[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%
--------------------------------------------------------------------------------------------------------------------------------------------------------