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                                                       Calendar No. 697
105th Congress                                                   Report
                                SENATE

 2d Session                                                     105-364
_______________________________________________________________________


 
                    FEDERAL RESEARCH INVESTMENT ACT

                               __________

                              R E P O R T

                                 OF THE

                  COMMITTEE ON COMMERCE, SCIENCE, AND

                             TRANSPORTATION

                                   on

                                S. 2217





                October 2, 1998.--Ordered to be printed


       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       one hundred fifth congress
                             second session

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
SLADE GORTON, Washington             WENDELL H. FORD, Kentucky
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA SNOWE, Maine                 JOHN F. KERRY, Massachusetts
JOHN ASHCROFT, Missouri              JOHN B. BREAUX, Louisiana
BILL FRIST, Tennessee                RICHARD H. BRYAN, Nevada
SPENCER ABRAHAM, Michigan            BYRON L. DORGAN, North Dakota
SAM BROWNBACK, Kansas                RON WYDEN, Oregon
                       John Raidt, Staff Director
                       Mark Buse, Policy Director
                  Martha P. Allbright, General Counsel
     Ivan A. Schlager, Democratic Chief Counsel and Staff Director
             James S.W. Drewry, Democratic General Counsel


                                     
                                                       Calendar No. 697
105th Congress                                                   Report
                                 SENATE

 2d Session                                                     105-364
_______________________________________________________________________


                    FEDERAL RESEARCH INVESTMENT ACT

                                _______
                                

                October 2, 1998.--Ordered to be printed

                                _______
                                

       Mr. McCain, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 2217]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 2217) ``A Bill to provide for 
continuation of the Federal research investment in a fiscally 
sustainable way, and for other purposes'', having considered 
the same, reports favorably thereon with an amendment in the 
nature of a substitute and recommends that the bill (as 
amended) do pass.

                          Purpose of the Bill

    The purpose of the bill, as reported, is to provide for the 
continuation of the Federal research investment in a fiscally 
sustainable way.

                          Background and Needs

    Technical innovation is a driving force behind the Nation's 
long-term economic growth and rising standards of living. 
Federal investments in research and development (R&D;) have 
resulted in enormous financial and employment growth of the 
private and public sector. Studies show that 50% of all post- 
World War II economic growth is a direct result of 
technological innovation.
    Contrary to popular belief, the R&D; enterprise in the 
United States receives nearly two-thirds (65 percent) of its 
funding from private industry. The Federal government supports 
much of the balance, with the remainder comprised of funding 
from colleges and universities, other non-profit institutions, 
and state and local governments. The role of the Federal 
government is particularly pivotal in funding basic research, 
supporting nearly 60 percent of the national budget for such 
research at both public and private institutions. A comparable 
portion of the applied research performed in U.S. colleges and 
universities also is funded federally. Because private sector 
R&D; investments are stimulated principally by individual 
company interests, the Federal government's impact on national 
R&D; priorities is profound, particularly in areas such as 
health, space, and national defense.
    Since the 1960's, trends in R&D; funding have paralleled 
those of overall discretionary spending. Thus, Federal 
investment in R&D; has expanded by slow, steady growth. However, 
increasing mandatory spending levels have begun to constrain 
discretionary spending, and to decrease fiscal flexibility for 
those programs. As the discretionary portion of the budget 
declines and spending caps continue to be imposed, R&D; programs 
will compete increasingly with funding for public 
infrastructure, housing, social services, education, 
transportation, and military operations. While Federal R&D; 
funding has increased in constant dollars from a peak in 1968, 
outlays have decreased from about 11 percent of the total 
budget in 1966, during the buildup for the space program, to 
less than 5 percent today. As a proportion of discretionary 
spending, outlays have decreased from 16 percent in 1966 to 
about 13.5 percent today. Budget trends continue to demonstrate 
preferences for selective increases in the funding the National 
Institutes of Health (NIH) and the National Science Foundation 
(NSF), with constant dollar decreases in many other areas.
    The Administration's fiscal year (FY) 1999 R&D; budget 
request is $78 billion. Approximately 60 percent of that 
request is designated for civilian programs, with health 
consuming the largest portion and defense programs receiving 
about 40 percent. As indicated above, these proposed R&D; 
expenditures represent 4.4 percent of the total budget and 13.5 
percent of the discretionary allocation. The FY 1999 request 
represents a 2.6 percent overall increase over FY 1998, and 
includes a 5.8 percent increase for civilian R&D.; The request 
reflects the Administration's priorities in health, energy, 
commerce, and general science, proposing an 11 percent increase 
for NSF, a 10.8 percent increase for the Department of Energy 
(DOE), and an 8.1 percent increase for NIH. The proposed budget 
seeks reductions of 6.9 percent for the National Oceanic and 
Atmospheric Administration (NOAA), 2.6 percent for the National 
Aeronautics and Space Administration (NASA), 1.4 percent at the 
Department of Transportation (DOT), and 0.9 percent at the 
Environmental Protection Agency (EPA).
    While funding levels are one important consideration for 
Federal R&D; programs, another issue is improving the 
effectiveness of such programs. On August 3, 1993, the 
Government Performance and Results Act (GPRA) was signed into 
law. GPRA requires that all federal agencies move toward 
performance budgeting by the year 2001. The President submitted 
a government-wide performance plan with the FY 1999 budget, and 
individual agencies are submitting performance plans to 
Congress during the FY 1999 authorization and appropriations 
cycle. The General Accounting Office reports that research 
agencies have encountered difficulties in preparing strategic 
plans and in developing performance measures.

                          Legislative History

    On April 16, 1997 and on April 28, 1998, the Subcommittee 
on Science, Technology, and Space conducted hearings on Federal 
R&D; funding. Witnesses included: Senators Phil Gramm, Joseph 
Lieberman, and Jeff Bingaman; Dr. Kerri-Ann Jones, Acting 
Director, Office of Science and Technology Policy; Dr. Judith 
Rodin, President of the University of Pennsylvania; Dr. Albert 
Tyche, Director of Science and Policy Programs, American 
Association for the Advancement of Science; and Mr. Dan 
Peterson, President, DAP & Associates.
    On June 25, 1998, Senators Bill Frist and Jay Rockefeller, 
Chairman and Ranking Member of the Commerce Committee's 
Subcommittee on Science, Technology, and Space, introduced S. 
2217, the Federal Research Investment Act. The bill is 
cosponsored by Senators Domenici, Lieberman, Gramm, Bingaman, 
Burns, Breaux, D'Amato, Moynihan, Cleland, Kerry, Moseley-
Braun, Kerrey, Allard, Abraham, Boxer, DeWine, Snowe, 
Feinstein, Hutchison, Durbin, Faircloth, Dodd, Cochran, 
Landrieu, Ashcroft, Warner, and Thompson.
    On July 29, 1998, the Committee met in open executive 
session and, by a voice vote, ordered S. 2217 to be reported 
with an amendment in the nature of a substitute. The substitute 
incorporates several suggested changes to the bill, makes a 
number of technical corrections, and addresses concerns raised 
regarding procedures established for evaluating and terminating 
unsuccessful R&D; programs.

                      Summary of Major Provisions

    Authorization of appropriations. S. 2217, as reported, 
authorizes appropriations for the R&D; programs of the following 
federal departments and agencies: NIH, NSF, the National 
Institute of Standards and Technology (NIST), NASA, NOAA, the 
Centers for Disease Control (CDC), DOE, DOT, the Smithsonian 
Institution, EPA, the United States Department of Agriculture 
(USDA), the United States Department of Education (USDE), the 
Department of the Interior (DOI), and the Department of Veteran 
Affairs (VA). A total of $37.7 billion is authorized to be 
appropriated in FY 1999, increasing to almost $70 billion in FY 
2010. The bill states that the increases called for are not 
intended to exceed discretionary budget caps.
    National R&D; findings, principles, and policy. S. 2217, as 
reported, outlines key findings regarding the value, impact, 
and status of R&D; in the United States and the link between the 
research process and useful technology. Four major topics are 
identified: (1) the flow of science, engineering, and 
technology; (2) excellence in the American research 
infrastructure; (3) commitment to a broad range of research 
initiatives; and (4) partnerships among industry, universities, 
and Federal laboratories. The bill also establishes principles 
for maintaining the Federal research effort, including ensuring 
good peer-reviewed science, demanding fiscal accountability, 
funding programs with measurable results, and selecting 
programs that adhere to established national priorities. In 
addition, S. 2217 establishes as a national policy the 
importance of federal investments in research and technology 
development to the economy and the American standard of living.
    Annual budget report. S. 2217, as reported, requires the 
President to submit, in coordination with his annual budget 
request, a report detailing the Federal R&D; commitment. The 
report would include a focused strategy for meeting 
Congressional funding targets for civilian R&D; and an analysis 
of the Administration's funding methodology.
    Accountability for R&D; programs. As reported, the bill 
requires the Office of Science and Technology Policy (OSTP), in 
consultation with the Office of Management and Budget (OMB) to 
enter into a contract with the National Academy of Sciences 
(NAS) to complete a study containing recommendations for 
criteria to evaluate Federal R&D; programs. In addition, S. 2217 
amends GPRA to require that such criteria be used to set 
performance goals under that law and establishes a process to 
ensure that R&D; programs meet those goals. If programs do not 
meet the goals, they must be brought into compliance, or may be 
terminated if such compliance efforts fail.

                            Estimated Costs

    In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 10, 1998.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2217, the Federal 
Research Investment Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Kathleen 
Gramp (for federal costs), and Lisa Cash Driskill (for the 
state and local impact).
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               congressional budget office cost estimate

S. 2217--Federal Research Investment Act

    Summary: S. 2217 would authorize appropriations for fiscal 
years 1999-2010 for civilian research and development (R&D;) 
activities at 14 agencies. Instead of authorizing separate 
amounts for individual agencies or programs, the bill would 
establish a single annual lump-sum authorization covering the 
R&D; activities at the designated agencies. The bill would 
authorize the appropriation of $37.7 billion for these 
activities for 1999 and would increase the total amount 
authorized by 5.5 percent a year for the following 11 years. 
Other provisions would direct agencies to develop and implement 
methods of evaluating R&D; programs, based in part on a $600,000 
study to be done by the National Academy of Sciences (NAS).
    Assuming appropriation of the authorized amounts, CBO 
estimates that implementing the bill would cost a total of $177 
billion over the 1999-2003 period and an additional $440 
billion after 2003. The bill would not affect direct spending 
or receipts; as a result, pay-as-you-go procedures would not 
apply. S. 2217 contains no intergovernmental or private sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 2217 is shown in Table 1. The costs of 
this legislation fall within budget functions 250 (general 
science, space, and technology), 300 (natural resources and the 
environment), 350 (agriculture), 370 (commerce and housing 
credit), 400 (transportation), 500 (education, training, 
employment, and social services), 550 (health), and 750 
(veterans benefits and services).

                                 TABLE 1.--ESTIMATED BUDGETARY IMPACT OF S. 2217
                                    [By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                        1998         1999         2000         2001         2002         2003
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION
R & D spending under current law:
    Budget authority \1\..........       34,820  ...........  ...........  ...........  ...........  ...........
    Estimated outlays.............       33,651       18,663        4,183        1,215          189           59
Proposed changes:
    Authorized level..............  ...........       37,721       39,790       41,980       42,290       46,720
    Estimated outlays.............  ...........       17,201       34,045       39,195       41,561       44,108
R&D; Spending Under S. 2217:
    Authorized level 1............       34,820       37,721       39,790       41,980       42,290       46,720
    Estimated outlays.............       33,651       35,864       38,228       40,410       41,750      44,167
----------------------------------------------------------------------------------------------------------------
\1\ The 1998 level is based on the Office of Management and Budget's estimate of the funding for R&D; activities
  at the designated agencies for that year. The 1998 total includes $318 million for R&D; at the Federal Highway
  Administration that was provided as contract authority (a form of direct spending).

    Basis of estimate: For purposes of this estimate, CBO 
assumes that the authorized amounts will be appropriated for 
each year and allocated among agencies and programs according 
to the distribution of funding for the civilian R&D; programs at 
the designated agencies in 1998. This estimate also assumes 
that the NAS study will be completed during fiscal year 2000. 
Table 2 shows the Office of Management and Budget's estimate of 
the amounts allocated for R&D; for the 14 agencies in 1998. 
These data suggest that rate of spending for bill's lump-sum 
authorization levels would largely be determined by trends at 
the National Institutes of Health, the National Aeronautics and 
Space Administration, the Department of Energy, and the 
National Science Foundation.

    TABLE 2.--ESTIMATED BUDGET AUTHORITY FOR 1998 FOR R&D; ACTIVITIES
                          AUTHORIZED BY S. 2217
                          [Millions of dollars]
------------------------------------------------------------------------
National Institutes of Health..............................       13,124
National Aeronautics and Space Administration..............        9,752
Department of Energy (civilian R&D;)........................        3,465
National Science Foundation................................        2,607
Departmenmt of Agriculture.................................        1,559
Department of Transportation...............................          676
Environmental Protection Agency............................          637
Department of the Interior.................................          609
Veterans Administration....................................          608
National Oceanic and Atmospheric Administration............          578
National Institute for Standards and Technology............          492
Centers for Disease Control................................          358
Department of Education....................................          209
Smithsonian Institution....................................          146
                                                            ------------
      Total................................................       34,820
------------------------------------------------------------------------

    Pay-as-you-go-considerations: None.
    Estimated impact on state, local, and tribal governments: 
S. 2217 contains no intergovernmental mandates as defined in 
UMRA and would impose no costs on state, local, or tribal 
governments. Currently, about $12.4 billion of the research and 
development budgets of the agencies affected by this bill goes 
to academic institutions, including public universities.
    Estimated impact on the private sector: This bill would 
impose no new private-sector mandates as defined in UMRA.
    Estimate prepared by: Federal costs: Kathleen Gramp; Impact 
on State, local and tribal governments: Lisa Cash Driskill.
    Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                      Regulatory Impact Statement

  In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:

                       NUMBER OF PERSONS COVERED

    The Committee believes that the bill will not subject any 
individuals or businesses affected by the legislation to any 
additional regulation.

                            ECONOMIC IMPACT

    This legislation will not have an adverse economic impact 
on the Nation. It authorizes funding to ensure sustained levels 
of federally-funded scientific, medical and pre-competitive 
engineering research over a 12-year period. In addition, the 
bill requires the OMB Director to submit an annual report to 
Congress outlining federally-funded program activities which do 
not meet acceptable GPRA criteria. This action will provide 
oversight of agency programs and promote more cost-effective 
use of Federal funds.

                                PRIVACY

    This legislation will not have a negative impact on the 
personal privacy of individuals.

                               paperwork

    This legislation will not increase the paperwork 
requirement for private individuals or businesses. It contains 
four Federal reporting requirements: (1) the President is to 
include in his annual budget request to Congress a report 
detailing the total level of funding for R&D; programs 
throughout all civilian agencies, and outlining the 
Administration's strategy for meeting Congressional funding 
targets through 2010; (2) the OSTP Director, in consultation 
with the OMB Director, is to contract with the National Academy 
of Sciences for a comprehensive study to be submitted to OMB 
and the Congress on methods for evaluating federally-funded R&D; 
programs; (3) the OMB Director is to identify the civilian R&D; 
program activities which do not meet the criteria defined in 
GPRA in an annual report to the President and to Congress; and 
(4) the head of an agency whose program activities do not meet 
the GPRA criteria for two years is to submit to Congress a 
strategic plan for bringing the program into compliance or 
terminating it.

                      Section-by-Section Analysis

Section 1. Short title and table of contents

    This section cites the short title of the reported bill as 
the ``Federal Research Investment Act.''

Section 2. General findings regarding federal investment in research

    This section of the reported bill outlines key findings 
regarding the value of R&D; to the United States and the status 
of the Federal R&D; investment. The findings state that current 
projections for Federal research funding show a downward trend. 
This trend reflects the confluence of increased national 
dependency on technology, increased targets of opportunity, and 
decreased flexibility in apportioning dwindling discretionary 
funds. Indicators show that more funding for science, 
engineering, and technology is needed, but, even with increased 
funding, priorities must be established among different 
programs.

Section 3. Additional findings regarding the link between the research 
        process and useful technology

    This section of the reported bill highlights four major 
observations: (1) the current flow of science, engineering, and 
technology from early stages of research through pre-
commercialization should be less discrete and better 
coordinated; (2) the relationship between Federal research and 
education should be expanded to include geographically-diverse 
states, primary and secondary educational institutions, and the 
community college system; (3) the United States should 
encourage research opportunities for interdisciplinary projects 
that foster collaboration among fields of research; and (4) 
partnerships among industry, universities, and Federal 
laboratories should be optimized.

Section 4. Maintenance of Federal research effort; guiding principles

    This section of the reported bill outlines four guiding 
principles. First, Federal programs must be focused, peer-
reviewed, merit-based, and not unnecessarily duplicative. They 
must address both knowledge-driven and mission-driven 
scientific requirements. The second principle guiding the 
maintenance of Federal research efforts requires programs to be 
fiscally accountable. Congress must exercise oversight to 
ensure that programs funded with scarce Federal dollars are 
properly managed. Third, government programs must have 
measurable results. The effectiveness of their goals must be 
evaluated. Fourth, selection of programs for Federal funding 
must balance the Nation's two traditional priorities: (1) basic 
scientific and technological research that represents an 
investment in the Nation's long-term scientific and 
technological capacity; and (2) mission-related research that 
derives from necessary public functions such as defense, 
health, education, and environmental protection. Because 
government investments should not compete nor displace short-
term, market-driven private-sector funding, they should be 
restricted to pre-competitive activities rather than commercial 
technologies.

Section 5. Policy statement

    Subsection (a) of this section states the overall goal of 
the bill to double amounts authorized annually for basic 
scientific, medical, and engineering research over a 12-year 
period. This corresponds to an annual increase of 2.5 percent 
in addition to the assumed 3 percent yearly rate of inflation.
    Subsection (b) identifies the agencies covered by the 
authorizations in the bill as: NIH, NSF, NIST, NASA, NOAA, CDC, 
DOE, DOT, the Smithsonian Institution, EPA, USDA, USDE, DOI, 
and VA. The Committee intends that the programs of these 
agencies are covered only to the extent that such programs 
involve activities that support basic scientific, medical, or 
pre-competitive engineering research.
    Subsections (c) and (d) discuss historic investment trends 
and potential damage to the U.S. research infrastructure from 
continued inadequate funding levels. Subsection (e) states that 
funding levels for R&D; research should be increased to 
approximately 2.6 percent of the total annual budget, in order 
to maintain and enhance the economic strength of the United 
States in the world market.
    Subsection (f) authorizes the following aggregate 
appropriation levels for civilian R&D; for FY 1999 through FY 
2010:
          $37.72 billion for FY 1999;
          $39.79 billion for FY 2000;
          $41.98 billion for FY 2001;
          $42.29 billion for FY 2002;
          $46.72 billion for FY 2003;
          $49.29 billion for FY 2004;
          $52.00 billion for FY 2005;
          $54.87 billion for FY 2006;
          $57.88 billion for FY 2007;
          $61.07 billion for FY 2008;
          $64.42 billion for FY 2009; and
          $67.97 billion for FY 2010.
    Subsection (g) requires that no funds be made available 
under the bill in a manner that does not conform with the 
discretionary spending caps provided in the most recently 
adopted concurrent resolution on the budget.
    Subsection (h) calls for the aggregate funding levels 
authorized by section 5 to be balanced among various scientific 
and engineering disciplines, and geographically dispersed 
throughout the states.

Section 6. President's annual budget request

    This section of the reported bill requires the President, 
as part of the annual budget request process, to submit a 
report on implementation of the commitment to support 
federally-funded R&D.; The report must provide: (1) a detailed 
summary of the total level of funding for R&D; programs 
throughout civilian agencies; (2) a focused strategy reflecting 
annual funding projections for R&D; through FY 2010; (3) an 
analysis of funding levels across federal agencies by 
methodology of funding, including grant agreements, procurement 
contracts, and cooperative agreements; and (4) specific 
proposals to improve R&D; infrastructure and capacity in States 
with less concentrated R&D; resources in order to create a 
nationwide R&D; community.

Section 7. Comprehensive accountability study for Federally-funded 
        research

    Subsection (a) of this section of the reported bill 
requires the Director of OSTP, in consultation with the 
Director of OMB, to contract with NAS for a comprehensive 
study. The goal of the study is to develop methods for 
evaluating federally-funded R&D; programs by: (1) describing the 
research process in various scientific and engineering 
disciplines; (2) examining the measures and criteria employed 
by each discipline to evaluate the success or failure of a 
program both for exploratory long-range work and short-term 
goals; and (3) recommending how these measures may be adapted 
for use by federally-funded R&D; programs.
    This subsection also calls for the study to assess the 
extent to which agencies incorporate independent merit-based 
review into the formulation of strategic plans, as well as the 
quantity and quality of this type of input. NAS would evaluate 
mechanisms for identifying poorly performing programs and the 
extent to which an independent merit-based review would 
contribute to addressing those problems. In addition, NAS is 
required to report on the validity of using quantitative 
performance goals for administrative aspects of a program 
including: paperwork requirements for contractors, grant 
recipients and external reviewers; cost and schedule controls 
for any associated construction projects; the ratio of overhead 
costs relative to other program costs; and responsiveness to 
requests for funding, participation, or equipment use. Finally, 
the study would examine the extent to which Federal funding 
decisions support the Nation's historical R&D; priorities.
    Subsection (b) of this section provides for integration of 
the results of the NAS study into GPRA requirements. Within six 
months of study completion, the Director of OMB is required to 
promulgate one or more alternative forms for performance goals 
under GPRA (31 U.S.C. 1115(b)(10)(B)) based upon the study 
recommendations. In the development of such alternatives the 
OMB Director is required to provide for public notice and 
comment, obtain the approval of the Director of OSTP, and 
consult with the National Science and Technology Council. The 
goal of this subsection is to offer the head of each agency 
that conducts R&D; activities alternative and more appropriate 
mechanisms to successfully comply with GPRA.
    Subsection (c) of this section requires each agency that 
carries out R&D; activities upon updating or revising their 
strategic plan under subsection 306(b) of title 5, United 
States Code, to describeits current and future use of the 
alternative performance goals consistent with the NAS study. Subsection 
(d) provides definitions for several terms used in this section of the 
reported bill, including ``Director,'' ``program activity,'' and 
``independent merit-based evaluation.'' Finally, subsection (e) 
authorizes appropriations of $600,000 for carrying out the NAS study.

Section 8. Effective performance assessment program for Federally-
        funded research

    Section 8(a) of the reported bill amends GPRA to add a new 
section 1120 dealing with accountability for R&D; programs. 
Subsection (a) of new section 1120 of GPRA requires the 
Director of OMB, based upon annual performance reports 
submitted by the President to Congress under GPRA, to identify 
civilian R&D; program activities or components of such 
activities that do not meet an acceptable level of success as 
defined by alternative performance goals developed under 
section 7 of the reported bill. The OMB Director is required to 
submit a report to the President and Congress that lists 
program activities or components identified under this 
subsection within 30 days after each agency submits its annual 
GPRA report to the President.
    Subsection (b) of new section 1120 of GPRA establishes a 
process for addressing programs that have failed to meet 
performance goals. When a program is identified as being below 
acceptable success levels in two consecutive OMB reports, the 
head of the responsible agency is required to submit a 
statement to the Congressional committees of jurisdiction 
outlining steps that will be taken to (1) bring the program 
into compliance with applicable performance goals; or (2) to 
terminate the program if compliance efforts have failed. A 
submission under this subsection also is required to identify 
any legislative changes needed for its implementation or 
termination. In establishing the process under this subsection, 
the Committee intends to improve accountability for R&D; 
spending and to encourage cost-efficiencies in federally-funded 
R&D; programs. However, this process should not be used to 
impose substantial new paperwork burdens on R&D; programs that 
are not required of other Federal programs. Nor does the 
Committee intend that the process should be used to target 
Federal R&D; programs for which the funding reflects 
Congressional rather than Administration priorities.
    Section 8(b) of the reported bill makes two technical and 
conforming amendments to GPRA.

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows:

                      TITLE 31--MONEY AND FINANCE

                    Subtitle II--The Budget Process

   CHAPTER 11--THE BUDGET AND FISCAL, BUDGET, AND PROGRAM INFORMATION

Sec. 1115. Performance plans

    (a) In carrying out the provisions of section 1105(a)(29), 
the Director of the Office of Management and Budget shall 
require each agency to prepare an annual performance plan 
covering each program activity set forth in the budget of such 
agency. Such plan shall--
          (1) establish performance goals to define the level 
        of performance to be achieved by a program activity;
          (2) express such goals in an objective, quantifiable, 
        and measurable form unless authorized to be in an 
        alternative form under subsection (b);
          (3) briefly describe the operational processes, 
        skills and technology, and the human, capital, 
        information, or other resources required to meet the 
        performance goals;
          (4) establish performance indicators to be used in 
        measuring or assessing the relevant outputs, service 
        levels, and outcomes of each program activity;
          (5) provide a basis for comparing actual program 
        results with the established performance goals; and
          (6) describe the means to be used to verify and 
        validate measured values.
    (b) If an agency, in consultation with the Director of the 
Office of Management and Budget, determines that it is not 
feasible to express the performance goals for a particular 
program activity in an objective, quantifiable, and measurable 
form, the Director of the Office of Management and Budget may 
authorize an alternative form. Such alternative form shall--
          (1) include separate descriptive statements of--
                  (A)(i) a minimally effective program, and
                  (ii) a successful program, or
                  (B) such alternative as authorized by the 
                Director of the Office of Management and 
                Budget,
        with sufficient precision and in such terms that would 
        allow for an accurate, independent determination of 
        whether the program activity's performance meets the 
        criteria of the description; or
          (2) state why it is infeasible or impractical to 
        express a performance goal in any form for the program 
        activity.
    (c) For the purpose of complying with this section, an 
agency may aggregate, disaggregate, or consolidate program 
activities, except that any aggregation or consolidation may 
not omit or minimize the significance of any program activity 
constituting a major function or operation for the agency.
    (d) An agency may submit with its annual performance plan 
an appendix covering any portion of the plan that--
          (1) is specifically authorized under criteria 
        established by an Executive order to be kept secret in 
        the interest of national defense or foreign policy; and
          (2) is properly classified pursuant to such Executive 
        order.
    (e) The functions and activities of this section shall be 
considered to be inherently Governmental functions. The 
drafting of performance plans under this section shall be 
performed only by Federal employees.
    (f) For purposes of this section and sections 1116 [through 
1119,] through 1120, and sections 9703 and 9704 the term--
          (1) ``agency'' has the same meaning as such term is 
        defined under section 306(f) of title 5;
          (2) ``outcome measure'' means an assessment of the 
        results of a program activity compared to its intended 
        purpose;
          (3) ``output measure'' means the tabulation, 
        calculation, or recording of activity or effort and can 
        be expressed in a quantitative or qualitative manner;
          (4) ``performance goal'' means a target level of 
        performance expressed as a tangible, measurable 
        objective, against which actual achievement can be 
        compared, including a goal expressed as a quantitative 
        standard, value, or rate;
          (5) ``performance indicator'' means a particular 
        value or characteristic used to measure output or 
        outcome;
          (6) ``program activity'' means a specific activity or 
        project as listed in the program and financing 
        schedules of the annual budget of the United States 
        Government; and
          (7) ``program evaluation'' means an assessment, 
        through objective measurement and systematic analysis, 
        of the manner and extent to which Federal programs 
        achieve intended objectives.

Sec. 1120. Accountability for research and development programs

    (a) Identification of Unsuccessful Programs.--Based upon 
program performance reports for each fiscal year submitted to 
the President under section 1116, the Director of the Office of 
Management and Budget shall identify the civilian research and 
development program activities, or components thereof, which do 
not meet an acceptable level of success as defined in section 
1115(b)(1)(B). Not later than 30 days after the submission of 
the reports under section 1116, the Director shall furnish a 
copy of a report listing the program activities or component 
identified under this subsection to the President and the 
Congress.
    (b) Accountability If No Improvement Shown.--For each 
program activity or component that is identified by the 
Director under subsection (a) as being below the acceptable 
level of success for 2 fiscal years in a row, the head of the 
agency shall no later than 30 days after the Director submits 
the second report so identifying the program, submit to the 
appropriate congressional committees of jurisdiction:
          (1) a concise statement of the steps that will be 
        taken--
                  (A) to bring such program into compliance 
                with performance goals; or
                  (B) to terminate such program should 
                compliance efforts have failed; and
          (2) any legislative changes needed to put the steps 
        contained in such statement into effect.