal interviews with Presidential appointees and other key agency manage- ment personnel. Further information was gained by inter- viewing officials from 0MB, the General Accounting Office, OSTP, and other selected sources.

A literature review of prior reports and past studies on the issue was also conducted. In all, 414 personal contacts were made and 104 significant past studies examined.

In reviewing Federal Government R&D, we contacted the major agencies including DOD, NASA, DOE, HHS (including NIH), NSF, Department of Agriculture, DOC, Department of Transportation, and the Environmental Protection Agency. Individual issues used the results of the data collected from subsets of these agencies. They are identified in the methodology sections of the appropriate issue.

Significant Contributions

We acknowledge the significant contributions of the Co-chairmen of the R&D Task Force: William Ballhaus

(Beckman Instruments); Karl Bays (American Hospital Supply); James Ferguson (General Foods); David Packard (Hewlett-Packard); and Edson Spencer (Honeywell). These individuals devoted a good deal of time and personal atten- 'tion to reviewing and guiding the study. We also acknowl- edge the significant contributions of the R&D Task Force members on temporary assignment in Washington, D.C. Our PPSS Management Field Officer O.T. Berkman and Desk Officer

12

Robert Pikul contributed thoughtful and helpful guidance. Sfhla eiceptional administrative support under the super- vision of Linda Holt#

A number of persons in the various ?orL^r'

tacted and interviewed in the course of the Task ®

assessment of Federal R&D. The area of be

perspective of those interviewed varied widely, expected, but the spirit of cooperation and universal and outstanding*. Agency officials vided data and supporting <?o®“>^®?tation that greatly assisted our efforts. Their attitude and support were ical to the success of the PPSS effort.

we specifically thank NASA for providing office space conducive^to the Task Force work and NSF for 3”

gathering statistical data, references, and other informa

tion.

We would also like to acknowledge the time and contri- butions of private sector persons who helped own private sector administrative model. We have listed these contributions in Section V.

13

E. ISSUE AND RECOMMENDATION

SUMMARIES

\3sc<-'

II.

ISSUE AND RECOMMENDATION SUMMARIES

RESEARCH AND DEVELOPMENT R5.D 1; STRATEGIC PLANNING

Issue and Savings

Can improvements in strategic planning, particularly in the goal-setting process, result in improved and more cost- effective research and development (R&D) management in agencies?

The Task Force believes that significant improvements are possible in the R&D management process through the imple- mentation of effective strategic planning. Implementation of specific r commendations woald result in estimated savings of I?!! bUliln in the first year, $2.4 billion

yeat, and ^2.7 billion in the third year for total three-ye r savings of $7,3 billion.

Background

Strategic planning has evolved over the last 25 years into fvaluIbL manageLnt tool, one that is necessary to set the overall direction for any organization and to provide the f?Lew«k to guide both long-range and short-term actions.

AS Shown in Exhibit II-l, on the following page, it is basically a system to:

articulate the agency goals;

formulate and evaluate program plans for achieving the goals;

select alternative projects within resource con- straints;

prepare and document implementation actions; and

o evaluate the programs.

Strategic planning must be evaluated as a process and as a substantive activity, particularly in the statement of goals. If the goals that come out of the process do not con tain the necessary attributes, then the remainder of the

[Exhibit II-l on the following page]

14

qtratRGIC planning

15

steps in the process of strategic planning are of limited value. It is increasingly recognized that the establishment of goals is one of the most difficult tasks involved in stra- tegic planning, it is also apparent that in those situations where the goals were poorly defined, the results of the en- tire process were less than satisf actory .

In recent years, the private sector has increasingly emphasized and focused attention on the establishment of specific long-range goals. More and more large corporations are instituting formal long-range strategic planning pro- cesses. Most corporations start by analyzing economic conditions and their projected market posture for ten or 15 years into the future. This exercise helps executives set specific goals and establish program definitions, budgets, and schedules, emphasizing the required near-term actions. These plans are usually produced by an iterative process involving many management levels, then communicated to all managers and supervisors. Top management reviews the plans periodically and must concur in any changes. The plans are used to establish and maintain audit trails for progress evaluations.

The Task Force members are familiar with the R&D stra- tegic planning processes used by the corporations represented on the Task Force and other well— managed industrial firms. Benefits of strategic planning must be very real because major corporations have continued to increase ' their planning emphasis, despite the many implementation problems that have been identified.

Within the Government, strategic planning received its first real emphasis in the early 1960s with the efforts of Secretary McNamara in the Department of Defense (DOD).

Initial strategic planning efforts were made under the Plan- ning, Programming and Budgeting System (PPBS). Since then, the name of the systems and the emphasis have changed, but some of the elements of the strategic planning process are in place in most agencies. The elements currently used include:

o definition of goals (sometimes called missions or

objectives ) ;

o analysis of requirements and constraints;

o identification of alternatives;

o analysis of alternatives;

16

O comparison of alternative to resources;

o selection of alternative;

o definition of implementing actions;

o consolidation and review; and

o documentation.

both the key substantive point of TtratUtrpuiiing aefinition of goals) and tne process

of strategic planning.

Methodology

The following approach -- ”asf

and validate the concisions reached. The TasK

° thrii teitS«rass«smInt'’orci?“ '

Tni iitetvieus with senior agency management:

o analyzed previous studies in related areas and discussed them with agency management; and

0 ' assessed comparable industry practices and experience.

Prior to discussions with performed

r^fvtli^ffuriSLrru i cations on th^ rtfdrerrerfcr^a^/or^^Inifnrproble'rfo; the technology base witLn several federal agencies.

Since it would have taken many months^of

part of this team to ^ its efforts for this

?he Task Force decided the National Aeronau-

issue on three Federal fwAQA) and the Department of

tics and space Administration (NASA), and tn^^^ budgeted

Energy (DOE). '^^®^®v,'^^f.®reDresents 82 percent of the total for $36.2 billion, «hich represents 82 per^ percent of

FY 1983 R&D ‘=>^^J®^;s/porce Emphasized its R&D involvement, these funds, the sider the National Institutes of

HeaU^<«Hrand III Department of Agriculture (USDA).

17

Although the team's efforts were concentrated on the three agencies, there is every reason to believe that the findings are typical of all agencies. Any benefits that could be derived from implementation of recommendations contained in this Report could be similarly achieved by the other agencies.

Findings

Based on the experience in our own corporations and on knowledge of other corporations in the private sector, the Task Force believes that the Government is five to ten years behind industry in strategic planning. There appears to be limited long-range strategic planning in Government agencies. Although a number of agencies have partially developed ele- ments of the strategic planning process, none of these ele- ments are based on specific Federal goals.

In describing our findings on strategic planning in the principal R&D agencies in the Federal Government, we have made a distinction between the statements of goals used in the planning process and the process itself. In some cases, strategic planning is based on goal statements that are so broad and general that they minimize the benefits that can be derived from the process. In other cases, where goals have been well defined, strategic planning can be a valuable tool.

Our analysis of strategic planning starts with an assessment of the existing statements of goals. This is then followed by an assessment of the strategic planning process itself. The section concludes with several findings dealing with the results of existing planning processes.

1. Lack of Consensus on Goals

The absence of full agreement on Federal goals causes confusion within the agencies and forces them to create their own goals. This is the greatest problem the Task Force found in current strategic planning efforts.

DOD serves as a clear illustration. The three Services (Army, Navy, and Air Force) plan almost autonomously and frequently at cross purposes with little direction provided by the Under Secretary of Defense for Research and Engineer- ing (USDRE) or the Office of the Secretary of Defense (OSD). There are relatively few joint programs between the Services, even though their tactical requirements often demand essen- tially the same R&D. In NASA and DOE, the absence of Federal goals has led to disarray in setting priorities and. to "bootlegging* pet projects.

18

In order to be more specific about the problems with existing Federal goals, the Task Force put together a set of criteria to be used in evaluating the usefulness of goals for strategic planning purposes. In developing these criteria, the Task Force relied on the experience in their own corpor- ations and the general literature available.

A good goal is a clear, measurable, specific state- ment of what is to be accomplished {for example, ■■TeHuce the nation's infant mortality rate by two percent over the next five years" ) .

A time frame is stated ("improve communications and control systems in the next eight years to make sure we can communicate with strategic forces, even

after a nuclear attack").

The group responsible for implementation is desig- nated ("to be carried out by the Chief of Naval Operations" ) .

Projected results of achieving the goal are per- ceived by the public, by employees and by others to be worthwhile (e.g., successful completion of a magnetic fusion demonstration plan would provide the nation with a safe, renewable, inexpensive source of energy).

The goa 1 is f eas ible (e.g., "put a man on the moon by the end of the decade" ) .

If goals little or no g analysis, rank implementing a infant mortal! provides real In contrast, a provides littl

do not meet these criteria, then there will be uidance in the design of alternatives; their ing and selection; and the identification of ctions. A goal for NIH to "reduce the nation^s ty rate by 2 percent over the next five years" guidance and direction to strategic planning.^ goal to "solve the nations’s energy problems" e, if any, help to the subsequent steps.

Using the criteria defined above-, the Task Force analyzed the content of some of the more prominent Federal goals .

strategic Program for Defense — The Strategic Program for Defense provides an example of a goal developed in exten- sive consultation between the White House and DOD, and then articulated by the President. It is a comprehensive plan for revitalizing our strategic deterrent which will end the rela- tive decline of U.S. strategic capabilities and- put the

19

United States in. a position to reshape the U.S. -Soviet stra- tegic competition in the eight years ahead. It deals with one specific area of national defense and embodies all of the basic characteristics of an effective goal. It outlines in detail in which direction the President wants to lead the nation in five strategic areas. It specifies a time frame for achieving results. The responsible party is clearly DOO. Further^ it is perceived to be worthwhile in enhancing the defense posture of the United States. It is feasible and can be accomplished in the time period specified. It is acceptable to DOD^ Congress/ and the public.

Strategic Program for Defense	Clear Measurable Specific	Stated Time Frame	Responsible Group Desiqnated	Results Worth- while	Feasible Goal
Yes	Yes	Yes	Yes	Yes

National Space Policy — The R&D goals of NASA are to extend our knowledge of the earth/ its space environment and the universe; to expand space technology for practical appli- cations; to develop/ operate/ and improve manned and unmanned space vehicles; to provide technology for improving the per- formance of aeronautical vehicles; and to assure continued development of the aeronautics and space technology necessary to accomplish national goals. These national goals articu- lated by President Reagan are:

o to strengthen the security of the United States;

o to maintain United States space leadership;

o to obtain economic and scientific benefits

through the exploitation of space;

o to expand United States private -sector invest- ment and involvement in civilian space and space-related activities;

o to promote international cooperative activi- ties in the national interest; and

20

o

to cooperate with other nations in maintain the fteeaom

Which enhance the security and welfare of mankind.

NASA's mission statement is much more than public relations, policy is not much more specific

too general to be considered and the President's space

	Clear Measurable Soeci f ic	Stated Time Frame	Responsible Group Designated	Results Worth- while	Feasible Goal
National Space Policy	No	No	Yes	Maybe	Maybe

NASA’s goal is incomplete compared to the five industry attriSu?es of a well-articulated goal. Goal ambiguity forces NASA to fill in the gaps on its own agency’s planning process suffers guidance .

As a from the

result, lack of

the

top-down

Institute national

( NHLBI ) attack

National Heart. Lung and Blood

3iUis«°o£™h"heat;'anS bi^^iess^ls, the lungs • also does not meet the industry criteria.

— The against and blood

	Clear Measurable C npc i f i c	stated Time Frame	Responsible Group Designated	Results Worth- while	Feasible Goal
NHLBI	No	No	Yes	Yes	Maybe

The issue team recognizes that setting specific g for basic research is more difficult than for applie research. Efforts should be made to be as specific ^ “

•Kio h*ir <;trict adherence to demands of timing or fea luiti Ty 3ri«e3u3tic. Again, nebulous goals are hamper- in9 ci good planning process*

Energy — National goals for energy development are in shambleT/ This is understandable in light of:

0 oil embargoes and instability in the Middle East;

21

o the distinct lack of public confidence in nuclear energy, prompted by the Three Mile Island crisis .and the nuclear waste disposal question;

o doe's tentative future;

o the shift in policy to allow the marketplace to guide the development of energy systems; and

o public disillusionment with expenditures on alter-

native energy technologies, i.e,, their failure to provide commercially viable energy production systems.

The issue team believes this is a prime example of an area where it is difficult to develop meaningful goals; by the same token, it is urgent that specific energy goals be developed.

The Task Force reviewed two statements of goals in the energy area: The National Energy Policy Plan and the much

more specific Magnetic Fusion Energy Program. The National Energy Policy Plan, submitted by President Reagan to Congress to meet the requirements of the Department of Energy Organi- zation Act (PL 95-91), is a broad statement of the Administra- tion's energy policy. The issue team did not find adequate guidance in the 1981 statement (the latest available at this time) for DOE management. As a broad policy document it did not articulate clear, measurable and specific goals which were to be met in a stated time frame.

	Clear Measurable	Stated Time	Responsible Group	Results Worth-	Feasible
National Energy Policy Plan	Specific	Frame	Designated	while	Goal
No	No	Yes	Yes	No

In contrast. The Magnetic Fusion Energy Engineering Act of 1980 (P.L. 96-386) provides national goals for demonstrat- ing the scientific and engineering feasibility of the use of fusion energy. 3y industry standards, this is a fairly complete goal.

22

	Clear Measurable Specific	Stated Time Frame	Responsible Group Designated	Results Worth- while	Feasible Goal
Magnetic Energy Fusion Program	Yes	Yes	Yes	Yes	Maybe

Some experts, -however, question the scientific and com- mercial feasibility of this goal.

Summary — In setting goals, an effort must be made to prevent political considerations and "wishful thinking" from biasing or overriding technical analysis. This may or may not have happened in the energy goal-setting process. There will always be some doubt about a goal's feasibility. The issue team emphasizes this doubt because it is commonly voiced during any good goal-setting process. Decision-makers worry that despite good analysis, the goal cannot be met.

There is no way to avoid the doubt. Therefore, goal-setting must be an ongoing process, where progress and feasibility are constantly reevaluated.

The issue team found elements at work in each of the agencies, but none has a complete set (see Exhibit II— 2, Summary Table, on the following page). The clarity and content of the actual goals simply do not meet the industry standard. There is little evidence of top-down, bottom-up consultation combined with staff analysis. None of the agencies has a complete set of clearly defined Federal goals. The absence of goals severely hampers the ability of existing planning processes to produce results. Typically, the agencies attempt to cover as many areas as possible rather than targeting R&D to top national priorities. This approach tends to allow R&D projects to proliferate when many. of them should be terminated. All of the PPSS Task Force reports dealing with weapon systems development and procurement (OSD, Air Force, Navy and Procurement), found, for example, that DOD suffers from an inability to prioritize its weapon systems projects.

(Exhibit II-2 on following page]

23

EXHIBIT I 1-2

SUMMARY TABLE; Five Federal Goals Compared to Basic Industry Criteria For Establishing Effective Goals

	Clear Measurable Specific	Stated Time Frame	Responsible Group Designated	Results Worth- while	Feasible Goal
Strategic Program for Defense	Yes	Yes	Yes	Yes	Yes
National Space Policy	No	No	Yes	Maybe	Maybe
NHLBI	No	No	Yes	Yes	•Maybe
National Energy Policy Plan	No	No	Yes	Yes	No
Magnetic Fusion Energy	Yes	Yes	Yes	Yes	Maybe

24

2» Most Agencies Use Key Elements of the Strategic Planning Process

Most of the Federal agencies utilize some of the key elements of strategic planning. In some cases, receive the emphasis they should because they are dominated by the annual budget process. In other cases, their effec- tiveness is severely hampered by the inadequacies in the goal statements cited above. The following paragraphs briefly evaluate the process used in the major agencies.

Department of Defense (POD) — At present overall DOD planning as well as R&D strategic planning is highly frag- mented. Each Service has developed its own independent plan- ning techniques, and each essentially competes for budget funding. Very few joint- programs are underway, and the role of USDRE is minimal due to the fact that it has no authori y for overall R&D programs within the Services, other than veto power. It would be difficult to establish a strategic for DOD R&D unless either OSD or USDRE directly manages the three Services, as well as other agencies within DOD such as the Defense Advanced Research Project

present, the three Services operate very different R&D plan- ning processes, as described below.

Air Force — The Air Force has developed and is using a formal planning process called Vanguard.

It requires' that each planner identify the jobs that must be done and assess the Air Force capa- bilities to perform those jobs with current forces and currently programmed improvements. The plan- ning system is designed to identify potential defi- ciencies, planned modifications, and comparison with budget constraints. The Vanguard plans are prepared as briefings. When properly used, the plan will provide answers to such questions as:

(a) How does a program element contribute to meet- ing Air Force military needs? (b) What is the contribution of a program to other mission areas?

(c) What is the effect of cancellation or delay?

(d) Does it fit the budget? (e) What are the key decision points and when do they occur? (f) Is the new system compatible with existing programs?

A technology plan links basic research and explor- atory development programs to decisions provided by other plans, thus providing guidance to the labora- tories. The Vanguard planning process is in its gacly stages of implementation and has not been in place long enough to produce any notable improve- ments .

25

There is little or no coordination of programs among the other Services of OSD included in this planning process. One of the purposes of the Vanguard plan is to project needs of the Air Force for the next 15 years. Accordingly, the plan should encompass joint efforts among the Services and be integrated with their long-range planning documents. For example, the Army Air Land 2000 and the Air Force 2000 programs are the long-range plans designed to project military needs in the next few- decades. Yet there appears to be little coordination between the two Services at the most critical phase, the planning process.

o Army — The Army planning process is identified in the U.S. Army Chief of Staff Regulation (CSR) No. 11-15, "Army Programs, Army Long-Range Planning System," issued in May 1981. This directs a look "ten to 20 years in the future." The Army recog- nizes that its planning is structured along program lines (e.g., tactical programs) and has a draft CSR in process titled, "Army Long-Range Research Devel- opment and Acquisition Planning." This will become a functional part of the Army long-range planning system described in CSR 11-15. The science and ‘ technology plan developed by this process is being issued for the first time in final form (the draft was issued two years ago), as is the first draft of the development and acquisition plan.

Our assessment is that the Army's long-range plan- ning process, as it is being developed for R&D, features all of the basic elements for effective strategic planning. It has the potential of becom- ing a system for all agencies, not just the Army. The Army agrees that it may take several years to implement and will require the continued attention of Army management from the Chief of Staff through all commands. Like the Air Force, the Army has little or no joint planning efforts with other Services or with OSD.‘

o Navy — After extensive discussions with a cross- section of naval R&D management, the issue team found little evidence of a formal, comprehensive long-range planning process for the Navy. It did, however, uncover the initiation of a planning pro- cess in Office of Naval Research (ONR). The team reviewed several internal documents issued by the Chief of Naval Research in January 1982, pertinent points of which are summarized below:

26

The policy guidance states that "the Naval R&D programs must display characteristics of tech- nical excellence, direction, and which reflect a clear commitment to the Depart

ment needs and priorities.*

' ■ - "The claimants (program originators) are

expected to tailor their projects so as to

complement (as opposed to

programs of DARPA, the ?^her Services,

national laboratories, industry and the

universities."

-Claimants are to consider the in the formulation of their project ^ and will be required to include an assessment of the relationship of these needs to their proposal . *

The issue team saw little evidence from the Navy strategic long-range plan was in aevelop-

™e«. ISe “elitce alpearl to be bogged down with bureaucratic policies and aitectives; it is not developing a set of goals from which an '

mission-directed research program can be derive .

tagic planni 9 kv President Kennedy to put a man on

ssiiicii

these lists that the majority of project cente?^

is from the bottom-up rather than top-down, aLinistrator justifying his/her existence and facility.

27

Department of Energy — Like NASA, DOE suffers from indirection. Long-range plans are assembled within the Department, but the ranking of alternatives is meaningless without clearly defined goals. As a result, the DOE long- range plan consists primarily of bottom-up project plans. Without adequate goals, DOE is subject to a high degree of micro-management from Congress and lobbying groups.

The issue team saw evidence that DOE managers scrutinize R&D programs and may even drop them if they do not fit their de facto goals. The team also observed that some expensive programs are "forced" on DOE by Congress (for example, the funding of insulation to be added to homes of the poor, which is clearly not a DOE mission). DOE was the only agency evaluated where agency officials stated that their own R&D budget should be reduced (and it was) rather than expanded..

The National Institutes of Health — In the health arena, the Government primarily supports basic research.

Most of this support is through NIH. In health, the Govern- ment is not the primary end-user (unlike defense or space) and,. for the most part, leaves the application of basic research to the private sector. Thus, the task of strategic planning in health research is more difficult. The NHLBI provides a good example of this process at work.

NHLBI goals are articulated in the 1972 law that estab- lished the Institute. Specifically, NHLBI is "... to advance the national attack against diseases of the heart and blood vessels, the lungs and blood . . . ." In the absence of more specific goals, NHLBI develops its own. The NHLBI strategic planning process involves an annual update cycle characterized by a continuous flow of information from the public, the biomedical research community, the medical com- munity, other Federal agencies and organizations outside of Government.

As part of this planning process, a series of reports and formal plans are published each year. These documents are prepared by NHLBI staff members to structure and coordi- nate input from the NHLBI Advisory Council and from commit- tees and consultants. The documents serve as resource materials, implementation plans for program activities, and state-of-the-art assessments. They define program component interrelationships, inform Congress and the Administration of needs for accomplishing the five-year plan, and inform the scientific community about the Institute’s accomplishments.

28

Department of Agriculture — USDA is in the early stages of developing a strategic plan. The program strategy describes the kind of research that Agricultural Research Service (ARS) scientists identified as necessary to meet the short- and long-term needs of the agricultural sector. In addition, a six-year implementation strategy is being devel- oped to provide guidelines for executing those portions of the plan that ARS believes have a high probability of attain- ing the stated research objectives. The guidelines seek to assure the most efficient use of available resources in pursuit of the objectives.

goal :

These plans are designed to achieve the following ARS

Through fundamental and applied research,

ARS seeks to provide the means to solve the technical food and agricultural problems of broad scope and- high national priority as required to assure perpetually an adequate supply of high quality food and fiber for the American people and for export.

The issue team concludes that the elements of this plan closely correspond to elements found in the private sector and will address many of the problems of ranking fundamental research programs. In the absence of more ^ defined Federal goals, the plan outlines key research efforts based upon estimating future demands for food and other agricultural products. The issue team views this plan as potentially one of the best bottom-up processes reviewed within Federal agencies.

3, Evidence of the Inadequacies of Strategic Planning

In the private sector, the strategic plan is the driv- ing force in establishing policy and setting priorities. Because of the lack of adequate goals and the inadequacies of the plans themselves, policy and funding priorities are deferred to the annual budget cycle in the Government.

Ultimately the final program selection is negotiated with the Office of Management and Budget (0MB), whose major interest is control of total budget dollars (rather than balancing national priorities). The annual budget cycle becomes a trade-off between competing laboratories and agencies. Rather than a debate between defined national priorities, the process is a series of negotiations deter- mining how much increase (or decrease) in funding each agency must plan for the fiscal year. Sometimes agencies receive

29

funds they did not request, causing a last-minute rejuggling of their own priorities. Other times, some deserving pro- grams are dropped in favor of a Congressionally supported program stemming from lobbying pressures. A set of defined long-range goals (five to 15 years) for each agency would provide agency management with a stronger mandate to minimize this type of redirection and simplify the planning process for individual agencies, as well as for Congress and 0MB.

It is extremely important in R&0 planning to achieve a balance between top-down planning and a bottom-up approach. In any Government agency, an absence of the top-down approach permits the bottom-up approach to predominate. This results in unnecessary program duplication between laboratories and agencies and tends to continue programs of marginal value because champions have successfully '’sold" them,. Some funda- mental research projects that are not mission oriented should, of course, be budgeted to encourage creativity and potential spinoff. The majority of RiD programs, however, should be oriented toward defined agency goals, not pet projects.

Again, the problem is the absence of formal, top-down guid- ance regarding the agency's goals that can .be translated into requirements, both near and long term.

Present planning techniques often do not include imple- mentation plans and scheduled decision points (milestones), making it difficult to determine progress and make course corrections from prior plans. Without defined strategic planning elements, these key milestones do not exist. Long- range planning should highlight program milestones and pro- vide the needed visibility to minimize the "budget ax" or program redirections that often occur during budget cycles. R&D programs are rarely completed in one year. The annual reviews would be more meaningful if progress could be mea- sured against a projected set of milestones and expenditures.

POD has no central planning focus. The isolated plan- ning techniques in the Services tend to muddy the planning focus at OSD; OSD exhibits little control of joint programs and does not provide encouragement for cross-fertilization of R&D and weapon systems. USDRE does not exercise leadership in DOD's goal-setting and planning process; there are very few joint Service R&D programs and little cross-fertilization. In fact, the issue team found that USDRE is encouraging greater decentralization. The Air Force, for example, has moved the direction of its many .laboratories from a single management point to individual user commands. The issue team

jnembers believe that such a step only serves to narrow the planning focus and make cross-fertilization even more diffi- cult and duplication of effort more prevalent.

The degree of isolation is evident by the following:

o Some military Service R&D managers do not even know who their counterparts are in the other military Services .

o Programs within DARPA are not disseminated rou- tinely to the Services.

o Cross-fertilization is rare.

The majority of the longer-range planning done within Federal agencies is not constraint driven. For the most part# agencies employ a bottom-up planning approach and a broad set of agency goals, resulting in a process that forces agency planners to cover all potential contingencies. There is little ranking of issues at each level of the organization to assure that the real issues emerge and are analyzed in light of budget targets. This approach also forces the orga- nization into a "selling mode" early in the process, a hazardous condition and one hard to change as the process rises to senior management.

The planning process fundamentally operates annually; almost all decisions are reviewed and re-reviewed and, indeed, many change from year to year. External pressure from Congress, frequent changes in policy and leaders, and failure of the system to provide a longer term strategic focus cause this kind of short-sightedness. Year-to-year planning is wasteful, particularly for R&D activities that tend to be long term. An enormous amount of time and dollars is eaten up in rejustifying each year's decisions. Agencies can avoid the important issues, since one year's unapproved program can be resubmitted the following year.

4. Implementation of Effective Strategic Planning Should Be Expected To Be Lengthy

Implementation of effective strategic planning in the Government R&D agencies is going to take time. Industry experience seems to indicate that agencies will need a three— to five-year learning process to evolve, refine, communicate, gain acceptance for and achieve a reasonably satisfactory degree of efficiency with respect to strategic planning. Top

31

management must persistently emphasize and support the pro- cess if there is to be any hope of success. Even then, according to industry experience, the process of setting goals and strategic planning is a never-ending discipline that must be maintained and continuously improved in order to produce results.

It is not surprising, then, that Government agencies attempting to incorporate long-range strategic planning are experiencing the same frustrations of the learning process. The O.S. Army started to develop its process four to five years ago. The first long-range plan for science and tech- nology only just recently entered the system in draft form. This year's revision to the Army's Science and Technology plan is in final form now and a long-range strategic plan for Development and Acquisition is in draft form.- The progress is real, and the Army should be commended and encouraged. Similarly, the Air Force Vanguard program is now being imple- mented and should produce measurable results by the next fiscal year.

Conclusions

Strategic planning as applied to Government R&D efforts is generally ineffectual in large part because the goals that have, been established are not adequate to guide the planning process. Also the process does not work within realistic budget constraints and does not result in implementation plans that clearly spell out actions necessary to meet the goals.

These shortcomings cause the following deficiencies in R&D planning:

o Federal R&D plans do not direct available resources to areas with achievable results.

o Many more R&D programs are initiated than can be funded at either the development or acquisition stage.

o R&D programs are not ranked, which leads to ineffi- cient use of development funds.

o Agency managers often are not able to terminate programs that do not meet cost and performance targets or that are no longer required to meet the mission and goals of the agency.

32

o

o

There is much program duplication because of lack of cross-fertilization between laboratories, the Services, agencies and users.

In the absence of formal, top-down guidance on the nation’s priorities. Federal R&D programs cannot be effectively translated to meet both the near- and far-term technological requirements.

These deficiencies are identified in several other PPSS Task Force reports. Several of the reports dealing with defense issues pointed to the problem of initiating more R&D piogtaras than can be funded and to problems of priorities.

The PPSS Task Force Report on DOE highlights ^

and problems in the RSD programs because of a

articulated goals. In the Report on the Department of Trans- portation, the Task Force questions the lack of specific focus for that agency's R&D program.

Recommendations

R&D 1-1: Redirect all agency planning efforts to _con-

ce nt rate on developing statements of goals that refiecj.

;.npncv orioaties. The lack o^ precision~and clarity that exists in current statements of agency and pro- grtm g«l5 harbeen documented by the Task ^

in strategic planning require a ma^or strlteaic^

all participants in redefining the goals so that strategic

planning can play the essential role that it should.

Goal setting is a discipline, not a sporadic chore. The nrocess. as well as the goals themselves, require constant ^xamtnaiion and%mphasis! Top -^agement cannot de^ separately from the line managers and staff strategy and implementation. Similarly, line managers c focus adequate resources to achieve long-range goals they set by themselves. They need top management s concurrence and authority; a top-down, bottom-up mix of management partici- pation is .required. A continuous intensive process of this kind is typical of what is sought in the private sector.

In order to develop goals for the Government R&D pro- arams. all levels of the organization must be involved, including 0MB, the Office of Science and Technology Policy (OSTP) and the White House staff. The Findings section pointed to the goals for the Strategic Defense Program as the kind of goal statements necessary to guide and direct stra tegic planning. In order to improve R&D planning the same type of effort will be required in all areas.

■33

The Task Force fully recognizes that the establishment of goals of the type described here is an evolutionary pro- cess that cannot be accomplished in a given time frame. In fact it will be a continuing process. Furthermore, it will not be possible to develop adequate goals for all aspects of Government R&D in a year or two. However, we recommend that the agencies initiate the process and develop the discipline , necessary to influence strategic planning. Thought and inter- action among all levels of the line and staff organization are the essential ingredients.

In order to institutionalize the goal-setting process, we recommend that each agency designate a senior official (at the Assistant Secretary level) to lead the internal effort and to coordinate with other agencies and the Executive Office of the President (EOP) through the Office of Science and Technology Policy (OSTP). Each agency should work with the appropriate Cabinet Council or the National Security Council in establishing the goals for the agency and review- ing the results of the strategic planning process. We recom- mend that OSTP coordinate the process and provide the neces- sary assistance in evaluating the adequacy of the goals. In the past, efforts to institutionalize strategic planning have focused on 0MB and the associated budget process. This has not been very successful. The success of strategic planning is ultimately related to the commitment of top management.

As this management changes, the new managers must assume the leadership role.

R&D 1-2: Develop improved strategic planning concepts

and procedures. The Task Force has commented on many of the existing strategic planning systems and procedures. Each agency will require revisions to certain aspects of its systems.

Given the diversity of R&D' missions and programs of the agencies we do not feel that a single system can be applied uniformly to all agencies. However, the system developed in each agency should provide for the essential element of stra- tegic planning.

We recommend that each agency adopt a strategic planning process that will meet its needs. The senior official desig- nated to lead the goal-setting effort should coordinate the development of the strategic planning process in the agency. Coordination with other agencies that appear to have effective systems (e.g., the Army and ARS) would be beneficial. How- ever, the organizational and management style of each agency will influence the systems and procedures used.

34

R&D 1-3: Use strategic planning as the basis for subse-

quentHBudgetinq and operational management^ As the strategic planning process develops and encompasses certain agency activities, those portions of an agency's operations should be driven by it.

Too many strategic planning efforts have failed because they are subjected to rigid timetables. In such cases, the quality of the strategic planning is inadequate to support the budge*ting and operational management. Artificial dead- lines lead to inadequate analysis and procedural solutions.

VJe recommend that the agencies initiate the process immediately and begin the cut-over to budgeting and operation al management as the quality of strategic planning permits. For example, we would not be surprised if it took more than five years of concentrated effort to develop an adequate strategic planning process in DOD. Any attempts to tie bud- geting and operational management to the strategic plans before then would be counterproductive.

We recommend that each agency set its own pace in imple- menting strategic planning and that the pace be controlled by the top management of the agency. To ensure that progress is made, the agency should make a commitment to EOF regarding an implementation schedule.

Savings and Impact Analysis

It is difficult to quantify the dollar impact of effect- ive long-range strategic planning. The primary thrust of our recommendations is improved management of the R&D process. Improved management focuses on the effectiveness of the pro- cess, not just the cost of conducting the program. The actual savings to be realized are open to debate. Although opinions vary, almost everyone agrees that real savings will result from incorporating long-range strategic planning into R&D operations. From industry's perspective, the process is essential .

One measure of the potential savings in the area can be seen from the PPSS Task F.orce on OSD. Issue OSD 21 recom- mended that DOD limit the number of new weapons systems starts based on anticipated funding availability (An effec- tive strategic planning process would achieve this objec- tive.). That Task Force estimated annual savings of $1.1 billion in Research, Development, Test and Evaluation (RDT&E) funds when the recommendations were fully implemented. If these figures were extrapolated to the total R&D budget of the Federal Government (on the basis of total R&D of $44.3

35

Isillion versus DOO's R&D of ^24.8 billion)/ the annual savings when fully implemented would be $1.96 billion.

Elimination of R&D starts based on funding availability would be only one aspect of the savings which could be attri- buted to the implementation of our recommendations in this area. The improved effectiveness of R&D, the ability to more easily eliminate redundant research, and the ability; to elimi- nate programs that do not meet cost and performance standards would add to anticipated savings.

Another approach to estimating potential savings was based on using three sources to develop an estimate of the degree of improvement and potential cost savings that could be expected with the implementation of an effective strategic planning system. These were:

o agency management personnel,

0 public interest leaders, and

o senior private sector R&D managers, particularly

the Co-chairmen of this Task Force.

It is the Task Force's collective judgment that 10 percent enhanced efficiency is a reasonable estimate. The leaders of several public interest organizations suggested numbers in the 10 to 20 percent range and the estimate of agency management personnel who would cite a figure was in the 10 to 15 percent range.

Accordingly, the Task Force conservatively estimates that the implementation of a strategic planning process would reduce overall R&D costs by 10 percent. However, in view of the complexity of this issue and of the many uncertainties involved, the Task Force recommends half of the claimed sav- ings (5 percent) be’ viewed as an objective and the other half be claimed as potential savings. Based on the FY 1983 R&D budget of $44.3 billion, first-year savings of $2.2 billion could be anticipated. Using a 10 percent inflation factor, the savings in the second and third years would be $2.4 billion and $2.7 billion, respectively. Total three-year savings potential is $7.3 billion. Given the savings docu- mented by the DOD Task Force, this level of savings appears reasonable. -

36

Implementation

Strategic planning can be implemented by ^jency

head by means of administrative action. .

importance of strategic planning to the ..

aaencv. the Task Force believes that specific direction for implementation must come personally from the head of each agency.

37

• ISSUE AND RECOMxMENDATION SUMMARIES (CONT'D)

RESEARCH AND DEVELOPMENT (CONT'D)

R&D 2; R&D MANAGEMENT AND THE BUDGET PROCESS

Issue and Savinas;

Can the detailed process associated with the budget be improved to make the research and development (R&D) manage- ment process more efficient?

The Task Force believes that implementation of its recommendations will significantly improve the overall management of R&D. Major savings opportunities are avail- able in the actual R&D and associated procurement funds. Several PPSS Task Forces recommended changes in this area with estimated savings opportunities of $25.9 billion over three years. These savings opportunities impact both the Research, Development, Test and Evaluation (rdt&E) budget and the associated procurement budget. This Task Force estimates three-year savings opportunities of $3.67 billion xn the RDT&E budget if major reforms are implemented in the budget process.

Background

All of the Task Forces that dealt with the Department of Defense (DOD) — the Office of the Secretary of Defense (OSD), Air Force (USAF), Army, and Navy — as well as the Task Forces on the Departments of Energy (DOE) and Trans- portation (DOT), and Procurement focused on problems of R&D and weapons systems acquisition caused in part by the annual budget process and the associated single-year pro- curement policies. These issues all dealt with the insta- bility that results and the opportunities for savings that exist if the instability is removed.

This issue will address several aspects of R&D manage- ment directly impacted by the budget process. By defini- tion, this Task Force is only dealing with the R&d phase. Yet, in several agencies, notably DOD and DOE, the R&D process is tied directly to the procurement process and opportunities for savings extend to those phases as well.

38

The budget process is the mechanism by which results of planning for R&D and weapons systems are minted This procLs in the O.S. Government is complicated

and takes two lalendat years or more to 3"on"the

ro!Ioi:inrpa.r;rrs“ei?^

D^Mes^fo? the FY 1983 budget. Individual sub-agency

level organizations began their budget *?

^^o<! in the fall of I960 (particularly for the larger

rulgeilJeprrauln"LJ?Ju?«no;me^ird'^;'?reSp^

The 0MB budget review and preparation immediately upon receipt and extended to January 1982 » tS^sibrnisLon of the President’s Budget to Congress.

During that period, agency P«^®°”"®^ ,''®f ® . 0M3 call to defend their budget, appeal '

and make the necessary revisions to the overall budget

package.

Once the President’s Budget is submitted to Congress, the focus shifts to the House .and Senate appropriation aStho^izItion hearings process. During this Phase the agencies must be prepared to testify and respond to the many Congressional committees and subcommittees with jurisdiction over their budget*

The end result is a series of appropriation bills and resolutions which give the agencies the authority money. For the FY 1983 budget, the con'Pl®^^®^' cess^for the individual appropriations was as follows.

Agency

HUD - Independent Agencies

Military Construction

Agriculture

Transportation

District of Columbia

Interior

(All others were included in the 2nd Joint Resolution)

Date Signed into Law

Sept. 30, 1982 Oct. 15, 1982 Dec. 18, 1982 Dec. 18, 1982 Dec. 23, 1982 Dec. 30, 1982 Dec. 21, 1982

(Exhibit II-3 on following page]

39

That all appropriation activity for the FY 1983 budget was completed by December 1982 reflects the fact that the final session of the 97th Congress would

bills and any bill not passed by ges-

die. In odd-numbered calendar years, when the first ses Sion of a Congress is involved, some of the appropriation bills generally are not signed into law the first of the next calendar year, since the same

Congress is in session.

fiscafyearunJil^irappropria?Lils^pass^

the 2nd Joint Resolution included the f ect of

language for the other appropriations and had the ettecc oi

the normal appropriation bills.

R&D budgets are included in the overall and the process for the review and

qets is the same. There can be one mapor difference for oc.n however# and that deals with new starts.

Cont?nu!*r«so^uUo;s generally provide ther the agency =er«ntiLe the activities of the prior fiacal year at the nrior year's level or the proposed level, whichever lower ^ Therefore, when an agency begins operating a fiscal year^n fcontinulng resolution, any new RSD start ”dst wart for the passage of the regular appropriation bill, t^in case^ some new starts are included in the continuing resolutions. This can become a real problem budget years handled by the first session of ® when certain appropriation bills are not passed until the summer of the fiscal year in question

Methodology

This issue focuses primarily on the R&D management process in four agencies: DOD, the National Aeronautics

and Space Administration (NASA), DOE and the ^®tiona Institutes of Health (NIH). Interviews were conducted at these agencies with the top management personnel most deeply involved in R&D. In addition, interviews were con ducted with staff at 0MB, the General Accounting Office (GAO), Office of Science and Technology Policy (OSTP), the CongUssional Research Service, Congressional Quarterly, the^Committee for a Responsible Budget, 4

firms with extensive R&D programs. The

viewed historical trend data on Congressional ^ ^

-operations, comparisons of public and private organizations. Congressional committee reports and h g

41

transcripts^ GAO reports/ special reports on Federal laboratories and r&d management practice, and various ppss Task Force reports with issues related to R&D programs.

Findings

In most agencies, budget detail and justification is

f requiring information on numerous projects

including those of relatively small size. In FY 1983 there are some 1,822 projects in NASA, DOD and DOE for which bud- get detail is provided. Exhibit II-4, on the following page, provides a summary of the budget justification submit-

HHS principal R&D agencies: DOD, NASA, DOE, and .

The top half of the exhibit shows that DOD, NASA and DOE supply detailed, project-level information on projects as small as $100,000. The average project size is $9.8 million in NASA and in excess of $31 million in DOD and DOE. In^the lower portion of the exhibit, the sized distri- bution of R&D projects within DOD is shown. Although the average-sipd project in DOD is $31.6 million, the distribu- tion data - indicate that roughly 75 percent of the projects are smaller than average.

exhibit also shows a striking contrast between the •NASA, DOD and DOE budgets and the NIH budget. In NIH's case, the budget is communicated in terms of total program levels, number of personnel, and an analysis of major program changes for each institute.

The time involved in the budget process is excessive and contributes to the cost growth proolem. The two to three years lag in the budget process between initial bud- get planning and subsequent funding actions makes management and planning difficult tasks. In an R&D environment with its rapid technological change, uncertainty and inflation, planning and management are much more difficult. Time lags of this nature, however, do not cause problems in budgeting such operational functions as medical payments, civil ser- vice payroll, and grants and loans.

(Exhibit II-4 on the following page]

The R&p budget justification package for DOD is

approximately 3,000 pages; the same package for NASA IS 1,000 pages.

42

I.Kh I li 1 1 11^

I

NOT REPRODUCIBLE

43

Because of the lags, R&D budgets are established on the basis of highly uncertain information. In the fall of 1980, program/project managers began developing their detailed budget submissions for expenditures in PY 1983. In an R&D environment where by definition the future is uncertain, developing detailed funding plans that far in the future presents major problems. The problem is exacerbated for new starts where the R&D project is not defined. In these cases the rush to get the project included in the budget to be considered precludes the kind of definitional planning that should be done. A NASA study of the cost growth problem (the Hearst Study) cited inadequate definition prior to the budget decisions as an element contributing to the cost growth.

The lack of definition and the lead times involved can cause subsequent cost growth in R&D projects because the initially requested amounts become commitments on the part of program managers. By the time the budgeted amounts are avail- able for spending, technology changes and the results of the prior years R&D efforts may indicate that a different amount of money is required. In such cases, program managers first try to live within the assigned ceilings by revising the scope of the project or changing the schedule. When they do, they are caught in the ■ situation that leads to real cost growth. Many recent reports on cost growth [the Rand Corporation's •Acquisition Policy Effectiveness* and the Air Force Systems Command (AFSC) "Affordable Acquisition Approach*] have shown that program stretch-outs and changes in technical require- ments are contributing factors to cost growth.

In the AFSC study of cost growth, they found funding instability as the cost and schedule growth factor that oc- curred most often. External management impacts (defined as the occurrence of program decisions above the program office or the occurrence of frequent program reviews at USAF head- quarters or higher) was the fourth most prevalent factor in cost and schedule growth.

The budget cycle in the private sector does not involve any delays of the magnitude encountered in the Government. Relying on our own experience and based on information ob- tained from other private sector firms, we have developed the following general scenario explaining how R&d programs are budgeted in the private sector.

o New projects are generally included in the overall five- to ten-year strategic plan which receives general approval. The projects are described in brief terms and budgets are stated in ranges of dollars such as $50-^75 million.

44

When it comes time to approve a specific project, detailed plans and a budget are prepared. They are then submitted to the Board for approval. This whole review and approval cycle generally takes 30-60 days. In general, this approval process is outside the annual budget cycle.

If annual approval is required for continuation of the project, it is generally handled as part of the normal budget cycle which takes two to four months.

We do not mean to imply that the Federal RSD budget process should adopt the same specific type of schedule as in the private sector. We recognize that in the P^yate sector decisions are made on project proposals by an individual or small group. In the Government, decisions require ® sus in^the agency, the Executive Office of the President, and Congress. Nevertheless, the length of the process is a maDor management problem and it should be shortened.

The ronoressional hearings process places a signifiga^ burden on the agency. There are 30 Congressional committees and subcommittees that have jurisdiction over DOE. In the 97th congress alone, DOE presented over 700 witnesses more than 300 hearings. This problem is not unique to DOE. agencies have found themselves appearing before an expanding array of Congressional committees. In the case of DOD, example, they have recently had to appear before the Interior and House Ways and Means Committees, in addition to their ^ numerous appearances before the Armed Services and Appropria- tions Committees. Each of these hearings ^

preparation of testimony. In addition, considerable time is required to respond to written requests for information on the part of the Committee, most of which are generated by growing staffs.

staffs have in- on the following to the- personal , have grown 11.7 II-6 shows the growth most influence the gy and Commerce and increased by a fac- ts on a single corn- 165. Despite this has grown only 25

Since World World II, Congressional creased about sixfold (See Exhibit II— 5 page). The Committee staffs, as opposed staffs of individual members of Congress times in 33 years (1947-1980). Exhibit in staff for those key committees which four large R&D agencies. The House Ener Public Works Committee staffs alone have tor of 16, and the number of staff membe mittee. Energy and Commerce, has reached growth, the actual number of committees percent since 1955-56.

(Exhibits II-5 and II-6 on the following pages]

45

CONGRESSIONAL STAFF SIZE 1947-1980

(PERSONAL AND COMMITTEE STAFF)

o

o c o < • • •

Oi ^ f— 1

o o o ^ ^

tn m

• • •

in

13NNOSH3d ddVXS

do b3Bir4nN

♦

*

r- ON vjo

f-4 ^ vD

^ in

\0 lO O CO

r- o r- « « ^

^ 00

VC ^ r-

m ^

m VO ^

iA •>

m ^

O rn rn ro rsi O (N n

^ rvji -.10- t- fc- <

U. < e

< &- C c/:

w

w c

*J t: t:

< e- 2 z ^ ^

w a o

Ca cj

r\j p—

m 00

♦ -N ♦ <« «

46

SOURCK; (U VITAL STATISTICS ON CONGRESS, 1980 -

(2) OFFICIAL PAYROLL RECORDS OF HOUSE AND SENATE

Exhibit II~6

Mirntyr of rnintiittees i" the axise and Senate (1955-1980).

84th 0>n9.

(1955-56) (1967-68) (1971 72 )_

Total Nvanber of 315

Congressional Corwnittees

Site - Key Biin fv^rsiqht Cormittess

333

97th ODng. (1981-82)

310

Hmisg (^snrnittees

o Appropriations o Energy a Oormerce o Science & Technology o Public Works o Armed Services o Education & Labor

Senate Conmittees

o Appropriations o Conmerce# Science and Transportation

o Energy and Natural Resources o Armed Services o Labor and Human Resources

1947 1960 1970

32

10

6

10

10

21

7

10

9

7

51

41

16

24

16

20

71

47

29

43

40

102

1981

140

165

88

95

54

135

1981 to 1947 Ratio

to l.C to 1.0 to 1.0 15.8 to 1.0 5.4 to 1.0 13.5 to 1.0

4.4 16.5

5.5

25	33	84	4.0 to 1.0
10	10	115	16.4 to 1.0
10	10	56	5.6 to 1.0
Q	8	42	4.6 to 1.0
22	34	134	19.1 to 1.0

Source:

Official PaytoU Becords cf Houae ard Senate.

47

The argument often used to justify this growth is the increased complexity in running the Federal Government. However/ even by Government standards this growth appears excessive. For example. Exhibit II-7, on the following page, shows that civilian and military Federal employment in the Executive Branch has increased less than 50 percent over the same period (about the same growth as the United States population) including the growth in military personnel resulting from the Vietnam conflict.

Both the internal agency review process and the 0MB and Congressional review process have created extensive layering in Federal R&D agencies. This results in excessive use of technical staff and micromanagement at numerous and high levels within the agencies. Large technical staffs are used to evaluate programs and advise upper management. These technical staffs who support the management structure do not have direct line responsibility (i.e., they do not manage or have responsibility for a program or function). The use of these technical staffs has grown to the point where it undermines the authority and responsibility concept of management. 'The staffs are so large that they have an organization and layered structure of their own.

Two of the Task Forces specifically addressed this issue as it applies to R&D.

o The Department of the Air Force Task Force recommended changes in the Air Force budget preparation and review cycle. They found that virtually the entire Air Staff is involved in the preparation or defense of the Program Objective Memorandum (POM) and the budget which are done sequentially. The Task Force recommended that the Planning, Programming and Budget System (PPBS) reviews and budget reviews be done at the same time and estimated that 120,000 staff-hours could be saved in the process. This analysis focuses primarily on the resources used in the internal agency review process. It does not address the staff required to respond to the Congressional deliberations phase of the budget process.

o The Department of Energy Task Force found an unnecessarily expensive structure of program direction and support in the Department and labs. They found a complex network of program managers and control personnel involving succes- sive layers of people who oversee, monitor and

(Exhibit II-7 on the following page]

48

Exhibit H ^

COHPARED TO CONGHESS tONAL STAFF SIZE

49

often participate in the management of laboratory programs. Their recommendations for improving the situation would eliminate 600 positions in DOE and 1,800 positions in the GOCOs (Government- Owned, Contractor-Operated facility).

We analyzed the RSD management structure in the Army and compared it to the private sector. The results of this analysis are shown in Figure II-l and II-2 which follow this page. Figure II-l presents the current R&D organiza- tion and technical. staff in the Army. (All nontechnical staff, of which there are many, are not shown.) As shown in this exhibit, there are roughly 600 people involved in technical staff positions with respect to the Army R&D program.

This use of technical staff in the Government is ex- tensive when compared to private sector R&D organizations, figure shows an organizational chart for a typical

industrial R&D firm. In this example, no technical staff serve in the top management structure. While Government may not operate like industry, the striking difference between these two examples cannot be justified in the organization. In our interviews with Army R&D management, they continually referred to this problem, pointing out that many people have to be lined up to make relatively simple decisions. Many can veto a decision but very few can give a go-ahead. This causes frustrating delays, lack of accountability and great waste in R&D program management resources.

These staff problems are caused, as shown by the Air Force example, by internal management inefficiencies, by the extensive micromanagement practiced internally as well as by external agencies, and by the Congressional budget process. To illustrate the magnitude of the problem, we analyzed the DOD RDT&E budget for FY 1983 and .the control procedures used by Congress.

As noted previously in Exhibit II-4, there are 768 un- classified items in the DOD R&D budget* There is agreement between DOD and Congress that the Secretary of Defense has the authority to reprogram funds up to $5 million without prior Congressional approval. However, this agreement also contains the provision that reprogramming of any individual item changed by Congress in the budget deliberations cannot be done without prior approval of Congress. A review of the FY 1983 RDT&E budget reveals that roughly 90 percent of the items were altered during Congressional deliberations. This has the effect of eliminating the reprogramming authority.

[Figures II-l and II— _2 on the following pages]

50

Picture I1~A

DOD (ARMY) ORGANIZATION CHART

	1 T UNDER SEC OE /
1 SIC. OF OEFENSt ^tP SEC OF DEFENSE	— ^ OEEENSE — ■' j R»E
~ SXtCUTIVE SECRET AA1 AT
	SBT**

’ SEC OE	ARMY ]
UNDER SE(	OE ARMY ] « « ■

/ 103 \

I m^O TtCHl

"CMtEF Of SIAM-TJ? 710 TWC ARMY

CMiBf Of SfAff

TTofT^R Of AHMY STAff

J oc^ COMO Otw ^ I asst STAff tACM

m;

7			ZS 1	p'i
	eradcom	I

(» NV b tot pmECTO^

0€7 QiWECTOW 3 asst DlWtCTQW

. NUMBtM OF EQUIVALEWT OEPAATMEWTS

•« numbew of persons including staff

average span oe control

(DIRECT REPORTS!

STO 2D

51

Figure II~2

$2 BILLION INDUSTRIAL R&D FIRM

VICE

CHAIRMAN OF THE BOARD

1* * ••• r*

RREStOENT

2 2 EXECUTIVE VICE RRESIOENT

3.5

VICE RREStOENT

	3i
31	DIVISION EXECUTIVE DIRECTOR	3
	3f
140	CENTER/LAB DIRECTOR	2
	4.3
EM	DEPARTMENT HEAD	2
	30
im	TECHNICAL SUPERVISOR	2
	B.«
1SM7	MEMBER OF TECHNICAL STAFF	10

NO. OF TECHNICAL STAFF

• NUMBER OF equivalent DEPARTMENTS

NUMBER OF PERSONS INCLUDING STAFF

••• AVERAGE SPAN OF

CONTROL lOlRECT REPORT)

52

nation	No. of Managers & supervisors	Total No. of Employees	Management Ratio
s-ederal
Governinent Dept
Defense	138,066	668,150	20.7%
	2,776	17,298	16.1%

The impact of this i"«hl?"elmp^

““ve?"nLSfanrp?tvrtrsector management ratios.

Average No. of Workers Per Manager _

3.8

5.2

Private Sector company

IBM

I

Exxon

Honeywell

3M

I Hewlett-Packard

45,600	364,796
25,604	173,000
12,228	94,062
14,856	87,388
10,608	68,000

BChnology oriented private seer

12.5%

14.8%

13.0%

17.0%

15.6%

7.0

5.8

6.7

4.9

5.4

average number, of workers in comparison to major

y

The table is extracted zational Effectiveness

from a to be

PPSS Special Report on released during November

Organi

1983.

53

Conclus i ons

As shown in the Findings^ the R&D management process, ■ly t^ose processes dealing with the annual budget cycle# are inefficient# lead to tremendous administrative burdens# and contribute to the cost growth being experi- enced by many R&D programs. All aspects of this process require change to reduce the time lags involved as well as the level of detail required. The problem of excess staffs in both the Executive and Leg*islative Branches is# to a certain extent# a chicken and egg argument. From one per- spective# they are needed to handle the growing complexity and level of detail involved. From another# the complexity and level of detail are growing because of these staffs.

At the same time# the Task Force recognizes that the process can not be governed by the desired efficiency in R&D management. The system of checks and balances built into the system# as inefficient as they might be# has served the country well. Nevertheless# the Task Force is convinced that fundamental changes can be made which will improve the efficiency of the process without harming the other objectives served by the process.

Recommendations

R&p 2-1; Implement multiyear budgeting specifically for R&D activities. The Task Force on Federal Management Systems hds r8Comni6nd6d inultiyoar bud9Btin9 con^ sider6d as

an issue for further study. Many of the other task forces have recommended that multiyear budgeting be implemented for various portions of Government operations including R&D and weapons systems procurement. This Task Force believes that this concept will be helpful in solving some of the problems associated with R&D management# parti- cularly eliminating some of the annual effort involved in budget preparation and review. Such an approach would also provide more stability to the R&D efforts# providing known funding levels for future years of essential R&D programs.

R&D 2-2; Develop a budget concept that significantly reduces the level of detail in the budgeting of r&d pro- As noted in the Findings section# the approval of budgets for 1#822 individual projects for DOD# DOE and NASA gets into an excessive level of detail. At the other extreme# if the R&D budget for the three Services# DOE and NASA were approved at a total level# the Congress would not be exercising the degree of oversight appropriate to its role.

54

The Task Force recommends that the budget for the DOD R&D program be presented in terms of the three Services and further broken down into the existing budget activities (tech- nology base, advanced technology development, strategic pro- grams, tactical programs, intelligence and communications, and defense-wide mission support). Within each budget activ- ity two or three major programs would be identified for information purposes only.

There are alternative structures that could be used for these budget activities. In the Army, for example, it might be more meaningful to break the R&D budget down into the following functions:

o armament,

o aviation,

o communication,

o mobility equipment,

o missiles,

o tanks, and

o troop support.

A similar functional list could be prepared for the other Services, DOE and NASA.

The Task Force is not in a position to specify the cate- gories that should be used. However, some scheme to get to more summary level information as currently used by NIH should be developed.

R&D 2-3: Develop ways to shorten the budget preparation

and review cycle. Certain recommendations contained in this Report should shorten the current budget cycle. The recom- mendations dealing with strategic planning should signifi- cantly reduce the time required for the individual agencies to prepare the budget package for submission to 0MB. Also the recommendations for multiyear budgeting would eliminate the annual cycle of the budget process. The largest portion of the cycle that has not been addressed is that taken up by the Congressional deliberations. We recognize that this portion of the cycle is outside the scope of the PPSS review. Yet, we must note that it is contributing to the inefficien- cies in Government operations.

Various Congressional budget reforms have been recommended over the course of the last several years. One of the strongest arguments has been made by Dr. Alice Rivlin,

55

former Director of the Congressional Budget Office. She believes that Congress has overloaded its own decision-making process. As one step to simplify the process and reduce this load^ she has repeatedly recommended that Congress adopt a multiyear budgeting process. Similar recommendations on budget reform have been advanced by the current and the former GAO Comptroller General, as well as many individual Congressmen.

As part of the negotiation with Congress, which will be required to implement multiyear budgeting and the reduction in the level of detail contained in the budget, the Executive Branch should explore ways to reduce the time required for Congressional review. One alternative might be to separate substantive program review (authorizations) from the formal budget cycle (appropriations), i.e., approve a funding level for the entire R&D program and establish an authorization cycle that is not tied to appropriations. A second alterna- tive might involve the scheduling of R&D deliberations early in the overall cycle in order to shorten the time frame.

R&D 2-4; Reduce technical staff positions in all R&D agencies . The preceding recommendations are directed toward streamlining and revising the R&D management process, par- ticularly the budget process. As these recommendations are implemented there will be an opportunity to reduce the technical staffs that have developed in the R&D management process.

It is recommended that the number of technical staff and .support personnel in R&D organizations be reduced to elimi- nate confusing lines of authority and unproductive staff work. Because the Task Force did not have the resources to analyze the staffing of R&D management agencies, it is not possible to specify the number of positions that should be eliminated.

A PPSS special report on Organizational Effectiveness, which will be released in November 1983, recommends a program for achieving a more effective Government organization struc- ture. Implementation of these recommendations, in conjunc- tion with the changes recommended in the report, should result in an improved R&D management process, operating with a reduced technical staff.

Savings and Impact Analysis

The recommendations presented in this issue should result in reductions in cost growth and savings in acquisi- tion costs through improved program stability. In part, these savings have been addressed in R&D 1 and the various

56

PPSS reports dealing with the agencies with primary R&D re- sponsibility. On the following page is a listing of the recommendations for multiyear budgeting/procurement and the savings opportunities that have been identified in other PPSS

reports, V

These savings opportunities apply to both R&D and pro- curement funds and there is some duplication between the items, so the total cannot be claimed as savings opportuni- ties for this analysis.

In order to attribute savings opportunities to these recommendations the analysis used in ENERGY 13 will serve as the base. In that issue, the Task Force used 5 percent of the R&D budget as the estimated savings opportunities attri- butable to multiyear budgeting. V Recognizing that we^are 3pplyin9 thG t3t6 to 3 b3S6^ this Tssk Forc6 will use

a 2.5 percent rate as the annual savings opportunities attri- butable to the budget reforms recommended in this issue.

Based on the FY 1983 R&D budget of $44.3 billion, first-year savings opportunities would be $1.11 billion. Applying a 10 percent inflation rate, second-year savings would be $1.22 billion and third-year savincs would be $1.34 billion. Total three-year savings would be $3.67 billion.

Implementation

Implementation of these recommendations will require Congressional approval. 0MB and the affected agencies should initiate discussions with the appropriate Congressional staff to begin working out the revised procedures.

3/ The Task Force recognizes that the recommendations for ” multiyear procurement do not necessarily imply a need

for multiyear budgeting. However, the increased stabil- ity provided by multiyear budgeting would greatly enhance the recommendations. Also the implementation of multi- year budgeting does not obviate the need for multiyear procurement authority.

4/ In the OSD report (OSD 23), a 7.5 percent factor was ” estimated for savings attributable to multiyear budgeting .

57

Multiyear Budgeting/Procurement Savings Opportunities

Task Force/ Issue	Three-year Savi Opportunities Title ($ millions)
ARMY 11;	Fully funded biennial budget for major weapon system procurement	$ 6,600.0
ENERGY 13;	Introduce three-year budgeting	413.7
NAVY 1;	Improvements in program stability including a two-year budget	3,000.0
OSD 23;	Reduce instability in the weapons acquisition process	7,185.0
PROC 4;	Expand multiyear contracting to all agencies	3,415.0
PROC 6;	Develop program management and acquisition plan	2,940.0
USAF 19;	Increase use of multiyear procurement and propose a multiyear budget	2,400.0

Total savings opportunities $25,953.7

58

II.

ISSUE AND RECOMMENDATION SUMMARIES (CONT*D)

RESEARCH AND DEVELOPMENT (CONT*D) R&D 3; PRIVATIZATION

Issue and Savings

Can cost savings be realized if the Government pri- vatizes certain Federal research and development (R&D) undertakings?

The Federal Government has a recognized role to play in supporting R&D in the United States# but areas exist where transfer of R&D responsibilities to non-Government entities would generate cost savings and strengthen R&D capabilities .

Background

According to the President's Private Sector Survey (PPSS) Task Force Report on Privatization# "Privatization# in a literal sense# means to turn over an activity# or part of an activity# currently performed by the Federal Govern- ment to a non-Federal entity." The Federal Government often becomes initially involved in activities for legit- imate reasons. For example, military commissaries arose in the 1860s when the typical army post was a frontier post, miles from the nearest city. The most cost-effective way to provide military personnel with food and supplies was to make the Federal Government their grocer. However, the circumstances that originally justify Government production of goods and services often change# so that eventually non-Federal entities can and should take over production.

In the R&D arena. Government clearly has a role to play in supporting and undertaking R&D activities. Con- sider the Government role in the following cases;

R&D That Entails Major Expenses, But Whose Outcome Is Highly Risky — There are scientific and technological areas important to the United States that are too expensive and risky to be developed by the private sector. Tn such

59

cases# the Federal Government can appropriately become involved in relevant R&D activities. For example, the Federal Government's willingness to underwrite the risks involved in the transistor's early exploitation.

Very Long-term R&D — Some R&D work involves planning horizons that extend beyond the normal planning horizons of industry. It is appropriate for the Federal Government to support actively such R&D. If significant progress in fusion-based energy system research is to be realized, Government must play an active role in its development.

Public Good Areas — The Federal Government is clearly responsible for doing such things as maintaining the national defense and assuring the existence of a good pub- lic health system.

Maintenance of the National R&D Infrastructure — Only the Federal Government possesses a national perspective on R&D. For example, while an individual electronics firm may be concerned about where it will find electrical engineers to fill staff openings in its labs, the Federal Government is concerned with having an adequate supply of electrical engineers to meet all the corporate and non-corporate needs of the United States. It is also concerned with developing an adequate cadre of scientists and engineers in all other areas of science and technology.

Maintenance of the U.S. Competitive Position in Cru- cial Areas — While we are tar from having universal agreement on this matter, there are many who believe that the Federal Government should do whatever is necessary to make certain that the U.S. does not lose its leadership position in certain key scientific and technological areas; e.g., in electronics, computers, and aerospace. This view has arisen in response to foreign challenges to American dominance in these areas, challenges that have their ori- gins in foreign government subsidies of their domestic R&D efforts (e.g., in Japan, France, and many Third World countries).

While Government has an important role to‘ play in sup- porting R&D efforts, care must be taken to make certain that legitimate Government-supported efforts do not, over time, become incursions into non-Governmental terrain.

60

Methodology

The R&D-related issues of all the PPSS Task Forces were reviewed to identify areas where Federally supported RSD can be privatized across a broad spectrum of Federal agencies. Interviews were conducted with high level per- sonnel in both the Federal and non— Federal sectors. Rele vant literature was reviewed.

Findings

The PPSS Task Force on Privatization made a distinc- tion between the Federal Government providing goods or services and producing them. There are many goods and services that the Federal Government can legitimately provide to the public, but the number that it should produce is far smaller. In this scheme of things, privatization primarily entails reducing the Federal Government's role as a producer of goods and services.

In our Report, we carry the concept of privatization even further. Our investigations have led us to the fol- lowing three broad findings:

0 The Federal Government should divest itself of R&D tasks:

that would otherwise be effectively done were the Government is not involved.

that can more efficiently be done by non- Government entities.

o The Federal Government should create an environ- ment that stimulates increased non-Federal R&D activity in certain target areas.

o Non-Federal entities should be profitably encour- aged to use Federal R&D facilities and the re- sults of Federally sponsored R&D.

There are two basic ways to accomplish divestiture.

One way is to farm out to non-Government entities tasks that Government legitimately needs to have performed.

Thus, while Government would. provide necessary R&D ser- vices, it would not be pr oducing them itself. Examples include the environmental testing done by Environmental Protection Agency (EPA) field workers throughout the United

61

States, and the later development phases of Department of Defenses (DOD) research.

The Federal Government can also divest itself of R&D undertakings by getting out certain R&D areas entirely.

This should happen when it is obvious that the R&D would be carried out by non-Federal entities even without Government involvement r or when it is determined that the R&D is not meritorious for Federal involvement. It is assumed that R&D projects that were meritorious from the private sector point view would be picked up. The following are some specific examples of programs that the Federal Government should divest itself of:

o The PPSS Task Force examining the Tennessee Val- ley Authority (TVA) determined that the Federal Government should phase out its support of the National Fertilizer Development Center (NFDC).

The NFDC has been quite successful in carrying out its mission. At this point private funding sources can support NFDC's work. A gradual phase-out of Government support would yield a savings of $12.1 million in the first year, $27.1 million in the second year, and $44.6 million in 'the third, for a total three-year savings of $83.8 million (See BUS-TVA 7).

o In reviewing the Cooperative State Research Ser- vice (CSRS), the PPSS Task Force on the Depart- ment of Agriculture found that 20 low priority CSRS projects could be dropped by the Federal Government, transferred out of the Agriculture Department to other agencies or transferred to non-Government entities. Those projects trans- ferred to non-Federal entities would save the Federal Government over $10 million a year in expenses, for a total savings of $35.4 million over three years (See AG 54).

o The PPSS Task Force on the Department of Energy

(DOE) concluded that DOE should not support proj- ects that can be adequately handled by the pri- vate sector (e.g., ocean thermal energy conver- sion). While the Task Force did not suggest a dollar figure for the savings realized by priva- tizing certain energy R&D efforts, it is clear that the savings would be very large, ranging in

62

the hundreds of millions or even billions of dol- lars (See DOE ID*

o The PPSS Task Force on Privatization determined that if funds for the fifth space shuttle were collected from the private investors, cost avoid- ances totaling $460 million in ^he first year,

$506 million in the second year, and $556.6 mil lion in the third year could be realized for a three-year total of $1,522.6 million. Currently, two shuttles have been procured and constructed with two more in the works. There are no plans for a fifth shuttle. However, it seems dear that the demand for space shuttle services

exceed the capacity of the four

it is reasonable to assume that a fifth shuttl

will have to be built. By bringing vestors into the procurement of the fifth snut tie, the Federal Government would be making a significant step in privatizing

day be a major American industry (See PRIVATE 3).

It should be recognized that privatization can be en- couraged through indirect means. By creating ment that reduces the level of risk in R&D investments, the FeSeral Government can stlmelate increased RSD activity in thr«eas that the private sector normally avoids.

The Federal Government should continue to explore mechanisms such as the R&D tax credit, the limited

partnership (R&D LP) and R&D Domt ventures (R&D JVs).

The Federal Government undertakes large quantities of R&D either in-house or through contracts. A significan coLJqSence ?s RiD assets valued in <=hVbiUi=ns of dol- lars These take the form of laboratories, equipment, pro auction fIcUUies, and a large cadre of well-trained scientists and engineers. They also

an enormous amount of technology patented by the Federal Government. To the extent that these assets ere amassed by the Government, they are not being

The R&D Task Force suggests that attention focus -on the

1/ It has been estimated that the annual savings in

Federal outlays for energy research could amount to $ billion, with greater future savings (Heritap Foundation, Backgrounder $270, "Privatizing Federal Energy Research," June 7, 1983).

63

following three ways of increasing the flow of technology from the Federal to the non-Federal sector:

o Non-Federal entities can be given improved access to the facilities of Federal laboratories.

o Information on Federally supported efforts can be more effectively disseminated to the public.

o Non-Federal entities can be encouraged to license Government-owned patented technology.

While the second and third items are discussed in sep- arate issues in this Report, improved access to the facil- ities of Federal laboratories is briefly discussed here.

DOE labs have ’user facilities" in which either Government or commercial entities can pay to have experiments con- ducted or analyses made. A prime example is Brookhaven National Laboratory's Synchotron Light Source, a unique diagnostic tool for studying such commercially important materials as alloys, catalysts, and polymers.. The facility is available on a time-sharing basis. Despite recent pub- licity, some potential users (including large beneficia- ries) may still not know of the facilities existence, much less its possible application to problems with which they are concerned.

Various gains can be realized from closer interaction between the national laboratories and the private sector. The private sector would get access to specialized equip- ment and expertise, in addition to gaining insights into high-risk, long-term work being performed at the labs that may ultimately have commercial significance. For its part, the laboratories would get a clearer value. They would also be able to identify and discontinue research in the Government sector that private companies and research in- stitutions are already performing.

Conclusions

The Federal Government has a legitimate role to play in R&D. This is particularly important for maintaining the national science and technology infrastructure and in the areas of long-term, high-risk R&D and public good-related RiD. However, the Government must be wary of undertaking R&D efforts that could be adequately undertaken by non- Government entities.

There are many R&D efforts currently funded by the Federal Government that should be turned over to the pri- vate sector, or abandoned if the private sector is not in- terested. The two most noteworthy examples are the Clinch

64

River Breeder Reactor Project and the Rational Fertilizer

Dsvslopnisnt C6nt6r#

There are several different

tion of Federal R&D S&D task to non-Government enti-

ties,, it can an atmosphere that encour-

S|«"grra'tlr“ri?4te sector Participation in

^“2rti«Vo‘?are''^«rei fd^vaiL^rorthe fLits Of govern- ment-sponsored R&D

RecomiT'endations

p»,.ral agencies sh^r

where they provide ^aD~ROO ^ Where logical, cn«r

i-So!:rd'rt ve^ t^ tl LnlflrtHi^ct ion of these goods and Je?ii=erw non-Federal entities.

Federal agen^aa ahorr

the RSD activities, they sop, ort compere

gjj^

« •■“••w-

orn -i The pam,^orai Government should strive to

.,,.rrlri;^nmenr that encuuiages^increaseu^y. >|t_^

HSU incLtives^iL^ T-^f?pd ^artne^cHins and loint venture?:

impact Analysis

The majority of benefi« ^“‘''®4amp?e,'’U''?rri?f icS?t cannot be t®adily quan i i • revenues gained

to speculate on the value o savings that might be

^r^L?reririetfi;irmafreJ“?o?Jer!ncrease\he productivity of the R&D process.

TO illustrate the. savings Prrrgs'ide«Uied''w'”her of R&D we have summarized the savings iaentitt« j

?isr?ir=es in the table on the following page.

65

Cost Savinqs/Avoidance ($ millions)

Source of Savings	Year 1	Year 2	Year 3	Three-year Total
National Fertilizer Development Center	$ 12.1	$ 27.1	$ 44.6	$ 83.8
Cooperative State Research Service	10.7	11.8	12.9	35.4
Clinch River Breeder Reactor _2/	200.0	200.0	200.0	600.0
5th Space Shuttle	460.0	506.0	556.6	1,522.6

Total t682.8 t744.9 t814. 1 ^2.241.8

These savings are shown here for illustration purposes only since they have been included In the other Task Force re- ports* They are not counted as savings attributable to this issue, but are included in the Compendium Issue (R&D 8) .

Implementation

Statutory and administrative authority exists to implement all the recommendations offered here (e.g., Stevenson-Wydler Act, 0MB Circular A-76). Implementation can be undertaken at the agency level.

The savings for the Clinch River Breeder Reactor are estimated since there are no annual appropriation requests for the project. In FY 1983, $194 billion was appropriated for the project. DOE requested that Congress appropriate $1.5 billion to be obligated through 1990 which, when combined with planned private sector funding would complete the project. Therefore, it was assumed that $600 million would be saved in three year. Total savings through 1990 would be $1.5 billion.

66

II. ISSUE AND RECOMMENP^T^TON SUMMARIES

ppcP^prH AND development (C0NT*D_I

P&D 4- tmppOVED MANAGEMEN'T' OF RESOURCES

«|::^£ARCH LABOKAIORTl;

Issue and Savings

Can Federal research reduced by managing funds ment of Federal research

and development (R&D) costs be , personnel, facilities and equip- laboratories more effectively.

Savings from improved mated to be $153.0 million million in the second year year for three— year total

resource management are esti-

in the first year, $168.3 , and $185.1 million in the third savings of $506.4 million.

Background

over the past y^l^^J^'total^FedeHl fundin^for

sectors:

indistty. Federal l>^f»5°“”j3tS?ies‘hI”bee“»lative^ fraction going to Federal la -g--ral, industry is princi- constant over t the Federal laboratories in

pally involved, in u a„d universities in basic

development and applied research, page) . There

research (see Exhibit II-8 on ^°Ji°'^i2ppinrcapabili-

are, however, many exceptions. areas of

ties among °aTv difficult to identify capa-

»u!y^Lr,re^tr£o^e;;Uctor.^^:n^

englnlifing to support the more applied aspects of their work.

Vices to the to^agency planning, program

their research, they the laboratories'

^ornl«irc^i?-^S^:f pen met, h^^^^

“tn“!tt«now^ra?rsnin?2^ntlJ1?4a^2f?esLrcb

[Exhibit II-8 on the following page]

67

Exhibit II-8

RELATIVE PERCENTAGE OF SCIENTIST AND ENGINEERS EMPLOYED IN R & D, BY SECTOR

LABORATORIES

NATURE OF R & D BY SECTOR

laboratories <INCL. INDUS. OPERATED

(INCL UMV OPERATED FEDERAL LABS-

FED LABS.)

SOURCE: National Science Foundation

68

u.-M¥iac The Federal laboratories have responded to capabilities. The . wavs, as have industry

changing environments ®^®"ator ies have remained

stftiS^'whiirithers’have changed their

static, _ The Federal Government must ascertain

2S«het these Ubitatoties are attending to the most rele- vant activities.

The Federal Government owns

tcries. these 700 If tJs^'XoJe ti”' oSX^hlvf fewer programs and scope ,®. . . under $300,000 while others

than ten employees and budgets unaer ^ exceeding $200 have over 2,000 employees with budgets exceeoing

million. _!/

tutes, activici , Veterans Administration (VA),

Government's tally of 700 laboratories.

Although it varies greatly from agency to agency, on

'h"!f^:r:reIr'S;/n:orin^ lu^dl? ■

r£r5e^u^fing1nl^ru^r?a?Life?^“°lnc!uStnr«

intramural R&D.

1/

2/

Federal Laboratory Directory Commerce, National Bureau of

1982 , Department Standards.

of

Funds for Reseatch and Development Fiscp^ 1981. 1982 and 1983, National Science Foundation,

Years p. 30.

69

DOD has 73 laboratories, of which 35 serve the Army,

24 the Navy, and 14 the Air Force. These laboratories employ more than 60,000 people, of which 80 percent are civilian, except the medical and Air Force labs which are 50 percent civilian. The Air Force accounts for 46 percent of DOD's R&D budget. Nearly two-thirds of the annual cash flow is Research, Development, Test and Evaluation (RDT&E) money. The balance of the cash flow comes from procurement funds that are used for the acquisition of initial hardware systems and associated support, particularly product improvements.

NASA operates eight major centers throughout the country. NASA's technical expertise and facilities, such as wind tunnels, are national resources often used by pri- vate industry, DOD, the Department of Commerce (DOC), the Department of Energy (DOE), other Federal agencies, and foreign governments. As a result, many of NASA's activi- ties are reimbursed by the using agency. In the FY 1983 budget submission, NASA estimated that 16.5 percent of $1 billion of NASA work will be reimbursable. This work pri- marily relates to space shuttle operations and space appli- cations.

Methodology

Issue team members interviewed outside advisors as well as 85 key staff members in NASA, the Office of the Secretary of Defense, the Defense Advance Research Projects Agency, former DOD officials, the National Academy of Sciences, the National Science Foundation, the American Association for the Advancement of Science, the General Accounting Office, DOC, Office of Management and Budget (0MB), and other Federal agencies.

Issue team members visited ten DOD laboratories and five NASA centers to gain a better understanding of Federal research facilities and programs. The DOD laboratory site visits included:

o Night Vision and Electro-Optics Lab, Fort Belvoir, VA;

o Mobility Equipment R&D Command Laboratories, Fort Belvoir, VA;

o Harry Diamond Lab, Adelphi, MD;

o Combat Surveillance and TGT-Acquisition Lab, Fort Monmouth, NJ;

70

O Aviation RSD Laboratories, Moffet Field, CA;

o Naval Medical Research, Bethesda, MD;

-o Army Medical Research Institute of Infectious Diseases, Fort Detrick, MD;

o Medical Bioengineering R&D Labs, Fort Detrick, MD;

o Army Institute of Dental Research, Washington,

DC; and

o Walter Reed Army Institute of Research,

Washington, DC.

NASA installations visited include;

o

o

o

o

o

Goddard Space Flight Center, Greenbelt, MD; Langley Research Center, Hampton Bays, VA; Ames Research Center, Palo Alto, CA;

Marshal Space Flight Centerr Huntsville^ AL Johnson Space Center, Houston, TX.

and

Laboratory directors and professional staff members upre interviewed during these visits. In addition to these personal contacts, the issue team analyzed numerous rele- vant published background documents.

Findings

Based on Task Force interviews, laboratory rnana^^^ hhP dpvelooment of "centers of excellence.,. The clllllt of centers' of excellence, utilized more ana more, inJol?es the concentration of efforts to pursue research in t «?ilrarea and centrally locate the resources to perform

that research. This concept recognizes that some critica

mass of resources is required to conduct first-rate research programs. Along the same lines, ^|}creased coordi- nation among R&D laboratories has been cited as desira 1

to atoid excessive program overlap. °°° ts a. c— V i ce oroQTains to insxiiniz© ths b6ri6rits

of the Aseist.nt

EMtgy weapons has been established to coordinate the efforts of the Services and defense agencies in this sp«Iftc ptoglam Lea. A concerted effort to reduce dupU- SniLof effort and enhance productivity is being made.

NASA is already using the concept of centers of excellence Each cLter has a specific set of goals, which haroermitted the avoidance of nonproductive RSD overlap among centers. Each center concentrates its efforts on specific areas of expertise.

71

There is no systematic ongoing process for evaluating R&D laboratories. Each Federal laboratory and its sponsor- ing agency generally have procedures to review and evaluate the efforts in the laboratory on an annual basis. However, these reviews do not generally cover the scope and merit of the science and programs being conducted in the labora- tory. DOD, in particular, has experienced problems in this area. Each Service has its own procedure for evaluating R&D programs and laboratories. The Joint Deputies for Laboratories Committee is a notable attempt at an overall evaluation of the laboratories, but most similar efforts have not been totally effective. In a recent review of DOD laboratories conducted by the Under Secretary of Defense for Research and Engineering (USDRE), the establishment of an effectiveness review process for the laboratories was recommended, reiterating the need for a systematic, ongoing process.

The current method of appropr iating laboratory funding has resulted in indecision and uncertainty concerning fund- ing well into the fiscal year for which the funds are needed. As described in R&D 2, R&D Management and the Budget Process, many aspects of the budget process impede effective management of the R&D labs. These problems pre- clude a normal planning process and have a negative effect on the R&D work of the laboratories. It is highly doubtful that the problem of Congressional delays and dragging out of funding appropriations will go away in the near future. Multiyear procurement by the laboratories of material and services would, however, provide more efficient planning and execution of the R&D process. In addition, more flexi- bility of the laboratory directors to allocate funds within their laboratories would help alleviate the problem 'through more efficient management and flexibility of action.

Staffing levels for Federal R&D laboratories have steadily decreased over the past ten years. The DOD Laboratory Management Task Force, composed of a broad array of senior level representatives from within DOD, reported that manpower ceiling reductions have been the greatest single factor negatively affecting the contribution of laboratories over the past 15 years. In the past decade, the Army laboratories were reduced in size by more than one-third, with reductions occurring every year. £/

2/ Dr. Robert J. Hermann, USDRE Independent Review of POP Laboratories , March 22, 1982.

y DOD , Report of the DOD Laboratory Management Task

Force, July 1980. * ’

72

Most POD personnel interviewed said that the ceilui on service salaries made it difficult to hire or

..a^ain tnn civilian researchers" Federal laboratories report a gradual loss of tecnnical personnel to industry. Furthermore, entry level salaries are not sufficiently competitive with private industry to attract the top college graduates.

A large portion of the Government's aging research

facilities have suffered deterioration and are in neeq_^_ modernization. The' current annual investment in and equipment is rapidly becoming inadequate mission performance. Many POD facilities that the Task Force visited are old and becoming inadequate for current use. Some facilities, which are

have received reasonable modernization through the years, remain highly useful. Others, however, have become or are becoming marginal in their utility.

The equipment in these facilities is in a similar state. In some instances these tools are merely old. In other instances they are outdated and J®'

because of age, but because of the rapid growth of techno- logy and mission requirements.

This was an issue raised by most of the laboratory directors interviewed and noted in published studies. Many POP laboratories are inadequately equipped -primarily because the Services principally fund ongoing, analytical programs and do not make adequate provision for genera Impose and technical equipment needs. The outdated equip- ment in the laboratories is costly to maintain and wastes manpower. As a result, productivity suffers. These facilities and equipment are an essential element of th work environment and as a consequence greatly affect the productivity of the laboratories. Based on Task Force interviews, the decline in facilities could seriously jeopardize the abilities of the laboratories to meet

mission challenges. A review of POP torv^

bv USDRE in 1981 concluded that many of the BOD laboratory facilities are substandard, inadequate, obsolete, or energy deficient and need to be updated. W

The designation of a facility as a Federal research and r^At/Aiopment laboratory is broadly and genetically ;,nmied to a variety of Government-sponsored activities.

;[;^rrare over75o facilities designated Federal K.D laboratories currently in operation. A number of these facilities are small and engaged in what would be more

pr. Robert J. Hermann, o£. cit .

73

properly described as data gathering or monitoring func- tions, not basic or applied R&D. The U.S. Geological Survey, for instance, operates an extensive system of field offices necessary to gather and apply data related to their mission. Another example is the VA, which operates 60 "R&D

"ith ten ot more personnel primarily engaged in studying problems arising during the care of veteran patients. These facilities are in sharp contrast to mor6 trsditional R&D laboratories. The ten largest laboratories, for instance, each employ a. staff of more than 5,000 personnel. Overall only 388 of the 700 R&D laboratories have a staff of ten or more employees. As a portion of the budget, those labs with 100 or fewer per- sonnel account for only 11 percent of the total operating costs for Federal R4D labs (see Exhibit II-9 on the following page).

Federal research and development laboratories are exempt from the provisions of A-76. In the March 29, 1979 version of Circular A-76, r&d was exempted pending develoo- ment of criteria for determining which R&D work was Govern- mental and which was commercial activity subject to A-76. The proposed and final revisions exempt R&D entirely from the reguirements of the Circular. However, several commer- cial activities in support of R&D are subject to the pro- visions of the Circular.

Conclusions

The development of centers of excellence for research should continue. The concentration of resources permits the creation of the critical mass necessary to provide effective research. The trend — a positive one — within DOD and NASA is toward more concentration of R&D efforts.

Consideration should be given to consolidating selected Federal R&D laboratories to achieve efficiencies Based on findings from other PPSS Task Forces, there are R&p laboratories that could benefit from consolidation.

This Task Force did not examine this issue in depth and ^5®li®ves that further study is required to determine the potential cost savings and benefits to be derived from consolidating selected Federal R&D laboratories.

In addition to looking at the laboratories for possible consolidations, the 700 Federal laboratories should

(Exhibit II-9 on the following page]

74

be evaluated to determine which ones are actually conduct- ing research and development and classify only those as R&d laboratories. Those facilities that clearly do not conduct actual R&D should be reclassified as to their actual func- tion. This would preclude the broad application of regula- tions and legislation to facilities with very different sizes, facilities, and missions.

The current exemption of R&D from application of 0MB Circular A-76 is not justified. There remain areas of R&D where the private sector would be well suited to conduct work that is now done by Federal laboratories at lower cost. Monitoring and testing functions conducted by many of the small facilities sponsored by the Environmental Protection Agency, National Oceanographic and Atmospheric Administration, U.S. Geological Survey, and others are prime examples of areas where contracting out could save significant amounts of money.

The cost of financing R&D is rapidly increasing for the Federal laboratories as well as for civilian-owned and -operated facilities. The competition for skilled technical personnel and the complexity and sophistication of modern equipment have made R&D, particularly in the areas of high technology, an expensive undertaking. To control these increasing costs, the most effective and efficient manage- ment possible must be applied. Many of the overall manage- ment problems that affect the R&D labs are covered in R&D 1 and 2 since these issues brave a major impact on the labs.

Based on Task Force findings, the overall quality of facilities, equipment and professional staff in the Federal R&D laboratories is declining, while the technology needed to support today's requirements is becoming more costly a^d sophisticated . Improved management of resources is required to upgrade the quality of facilities and staff.

The current Federal pay schedules significantly hand- icap the laboratories in recruiting and retaining well- qualified scientists and techniciai^ Federal pay rates and policies for personnel in the science and engineering disciplines are not comparable with private sector pay for the same level of work.

Any decline in the quality of R&D facilities seriously jeopardizes the ability of laboratories to meet mission challenges. The lack of modernization of many laboratories inhibits work productivity and slows developments. In addition, these facilities are not able to attract and ’ support the highest quality technical personnel. A modernization program geared toward both updating and replacing as well as anticipating future needs should be instituted to address the problems of aging facilities.

76

provisions should be made to monh on a timely basis. Procurement policies should

expeS!e« acquisition of state-of-tha-att equip-

ment Replacement of obsolete equipment with more ment. Repxacemem. « costly to maintain will

efficient equipment that is less costiy

result in overall cost savings.

Recommendations

4-1: Additional centers of excellence for R^D

o

o

rp<;earch should be form^ Even though many organizations , inliuding are utTTIzing this concept to a greater

extent, the formation of additional centers of excellenc would result in the following benefits:

more intensive research on given technologies;

greater purchasing power for sophisticated equipment;

o reduced duplication of work efforts within given technologies; and

o lower administrative and operating costs through better utilzatipn of resources.

R&D 4-2: The Executive Branch should form a labora-

broaram evaluation feam. To ausut. . high labLatorv effectiveness, a systematic approach evaluation is necessary. Evaluating laboratory P^°g^ neriodicallv will help reduce the amount of money that is ^ ioH on nroiects that will not result in substantial

l«qer key labs shoud be conducted every three years. The following areas should be reviewed:

o program overlap;

o laboratory staffing, facilities and equipment;

o mission and research congruency; and

o technical effectiveness of the laboratories.

Each laboratory will continue to be responsible for conducting annual technical reviews. The periodic reviews will provide a comparison among laboratories and will serve as one basis for program and funding decisions.

77

,1 Executive Branch should undertake a

potential benefits "of consolidating

FHer^L interviews, '

gp?arho^ strong evidence, that suggests consolidating

cos^sIvinag^^^ih^^S laboratories can result in substantial . '^^^93. The Task Force currently has insufficient

£?om cl„«u3aUon!'’"'‘“' laboratories that would benefit

Kia r, ^ Pi rectors of Federal R&D laboratories should

FmphS!! budget appropriations. Liii

emphasis should be placed on specifying budget items bv

Object code and more flexibility should br|!5en triaLra-

determining how the funds will be objective of increasing directors'

resoSrLr®'^m^^%“®! improved management of

... * The funds can be utilized in those areas that

will most benefit the laboratory.

^^^4 — -Administrative and legislative actions fri create; at Government-operTt^

^■^^^"■^^f^a/technioal oarsonnai' system ^depen^t of the current Civil Service personne^7Fg^a^r^

IS action would alleviate to some degree the disadvan- taps now faced by the Government labofaHrlel t^att^Sct rpain, and motivate scientific and techni^rpe^sS^e! required to fulfill efficiently and effectiveirtheir agency-assigned missions. ^ ^

Establish a set of guidelines which would f?.^ ? constitutes an R&D laboratory. Reclassif^hngg

1 - guidelines but^ now included ^

the list of /uu laboratories." These guidelines should requirements that the facility, as its primary activity, be engaged in basic research, applied research

n»anagement of R&D. Those organizations '

FedJjal labfrf?«r^ from designation as

in ^ ^ those which are engaged primarily

in routine quality control and testing, routiL service

dinnenin^tion^°ft?‘'^°?^"'®^^^?^ surveys, information ^ reclassification would take

included in the category of R&d laboratories nd place them into a more appropriate category such as

fa^ilinj^^tn^^'^T?- facility, medica/support

facility, etc. This reclassification would open the door

to more appropriate application of "r&d laboratory" regula- tions and requirements. ^-otory reguia-

78

R&D 4-7; Remove current exemption of R&D froin the application of the requirements of 0MB Circular A-76; In the March 29, 1979 version of the Circular » R&D was exempted pending development of criteria for determining which R&D work was Governmental and which was a commercial activity subject to A-76. The proposed and final revisions exempt R&D entirely from the requirements of the circular. How- ever» several commercial activities in support of R&D are subject to the Circular's provisions.

Savings and Impact Analysis

The major benefit to be derived from implementing the Task Force recommendations is improved productivity. Based on Task Force interviews with private sector experts, it is estimated that productivity increases of up to 5 percent could be realized. Since the implementation of these recom- mendations will also incur costs related to the conduct of the evaluations, modernizing facilities, replacing outdated equipment and hiring additional staff at higher salary levels, the Task Force assumes that only approximately 1 percent of actual net savings will be realized on the Federal laboratory budget. Using the FY 1983 figure for intramural research of $10.2 billion, the savings oppor- tunities would be $102 million in the first year.

Removal of the current exemption of Government R&D from application of 0MB Circular A-76 would conservatively allow 5 percent of the current laboratory in-house budget to be contracted out. Again using a conservative estimate, a 10 percent savings on the contracted-out work would be realized. Using a base of approximately $10 . 2 'bill ion as that portion of the laboratory budget spent in-house, ?51 million per year could be saved.

The following savings are estimated based on 1983 budget figures and the current Federal laboratory orga- nization. Reclassification of facilities to define as R&D laboratories only those major installations conducting actual R&D would result in a broader application of A-76 and a small increase in savings.

79

An analysis of potential cost savings is as follows:

millions)

	Year 1	Year 2	Year 3	Total
Savings resulting from productivity increase	$102.0	$112.2	$123.4	$337.6
Savings resulting from increased use of A-76	51.0	56.1	61.7	168.8
Total savings	$153.0	$168.3	$185.1 ■	$506.4

Implementation

Implementation of r&d 4-1 (centers of excellence), R&D 4-2 (lab evaluation team), and R&D 4-3 (lab consolidation)

agencies. Congressional action will be necessary to implement R&D 4-4 (lab directors have more

i ^'''^^et), R&D 4-5 (scientific/technical person-

nel system), r&d 4-6 (reclassify facilities), and R&D 4-7 (remove exemption).

80

PPgEARCH ANT) development ( CONT

Issue and Savings

can changes in the manner in ™nrove

improve increases ( c)

Revision in the ^J^otiat ing^pr incipl^ reimbursement 2/ ® _.^tunities of $117.2 million in

fhrarU^^eLrtm!5^^urorrn^tJ. secoSa year, ana $141.8

„i 1 lion in the^tM ra^year .

thruni^erfitTL'and f

rates. Actual savings to be reaiizea woux these parties.

tunities over ar e » in part y tions between indirect cost determined by

1/ The Taah Force ^^^nires that the S-ern.ent f^^naing^of research ^?"?“fu®'^aisti!lction basea in the specificity orthrscop^e Pf^the worh For purposes

nrifnofl^J-t'anf since the same cost principles apply to both forms.

V The Pf-i^ent's Private^Sector Survey

nLlth CarfFinLcing Aaministration Task Force identi- Health aroa for savings opportunities in the

fied this as an J Health”(NIH) . They recommended

National Institutes of Health INini. by 10

that f^imbursement tor inait i-ecognizes this as an

percent. The RSO Task Force ai ^ is slightly

area with savings potential, uur ant' different .

Background

1940s the United States Government has empha- sitifs research performed at univer-

leSel of.^PeLri? f^"! a strong research enterprise. As the

financial support grew, the relationship •

complex aSd sjibiotic!®^ Government became increasingly

1983, the level of Federal Government financial

iT^?n in reached ^4.7 billion (see Exhibit

PAdiSA? riifA percent of the total

Federal research and development (r&d) budget. It continued

to account for almost 70 percent of all monies spent on re- search at universities (see Exhibit II-ll). Today, there are approximately 800 colleges and universities condu^Ung

sponsored research, 100 of which receive approxi- mately^75 percent of the Federal research funds (see Exhibit

(Exhibits II-IO, II-ll and 11-12 on the following pages]

82

« BILLIONS

EXHIBIT II-IO

Trends in Total Federal R&D Budgets and rpderallv Supported University Research

TOTAL R&D BUDGET AUTHORITY

FEDERAL GOVERNMENT SPONSORED R&D AT

UNIVERSITIES

Exhibit II-ll

SOURCE OF R&D FUNDING AND TYPE OF R&D PERFORMED AT UNIVERSITIES

SOURCE OF UNIVERSITY R&D FUNDING

1172

1M1

TOTAL: $2.t3 BILUON

TOTAL: $6.60 BILLION

TYPE OF R&D PERFORMED BY UNIVERISITIES

SOURCE: AAAS '

RfrD REPORT VII, 1S82.

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86

<?ince World War Ilf Government agencies have used a variety of mechanisms to promote quality basic re-

MTU fnr evamole. was among the first to provxae

funrs’’^ bi=;e«=a!*?"li«=h. NIH

system to reach decisions on funding ?tant applications baled upon the highest scientific merit. ' ‘^is sys

jrsrEsiS-'iH

^ o-ri-j nth's Peer Review Systent for use in its grant pro «ams agencieslluch^ Department . of Defense

(DOD>; extended their existing co’i'tract Peer

sponsor university research but did not adopt the NIH Peer

Review model*

Initially# most award systems appeared to 11 PoHpral funds were available and competition for funds

tions due to declining enrollments, shrinking endowments, and escalating operating costs.

Tha financial constraints on both '^•'e Government and Che universities, as well as differences in goals, have

created controversy and «««rl!ty

n^raaLrch are often difficult to integrate with the cLernment's need for effective cost reimbursement and accounting procedures.

The Government has attempted streamline reDortinq requirements for universities i

aS revision^of the Office of Management and Budget (0MB) r' • lave i ')\ ("Cost Principles for Educational Institu-

In^Aiuo (-IrlnmnS Agreements with Institutions I) SloLrEdIcatlon, Hospitals, and Other Nonprofit Organi- sations*) among others. Nevertheless, grant accounting

research.

Methodology

The Task Force focused its detailed review for this IHm! These three agencies were selected because

87

they fund about 65 percent of all Federally funded research performed at universities today (see Exhibit 11-13 on the following page).

Although the Task Force's in-depth analysis concen- trated on these agencies to obtain a more complete under- standing of R&D Government-wide, the Task Force reviewed reports of, and conducted interviews in, several other agencies, including;

o White House Office of Science and Technology

Policy (OSTP),

O 0MB ,

o General Accounting Office (GAO), and

o Department of Commerce (DOC).

These discussions and additional analyses of previous studies resulted in a set of preliminary issues that were developed in outline and questionnaire form. These issues were used in follow-up conversations with officials from the University Council on Government Relations (COGR) and the National Academy of Sciences (NAS). The issues were then refined and served as the basis for visits to nine major universities, which together receive about 25 percent of total Federal funds for university research. The issue team interviewed university administrators, department chairpersons and faculty researchers during campus visits.

The universities were selected on the basis of their: (a) representation among both public and private institu- tions, (b) geographic distribution, (c) varying indirect cost rates, (d) difference in cognizant audit agency (Health and Human- Services (HHS) or DOD], and (e) differ- ence in Federal funding patterns (i.e., different funding source among NIH, NSF, DOD, Department of Energy, National Aeronautics and Space Administration, and Department of Agriculture). Universities visited were:

o Harvard University,

o Massachusetts Institute of Technology,

o University of North Carolina,

o University of Michigan,

o University of Illinois,

o Northwestern University,

o University of Minnesota,

o Stanford University, and

o University of California.

(Exhibit 11-13 on the following page]

88

exhibit 11-13

Source:

D I S TR I BUT I ON OF * AMONG MAJOR

UN TVFPgTTY R&D SUPPORT "federal agencies

1981

AAAS R&D REPORT VII, 1982.

89

Findings

The subject of indirect cost recovery is a major source of controversy between the universities and the Federal Gov- ernment . Although the controversy has heightened in recent years because of attempts by various Federal agencies to control the growth of the rates, its origin goes back to the basic principles involved in calculating indirect costs.

0MB Circular A-21 sets forth the basic principles to be used in determining indirect costs. This Circular has evolved based on the active participation of the universi- ties and the Federal Government. The issue that has been the most troublesome is the calculation of the labor-based indirect cost pools, particularly departmental administra- tion. This cost pool is determined based on a system of payroll distribution, which can take several forms, includ- ing:

o a planned, budgeted, or assigned allocation of effort, which is documented and confirmed after the fact;

o an after-the-fact activity record; and

o multiple confirmation records.

Each university applies these principles in a slightly different manner based on its own institutional structure and accounting practices. The following table presents' the average indirect cost rate and its components for all universities under the cognizance of HHS.2/

Average Indirect Cost Rate as a Percent of Direct Cost

Operation and Maintenance 11.7%

Departmental Administration 14.5

Sponsored Project Administration 3.0

General and Administration 7.3

Library 1.9

Depreciation/Use Allowance 4.2

Student Services 0.3

Carry Forward 0 . 7

Total 43.6

2/ The Federal Government uses the single audit concept for universities. Responsibilty for approval and audit of the indirect rate for any one university is assigned either to HHS or ONR as the cognizant agency.

90

As Shown above, the largest indirect cost component

is departmental administration, ^ i"®

spent in institutional administration, committees and other miscellaneous institutional activities. This is also th6 inost contentious coniponent*

The universities have incurred an increased burden in setting up systems to account for the indirect costs. ^1980 repor? by the University of California 4/ f ti- mated the cost of complying with 0MB to

i900 per award. Other universities which I20 million in grants each year report staffs of three to six people devoted to maintaining the effort reporting system with upwards of 20 people involved in grant administration .

The indirect cost rates that result from the applica- tion o~f the Circular have been increasing in tine 1972-1982 time frame as shown in Table II-l on the following pagT: nTl972 the average indirect rate as

measured as a percentage of direct costs was 25.9 per cent. By 1982 the rate had grown to 42.8 percent V* ®

65 percent increase. Seventy-five percent of this crease occurred in the first half of the period covered (1972-1977) and although the rate of increase has de- clined in the later half (1977-1982), it is still in- creasing.

[Table II-l on the following page]

4/

5/

The University of California, Partnership Between Universities and the Federal Government, January 14, 1980.

The figure used here differs from the 43.6 percent rate shown in the previous table primarily because of the different base to which it is applied. The 42 8 percent is derived by adding the total indirect cost awards to each NIH grant and dividing by the total cost. The 43.6 percent figure applies only to the universities under HHS cognizance (approximately 90 percent) and is weighted on the basis of the total research program of those universities.

91

Table II-l

HISTORY OF INDIRECT COST RATES PAID BY NIH

	DIRECT COST	INDIRECT O
72	$ 641,865	$ 166,243
73	614,078	185,587
74	745,547	240,191
75	741,558	258,938
76**	1,058,466	386,164
77	961,162	359,140
78	1,112,973	416,093
79	1,331,722	512,279
80	1,463,768	586,306
81	1,568,995	655,143
82	1,610,679	689,855

TOTAL COST

$ 808,108 799,665 985,738 1,000,496 1,444,630 1,320,302 1,529,066 1,844,001 2,050,074 2,224,138 2,300,534

INDIRECT COST RATE*

25.9

30.2

32.2

34.9 36.5 37.4

37.4

38.5 40.0

41.8

42.8

* Indirect Cost Rate measured on the basis of the ratio of indirect costs to direct costs.

** Includes the quarter (7/76-9/76) involved in the transition from the July 1 - June 30 fiscal year to the October 1 - September 30 fiscal year.

92

There are basically three causes for this growth.

o the initiation of indirect cost accounting systems by the universities, as they shifted away the flat rates that were prevalent in the 19ous (these systems provide for improved identification of costs to be included in the indirect pool);

G inflation in certain components of

which is in excess of the inflation in payroll (e.g., energy cost); and

o a more liberal interpretation of the guidelines which have expanded the indirect cost base.

There has been increasing recognition of this

in Indirect costs, and

growth. (The growth in the indirect =®st rate is affecting NIH and NSF more than the other agencies eth=® cent of their total budget, approximately 75 percent for each aqency# is composed of university research grants. ) NIH^proposed to reduce the reimbursement

by 10 percent in FY 1983, but Congress rejected the pro- pLal.^ The House Committee on Appropriations requested a ?eport on the* indirect cost of biochemical and research from HHS. The report recommended the establis ment of a fixed allowance tailored to each institution historical level .

The reason for the pressure on NIH to control the indirect "sts can be se^n from Table 11-2, on the fc low- ina oaae. which shows the average cost of NIH grants in

cSnslant dollars from FY 1970 to FY 1982. “

from the report to the House Appropriation Committee.

Average indirect costs have increased over the time frame

and average direct costs have decreased, particularly fihce

1972. More and more of the average grant amount is ei g

absorbed by indirect costs. As shown in the

the table, the ratio of indirect cost to direct cost has

increased from 28.4 percent in 1970 to 44.0 percent in

1982, a 55 percent increase in the rate.

New funding mechanisms and grant administratipn pro cedures designed to create more academic .

flexibility, stability, responsibility and are being evaluated and- implementeo bv NIH, NSF and onk. Examples include the following:

o NSF has "redefined* its grant relationship with universities to permit greater flexibility in grant management. Differences between old and

(Table II-2 on following page]

93

Table II-2

TRENDS IN AVERAGE AMOUNT AWARDED FOR NIH TRADITIONAL RESEARCH PROJECT GRANTS

	FISCAL YEARS	1970-1982	IN TERMS OF 1970	DOLLARS
	TOTAL	DIRECT	INDIRECT
	COSTS -	COST -	COST -	INDIRECT COST
FISCAL	CONSTANT,	CONSTANT	CONSTANT	AS A PERCENT OF
YEAR	DOLLARS	DOLLARS	DOLLARS	DIRECT COST

1970	^36,894	^28,740	$ 8,154	28.4%
1971	39,497	30,395	9,102	29.9
1972	41,817	31,657	10,160	32.1
1973	42,272	31,561	10,711	33.9
1974	44,186	32,781	11,405	34.8
1975	40,890	30,242	10,648	35.2
1976	40,666	29,576	11,090	37.5
1977	42,394	30,757	11,637	37.8
1978	42,889	30,937	11,952	38.6
1979	42,243	30,204	12,039	39.9
1980	41,778	29,619	12,159	41.0
1981	41,651	29,271	12,380	42.3
1982	41,986	29,144	12,842	44.0
Note:	Supplements to	prior-year awards	are excluded	in the compu-

tation of the average dollars. Constant dollars are based on the biomedical R&D price deflators (FY 1970 = 100). The transition quarter (TQ) which recurred between the end of FY 1976 and the beginning of FY 1977 is excluded. Unobli- gated balances are distributed between direct and indirect costs.

94

new procedures are shown in Exhibit 11-14 on the following page.

NIH is experimenting with Fixed Obligation Grants

• (FOGs) and has redefined administrative relation- ships with grantees in a manner similar to NSF , as discussed above. Under FOGs, once the funding agency has made a tentative decision to make a particular award (e.g., the applicant has com- pleted the current application and peer review procedures), the agency and the prospective per- former engage in preaward negotiations to establish agreement on the following: (1) the

objectives of the project, (2) the nature and frequency of the technical reports that the per- former is to furnish the sponsor as evidence of progress, and (3) the amount and period of the award.

If these negotiations are successful, the sponsor makes the award without any additional require- ments for reporting. The sponsor would rely exclusively upon the technical reports to assess whether the performer's accomplishments under the project constitute an acceptable return. Failure by the performer to achieve the mutually agreed upon objectives would weigh negatively in the sponsor's considerations about future funding for that performer's activities, but would not require the withdrawal or return of funds already awarded — hence the name "Fixed-Obligation Grant. "^/

o ONR is experimenting with a Total Business System Review (TBSR) approach that analyzes an institu- tion's financial resources and business manage- ment policies. The TBSR emphasizes business management systems review, audit and monitoring rather than grant-by-grant transactions,.

[Exhibit 11-14 on the following page]

§/ HHS, NIH, Advisory Committee to the Director. Costs for Biomedical Research, Proposed Changes in NIH Authorization and Operations and a Proposal for the Fixed Obligation Grant" Washington, October 1981.

95

Exhibit 11-14

DIFFERENCES RESULTING FROM NSF'S REDEFINITION OF GRANT PROCEDURES

Does the University Have the Authority to Make the Subject Changes Under: '

Type of Change	Old Procedures	New Procedures
Adjust dollars among budget line items	Yes, except 125% or $500 limit on domestic travel	Yes, without regard to per- cent or dollars
Approve foreign travel	No	Yes
Approve all permanent equipment purchases	No	Yes
Cover pre-award costs	No	Yes, up to '90 days at grantee risk
Allocate funds among related projects	No	Yes
Allow-no-cost extensions	No	Yes, one time up to six months
Contract for project effort	No	Yes
Change principal investigator	No	No
Change scope	No	No

Source; R.D. Newton, Redefining the NSF-Universitv Grant Relationship, NSF, September 1982. 7~.

96

NIH and NSF are placing increasing emphasis on multiyear funding of grants in order to achieve greater research program stability. The average NIH grant is for a period greater than three years, and in FY 1982, 20 percent of the grants were for five years. In FY 1982, for the first time, NSF had more multiyear grants than one-year grants.

Conclusions

The Government-university relationship is strained by external and internal factors that inhibit the effective performance -ot basic research. The current environment is not optimal for attaining either party's mission and goals.

The increased tension associated with the indirect cost question is counterproductive. The time devoted to the question by senior university administrators and senior Government officials is totally unwarranted and is detrimen- tal to their leadership functions. A method should be found to permit the indirect cost to be handled at lower levels

in the organization.

New funding mechanisms and recent changes in Govern- ment policies are having a positive impact on the conduct and management of university research. The programs listed in the Findings section demonstrate that Federal agencies are making initiatives toward improving the Government- university relationship. Our interviews indicated that these innovative approaches can result in a better grants administration process. NSF's redefined grant program, in particular, has been well received by the universities and the Government.

Recommendations

R&D 5-1; The cognizant agencies should negotiate indirect cost rates that include a fixed rate for the administrative components and relieve the universities of the main portion of the burden associated with effort reporting .

The administrative components of the indirect cost rate (departmental administration, general and admin- istration, and sponsored project administration) are the most difficult components to establish on the basis of documented, objective evidence and further attempts to reach a compromise on acceptable forms of documentation will only create more friction and frustration. Instead fixed rates should be negotiated and the ongoing require- ments for documentation of actual rates should be eliminated.

97

Such an approach should benefit the universities in that it reduces the burden on them and gives them a defi- nite target toward which to manage. To the extent that their actual administrative expenses are less than the negotiated amount, they would benefit. If the actual expenses cannot be controlled within the target, they will have to make up the differences.

The Federal agencies would also benefit because this would help to eliminate the most contentious element in the management of the grant programs. Also to the extent that increases in the administrative components are the cause in the growth of indirect rates, it could be better controlled in this manner..

In operation it would be desirable to establish one rate nationwide. Such a rate would be applied to all uni- versities and would greatly simplify grant administration and record-keeping. This approach may be difficult to implement initially with such a diverse group. As an alter' native, it should be possible to negotiate a fixed rate with each university which should be considerably below the current rate since the burdens associated with the documen- tation of the rate would be eliminated. 2/

R&D 5-2; 0MB should encourage agencies to implement new funding mechanisms and grant administration procedures.

The issue team recommends that NSF, NIH, DOD, and other Federal agencies continue examining alternative fund- ing mechanisms and grant administration procedures. The most promising programs at an agency should be examined by other agencies for applicability to their own research grants and contracts. 0MB should provide this coordina- tion. Greater agency coordination and cooperation is need- ed to share improvements in Federal support mechanisms. It is recommended that;

o All Federal agencies supporting university re- search experiment with the NSF redefined grant concept during the next fiscal year. The NSF redefined grant program permits limited grouping of scientifically related projects, allows the university to make certain specified types of budgetary changes on its own, and streamlines grant administration. After each agency's evai-

2/ We recognize that all of the burden associated with

indirect cost would not be eliminated. However, since the accounting for departmental administration is supposed to be 'the most burdensome, the burden would be considerably reduced.

98

uation shows adequate university accountability practices, a Government-wide program can be implemented. This program will result in cost- effective university research management and increased researcher productivity.

o NSF and NIH evaluate the ONR short-form research contract approach and adapt it to selected small (e.g., less than $50,000) programs within the next year. The short-form contract streamlines and accelerates research contract award, thereby reducing administrative costs to both the Govern- ment and universities. NIH and NSF should eval- uate whether ONR's short form can be used with their peer review systems or if an internal review process is mote cost-effective.

o All agencies funding university research develop quantifiable goals within the next fiscal year for increased use of multiyear grants. These goals should be explicitly stated in annual bud- get materials. This activity will improve the stability of ongoing research efforts and encour- age the longer term research investigations of more complex problems which may not be amenable to near-term solutions.

HHS conduct an evaluation of the TBSR being imple- mented by ONR. TBSR provides oversight consistent with the trend of transferring more responsibility for research grant administration to the institu- tions. HHS should determine if TBSR could encour- age greater research effectiveness without loss of accountability in health research.

R&D 5-3: 0MB should develop a simplified, optional

method for determining indirect rates for institutions

receiving less than $10 million annually

0MB should work with HHS and ONR to develop and test a simplified method of institutional reporting for universi- ties receiving between $3 million and $10 million in Federal research support each year. Currently, 0MB Circular A-21 provides a simplified method for determining indirect rates for universities receiving less than $3 million in Federally sponsored research grants. No such option is available to the universities receiving between $3 million and $10 mil- lion. Savings in administrative time could be achieved for both universities and the Government without serious degra- dation of the information needed for program management. Although there are about 700 universities (88 percent) with less than $10 million a year in research funds, they receive only 20 percent of this total.

99

Savings and Impact Analysis

The Government has invested more than $100 billion in universities during the past 35 years to build the world's finest basic research enterprise. The technological prom- inence that the United States gained as a result of this investment must be safeguarded. Recent years have been characterized by minimal real growth or actual decline in support of university research. The Task Force believes that attention should be focused on how to optimize the conduct of research through improvements in environment, systeijis and research management rather than by reducing funding for R&D.

A savings and impact analysis for each recommendation follows:

R&D 5-1: It is anticipated that the negotiation of the

administrative components would result in lower costs to the Government for the existing base of university research The reduction in the university burden associated with the documentation of departmental administration and the elimination of that controversial part of the problem should result in a lower average rate.

There is no basis to predict the actual reduction that would occur in the indirect rate when the recommendations are implemented. The rates to be set are to be negotiated between the universities and the Government and the results of these negotiations cannot be anticipated. In order to compute savings, it will be assumed that the administrative components would be reduced an average of 3 percent. The 3 percent assumption is based on a reduced burden associated with effort reporting, a reduction in other accounting

requirements, and the improvements in the relationship that should develop.

The university research budget is currently $4.7 bil- lion. Using an average indirect rate of 43.6 percent, the direct labor component of the $4.7 billion is $3,273 bil- lion ($4.7 billion divided by 1.436). Anticipated savings at this level would be $98.2 million ($3,273 billion x 0.03) or 2.1 percent of the $4.7 billion research grant award. It should be noted that the actual savings to be realized would be set by the university - Government negotiations. Also these savings may or may not result in reductions in the R&D budget since these "administrative savings" could be deployed to increase direct research funds allocated to university research.

100

CO Tf fhe new funding mechanism described in R&D 5-2 Unreduced and the J^^f sted changes in repo^^ requirements agencies could^sa^ estimates the

the first year. ^J,^PeLral agencies and from seven

Task Force obtained from that used the NSF redefined

public and private institutions’ estimated

grant on an e^cperimental basis. ppjoximately 1.5 percent savings ranged ^ "®^H|^receLed% the university. Most of the total 'Federal funds of 0.5 to 1.0 per-

frequent estimates were would be passed back

cent. These savings to the universi y amounts. The

to theGovernment through reduce savings;

following estimates are usea

O 1983 annual Federal support of universities =

^4.7 billion.

O Less $ 0.9 billion already under the NSF model

(at NSF) = $3.8 billion.

0 $3.8 billion X 0.5% • $19.0 (low estimate)

o' $3.8 billion X 1.0% = $38.0 million (high

estimate ) .

we have conservatively estimated th.^

redS5tiirof Td^mifis^t^atil f -rhead and do not overlap With the savings from R&D 5-1.

another i^Postant benefit is greater^ejf^

rd^iri?trato?J “‘"“Lr?bunfv:rSSry!|lv rnment

eluded in the recommendation, and the university relationship is bound to improve.

R^Di^ .A ®^^f/i^:Lrs?rarivl foltraritr^n^tren

Federal and university administrative Federal oversight.

NO savings are quantified for this recommendation.

101

Summary: The chart below summarizes the net savings for

this issue, assuming 10 percent annual inflation.

	Summary of Savincs (| millions)
Recommedations	Year 1	Year 2	Year 3	Total
R&D 5-1	^ 98.2	$108.0	$118. 8	$325.0
R&D 5-2	19.0	20.9	23.0	62.9
R&D 5-3	NQ	NQ	NQ	NQ
Total (NQ = Not Quantified)			$141.8	$187.9
Implementation
All recommendati agency authority.	ons can be	implemented	under existing

102

II, ISSUE AND RECOMMENDATION SUMMARIES (CONT D)

RESEARCH AND DEVELOPMENT (CONT’D)

R&D 6t RESEARCH PROGRAM REPORTING

Issue and Savings

can unnecessary research project redundancy be reduced bv use of an automated central data file as part of t rLearch and development (R&D) project initiation and on- going management?

The Task Force conservatively estimates that tation of a centralized data base containing records of all ^oh'?lassified. Federally funded, completed and oroiects will reduce unnecessary- program redundancy ISd^app!ied research by a minimum of 0.5 percent in the second year and by 1.0 percent by the third year. This will result in net savings of $71 million in the second yll) anl $158.5 mllion in the third year. inq for the $4.0 million in start-up costs, the three ye

total net savings would be $225.4 million.

Background

The need for a central depository to control and dis- seminate information on completed and ongoing Federally funded R&D has been considered for nearly four ^

is estimated that in FY 1983 the Federal

spend $43.0 billion on R&D projects conducted by the Fed eral Government, industrial firms, universities and col llges, and other nonprofit institutions (excluding $1.3 billion expenditures on R&D facilities) .

In add one agency Table II- 3, agency and of research For example tive agency research at

it ion, numerous areas of R&D involve more than or multiple subdivisions of a single agency.

on the following page, shows levels of ^^oss cross-subdivision activity in various categories in the physical and environmental sciences.

there are 22 independent agencies and Execu- subdivisions involved in chemistry-related a funding level of $532.8 million for FY 1983.

(Table II-3 on following page]

103

Table II-3

rtOERAL OBLIGATIONS FOR RESEARCH IN PKTSICAL AND ENVIRONMENTAL SCIENCES, BY AGENCY AND detailed field of SCIENCE: FISCAL TEAR I9B3 (ESTIMATED)

(THOUSANDS OF DOLLARS)

agency AMO SUBDIVISION	TOTAL	PHYS. ASTRON- OMY	ML ISl CHEM- ISTRY	:nc» PHYSICS	PHYSICAL SCIENCES NEC	total	fnviROn' ATHQS- PHERIC		IFKCFS ocean- ography	environ- mental sciences m
TOTAL. ALL AGENCIES	R«A44,T94	384,078	532.818	1.742.371	145.027	1,047.700	J90,3AB	344.813	252.752	84,837
OC^AKTMENTS DEPARTMENT OP ACRICUITURC, TOTAL	AB,023	*	44.250	3.773	•	13,178	5,112	8.044	-	-
agricultural research service	53.404		50.770	2.434	.	3,007	2.142	815	•	-
COOPERATIVE state RESEARCH SERVICE .	10,021	—	10.021	•	-	1.255	1,255
FOREST SERVICE	4,543	-	3.454	1.134	•	8,514	1,445	7.251
DEPARTMENT OP COW«EPCE. TOTAL	1,117.3B4	448	115.444	443.744	4.473	133.478	BO, 743	38.424	29,315	5.072
ENERGY RESEARCH AMO TECHNOLOGY AOMIN 1/	1,071, u:	340	102.478	441.421	4,973	72,045	22.483	34.011	8.024	5,072
NATIONAL lUREAU OP STiNOAROS NAT'L oceanic & ATMOSPHERIC AOMIN ..	34.447	558	12.141	24.548	•	377	•	377	—	*
4.277	-	880	5.347	•	41.004	37,774	2.041	21.184
OERARTMENT OF DEFENSE, TOTAL	B07.445	14.444	128.030	513.477	145.242	230.241	41.744	41.422	77.543	1B,B07
department op the ARMT	134,310		58.451	52.124	28.733	23.524	13,134	8,734	437	I,Z2A 1X,9T3
department op the NAVY	251.237	11.024	35,343	184.750	18.055	40.810	11.470	4.151	41.014
DEPARTMENT OP THE AIR PORCE	47.145	5.417	33.414	55.140	2.872	51.405	43.074	1.324	•	*
DEFENSE AGENCIES	314.303		300	214.441	45.542	44,547	23.884	18.708	14.540	5.410
DEPT OP HLTH i HUMAN SERVICES, TOTAL .	B5.415	•	74.821	8,744	-	-	-	-	•	•
ALCOHOL. DRUG ABUSE A MENTAL HLTH AOHIN	2.44B		2.448				•		-	-
national INSTITUTES OF HEALTH	B2.447	-	7a, 173	8.744	•	•
DEPARTMENT OP