    [Analytical Perspectives]
    [Crosscutting Programs]
    [5. Research and Development]
    [From the U.S. Government Printing Office, www.gpo.gov]

                                I.  INTRODUCTION

      U.S. investments in science and technology in past decades have
    greatly enhanced the standard of living and quality of life we enjoy
    today and have generated significant economic growth in the United
    States. Advances have been possible only with the support of both public
    and private investment in research and development (R&D).
      The U.S. Government boasts the highest level of R&D investment in the
    world: $132 billion. However, unlike 40 years ago, when Federal R&D
    expenditures were double those of the private sector, industry R&D
    spending now exceeds Federal Government R&D spending.
      While the U.S. investment is, by a wide margin, the largest in the
    world, we also strive to make sure it is going to the highest priority
    and highest quality work. The President's 2006 Budget maintains a strong
    focus on winning the war against terrorism, while moderating the growth
    in overall spending, and this focus is reflected in the R&D the
    Administration proposes for 2006. In addition, recognizing that
    fundamental research fuels future innovation and technology development,
    the Administration has maintained high levels of support for priority
    R&D areas such as nanotechnology, information technology, hydrogen
    energy, and space exploration.
      The Federal Government funds many types of R&D. First, the Government
    is the primary supporter of basic research, which is directed toward
    greater understanding of fundamental scientific phenomena. Basic
    research is the source of tomorrow's discoveries and new capabilities,
    and this long-term research will fuel further gains in economic
    productivity, quality of life, and homeland and national security. The
    Government has an important role in supporting applied research, which
    is driven by more targeted scientific questions and specific needs, and
    development, which applies scientific knowledge and technology to
    specific needs. Together, these R&D activities are critical for ensuring
    that agencies effectively implement their missions.
      In addition to direct R&D investments, the Federal Government also
    helps stimulate private investment and provide incentives for private
    sources to continue to fuel the discovery and innovation of tomorrow.
    The Administration proposes to do this, for instance, by permanently
    extending the Research and Experimentation Tax Credit.
      The Administration continues to meet the President's charge to improve
    the management, performance, and results of the Federal Government. By
    strengthening effective programs and addressing lower performers through
    reforms or reallocations to higher performers, we will increase the
    productivity of the Federal R&D portfolio and transcend the attention
    given to year-to-year marginal increases or decreases. Additionally,
    while it can be difficult to assess the outcomes of some research
    programs, many of which may not fully pay off for years, agencies can
    establish meaningful program goals and measure annual progress and
    performance in appropriate ways.
      Towards that end, the Administration continues to implement and
    improve investment criteria for R&D programs across the Government as
    part of the President's Management Agenda. Further, the Government will
    coordinate interrelated and complementary R&D efforts among agencies,
    combining programs where appropriate to improve effectiveness and
    eliminate redundancy, to leverage these resources to the greatest
    effect.
      This chapter discusses how the Administration will improve the
    performance of R&D programs through investment principles and other
    means that encourage and reinforce quality research. Highlights of the
    coordination of multi-agency R&D priority areas are also included. The
    chapter concludes with details of R&D funding across the Federal
    Government.

                 II.  IMPROVING THE PERFORMANCE OF R&D PROGRAMS

      R&D is critically important for keeping our Nation economically
    competitive, and it will help solve the challenges we face in health,
    defense, energy, and the environment. Therefore, and consistent with the
    Government Performance and Results Act, every Federal R&D dollar must be
    invested as effectively as possible. The discussion below will focus on
    the use of R&D investment criteria and the effect on overall performance
    of research earmarks on the Federal R&D portfolio.

                             R&D Investment Criteria

      The Administration is improving the effectiveness of the Federal
    Government's investments in R&D by applying transparent investment
    criteria in analyses that inform recommendations for program funding and
    management. R&D performance assessment must be done with care. Research
    often leads scientists and engineers down unpredictable pathways with
    unpredictable results. This outcome can require special consideration
    when measuring an R&D program's performance against its initial goals.

    [[Page 62]]

      With this in mind, the Administration is improving methods for setting
    priorities based on expected results, including applying specific
    criteria that programs or projects must meet to be started or continued,
    clear milestones for gauging progress, and improved metrics for
    assessing results.
      As directed by the President's Management Agenda, the R&D Investment
    Criteria accommodate the wide range of R&D activities, from basic
    research to development and demonstration programs, by addressing three
    fundamental aspects of R&D:
         Relevance--Programs must be able to articulate why they are
              important, relevant, and appropriate for Federal investment;
         Quality--Programs must justify how funds will be allocated
              to ensure quality; and
         Performance--Programs must be able to monitor and document
              how well the investments are performing.
      In addition, R&D projects and programs relevant to industry are
    expected to apply criteria to determine the appropriateness of the
    public investment, enable comparisons of proposed and demonstrated
    benefits, and provide meaningful decision points for completing or
    transitioning the activity to the private sector.
      As discussed throughout the 2006 Budget, the Office of Management and
    Budget (OMB) and the agencies are working on other initiatives as part
    of the President's Management Agenda. For the Budget and Performance
    Integration initiative, the Administration developed the Program
    Assessment Rating Tool (PART) to consistently assess the effectiveness
    of programs. A section of the PART specifically addresses the assessment
    of R&D program management and performance and is aligned with the R&D
    Investment criteria. In the last three years, agencies have completed
    PART assessments of 84 R&D programs. The results of these PART
    assessments may be found on the web at http://www.whitehouse.gov/omb/
    part/.

      Performance assessments help policy makers identify those programs
    that are the most effective and worthy of funding; however, the
    Administration does not allocate funding levels and initiate management
    reforms strictly by formula or based solely on PART results. For
    instance, funding may be reduced for ``effective'' programs that have
    achieved what they set out to do, and ``ineffective'' programs might
    receive more money if it is clear it would help them become more
    effective. The PART provides information that leads to more informed
    decisions. For example, as a result of the PART review process, the
    Department of Veterans Affairs designed new performance measures that
    will enable its senior management to better assess the agency's overall
    research direction and its contributions to the health of veterans and
    the general population. In another case, the PART informed a decision in
    the 2006 Budget to eliminate funds for the Department of Energy's oil
    and gas R&D programs, which were determined to often duplicate private-
    sector R&D efforts and generate benefits primarily for the private
    sector.

    [[Page 63]]

      R&D agencies will continue to integrate the R&D Criteria more
    meaningfully into the budget formulation process in the coming year.
    Interagency R&D initiatives use the R&D Criteria in developing plans and
    reports, such as ``A 21st Century Frontier for Discovery: The Physics of
    the Universe.'' Based on lessons learned and other feedback from experts
    and stakeholders, the Administration will continue to improve the R&D
    Investment Criteria and their implementation to achieve more effective
    management of R&D programs and better-informed budget-allocation
    decisions.
    ------------------------------------------------------------------------

                                        President's Management Agenda Initiative

    Research and Development Investment Criteria

     FY 2005, Quarter 1 Status: RED, Progress: YELLOW

    The initiative's red status score reflects the limited success many agencies have had in the Government-wide
     implementation of the initiative. The yellow progress score indicates that the initiative has momentum, as some
     agencies have made improvements this year, including the National Science Foundation and the Department of
     Energy. More R&D agencies are using the criteria to assess their programs, due to the improved alignment of the
     R&D Investment Criteria with the R&D PART for program-level assessments. All of the top 13 R&D agencies are
     using the R&D PART to assess their programs this year. Most of the major R&D agencies submitted 2006 Budget
     requests that, to varying degrees, observe the principles of the Investment Criteria. To achieve a yellow
     status score, half of the R&D programs assessed for each agency using the R&D PART must receive at least a
     Moderately Effective rating, which is proving to be a challenging requirement. Agencies must also integrate the
     R&D Criteria framework into their budget proposals, including using detailed criteria-based assessments to
     justify specific requests or allocation changes.

    ------------------------------------------------------------------------

                                Research Earmarks

      The Administration strongly supports awarding research funds based on
    merit review through a competitive process. Such a system generally
    ensures that the best research is supported. Research earmarks--in
    general the assignment of money during the legislative process for use
    only by a specific organization or project--are counter to a merit-based
    competitive selection process. Earmarks signal to potential
    investigators that there is an acceptable alternative to creating
    quality research proposals for merit-based consideration, including the
    use of political influence or appeals to parochial interests. Such an
    alternative is seldom the most effective use of taxpayer funds.
      Unfortunately, the practice of earmarking to colleges, universities
    and other entities for specific research projects has expanded
    dramatically in recent years. The American Association for the
    Advancement of Science (AAAS) recently estimated that R&D earmarks total
    $2.1 billion in 2005, an increase of nine percent over the Association's
    2004 estimate.
      Some argue that earmarks help spread the research money to states or
    institutions that would receive less research funding through other
    means. The Chronicle of Higher Education reports that this is not the
    main role earmarks play; often only a minor portion of academic earmark
    funding goes to the states with the smallest shares of Federal research
    funds. Meanwhile, earmarks help some rich institutions become richer.
      Some proponents of earmarking assert that earmarks provide a means of
    funding unique projects that would not be recognized by the conventional
    peer-review process. To address this concern, a number of research
    agencies have procedures and programs to reward ``out-of-the-box''
    thinking. For example, within the Department of Defense (DOD), the
    Defense Advanced Research Projects Agency seeks out high risk, high
    payoff scientific proposals, and program managers at the National
    Science Foundation (NSF) set aside a share of funding for higher-risk
    projects in which they see high potential.
      Often Congressional direction has little to do with an agency's
    mission. In addition to earmarked funding noted above, the Congress also
    directed DOD to fund research on a wide range of diseases, including
    breast cancer, ovarian cancer, prostate cancer, diabetes, leukemia, and
    muscular dystrophy. Funding at DOD for such research totals about $900
    million in 2005 alone, an increase of about $200 million in just one
    year. While research on these diseases is very important, it is
    generally not unique to the U.S. military and can be better carried out
    and coordinated within civil medical research agencies, without
    disruption to the military mission. At the same time, intrusion of
    earmarks into the peer-review processes of civilian medical research
    agencies would have a significant detrimental impact on funding the most
    important and promising research.
      The Administration will continue to work with the Congress, academic
    organizations, colleges and universities to discourage the practice of
    research earmarks and to achieve our common objectives.

    [[Page 64]]

              III.  PRIORITIES FOR FEDERAL RESEARCH AND DEVELOPMENT

      The 2006 Budget requests $132 billion for Federal R&D funding, which
    targets key research investments within agencies such as NSF, the
    National Aeronautics and Space Administration, the Department of
    Commerce's National Institute of Standards and Technology, and the
    National Institutes of Health (Table 5-2 provides details by agency).
      The ``Federal Science and Technology'' (FS&T) budget (shown in Table
    5-3) highlights the creation of new knowledge and technologies more
    consistently and accurately than the traditional R&D data collection.
    The FS&T budget emphasizes research, does not count funding for defense
    development, testing, and evaluation, and totals less than half of
    Federal R&D spending. The 2006 Budget requests $61 billion for FS&T.
      Over the last year, the Office of Science and Technology Policy and
    OMB have worked with the Federal agencies and the science community to
    identify top priorities for Federal R&D. These are in areas critical to
    the Nation, such as information technologies, and in emerging fields,
    such as nanotechnology, that will provide new breakthroughs across many
    fields. Some priorities, such as hydrogen R&D, address newly recognized
    needs. The discussion below focuses on five multi-agency priority areas
    and concludes with how the Federal Government stimulates private R&D
    investment.

                           Multi-Agency R&D Priorities

      The 2006 Budget targets important research investments that must be
    coordinated across multiple agencies. Three of these multi-agency
    initiatives--nanotechnology, information technology R&D, and climate
    change science--are coordinated by three separate dedicated offices to
    ensure unified strategic planning and implementation. The Administration
    is strengthening interagency coordination for other priority areas--such
    as combating bioterrorism. The Administration will continue to analyze
    other areas of critical need that could benefit in the future from
    improved focus and coordination among agencies.

      Combating Terrorism R&D: Since September 2001, the Administration
    increased its focus on R&D that aids in securing the homeland. Research
    programs across the Federal Government are being coordinated to develop
    systems to help prevent future terrorist attacks, minimize our Nation's
    vulnerability to terrorist acts, and respond and recover if an attack
    should occur.
      The President issued 12 Homeland Security Presidential Directives
    (HSPD) that call for, among other things, increased interagency
    coordination of R&D to defend against biological threats to our people,
    economy, agriculture, food and water supplies. For example, one HSPD,
    Defense of United States Agriculture and Food, establishes a national
    policy to provide protection against an attack on the agriculture and
    food systems.
      In 2004, multi-agency efforts made significant progress. For example,
    the Department of Homeland Security established both the National
    Biodefense Analysis and Countermeasures Center to study biological
    agents and the National Bioforensic Analysis Center to provide a world
    class forensics center. These centers join other DOD, U.S. Department of
    Agriculture, and National Institutes of Health facilities at Fort
    Detrick to create a National Interagency Biodefense Campus that will
    become a focal point for countermeasures research. Together, these
    agencies will establish research priorities to reduce the threat of
    biological terrorism.

      Networking and Information Technology R&D: The budget provides $2
    billion for the multi-agency Networking and Information Technology
    Research and Development (NITRD) program, which focuses and coordinates
    agency research efforts in advanced computing systems, networks,
    software, and information-management technologies. The agencies involved
    in this program work together enabling more rapid advancement than they
    could achieve working on their own. These advances have an impact on
    virtually every sector of the economy.
      In 2004, agencies with responsibilities for high-end computing--ultra-
    powerful supercomputers, components and software--made significant
    progress in implementing the recommendations of the interagency High-End
    Computing Revitalization Task Force. For example, new supercomputing
    activities at both NASA and the Department of Energy (DOE) were begun
    and will be managed in accord with the Federal Plan for High-End
    Computing.
      To enable a better understanding of the potential scientific impact of
    high-end capability computing, the NITRD National Coordination Office
    will commission a National Academy of Sciences study that identifies and
    categorizes important scientific questions and technological problems
    for which an extraordinary advancement in our understanding is difficult
    or impossible without leading-edge scientific simulation capabilities.

      Nanotechnology R&D: The budget provides $1 billion for the multi-
    agency National Nanotechnology Initiative (NNI). The NNI focuses on R&D
    that creates materials, devices, and systems that exploit the
    fundamentally distinct properties of matter as it is manipulated at the
    atomic and molecular levels. The results of NNI-supported R&D could lead
    to breakthroughs in disease detection and treatment, manufacturing at
    the nanoscale level, environmental monitoring and protection, energy
    production and storage, and creating electronic devices that have even
    greater capabilities than those available today.
      Guided by the NNI, participating agencies will continue to focus on
    fundamental and applied research through investigator-led activities,
    multidisciplinary centers of excellence, education and training of
    nanotechnology workers, and infrastructure development, including user
    facilities and networks that are broadly available to researchers from
    across the sci

    [[Page 65]]

    entific research community. For example, the 2006 Budget provides
    funding for DOE to complete construction on four new major nanoscale
    science research centers located around the country. In addition,
    agencies continue to maintain a focus on the responsible development of
    nanotechnology, with attention to the human and environmental health
    impacts, as well as ethical, legal, and other societal issues.

      Climate Change R&D: The 2006 Budget for the Climate Change Science
    Program (CCSP) continues to support the goals outlined in the CCSP
    Strategic Plan, which was released in July 2003. The Budget reflects the
    coordinated planning efforts of the 13 departments and agencies that
    participate in CCSP. Beginning in FY 2006, CCSP will formally track the
    expected actions, deliverables, and milestones for each of its programs
    in order to assess overall performance. Additional detail on individual
    agency activities will be provided in the Administration's FY 2006
    edition of Our Changing Planet.
      The Climate Change Technology Program (CCTP) continues to prioritize
    the portfolio of Federally funded climate change technology R&D
    consistent with the President's National Climate Change Technology
    Initiative (NCCTI). In 2005, the CCTP will publish a draft Strategic
    Plan and solicit comments from the scientific community and the public.
    The CCTP will also identify within its portfolio a subset of NCCTI
    priority activities, defined as discrete R&D activities that address
    technological challenges, which, if solved, could advance technologies
    with the potential to dramatically reduce, avoid, or sequester
    greenhouse gas emissions.

      Hydrogen R&D: In 2004, the Hydrogen R&D Interagency Task Force,
    established by the Office of Science and Technology Policy, initiated a
    plan to coordinate agency efforts in key research areas, such as novel
    materials for fuel cells and hydrogen storage, inexpensive and durable
    catalysts, and hydrogen production from alternative sources. In 2005,
    the task force will implement this plan and expand public outreach and
    collaboration with the private sector, state agencies, and other
    stakeholders. The U.S., through the Department of Energy, will continue
    to lead the International Partnership for the Hydrogen Economy,
    established in 2003 to coordinate hydrogen research among 15 nations
    representing two thirds of global energy consumption.
      DOE will continue the President's Hydrogen Fuel Initiative to
    accelerate the worldwide availability and affordability of hydrogen-
    powered fuel cell vehicles. The initiative, which includes an 11-percent
    increase in targeted basic research investments in 2006, focuses on
    research to advance hydrogen production, storage, and infrastructure.
    The Initiative complements the Department's FreedomCAR Partnership with
    the auto industry, which is aimed at developing viable hydrogen fuel
    cell vehicle technology.

                         Stimulating Private Investment

      Along with direct spending on R&D, the Federal Government has sought
    to stimulate private R&D investment through incentives in the Internal
    Revenue Code. Current law provides a 20-percent tax credit for private
    research and experimentation expenditures above a certain base amount.
    The credit, which expired in June 2004, was extended again for another
    18 months, through 2005, in the Working Families Tax Relief Act of 2004.
    The budget proposes to make the Research and Experimentation (R&E) tax
    credit permanent. The proposed extension will cost nearly $30 billion
    over the period from 2006 to 2010. In addition, a permanent tax
    provision lets companies deduct, up front, the costs of certain kinds of
    research and experimentation, rather than capitalize these costs. Also,
    equipment used for research benefits from relatively rapid tax
    depreciation allowance. Table 5-1 shows a forecast of the costs of the
    tax credit.

                     Table 5-1.  PERMANENT EXTENSION OF THE RESEARCH AND EXPERIMENTATION TAX CREDIT
                                       (Revenue loss, dollar amounts in millions)
    ----------------------------------------------------------------------------------------------------------------
                                                         2005     2006     2007     2008     2009     2010   2006-10
    ----------------------------------------------------------------------------------------------------------------
    Current Law......................................    5,080    2,100      910      390      180       50    3,630
    Proposed Extension...............................  .......    2,097    4,601    5,944    6,889    7,669   27,200
                                                      --------------------------------------------------------------
      Total..........................................    5,080    4,197    5,511    6,334    7,069    7,719   30,830
    ----------------------------------------------------------------------------------------------------------------

    [[Page 66]]

                              IV.  FEDERAL R&D DATA

                               Federal R&D Funding

      R&D is the collection of efforts directed towards gaining greater
    knowledge or understanding and applying knowledge toward the production
    of useful materials, devices, and methods. R&D investments can be
    characterized as basic research, applied research, development, R&D
    equipment, or R&D facilities, and OMB has used those or similar
    categories in its collection of R&D data since 1949.

      Basic research is defined as systematic study directed toward greater
    knowledge or understanding of the fundamental aspects of phenomena and
    of observable facts without specific applications towards processes or
    products in mind.
      Applied research is systematic study to gain knowledge or
    understanding necessary to determine the means by which a recognized and
    specific need may be met.
      Development is systematic application of knowledge toward the
    production of useful materials, devices, and systems or methods,
    including design, development, and improvement of prototypes and new
    processes to meet specific requirements.
      Research and development equipment includes acquisition or design and
    production of movable equipment, such as spectrometers, microscopes,
    detectors, and other instruments.
      Research and development facilities include the acquisition, design,
    and construction of, or major repairs or alterations to, all physical
    facilities for use in R&D activities. Facilities include land,
    buildings, and fixed capital equipment, regardless of whether the
    facilities are to be used by the Government or by a private
    organization, and regardless of where title to the property may rest.
    This category includes such fixed facilities as reactors, wind tunnels,
    and particle accelerators.
      There are over twenty Federal agencies that fund R&D in the U.S. The
    nature of the R&D that these agencies fund depends on the mission of
    each agency and on the role of R&D in accomplishing it. Table 5-2 shows
    agency-by-agency spending on basic and applied research, development,
    and R&D equipment and facilities.

                                                      Table 5-2.  FEDERAL RESEARCH AND DEVELOPMENT SPENDING
                                                         (Budget authority, dollar amounts in millions)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                   Dollar         Percent
                                                                                              2004        2005         2006        Change:     Change:  2005
                                                                                             Actual     Estimate     Proposed   2005 to 2006      to 2006
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    By Agency
      Defense............................................................................     65,462       70,422       70,839           417              1%
      Health and Human Services..........................................................     28,047       28,752       28,807            55  ..............
      NASA...............................................................................     10,574       10,990       11,527           537              5%
      Energy.............................................................................      8,779        8,629        8,528          -101             -1%
      National Science Foundation........................................................      4,160        4,082        4,194           112              3%
      Agriculture........................................................................      2,222        2,415        2,039          -376            -16%
      Homeland Security..................................................................      1,053        1,185        1,467           282             24%
      Commerce...........................................................................      1,137        1,134        1,013          -121            -11%
      Transportation.....................................................................        661          748          808            60              8%
      Veterans Affairs...................................................................        866          784          786             2  ..............
      Interior...........................................................................        627          615          582           -33             -5%
      Environmental Protection Agency....................................................        661          572          569            -3             -1%
      Other..............................................................................      1,089        1,243        1,145           -98             -8%
                                                                                          ------------------------------------------------------------------
        Total............................................................................    125,338      131,571      132,304           733              1%

    Basic Research
      Defense............................................................................      1,358        1,513        1,319          -194            -13%
      Health and Human Services..........................................................     14,780       15,124       15,246           122              1%
      NASA...............................................................................      2,473        2,368        2,199          -169             -7%
      Energy.............................................................................      2,847        2,887        2,762          -125             -4%
      National Science Foundation........................................................      3,524        3,432        3,480            48              1%
      Agriculture........................................................................        829          851          788           -63             -7%
      Homeland Security..................................................................         68           85          112            27             32%
      Commerce...........................................................................         43           58           71            13             22%
      Transportation.....................................................................         20           38           41             3              8%
      Veterans Affairs...................................................................        347          315          315  ............  ..............
      Interior...........................................................................         37           36           30            -6            -17%
      Environmental Protection Agency....................................................        113           66           70             4              6%
      Other..............................................................................        149          155          175            20             13%
                                                                                          ------------------------------------------------------------------
        Subtotal.........................................................................     26,588       26,928       26,608          -320             -1%

    [[Page 67]]

    Applied Research
      Defense............................................................................      4,351        4,851        4,139          -712            -15%
      Health and Human Services..........................................................     13,007       13,274       13,410           136              1%
      NASA...............................................................................      3,006        2,497        3,233           736             29%
      Energy.............................................................................      2,693        2,760        2,709           -51             -2%
      National Science Foundation........................................................        266          279          276            -3             -1%
      Agriculture........................................................................      1,055        1,093          942          -151            -14%
      Homeland Security..................................................................        247          346          399            53             15%
      Commerce...........................................................................        828          825          763           -62             -8%
      Transportation.....................................................................        349          423          494            71             17%
      Veterans Affairs...................................................................        476          430          433             3              1%
      Interior...........................................................................        538          530          495           -35             -7%
      Environmental Protection Agency....................................................        423          365          386            21              6%
      Other..............................................................................        599          562          553            -9             -2%
                                                                                          ------------------------------------------------------------------
        Subtotal.........................................................................     27,838       28,235       28,232            -3  ..............

    Development
      Defense............................................................................     59,701       63,903       65,331         1,428              2%
      Health and Human Services..........................................................         41           54           28           -26            -48%
      NASA...............................................................................      3,189        3,727        3,511          -216             -6%
      Energy.............................................................................      1,992        1,846        1,959           113              6%
      National Science Foundation........................................................  .........  ...........  ...........  ............  ..............
      Agriculture........................................................................        159          157          146           -11             -7%
      Homeland Security..................................................................        481          599          746           147             25%
      Commerce...........................................................................        152          149           90           -59            -40%
      Transportation.....................................................................        279          269          254           -15             -6%
      Veterans Affairs...................................................................         43           39           38            -1             -3%
      Interior...........................................................................         49           46           54             8             17%
      Environmental Protection Agency....................................................        125          141          113           -28            -20%
      Other..............................................................................        324          495          396           -99            -20%
                                                                                          ------------------------------------------------------------------
        Subtotal.........................................................................     66,535       71,425       72,666         1,241              2%

    Facilities and Equipment
      Defense............................................................................         52          155           50          -105            -68%
      Health and Human Services..........................................................        219          300          123          -177            -59%
      NASA...............................................................................      1,906        2,398        2,584           186              8%
      Energy.............................................................................      1,247        1,136        1,098           -38             -3%
      National Science Foundation........................................................        370          371          438            67             18%
      Agriculture........................................................................        179          314          163          -151            -48%
      Homeland Security..................................................................        257          155          210            55             35%
      Commerce...........................................................................        114          102           89           -13            -13%
      Transportation.....................................................................         13           18           19             1  ..............
      Veterans Affairs...................................................................  .........  ...........  ...........  ............             N/A
      Interior...........................................................................          3            3            3  ............  ..............
      Environmental Protection Agency....................................................  .........  ...........  ...........  ............             N/A
      Other..............................................................................         17           31           21           -10            -32%
                                                                                          ------------------------------------------------------------------
        Subtotal.........................................................................      4,377        4,983        4,798          -185             -4%
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    [[Page 68]]

                                    Table 5-3.  FEDERAL SCIENCE AND TECHNOLOGY BUDGET
                                     (Budget authority, dollar amounts in millions)
    ----------------------------------------------------------------------------------------------------------------
                                                                                              Dollar
                                                           2004       2005        2006       Change:       Percent
                                                          Actual    Estimate    Proposed     2005 to       Change:
                                                                                               2006     2005 to 2006
    ----------------------------------------------------------------------------------------------------------------
    By Agency

    National Institutes of Health.....................     27,878     28,444       28,607          163            1%

    NASA..............................................      9,231      9,116        9,493          377            4%
      Science.........................................      5,600      5,527        5,476          -51           -1%
      Aeronautics.....................................      1,057        906          852          -54           -6%
      Exploration Systems.............................      2,574      2,683        3,165          482           18%

    National Science Foundation.......................      5,578      5,473        5,605          132            2%

    Defense...........................................      5,709      6,363        5,458         -905          -14%
      Basic Research..................................      1,358      1,513        1,319         -194          -13%
      Applied Research................................      4,351      4,850        4,139         -711          -15%
    Energy \1\........................................      5,494      5,635        5,357         -278           -5%
      Science Programs................................      3,484      3,600        3,463         -137           -4%
      Energy Supply: Renewables.......................        357        380          354          -26           -7%
      Energy Supply: Electricity Transmission &                81        101           84          -17          -17%
       Distribution...................................
      Energy Supply: Nuclear Energy...................        292        386          390            4            1%
      Energy Conservation \2\.........................        607        596          576          -20           -3%
      Fossil Energy...................................        673        572          491          -81          -14%

    Agriculture.......................................      2,047      2,127        1,922         -205          -10%
      CSREES Research and Education \3\...............        629        670          560         -110          -16%
      Economic Research Service.......................         71         74           81            7            9%
      Agricultural Research Service \4\...............      1,081      1,102          996         -106          -10%
      Forest Service: Forest and Rangeland Research...        266        276          285            9            3%

    Interior (USGS)...................................        938        935          934           -1  ............

    Commerce..........................................        965        992          858         -134          -14%
      NOAA: Oceanic & Atmospheric Research............        393        404          361          -43          -11%
      NIST: Intramural Research and Facilities........        401        451          485           34            8%
      NIST: Advanced Technology Program...............        171        137  ...........         -137         -100%

    Environmental Protection Agency \5\...............        826        780          792           12            2%

    Veterans Affairs \6\..............................        866        784          786            2  ............

    Transportation....................................        683        694          673          -21           -3%
      Highway research \7\............................        564        566          543          -23           -4%
      Federal Aviation Administration: Research,              119        131          130           -1           -1%
       Engineering, and Development...................

    Education.........................................        350        355          345          -10           -3%
      Special Education Research and Innovation.......         78         83           73          -10          -12%
      National Institute on Disability and                    107        108          108  ...........  ............
       Rehabilitation Research........................
      Research, Development, and Dissemination \8\....        165        164          164  ...........  ............
                                                       -------------------------------------------------------------
      Total...........................................     60,565     61,696       60,819         -877           -1%
    ----------------------------------------------------------------------------------------------------------------
     \1\ Data do not reflect actual transfers to Science Programs from other Department of Energy R&D programs to
      support the Small Business Innovation Research and the Small Business Technology Transfer programs.

    \2\ Excludes weatherization and state grant programs.

     \3\ Includes receipts and interest for Native American Endowment: $11 million in 2004; $14 million in 2005; $15
      million in 2006.

     \4\ Excludes buildings and facilities.

     \5\ Includes the medical care and prosthetic research appropriation and VA medical care support transfer to
      research.

     \6\ Science and Technology, plus Superfund transfer.

     \7\ Includes research and development funding for the Federal Highway Administration, the Federal Motor Carrier
      Safety Administration, and the National Highway Traffic Safety Administration.

     \8\ Does not include funding for Regional Educational Labs.

    [[Page 69]]

                                                  Table 5-4.  AGENCY DETAIL OF SELECTED INTERAGENCY R&D EFFORTS
                                                         (Budget authority, dollar amounts in millions)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                   Dollar         Percent
                                                                                              2004        2005         2006        Change:     Change:  2005
                                                                                             Actual     Estimate     Proposed   2005 to 2006      to 2006
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Networking and Information Technology R&D
      Defense \1\........................................................................        241          277          294            17              6%
      National Science Foundation........................................................        773          795          803             8              1%
      Health and Human Services \2\......................................................        542          573          551           -22             -4%
      Energy.............................................................................        343          383          355           -28             -7%
      Commerce...........................................................................         47           58           61             3              5%
      National Aeronautics and Space Administration......................................        258          192           57          -135            -70%
      Environmental Protection Agency....................................................          2            4            6             2             50%
                                                                                          ------------------------------------------------------------------
        Total............................................................................      2,206        2,282        2,127          -155             -7%

    National Nanotechnology Initiative
      National Science Foundation........................................................        256          338          344             6              2%
      Defense............................................................................        291          257          230           -27            -11%
      Energy.............................................................................        202          210          207            -3             -1%
      Health and Human Services \3\......................................................        108          145          147             2              1%
      Commerce (NIST)....................................................................         77           75           75  ............  ..............
      National Aeronautics and Space Administration......................................         47           45           35           -10            -22%
      Agriculture........................................................................          2            3            8             5            167%
      Environmental Protection Agency....................................................          5            5            5  ............  ..............
      Justice............................................................................          2            2            2  ............  ..............
      Homeland Security..................................................................          1            1            1  ............  ..............
                                                                                          ------------------------------------------------------------------
        Total............................................................................        991        1,081        1,054           -27             -2%

    Climate Change Science Program
      National Aeronautics and Space Administration......................................      1,321        1,264        1,162          -102             -8%
      National Science Foundation........................................................        215          198          197            -1             -1%
      Commerce (NOAA)....................................................................        116          124          181            57             46%
      Energy.............................................................................        133          129          132             3              2%
      Agriculture........................................................................         70           73           88            15             21%
      National Institutes of Health......................................................         61           65           65  ............  ..............
      Interior (USGS)....................................................................         28           24           24  ............  ..............
      Environmental Protection Agency....................................................         22           20           21             1              5%
      Smithsonian........................................................................          6            6            6  ............  ..............
      U.S. Agency for International Development..........................................          6            6            6  ............  ..............
      Transportation.....................................................................          1            3            3  ............             N/A
      State..............................................................................          1            1            1  ............  ..............
                                                                                          ------------------------------------------------------------------
          Total..........................................................................      1,975        1,913        1,886           -27             -1%
                                                                                          ------------------------------------------------------------------
          Subtotal, CCRI (included in CCSP total)........................................        168          221          183           -38            -17%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ In 2006, DOD will reassess which of its IT R&D programs are appropriate to count as part of the NITRD program, and any changes will be reported in
      subsequent NITRD publications.
    \2\ Includes funds from offsetting collections for the Agency for Healthcare Research and Quality.
    \3\ Includes funds from both the National Institutes of Health and National Institute of Occupational Safety and Health.

    [[Page 70]]

                       V.  ALLOCATION OF RESEARCH FUNDING

      Federal funds appropriated to Executive Branch agencies may be used in
    different ways, ranging from grants awarded to university researchers to
    supporting research at Federal laboratories. The Administration strongly
    supports the competitive, merit review process for funding research in
    most cases. However, there are appropriate roles for other modes of
    allocating research funding in some circumstances, such as funding
    research at specific facilities that have unique capabilities. In such
    cases, however, the proposed allocation should be reviewed by scientific
    or technological experts, as well as mangement and program experts.
      In order to better understand and characterize the methods agencies
    use to allocate their research funding, agencies reported how research
    funds are allocated by the following five categories:

      Research performed at congressional direction consists of intramural
    and extramural research programs where funded activities are awarded to
    a single performer or collection of performers with limited or no
    competitive selection or with competitive selection but outside of the
    agency's primary mission, based on direction from the Congress in law,
    in report language, or by other direction.
      Inherently unique research is intramural and extramural research
    programs where funded activities are awarded to a single performer or
    team of performers without competitive selection. The award may be based
    on the provision of unique capabilities, concern for timeliness, or
    prior record of performance (e.g., facility operations support for a
    unique facility, such as an electron-positron linear collider; research
    grants for rapid-response studies to address an emergency).
      Merit-reviewed research with limited competitive selection is
    intramural and extramural research programs where funded activities are
    competitively awarded from a pool of qualified applicants that are
    limited to organizations that were created to largely serve Federal
    missions and continue to receive most of their annual research revenue
    from Federal sources. The limited competition may be for reasons of
    stewardship, agency mission constraints, or retention of unique
    technical capabilities (e.g., funding set aside for researchers at
    laboratories or centers of DOD, NASA, EPA, NOAA, and NIH; Federally
    Funded Research and Development Centers; formula funds for USDA).
      Merit-reviewed research with competitive selection and internal
    (program) evaluation is intramural and extramural research programs
    where funded activities are competitively awarded following review for
    scientific or technical merit. The review is conducted by the program
    manager or other qualified individuals from within the agency program,
    without additional independent evaluation (e.g., merit-reviewed research
    at DOD).
      Merit-reviewed research with competitive selection and external (peer)
    evaluation is intramural and extramural research programs where funded
    activities are competitively awarded following review by a set of
    external scientific or technical reviewers (often called peers) for
    merit. The review is conducted by appropriately qualified scientists,
    engineers, or other technically-qualified individuals who are apart from
    the people or groups making the award decisions, and serves to inform
    the program manager or other qualified individual who makes the award
    (e.g., NSF's single-investigator research; NASA's research and analysis
    funds).
      Table 5-5 lists how Federal R&D agencies report allocating research
    funding among these categories.

    [[Page 71]]

                                                Table 5-5.  ALLOCATION OF FEDERAL RESEARCH FUNDING, 2004 AND 2005
                                                                  (Percent of Agency Research)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Research         Inherently      Merit Reviewed    Merit Reviewed    Merit Reviewed
                                                                      Performed at     Unique Research    Research with     Research with     Research with
                                                                      Congressional  ------------------      Limited         Competitive       Competitive
                                                                        Direction                          Competitive      Selection and     Selection and
                                                                   ------------------                       Selection         Internal          External
                                                                                        2004     2005  ------------------    Evaluation        Evaluation
                                                                      2004     2005                                      -----------------------------------
                                                                                                          2004     2005     2004     2005     2004     2005
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    By Agency

      Health & Human Services.....................................  .......       1%       1%       1%      12%      12%  .......  .......      86%      86%

      Defense.....................................................      17%      12%       9%       8%       6%       6%      65%      72%       3%       3%

      Energy......................................................       5%       4%      23%      23%      51%      52%       4%       4%      18%      17%

      NASA........................................................       4%       9%       1%       2%      10%      11%      35%      26%      51%      52%

      National Science Foundation.................................  .......  .......  .......  .......       6%       6%      21%      21%      73%      73%

      Agriculture.................................................      17%      17%      55%      52%      14%      14%  .......  .......      13%      17%

      Commerce....................................................       6%       6%      41%      44%      15%      14%      18%      18%      22%      18%

      Veterans Affairs............................................  .......  .......  .......  .......  .......  .......  .......  .......     100%     100%

      Interior....................................................       7%       7%      30%      30%      33%      33%      27%      27%       2%       2%

      Transportation..............................................      13%      15%      17%      23%       1%       1%      69%      61%  .......  .......

      Homeland Security...........................................  .......      24%  .......  .......      30%      23%      48%      36%      22%      16%

      Environmental Protection Agency.............................       8%  .......       3%       7%      44%      50%      12%      15%      32%      28%
                                                                   -----------------------------------------------------------------------------------------
        Research Funding (dollars in millions)....................    2,312    2,427    3,965    4,101    8,174    8,414    7,587    7,888   32,398   32,549
        Percentage of Federal Research............................       4%       4%       7%       7%      15%      15%      14%      14%      60%      59%
    --------------------------------------------------------------------------------------------------------------------------------------------------------