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NSF & Congress
NSF Section of H.R. 3666, House VA/HUD and Independent Agencies Bill

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National Science Foundation
Research and Related Activities
Major Research Equipment
Academic Research Infrastructure
Education and Human Resources
Salaries and Expenses
Office of Inspector General
National Science Foundation Headquarters Relocation

NATIONAL SCIENCE FOUNDATION

Fiscal year 1997 recommendation

$3,253,000,000

Fiscal year 1996 appropriation

$3,220,000,000

Fiscal year 1997 budget request

$3,325,000,000

Comparison with fiscal year 1996 appropriation

+$33,000,000

Comparison with fiscal year 1997 request

-$72,000,000

The National Science Foundation was established in 1950 and received its first appropriation of $225,000 in 1951. The primary purpose behind its creation was to develop a national policy on science, and support and promote basic research and education in the sciences filling the void left after World War II.

The Committee recommends a total of $3,253,000,000 for fiscal year 1997. The amount recommended is $33,000,000 above the fiscal year 1996 appropriation and $72,000,000 below the President's budget request.

Of the amounts approved in the following appropriations accounts, the Foundation must limit transfers of funds between programs and activities to not more than $500,000 without prior approval of the Committee. Further, no changes may be made to any account or program element if it is construed to be policy or a change in policy. Any activity or program cited in this report shall be construed as the position of the Committee and should not be subject to reductions or reprogramming without prior approval of the Committee.

Finally, it is the intent of the Committee that all carryover funds in the various appropriations accounts are subject to the normal reprogramming requirements outlined above.

RESEARCH AND RELATED ACTIVITIES

Fiscal year 1997 recommendation

$2,422,000,000

Fiscal year 1996 appropriation

$2,314,000,000

Fiscal year 1997 budget request

$2,472,000,000

Comparison with fiscal year 1996 appropriation

+$108,000,000

Comparison with fiscal year 1997 request

-$50,000,000

The appropriation for Research and Related Activities covers all programs in the Foundation except Education and Human Resources, Salaries and Expenses, NSF Headquarters Relocation, Major Research Equipment, and the Office of Inspector General. These are funded in other accounts in the bill. The Research and Related Activities appropriation includes United States Polar Research Programs and Antarctic Logistical Support Activities and the Critical Technologies Institute, which were previously funded through separate appropriations.

Beginning with fiscal year 1997, the President's budget provided funding for the instrumentation portion of Academic Research Infrastructure in this account.

The Committee recommends a total of $2,422,000,000 for Research and Related Activities in fiscal year 1997, a reduction of $50,000,000 to the budget request. The Committee recommendation includes approval of the National Science Foundation proposal to include within the Research and Related Activities account, $50,000,000 for acquisition of instrumentation which was previously funded in the Academic Research Infrastructure account. Taking into consideration the increase to this account caused by the transfer of instrumentation funds, the remaining increase of $108,000,000 would have represented a growth of approximately 5% over the fiscal year 1996 level.

While this is not an excessive amount of growth, and while the Committee remains a strong supporter of scientific research, the Committee can not fund the budget request within its current allocation of budget authority and outlays. The reduction recommended by the Committee is taken without prejudice and is to be allocated by the Foundation in accordance with internal procedures, subject to approval by the Committee.

Academic Research Fleet

The Committee is concerned with the possibility of new Navy-owned, university-operated, Class I Oceanographic Research vessel being added to the academic fleet. There is no existing academic fleet planning to incorporate a new vessel at this time. The addition of new ships without corresponding increases in ship operations funding and in the funding for research programs that require ship time threatens the health of oceanography. NSF is directed to report to the Committee by August 30, 1996, the ramifications, fiscal and otherwise, of such an addition, with particular attention to the overall balance between research funding and ship operations funding. The Committee is concerned about a funding shortfall for the operations of the academic fleet and supports NSF's efforts to work with other agencies to broaden usage of the fleet.

MAJOR RESEARCH EQUIPMENT

Fiscal year 1997 recommendation

$80,000,000

Fiscal year 1996 appropriation

$70,000,000

Fiscal year 1997 budget request

$95,000,000

Comparison with fiscal year 1996 appropriation

+$10,000,000

Comparison with fiscal year 1997 request

-$15,000,000

This account provides funding for the construction of major research facilities that provide unique capabilities at the cutting edge of science and engineering. The Committee recommends a total of $80,000,000 for the major research equipment account for fiscal year 1997. This level reflects $55,000,000 for construction of the Laser Interferometer Gravitational Wave Observatory (LIGO) and $25,000,000 for maintenance of facilities in Antarctica.

The Committee recommendation for LIGO funding is the same amount that was projected as a fiscal year 1997 requirement when the fiscal year 1996 budget was presented to the Congress. The amount recommended is $15,000,000 below the request in the fiscal year 1997 budget, but based upon information provided with the fiscal year 1996 budget and briefings provided by the program managers the reduction should have no effect on the program schedule.

The Conference Report accompanying H.R. 2099 directed that there be a government-wide review of activities in the Antarctic region and the results of the review reported to the Committees on Appropriations of the House and Senate. That report was submitted in April and concluded that ". . . from a policy perspective the NSTC [National Science and Technology Council] finds that maintaining an active and influential presence in Antarctica, including year-round operation of South Pole Station, is essential to U.S. interests."

The report also concluded that the National Science Foundation planning for replacement of the South Pole Station will greatly benefit from further cost-benefit analyses. The Committee acknowledges the conclusions contained within the report and provides $25,000,000 for correcting critical health, safety, and environmental issues at the current South Pole station while awaiting further information from the NSF on how it will structure a long-term solution to the problems of the current station. The Committee recommends that the funds provided be used for the heavy maintenance facility, power plant upgrade, and fuel storage facilities.

ACADEMIC RESEARCH INFRASTRUCTURE

Fiscal year 1997 recommendation

$0

Fiscal year 1996 appropriation

$100,000,000

Fiscal year 1997 budget request

$0

Comparison with fiscal year 1996 appropriation

-$100,000,000

Comparison with fiscal year 1997 request

$0

This program is a consolidation of academic research facility modernization and support of academic research instrumentation. The Committee agrees with the President's budget proposal to transfer the instrumentation portion of this program to the Research and Related Activities account and provide no funding for buildings and facilities.

EDUCATION AND HUMAN RESOURCES

Fiscal year 1997 recommendation

$612,000,000

Fiscal year 1996 appropriation

$599,000,000

Fiscal year 1997 budget request

$619,000,000

Comparison with fiscal year 1996 appropriation

+$13,000,000

Comparison with fiscal year 1997 request

-$7,000,000

The Foundation's Education and Human Resources activities are designed to encourage the entrance of talented students into science and technology careers, to improve the undergraduate science and engineering education environment, to assist in providing all precollege students with a level of education in mathematics, science, and technology that reflects the needs of the nation and is the highest quality attained anywhere in the world, and extend greater research opportunities to underrepresented segment of the scientific and engineering communities.

For fiscal year 1997, the Committee recommends $612,000,000, a reduction of $7,000,000 from the President's budget request and $13,000,000 above the fiscal year 1996 appropriation. The Committee recommendation includes a reduction of $2,000,000 in the grants for graduate fellowships and $5,000,000 from undergraduate curriculum development.

Systemic Initiative

The National Science Foundation has made considerable progress with its state, urban, and rural systemic initiatives designed to promote reform of K-12 math and science education. Early results show significant math and science student achievements in NSF funded sites. The Committee believes each program should be sustained as appropriate and in particular, the Urban Systemic Initiative should be fully funded in fiscal year 1997.

Advanced Technological Education Program

Although only established within the past few years, the Advanced Technological Education program is viewed as crucial to ensuring a highly competent technical workforce. The Committee is pleased that the Foundation has forged effective partnerships with the relevant, local scientific and technical business sector to further expand the scope and significance of the program. The Committee encourages continued growth of this important activity.

Teacher Preparation

Efforts to achieve high quality math and science performance in the K-12 sector is highly dependent upon the quality of the teacher workforce and, especially in urban and rural school systems, there is a growing inadequacy of highly qualified math and science teachers. Accordingly, the Committee strongly urges the National Science Foundation to strengthen and significantly expand its math and science teacher preparation programs.

Technology Education

Increasingly the purposeful applications of technology is regarded as an integral and value-added component of high quality math, science, engineering and technology education. The National Science Foundation is urged to increase its investments in research and development that undergird learning technologies and their application in math, science, engineering, and technology education sites at the K-12, two year and community colleges, and undergraduate levels.

Experimental Program To Stimulate Competitive Research

The Committee is pleased with the efforts which the Foundation has made to ensure that the Experimental Program to Stimulate Competitive Research (EPSCoR) is part of the broader systemic reform initiatives pursued in recent years. These efforts have formed a solid base for education and human resource development activities in many of the EPSCoR states. The Committee has recommended the budget request for the Experimental Program to Stimulate Competitive Research (EPSCoR). As the National Science Foundation research funding increases, new efforts should be undertaken to ensure that the participating jurisdictions, which are working diligently to enhance their infrastructure and become truly competitive, participate fully in NSF's programs. Of the funding the Committee has recommended, $5,000,000 is available to assist EPSCoR institutions to participate in the new advanced computing infrastructure with high bandwidth connections that support advanced applications, distributed computing, remote visualization and imaging, and telecollaboration. The Committee also recommends that funds be made available to assist EPSCoR institutions to facilitate their competitiveness by engaging in joint projects between EPSCoR institutions, or between EPSCoR and non-EPSCoR institutions. Both efforts are important to ensuring that EPSCoR states are in the mainstream of science and technology efforts. The participation of representatives from EPSCoR states on peer review panels and on advisory committees. In addition, the Committee expects NSF to initiate a planning process for full participation of states which generally meet EPSCoR criteria but that are not currently participating in the EPSCoR program.

Informal Science Education

The Committee is concerned with the nearly 28% reduction in funding for Informal Science Education. In many instances, science education received through exposure to museums, parks, libraries, television, and community groups is the most important spark to stimulate greater interest in science. The Committee has not been able to add money to this account, but encourages the National Science Foundation to reevaluate the priorities which caused the current sub-allocation of Education and Human resources funding to determine if the cut of 28% in this program is justified.

SALARIES AND EXPENSES

Fiscal year 1997 recommendation

$134,310,000

Fiscal year 1996 appropriation

$127,310,000

Fiscal year 1997 budget request

$134,310,000

Comparison with fiscal year 1996 appropriation

+$7,000,000

Comparison with fiscal year 1997 request

0

The Salaries and Expenses activity provides for the operation, support and management, and direction of all Foundation programs and activities and includes necessary funds that develop, manage, and coordinate Foundation programs. Also included in this account beginning in fiscal year 1997 is funding for NSF headquarters relocation. The Committee recommends an appropriation of $134,310,000 for salaries and expenses and headquarters relocation in fiscal year 1997, the same as the President's budget request. The amount provided is $1,800,000 above the fiscal year 1996 appropriation when adjusted for the change to incorporate funding for the NSF headquarters relocation.

OFFICE OF INSPECTOR GENERAL

Fiscal year 1997 recommendation

$4,690,000

Fiscal year 1996 appropriation

$4,490,000

Fiscal year 1997 budget request

$4,690,000

Comparison with fiscal year 1996 appropriation

+$200,000

Comparison with fiscal year 1997 request

0

This account provides National Science Foundation audit and investigation functions to identify and correct management and administrative deficiencies which could lead to fraud, waste, or abuse. For fiscal year 1997, the Committee has recommended $4,690,000 for the Office of Inspector General. This amount is $200,000 above the fiscal year 1996 level and is the same as the President's budget request.

NATIONAL SCIENCE FOUNDATION HEADQUARTERS RELOCATION

Fiscal year 1997 recommendation

$0

Fiscal year 1996 appropriation

$5,200,000

Fiscal year 1997 budget request

$0

Comparison with fiscal year 1996 appropriation

$0

Comparison with fiscal year 1997 request

$0

This account provides reimbursement to the General Services Administration (GSA) for expenses incurred by GSA pursuant to the relocation of the National Science Foundation.

The National Science Foundation proposed including this funding within the Salaries and Expenses Account beginning in fiscal year 1997. The Committee recommendation endorses the account change.

Section 421 -- Additional Views of Mr. Obey and Mr. Sabo: Should Tax Dollars Appropriated To Enhance American Competitiveness in the Computer Industry Be Used To Buy a Dumped Foreign Supercomputer?

For decades the National Science Foundation has argued that our public investment in science was closed linked to the future growth of the nation's economy. Just a few months ago the agency's director told this committee, "There is a general consensus among economists and policy researchers that public investments in science and engineering yield a very high annual rate of return to society * * * research and development have a significant and important positive effect on economic growth and living standards."

NSF makes this argument not only with respect to the overall economy but with specific sectors of the U.S. economy. In the agency's fiscal 1997 budget justification, $277 million is requested for Computer and Information Science Engineering, a $22 million of 8.6% increase above the previous year. The goals of this activity, according to the agency justification, are "to promote fundamental research and education in the computer and information sciences and engineering, and to maintain the nation's preeminence in these fields." (emphasis added)

Some in the scientific community would prefer that the argument for research funding be based solely on the need for expanding human knowledge and argue that nationalistic concerns such as economic growth, international security and the competitiveness of the nation's industries be excluded from the debate over federal support of agencies such as NSF. Wisely, NSF Directors have chosen to ignore that advice and, as a result, the Foundation has been spared the deep cuts which have been imposed on most other areas of the domestic discretionary budget.

The NCAR Procurement

But there is real doubt as to how seriously NSF weighs broader national goals once its leadership has left the witness table. We fear that a recent incident involving the procurement of a supercomputer by the Foundation's National Center for Atmospheric Research (NCAR) may be very revealing as far as defining NSF's true commitment to broader national goals in its day to day expenditure of public funds.

NCAR, which was organized by NSF and receives the overwhelming share of its budget from NSF, uses supercomputers for complex weather simulation analysis. Over the years, NCAR has been working to build one of the world's largest complexes of supercomputers used for purposes other than national security. As part of that effort, NCAR attempted to negotiate the donation of a supercomputer by Fujitsu Ltd. of Japan but that effort was thwarted by the realization that U.S. anti-dumping laws would prohibit such a donation.

More recently, NCAR published a request for proposals to provide the most capable supercomputer possible for a fixed price of $35 million--to be operational by October, 1998. More than 90% of the funding for the new computer was to be provided by NSF--principally through NSF's High Capacity Computing Program.

Three companies made proposals, NEC Ltd. of Japan, Cray Research of the United States and Fujitsu Ltd. also of Japan. The architecture and capabilities of the U.S. machine differed from that of the two machines proposed by the Japanese. The U.S. machine ran at a faster "clock speed" and would therefore be considered a faster machine on a pound for pound or chip for chip basis. But one of the Japanese companies, NEC, proposed to provide NCAR with about three times the amount of equipment--thereby providing a significantly faster overall machine. (The content of the Fujitsu bid is unknown.)

Despite the very clear likelihood that such a generous offer of equipment on the part of NEC might involve unfair trade practices and constitute "dumping" under U.S. law, NCAR decided to proceed solely on the basis of cost. The Los Angeles Times reported on May 20:

Lawrence Rudolf, NSF general counsel, said the only criterion important to the Center was which computer could calculate its set of equations fastest, thereby making U.S. climate research preeminent in the world.

"We were not weighing national interest here, but we were evaluating the singular interest of our scientists to be at the cutting edge of climatological research," Rudolf said.

The Times further indicated that Rudolf has told them "* * * federal laboratories--the biggest customers for supercomputers--are under such tremendous budget pressure that they are not inclined to do any favors for U.S. corporations." The article quoted a "senior federal technology official," saying, "It is a very surprising situation. These people don't have any loyalty to brand or country. * * *"

Because of concern that enforcers of U.S. "anti-dumping" laws might look harshly on the generous Japanese offer and interfere with the procurement, NCAR hired a consultant to defend their decision. The consultant was provided details on the NEC proposal and based on those details estimated the true value of the NEC equipment to be less than the price permitted by the NCAR proposal request.

Further analysis of the work done by the NCAR consultant, however, demonstrated that he had in fact documented a clear case of dumping. The consultant had omitted consideration of development costs, full costs and full general and administrative expenses. Even the most modest estimates of these costs indicate that NEC was bidding to sell the NCAR computer at a significant loss.

Cray indicates that their most conservative estimate of the total cost to NEC of the NCAR deal is $90 million. There are indications that other estimates of the true value of the NEC offer may exceed Cray's.

Prior to announcing that they were proceeding with the NEC proposal, the National Science Foundation was warned by the U.S. Department of Commerce that the NEC computer was being dumped. Before the Commerce Department could deliver that warning in writing, however, NSF sent word to NCAR to proceed with the procurement, stating that they were "to be complimented on the care and professionalism with which this procurement has been managed from the initial conception * * *" and faxed a press release to the New York Times announcing that the NEC proposal "is best suited to meet its technical requirements."

Following NSF's procurement announcement, the Commerce Department warned NSF Director Neal Lane in a formal letter, "We have significant concerns that importation of the NCAR supercomputer system would threaten the U.S. supercomputer industry with material injury * * *" The letter further stated, "* * * using standard methodology prescribed by the antidumping law, we estimate that the cost of production of one of the foreign bidders is substantially greater than the funding levels projected by NCAR's request proposals * * * the amount by which the fair value of the merchandise to be supplied exceeds the export price, is likely to be very high." (emphasis added)

The U.S. Supercomputer Industry Is Critical to Economic Growth and National Security -- It Is Also Highly Vulnerable to Foreign Mercantilism

To fully understand this story, it is necessary to have some background on the supercomputer industry, its financial structure and its strategic importance to other industries with respect to competition in international trade. The Los Angeles Times May 20th article on the NCAR procurement provided a succinct discussion of the critical place supercomputer production holds with respect to international economic competition:

Although the supercomputer industry is a relatively small and obscure sector of the U.S. electronics business--dwarfed by the market for personal computers, for example--it is widely regarded as a cornerstone of U.S. competitiveness * * *

Supercomputers are crucial to the design of aircraft and jet engines, not to mention other computers. The nation with the best supercomputers can decode other nation's (sic) secrets, predict the weather with greater accuracy and better unravel the mysteries of genetics.

Moreover, the ability to design supercomputers--the fastest computers--has always been assumed to create a trickle-down effect that benefits leadership of everything from microprocessors to personal computers.

The Times might have also mentioned the emerging role of supercomputers in the design, simulation, testing and manufacture of new products ranging from automobiles to fighter aircraft and new fabrics. There are few observers of the world automobile industry who do not give the intensive application of supercomputers a measurable share of the credit for the resurgence of the U.S. automotive industry. Any cursory review of the direction of commercial air craft production equally demonstrates the emerging role of supercomputers in manufacturing and production. The entire production process of the new Boeing 777 is centered around the supercomputer--a fact that has not been lost on Mitsubishi and other would be entrants into the world commercial aircraft market.

Financial analysts of the supercomputer industry have questioned the long term viability of U.S. supercomputer producers for some years. These questions are not directed at the technology possessed by U.S. firms, the compensation of their workforce or their commitment to future research and development. Rather, analysts have been concerned that the extraordinary expenditures required for research in this industry provides an inordinate advantage to firms with very deep pockets. Because of the more fluid and open demand for capital in the United States, it if difficult to find investors willing to sustain large losses over extended periods of time in order to dominate any particular market. The difficult path which U.S. producers have faced is demonstrated by the fact that 10 of the 15 U.S. companies that have produced Supercomputers are now out of business, two others remain in business but have ceased producing supercomputers and each of the remaining three have merged with larger companies. The major remaining producer, Cray Research, now a subsidiary of Silicon Graphics, does not have deep pockets, even by U.S. standards. Although it presently maintains more than a 60% share of the world supercomputer market, it finances its research and development of future generations of supercomputers out of profits on current sales.

That stands in sharp contrast to the financial situation enjoyed by both Fujitsu and NEC. Subsidiaries of two of the largest capitalized companies in the world, both producers are beneficiaries of their parent company's membership in two of the most powerful Japanese Keiretsu and the almost limitless credit that relationship implies from the mega banks that lead those keiretsu. (NEC is a member of the Sumitomo industrial group which includes the Sumitomo Bank with assets of more than half a trillion U.S. dollars--more than twice the size of the largest U.S. bank.)

Laura Tyson, chairman of the President's National Economic Council described the situation in her book, Who's Bashing Whom:

At the root of the ability of Japanese firms to compete aggressively on price, even when it means selling products below cost and running losses, are the unique structural features of the Japanese economy. The companies competing with Cray and Motorola have deep pockets and long time horizons. They can afford to cross-subsidize losses in one market with profits from another. They continue to benefit from a variety of promotional policies and from lax enforcement of regulations on restrictive business practices. They also continue to benefit from the insulated nature of the Japanese market, fostered by these and other structural impediments. In short, the pricing behavior of Japanese companies is a natural outgrowth of Japan's business and government environment.

Both NEC and Fujitsu supercomputer operations have lost significant amounts of money every single year since their inception in the early 1970s. Their annual sales have averaged less than $50 million, while their annual research costs alone are likely to have exceeded $100 million. But the prize is the potential opportunity to eliminate a competitor who cannot sustain losses for an extended period of time and who currently holds 60% of the world market. Once that competitor is eliminated, pricing could become highly advantageous. The business partners who have helped NEC and Fujitsu sustain their business through more than a decade of heavy losses would not only benefit from this long term opportunity for profitability, but also from the strategic advantage of controlling a technology that will be critical to future generations of manufacturing processes and to the security efforts of the U.S. and other nations.

 

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