[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]








                   OVERVIEW OF THE NATIONAL INSTITUTE
                      OF STANDARDS AND TECHNOLOGY
                      BUDGET FOR FISCAL YEAR 2013

=======================================================================

                                HEARING

                               BEFORE THE

               SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                         TUESDAY, MARCH 6, 2012

                               __________

                           Serial No. 112-66

                               __________

 Printed for the use of the Committee on Science, Space, and Technology






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              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                    HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR.,         EDDIE BERNICE JOHNSON, Texas
    Wisconsin                        JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas                LYNN C. WOOLSEY, California
DANA ROHRABACHER, California         ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland         BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma             DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois               DONNA F. EDWARDS, Maryland
W. TODD AKIN, Missouri               MARCIA L. FUDGE, Ohio
RANDY NEUGEBAUER, Texas              BEN R. LUJAN, New Mexico
MICHAEL T. McCAUL, Texas             PAUL D. TONKO, New York
PAUL C. BROUN, Georgia               JERRY McNERNEY, California
SANDY ADAMS, Florida                 JOHN P. SARBANES, Maryland
BENJAMIN QUAYLE, Arizona             TERRI A. SEWELL, Alabama
CHARLES J. ``CHUCK'' FLEISCHMANN,    FREDERICA S. WILSON, Florida
    Tennessee                        HANSEN CLARKE, Michigan
E. SCOTT RIGELL, Virginia            VACANCY
STEVEN M. PALAZZO, Mississippi
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
                                 ------                                

               Subcommittee on Technology and Innovation

                  HON. BENJAMIN QUAYLE, Arizona, Chair
LAMAR S. SMITH, Texas
JUDY BIGGERT, Illinois               DONNA F. EDWARDS, Maryland
RANDY NEUGEBAUER, Texas              JOHN P. SARBANES, Maryland
MICHAEL T. McCAUL, Texas             FREDERICA S. WILSON, Florida
CHARLES J. ``CHUCK'' FLEISCHMANN,    DANIEL LIPINSKI, Illinois
    Tennessee                        BEN R. LUJAN, New Mexico
E. SCOTT RIGELL, Virginia            VACANCY
RANDY HULTGREN, Illinois                 
CHIP CRAVAACK, Minnesota                 
RALPH M. HALL, Texas                     

                                     EDDIE BERNICE JOHNSON, Texas














                            C O N T E N T S

                         Tuesday, March 6, 2012

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Benjamin Quayle, Chairman, 
  Subcommittee on Technology and Innovation, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..    10
    Written Statement............................................    11

Statement by Representative Donna Edwards, Ranking Minority 
  Member, Subcommittee on Technology and Innovation, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..    12
    Written Statement............................................    13

                               Witnesses:

Dr. Patrick Gallagher, Under Secretary of Commerce for Standards 
  and Technology and Director, National Institute of Standards 
  and Technology
    Oral Statement...............................................    15
    Written Statement............................................    17

Discussion
  ...............................................................    33

             Appendix I: Answers to Post-Hearing Questions

Dr. Patrick Gallagher, Under Secretary of Commerce for Standards 
  and Technology and Director, National Institute of Standards 
  and Technology.................................................    40

            Appendix II: Additional Material for the Record

Submitted by Dr. Patrick Gallagher, Under Secretary of Commerce 
  for Standards and Technology and Director, National Institute 
  of Standards and Technology....................................    50

 
                   OVERVIEW OF THE NATIONAL INSTITUTE
                      OF STANDARDS AND TECHNOLOGY
                      BUDGET FOR FISCAL YEAR 2013

                              ----------                              


                         TUESDAY, MARCH 6, 2012

                  House of Representatives,
         Subcommittee on Technology and Innovation,
               Committee on Science, Space, and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 11:00 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Benjamin 
Quayle [Chairman of the Subcommittee] presiding.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Chairman Quayle. The Subcommittee on Technology and 
Innovation will come to order.
    Good morning. Welcome to today's hearing entitled ``An 
Overview of the National Institute of Standards and Technology 
Budget for Fiscal Year 2013.''
    In front of you are packets containing the written 
testimony, biographies and Truth in Testimony disclosures for 
today's witness. I now recognize myself for five minutes for an 
opening statement.
    Today we will be discussing the fiscal year 2013 budget 
request for the National Institute of Standards and Technology 
and gathering details about NIST's priorities. I would like to 
thank Dr. Gallagher for appearing before us today. NIST has 
been well served by your leadership.
    Before getting into the specifics of NIST's request, I 
would like to briefly discuss the President's 2013 budget 
proposal. Unfortunately, the budget submitted by the 
Administration a few weeks ago continues to promote the same 
failed policies that have made our economic situation worse. 
The President's budget includes the most government spending in 
history, the biggest tax increase in American history, and the 
biggest debt in history. This proposal increases overall 
spending $200 billion, to a total of $3.8 trillion, nearly a 
quarter of our gross domestic product. The budget will increase 
taxes on American families and job creators by $1.9 trillion. 
While paying lip service to the need to cut debt and deficits, 
under the President's framework, our gross national debt will 
increase from $15 trillion today to approximately $26 trillion 
ten years from now. The Administration has failed to rein in 
spending and has failed to lay out a credible plan for bringing 
the deficit and debt under control. This is unsustainable and 
irresponsible.
    Today, we examine one portion of that budget proposal, the 
President's fiscal year 2013 budget request for NIST. While 
NIST is a smaller agency, this request does not exist within a 
vacuum and must be weighed in the context of our fiscal 
situation. NIST is a non-regulatory laboratory of the federal 
government tasked with making contributions to our Nation's 
innovation and industrial competitiveness by advancing 
measurement science, standards and technology. NIST works 
closely alongside industry to make sure their activities 
improve the quality of life of Americans and the economic 
security of our Nation.
    Although we may not be aware of NIST's impact in our lives, 
NIST research advances a variety of national priorities and 
challenges related to advanced manufacturing and materials, 
nanotechnology, cybersecurity, health information technology, 
advanced communications networks, and disaster resilience.
    The fiscal year 2013 budget request for NIST totals $857 
million, an increase of $106.2 million, or 14.1 percent, from 
the fiscal year 2012 enacted level. The Committee on Science, 
Space, and Technology has a long, bipartisan record of support 
for NIST and its contributions. Given the value of NIST 
research to our Nation's competitiveness, we are strongly 
supportive of NIST's scientific and technical research and 
services. We also recognize the work of NIST's industrial 
technology services. However, I believe we need to do a better 
job of prioritizing our investments, and a 14.1 percent budget 
increase is simply unrealistic in our current fiscal 
environment.
    While we can all agree that the research NIST conducts is 
important for our economy, we simply cannot afford to continue 
spending at these rates, given our current fiscal reality. I 
have every reason to believe that NIST will continue to conduct 
innovative research while seeking ways to improve the 
efficiency of its programs so that this research is undertaken 
in a fiscally responsible manner.
    I am appreciative of the opportunity to learn more about 
how fiscal year 2013 funds will be prioritized by NIST, and I 
thank our witness, Dr. Gallagher for his time, today.
    [The prepared statement of Mr. Quayle follows:]
               Prepared Statement of Chairman Ben Quayle,
               Subcommittee on Technology and Innovation,
      Committee on Science, Space, and Technology, U.S. House of 
                            Representatives
    Good Morning. I would like to welcome everyone to today's hearing. 
We will be discussing the fiscal year 2013 budget request for the 
National Institute of Standards and Technology (NIST), and gathering 
details about NIST's priorities. I would like to thank Dr. Gallagher 
for appearing before us today. NIST has been well served by your 
leadership.
    Before getting into the specifics of NIST's request, I would like 
to briefly discuss the President's 2013 budget proposal. Unfortunately, 
the budget submitted by the Administration a few weeks ago continues to 
promote the same failed policies that have made our economic situation 
worse. The President's budget includes the most government spending in 
history, the biggest tax increase in American history, and the biggest 
debt in history.
    This proposal increases overall spending $200 billion, to a total 
of $3.8 trillion--nearly a quarter of our gross domestic product (23.3 
percent). The budget will increase taxes on American families and job 
creators by $1.9 trillion. While paying lip service to the need to cut 
debt and deficits, under the President's framework, our gross national 
debt will increase from $15 trillion today to approximately $26 
trillion ten years from now. The Administration has failed to rein in 
spending and has failed to lay out a credible plan for bringing the 
deficit and debt under control. This is unsustainable and 
irresponsible.
    Today, we examine one portion of that budget proposal, the 
President's FY 2013 budget request for NIST. While NIST is a smaller 
agency, this request does not exist within a vacuum and must be weighed 
in the context of our fiscal situation. NIST is a non-regulatory 
laboratory of the federal government tasked with making contributions 
to our Nation's innovation and industrial competitiveness by advancing 
measurement science, standards, and technology. NIST works closely 
alongside industry to make sure their activities improve the quality of 
life of Americans and the economic security of our Nation.
    Although we may not be aware of NIST's impact on our lives, NIST 
research advances a variety of national priorities and challenges 
related to advanced manufacturing and materials, nanotechnology, cyber 
security, health information technology, advanced communications 
networks, and disaster resilience.
    The fiscal year 2013 budget request for NIST totals $857 million, 
an increase of $106.2 million or 14.1 percent from the FY 2012 enacted 
level. The Committee on Science, Space, and Technology has a long, 
bipartisan record of support for NIST and its contributions. Given the 
value of NIST research to our nation's competitiveness, we are strongly 
supportive of NIST's Scientific and Technical Research and Services. We 
also recognize the work of NIST's Industrial Technology Services. 
However, I believe we need to do a better job of prioritizing our 
investments, and a 14.1 percent budget increase is simply unrealistic 
in our current fiscal environment.
    While we can all agree that the research NIST conducts is important 
for our economy, we simply cannot afford to continue spending at these 
rates, given our current fiscal reality. I have every reason to believe 
that NIST will continue to conduct innovative research while seeking 
ways to improve the efficiency of its programs so that this research is 
undertaken in a fiscally responsible manner. I am appreciative of the 
opportunity to learn more about how fiscal year 2013 funds will be 
prioritized by NIST, and I thank our witness, Dr. Gallagher for his 
time, today.

    Chairman Quayle. I now recognize the gentlelady from 
Maryland, the Ranking Member, Ms. Edwards, for her opening 
statement.
    Ms. Edwards. Thank you, Chairman Quayle, and thank you very 
much for holding today's hearing to examine the 
Administration's fiscal year 2013 budget request for the 
National Institute of Standards and Technology, and I want to 
thank Dr. Gallagher also for appearing before us this morning 
and for your leadership at NIST. And while it would be 
interesting to hold a hearing about the overall budget 
priorities in the Administration's budget, our task today is 
really specifically with respect to NIST and putting that into 
a context in which we examine where we want to be in terms of 
our future in manufacturing and research and development and 
NIST's role in that. And so it is that framework from which I 
will be asking questions today because I am sure Dr. Gallagher 
doesn't have expertise on the larger federal budget.
    And although NIST is a relatively small agency, it is an 
extremely important player in federal efforts to spur 
innovation and economic prosperity in the country, and for more 
than 100 years, NIST has supported the competitiveness of U.S. 
industry by advancing measurement science, standards and 
technology. NIST's broad and deep technical expertise, as well 
as its ability to serve as a bridge to U.S. businesses, is 
really unparalleled.
    And I am pleased that the President's fiscal year 2013 
budget request draws on the strengths of NIST and gives the 
agency a prominent role in the Administration's strategy to 
revitalize American manufacturing, and I think there is no one 
in this country who couldn't agree that we have to revitalize 
American manufacturing in order to be competitive for the 21st 
century, and NIST's role in that is really paramount.
    Since 2000, the United States has lost over 650,000 high-
tech manufacturing jobs. It is really shocking. Our trade 
deficit in advanced technology products is growing and China is 
now the world's biggest exporter of high-technology goods. The 
truth is that our position as the global leader in innovation 
and technology is being threatened as developing nations build 
up their capabilities to become not only the technology 
assembly line, but also the creator of new and innovative 
technologies, that is, linking manufacturing with their 
domestic production capacity.
    The Administration's budget proposal includes a number of 
initiatives that can reverse these disturbing manufacturing 
trends. For example, the establishment of industry-led public-
private consortia is exactly what ``the doctor ordered'' to 
address the pre-competitive challenges faced by U.S. companies. 
The Advanced Manufacturing Technology Consortia, or AMTech, 
program included in the budget request will tackle technical 
issues that are prohibiting the growth of advanced 
manufacturing here at home, and will provide a foundation for 
new and existing companies to flourish, producing high-quality, 
well-paying jobs which are key to the growth of our economy and 
the middle class.
    I am interested in learning more today about the 
Administration's proposal to launch a National Network for 
Manufacturing Innovation. From what I gather, this proposal is 
based in part on a successful model, the Fraunhofer 
Institutes--we will have a chance to talk about later--
implemented in Germany with the support of its government. This 
is certainly a promising model that I believe we should fully 
explore in this country and I am eager to hear whether the 
network is in fact intended to spur these sorts of public-
private research partnerships. Again, another example of the 
international community investing in advanced manufacturing and 
the United States taking a back seat. We hope to change that 
today and hope to do that with the President's budget.
    And so whether you agree with it or not, the truth is, most 
of our competitors are putting significant and targeted 
resources towards helping businesses, small and large, 
accelerate commercialization of innovative technologies. The 
current budget request finalizes the termination of the 
Technology Innovation Program, or TIP. And it marks the first 
time in years that NIST--in 25 years in fact that NIST lacks a 
mechanism to provide competitive grants to U.S. companies to 
accelerate the development of promising technologies that hold 
the potential for significant commercial payoff and widespread 
benefits for the United States. I am troubled by the void that 
will be left by the termination of TIP and am interested in 
exploring with the Chairman and Under Secretary Gallagher the 
possibility of establishing a new program, or even 
reconstituting a previous one, at NIST for this important 
purpose.
    I am also interested in learning more today about how the 
current budget request will advance NIST's efforts in forensic 
science. As you know, the National Research Council released a 
report in 2009 that highlighted the fragmented nature of 
forensic science in the United States, and expressed concern 
over the lack of a rigorous scientific base for the field. The 
NRC also emphasized the role NIST can and should play in 
addressing the identified weaknesses, and I applaud the 
strategic initiative outlined in NIST's budget proposal and 
look forward to hearing how this initiative will strengthen 
forensic science.
    We could go on, but Mr. Chairman, I want to thank you again 
for holding the hearing and I look forward to working with you 
and our colleagues to ensure that NIST has the resources it 
needs to fulfill its critical role in promoting innovation, 
commercialization and business growth, and with that, I yield 
the balance of my time.
    [The prepared statement of Ms. Edwards follows:]

          Prepared Statement of Ranking Member Donna Edwards,
               Subcommittee on Technology and Innovation,
      Committee on Science, Space, and Technology, U.S. House of 
                            Representatives
    Thank you, Chairman Quayle. And thank you for holding today's 
hearing to examine the Administration's fiscal year 2013 budget request 
for the National Institute of Standards and Technology. I'd like to 
thank Dr. Gallagher for appearing before us this morning and for his 
leadership at NIST.
    Although NIST is a relatively small agency, it is an extremely 
important player in federal efforts to spur innovation and economic 
prosperity in this country. For more than 100 years, NIST has supported 
the competitiveness of U.S. industry by advancing measurement science, 
standards, and technology. NIST's broad and deep technical expertise, 
as well as its ability to serve as a bridge to U.S. businesses, is 
unparalleled.
    I am pleased that the President's fiscal year 2013 budget request 
draws on the strengths of NIST and gives the agency a prominent role in 
the Administration's strategy to revitalize American manufacturing.
    Since 2000, the U.S. has lost over 650,000 high-tech manufacturing 
jobs. Our trade deficit in advanced technology products is growing and 
China is now the world's biggest exporter of high-technology goods. The 
truth is that our position as the global leader in innovation and 
technology is being threatened as developing countries build up their 
capabilities to become not only the technology assembly line, but also 
the creator of new and innovative technologies.
    The Administration's budget proposal includes a number of 
initiatives that can reverse these disturbing manufacturing trends. For 
instance, the establishment of industry-led public-private consortia is 
exactly ``what the doctor ordered'' to address precompetitive 
challenges faced by U.S. companies. The Advanced Manufacturing 
Technology Consortia, or AMTech, program included in the budget request 
will tackle technical issues that are prohibiting the growth of 
advanced manufacturing here at home, and will provide a foundation for 
new and existing companies to flourish--producing high-quality, well 
paying jobs which are key to the growth of our economy and the middle 
class.
    I'm interested in learning more today about the Administration's 
proposal to launch a National Network for Manufacturing Innovation.
    From what I gather, this proposal is based in part on a successful 
model--the Fraunhofer Institutes--implemented in Germany with the 
support of its government. This is certainly a promising model that I 
believe we should fully explore in this country and I'm eager to hear 
whether the Network is in fact intended to spur these sorts of public-
private research partnerships.
    Whether you agree with it or not, the truth is most of our 
competitors are putting significant and targeted resources towards 
helping businesses--small and large--accelerate the commercialization 
of innovative technologies. The current budget request finalizes the 
termination of the Technology Innovation Program, or TIP. And it marks 
the first time in 25 years that NIST lacks a mechanism to provide 
competitive grants to U.S. companies to accelerate the development of 
promising technologies that hold the potential for significant 
commercial payoff and widespread benefits for the U.S. I'm troubled by 
the void that will be left by the termination of TIP and am interested 
in exploring with the Chairman and Under Secretary Gallagher the 
possibility of establishing a new program, or even reconstituting a 
previous one, at NIST for this important purpose.
    I'm also interested in learning more today about how the current 
budget request will advance NIST's efforts in forensic science. As you 
know, the National Research Council released a report in 2009 that 
highlighted the fragmented nature of forensic science in the U.S., and 
expressed concern over the lack of a rigorous scientific base for the 
field. The NRC also emphasized the role NIST can and should play in 
addressing the identified weaknesses. I applaud the strategic 
initiative outlined in NIST's budget proposal and look forward to 
hearing how this initiative will strengthen forensic science in the 
U.S.
    I am equally interested in NIST's cybersecurity activities and am 
interested in hearing more about how the FY 2013 request will help 
ensure that NIST continues to play an important role in the Federal 
Government's cybersecurity efforts, particularly as it relates to the 
development of cybersecurity standards and guidelines for Federal 
agencies and U.S. industry.
    Mr. Chairman, thank you again for holding this hearing and I look 
forward to working with you and our colleagues to ensure that NIST has 
the resources it needs to fulfill its critical role in promoting 
innovation, commercialization, and business growth. I yield back the 
balance of my time.

    Chairman Quayle. Thank you, Ms. Edwards.
    If there are members who wish to submit additional opening 
statements, your statements will be added to the record at this 
point.
    At this time I would like to introduce our witness. Our 
witness is Dr. Patrick Gallagher, the Under Secretary of 
Commerce for Standards and Technology and the Director of the 
National Institute of Standards and Technology. Thanks again to 
our witness for being here this morning.
    As our witness should know, spoken testimony is limited to 
five minutes. After presenting your spoken testimony, members 
of the Committee will have five minutes each to ask questions. 
I now recognize our witness, Dr. Patrick Gallagher, for five 
minutes.

        STATEMENT OF PATRICK GALLAGHER, UNDER SECRETARY

           OF COMMERCE FOR STANDARDS AND TECHNOLOGY,

  AND DIRECTOR, NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY

    Dr. Gallagher. Thank you very much, Mr. Chairman and 
Ranking Member Edwards. I want to thank you both for your kind 
words and recognition of my leadership and the work of NIST. I 
want to recognize and thank all the members of the Subcommittee 
for your support to NIST and for the opportunity to testify 
today about the Administration's fiscal year 2013 request for 
NIST.
    This year's request can be summarized in two words: 
advanced manufacturing. The President's request reflects his 
strong commitment to accelerate the pace of innovation and to 
better enable the transfer of technologies and products to help 
American manufacturers to, as Secretary Bryson put it, make it 
here and sell it everywhere.
    NIST is an agency whose mission, rooted in the Constitution 
is specifically charged with supporting U.S. industry, 
especially the manufacturing sector, by advancing measurement 
science, supporting standards and testing, and accelerating 
commercialization of new technologies.
    This year's request builds on our past successes and on 
your past support of our mission. The overall discretionary 
request for fiscal 2013 is $857 million. This is an increase of 
$106 from the fiscal year 2012 enacted level. And to just focus 
on the significance of manufacturing to our request, over $156 
million in total is dedicated to areas specifically part of 
advanced manufacturing-related programs and activities.
    NIST's discretionary budget contains three accounts, and 
let me briefly summarize them. The request for our laboratory 
programs, which is the largest program at NIST, is $648 
million. This is an increase of $81 million. Over half of that 
proposed increased is focused specifically on advanced 
manufacturing. The remaining increase includes targeted areas 
of research in advanced communications, forensics, disaster 
resilience, and the National Strategy for Trusted Identifies in 
Cyberspace, or NSTIC, and for the establishment of Centers of 
Excellence to accelerate innovation through knowledge transfer 
and collaboration.
    The request for the Industries Technology Services account 
is $149 million. This is an increase of $20 million over fiscal 
year 2012. Within that account is a request for $128 million 
for the Hollings Manufacturing Extension Partnership Program 
and $21 million for the Advanced Manufacturing Technology 
Consortia, or AMTech. AMTech will support R&D in advanced 
manufacturing and strengthen long-term U.S. leadership in 
critical and emerging technologies.
    Our Construction of Research Facilities request is $60 
million. This is an increase of nearly $5 million. The CRF 
account funds construction and facility maintenance and 
operations activities on both of our campuses. This request 
includes funds for the renovation of the 60-year-old Building 1 
in Boulder, Colorado, which is completely inadequate and cannot 
support our scientific mission at this time.
    The request also proposes two mandatory accounts. The first 
one would provide $300 million to address and support critical 
barriers to innovation and accelerate the delivery of new 
products and services for public safety communication. This 
program was included in the Middle Class Tax Relief and Job 
Creation Act of 2011, which was recently signed into law.
    The second account would catalyze a National Network for 
Manufacturing Innovation. The President views this one-time 
investment of $1 billion as crucial to revitalizing U.S. 
manufacturing. This program would be in direct collaboration 
between NIST, the National Science Foundation, the Department 
of Defense and the Department of Energy, and we look forward to 
working with this Committee on the necessary legislation to 
establish this program.
    Mr. Chairman, NIST's mission is to work with industry to 
benefit the competitiveness of American industry, and it could 
not be more relevant to today's challenges. This concludes my 
testimony, and I am looking forward to any questions you may 
have.
    [The prepared statement of Dr. Gallagher follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman Quayle. Thank you, Dr. Gallagher.
    Now I just want to remind members that the Committee rules 
limit questioning to five minutes. The Chair will at this point 
open the round of questions, and I recognize myself for five 
minutes.
    I first want to--you know, at the end of your testimony, 
you said how NIST works well with industry, and you absolutely 
do and it is a great way to show how the regulatory body and 
also industry can actually work together to come up with the 
type of standards that will work for everybody, but I want to 
go to one of the mandatory programs that you were talking 
about, so the request proposed the creation of a mandatory $1 
billion account to establish a multi-agency National Network of 
Manufacturing Innovation, aimed at bridging the gap between lab 
and the market, and I am a little skeptical of the proposal 
just because if I understand, NIST would be charged with 
leading a program with a funding level that is greater than its 
total annual budget. We haven't received any justification 
describing how this account may differ from the MEP or from 
AMTech program that the Administration is proposing. So could 
you please describe the reason for this new account and also 
what role NIST will play in managing it?
    Dr. Gallagher. Thank you. The details of the National 
Network of Manufacturing Institutes has not been really 
announced except for this sort of framework that was included 
in the request. So I actually don't have a lot of detail at 
this time to share with you, and I understand that it is going 
to be announced quite shortly.
    What I can tell you is that the program is specifically 
looking at stimulating private sector R&D, that advanced 
manufacturing, in particular, depends on a robust transfer of 
knowledge from research and development into industry, and the 
President laid out a goal when he first came into office that 
we had to increase the R&D intensity in the United States. 
Well, the majority of R&D in the United States is private 
sector, and so the focus here is really to create a venue where 
companies can pool resources and invest in that transfer of R&D 
to industry.
    With regards to the capacity within NIST, you are quite 
correct, it would be a sizable account. It is one-time funding 
so it would be presumably available over some period of time so 
on an annual basis, this probably is not exceeding what we 
would have managed in the past. It certainly would not exceed 
what we have dealt with successfully under the Recovery Act. So 
I think we are comfortable there, and I think also the fact 
that all of the science agencies are directly involved--
Defense, Energy. NSF also brings a lot of capacity to the 
table.
    Chairman Quayle. Do you know or can you provide any insight 
into how the $1 billion number was chosen? I mean, we haven't 
gotten any of the details and I look forward to seeing what the 
details are, but when you have a mandatory program that is 
outside of the Congressional appropriation process, immediately 
you kind of start to raise some alarm bells just because the 
mandatory spending that we are incurring year over year, 
obviously this is a one-time expenditure but those things are 
troubling to me, especially without any of the details coming 
out of the Administration.
    Dr. Gallagher. And it is hard for me to answer your 
question without any of those same details out there, and so I 
think we would want to work closely with you as soon as those 
details are out. It would clearly require legislation to put 
into place, and I think the justification for the size is 
probably related to the intensity of effort, and again, I hope 
that is part of the announcements.
    Chairman Quayle. I was just also--is there any duplication 
amongst them--we are talking about manufacturer programs. Is 
there any duplication amongst NIST extramural programs--the MEP 
and the proposed AMTech? I just want to make sure that we 
aren't overlapping in any areas that we don't need to and 
making things as efficient as possible.
    Dr. Gallagher. So as you can imagine, looking at program 
overlap and program efficiency, particularly across agencies, 
has been a high priority so there has been a lot of effort at 
the interagency level making sure these things are not in 
duplication. Certainly in the context of NIST, this has really 
no resemblance at all to MEP. MEP is a public-private 
partnership, that is true. It also includes partnerships 
directly with the states. But the purpose of that program is to 
support small and mid-sized businesses, existing manufacturers, 
to make them more competitive, accelerate their adoption of new 
technologies. The innovation network is really about supporting 
advanced R&D efforts by industry in a collaborative way.
    Chairman Quayle. Okay. Thank you very much.
    I will now recognize the Ranking Member, Ms. Edwards, for 
five minutes.
    Ms. Edwards. Thank you very much, Mr. Chairman, and thank 
you, Dr. Gallagher, for your testimony.
    I am curious as to where you perceive the gaps that this 
budget attempts to fill with respect to pushing forward on the 
President's agenda for more advanced manufacturing and 
developing that capacity that is coupled with an R&D capacity, 
and I referred in my opening statement to the Fraunhofer 
Institutes. I wonder if you could discuss in this budget the 
relationship between what you see, for example, in Germany and 
other countries doing and where we are trying to get and how 
that what is accomplished in the budget.
    Dr. Gallagher. So I think that as soon as you look at 
advanced manufacturing, it is really the intersection between 
our capacity to innovate new technologies and our capacity to 
produce and sell them. That is really the nexus we are talking 
about. So the role of NIST in that space, we don't produce 
anything so our real role is to work with industry to support 
what is really the advancement of the measurement capacity that 
enables those new technologies to move from a laboratory 
environment into the market--that is quite a transformation--
and in some cases, the standards infrastructure or the 
standards framework that drives both those technologies and the 
markets that they go into. So the gaps that we are always 
looking at are the ones where there is an emerging technology 
arena, where the technology space is quite new and we want to 
advantage the producers in the United States to exploit those 
new technologies. So most of the increases that you see in our 
2013 request are in emerging technology areas, looking at 
nanotechnology and biotechnology, looking at advanced smart 
manufacturing infrastructure that is needed.
    With the context to Fraunhofers, I don't want to speculate 
on how much the Fraunhofers specifically have been a model for 
what has been proposed but there has been a lot of interest in 
looking at the German model of partnership because what is 
intriguing about the institutes is that they combine very 
efficiently, apparently, a federal government, state 
government, and industry partnership, and I think that is 
probably intrinsic to almost anything we do in manufacturing 
because you are coupling this public sector-funded R&D 
enterprise with a robust private sector-funded and carried out 
commercial activity, and making sure we don't have unnecessary 
barriers there is really the heart of the matter.
    Ms. Edwards. Thank you. And I want to go for a minute to 
the TIP program. The budget for fiscal year 2013 doesn't 
include any funding for new projects within the Technology 
Innovation Program, which is aimed at speeding the development 
of industry-led high-risk transformative research. This 
decision comes on the heels of the previous budget, fiscal year 
2012 appropriations bill, rather, that failed to provide any 
funding to TIP and forced NIST to begin the process of shutting 
the program down. I wonder if you could talk for a minute about 
the decision to end TIP and the void that is going to be left 
at NIST and the Federal Government as a whole by the 
termination of the program, and I wonder if you can relate that 
to the predecessor ATP program because I am looking at the 
Advanced Technology Program that existed and the number of 
successes that that program had, and can you relate the two and 
is this is an area that we need to reconsider?
    Dr. Gallagher. So thank you. I think you are correct. The 
TIP program was defunded for 2012, and we are currently in the 
process of shutting that program down, and that is why it was 
not included in the 2013 request. The TIP program was a 
bipartisan effort that came out of the first America COMPETES 
Act. It specifically is looking at the gap of--it is in this 
valley of death space where it is even pre-angel and pre-VC 
where you are looking at taking a technological concept and 
turning into a pre-competitive technology. So while those 
private sector venture funds are really looking at the business 
risk, there is still this big problem of de-risking the 
technology, getting it further down the path. This has been a 
very natural focus as soon as innovation became one of the main 
drivers for R&D investments: how do you efficiently move ideas 
further down the path so that they can be harvested and used 
and exploited commercially.
    I think the ATP program, which was envisioned to be a 
civilian DARPA looking at this high-risk, high-payoff space was 
very successful, in terms of the value it generated. I think 
TIP, while a much younger program, was showing similar signs of 
targeting new technologies exceptionally well, and I think 
really what happened was, the scale of the program combined 
with the fiscal environment and the need to make priorities, 
and that is really what happened with regard to TIP.
    Ms. Edwards. And then would you say--I mean, would you care 
to characterize it? Are we really missing something here?
    Dr. Gallagher. Well, I believe everyone who is looking at 
this is quite concerned about the high friction between taking 
what we believe to be and what I believe to be the world's best 
R&D enterprise and making sure that we take every advantage to 
be able to leverage that in terms of creating new companies, 
developing new products and new technologies. And we have some 
points in that value stream, if you will, that are very 
inefficient, and these programs were specifically designed--
these are proof-of-concept-type programs that are specifically 
designed to take a research result and demonstrate an actual 
concept, and you need that to be able to sort of begin the 
business process of developing a business.
    So this is not a secret. I think every S&T agency in the 
Federal Government is looking at this. States are looking at 
this. Other countries are looking at this and investing a lot 
of money in this area, and it is something that I would like to 
continue to discuss and work with this committee in terms of 
how we effectively operate, but it is very much in this public-
private space, and I think we have to get it right.
    Chairman Quayle. Thank you, Ms. Edwards.
    I now recognize the gentlelady from Illinois, Mrs. Biggert, 
for five minutes.
    Mrs. Biggert. Thank you, Mr. Chairman, for holding this 
important hearing, and Dr. Gallagher, the mission of NIST is to 
promote U.S. innovation and competitiveness by advancing 
measurement science, standards, and technology in ways that 
enhance economic security and improve our quality of life, and 
I think in this role, NIST has done a good job of coordinating 
the development and dissemination of codes and standards for 
use in the private sector.
    I have heard that the implementation of codes and standards 
varies across sectors and municipalities sometimes becoming a 
barrier for innovation. For example, I have heard that the 
innovation in the commercial kitchen equipment and laundry 
sector is not largely being adopted for a variety for reasons 
like the cost to purchase the new standards or lack of training 
in enforcing them and the level of efficiencies in those 
products really could offer enormous savings to taxpayers in 
the energy or water bills if they were able to use them. Does 
NIST also hear the same thing, and if so, could you elaborate?
    Dr. Gallagher. Yes. Thank you very much. We hear this type 
of claim all the time. The United States has a very 
interesting, and as a result, very complex standards framework 
so standards are the realm of the private sector. We are 
probably one of the only industrialized countries in the world 
where the standard setting is not done by government mandate. 
So the role of NIST is to coordinate, to make sure the best 
science is there, to make sure there is a sound foundation for 
this, to bring stakeholders together. I think it is one of the 
reasons our track record for working with industry is what it 
is, that we are above the technical but a non-regulatory 
agency. We can bring folks together.
    And of course, you are right. Making a standard itself is 
not enough. It has to be put into meaningful practice at a 
broad enough cross-section of the market to make a difference, 
and that is often where I think the efforts flag. There is 
often competing interests. A standard is really a collective 
behavior on the part of often-competing interests and companies 
and so there is a lot of intrinsic tension in sort of pulling 
this together and yet the advantages, as you point out, can be 
considerable.
    So we are always weighing what is our appropriate role. We 
don't want to supplant the natural forces in the market to make 
choices about what the right solutions are but there is 
always--very often strong public interest as well and it may be 
things like a municipal interest to provide safe and effective 
infrastructure, promote energy or water efficiency and so 
forth.
    Mrs. Biggert. Thank you. The release of the latest smart 
grid framework updates the previous version. Can you explain 
NIST's role in the continued development of the smart grid and 
specifically what steps are being taken to ensure the safety 
and security of the smart grid technologies?
    Dr. Gallagher. Thank you very much. So the smart grid 
effort was just released last week, a version 2.0--we are 
adopting IT terminology here--of the standards framework or 
roadmap for smart grid. The NIST efforts really have been 
overtaken by what is really an all-industry effort now. The 
NIST Smart Grid Interoperability Panel has over 700 direct 
participants in the process, and they have made enormous 
progress in identifying a framework, a set of priorities, and 
in particular working on these new technologies.
    Very recently, I just received the first advisory committee 
report on smart grid. The keys I think moving forward are to 
develop testing and certification framework so very much to 
your first question so that the market understands that devices 
that are bought and put in practice in a grid or in a home or 
in a business are safe, interoperable and meet the requirements 
of this overall framework so that we turn what is really a 
disparate set of technologies into a functioning system, which 
was really the goal of the project.
    Mrs. Biggert. In one of the communities in my district, 
they are putting in the home devices and there is a lot of 
concern from some members of the community that it is not safe 
or that it is Big Brother watching over the use of water and 
all the other things that they will be doing.
    Dr. Gallagher. Well, you are right, and with any IT-related 
technology, you immediately get into very directly now concerns 
of cybersecurity because now it is not just data but it is 
control of electricity--the stakes are quite high--and also 
privacy. I mean, both the power of this technology to give 
consumers the information to make choices has the other side 
which is, there is a lot of data about what consumers are using 
with this and we have to make sure that the consumer and the 
public utility interests move--and that is why that stakeholder 
group was so large in smart grid. That is very important.
    Mrs. Biggert. Thank you. I yield back.
    Chairman Quayle. Thank you, Mrs. Biggert.
    I now recognize the gentleman from Texas, Mr. Neugebauer, 
for five minutes.
    Mr. Neugebauer. Thank you, Mr. Chairman, and thank you for 
holding this hearing.
    Dr. Gallagher, as you can imagine, right now it is budget 
season in the United States Congress. Your President has sent 
over his budget. We are going through the budget process and, 
you know, everybody that is testifying, as you can imagine, 
understands the depth of our deficit problem, but what we still 
see is people coming over and saying, you know, we still need 
more money. And I noticed that the budget that we are looking 
at from NIST right now, basically you added some new programs 
but we really didn't see very much reduction in the existing 
programs. If we are going to prioritize, you know, how we spend 
the American taxpayers' money, by the way, and we don't have 
all the money we are spending, we are borrowing 40 cents for 
every dollar we are spending, when does a department like yours 
start to take that leadership role and say you know what, we 
are going to have to go in and prioritize our programs, we may 
not be able to do all the things that we have been doing and so 
we need to prioritize that. Did you go through that process?
    Dr. Gallagher. Yes, sir, we did actually, and you are 
correct. In an environment like this, I would say that looking 
at internal efficiencies, looking at program efficiencies has 
been really unprecedented. I certainly appreciate the difficult 
task you have within Congress as this all comes up from 
different agencies to look at that.
    From the NIST side, what I can tell you is that we have in 
fact made probably the most significant priority decisions we 
have ever made. Two of our four programs were terminated and 
defunded. In fact, one was terminated and one was moved 
entirely to private sector funding. We have reduced 
administrative programs by over $12 million within NIST and are 
continuing to make further cuts. We have been reprogramming 
activities within the agency. And I think the NIST budget 
request--and you are quite correct, it is significantly up--was 
done in the context of an overall discretionary budget request 
that was flat. So what the Administration has tried to do is 
make relative priorities within the Budget Control Act number 
that put a premium on some of the high growth and I think the 
science and technology agencies have been the beneficiary of 
that.
    Mr. Neugebauer. So when you say you went through a very 
rigorous process to evaluate and to prioritize, what measures 
are in place today to evaluate these programs? I mean, where 
can someone go and look at the documentation of the 
evaluations?
    Dr. Gallagher. So NIST looks at--because of the 
heterogeneous nature of the NIST programs, we evaluate them 
differently. So in the case of some of the technology transfer 
programs we were talking earlier about, the TIP or Advanced 
Technology Program where NIST funded these high-risk payoffs, 
we actually have metrics that look directly at the value 
generation of the companies that were started, the new revenue, 
the new products, new services. I just looked at a review last 
week of the overall return on investment. For 36 companies we 
looked at it was something like 27 to 1.
    In the case of our Manufacturing Extension Partnership 
program where we are providing services to small and mid-sized 
manufacturers, we look directly at jobs saved or created, we 
look at new investments, and there is a whole set of metrics 
that support that. We would be happy to provide that.
    And the laboratory programs are a little bit more difficult 
because we are working farther upstream in the science and R&D 
side. We do a couple of things. One is to make sure that our 
work is meeting industry needs, so we do a lot of work looking 
at industry roadmaps and consortia and things of that type to 
make sure that the NIST programs are there. We look at the 
things we sell. We actually sell primary calibration services 
and standard reference materials. We are looking very carefully 
at that. And lastly, we also do economic impact studies where 
we do selective retrospective studies to look at the value of 
those programs, and we would be happy to share all of that 
information with you.
    Mr. Neugebauer. Now, recently, I was at a firm that does a 
lot of high-tech work and actually participates in some of the 
programs that you are talking about, and I posed this question 
to them and I think it kind of caught them off guard, and the 
question that I asked them was what if instead of you 
leveraging federal dollars, because many of them, they put the 
public-private partnership, rather than leveraging a small 
amount of your money with a large amount of federal money, what 
if we changed the corporate tax structure in such a way that 
most of the money was your money, would you still be investing 
in those same kind of research, or because of the speculative 
level would you probably not. Because I think where we have to 
begin to look at it and when we prioritize how we spend 
American taxpayers' money, we have to make sure that we are 
investing it in places where we get high degrees of return, and 
I submit to you that I think a lower corporate tax structure 
and allowing these companies to invest in the technology they 
think has longer prominence puts a little of a market 
perspective over research and development rather than trying to 
put together academic standards that these may or may not be. 
What would be your response to that?
    Dr. Gallagher. I would actually be in strong agreement. I 
think that in this space between the public sector and private 
sector, there is both pushes and pulls. I think that the market 
forces are incredibly important, possibly the most important. I 
think that is why the Administration has also supported the R&D 
tax credit and looking at corporate tax reforms for the very 
reasons you articulated.
    I also think that there is in some cases push from the 
technology sector. What is happening in the labs opens up 
opportunities that the market may not see or understand, and so 
in some cases we have to make sure that those are made visible 
to them as well, and you are highlighting really one of the 
most important areas, which is this intersection, how do we 
make this operate effectively without getting in the way of the 
market itself.
    Chairman Quayle. Thank you, Mr. Neugebauer.
    I now recognized Mr. Hultgren for five minutes.
    Mr. Hultgren. Thank you, Mr. Chairman.
    Just a couple questions dealing more with manufacturing and 
jobs. The President stated in his State of the Union address, 
and I know you have reaffirmed in your testimony--I apologize, 
we had a couple other meetings going on at the same time--but I 
know you testified that one of the goals of this budget is to 
encourage high-tech manufacturing in the United States. I 
certainly agree with this admirable goal and want to be 
fighting for that as well, but wonder if any amount of federal 
spending on science and technology will lead to more high-
technology manufacturing without significant regulatory and tax 
reform.
    So I wonder, can you provide us with your thoughts on this 
as well as how to create the optimal environment to support 
high-tech manufacturing and job creation here in the United 
States? Since the United States has one of the highest 
corporate tax rates, do you believe we can attract business to 
the United States and keep them here without reducing 
regulation and reforming the tax code?
    Dr. Gallagher. Thank you very much. I certainly agree 
wholeheartedly that the set of conditions that a manufacturer 
will use to make a decision to site in the United States or to 
grow are more than just the R&D piece itself and it is going to 
be access to the workforce, it is going to look at the tax and 
cost structure, it is going to be a whole host of things, and I 
think the NIST manufacturing efforts should be viewed really in 
the fabric of a much larger effort that looks at how do we set 
the right macroeconomic conditions to support investments in 
advanced manufacturing and so forth. That includes trade, 
workforce, tax structure and so forth.
    But I think that in the context of R&D-intensive 
industries, ones that are really dependent on the flow of new 
ideas, there is an important touch point and I think that 
setting the right structure is really about making sure that we 
both facilitate the scale-up problem, taking an idea from a lab 
and how does it look in full scale-up and which is often a very 
deep measurement problem, and the other one is getting the 
market right, and you are exactly right. Many of these new 
emerging technologies are touching potential regulatory issues. 
So if you look at biotech where we are looking at the promise 
of an incredibly fast production of new biomaterials and new 
bioproducts, everyone concludes in the sector that I have 
talked to that we have to do something to make sure the 
regulatory process that protects the safety and efficacy of 
these materials keeps pace with that. And so what we are trying 
to do in NIST is to make sure that to the extent that this can 
be done through measurement, and the way to think of that is 
through quality control and quality assurance processes within 
industry itself, that we might be able to set from the 
technology side a better barrier so that we have smart and 
nimble regulation or requirements.
    One of the goals in standard setting is certainly if 
industry has broadly adopted a set of practices that are self-
protective, that goes a long way to addressing the type of 
breakdowns or market breakdowns you would expect to look at and 
regulations, so that is true in our nanotechnology where we are 
looking at environment, safety and health issues, how do we 
measure with nanoparticles and also looking at biotech.
    Mr. Hultgren. You touched on this a little bit but I guess 
just to delve in a little bit deeper, you talked about a number 
of distinct manufacturing initiatives and programs that NIST 
supports. I wonder if you could give your view more broadly of 
the direction of concern about U.S. manufacturing and making 
sure that it is growing, that that is a vital part of our 
economy, always has been and I believe needs to be going 
forward. I wonder if you could kind of give your thoughts of 
how you see that going in the near future and then longer term 
from the work that you have been doing at NIST but also just 
recognizing, do you feel like there is enough leadership coming 
from Washington, from agencies, from the Administration on 
manufacturing and how could the Administration coordinate 
manufacturing activities amongst the different federal agencies 
more effectively?
    Dr. Gallagher. I have to tell you that in my 18 years in 
the Federal Government, I have never been more optimistic about 
manufacturing than I am today. I think a tone has changed. I 
think for a while there was a feeling that it was just 
inevitable, that we didn't have to worry about manufacturing, 
we could simply invent it here and it would go somewhere else 
and that was okay. I think that has changed. I think there has 
been recognition not just within the Federal Government but 
every discussion I have had in Congress has sort of reaffirmed 
this, and most importantly, the business community has really 
stepped up and begun to make the case very strongly that there 
is a deep interplay between our capacity as a country to 
innovate and our capacity as a country to produce a benefit 
from those innovations.
    And in fact, we probably should have known this because our 
competitors were doing this to us. They would start with the 
low-end manufacturing, which had no R&D, and work their way up 
the value chain until they were eventually building out R&D 
infrastructure and so that interplay was obvious to them, and I 
think we may have just taken it for granted since it had been 
such a core part of our strength for so many years. But I think 
that has really changed. I think the dynamic, as I said, is as 
robust as I have ever seen it. Now I think what we have to do 
is use that window of opportunity wisely and begin to craft 
some programs that work effectively because, as I said, the 
Federal Government doesn't manufacture anything. What we want 
to do is make sure we are providing an environment that is 
conducive to that set of industries.
    Mr. Hultgren. Just real quickly on that, is there some 
coordinated effort going on again amongst--I am glad to hear of 
your optimism from your perspective but is there some 
coordination as far as making sure that the effort really is 
being productive among different agencies from what you have 
seen?
    Dr. Gallagher. Yes. The answer is again as much I have ever 
seen, so when Secretary Bryson was confirmed as Commerce 
Secretary, he was made a co-chair of a new office called the 
Office of Manufacturing Policy. This was a Cabinet-level group. 
In fact, I was at the first meeting. I had the privilege of 
sitting on the side wall while they met. And in fact, we have 
had vigorous and active participation by most of the Cabinet 
actually. It has been remarkable. The President himself was 
personally engaged in manufacturing. And at the working level 
in the advanced manufacturing space, NIST was named as the 
coordination agency, so we were given what was called a 
National Program Office to specifically provide the support for 
robust, all-of-government effort, and I would say routinely 
every day one door down from my office, Mike Molnar, who heads 
that office, is coordinating with Defense and Energy and NSF. 
So it is extremely active at this time.
    Mr. Hultgren. My time is expired. I yield back. Thank you, 
Mr. Chairman.
    Chairman Quayle. Thank you, Mr. Hultgren, and I want to 
thank Dr. Gallagher for his valuable testimony and the members 
for their questions.
    The members of the Subcommittee may have additional 
questions for you, Dr. Gallagher, and we will ask you to 
respond to those in writing. The record will remain open for 
two weeks for additional comments and statements from members.
    The witness is excused. Thank you all for coming. The 
hearing is now adjourned.
    [Whereupon, at 11:45 a.m., the Subcommittee was adjourned.]
                               Appendix I

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Dr. Patrick Gallagher, Under Secretary, Commerce for 
        Standards 
and Technology and Director, National Institute of Standards and 
        Technology


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                              Appendix II

                              ----------                              


                   Additional Material for the Record




    Submitted by Dr. Patrick Gallagher, Under Secretary of Commerce
                    for Standards and Technology and
        Director, National Institute of Standards and Technology



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