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IP: Exploring Alternative Models of Federal Support for
From: Dave Farber <farber () central cis upenn edu>
Date: Thu, 2 Nov 1995 10:24:22 -0500
TRENDS IN INDUSTRIAL R&D After World War II, as the Federal Government's role in research funding expanded, so did industrial involvement in R&D. Until 1980, the Government supported a larger share of the total national R&D endeavor than industry; it was not until 1982 that the business community first funded over 50 percent of the total. Various industries, particularly defense and space-related companies became dependent on Federal funding. Between 1955 and 1965, the Government funded an average 55 percent of the research and development performed in industry. The following ten years found a decreasing amount of the total R&D undertaken by industry to be supported by Federal funds, an average of 46 percent. This trend continued between 1975 and 1985 with the Government financing an average of 33 percent of the R&D work performed in the business sector. The source of research and development funding is important because it provides insight into the type of innovation that might be anticipated in the long term. The Federal Government generally funds R&D to meet the mission responsibilities of the Federal departments and agencies. It also supports work in areas where the Government is the primarily user of the results or where there is an identified national need for R&D not being performed in the private sector. On the other hand, industry makes the new products sold in the CRS-9 marketplace which generate profits or develops the new processes which can be applied to make manufacturing more productive. Increases in R&D spending on behalf of industry tend to be directed toward the development of commercial goods and services to meet or create market demand. There have been commercial successes resulting from Government- financed research and development. However, studies show that innova- tions are most successful when the R&D processes are tied to market demand,(9) and it is industrial activities which would be expected to be ori- ented toward the marketplace . rrhus, the extensive involvement of the Federal Government in the funding of the national R&D endeavor created an environment in which Government priorities have influenced industrial development. Certain industries, in part, create ca- pabilities and pursue avenues of research to reflect Government needs for the provision of goods and services. Federal support for mission-related research and development can have a significant impact on the scope and direction of industrial activities in a manner different from that of Federal support for general industrial competitiveness. Much Federal support, prior to the mid 1980s, was for basic research with the exception of funding for development in the areas of defense and space. Various legislative initiatives have promoted this through tax credits for increases in industrial research and for research in universities, changes to the antitrust laws designed to facilitate cooperative research, increased Government funding for research, and policies to encourage cooperative R&D between Federal laboratories and the private sector. rrhese activities have been based upon the "linear" model of innovation which viewed technological advancement as a series of sequential steps starting with idea origination and moving through basic research, applied research, development, engineering, commercialization, and diffusion into the economy. Increases in Federal funds at the basic research **************************************************************** 9 Fernelius, W. Conrad and W. H. Waldo. Innovations Debt to Basic Research. In: Chemtech, v. 13, Mar. 1983. p. 150. CRS-10 stage were expected to result in proportional increases in new products and processes. However, this linear concept as a basis for governmental initiatives is no longer considered the most effective way of stimulating technological advance. Technological progress is a dynamic process which is not necessarily linear. An innovation may emerge without developing through these steps. Innovations often occur that do not require basic or applied research or development; in fact, as stated above, most innovations are incremental improvements to existing products or processes. In certain areas, such as biotechnology, the distinctions between basic research and commercialization are small and shrinking. In others, the differentiation between basic and applied research is artificial. The critical factor is the commercialization of the technology. Reflecting the concentration on research promoted by Government policies and programs, at least through the 1980s, American industry tended to pursue science which is often aimed at the large breakthroughs in technology that could create a new industry or revolutionize an existing one. However, Robert Reich pointed out that "...such breakthroughs generally mean less to a nation's economic or military might than the speed and success with which they are absorbed, improved upon, and incorporated into new products and processes"(10) Focusing on breakthroughs or large scale technologies also ignored the fact that, while research has shown that innovations resulting from R&D are the more important ones, most innovations are actually incremental changes to existing products and processes. It is the incremental improvements that can make one company's product or service better than that of another firm. It is what can increase the quality of a good or result in more efficient means of production. This is so critical that Ralph Gomory, then Senior Vice President for Science and Technology at IBM, argued in 1987, ". . . in the areas where the U.S. has not been competitive, it has lost, insofar as technical factors are concerned, usually not to radical new technology, but to better refinements, better manufacturing technology, better quality in an existing product."(1l) Yet, at that time, three-quarters of U.S. industrial R&D investment was directed at the generation of products. In contrast, Japanese companies spent 75 percent of their funds on process technologies.l2 ***************************************************************** 10 Reich, Robert B. The Rise of Techno-Nationalism. The Atlantic Monthly, May 1987. p. 68. See also: Executive Office of the President. Of~lce of Science and Technology Policy.1995 National Critical Technologies Report. Washington, March 1995. p. viii. 11 Gomory, Ralph E. Dominant Science Does Not Mean Dominant Product. Research and Development, Nov. 1987. p. 73. 12 McCormack, Richard. Industrial R&D Forecast: "Disturbing." New Technology Week, Dec. 32, 1991. p. 4. See Also: National Academy of Engineering. Mastering a New Role, Shaping Technology Policy for National Economic Performance. National Academy Press, Washington, 1993. p. 76. CRS-11 However, some things began to change toward the close of the 1980s. As new technologies were developed and the effects of technology expanded, it became increasingly expensive to perform R&D. The expanding costs of R&D were juxtaposed with shareholder demands for short-term profits. Outside sources began to be looked to as a way to obtain the results of research, particularly basic research, as well as to reduce costs. This has been accompanied by the growth in Government-industry, industry-industry, industry-university, and Government-industry-university partnerships, oftentimes promoted by congressional legislation. The Bayh-Dole Act of 1980, the National Cooperative Research Act of 1984, the National Cooperative Manufacturing Act of 1993, the Stevenson-Wydler Technology Innovation Act of 1980, the Federal Technology Transfer Act of 1986 (as amended), the Economic Recovery Tax Act of 1981 (as amended), the Omnibus Trade and Competitiveness Act of 1988, the Small Business Innovation Research Act of 1982 (as amended), and others have facilitated these cooperative activities. Some of the figures reflect these changes. Industry has funded an increasing percentage of the total amount of R&D performed at universities since the early 1960s. Throughout most of the later 1960s and 1970s, the business community was the source of 3 percent of total R&D performed at academic institutions. By the mid 1980s, this had risen to 6 percent and in the 1990s to 7 percent. In 1982, industry for the first time funded over 50 percent of the total national R&D effort; since 1992, industry has funded 59 percent of the country's R&D, while the Government has funded 36 percent. In addition, the industrial community has displayed a decreasing dependence on Federal funding for internal research and development. Between 1985 and 1990, the Government financed an average 31 percent of the work performed by industry; between 1990 and 1994, the Government financed only 22 percent. In 1994, Federal dollars are only 19 percent of the funding used in industrial R&o and was primarily concentrated in aerospace and communications equipment.(l3) This is in contrast to figures discussed above for earlier years. While the private sector is funding a greater portion of the country's total R&D endeavor, in recent years there has been a decline in the rate of growth. The average annual increase in industrial spending on R&D (in constant dollars) was 3 percent from 1985 through 1994. In both 1993 and 1994, there was a decrease in actual (constant dollars) industrial funding for R&D. [However, it should be noted that annual growth rates vary widely across industries: chemicals, drugs, and medicines have had largest growth since mid 1980s.(l4) This contrasts with an average annual growth rate of 7 percent between 1375 ************************************************************** 13 U.S. National Science Foundation. National Patterns of R&D Resources: 1994. Washington, 1995. p. 20. 14 Ibid, p. 89-90. CRS-12 and 1985. The rates of increase between 1965 and 1975 were an average 3 percent per year and 8 percent between 1955 and 1965. Despite the decrease in the portion of Federal funding American industry utilizes for R&D, the fig- ures still are high- er than those found in Germany and Japan. Since 1990, while an average of 78 per- cent of the work undertaken by the business communi- ty was financed by industry in the United States, international com- parisons show that, in Germany, the private sector financed an average 89 percent of the R&D performed within companies, and, in Japan, the figure is an average 99 percent.(15) COMPOSITION OF INDUSTRIAL R&D Industrial support for R&D is important, in part, because research and development contribute to economic growth by their impact upon productivity. Over the years, various experts have studied the effects of R&D spending on the productivity increases of firms or industries. As summarized by Edwin Mansfield, the results indicate that ". . . R&D had a significant effect on the rate of productivity increase in the industries and over the time periods that have been studied.nl6 Recent work supported by the Department of Commerce has also shown that advanced technologies are associated with higher manufacturing **************************************************************** l5 Organisation for Economic Co-operation and Development. Directorate for Science, Technology and Industry. Main Science and Technology Indicators. Paris, 1995. p. 30. 16 Mansfield, Edwin. Economic Growth or Stagnation: The Role of Technology. National Planning Association Newsletter, Looking Ahead and Project Highlights. Sprin~ 1980. p. 3. CRS-13 productivity, which is in turn related to employment growth.(l7) In addition, productivity growth in an industry or in a fir~ is directly and significantly related to the amount spent previously on R&D in that industry or company.(18) Another factor which apparently plays a role in eco- nomic growth is the composition of the research which is performed in industry. Basic research, that re- search undertaken to gain knowledge and understanding of the fundamental aspects of the uni- verse, is the foun- dation of many important new innovations. How- ever, the payoff for basic research is generally long in coming, the results sometimes not marketable, and the rewards often diffused among many users. Yet, while basic research is usually performed with little certainty that it will produce results in the future, it appears that there is a significant relationship between the amount of basic research a firm conducts as part of total R&D spending and increases in firm productivity. (19) Consequently, investments in long-term research can contribute to the growth of the firm and industry in general. Changes in National Science Foundstion accounting procedures between 1985 and 1986, as they pertain to the breakdown of industrial spending between basic research, applied research, and development, make comparisons with previous years difficult and inaccurate. Looking only at recent figures, the ************************************************************* 17 U.s. Dept. of Commerce. Economics and Statistics Admin. Technology, Economic Growth and Employment: New Research from the Department of Commerce. Washington, Dec. 1994. p. 10-11. 18 Mansfield, Edwin. How Economists See R&D. Harvard Business Review, Nov.-Dec. 1981. p. 98. 19 Mansfield, Edwin. New Findings in Technology Transfer, Productivity and Economic Policy. Research Management, Mar.-Apr. 1983. p. 16. See also: Mansfield, Edwin. Academic Research and Industrial Innovation. Research Policy, v. 20, 1991. CRS-14 average annual growth rate in industry funding for basic research between 1986 and 1994 was approximately 7 percent. This however, includes a 53-percent rise between 1990 and 1991; if this large increase is deleted from the calculations, there is no growth during that time period. In 5 of the 8 years, there was either no growth in funding or a decrease in support, including a 2-percent decrease in both 1993 and 1994. For every dollar industry spent on R&D in the 1990s, an average 8 percent went to basic research. This is in contrast to an average 23 percent for applied research, and 69 percent for development activities. The average annual growth rate of industry funding from applied research between 1986 and 1994 was 2 percent. In 4 of the 8 years, there was either no growth or a decline in support. During this time, industrial spending on development averaged an annual growth rate of 3 percent. As with funding for applied work, there has been no discernable increase in support between 1992 and 1994. FEDERAL R&D--CURRENT STATUS Today, a Federal role in funding R&D is firmly accepted as an important national policy. Most policymakers agree that the Federal Government has had the dominant responsibility for funding basic research. The current set of appropriation bills emerging from Congress for FY1996 reflect this view, given that basic research may receive a slight increase overall from FY1995, although the amounts are generally somewhat less than were requested. In many cases, however, applied research appropriations are considerably lower than FY1995, and are well below those requested by the Administration. This divergence reflects the long-standing R&D policy debate about where Federal support of R&D should end. Whereas the Administration is continuing to pursue a policy of increasing Federal support for applied research which potentially is of direct interest to the private sect~r, the Republican majority in Congress believes that this policy is an unwarranted interference in the marketplace. There are aspects of this issue, however, which make the characterization of the current debate over Federal R&D policy less clear than it appears. First, there are notable exceptions in congressional actions reducing funding for applied research. Current appropriations bills for defense and applied health R&D are above last year's amounts. The space station, which is an applied research project, is also enjoying substantial congressional support. A second aspect is the definition of basic research. Within the basic research accounts supported by the Congress, the scope of research ranges from projects which search for the most fundamental secrets of nature to those attempting to solve scientific problems essential for progress on development or improvement of technologies and processes. In many instances, there is no clear line marking the end of basic research and the start of applied research, and a significant portion of the basic research funded by Congress could indeed be classified as applied research. A third point concerns funding of major Federal research facilities. The broad consensus for Federal support of basic research does not appear to hold for these facilities, particularly the Federal laboratory structure, CRS-15 even though a considerable amount of basic research is carried out at many of these laboratories. There is currently substantial disagreement among policy makers about how much of this laboratory structure should be maintained. OUTLOOK While total Federal R&D funding growth has been approximately steady since the end of World War II, there have been notable shifts in emphasis within the R&D portfolio. These shifts have been the result of major additions to that portfolio and changes in the proportion of funds going to defense and civilian R&D. In addition to the growth in total funding, there has been growth in the number of Federal agencies funding R&D. Currently, 33 Federal agencies support R&D at some level compared to about 17 in 1952. Funding growth, however, appears to have stopped and is likely to decline for at least several years. Pressures to reduce the Federal budget deficit are and will continue to take a toll on Federal R&D funding which is a significant fraction of the discretionary portion of the budget. While there is little disagreement that R&D support is critical to the Nation's long-term future, there is also an agreement among most policymakers that a closer look at what we are funding is required. The budget projections of both the Administration and Congress call for reductions in several areas of R&D over the next five to seven years, although there are substantial differences in what areas should be cut. In addition to the budget pressures, the debate over what is appropriate R&D for the Federal Government to support will also affect Federal funding patterns. Besides halting the growth of Federal R&D funding, the new majority in Congress has proposed to eliminate or reduce a variety of collaborative R&D initiatives between the Federal Government and industry on the grounds that the Government cannot pick technological "winners and losers." These proposals, if approved, would halt a number of Administration and congressional R&D initiatives and make other changes including * The Administration's goal of 3 percent of GDP for total R&D national investment (public and private). Total Federal investment will fall below 1 percent of GDP for the first since 1958 (It reached 2.2 in 1964, and has hovered around i.2 percent since 1975); * The Administration goal of shrinking the defense portion of Federal R&D below 50 percent by 1998; * Elimination of the Advanced Technology Program and reductions in the Manufacturin~ Extension pro~rams at NIST; * Termination of the Technology Reinvestment Project at ARPA, and instructing ARPA to focus primarily on defense-related technologies; * Reduction or elimination of a variety of collaborative Government and industry manufacturing R&D initiatives; CRS-16 * Elimination or reduction of funding for certain technology transfer activities in Federal laboratories; * Elimination or reduction of new programs to improve productivity in energy use in industry, transportation and buildings, including renewable energy programs within DOE;and * Cessation of efforts to increase NSF's budget, with much of the increase to go to "strategic research" in such areas as manufacturing, biotechnology, materials science, computing, and communications. Given these proposed congressional actions, it appears that basic research will become a greater fraction of total civilian R&D funding as actions are taken to reduce civilian applied research and development funding. Among the various functions, health research is likely to continue to take a larger share of the Federal R&D dollar, while the energy and space research share--outside of the space station--will probably decline. Further, with an increasingly constrained budget outlook and strong policy disagreements, there likely will be closer scrutiny of the actual research being funded and its relationship to the missions of the agencies doing the funding. ALTERNATIVE MODELS OF FEDERAL SUPPORT FOR R&D The previously discussed Federal R&D policy changes, if implemented, will likely force a resurgence in the role of the States and foundations and may call into question the traditional modes of Federal support of R&D. While Congress has not reached a consensus on the appropriate Federal role in supporting R&D, the following models are offered for discussion as 4 alternatives, among many, that may be put forward for the Federal Government. The models are not intended to be exhaustive, but are offered as an illustrative vehicle for exploration and discussion. Our primary objective is to have the workshop participants begin their discussions from a common reference point, and to come to the workshop prepared to offer their critiques and alternative models. Again, it is important to note that CRS takes no position, for or against, any of the models that will be discussed at the workshop. I. Federal Support for Research and Development Would Be Aimed at Meeting National Security Needs This model presents a narrow view of national security, in which the Federal Government would support R&D for defense purposes only, which would include the Department of Energy's weapons programs. This model would involve support for basic and applied research aimed at meeting national security needs only. An intramural R&D capability would have to be maintained to ensure that DOD has a cadre of scientific and technical (S&T) expertise capable of identifying and evaluating new weapon systems that the government purchases from defense contractors. CRS-17 Over the next five to seven years, all other Federal R&D activities would be eliminated. Existing Federal R&D infrastructure would be sold, leased, or shut down. Responsibility for funding R&D in such areas as health, space, the environment, and energy would rest with private industry, the States, universities, foundations, and non-profits. State prominence in research funding has begun to reemerge as States take on more responsibility for developing tax, land, and subsidy policies to enhance the direct and indirect contributions of R&D to local and regional economies by fostering collaborative research relationships between universities and industry, 20 and promoting the development of R&D "parks" or "corridors." As specific examples: recently the Legislature of Connecticut voted to award $1 billion to upgrade the University of Connecticut, including major funding to upgrade scientific facilities.2l In 1983, Richard Thornburgh, then Governor of Pennsylvania, helped to establish the Ben Franklin Partnership, a system of universities and industries sharing know-how and facilities, and collaborating in efforts to form new businesses and create jobs. Governor Thornburgh has recommended that the Federal Government shift ownership or administration of some NASA, DOD or DOE laboratories to State agencies. "The Energy Department already contracts with the University of California, a state institution, to run a few off its laboratories," he said. The responsibility of educating future scientists and engineers would fall primarily to the States, industry, universities, and foundations. Federal support for such activities would be tied to meeting the Government's national security responsibilities. Between 1985 and 1994, industry support to universities jumped 95 percent, and is slated to grow more in the future. Universities' own institutional funds provide the largest nonFederal source, and are 70-percent higher in real terms, accounting for 18 percent ($3.7 billion) of their separately budgeted 1994 R&D expenditures. Real R&D funds from State and local governments increased by 65 percent over this 9-year period and constitute 8 percent ($1.7 billion) of universities' 1994 total R&D. The primary role of the Federal Government would be to create an environment that would encourage the private sector and non-profits to invest in research and development. This could include, but would not be limited to the following Federal initiatives: 1. Make permanent and expand the Federal R&E tax credit; 2. Enforce favorable trade policies that enhance and strengthen high- technology industries, ensuring that American firms have access to foreign markets; **************************************************************** 20 Mowery, p- 140- 21 What's New. By Robert L. Park, July 7, 1995. (The American Physical Society.) CRS-18 3. Improve the Nation's financial environment, including a balanced budget within the next seven years; 4. Reduce regulatory impediments to minimize costs and encourage investments in R&D; and 5. Improve the overall economic environment to encourage increases in the availability of capital, and lower interest rates, which should increase long term investments. II. Federal Support for Research and Development Would Be Aimed at Meetin~ Broad National Security Needs This model presents a broad view of national security, in which the Federal Government would not only support R&D for defense purposes, but would support R&D in the areas of environmental clean-up, space, and public health. Defense oriented research would account for 70-80 percent of Federal funds, while non-defense would receive the remainder. This model would include support for basic and applied research aimed at meeting both national security needs as well as those in the areas of public health, space, and environmental clean-up. Federal R&D in the area of environmental clean-up would focus on those areas where the Federal Government is clearly responsible for the creation of the pollution. In such a situation, it is very unlikely that the private sector would support the type of R&D that may be necessary to restore these facilities. Funding for environmental research would be phased out, once the Government had completed clean-up of these sites. Federal support for public health research would focus on the newly emerging threats in the area of infectious diseases. Examples of unanticipated disease outbreaks include AIDS, Lyme disease, toxic shock syndrome, legionnaires' disease, hantavirus pulmonary syndrome, and food-borne illnesses. The emergence of these diseases and the reemergence of tuberculosis, which was once thought to be under control, raise great public concerns. While these diseases could pose a great threat to our security, it is unclear if the private sector will make sufficient R&D investment to respond to this threat. Federal space R&D funding would focus primarily on those activities surrounding the completion of the space station. NASA would also support a modest basic and applied research program aimed at meeting the challenges of building and operating the space station. Over the next five to seven years, all other Federal R&D activities would be eliminated. The existing Federal R&D infrastructure would be sold, leased, or shut down. To help reduce the cost of maintaining excess infrastructure capacity, about half of DOD's and DOE's laboratories and NASA's centers would also be sold. Ieased. or closed. ResPonsibilitv for fundin~ R&D in other areas of CRS-l9 health, space, the environment, energy, and general sciences would rest with private industry, the States, universities, foundations, and non-profits. The education of future scientists and engineers would fall primarily to the States, industry, universities and foundations. Federal support for educating future scientists and engineers (S&E) would be tied to meeting the Government's national security responsibilities, as well as those related to public health and environmental clean up. As with the previous model, the primary role of the Federal Government would be to create an environment that would encourage private sector and non- profits to invest in research and development. As indicated earlier, the new Republican controlled Congress seeks to create national economic conditions to reduce Federal deficits and give industry more resources ar)d capital for R&D investment. Murray Weidenbaum's views illustrate the current thinking of the Republican majority: To start with, government should reduce the numerous government- erected obstacles that discourage private firms from investin~ in risky long-term ventures. As is well known, a basic way of redu~ing the cost of long-term investments is to lower the cost of capital (which over the years has been higher in the United States than i~ J~apan). The most direct way. . .to do that is to reduce the extent to which the Treasury competes for the limited supply of private saving via deficit financing. . . . Bringing down the deficit by curtailing the government's consumption-oriented outlays . . . would be a real plus.(22) m. Reduce Support for Federal R&D by Thirty to Fifty Percent This model would maintain many of the R&D activities of the Federal Government, but at funding levels that are up to fifty percent below current efforts. This model treats the private sector and universities as equal partners in the Nation's R&D enterprise. Federal funding for R&D would be evenly split between defense and nondefense activities. A significant portion of this reduction would be achieved through the downsizing (over the next 5-7 years) of the existing Federal R&D infrastructure. At least half of the over-700 Federal laboratories and testing centers would be closed or sold to the private sector. Much of the remaining infrastructure would be consolidated and/or leased to universities or private entities. A number of Federal R&D activities that are aimed at the development of civilian technology would be canceled or transferred to the private sector. This might include such actions such as: eliminating NASA's aeronautical research and development program; commercialization of the space shuttle; reducing funding of applied research at NIH by ten to twenty percent; terminating ***************************************************************** 22 Weidenbaum, Murray. Sponsoring Research and Development. Society, v. 29, July/Aug. 1992. p. 44. CRS-20 funding for energy supply R&D, as well as support for manufacturing extension programs; focusing DOD's science and technology activities on defense related needs; and eliminating all R&D activities at EPA except for those aimed at solving problems related to environmental clean-up at Federal facilities. The Government would continue to support basic research across a variety of disciplines. However, over the next seven years funding for basic research would decline ten percent, in real terms. According to House Science Committee Chairman Robert Walker, such research would be "long-term and non- commercial, pursuing revolutionary ideas that make possible the impossible, avoiding funding research that is, or could be, conducted by the private sector." Under this model, Congress might choose to create a Department of Science and Technology to help eliminate duplication and waste, permit the formulation of long-range strategies, and facilitate interdiscip!inary approaches to solving problems involving the application of science and technology. However, unlike past proposals to create such a Department, this proposal might include all Federal agencies that conduct R&D, including DOD and NIH. This decline in funding for research would force many universities to stop research in some fields of science and education. This model would limit the number of universities that would be able to perform research in specific fields of science. Donald Kennedy, President emeritus of Stanford University, stated that, "Financial pressures will force the research universities . . . to choose, in a much more disciplined way than ever before, not just among attractive new possibilities or program alternatives, but among traditional, well-established fields and disciplines, with ultimately difficult choices, but sharp differentiation among institutions." (23) The private sector, universities, non-profits, and foundations would be expected to fill the void left by the decline in Federal R&D. The private sector, some universities, and non-profits would be expected invest in R&D activities aimed at the development and commercialization of new technologies. Federal support for applied research and development would be tied to the mission of the agency financing such research. Before 1940, private philanthropic foundations provided large sums of money for research. But they "have withdrawn . . . because they could not match government levels of funding," and newer ones generally never began funding scientific research. Today, less than six percent of foundation funding is directed to scientific research. Foundation support has been strongest in the biomedical sciences and several foundations and philanthropies have made sizable financial contributions to academic research and personnel training in specific areas. Some funding has been on the same order of magnitude or larger than Federal support. The Huntsman family's donation of $100 million to the University of Utah for *************************************************************** 23 Donald Kennedy Making Choices in the Research University. Daedalus, v. 122, Fall 1993. p. 153. CRS-21 cancer research, which generated an additional $51 million from other sources, ". . . is a windfall for cancer research," according to the New York Times. "It surpasses the amount spent each year by the American Cancer Society. The National Cancer Institute, which finances most basic cancer research, spreads $130 million a year for basic support among 55 cancer centers. With recent cutbacks in Federal funds for science, the gift positions Utah as a major player in cancer research for the next decade."(24) Federal support for the education of futu. e scientists and engineers would be primarily limited to meeting the needs of the Federal Government and the support of basic research. With universities funding fewer Ph.D programs, output of Ph.Ds would be closely tied to private sector demand, and the existin~ teaching and research needs of the Nation's universities. Education of Ph.Ds would not be used as a primary justification for increasing Federal support for university based research. IV. Federal Support for R&D Would Focus on Broad Based Support for Basic Research This model places emphasis on the Federal Government as the dominant supporter of basic research. Applied research and development would shrink by up to 30 percent over the next five to seven years, while concomitantly, basic research would increase at an annual rate of 2 percent above inflation. Nondefense R&D would account for 70 to 80 percent of Federal funding, with the remainder focusin~ on national security needs. Funding for defense related R&D (including DOE's weapons programs) would decline by 50 percent. Most of these reductions would be achieved through the closure and consolidation of at least half of DOD's and DOE's laboratories and testing facilities, including significant reductions in laboratory personnel. Further, Federal support for defense applied research and development would be limited to those R&D areas (i.e., stealth technology, nuclear weapons, submarines, tanks, etc.) in which the private sector would not make investments. The Federal Government would support a broad array of basic research activities aimed at advancing fundamental knowledge across all scientific disciplines. Collaborative efforts among universities, Government, and industry, would be encouraged. However, efforts to transfer knowledge derived from these initiatives to the private sector would continue, primarily through a laissez-faire approach. In some selected areas, the Government, working with universities and industries, would take a direct role in funding both basic research and research aimed at broadenin~ the Nation's technology base. Further, the results ************************************************************** 24 Blakeslee, Sandra. With Huge Gift, Utah Researchers To Study Cancers' Earliest Stages. New York Times, October 17, 1995, p. C3. See also: Mercer, Joye. Assault on Cancer. Chronicle of Higher Education, Oct. 15, 1995. p. A35- A36. CRS-22 of that research would be available to anyone. In other words, cooperative ventures subsidized by the Federal Government would be conducted on a non- proprietary basis.(25) The guidelines for Federal reimbursement of indirect costs associated with university based research would be altered. Essentially, university overhead charges would be frozen and would decline over a period of from 3-5 years and capped at 20 percent. The reimbursement for purchasing expensive research equipment would be negotiable, with the Government paying up to 50 percent of the costs. Universities and other private entities, that would purchase time to use the equipment, would be responsible for paying the remaining balance. There have been several proposals to modify grant mechanism procedures as a way of reducing costs associated with university-based research. They include such suggestions as providing more long-term awards for federally funded R&D to reduce review and paperwork burdens; leveraging Federal support and engaging users by requiring more cost-sharing and matching requirements; grant-in-aid funding, as opposed to an "all-or-nothing" funding; using a sliding scale of aid, that could assure wider diversity and interim funding to carry researchers through one year when their funding is not renewed; and using a 'just-in-time' system for grant applications . . . [when] investigators would be asked to submit such cumbersome materials as budget breakdowns only after their proposal had been given an initial review and deemed a likely candidate for funding. In addition, proposals have been made to extend within Federal civilian agencies the "strong manager system" used by the Advanced Research Projects Agency (ARPA) and some other agencies. Using a variant of this system, the NSF sets-aside a portion of its grants funding to be allocated by program managers at their discretion (without peer review or competition with other proposals) for funds to be awarded to high-risk, novel creative research proposals. A related proposal calls for funding a "star" system of scientists under which financial support would be proportional to a scientists' past productivity. "Grants would not be awarded to individuals but to a group usually of the size of a department or an interdisciplinary laboratory." Recipients would have the discretion to allocate funds to group members.(26) Like the previous model, Federal support for the education of future scientists and engineers would be primarily limited to meeting the scientific needs of the Federal Government and the support of basic research. Since this model emphasizes a government/private sector partnership, the private sector would be responsible for paying the costs of meeting their Ph.D requirements. ************************************************************ 25 See Cohen, Linda R. and Roger G. Noll. Privatizing Public Research. Scientific American. Sept. 1994. p. 72-77. 26 Rustum Roy. Alternatives to Review by Peers: A Contribution to the TheorY of Scientific Choice. Minerva, Autumn-Winter 1984. p. 321-326. CRS-23 Federal support for Ph.D candidates would be closely tied to existing teaching and research needs of the Nation's universities. Education of Ph.Ds would not be used as a primary justification for increasing Federal support for university based research. Finally, support for nondefense applied research and development would be reduced by up to thirty percent, excluding health related research. Federal support for applied research and development would primarily be aimed at meeting Federal needs. However, in some instances, limited Federal support would be available, on a cost-shared basis and for a specified time period, to targeted industries, such as in robotics, that lack sufficient size or coordination to carry out R&D on an effective scale. Further, as with the previous model, Congress might establish a Department of Science and Technology which would be resPonsible for setting Priorities for all of Federal R&D.
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