• maximize efficiency and effectiveness of federal R&D investments through means such 

as competitive, peer-reviewed processes and phase-out of programs that are neither 

productive nor important to an agency’s mission; 

• promote collaborations among agencies, industry, academia and states to advance 

common S&T goals; and 

• strengthen international partnerships that foster advancement of scientific frontiers and 

accelerate the progress of science across borders. 

This memo does not set forth every Administration S&T priority. In particular, it does not 

include all priorities that fall within the purview of a single agency. 

Some agencies operate programs or facilities whose capabilities are important to the missions of 

other agencies. Such programs and facilities will be given special consideration in budget 

preparations. Consistent with the President’s Management Agenda, it is imperative that, where 

appropriate, federal R&D investments be managed as a portfolio of potentially interconnected 

activities to optimize scientific discovery through interagency coordination of related research 

areas. OSTP informs the budget process regarding the availability of instrumentation and 

facilities for S&T priorities and the need for coordination of related research programs based on 

information generated through the National Science and Technology Council (NSTC) and other 

interagency mechanisms. 

The President’s Council of Advisors on Science and Technology has urged increased investment 

in certain areas of physical science, citing opportunities for continued scientific discovery and 

the fact that such discoveries often drive advances in other areas of science. Budgetary proposals 

for these or any other area must be specific regarding how the programs will expand scientific 

frontiers in a manner consistent with stated agency missions and national goals and demonstrate 

coordination with similar programs in other agencies. The desire to achieve parity in funding 

levels among disciplines does not by itself suffice to justify funding increases. 

Education and workforce development are essential components of all federal R&D activities 

and continue to be high priorities for this Administration. Effective interagency collaboration 

will promote the implementation of research-based programs and practices addressing priorities 

established in the No Child Left Behind Act of 2002. In addition to promoting effective 

educational outreach, a high priority will be given to research addressing math and science 

learning and achievement, including best practices for improving the quality of math and science 

education. Federal agencies also are expected to coordinate their ongoing efforts to maintain the 

adequacy of the supply and capacity of the R&D workforce. 

Interagency Priorities for R&D Budgets 

The President’s R&D agenda includes existing and emerging priorities that require significant 

levels of interagency coordination and planning. During preparation of the FY 2005 Budget, the 

priority areas listed below will receive particular attention. 

Agencies that receive funding for the following activities are expected to participate in 

applicable interagency coordination groups to produce: 1) a clear and concise definition of 

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program activities and priorities within the overall priority title; 2) an inventory of the programs 

in the baseline budget; and 3) an interagency implementation plan. 

1. R&D for Combating Terrorism 

Winning the war on terrorism and securing the homeland are national priorities. As articulated 

in the President’s National Strategy for Homeland Security, the nation’s S&T enterprise provides 

a key advantage in the war against terrorism when applied to: 1) preventing terrorist attacks 

within the U.S.; 2) reducing America’s vulnerability to terrorism; and 3) minimizing the damage 

and recovering from attacks that do occur. The aim of this priority is to harness and focus 

America's substantial R&D capability to achieve these strategic objectives. Agencies are 

encouraged to promote R&D efforts, with emphasis on applied technologies, to address our 

nation’s ability to detect, prevent, treat, remediate, and attribute acts of terrorism. Research and 

development, testing, evaluation and validation strategies should be elicited for both medical and 

non-medical countermeasures to weapons of mass destruction. 

Research priority areas include: 

(1) enhancing detection, treatment, and remediation of chemical, biological, and radiological 

threats; 

(2) developing and transitioning technology to support first responders; 

(3) exploiting the significant advances in human and microbial genetic sequencing to 

promote the development of novel or next-generation vaccines, therapeutics and 

diagnostics to counter biological threat agents; 

(4) converting the vast amount of intelligence data into actionable knowledge; 

(5) assessing the social and behavioral aspects of terrorism to help anticipate, counter, and 

diffuse threats to our homeland security; 

(6) facilitating inspection of cargo and people at ports-of-entry; and 

(7) securing critical infrastructure including information infrastructure. 

The NSTC is actively shaping more specific R&D priorities within each of these categories. 

This is an ongoing process requiring intensive interagency planning and coordination. 

2. Nanotechnology 

The National Nanotechnology Initiative (NNI) continues to offer great promise broadly across 

many scientific fields and most sectors of the economy, and remains an Administration priority. 

The NNI supports both fundamental and applied R&D in nanotechnology and nanoscience 

across a broad range of areas, development of nanoscale instrumentation and metrology, and the 

dissemination of new technical capabilities to industry. Nanoscale R&D priority areas continue 

to include material science and research relevant to medical care and homeland security. Though 

research at the nanoscale offers natural bridges to interdisciplinary collaboration, especially at 

the intersection of the life and physical sciences, the Administration encourages novel 

approaches to accelerating interdisciplinary and interagency collaborations. Activities such as 

joint programs utilizing shared resources, as well as support for interdisciplinary activities at 

centers and user facilities, are encouraged. 

3. Networking and Information Technology R&D

The interagency Networking and Information Technology R&D (NITRD) Program continues to 

be an Administration priority. Efforts that contribute to other interagency R&D priorities 

(research related to critical infrastructure protection and cybersecurity, for example) are 

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especially important, and may also require broader coordination with other NSTC entities. 

Research on networking is another high priority area. In addition, while the overall importance 

of each of the NITRD Program Component Areas remains undiminished, high-end computing is 

the subject of increased attention through coordinated multi-agency planning activities that are 

underway. These activities are focused on developing coordinated, multi-agency investment 

plans for R&D for core high-end computing technology, and will also address high-end 

computing capability, capacity and accessibility issues. Because of the emphasis on leveraging 

efforts and providing benefit to multiple agencies through these planning activities, agency plans 

and requests should reflect full consideration of the results of this planning activity. 

4. Molecular-level Understanding of Life Processes

Methods for characterizing plants, animals and microorganisms have evolved from observation 

at the level of the whole organism, to deconstruction and manipulation at the cellular and 

molecular levels. New computer algorithms permit the synthesis of sequence data with 

experimental evidence of function across species to enable greater understanding of normal 

development and processes associated with disease, including the role of individual proteins and 

their interactions (proteomics). The NSTC coordination process (including efforts on Plant 

Genomes, Domestic Animal Genomes, and the Microbe Project) will assist in identifying R&D 

opportunities and needs to most effectively utilize federal resources and take better advantage of 

current biological, computational and bioinformatics technologies. 

5. Environment and Energy

The Administration’s environment and energy research initiatives are critical for achieving 

sustained economic growth while ensuring national energy security and a healthy environment. 

• Climate Change: The Administration's R&D investments responding to the challenge of 

global climate change will increase our understanding of climate change science to 

provide sound climate policy decision-making. Agencies should implement strategic 

plans being developed for the Climate Change Science Program and the National Climate 

Change Technology Initiative, and should then move forward in prioritizing areas 

identified in the strategic plans and in establishing program-wide performance metrics. 

• Environmental Observations: A key goal of the Administration’s R&D investments is to 

enhance capabilities to assess and predict key environmental systems. Assessment and 

prediction are important in improving our understanding of and ability to model climate 

change, but they also affect many other aspects of society, such as health, resource 

management, weather prediction, sustainable development, and economic prosperity. To 

this end, integrated, comprehensive, global observation systems are required for 

understanding, monitoring, and predicting changes to the Earth system (atmosphere, land, 

fresh water, ocean, and ecosystems). Through the NSTC, the responsible agencies will 

develop and implement a coordinated, multi-year plan to enhance data time series, 

minimize data gaps, and maximize the quality, integrity, and utility of the data for shortterm and long-term applications. 

• Hydrogen Fuel R&D: President Bush’s Hydrogen Fuel Initiative will work through 

partnerships with industry to develop the technologies and infrastructure needed to 

produce, store, and distribute hydrogen, and to use it in stationary, portable, and vehicular 

applications. Agency research efforts should address key technology barriers such as 

lowering the cost of hydrogen production, creating effective hydrogen storage, and 

developing affordable hydrogen fuel cells. OSTP will coordinate agency efforts, which 

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should support basic research in materials, electrochemistry, and advanced hydrogen 

production methods; development of components and manufacturing technologies; and, 

as appropriate, demonstration of systems and end-use applications and development of 

safety codes and interface standards. 

Research and Development Investment Criteria 

As an initiative of the President’s Management Agenda, the development of explicit R&D 

investment criteria builds on the best of the planning and assessment practices that R&D 

program managers use to plan and assess their programs. The Administration has worked with 

experts and stakeholders over the past two years to build upon lessons learned from previous and 

ongoing practice. 

This year, the content of the R&D investment criteria has not changed from last year, but OMB 

has worked to clarify their implementation, especially in relation to OMB’s Program Assessment 

Rating Tool (PART). Specifically, agencies should use the criteria as broad guidelines that apply 

at all levels of federally funded R&D efforts, and they should use the PART as the instrument to 

periodically evaluate compliance with the criteria at the program level. To make this possible, 

the R&D PART has been modified to clarify its alignment with the R&D criteria. 

The R&D criteria address not only planning, management, and prospective assessment but also 

retrospective assessment. Retrospective review of whether investments have been well-directed, 

efficient, and productive is essential for validating program design and instilling confidence that 

future investments will be wisely invested. Retrospective reviews should address continuing 

program relevance, quality, and successful performance to date. 

While the criteria are intended to apply to all types of R&D, the Administration is aware that 

predicting and assessing the outcomes of basic research in particular is never easy. 

Serendipitous results are often the most interesting and ultimately may have the most value. 

Taking risks and working towards difficult-to-attain goals are important aspects of good research 

management, and innovation and breakthroughs are among the results. However, there is no 

inherent conflict between these facts and a call for clearer information about program goals and 

performance towards achieving those goals. The Administration expects agencies to focus on 

improving the management of their research programs and adopting effective practices, and not 

on predicting the unpredictable. 

The R&D investment criteria have several potential benefits: 

• Use of the criteria allows policy makers to make decisions about programs based on 

information beyond anecdotes, prior-year funding levels, and lobbying of special interests. 

• Improving the process for selecting, planning, and managing R&D programs helps increase 

the productivity of the federal R&D portfolio and the return on taxpayer investment. 

• The R&D investment criteria will help communicate the Administration’s expectations for 

proper program management. 

• The criteria and implementation guidance set standards for information to be provided in 

program plans and budget justifications. 

• The processes and collected information promoted under the criteria will improve public 

understanding of the possible benefits and effectiveness of the federal investment in R&D. 

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To facilitate interagency discussion, dissemination and implementation of the R&D investment 

criteria, OSTP has commissioned a series of case studies that document and explain existing 

effective management practices in various research agencies. These documented management 

practices illustrate how agencies may be able to satisfy the investment criteria. The interagency 

working group convened under the NSTC will meet again in early June to critique the first case 

studies and select further good management practices for documentation. 

The Investment Criteria 

The Relevance, Quality, and Performance criteria apply to all R&D programs. Industry-relevant 

applied R&D must meet additional criteria. Together, these criteria can be used to assess the 

need, relevance, appropriateness, quality, and performance of federal R&D programs. 

I. Relevance 

R&D investments must have clear plans, must be relevant to national priorities, agency missions, 

relevant fields, and “customer” needs, and must justify their claim on taxpayer resources. 

Review committees should assess program objectives and goals on their relevance to national 

needs, “customer” needs, agency missions, and the field(s) of study the program strives to 

address. For example, the Joint DOE/NSF Nuclear Sciences Advisory Committee’s Long Range 

Plan and the Astronomy Decadal Surveys are the products of good planning processes because 

they articulate goals and priorities for research opportunities within and across their respective 

fields. Programs that directly address Presidential priorities may receive special consideration 

for support, with adequate documentation of their relevance to those priorities. 

OMB will work with some programs to identify quantitative metrics to estimate and compare 

potential benefits across programs with similar goals. Such comparisons may be within an 

agency or among agencies. 

A. Programs must have complete plans, with clear goals and priorities. 

Programs must provide complete plans, which include explicit statements of: 

- specific issues motivating the program; 

- broad goals and more specific tasks meant to address the issues; 

- priorities among goals and activities within the program; 

- human and capital resources anticipated; and 

- intended program outcomes, against which success may later be assessed. 

B. Programs must articulate the potential public benefits of the program. 

Programs must identify potential benefits, including added benefits beyond those of any 

similar efforts that have been or are being funded by the government or others. R&D 

benefits may include technologies and methods that could provide new options in the 

future, if the landscape of today’s needs and capabilities changes dramatically. Some 

programs and sub-program units may be required to quantitatively estimate expected 

benefits, which would include metrics to permit meaningful comparisons among 

programs that promise similar benefits. While all programs should try to articulate 

potential benefits, OMB and OSTP recognize the difficulty in predicting the outcomes of 

basic research. Discovery is a legitimate object of basic research, and some basic 

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research investments may be justified on external judgments of the opportunity for 

discovery. 

C. Programs must document their relevance to specific Presidential priorities to 

receive special consideration. 

Many areas of research warrant some level of federal funding. Nonetheless, the President 

has identified a few specific areas of research that are particularly important. To the 

extent a proposed project can document how it directly addresses one of these areas, it 

may be given preferential treatment. 

D. Program relevance to the needs of the Nation, of fields of science and technology, 

and of program “customers” must be assessed through prospective external review. 

Programs must be assessed on their relevance to agency missions, fields of science or 

technology, or other “customer” needs. A customer may be another program at the same 

or another agency, an interagency initiative or partnership, or a firm or other organization 

from another sector or country. As appropriate, programs must define a plan for regular 

reviews by primary customers of the program’s relevance to their needs. These programs 

must provide a plan for addressing the conclusions of external reviews. 

E. Program relevance to the needs of the Nation, of fields of science and technology, 

and of program “customers” must be assessed periodically through retrospective 

external review. 

Programs must periodically assess the need for the program and its relevance to 

customers against the original justifications. Programs must provide a plan for 

addressing the conclusions of external reviews. 

II. Quality 

Programs should maximize the quality of the R&D they fund through the use of a clearly stated, 

defensible method for awarding a significant majority of their funding. A customary method for 

promoting R&D quality is the use of a competitive, merit-based process. NSF’s process for the 

peer-reviewed, competitive award of its R&D grants is a good example. Justifications for 

processes other than competitive merit review may include “outside-the-box” thinking, a need 

for timeliness (e.g., R&D grants for rapid studies in response to an emergency), unique skills or 

facilities, or a proven record of outstanding performance (e.g., performance-based renewals). 

Programs must assess and report on the quality of current and past R&D. For example, NSF’s 

use of Committees of Visitors, which review NSF directorates, is an example of a good qualityassessment tool. OMB and OSTP encourage agencies to provide the means by which their 

programs may be benchmarked internationally or across agencies, which provides one indicator 

of program quality. 

A. Programs allocating funds through means other than a competitive, merit-based 

process must justify funding methods and document how quality is maintained. 

Programs must clearly describe how much of the requested funding will be broadly 

competitive based on merit, providing compelling justifications for R&D funding 

allocated through other means. (See OMB Circular A-11 for definitions of competitive 

merit review and other means of allocating federal research funding.) All program funds 

allocated through means other than unlimited competition must document the processes 

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they will use to distribute funds to each type of R&D performer (e.g., federal laboratories, 

federally funded R&D centers, universities). Programs are encouraged to use external 

assessment of the methods they use to allocate R&D and maintain program quality. 

B. Program quality must be assessed periodically through retrospective expert review. 

Programs must institute a plan for regular, external reviews of the quality of the 

program's research and research performers, including a plan to use the results from these 

reviews to guide future program decisions. Rolling reviews performed every 3-5 years 

by advisory committees can satisfy this requirement. Benchmarking of scientific 

leadership and other factors provides an effective means of assessing program quality 

relative to other programs, other agencies, and other countries. 

III. Performance 

R&D programs should maintain a set of high priority, multi-year R&D objectives with annual 

performance measures and milestones that show how one or more outcomes will be reached. 

Metrics should be defined not only to encourage individual program performance but also to 

promote, as appropriate, broader goals, such as innovation, cooperation, education, and 

dissemination of knowledge, applications, or tools. 

OMB encourages agencies to make the processes they use to satisfy the Government 

Performance and Results Act (GRPA) consistent with the goals and metrics they use to satisfy 

these R&D criteria. Satisfying the R&D performance criteria for a given program should serve 

to set and evaluate R&D performance goals for the purposes of GPRA. OMB expects goals and 

performance measures that satisfy the R&D criteria to be reflected in agency performance plans. 

Programs must demonstrate an ability to manage in a manner that produces identifiable results. 

At the same time, taking risks and working towards difficult-to-attain goals are important aspects 

of good research management, especially for basic research. The intent of the investment criteria 

is not to drive basic research programs to pursue less risky research that has a greater chance of 

success. Instead, the Administration will focus on improving the management of basic research 

programs. 

OMB will work with some programs to identify quantitative metrics to compare performance 

across programs with similar goals. Such comparisons may be within an agency or among 

agencies. 

Construction projects and facility operations will require additional performance metrics. Cost 

and schedule earned-value metrics for the construction of R&D facilities must be tracked and 

reported. Within DOE, the Office of Science’s formalized independent reviews of technical cost, 

scope, and schedule baselines and project management of construction projects (“Lehman 

Reviews”) are widely recognized as an effective practice for discovering and correcting 

problems involved with complex, one-of-a-kind construction projects. 

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A. Programs may be required to track and report relevant program inputs annually. 

Programs may be expected to report relevant program inputs, which could include 

statistics on overhead, intramural/extramural spending, infrastructure, and human capital. 

These inputs should be discussed with OMB. 

B. Programs must define appropriate output and outcome measures, schedules, and 

decision points. 

Programs must provide single- and multi-year R&D objectives, with annual performance 

measures, to track how the program will improve scientific understanding and its 

application. Programs must provide schedules with annual milestones for future 

competitions, decisions, and termination points, highlighting changes from previous 

schedules. Program proposals must define what would be a minimally effective program 

and a successful program. Agencies should define appropriate output and outcome 

measures for all R&D programs, but agencies should not expect fundamental basic 

research to be able to identify outcomes and measure performance in the same way that 

applied research or development are able to. Highlighting the results of basic research is 

important, but it should not come at the expense of risk-taking and innovation. For some 

basic research programs, OMB may accept the use of qualitative outcome measures and 

quantitative process metrics. Facilities programs must define metrics and methods (e.g., 

earned-value reporting) to track development costs and to assess the use and needs of 

operational facilities over time. If leadership in a particular field is a goal for a program 

or agency, OMB and OSTP encourage the use of benchmarks to assess the processes and 

outcomes of the program with respect to leadership. OMB encourages agencies to make 

the processes they use to satisfy GPRA consistent with the goals and metrics they use to 

satisfy these R&D criteria. 

C. Program performance must be retrospectively documented annually 

Programs must document performance against previously defined output and outcome 

metrics, including progress towards objectives, decisions, and termination points or other 

transitions. Programs with similar goals may be compared on the basis of their 

performance. OMB will work with agencies to identify such programs and appropriate 

metrics to enable such comparisons. 

IV. Criteria for R&D Programs Developing Technologies That Address Industry Issues 

The purpose of some R&D and technology demonstration programs and projects is to introduce 

some product or concept into the marketplace. However, some of these efforts engage in 

activities that industry is capable of doing and may discourage or even displace industry 

investment that would occur otherwise. Programs should avoid duplicating research in areas that 

are receiving funding from the private sector, especially for evolutionary advances and 

incremental improvements. For the purposes of assessing federal R&D investments, the 

following criteria should be used to assess industry-relevant R&D and demonstration projects, 

including, at OMB discretion, associated construction activities. 

OMB will work with programs to identify appropriate measures to compare potential benefits 

and performance across programs with similar goals, as well as ways to assess market relevance. 

9 
A. Programs and projects must articulate public benefits of the program using uniform 

benefit indicators across programs and projects with similar goals. 

In addition to the public benefits required in the general criteria, all industry-relevant 

programs and projects must identify and use uniform benefit indicators (including 

benefit-cost ratios) to enable comparisons of expected benefits across programs and 

projects. OMB will work with agencies to identify these indicators. 

B. Programs and projects must justify the appropriateness of federal investment. 

Programs and projects must demonstrate that industry investment is sub-optimal to 

develop a technology or system and explain why the development or acceleration of that 

technology or system is necessary to meet a federal mission or goals. 

C. Programs and projects must demonstrate that investment in R&D and 

demonstration activities is a more effective way to support the federal goals than 

other policy alternatives. 

When the federal government chooses to intervene to address market failures, there may 

be many policy alternatives to address those failures. Among other tools available to the 

government are legislation, tax policy, regulatory and enforcement efforts, and an 

integrated combination of these approaches. Agencies should consider that the 

legislation, tax policy or regulatory or enforcement mechanisms may already be in place 

to achieve a reasonable expectation of advancing the desired end. 

D. Programs and projects must document industry or market relevance, including 

readiness of the market to adopt technologies or other outputs. 

Programs must assess the likelihood that the target industry will be able to adopt the 

technology or other program outputs. The level of industry cost sharing or enforceable 

recoupment commitments in contracts are indicators of industry relevance. Agencies 

must be able to justify any demonstration activities with an economic analysis of the 

public and private returns on the public investment. 

E. Program performance plans and reports must include “off ramps” and transition 

points. 

In addition to the schedules and decision points defined in the general criteria, program 

plans should also identify whether, when, and how aspects of the program may be shifted 

to the private sector. 

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