U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

90–577 PDF 2005

S. HRG. 107–1111

TECHNOLOGY ADMINISTRATION AND THE

NATIONAL INSTITUTE OF STANDARDS AND

TECHNOLOGY, INCLUDING THE ADVANCED

TECHNOLOGY PROGRAM

HEARING

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION, 

UNITED STATES SENATE,

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

APRIL 16, 2002

Printed for the use of the Committee on Commerce, Science, and Transportation

(

(II)

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

ERNEST F. HOLLINGS, South Carolina, Chairman 

DANIEL K. INOUYE, Hawaii 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

JOHN B. BREAUX, Louisiana 

BYRON L. DORGAN, North Dakota 

RON WYDEN, Oregon 

MAX CLELAND, Georgia 

BARBARA BOXER, California 

JOHN EDWARDS, North Carolina 

JEAN CARNAHAN, Missouri 

BILL NELSON, Florida 

JOHN MCCAIN, Arizona 

TED STEVENS, Alaska 

CONRAD BURNS, Montana 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

SAM BROWNBACK, Kansas 

GORDON SMITH, Oregon 

PETER G. FITZGERALD, Illinois 

JOHN ENSIGN, Nevada 

GEORGE ALLEN, Virginia 

KEVIN D. KAYES, Democratic Staff Director 

MOSES BOYD, Democratic Chief Counsel 

JEANNE BUMPUS, Republican Staff Director and General Counsel 

(III)

C O N T E N T S 

Page 

Hearing held on April 16, 2002 .............................................................................. 1

Statement of Senator Allen ..................................................................................... 16

Prepared statement .......................................................................................... 16

Letter from Jeffery Payne, President and CEO, Cigital, Inc. ....................... 17

Statement of Senator Hollings ............................................................................... 1

Prepared statement .......................................................................................... 2

Statement of Senator McCain ................................................................................. 3

Prepared statement .......................................................................................... 4

Statement of Senator Nelson .................................................................................. 23

Statement of Senator Wyden .................................................................................. 21

WITNESSES

Armstrong, Anne A., President, Virginia’s Center for Innovative Technology ... 25

Prepared statement .......................................................................................... 27

Bodman, Hon. Samuel, Ph.D., Deputy Secretary, Department of Commerce .... 5

Prepared statement .......................................................................................... 8

Branscomb, Lewis M., Ph.D., Professor, Harvard University .............................. 29

Prepared statement .......................................................................................... 31

Donnelly, Scott, Senior Vice President for Global Research, General Electric 

Company ............................................................................................................... 34

Prepared statement .......................................................................................... 36

APPENDIX

Response to Written Questions Submitted by Hon. John B. Breaux to

Hon. Samuel Bodman .......................................................................................... 57

Response to Written Questions Submitted by Hon. Ernest F. Hollings to 

Hon. Samuel Bodman .......................................................................................... 56

Response to Written Questions Submitted by Hon. John McCain to: 

Anne A. Armstrong ........................................................................................... 57

Hon. Samuel Bodman ....................................................................................... 43

Dr. Lewis Branscomb ....................................................................................... 58

Scott Donnelly ................................................................................................... 61

(1)

TECHNOLOGY ADMINISTRATION AND THE

NATIONAL INSTITUTE OF STANDARDS

AND TECHNOLOGY, INCLUDING THE

ADVANCED TECHNOLOGY PROGRAM 

TUESDAY, APRIL 16, 2002

U.S. SENATE, 

COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, 

Washington, DC. 

The Committee met, pursuant to notice, at 9:31 a.m. in room

SR–253, Russell Senate Office Building, Hon. Ernest F. Hollings, 

Chairman of the Committee, presiding. 

OPENING STATEMENT OF HON. ERNEST F. HOLLINGS,

U.S. SENATOR FROM SOUTH CAROLINA 

The CHAIRMAN. Good morning. The Committee will come to 

order. We are pleased this morning to conduct our hearing relative 

to the programs of the Technology Administration and NIST, particularly the ATP program. I want to put my full statement in the 

record and let me shorten it by observing that this ATP program 

has been tried and true. We have actually got great results—ATP 

has been studied to death in a sense. It’s projects have improved 

automobile manufacturing processes, reduced the cost of blood and 

immune cell production, and developed new material for prosthetic 

devices, all of which have more than paid for all of the projects the 

ATP program has funded. 

The reason I emphasize this is that it is always a struggle seemingly with the Office of Management and Budget on the cost of the 

program. Every attempt has been made over the years to eliminate 

the program, bluntly. 

I have had the pleasure of working with Secretary Bodman—and 

we welcome you here today, Secretary Bodman—on the premise 

and promise of Secretary Evans relative to trying to fine-tune the 

ATP program to the satisfaction of the Administration. With regard 

to those changes, we go along with the participation of the universities and various other suggestions, save and excepting that 

recoupment. 

We did away with recoupment in 1992, some ten years ago. We 

found it counterproductive in the sense it discouraged companies 

from participating on the one hand. On the other hand, we noted 

the Administration has suggested, essentially, a five times taxation 

for success of the technology itself. So we welcome you. 

Let me yield to my distinguished ranking member here. 

[The prepared statement of Senator Hollings follows:]

2

PREPARED STATEMENT OF HON. ERNEST F. HOLLINGS,

U.S. SENATOR FROM SOUTH CAROLINA

Today’s hearing will examine the programs of the Department of Commerce’s 

Technology Administration and the National Institute of Standards and Technology, 

with particular emphasis on the Advanced Technology Program. We are pleased to 

have Deputy Secretary of Commerce Dr. Sam Bodman, as well as our other distinguished witnesses, here with us today. 

NIST is really a hidden treasure. Twice in the past five years, NIST Scientists 

have shared in the Physics Nobel Prize. Whether they are investigating the collapse 

of the world trade center, making small manufacturers better, sponsoring innovative 

research, or improving timekeeping, the people of this little-noticed agency continue 

to do amazing work, and I commend them. 

Nonetheless, we continue to be embroiled in an annual tug-of-war on funding for 

the Advanced Technology Program, known as ATP. I am encouraged that Secretary 

Evans and Deputy Secretary Bodman want to stabilize this program. 

After all, the benefits of the program are well-documented. The program has been 

studied thoroughly from individual case studies, to comprehensive examinations like 

the 2001 study for the National Academy of Sciences’ National Research Council. 

What the analysis shows time and time again is that the ATP is stimulating collaboration, accelerating the development of high-risk technologies, and paying off for the 

nation. 

The Commerce Department has proposed several changes to the ATP. I look forward to examining each of these changes and hope to include many of them in a 

NIST authorization bill this year. 

However, the proposal for recoupment of up to 5 times the original amount of 

funding is not acceptable. First, the program has tried recoupment and failed. The 

Department cites the Clean Coal Technology Program of the Department of Energy 

as a poster child for recoupment. That program—established in 1986—has recovered 

approximately one-tenth of one percent of the $1.1 billion invested in completed 

projects. 

More importantly, recoupment discourages companies from participating in the 

program. When they do participate, a cost recovery provision encourages the companies to say that the enabling ATP research had no impact on successful products. 

In another ten years, supporters of the program will have no success stories to tell 

and through recoupment, we will have done what opponents of the program have 

failed to do for ten years, kill ATP. 

And what successes the program has had. Since its inception in 1989 this industry-led, competitive, and cost-shared program has helped the U.S. develop the next 

generation of breakthrough technologies in advance of its foreign competitors. 

On the second panel, we will hear from Scott Donnelly of GE. His company, with 

ATP funding, developed a new method to produce the X-ray panels that are the 

heart of a new digital mammography system. This system is giving women and 

their doctors access to better, cheaper digital mammograms. 

A March 1999 study found that future returns from just three of the completed 

ATP projects—improving automobile manufacturing processes, reducing the cost of 

blood and immune cell production, and using a new material for prosthesis devices—would pay for all projects funded to date by the ATP. 

The ATP is not the only well-regarded program that is threatened. In spite of rave 

reviews and dramatic successes, the Administration has proposed to eliminate Federal support for Manufacturing Extension Partnership Centers in FY 2003. 

Ironically, these MEP Centers help fulfill one of the top priorities stated in the 

Administration’s budget: ‘‘revitalize the economy and create jobs.’’ MEP helps small 

manufacturers stay competitive and, in 2000, helped these businesses attain $2.3 

billion in increased or retained sales, save costs of $480 million, and create or retain 

more than 25,000 jobs. 

Support for MEP is strong. Members of the Senate have received approximately 

8,000 letters from manufacturers and private consultants urging us to continue to 

support the program. 

I look forward to examining these and other related issues and to the testimony 

of our distinguished witnesses.

3

STATEMENT OF HON. JOHN MCCAIN,

U.S. SENATOR FROM ARIZONA 

Senator MCCAIN. Thank you, Mr. Chairman. Thanks for calling 

the hearing today. I want to thank our witnesses for appearing before the Committee. 

As we look forward to the twenty-first century, it is impossible 

to discuss the future without considering the role of technology. In 

the past the United States has focused the majority of its research 

and development funds towards defense. However, recent analyses 

show that Federal R&D funding has shifted toward the civilian 

side. An essential element of a modern economy is a well-educated, 

versatile work force able to conduct R&D and to convert its results 

into innovative products, processes, and services. We must continue 

to refine our innovation models to ensure the United States maintains its position of leadership in science and technology development, given the constantly changing nature of the world. 

Today we will review the Technology Administration at the Department of Commerce and its role in the Federal Government. 

The Technology Administration has broad responsibilities, ranging 

from space commercialization to publication of technical documents 

to nanotechnology to local building codes. The quality of work conducted at its laboratories in Gaithersburg, Maryland and Boulder, 

Colorado is evident by the awarding of two Nobel Prizes to NIST 

researchers, Dr. Bill Phillips and Dr. Eric Cornell, in the past 5 

years. To Dr. Bodman and the many other engineers and scientists 

at the laboratory, we look forward to your third award in the near 

future. 

This year’s budget request, as usual, is not without controversy. 

Usually Advanced Technology Program funding level is a point of 

contention. This year the controversy extends into the Manufacturing Extension Partnership Program. I understand that the administration had to make some tough choices based upon limited 

resources. It appears the administration made a decision to fund 

ATP at $100 million above last year’s request while cutting MEP 

funding by $100 million below last year’s request. 

Although the administration stated that the decision to reduce 

MEP funding was based on retaining the 6-year sunset envisioned 

in the original statute that created the MEP program, the sunset 

was repealed in 1998. 

I look forward to hearing not only what criteria were used to 

reach these budgetary decisions, but also the results of the evaluations of the ATP and MEP programs. I think it would be helpful 

to understand how it is in the best interests of the country to take 

away millions of dollars in a program which provides assistance to 

small manufacturers in adopting new technologies, processes, and 

business practices and give these millions to a small number of 

companies, including Fortune 500 companies, for high-risk longterm research. 

In the spirit of making tough decisions, I would also like to understand why the Teacher Science and Technology Enhancement 

Program that was created in 1998 by the Congress to work with 

high school math and science teachers during the summer months 

to help them better understand the relationship between technology and commerce, did not receive any consideration in this 

4

budget request. Given the importance that everyone is placing on 

math and science education and realizing the economic potential of 

technology, how is this a loser? 

I know there are also other programs in which Members of this 

Committee have expressed an interest that are not included in the 

budget request. I hope we can reach a resolution on these matters. 

Finally, Mr. Chairman, I am interested in hearing about activities at the Technology Administration concerning climate change. 

In the energy bill that is currently on the Senate floor there are 

several provisions that will have an impact on the programs of the 

Department. It would be useful to hear the Department’s evaluation of these provisions. 

Thank you, Mr. Chairman. I look forward to the witnesses’ testimony. 

[The prepared statement of Senator McCain follows:]

PREPARED STATEMENT OF HON. JOHN MCCAIN, U.S. SENATOR FROM ARIZONA

Mr. Chairman, thank you for calling this hearing today. I also thank our witnesses for appearing before the Committee. 

As we look to the 21st century, it is impossible to discuss the future without considering the role of technology. In the past, the United States has focused the majority of its research and development funds toward defense. However, recent analysis 

show that Federal R&D funding has shifted toward the civilian side. 

The essential element of a modern economy is a well-educated, versatile workforce 

able to conduct R&D and to convert its results into innovative products, processes, 

and services. We must continue to refine our innovation models to ensure that the 

United States maintains its position of leadership in science and technology development, given the constantly changing nature of the world. We must ensure that our 

research continues to lead to innovations which are fueled by a technically savvy 

workforce, and is supported by appropriate technology transfer and commercialization activities creating further economic growth. 

Today, we will review the Technology Administration at the Department of Commerce and its role in the Federal government. I hope that we can learn more about 

the vision for the organization. Because a vision without a strategy is just an illusion, I am also interested in hearing about the associated strategy. 

The Technology Administration has broad responsibilities ranging from space 

commercialization, to publication of technical documents, to nanotechnology, to local 

building codes. The quality of work conducted at its laboratories in Gaithersburg, 

Maryland and Boulder, Colorado is evident by the awarding of two Nobel Prizes to 

NIST researchers, Dr. Bill Phillips and Dr. Eric Cornell, in the past five years. To 

Dr. Bodman and the many other engineers and scientists at the laboratory, we look 

forward to your third award in the near future. 

This year’s budget request, as usual, is not without controversy. Usually, the Advanced Technology Program (ATP) funding level is the point of contention. This 

year, the controversy extends into the Manufacturing Extension Partnership (MEP) 

program. 

I understand that the Administration had to make some tough choices based upon 

limited resources. It appears that the Administration made a decision to fund ATP 

at $100 million above last year’s request while cutting MEP funding by $100 million 

below last year’s request. Although the Administration stated that the decision to 

reduce MEP funding was based on retaining the six-year sunset envisioned in the 

original statute that created the MEP program, the sunset was repealed in 1998. 

I look forward to hearing not only what criteria were used to reach these budgetary decisions, but also the results of the evaluations of the ATP and MEP programs. I think it would be helpful to understand how it is in the best interest of 

the country to take away millions of dollars in a program which provides assistance 

for small manufacturers in adopting new technologies, processes, and business practices, and give these millions to a small number of companies, including Fortune 

500 companies, for ‘‘high-risk’’ long-term research. 

In the spirit of making tough decisions, I would also like to understand why the 

Teacher Science and Technology Enhancement Program that was created in 1998 

by the Congress to work with high school math and science teachers during the 

5

summer months to help them better understand the relationship between technology and commerce did not receive any consideration in this budget request. 

Given the importance that everyone is placing on math and science education and 

realizing the economic potential of technology, how was this a loser? 

I know there are also other programs in which Members of this Committee have 

expressed an interest that are not included in the budget request. I hope we can 

reach a resolution on these matters. 

Finally, Mr. Chairman, I am interested in hearing about activities at the Technology Administration concerning climate change. In the Energy bill that is currently on the Senate floor, there are several provisions that will have an impact on 

the programs at the Department. It would be useful to hear the Department’s evaluations of these provisions. 

Thank you Mr. Chairman, and I look forward to the witnesses’ testimony.

The CHAIRMAN. Thank you. 

Secretary Bodman, we would be delighted to hear from you at 

this time. We include your statement in its entirety in the record 

and you can deliver it as you wish or summarize, either way. 

STATEMENT OF HON. SAMUEL BODMAN, PH.D.,

DEPUTY SECRETARY, DEPARTMENT OF COMMERCE 

Dr. BODMAN. Well, I have a summary statement. Chairman Hollings, Ranking Member McCain, thank you very much for your invitation to be here. It is a privilege to be here to talk about something near and dear to my heart, namely technology and the commercialization of technology. 

I know that the Committee has particular interest in the proposals related to the ATP program and I am happy to discuss our 

thinking related to that. I also want to say at the outset that I recognize that the level of funding in the administration’s request is 

disappointing in some areas and to some Members of the Committee. That has already been made clear. But this has been a 

challenging budget year. As you well know, the priorities of the administration have been focused on the war on terror and on homeland security, and therefore our requests for the various programs 

here represent our best judgment as to how to balance the needs 

of those priorities versus the various science programs that are of 

interest here. 

TA and NIST are committed to maximizing the contribution of 

technology to our Nation’s economy. They work with the private 

sector, with our universities and other agencies to spur innovation 

and entrepreneurship. More than ever before, as Senator McCain 

has said, technology is vital to maintaining and building our country’s strength. 

It is no accident that our country leads the world in technology. 

Our achievements are in my view a dividend of funding that was 

started in the forties, largely from the Office of Naval Research, 

that helped establish the technological beachheads in many of our 

research-based institutions, which has then spread nationally to 

most of our universities in America. 

Private enterprise takes the lead in ensuring that the United 

States remains on the cutting edge of technology from a commercial standpoint. But our government, our Federal Government, 

plays a critical role in enabling the creation of new technology for 

private industry. The Technology Administration is the principal 

Federal agency with the explicit mission to maximize technology’s 

contribution to our economy. TA is the leading portal, a bully pulVerDate 0ct 09 2002 07:48 Feb 24, 2005 Jkt 090577 PO 00000 Frm 00009 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\90577.TXT JACK PsN: JACKF
6

pit, if you will, for the Federal Government in its relations with the 

technology industry. The Under Secretary and the Office of Technology Policy coordinate policy for the government in partnership 

with industry and the technical or the high tech community. 

Recently, TA hosted a number of workshops, several of which I 

have chaired myself or co-chaired. Topics have included the environment for innovation and R and D in the United States, the factors affecting domestic demand for broadband technologies, the 

state of technological development in the European Union, and the 

flow of venture capital in Russia. 

As this Committee well knows, NIST is a world-class organization that performs cutting edge research. NIST programs support 

homeland security. Currently NIST conducts more than 75 projects 

that aid law enforcement, military operations, emergency services, 

airport and building security, and cyber security. On March 29th, 

NIST and FEMA entered into a memorandum of understanding 

that establishes a framework under which NIST will be a research 

source for FEMA in disaster prevention and homeland security. 

The administration requests a total budget of $578 million for 

NIST, which represents a total decrease of $103 million from the 

fiscal 2002 appropriation. Within this amount, $396 million is provided for NIST labs, or a $75 million increase relative to 2002, of 

which $50 million will be used to complete and equip the Advanced 

Measurement Laboratory now under construction. 

The new laboratory is a unique facility. It is to be completed in 

late calendar year 2003. Key technology industries will require extremely precise measurements and standards at the atomic scale 

and growing demand for these capabilities can only be met with 

the special equipment and the highly controlled environment in 

this new lab. 

NIST will also undertake some long-overdue improvements at 

NIST’s Boulder, Colorado, laboratories. Most of these buildings are 

over 50 years old. I would respond, if I may, to Senator McCain’s 

comment about our next Nobel Prize winner coming along, which 

I devoutly hope will be the case, but I would tell you, based on my 

eight months of experience in working for the government, I have 

found that our physical facilities do not seem to attract maintenance funds in the same way that happens in private industry. 

So we find ourselves with a physical infrastructure, of which 

Boulder is an example, that is not conducive to world-class research, and in fact I think it is raised from time to time as a reason 

that we might have difficulty holding onto the kinds of scientists 

that we wish to keep. 

The plans also are to expand our operations out in Gaithersburg 

at the Center for Neutron Research. This center is the best facility 

of its kind in the United States and is now chockablock with demand for time on it and we wish to expand the facility. 

The ATP program has been, as has been noted, a subject of perennial debate. Last summer Secretary Evans initiated a review 

with the intention of stabilizing the program. He asked me to head 

that up. As has been mentioned, we have confirmed that which the 

Committee already knew, namely that this has been a very effective program. We nevertheless concluded that some reforms could 

7

be put in place that would improve the performance of the program. 

Specifically, we have proposed reforms that include first recognizing the significant value of the resources that institutions of 

higher education offer by allowing universities to lead ATP programs; secondly, to allow universities to negotiate with joint venture partners for the right to intellectual property, which they are 

denied permission to do under current law. 

It is our view that it would be appropriate to limit very large 

companies’ participation in the ATP program to joint ventures. We 

do have a proposal that we believe in that—again, this relates to 

the funding stress that we find ourselves under—that some kind of 

cost recoupment for successful projects, a royalty, if you will, from 

successful awards would be appropriate. 

We have recommended that we modify ATP project management 

activities and selection criteria to ensure that the program funds 

technical innovation and development. This is a technology program, as to be contrasted with marketing or other commercialization activities. 

Then lastly, to ensure that ATP’s project evaluation boards 

where appropriate have additional private sector non-proprietary 

input as to whether a specific technology is truly innovative and 

not already being adequately supported by the private sector. You 

can read into that some input from the venture capital or angel investor community we think would be useful. 

We would like to work with the Congress to implement these reforms. The Secretary and I have been deeply involved in this issue. 

Personally, I have done so myself and spent a good deal of time on 

it. We have asked for a budget of $108 million, which would demonstrate our commitment to the program, of which $35 million 

would be for new projects and the balance would be for continuation of those projects which began in prior years. 

In tomorrow’s Federal Register the Department will announce 

the fiscal 2002 competition for ATP. We plan to hold a single competition open to all technology areas. Those proposals received by 

the first deadline in June will be eligible for funding this fiscal 

year. 

With respect to the MEP program, our $12.9 million request for 

the MEP partnership would return that program, as has been mentioned, to its original plan, which called for the phaseout of Federal 

moneys after 6 years of funding. The administration’s proposal 

would continue NIST funding for two centers which are less than 

6 years old and continue full funding for those administrative centralized activities that are appropriate for coordinating the network 

of some 60 MEP centers, at least in the near term. 

This past year was a notable one for the Baldrige program. We 

awarded our first Malcolm Baldrige Awards in the education category. Two school districts, the Chugach, Alaska, School District 

and Pearl River, New York, School District, as well as the University of Wisconsin at Stout, accounted for three of the five awards. 

I may mention in passing that the young man, a 17-year-old senior from Chugach, Alaska, gave the acceptance speech and made it 

exceedingly difficult on those who followed him to the podium, who 

8

were 20 years older and had to fight to do as good a job as he did 

in his acceptance speech. 

There was a column, David Broder’s column, this past Sunday 

about the success of the Chugach School District. Apparently the 

word is getting out that working hard and applying the Baldrige 

quality principles can help our educational institutions, and we are 

optimistic about future awards in this field. 

That concludes my introductory remarks, sir, and I would be 

happy to try to respond to questions. 

[The prepared statement of Dr. Bodman follows:]

PREPARED STATEMENT OF HON. SAMUEL BODMAN, PH.D,

DEPUTY SECRETARY, DEPARTMENT OF COMMERCE

Chairman Hollings, Ranking Member McCain, and Members of the Committee, I 

thank you for this opportunity to testify in support of Congressional authorization 

of the programs of the Technology Administration and the National Institute of 

Standards and Technology (NIST) within the Department of Commerce. I also understand that the Committee wishes to focus particular attention on the reforms 

that the Administration has proposed concerning the Advanced Technology Program. I look forward to discussing them with you today. 

Technology Administration (TA) and NIST Programs: their goals and importance. 

TA and NIST are committed to maximizing the contribution of technology to our 

national economy. They also work with the private sector and other agencies to spur 

the innovation and entrepreneurship that lead to more high-quality, high-paying 

jobs, which in turn foster our country’s economic security. A strong economy and national defense are not only the bedrock of our quality of life and global leadership, 

but of our very freedom. More than ever before, technology is vital to maintaining 

and building these U.S. strengths. 

As we have all witnessed in the past few months, technology is our force-multiplier in the war on terrorism and in homeland security. Thanks to technology, we 

can put the world’s finest tools in the hands of our military, law enforcement and 

public safety personnel. Our advanced technologies are significantly reducing the 

risk to these American men and women in service to their communities and their 

country. There is every reason to believe that, in the years ahead, technology will 

continue to be a significant force in our economy and in the defense of our nation. 

I would like to report to the Committee that on March 29th, NIST and FEMA 

entered into a Memorandum of Understanding (MOU) that we believe will significantly enhance the effectiveness of the two agencies’ cooperation. The MOU establishes a framework under which NIST will be a research resource for FEMA in the 

areas of disaster prevention and homeland security. 

It is no accident that the United States leads the world in sophisticated technology, both civilian and defense. Our achievements are the dividends that flow 

from sustained public and private sector investments in research and development 

since the late 1940’s, coupled with America’s entrepreneurial spirit and willingness 

to take risks. While under our economic system private enterprise takes the lead 

in ensuring that the United States remains on the cutting edge of technology and 

stays competitive in the world’s high-tech markets, the Federal government plays 

a critical enabling role. The U.S. Government, in recent decades, has strongly supported scientific and technological research, fostered excellence in standards development, and maintained laws that foster innovation. These activities—in which the 

Technology Administration plays a key part—have not only helped our industries 

become technology leaders, but have caused our universities to become world-class 

scientific and technological research institutions. I would like briefly to outline some 

of the key operational elements and programs of TA and NIST that support this 

role. 

The Technology Administration 

The Office of Technology Policy. In support of the President’s priorities for science, 

technology, and U.S. competitiveness, the Technology Administration’s Office of 

Technology Policy develops and advocates national policies and initiatives that support the use of technology to build America’s economic strength. Its activities include:

9

• Promoting innovation through leadership and advocacy of policies that encourage research, development, and commercialization of new technologies (such as 

nanotechnology and biotechnology);

• Representing the interests of U.S. innovators and entrepreneurs in international forums and partnerships;

• Working with states, localities, and Federal labs to institute policies that promote technology-led economic development;

• Fostering national workforce policies that promote and improve the education 

and training of future scientists and engineers, and by recognizing excellence 

through the National Medal of Technology program;

• Working with industry to employ technologies, such as telemedicine and other 

e-commerce applications, in new ways for greater productivity and higher standards of living, and encouraging more students to pursue scientific and technological careers through the GetTech public-private partnership;

• Maintaining close communication and understanding between government, industry and academia on technological and innovation issues. Recently TA has 

hosted a series of workshops, several of which I have chaired, that build mutual 

understanding of important market trends and developments. Topics have included the environment for innovation and R&D in the U.S., the factors affecting domestic demand for broadband technologies, the state of technological development in the EU, and the flow of venture capital in Russia.

The National Technical Information Service (NTIS). The overall role of NTIS is 

to enhance public access to Federal ly generated scientific and technical information. 

I am pleased to report that NTIS is performing this important work on a self-sustaining basis. Part of its revenue is derived from the sale of technical reports. But, 

consistent with Congress’ 1988 mandate that NTIS develop new ways to disseminate information and its 1992 mandate to focus on electronic media, NTIS is also 

generating revenue through services to other Federal agencies that help them communicate more effectively with their own constituencies online. 

The National Institute of Standards and Technology (NIST). 

As this Committee well knows, NIST is a world-class organization that performs 

cutting edge research driven by its mission of developing and promoting measurements, standards, and technology to enhance productivity, facilitate trade, and improve the quality of life. 

NIST, has just begun its second century of service to the Nation, and in this period it has already produced some notable achievements. In 2001, for the second 

time in five years, a NIST scientist won the Nobel Prize in Physics, the ultimate 

recognition in science. This time, NIST’s Eric Cornell, along with a colleague from 

the University of Colorado and another from MIT, won the prize for creating an entirely new state of matter, called a Bose-Einstein condensate. This super-cold creation, first accomplished in 1995, has launched a new branch of atomic physics and 

unlocked a potential treasure trove of discoveries and new technologies. The work 

of Cornell and his colleagues builds on the contributions of NIST’s 1997 Nobel Prize 

winner, Bill Phillips, who perfected methods for trapping and cooling atoms with lasers. This capability is now exploited in NIST’s newest atomic clock, which neither 

gains nor loses as much as one-billionth of a second in 20 years. 

NIST’s standards and measurements activities actively support efforts to 

strengthen homeland security. Currently, NIST is conducting more than 75 projects 

that support law enforcement, military operations, emergency services, airport and 

building security, cyber security, and efforts to develop new types of security technologies. NIST is truly the ‘‘crown jewel’’ of the Federal laboratory system. 

Three particular ongoing or planned initiatives address homeland security. The 

first of these deals with current building design standards and practices. Current 

building design practices do not consider fire as a design condition or the consequences of injected fuels or other highly flammable materials. Architects, not engineers, specify fire protection in buildings, and the current testing standards are 

based on work carried out by NIST in the 1920s. In addition, progressive collapse—

the spread of failure by a chain reaction disproportionate to the triggering event—

is an important issue that will be investigated in connection with the World Trade 

Center collapse and was responsible for the high number of deaths in the 1995 

bombing of the Federal building in Oklahoma City. Yet there are no U.S. standards, 

codes, and practices to assess and reduce this vulnerability. Beyond designing buildings that are better able physically to withstand major disasters, the development 

of ‘‘intelligent’’ buildings could significantly affect the outcome in terms of lives 

saved. 

10

For this and other reasons, NIST is proposing to increase the resources devoted 

to its Program for Accelerating Critical Information Technologies. This increase in 

emphasis will support the development of networked systems of embedded devices 

(‘‘EmNets’’) to detect, prevent, and respond to natural and human-caused disasters. 

As computing device costs decline and capabilities increase, devices and sensors will 

be embedded in buildings, office spaces, manufacturing floors, transportation medians, and appliances and will be interconnected using wired or wireless networks. 

EmNets could offer enormous benefits to personnel responding to a disaster, providing substantial amounts of information in real time that could help to save lives 

and resources. 

NIST’s third new initiative in support of homeland security involves the Computer 

Security Expert Assist Team. This team, based at NIST, assists other Federal agencies on a cost-reimbursable basis. Federal agencies are taking action to improve security, but most do not understand what actions to take or in what order. NIST staff 

includes world leaders in all aspects of information security. 

The Advanced Technology Program. The Advanced Technology Program (ATP) has 

been the subject of perennial debate that has hindered its stability and effectiveness. Last summer, Secretary Evans initiated a review of the Program with a view 

toward resolving this debate. The results of that review are outlined in a report, 

The Advanced Technology Program: Reform with a Purpose, which was issued earlier this year. 

Based on the Department’s careful review and analysis of ATP, the report highlights important reforms for the Program and more clearly defines its role in the 

R&D enterprise. Technologies developed through ATP have significant potential to 

bring economic growth and benefits to the entire Nation. Nevertheless, our review 

concluded that some reforms are needed to provide ATP with the proper tools and 

direction it needs in order to be effective in the 21st century. For example, much 

has changed since the Program’s inception over a decade ago, such as the increasingly important role of universities in innovative activity. Despite this expansion in 

their R&D role, universities may not, under current law, lead ATP joint ventures 

or hold rights in the intellectual property that results from ATP-funded research. 

The Program needs to respond to this and other changes in the research and business environment. Specifically, the proposed reforms include:

• Recognizing the significant value of the resources that institutions of higher 

education offer by allowing universities to lead ATP joint ventures;

• Offering universities increased incentive to participate in developing commercially relevant technologies by allowing them to negotiate with joint venture 

partners over the rights to hold the intellectual property that results from research;

• Limiting very large companies’ participation in ATP to joint ventures. ATP support for companies of Fortune 500 size as single applicants is inappropriate. 

However, in recognition of the economic value of the diffusion of knowledge—

as well as other national benefits that arise from large firm participation in 

joint ventures—very large companies should be permitted to receive ATP 

awards, although only as part of a joint venture;

• Allowing recoupment from companies, and reinvestment into the Program, of a 

percentage of revenues derived from successfully commercialized awards. To accomplish this, ATP-funded companies that achieve commercialization would pay 

an annual royalty to the government of 5 percent of any gross product revenues, 

up to 500 percent of the amount of the original award;

• Modifying ATP project management activities and selection criteria to ensure 

that the Program funds technological innovation and development, as contrasted with marketing or other commercialization activities; and

• Ensuring that ATP’s project evaluation boards, where appropriate, have additional private-sector, non-proprietary input as to whether a specific technology 

is truly innovative and not already being adequately supported by the private 

sector.

We want to work with the Congress on the implementation of appropriate reforms, including recoupment of the government’s investment in profitable ventures, 

which can be re-invested into the Program. In this way the stability and effectiveness of the Program, we believe, can be greatly improved. The Secretary and I have 

been personally involved in this issue and feel strongly about the proposed reforms. 

The Administration’s proposed budget of $107.9 million demonstrates our commitment to an enhanced ATP. 

NIST Laboratory Initiatives. For the upcoming fiscal year, the Administration has 

requested a budget of $396.4 million, an increase of slightly more than $75 million 

11

over last year’s appropriation. Of this amount, $50 million will be used to complete 

and equip NIST’s state-of-the-art Advanced Measurement Laboratory, now under 

construction. A facility like no other in the world, the Advanced Measurement Laboratory is due to be completed in late 2003. 

The Advanced Measurement Laboratory (AML) is extremely important to the Nation’s technology future. Its unique, highly controlled environment is essential to 

NIST’s ability to develop necessary capabilities and tools. High-technology industries need advanced measurement methods and standards to efficiently develop and 

produce new products and services. The semiconductor, telecommunications, data 

storage, biotechnology, and other key technology industries already require extremely precise measurements and standards that are approaching atomic scale. 

Growing demand for these and other exceedingly accurate measurement capabilities 

can only be met with special equipment in the unique AML environment. 

NIST is also planning construction and renovation activities that will include 

long-overdue improvements at NIST’s Boulder, Colorado, laboratories, where most 

of the buildings are nearly 50 years old. Facility-related problems at the Boulder 

campus include severe temperature fluctuations and power interruptions that often 

threaten the quality of NIST data; power outages, spikes, and brownouts that damage sensitive equipment; and poor heating and air conditioning controls that have 

prevented the on-time delivery of specialized superconducting chips to defense contractors, instrument makers, and other NIST customers. 

Key initiatives of the NIST laboratories will help to achieve the President’s aim 

to leverage the Nation’s technology resources to speed progress on several security 

fronts. For example, NIST plans to expand operations and strengthen research capabilities at the NIST Center for Neutron Research. This Center is the best and most 

productive facility of its kind in the United States and among the best in the world. 

As growing numbers of researchers are discovering, neutrons are incredibly useful 

probes. Requests for ‘‘beam time’’ (experimental measuring time) at this facility 

greatly exceed the Center’s existing capacity. We plan to take steps to meet this demand for what is a truly unique resource for U.S. science. NIST will build staff expertise for the development of new instruments and capabilities that will allow the 

agency to increase the number of users by a minimum of 25 percent, from approximately 1,750 to 2,300 per year, and strengthen key program areas ranging from materials science to biology to fuel-cell research. 

NIST also plans to expand its program in nanotechnology, an exceptionally promising area in which NIST is already a leader. Miniature technologies are important 

in many fields, including health care, semiconductors, information technology, biotechnology and data storage—many of which applications are important to homeland and national security. Nearly all industrial sectors plan to exploit 

nanotechnology, and most of their plans call for appropriately scaled measurements 

and standards—NIST’s specialty. 

The Manufacturing Extension Partnership Program (MEP). The original blueprint 

for MEP called for NIST to provide cost-share support to new centers in the network 

during their crucial start-up years, after which the Federal funding would be slowly 

phased out and the centers would become self-sufficient. The $12.9 million FY 2003 

budget request would return MEP to this original plan, which called for the phase 

out of Federal monies to centers after six years of funding. The Administration’s 

proposed budget will continue NIST cost-share funding for two centers that are less 

than six years old, while allowing MEP to continue to provide full technical and 

product support and coordination for the network of centers. 

Malcolm Baldrige National Quality Program. This past year was an especially notable one for the Baldrige Program. It awarded its first Malcolm Baldrige National 

Quality Awards in the education category. Two school districts—Chugach, Alaska, 

and Pearl River, New York—and one university—Stout University in Wisconsin—

accounted for three of the five awards given this year. These award winners will 

be excellent role models for 21st century education organizations. We are optimistic 

that, in the years to come, adoption of the Baldrige criteria for performance excellence will spread across the education sector. As it does, we anticipate that the Program will motivate the same kind of revolution in the quality of American education 

that it helped to launch in U.S. industry. 

Mr. Chairman, I thank you for the opportunity to address the Committee on these 

important issues. I will be happy to answer questions you may have.

The CHAIRMAN. Secretary Bodman, let the record show that you 

and I have been conferring and also with Secretary Evans—I have 

the highest regard for both you and the Secretary—in trying to iron 

this controversy regarding ATP out, because I think you folks have 

12

the understanding and want to make this program a success or, let 

us say, continue it as a success. 

In other words, the hearing is to how are we going to save a little 

here, save a little there. For the benefit of the hearing, let me relate my feelings with respect to the elephantine size of government. 

It started under President Nixon. I will never forget it. What we 

had was a donnybrook. He wanted to send all the money back to 

the States. Governor Allen and I would love that because we have 

been governors. And the Congress wanted to continue all the particular programs. 

So in the conference we had over at the White House, the President said: Well, go ahead, just pass both of them. We did not know 

and mind how tricky he was, and we passed both of them. He 

signed both of them and then he impounded ours. In other words, 

the program that the Congress had continued, the President cancelled, so we had to sue him. 

Secretary Bodman, you know, you and I are good friends, so we 

are not going to sue each other to get you to spend the money. The 

only reason I think of this story is that you say that finally the end 

of April we are going to begin the 2002 ATP competition. The fiscal 

year began in October of last year, months and months ago and 

just now you are coming for the ATP program that you say is a 

very good program, yet none of the $60 million in awards are 

made. 

So in a sense, that is one way to administer it, and another way 

for us to make sure it is administered in the way the Congress intended is to sue the so-called tentative impoundment or the onehalf impoundment, because you are going to carry over the $35 million and that is only a request. 

That is one way to save money, but if you want to save money, 

this Committee might look at the space station which started out 

at $8 billion. It is now 10 years over schedule and will cost $98 billion over its lifetime. It is $90 billion over cost. If you want to save 

money, Senator, we can go down on the floor and save some on 

that $30 billion farm subsidies that they are trying to embellish 

with this other particular program, the corn. They want to put in 

some several billion more there. 

Here with ATP, we have got just a few million dollars and, like 

you say, world-class research. This ATP program of NIST started 

with Craig Fields over there in DARPA. He found out that we had 

all this technology backed up in the National Bureau of Standards, 

and so we created ATP and renamed the Bureau as the National 

Institute of Standards and Technology. Now, we are trying to keep 

it going. 

With regard to ATP, you speak of the original intent. You are 

talking to the original intender. I do not want to sound like Al 

Gore, I invented technology. 

But for example, if we had put it in the universities originally 

that would not have passed muster with Chairman Danforth, then 

Chairman of this Committee. We were trying to make sure ATP 

was not pork, and universities are famed for pork. We have got the 

expert Senator on pork right here to my right. They would have 

eliminated the whole program. That is why the universities were 

not in it. 

13

Now you are coming recommending pork. You want to get the 

universities into the program. We had it studied out by experts and 

each project has to be vetted by them before an award could even 

be considered and then brought over to the Department of Commerce and by your Committee—not you, not me, not the President, 

not the Secretary—on a competitive basis make those awards. 

So we made all the fences for pork. Here we come back in with 

the universities’ pork, which we are glad to go along with. We 

know about pork. Yet on the other hand, the recoupment you propose would discourage participation and the taxation really of five 

times the value of the particular program is really on the one hand 

let us award technology, but make darn sure we penalize it if it 

succeeds. 

I would like your comment with respect to that and with respect 

to only now just coming with the awards. Do you expect to make 

the grants this year of the full $60 million amount provided by 

Congress? 

Dr. BODMAN. First I want to reiterate that I am aware that you 

were the creator of this, sir. Secondly, I am relieved at your statement that I will not be sued, which I take some solace in. 

Thirdly, against the fiscal constraints within which we operate, 

it was my judgment that we would operate with $35 million of new 

projects in 2002, $35 million of new projects in 2003. When we get 

to the end of 2003, we would be in a position where we would not 

have any carried over funds. This year, as you have pointed out, 

we have had carryover funds, between $30, $40 million for each of 

the last 2 years. 

The current plan would be to award some $25 million by the end 

of June and that we would expect another $10 million plus or 

minus, depending on what we find in the applications, by the end 

of the fiscal year. So the answer is the current program would call 

for awarding some $35 million this year, which would be consistent 

with the requested number for next year. 

That was a judgment that I made, given the overall fiscal constraints and trying to even it out so that we would have an equal 

amount of new programs that we would be able to support in each 

of the 2 years. 

With respect to your comments on the recoupment, I do not consider it a penalty. I do consider that if there is success in these programs, having a royalty to provide additional funding that would 

be able to support the ATP program is a reasonable and a responsible thing to do. 

What we have attempted to do, Senator, is to stabilize the program. As you pointed out yourself in your opening remarks, there 

has been a lot of controversy apparently over the years about this 

program. It has been criticized on the one hand for being corporate 

welfare; it has been criticized on the other hand as being ineffective. We have found that neither of those is the case, that there is 

a need, the so-called ‘‘valley of death’’ in terms of funding new technology, that that is in fact the case. 

We have consulted at some length with Dr. Branscomb up at the 

Kennedy School, who is by my way of thinking the great expert in 

this field, on this topic, and in this country on this topic, in order 

14

to try to get his views on the matter. Out of that came a sense of 

the reforms that we have put before you. 

We do believe in the ATP program, and we will do our best in 

representing the program both to you and to the people at OMB 

who we deal with, as you know, in making the budgetary tradeoffs 

that are part of the budgeting system. 

The CHAIRMAN. Thank you. 

Senator McCain. 

Senator MCCAIN. Thank you, Mr. Chairman. 

For years I tried to put a cap on the space station expenses as 

we received testimony after testimony that it was spiraling out of 

control. In fact, we did put a cap, but that was weakened by other 

legislative action, and we now see a classic example of a system 

once beginning to be built assembling a coalition of special interests to allow it to go, as you mentioned, from $7 or $8 billion to 

about $98 billion, and I guarantee it will be well over $100 billion 

before we are through. However, because one program is out of control does not justify other programs doing the same. 

Just to start with, Mr. Secretary, General Electric, one of the largest companies in the world, with revenues of $126 billion in 

2001, was awarded an ATP grant in October 2001 as a single applicant. That is not corporate welfare? 

Dr. BODMAN. I believe that, depending on what definition you 

want to use for it——

Senator MCCAIN. Why would one of the largest corporations in 

the world need government money to pursue anything? 

Dr. BODMAN. The idea of the ATP program is to find the best 

technology that this country has to offer, and those——

Senator MCCAIN. The largest corporation in the world needs that 

money from the Federal taxpayers? 

Dr. BODMAN. Senator McCain——

Senator MCCAIN. You do not need to bother to continue to answer, sir. You have no grounds with which to respond that we need 

to spend the taxpayers’ dollars of America in a single applicant 

grant that is awarded to one of the biggest corporations in the 

world. I do not think my constituents would agree with such a decision, no matter how worthy the cause. 

Dr. BODMAN. Sir, one of the reforms that we put into place, at 

the risk of continuing to answer when you told me not to, one of 

the reforms we put into place would be to put companies like General Electric, like IBM, to continue to allow them to participate in 

the program, but not as a sole participant, that they would have 

to be in there as a joint venture participant. 

Senator MCCAIN. Well, that is a wonderful breakthrough. 

But at the same time, while you give corporate welfare to one of 

the largest corporations in America, you cut the Teacher Science 

and Technology Enhancement Program. They do not have any big 

lobbyists around here, the average teachers. They are not big soft 

money contributors. They do not get corporate welfare, and yet you 

cut their program. How about explaining that one? 

Dr. BODMAN. Sir, to my knowledge that is not a program that we 

have cut and I cannot speak to that. That is a program——

Senator MCCAIN. You have not looked at this year’s budget request? 

15

Dr. BODMAN. I have looked at this year’s budget request. 

Senator MCCAIN. According to my reading, the Teacher Science 

and Technology Enhancement Program has not received any funding request. 

Dr. BODMAN. That may well be the case, sir. But as far as I am 

aware—I am not familiar with that program, I have to tell you, sir. 

Senator MCCAIN. I can understand that. They are not big donors. 

I can understand why you would not know about a program such 

as that. 

Dr. BODMAN. I do not know how to respond to that, sir. 

Senator MCCAIN. I am sure you do not. Senator Brownback and 

I introduced legislation last year requiring the Secretary of Commerce to establish a registry whereby companies can register reductions in greenhouse gas emissions. The registry would provide 

for trading of these reductions among various companies. Similar 

registry programs are under consideration as part of the energy 

bill. 

One of the main reasons surrounding the registry is which Federal agency would lead the effort. DOE currently has a registry, 

but it does not contain the robustness that industry needs. Some 

of those involved in the current industry trading activities have 

told the Committee that what they need most is a consistent approach to measuring and reporting reductions to ensure when they 

buy a ton of carbon they are indeed buying a ton of carbon. 

Do you feel that the Commerce Department because of its relationship with industry has any unique advantages to serve this 

need as opposed to any agency like DOE or EPA? 

Dr. BODMAN. No. 

Senator MCCAIN. How do you respond to some critics who may 

say that by making revisions to provide for more university involvement it is just an effort to build a larger constituency base? 

Dr. BODMAN. Is this with respect to ATP, sir? 

Senator MCCAIN. Yes. 

Dr. BODMAN. It is my view that the whole funding of universities 

has been modified and changed over the past one to two decades. 

More and more universities, I believe correctly, are engaging in the 

development of new technology, are participating in licensing programs, and therefore have greater capacity to manage the commercialization or participate in the commercialization of technology. 

Therefore, I view it as perfectly appropriate to see that universities can participate as full partners in the ATP program. The 

ATP program, as I mentioned before, has been successful. I think 

it can be more successful with greater participation of our universities. I do not see it in my view as expanding or responding to any 

particular constituency other than trying to do our job of providing 

an environment for commercializing technology. 

Senator MCCAIN. What plans do you have for completing a study 

of the collapse of the Twin Towers? 

Dr. BODMAN. The people at NIST, who are among the world’s experts both on the structures of buildings and on the modeling of explosions and conflagrations, are now working on a program to 

model the collapse of the Twin Towers and to reach some conclusions as to what modifications might be made in building codes 

throughout the country. 

16

Senator MCCAIN. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Allen. 

STATEMENT OF HON. GEORGE ALLEN,

U.S. SENATOR FROM VIRGINIA 

Senator ALLEN. Thank you, Mr. Chairman. I very much thank 

you and Senator McCain for calling this hearing today and thank 

all our witnesses, especially Ms. Anne Armstrong from the CIT in 

Virginia. I have read her testimony. I think it is very cogent testimony and I substantially agree with her assessment of some of 

these proposals. I certainly look forward to working with my colleagues to pass this Technology Administration legislation and 

funding this year. There will be some controversial issues and it 

will need some massaging before it gets through. 

I have a statement, Mr. Chairman, that I would like to have put 

into the record rather than reading. 

The CHAIRMAN. It will be included. 

Senator ALLEN. Included in there is also a letter from a constituent, Mr. Jeffrey Payne, on his experiences with ATP and some 

of his suggested changes and where the program is worthwhile. 

The CHAIRMAN. it will be included. 

[The prepared statement of Senator Allen follows:]

PREPARED STATEMENT OF HON. GEORGE ALLEN, U.S. SENATOR FROM VIRGINIA

Mr. Chairman, I would like to thank you and Senator McCain for calling today’s 

hearing, and thank all of our witnesses, especially Ms. Anne Armstrong, for appearing here today. I believe that it is important that we reauthorize the Technology 

Administration this year, and am willing to work with my colleagues to pass this 

legislation. 

The Technology Administration (TA) serves as the President’s principal voice on 

domestic and international technology issues. By working with the private sector, 

TA develops policies that will shape the future of American research and development. 

The component parts of TA are the Office of Technology Policy (OTP), the Office 

of Space Commercialization (OSC), the National Technical Information Service 

(NTIS), and the National Institute of Standards and Technology (NIST). Through 

these organizations, TA develops policies to improve technology transfer from universities and research institutions to the commercial sector, fosters greater private 

investment in space, and serves as a clearinghouse for American and international 

research. 

NIST serves as the most high-profile part of TA by conducting ‘‘cutting-edge’’ research and establishing measurement tools and technical standards that ensure national competitiveness. Examples of NIST’s research include: research on quantum 

computing; developing nanotechnology measurements and standards to support the 

development of new devices and materials on the atomic level; and maintaining the 

Atomic Clock. NIST also runs the Baldridge National Quality Program, which is the 

Nation’s premiere award for excellence in the categories of business, education, and 

health care performance. 

The recent awarding of the Nobel Prize in Physics to Dr. Eric A. Cornell for his 

work in creating the Bose-Einstein Condensate underscores NIST’s commitment to 

excellence. Dr. William D. Phillips won the Nobel Prize in 1997 for his work on cooling and trapping atoms with laser light. I would like to congratulate Secretary 

Bodman and Dr. Bement for these awe-inspiring achievements. 

This morning, I would like to emphasize the role that TA plays in ensuring our 

homeland defense. Currently, NIST is formulating a plan to analyze the technical 

causes of the World Trade Center collapse in order to update building codes and improve physical infrastructure safety. Also, it is establishing voluntary standards for 

equipment that will protect police, fire and EMS personnel. In addition, NIST works 

with other federal agencies to protect our Nation’s critical infrastructure by develVerDate 0ct 09 2002 07:48 Feb 24, 2005 Jkt 090577 PO 00000 Frm 00020 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\90577.TXT JACK PsN: JACKF
17

oping encryption standards, and resolving vulnerabilities in the federal information 

systems. 

I am interested in hearing about the Administration’s plans regarding the Manufacturing Extension Program. Virginia’s A.L. Philpott Manufacturing Extension 

Partnership helping 1,000 manufacturers throughout the state. I am concerned that 

a cut in the federal funding to this center would result in a loss of expertise. 

In addition, I would like to highlight the importance of fully funding the construction and maintenance of NIST laboratories and facilities. It is important that this 

infrastructure be properly maintained in order to ensure continued groundbreaking 

research. 

I am also interested in hearing the Secretary’s views on how to reform the Advanced Technology Program, and today’s debate on this issue. 

Finally, I would like to point out the important role that NIST can play in ensuring free trade and access of American goods to foreign markets. Some of our trading 

partners have used standards as non-tariff barriers to keep out American products. 

NIST can play major role in international standard setting organizations to establish commonly-accepted technical standards that will prevent this practice and expand international trade. 

Again, thank you, Mr. Chairman, for holding this hearing. I look forward to hearing from our witnesses. 

CIGITAL

Hon. George Allen, 

Commerce, Science, and Transportation Committee, 

Washington, DC.

Dear Senator Allen:

Your interest in the Advanced Technology Program (ATP) has recently come to 

my attention. As Virginia’s first single company ATP award winner and also Virginia’s first two time ATP award winner, I’d like to express my opinion about the 

ATP program. 

Cigital helps companies build and deploy software that is reliable and secure. We 

have worked with 35 of the Fortune 500 helping them protect themselves against 

software failure. Cigital Labs, our award winning research laboratory, has won research grants and contracts from a number of prestigious federal agencies (e.g. National Security Agency, Defense Advanced Research Projects Agency, National 

Science Foundation, NASA) during our ten-year existence. The Advanced Technology Program out of the Department of Commerce has been the most beneficial 

research program we have been involved in. There are a number of reasons why 

this is so:

1. ATP is the only research program that makes its awards decisions based partially upon business criteria. In the past, Cigital has been frustrated by federal agencies that award research money to companies who have little or no 

plans or ability to commercialize the technology they are proposing. My belief 

is that applied research programs are most effective when there is not only 

a good research idea but a solid business plan for commercialization that has 

been thought through. ATP’s rigorous review of an ideas business plan as part 

of the proposal selection process is an excellent way to accomplish this

2. ATP is staffed by both scientists and business professionals. Most research 

programs give no guidance on the business aspects of technology transfer and 

commercialization of ideas. By assigning both a technical and business program manager to each ATP project, the Advanced Technology Program 

assures that adequate time is spent on the business aspects of each research 

idea.

There are, however, several issues with ATP that if corrected, would improve the 

program:

1. Too much money goes to Fortune 500 companies. ATP is supposed to fill the 

gap between idea generation and institutional funding (i.e. Venture Capital). 

The program should not be giving scarce ATP money to large companies who 

are obviously not in this funding gap.

2. Focused ATP programs have been abolished. Traditionally, ATP awards were 

given in each of a series of programs focused on a particular technology topic 

(e.g. biotechnology, software component technologies, homeland security). 

These topics were selected by ATP program managers based upon industry 

feedback on those technology areas most important to our economic future. 

18

Today, all proposals are evaluated through a ‘‘general competition’’ where any 

topic can be proposed. This has greatly increased the politics associated with 

which proposals are funded and which are not.

In summary, the ATP program has been of tremendous value for Cigital and 

America. If the above program issues are adequately addressed, ATP is a model for 

how all applied research programs should be structured and run. 

Sincerely, 

JEFFERY PAYNE, 

President and CEO, Cigital, Inc.

Senator ALLEN. I would say that some of the aspects of NIST, 

which is obviously the most high profile part of the Technology Administration, is developing some examples of good research, including research on quantum computing, and developing 

nanotechnology measurements and standards to support the development of new devices and materials at the atomic level. I am 

going to ask you, Secretary Bodman, in a second about some of the 

fire and police and EMS personnel interoperability and communications improvements. 

You do have some aspects of this that I have some concerns and 

it has not really been mentioned much on the Manufacturing Extension Program in cross-examination, but I do have some concerns, especially with the thousands and thousands of jobs we are 

losing, generally due to international competition. The only way 

that I see us competing in the future is with better technology that 

does not require maybe as many employees, but with better quality 

and better technology. 

To my point of view and sentiments, this may not be the best 

time to be making such radical changes in that Manufacturing Extension Program, and that will all get worked out. 

Let me ask you a question here or series of questions relating to 

public safety communications interoperability. One of the major 

issues that arose from the emergency responses to the attacks, terrorist attacks on September 11th, was the inability of fire and police and emergency services to work together. It was not that they 

could not work together. They were having a hard time communicating and they were all on different wavelengths, and they 

ought to be on the same wavelength. 

The Office of Law Enforcement Standards at NIST has experience in developing wireless communications standards. You may 

know that here in the Metro D.C. area Maryland, Northern Virginia, and the District of Columbia are working on what is called 

CapWIN so they all can get on the same wavelength. 

Now, as far as the guidelines for interoperability for criminal justice and public safety areas, what recommendations would you 

make on how to resolve this communications interoperability issue? 

Dr. BODMAN. That is a very technical question, Senator. I do 

know that the NIST office that you referred to is in fact working 

on this matter and that we will have forthcoming a series of recommendations as to how to improve it. There are ways of, if you 

will, jerryrigging the system now so that we could solve it, but I 

think the more appropriate thing is to put standards in place, 

which these people are great experts on, that would enable the 

problem that you referred to, which is in fact a real problem, to be 

dealt with once and for all. 

19

That is all I know about the topic. I would be happy to come back 

to you with a more complete schedule and answer on it than I can 

give you at this point in time. 

Senator ALLEN. Well, I would just want to emphasize, Mr. Chairman, to Secretary Bodman how important this is for our homeland 

security. The standards being developed I think would be very 

helpful to local, regional, and state law enforcement and also emergency personnel. 

I would also suggest in this and other areas, rather than trying 

to have the government or NIST reinvent the wheel or invent a 

new wheel, that there are many enterprise or commercial applications that can be adapted to the governmental needs, whether they 

are Federal silos that need to communicate or whether they are 

state or local, and all actually do need to communicate with one another. 

I met with a company—I am not suggesting this is the only solution—but a company called M/A-COM, who said they had a system 

whereby you would not have to buy new equipment, but just get 

the existing equipment to communicate. So I would hope that in 

the midst of this study and analysis of standards and determining 

what is workable, that you listen very closely to hundreds of those 

in the private sector who have ideas. 

I am not one to be able to evaluate what everyone says to me, 

but nevertheless if you can evaluate and be a testbed of assistance 

to law enforcement and emergency personnel, but also listen to the 

private sector to see which of those systems could work the best if 

they so desired to procure them. 

Dr. BODMAN. I think the Senator is certainly correct in underscoring the importance of the problem. The challenge is there are 

any of a variety of ways to solve it, and the goal here is to try to 

get an approach hopefully making use of current equipment that 

is already available so that we do not have to, as you point out, 

reinvent the wheel. 

So that is the challenge, where you have got a lot of different solutions and how do you pick the one that is optimum. That is the 

challenge that confronts them. I can, as I said before, be happy to 

get you more information as to what the schedule or anticipated 

schedule is. 

Senator ALLEN. Good. I am very much interested in it. Although 

Senator Wyden is not here, I know that he shares the same view. 

We are working together on what we call NET Guard, trying to get 

technology people involved in helping out with national homeland 

security. 

Thank you, Mr. Secretary. 

The CHAIRMAN. Mr. Secretary, I can probably give one answer to 

the reason that the largest corporation would want taxpayer 

money. Thirty-five years ago, General Electric Corporation had this 

submersible called TECTITE. It was down over 100 feet at the bottom of the ocean and with the astronauts and others, aquanauts, 

we went down in it. I became friends of Mark Norton and Mr. Otto 

Clymer, two vice presidents of General Electric. 

One day Mr. Clymer came in, he had a big briefcase full of technology and said he was headed to Japan. It seemed that what had 

occurred is the Pentagon had put on a competition out at VandenVerDate 0ct 09 2002 07:48 Feb 24, 2005 Jkt 090577 PO 00000 Frm 00023 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\90577.TXT JACK PsN: JACKF
20

berg Air Base for servicemen’s housing. They wanted to get the finest little house at the most economical cost. Three bedroom, two 

and a half bath, for $21,000 was the winner by General Electric 

Corporation. They put in, instead of copper gutterings, composite 

guttering and piping and different other innovations of that kind, 

with insulation and otherwise. 

I said: Why are you taking that to Japan? He said: Well, the bureaucratic snarls here with all of the zoning laws. We will just 

waste too much time going through that bureaucratic maze, and we 

can make way more money by just selling the technology. 

Otherwise, there is a better reason and that is that you put corporate executives under the pressure, if you do not get the stock 

up within 3 years you are gone, and so they do not have time for 

any long-term investments. A lot of this outstanding technology 

that needs to be entered into and researched, needs to be developed 

and commercialized, takes longer than the 3 years. 

So the largest, richest corporation in the world would pass it by 

and sell it off, just like GE was selling off that housing technology 

that was the winner, that the Pentagon had put the program on 

and everything else and did not get the advantage of it because 

there were certain other things commercially they found with the 

city councils and otherwise on zoning laws. They said, look, this is 

fine, we won, but let us sell it and move on to something else. 

That is the way the richest corporations operate. So they are encouraged in this program to participate. 

Let me ask about those facilities, though, that you mentioned at 

Boulder, Colorado, and out here in Maryland. You said the physical 

infrastructure—this is not a hearing on what you need out there, 

but this Committee is vitally interested in it—will not attract first 

class research. Mr. Secretary, tell us about that before I yield here 

to Senator Wyden. 

Dr. BODMAN. As far as I know, the physical infrastructure in 

Gaithersburg is in good shape. That is a more modern facility. 

Some of the funding that has been requested will go to providing 

a more secure environment, to providing, for example, protection of 

some of our nuclear instrumentation such that they cannot be attacked. So we are dealing there with the homeland security issue. 

That is really what is involved in Gaithersburg. 

The statement that I made I believe to be true and that is that 

many of our older facilities have not been properly maintained, and 

that is certainly the case in Boulder. The Boulder facility is wanting in adequate utilities and just the things that one needs to do 

in maintaining any old structure. It needs to have funding in order 

to keep it up to snuff. 

I have had the same experience, frankly, in visiting both the 

Census and the NOAA facilities in Suitland. The Suitland facility, 

which is owned and operated by GSA, is an embarrassment, and 

we have taken some steps to the extent that I can do it to see to 

it that we live with the facilities there until we can get new facilities built. That is now an ongoing thing. 

But I was just making the observation, which I believe to be 

true——

The CHAIRMAN. It is an important observation, Mr. Secretary. 

Give us a memo, please. Give the Committee a memo on suggested 

21

needs both out there at that NOAA facility and at Boulder and 

wherever. The Committee is vitally interested in that. 

Senator Wyden. 

STATEMENT OF HON. RON WYDEN,

U.S. SENATOR FROM OREGON 

Senator WYDEN. Thank you, Mr. Chairman. First let me say, Mr. 

Chairman, how much your leadership has meant in this area. I 

mean, the fact of the matter is we would not have these public-private partnerships in the technology area except for the fact on ATP 

and on the MEP program you put those together. They exist because you have been at it all these years and we want you to know 

we appreciate that. 

The CHAIRMAN. Thank you. 

Senator WYDEN. Just a question or two, if I could, for you, Dr. 

Bodman. Your people have been very helpful to Senator Allen and 

myself. As you know, we have proposed a major initiative with respect to dealing with the events of 9/11, the NetGuard legislation. 

The Science and Technology Mobilization Act proposes the creation 

within NIST of a national clearinghouse, a testbed, to look at the 

security and response products that have flooded the Federal government. 

Senator Allen and I found after our hearing that thousands of 

these products had essentially come unsolicited to the Federal government. Some of them seem promising, others not so promising. 

But there is no systematic way at present to really test them and 

evaluate them on the basis of objective criteria. 

So in our legislation, Senator Allen and I proposed that NIST 

really look in a thoughtful way at these various technologies so 

that we can have in effect a government-wide capability for examining them. Your folks have been very helpful to the two of us, and 

I would just like to have your thoughts on the record with respect 

to NIST’s ability to look at a function like this, assuming it was 

properly funded. 

Dr. BODMAN. Well, first of all, I am aware of the legislation. Secondly, the Department is studying the proposed legislation and will 

be shortly issuing a formal response. 

My own thoughts, in the absence of having had any preview of 

where the evaluation is going, is that I think it is a good idea to 

have some central facility. The people at NIST are largely qualified 

to deal with the technological evaluation of instrumentation. 

Whether they have the breadth of knowledge and experience that 

is necessary to do everything that is required in this field, I do not 

know. So that is part of what we are doing, is to try to understand 

what will be required and do we have the necessary capabilities of 

doing it. 

I always worry where you have a centralized group that is trying 

to make a technical judgment, if you will, picking the winners from 

the losers, and you do not have the market involved in it, it makes 

it a problem. One man’s expert is another man’s meddler. So I 

would want to be sure that we can really do a good job, and we 

will do our best to evaluate precisely what will be required, the 

range of technical skills needed, and we will give you a response. 

22

Senator WYDEN. That is a thoughtful answer. I want to make 

clear, and I know Senator Allen agrees with this, we are not interested in the Federal government picking winners in the technology 

area. The last thing we need to do now is to have some kind of industrial policy in the technology field. 

What we do want is some objective effort to look and to report 

on whether or not these products seem promising and what areas 

the government and the private sector should look for. You have 

been very cooperative in this area. 

The only other question stems from another hearing that we held 

in the Science and Technology Subcommittee after 9/11. In that 

hearing we found that there were no uniform standards for equipment used by firefighters in trying to respond to chemical and biological attacks. What we found there is that the typical department, the typical fire department, did not have the capability for 

looking at these various technologies. 

As you know, NIST already tests equipment used by law enforcement agencies in many areas, so we have been interested in looking at the agency’s role in again testing chemical and biological 

agent detection equipment so as to help the firefighters. My understanding is that you have begun some discussions within the Department on that and I would be interested in a report there as 

well. 

Dr. BODMAN. I am less familiar with that. I always hesitate to 

say that there is anything that NIST cannot do because they are 

so able. They obviously have a lot of skill in the fire area. They 

have demonstrated their capability in the bioterrorism area in certain respects, that is to say dealing with the anthrax problem that 

we had and how to analyze it and deal with the issues. 

So all I can say is I believe they will have the capability that you 

are looking for, but I do not have a specific response for you at this 

point in time. 

Senator WYDEN. If you could give us a status report on that as 

well. 

Dr. BODMAN. Be happy to do it. 

Senator WYDEN. We will work with you closely on the NetGuard 

effort. I share your views with respect to the role of NIST, and obviously the agency is going to have to have adequate resources to 

do that. We do offer some additional funds in the NetGuard proposal, and we thank you for your cooperation. 

Thank you, Mr. Chairman. 

Dr. BODMAN. Thank you, Senator. 

The CHAIRMAN. Thank you. 

Any further questions? 

[No response.] 

The CHAIRMAN. Mr. Secretary, we are very lucky to have you and 

your willingness to serve in government. You have had some tough 

questions, but that in no way indicates anything other than the 

highest respect for you and for Secretary Evans. The Committee 

will continue to work with you, and we will see if we can iron out 

these differences and keep these two programs going. 

I was just remembering Craig Fields of DARPA. He is the one 

who started us on this course with the Rapid Acquisition of Manufactured Parts. It was put in for the Navy. A ship breaks down in 

23

the Gulf, the ship is 23 years old. They do not make the part any 

more. It lies fallow there in the Gulf for 2 or 3 months while they 

are trying to get the part. All the parts now, not just for the Navy 

but for the Air Force and everyone else has adopted this particular 

program that came out of the National Bureau of Standards, because we found that that research and technology was over there. 

We computerize every part, and we file it. So all we have to do 

is just punch, find the history of that particular part, and it is 

manufactured and out there in a couple of days. 

So we thank you very, very much—excuse me. Senator Nelson. 

STATEMENT OF HON. BILL NELSON,

U.S. SENATOR FROM FLORIDA 

Senator NELSON. Thank you Mr. Chairman. Just a quick question, Mr. Chairman. 

Dr. Bodman, you have jurisdiction over the little Office of Space 

Commercialization and during another confirmation I asked about 

the importance of that office and spoke about the importance of 

that office from the standpoint of the United States having a viable 

commercial space industry. Yet the office has not had a director for 

about 2 years. Can you tell me when that position will be filled? 

Dr. BODMAN. I do not have an answer for you. I can tell you that 

I have spent a good deal of my personal time with people from the 

space manufacturing industry trying to understand their needs and 

we have been working on particularly issues related to the licensing of products so that they can be more efficiently sold and made 

available in the marketplace. So that it is a topic that I have spent 

some time on. 

But I do not have a quick answer as to any schedule for filling 

that particular role. 

Senator NELSON. Well, I would suggest that you look at it. We 

are now a year and a quarter into the new administration. The office is vacant. 

Let me just suggest, Mr. Chairman, quite quickly what is in the 

interest of the United States. If all of the capability of launching 

goes abroad to others, primarily the competitor, the European 

Space Agency, and the Chinese want to get into the market. There 

are combinations between the Russian Zenit rocket, and other folks 

that want to put payloads on the top of that. Pretty soon you start 

diminishing the U.S. ability to have lift capability to get into orbit, 

and sooner or later there is going to be a terrorist act in trying to 

deny us some of our capability of getting into space. The more robust stable of horses that we have to get to space, to get our assets, 

the more it is clearly in the interest of the United States. 

That is one of the reasons why this little office was set up years 

ago when I was in the House, and I would suggest that you start 

looking for a director for that office. 

Dr. BODMAN. I will certainly try to understand what that office, 

specific office, is and respond to it. As I say, I have spent time with 

the various industry associations and the companies themselves. 

The challenge that one has in this area is on the one hand trying 

to protect the national security, and our friends in the Department 

of Defense have strong feelings about what should or should not be 

exported. 

24

The issue is having enough of a market to support industries 

that are U.S. industries that have this kind of capability. What you 

would like to have is a market greater than that in the United 

States, so that to the extent that products can be developed and 

sold elsewhere it allows you to spread the cost and keeps the cost 

down for each individual product. That is the reason that we have 

spent time on matters related to licensing and what can be exported and what cannot be exported and who controls that and 

what are the terms of it and so forth. 

So those are some of the issues involved on it. But I will certainly—as I said before, I do not have a comment or a schedule for 

filling that particular job. But I thank you for your comments, sir. 

Senator NELSON. That is not what I am speaking of. The issue 

that you raise, for example of whether there ought to be a license 

for an American spacecraft to be launched on a Chinese Long 

March rocket, I happen to take the side with the Department of 

Defense. I have been rather hard-line and hard-nosed on that for 

years. 

But I am talking about keeping a viable expendable launch vehicle market alive with U.S. manufacturers. The Office of Commercial Space has a good bit to do with that and there needs to be a 

director in that office. So I would like very much, since I raised this 

at a previous confirmation hearing and a year and a quarter later 

it is still vacant and you have oversight responsibility on it, I would 

like to have a report from you of when that position is going to be 

filled. 

Dr. BODMAN. You will have it, sir. 

Senator NELSON. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. In that regard, Mr. Secretary, please pay attention to the satellite business. Specifically, today is April the 16th. 

By April 30th the Chinese are going to make a decision, and we 

are in competition with the French and the French have been using 

the bureaucratic holdup in the United States against one of the 

best producers of space satellites in all of history. 

Specifically, this Committee was having all kinds of difficulties 

with our weather satellites in the Ford technology section of Ford 

Motor. There were cost overruns and everything else. Mr. Bernard 

Loral came, sat in that chair where you are seated, testified that 

he could do it with a certain cost fixed and a certain time fixed, 

and he produced, his company, under cost and under time. 

He got delayed because there was an insurance investigation, 

they tell me, about certain instrumentalities there in China, but 

that has been cleared. The Defense Department has cleared it. The 

State Department is happy and everyone else is happy, but no one 

moves. Since we do not have anybody interested in the Department 

of Commerce in this particular business, if we lose this then they 

will go on, like investors will respond in the corporate world and 

we will lose that business and then we will lose that technology. 

So get into the satellite business right now that they are interested in and have been trying to shake loose this particular administration. Otherwise, by the end of the month here in two weeks’ 

time we are going to lose that business. 

25

Dr. BODMAN. Senator, I cannot predict what is going to happen 

with respect to the decision. I can tell you, sir, that I have spent 

time on it. 

The CHAIRMAN. You have? 

Dr. BODMAN. Yes, sir. 

The CHAIRMAN. You know about this one? 

Dr. BODMAN. Yes, sir. 

The CHAIRMAN. Oh, good. 

Dr. BODMAN. So I have talked to the people involved and the 

issues, the complaints, come about whether, particularly from the 

European competitors, have been effective in describing the licensing process that goes on in the Federal Government and that is a 

delay and that therefore that causes delays and should be a reason 

for a foreign nation to buy something from the French or whoever. 

So no, we have been. We have advocated. I have advocated for 

it. I have been in China, advocated for it. So we have not been uninvolved in this matter. But neither can I promise what the result 

will be. 

The CHAIRMAN. Well, as long as you know about it and you are 

involved, you know as much as this Senator does, then. I just did 

not want to pass this by and nobody act on the particular measure. 

We thank you very much and if there are no further questions 

then we will move to panel number two. Thank you very much, Mr. 

Secretary. 

Dr. BODMAN. Thank you. 

The CHAIRMAN. Ms. Anne Armstrong, the President of the Virginia Center for Innovative Technology; Dr. Lewis Branscomb, the 

Aetna Professor in Public Policy and Corporate Management at the 

Belfer Center for Science and International Affairs at the Kennedy 

School; Mr. Scott Donnelly, the Senior Vice President for Research 

in GE Global Research for the GE Company. 

[Pause.] 

The CHAIRMAN. Ms. Armstrong, we welcome you. We have your 

statement in its entirety. It will be included in the record and you 

can deliver it or summarize as you wish. 

STATEMENT OF ANNE A. ARMSTRONG, PRESIDENT,

VIRGINIA’S CENTER FOR INNOVATIVE TECHNOLOGY 

Ms. ARMSTRONG. I will give you a short version of it. 

The CHAIRMAN. Thank you very much. 

Ms. ARMSTRONG. Chairman Hollings, Members of the Committee, 

Senator Allen: I am the President of the Virginia Center for Innovative Technology. A lot of people know that as the upside-down 

building out by Dulles Airport, but we are a State-funded nonprofit 

organization that supports the growth of technology-based businesses in Virginia, the deployment of technology throughout the 

State, and the development of our State’s research infrastructure. 

We have ten regional offices around the State and a staff of around 

40 people. 

Like ATP, we invest in early stage, high risk research, although 

such awards are part of a portfolio of programs that we provide to 

help build the technology industry in Virginia. Our total budget is 

around $10 million a year, so we count on complementary programs from the Federal sector to help our businesses. 

26

As our own State budgets have declined and as the availability 

of venture capital has dried up, particularly in the seed and early 

stages, we count even more on these valuable programs to help our 

companies and our State progress. 

The two programs that support businesses at the very early 

stage of R&D before the venture capitalists will deal with them are 

the ATP and the Small Business Innovative Research, the SBIRs. 

But the ATP is typically earlier stage and it has larger scale 

projects. Virginia companies have done very well in winning the 

SBIR awards. For several years running, we have ranked third 

among the States in the total number of awards. We are working, 

like many other States, to improve that early stage research, how 

it is commercialized and moved into the economy. 

Virginia companies have not won very many ATPs. We are participating in between one and five projects a year over the life of 

the program, but the ones that we do win are in very promising 

areas. These companies would not ordinarily receive venture capital for such projects because of the stage of development of the 

technologies and because they are located in parts of the States 

that do not have a strong venture capital community, places like 

Bristol on the Virginia-Tennessee border and Blacksburg, which 

has one of our largest, strongest research universities, but is not 

where a lot of venture capitalists live. 

In the last 2 years CIT has established a good working relationship with the ATP management and we are focused currently on 

raising awareness throughout the State, as well as addressing 

what some people in the State perceive as barriers to participation 

on the university side. The Virginia General Assembly has given us 

a number of studies to look at in the coming year specifically on 

commercialization and looking at some of the intellectual property 

issues. I will not go into all of those. 

Virginia companies since 1990 have won 24 ATP awards totaling 

$38.4 million, a number that could be increased dramatically by reforming some elements of the program, particularly reforms that 

make it easier for our universities to participate, that promote 

small business involvement while still allowing large firms and 

their resources to participate, and improve the program marketing, 

most of which are addressed in the Evans report. 

The Evans report makes six recommendations for reforming ATP 

and I would like to make a few comments on our reactions to those. 

The first recommendation concerns allowing university leadership 

of ATP joint ventures and the second would allow university and 

other nonprofit organizations to negotiate ownership of ATP-funded 

patents. 

We support this approach as long as all the parties involved support it and the projects are evaluated with the same or perhaps 

more attention to the degree of industry participation and the market potential for the technology. We have heard and understand 

suggestions that universities should not take the lead in what is 

essentially a business venture. We have also heard universities’ 

claims that they are unable to participate in the program if they 

have to relinquish ownership of the intellectual property. We suggest that allowing universities to lead might remove a barrier or 

27

a perceived barrier to more university-industry participation in the 

program, which is an issue that we are facing in Virginia. 

The third recommendation would allow large firm participation 

in ATP joint ventures. We support this as long as there is consideration for participation by small businesses. Small businesses can 

benefit from the resources and the infrastructure of their larger 

partners, and several of the existing projects in Virginia represent 

these sort of partnerships. 

While the argument is often made that large firms can well afford to undertake this research on their own dollar, they do in fact 

contribute funding to the research. Further, ATP funding allows 

the firm to expand its research horizon beyond the immediate concerns of the bottom line and allows specific researchers within a 

large organization to explore a line of research. 

The fourth recommendation would require royalties on government investments in profitable ATP ventures. We do not support 

this because we have found in Virginia that the approach does not 

work. It sets up a contentious relationship as the funding organization also becomes a bill collector. We have tried several versions of 

payback and we are about to abandon our own royalty-based programs and replace them with new arrangements. 

When funding early stage research that is not always directly 

traceable from the product to the commercial stage, we have found 

that payback generally generates more heat than cash. We also believe with recoupment as a goal ATP program managers would 

have far less incentive to invest in high-risk projects, basically 

transforming them into government-sponsored venture capitalists. 

I see my time is up and so I will pass. 

[The prepared statement of Ms. Armstrong follows:]

PREPARED STATEMENT OF ANNE A. ARMSTRONG, PRESIDENT,

VIRGINIA’S CENTER FOR INNOVATIVE TECHNOLOGY

Chairman Hollings and Members of the Committee 

In my testimony, I will discuss why NIST’s Advanced Technology Program (ATP) 

is important to our organization and to Virginia. In the process, I’ll tell you some 

of what our organization does. We do have specific responses to the recommendations for reforming ATP in the Evans report. Finally, we offer some additional 

thoughts on how state organizations, such as CIT, could work more closely with 

ATP in the future. 

I am the President of Virginia’s Center for Innovative Technology (CIT), a statefunded nonprofit organization that supports the growth of technology-based businesses in Virginia, the deployment of technology throughout the state and the development of our state’s research infrastructure. We have ten regional offices and a 

staff of about 40. Like ATP, we invest in early stage, high-risk research, although 

such awards are part of a portfolio of programs we provide to help build the technology industry in Virginia. 

Our total budget is some $10 million per year, so we count on the complementary 

programs from the federal sector to help our businesses. As our own state budgets 

have declined, and as the availability of venture capital has also dried up—particularly at the seed and early stages—we count even more on these valuable programs 

to help our companies and our state progress. 

The two programs that support businesses at the very early stages of R&D, before 

the venture capitalists will deal with them, are the ATP and Small Business Innovative Research (SBIR), but ATP is typically earlier stage and has larger scale 

projects. Virginia companies have done very well in winning SBIR awards. For several years running, we have ranked third among the states in total numbers of 

awards. We are working, like many other states, to improve how that early stage 

research is commercialized and moved into the economy. 

28

Virginia companies have not won very many ATPs, winning or participating in 

between one and five projects per year over the life of the program, but the ones 

we do win are in some of the most promising technologies—transgenics, 

nanotechnology, and networking. These companies would not ordinarily receive venture capital for such projects because of the stage of development of the technologies, and often because they are not located in parts of the state with a strong 

venture capital community—places like Bristol, on the Virginia-Tennessee border, 

and Blacksburg, home to one of our strongest research universities, but far from 

where most venture capital firms are concentrated. 

In the last two years, CIT has established a good working relationship with ATP’s 

management, and we are focusing currently on raising awareness in the state as 

well as addressing what some perceive as barriers to participation on the university 

side. For example, The Virginia General Assembly has requested CIT and a number 

of other stakeholders to;

• develop a statewide policy and uniform standard for the commercialization of 

intellectual property developed through university research (HJ88),

• recommend incentives necessary to encourage the commercialization of university research and development (HB530), and

• establish a task force to study best practices for assisting the development of 

technology-based businesses that will produce jobs and other economic benefits 

throughout the Commonwealth (HJ206).

In addition, Governor Mark Warner campaigned on the platform of improving the 

state’s technology transfer capabilities to extend prosperity to other areas of the 

state, and has continued this focus in the first months of his administration. 

Virginia companies, since 1990, have won 24 ATP awards, totaling $38.4 million, 

a number that could be increased by reforming elements of the program, particularly reforms that make it easier for our universities to take participate, promote 

small business involvement (while still allowing large firms and their resources to 

participate), and improve program marketing, most of which are addressed in the 

Evans report. 

The Evans report makes six recommendations for reforming the ATP. While we generally support the recommendations, we do have some comments: 

The first recommendation concerns allowing university leadership of ATP Joint 

Ventures, and the second recommendation would allow university and other nonprofit organizations to negotiate ownership of ATP-funded patents. We support this 

approach, as long as all the parties support the approach and the projects are evaluated with the same, or perhaps more, attention to degree of industry participation 

and the market potential for the technology. 

We have heard and understand suggestions that universities should not take the 

lead in what is essentially a business venture. We have also heard universities’ 

claims that they are unable to participate in the program if they have to relinquish 

ownership of intellectual property. We contend that allowing universities to lead 

might remove a barrier, or a perceived barrier, to more university/industry participation in the program—an issue we face in Virginia. 

The third recommendation would continue to allow large firm participation in 

ATP joint ventures. We support this as long as there is consideration for participation by small businesses. Small businesses can benefit from the resources and infrastructure of their larger partners, and several of the existing projects in Virginia 

represent these sorts of partnerships. While the argument is often made that large 

firms can well afford to undertake this research on their own dollar, they do, in fact, 

contribute funding to the research. Further, ATP funding allows the firm to expand 

its research horizon beyond the immediate concerns of its bottom line or allows specific researchers within the large organization to explore a line of research that 

would not normally be considered core to existing business functions. CIT has undertaken similar projects with large Virginia companies in addition to our mainstay 

work with small companies, and the resulting jobs, additional revenues resulting in 

additional taxes paid, cost savings to the company or their renewed commitment to 

remaining in the state has given us substantial return on these investments. 

The fourth recommendation would require royalties on government investments 

in profitable ATP ventures. We do not support this because we have found the approach does not work well, and it sets up a contentious relationship, as the funding 

organization also becomes a bill collector. Virginia has tried several versions of payback, and we are about to abandon our own royalty-based program and replace 

them with new arrangements. Especially when funding early stage research that is 

not always directly traceable from the product and commercial stage, we have found 

the payback generates more heat than cash. 

29

We also believe that with ‘‘recoupment’’ as a goal, ATP program managers would 

have far less incentive to invest in the highest risk projects, effectively transforming 

them into government-sponsored venture capitalists. 

The fifth recommendation specifies that ATP would only fund projects that support removal of scientific or technological barriers to development. We support this 

approach instead of recommendation number 4. This language provides additional 

shoring up of the program’s intent, as we understand it, but doing this works directly against recoupment, since it ensures earlier stage research. 

The report’s final recommendation would change the ATP Project Review and 

Evaluation Process. We have no comment on this. We have not heard or experienced 

anything to warrant changing the existing system, and we understand that using 

federal experts for the review ensures recourse for non-adherence to confidentiality 

agreements, but we use outside experts to review proposals from time to time and 

we would recommend leaving it to the ATP management to decide how to proceed. 

Some additional comments: 

Most federal (and state) programs would benefit from additional marketing in 

order to expand the pool of potential applicants. State entities—such as CIT—can 

help the program in these endeavors. We have existing relationships with a number 

of potential ATP clients. We recommend improving the mechanisms for working 

with state entities in spreading the word on the program, training potential applicants how to participate in the proposal process and potentially even evaluating proposals, if outside review is an avenue chosen by the ATP management. 

We strongly support ongoing funding for this program, and this point was also 

made in a March 19th presentation to Virginia’s Congressional Delegation by the 

Virginia Research and Technology Advisory Commission. Our state entities support 

the program. Our companies and to some extent, our universities have benefited 

from the program. We support 5 of the 6 reforms proposed in the Evans report. We 

are troubled by the ‘‘recoupment’’ recommendation. We hope you will take my comments into consideration when considering the report. Thank you for your time.

The CHAIRMAN. Thank you very much. 

Dr. Branscomb. 

STATEMENT OF LEWIS M. BRANSCOMB, PH.D.,

PROFESSOR, HARVARD UNIVERSITY 

Dr. BRANSCOMB. Senator, as a former Director of the National 

Bureau of Standards, I had the pleasure of creating the laboratory 

that just won the two Nobel Prizes, and my pride in the National 

Bureau of Standards and NIST is great. It is a fine technical community and it is entirely appropriate that the ATP program should 

be rooted in its technical excellence. It is a technical program and 

we are grateful to you for your leadership in creating it. 

I am going to respond quickly to the six recommendations made 

by the Department of Commerce. I do it on the basis of research 

that I have been doing for two years. The research is funded by 

ATP. You probably know that ATP has a small economic analysis 

unit independent of the actual project part of the operation, and I 

am pleased at their interest in our studies done collaboratively 

with an economist, Dr. Philip Auerswald. 

We have in fact just completed the last two years of work tracing 

the sources of risk money for this invention-to-innovation transition, which is what ATP provides. While this is still under review 

by ATP and by our advisory committee, I have two copies of this 

available for your staff because I know you are actively considering 

it and I have been given permission to share that with you. 

Let me turn immediately to the proposed reforms from the Department. I certainly support the first two related to universities. 

In particular, I know a number of universities that have told me 

that they just cannot see how they can participate if they are not 

30

even allowed to negotiate with the companies in their consortium 

the intellectual property rights for the work done by their own people in the university. That seems like a no-brainer to me. 

The issue of whether the university should play a lead role in the 

consortium, that just seems to me a practical issue. We are talking 

here about high-risk, very advanced technology. The universities 

are increasingly interested in going beyond just the basic research 

limits, which the government funds very generously, to do the sort 

of reduction to practice of the technology. A lot of this is done in 

engineering schools, and that kind of technology, practical but intellectually demanding work that the universities do is in many 

cases more sophisticated than what the companies can do, but 

much of the same kind. 

So the collaboration is very logical, and I see no reason why, if 

the university assembles a group of companies for a project, that 

is any less desirable than a company assembling a university and 

several colleagues. The criteria for the award should not be influenced by whether a university had the talent and the leadership 

to put the program together. 

With respect to the third proposal on the large companies, I listened to Senator McCain. I have heard that same reaction from 

lots of folks. I think that is a political reality. I do not believe that 

constraining the big companies would damage the program much, 

but I have to tell you that in the research we have done, we did 

four very detailed case studies of ATP awards or programs that involved, among other things, an ATP award. One of them was in 

fact a General Electric program, how they went about developing 

amorphous semiconductors and applying them ultimately to medical instruments. 

I can respond to questions later about why I think that would 

not have been done without government funding of a variety of 

kinds, even though GE was a very rich company and even though 

Mr. Welch took a personal interest at one point in trying to keep 

this project alive when there was no market for it. 

Let me skip to the third proposed reform, which is that ATP 

funding not fund product development but stay at the early stage, 

just beyond the invention stage, the reduction to practice stage. 

That is certainly right. That is what ATP does already. That is 

what I think your law says they should do, and so I see no problem 

in saying it again, and I will come back to that in just a second. 

The fifth proposal says that the ATP people in their evaluation 

process—the sixth one, I am sorry—should look to experts from 

outside to a greater degree, and it mentions venture capitalists. I 

believe that is a wise thing to do, but the people they should talk 

to are the angel investors, not the venture capitalists. There are 

very few venture capitalists that do this very early stage seed investment. Venture capitalists are in the business of buying companies cheap and selling them high. Of course they like to buy technology companies cheap and sell them high because they typically 

have, may have, very rapid growth. 

But that is very different from what angel investors do, who have 

been there, done that, and are looking—and cashed out—and are 

looking for bright young entrepreneurs who want to do it again. 

They offer not only money, but advice and entry into the network 

31

that makes it all go. I am sure those folks can be very helpful to 

NIST providing can figure out how to protect the proprietary information of the companies, which they of course do and they are authorized to do under the law. 

Having said that, let me return to the controversial recommendation for reform, which is the recapture. I have exactly the same arguments against it as you do, and that is this is a technology program and this would provide a very perverse incentive to the ATP 

managers. They would be driven to in fact invest in product development or even in manufacturing if they can get away with it, because the have got to get the money back somehow by recapturing 

profits. 

If in fact ATP does what you have told them to do and what the 

Commerce Department tells them to do in their reform number 

five, and that is invest only in the technology and stop before they 

get to product development, and the company does the product development, then you are asking the company to pay the government a royalty on the money they spent on the product. 

In fact, I do not even know exactly how the company would know 

which product actually benefited how much from the R&D that 

they did with the government. So it seems to me very difficult to 

administer and it drives the ATP management to do the wrong 

things. 

Thank you. 

[The prepared statement of Dr. Branscomb follows:]

PREPARED STATEMENT OF LEWIS M. BRANSCOMB, PH.D.,

PROFESSOR, HARVARD UNIVERSITY

I am pleased to have the opportunity to provide to this committee my views on 

the ATP program in general, and my observations on the evaluation of the program 

and recommendations for reform from the Secretary of Commerce in particular. Let 

me first address the recommendations from the Secretary of Commerce. I will follow 

with the reasoning behind my conclusions, which is based in part on research Dr. 

Philip Auerswald and I have conducted on the transition from inventions to innovations in the US economy. 

I applaud the Commerce Department’s report on ATP. They came to reasoned and 

well-supported conclusions that should go a long way toward ending the debate, 

often conducted along ideological lines, over the program’s future. Secretary Evans 

and Deputy Secretary Bodman concluded that ATP is a useful policy tool for accelerating science-based innovation in our economy. They proposed six reforms, which 

I paraphrase for brevity.

1. Universities should be able to lead ATP consortium projects. 

2. Universities should be able to negotiate patent rights with firms. 

3. Large firms should be eligible for ATP funding only in consortia. 

4. ATP should recoup profits by a 5 percent royalty. 

5. ATP should fund only technology prior to product development. 

6. ATP should improve its evaluation process with inputs from venture capital 

experts and other such sources of information.

I strongly support the first two of these recommendations, which would clarify the 

important role that universities already play in ATP and would remove one serious 

and unnecessary impediment to intensified university participation in ATP-supported projects: the denial of university access to intellectual property that results 

from their work with a firm or firms in an ATP program. I have heard from a number of senior research officers of universities that such denial of their legitimate 

rights to the fruits of their work—in contradiction to the intentions of the Bayh-Dole 

Act—caused them to decline to participate in any ATP consortium. The DOC wisely 

would have the Congress leave the negotiation of intellectual property rights to the 

parties directly involved—the firm(s) and the university. I urge the Congress to 

make whatever legislative adjustments are required to enact this change, and furVerDate 0ct 09 2002 07:48 Feb 24, 2005 Jkt 090577 PO 00000 Frm 00035 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\90577.TXT JACK PsN: JACKF
32

ther to allow a University to be the lead party in a consortium if such an arrangement is agreeable to all involved parties. 

The third proposed reform would permit large firms to participate in ATP projects 

only when part of a consortium including smaller firms. I see this change as primarily responsive to the understandable political objection concerning grants going 

to firms with deep pockets. Examples exist in which an ATP grant to a large firm 

was, in our view, fully justified. We have studied in detail one such case involving 

GE. However, I do not believe this change would materially reduce the effectiveness 

of ATP, and it has the benefit of eliminating one point of contention regarding the 

program. 

Let me now skip to the last two proposed reforms, before returning to the fourth 

pertaining to recoupment. 

The fifth proposed reform, which limits ATP funding to projects that have not yet 

reached the product development stage, represents a reiteration of the rules already 

governing the program. This principle is certainly correct. ATP is a research and 

development program focused on early stage technology development. The only difficulty I see here is that the rule as stated will have to be interpreted properly. Policy debates usually characterize early stage technology development as a linear 

process that begins with a workbench model and ends successfully with the development, production, and marketing of a commercially viable product. In reality the 

process is often iterative. The first product may be unsuccessful, but by producing 

it the firm learns enough about customer needs and reactions to create another that 

is successful. With a breakthrough technology, the process of trying to develop an 

entirely new market may take years, with many stops and shifts in direction. This 

fifth proposed reform should be interpreted as focusing ATP funds on technology 

R&D in order to determine product specifications, production processes and costs of 

a developed product, but requiring projects to rely on private funds for the actual 

product development when such information is in hand. The possibility that a prior 

product of perhaps marginal success had been designed by a firm (with its own 

funds) should not disqualify the firm from submitting an ATP proposal for technology project that remedies prior problems with the technology, covers new technical ground and leads to other, more successful products that may follow. 

Finally (reform 6) the DOC would have ATP improve the evaluation process with 

inputs from experienced venture capitalists and other sources. This is sensible advice, but I would suggest that only a small number of VC firms are experienced at 

evaluating technology based projects in early stages of development. A richer source 

of that talent is found among individual private equity investors, commonly known 

as ‘‘angel’’ investors—for example members of Silicon Valley’s Band of Angels and 

similar groups elsewhere. These experienced innovator-investors could indeed be of 

great help to ATP if protection of applicant firm’s proprietary information can be 

assured. 

Let me now turn to the one reform (no. 4) to which I take exception: the proposal 

to recoup profits accruing to ATP supported projects by a capped royalty of 5 percent. While this proposal appeals to an intuitive sense of fairness, it is deeply problematic in at least two respects. 

Firstly, to the extent that such recoupment might become a primary mechanism 

by which ATP was funded, it would introduce a perverse incentive into the ATP 

project selection process. In order to ensure ongoing funding, project managers 

would be motivated to pick projects that are close to product development. It this 

sense, proposed reform number 4 works against the spirit of proposed reform number 5. In effect it pushes ATP to act as if it were a ‘‘public venture capital’’ business, 

despite the fact that the program (correctly) lacks the ability to use many of the 

management tools that VC firms routinely use to manage their risks—staged investments, the taking of positions on the firm’s board, acting to replace the CEO when 

necessary, etc. As the 5th and 6th proposals from the Secretary of Commerce suggest, the proper role of a Federal technology program such as ATP is in the support 

of nascent firms and projects—more the domain of the Angel investor than of the 

venture capital firm. Popular press accounts notwithstanding, venture capital firms 

are not in the R&D business. Rather, they are in the business of earning maximal 

returns to their investors by buying firms low and selling them high. Venture capitalists do indeed back high-growth, new ventures. In many cases, though not the 

majority, they support firms that are bringing radical new technologies to market. 

However, even when venture capitalists do support technology-based enterprises, 

they prefer to support ones that have at least proceeded beyond the product development stage. For all of these reasons, I do not believe the ‘‘public venture capital’’ 

model is a good one for ATP. 

A second problem with the recoupment proposal concerns the challenge of computing the royalty. In my view, this would be a daunting task. If royalties are based 

33

1 (See L M. Branscomb and Philip Auerswald, Taking Technical Risks: How Innovators, Executives, and Investors Manage High Tech Risks (Cambridge MA: MIT Press, 2001) 

on the profits generated by a product, what product shall be associated with the 

ATP R&D? Reform 5 says ATP stops before the product development phase begins. 

In essence, the recoupment would be on profits derived from the firm’s investment 

in product development and manufacturing, not on ATP’s R&D investment. 

Let me conclude this part of my testimony with on observation based on my 50 

years of experience with the Department of Commerce, beginning when I first went 

to work there in 1951. In my view, the Department of Commerce has today, with 

the appointments made in the last year, the strongest leadership team for understanding the role of innovation in our economy that it has ever had. We are fortunate to have a Secretary of Commerce who is trained in engineering; a Deputy Secretary who led one of America’s most innovative firms and understands the world 

of industrial research and of capital investment in high tech industry; an Undersecretary, now also Chief of Staff, who is also experienced in the high tech world; and 

an exceptionally gifted and well qualified director of NIST, Dr. Arden Bement. The 

committee can place its confidence in Dr. Bement and the senior members of the 

department with whom he works. With support from the President and Congress, 

NIST can fulfill its promise as the one laboratory in government that truly understands the world of research and innovation in support of a strong, knowledge-based 

economy. 

Let me turn now to a brief background discussion of the process of technological 

innovation in the United States that will support my previous observations regarding the reforms to ATP proposed by the Secretary of Commerce. 

The transition from invention to innovation plays a very important role in our 

economy, and is unlike the pursuit of business growth in an established, competitive 

environment, or the performance of research in the pursuit of knowledge. For new 

product ideas to create new markets requires entrepreneurship, science and engineering imagination, cross-cultural trust, dreams of riches and willingness to risk 

failure. My coauthor, Dr. Philip Auerswald, and I have explored the risks faced by 

scientists and inventors with dreams of a new product or a new business; the risks 

faced by an entrepreneur trying to bring that dream to commercial fruition; and the 

risks faced by investors who put their own money—or other people’s money—into 

a nascent technology-based venture with inherently and irreducibly uncertain prospects. 1 More recently we have completed a study for NIST tracking the sources and 

flows of risk capital that are available to high tech entrepreneurs to create commercially promising innovations. This work is now being reviewed by NIST, and I expect it to be published in the next couple of months. 

I can share with the committee a few of the most important things we have 

learned:

• Entrepreneurs and private equity investors alike consistently state that there 

exists a financial ‘‘gap’’ facing early stage technology ventures seeking funding 

in amounts ranging roughly from $200K to $2 million. Entrepreneurs report a 

dearth of funding sources for technology projects that no longer count as basic 

research (and perhaps eligible for federal science funding) but are not yet far 

enough along to form the basis for a business plan (which could attract the typical $7 million in venture capital funding). At the same time, venture capital 

firms and other investors are sitting on record sums, with over $70 billion still 

undisbursed from funds raised during the boom years.

We should not be surprised by this. Whenever outcomes of investment are uncertain, social and private benefits diverge, and/or products are indivisible, we 

can no longer expect competition to yield efficient outcomes—a theorem that 

comes not from ‘‘New Economy’’ prophets, but rather from a classic analysis of 

inventive activity published four decades ago by Nobel Laureate Kenneth 

Arrow. Clearly, early stage technology development involves uncertainty, imperfect ability to capture full benefits, and indivisibilities. Whether or not efficient 

markets exist on Wall Street may be an open question. However, efficient markets do not exist for allocating risk capital to early stage technology ventures.

• The primary sources of funding for early stage technology development are not 

venture capital firms, as many people believe. Nor are they state governments 

or universities. The leading sources of support for the conversion of inventions 

to innovations are the ‘‘angel’’ investors to whom I referred earlier; large corporations still willing in the current highly competitive global economy to support promising technologies outside of their core business; and government programs like ATP and SBIR.

34

• Angel investors are especially important, not only because their investments in 

early stage technology development far outpace those by venture capitalists, but 

because the best of the Angels are themselves successful entrepreneurs who 

made their millions, cashed out and now look for promising images of themselves. They are more than sources of money; they are mentors who help newly 

minted entrepreneurs get access to the networks of trust that make Route 128 

in Boston and Silicon Valley in California such a fertile ground for new ventures.

These findings lead me to four observations:

• The financial gap is real, but, as noted above, it reflects a gap in information, 

in networks of trust, and in the experience to perform the ‘‘due diligence’’ required by any investor. It follows that the government should not attempt to 

become a public venture capitalist. I am in full agreement with Josh Lerner of 

Harvard Business School, Richard Florida at Carnegie Mellon, and others on 

this point. But the government should selectively identify entrepreneurs with 

promising technical ideas and share with them the risks of reducing these ideas 

to practice in the context of a promising commercial market. This is what ATP 

does; and it does it well.

• ATP should therefore focus on its role as an R&D program (as the DOC’s 5th 

reform proposal requires), and take every opportunity to leverage the most important sources of radical, interesting technical ideas. The research universities 

have shown themselves to be rich sources of those ideas and their ability to help 

ATP achieve its goals should not be needlessly limited.

• ATP’s performance consequently should be evaluated by its success at identifying and nurturing—in partnership with innovative firms—promising new 

technologies capable of building a foundation for economic growth. The goal is, 

of course, to create jobs and wealth for Americans. But that is the ultimate, not 

the immediate, goal of the program. Indeed it is often the case that a R&D 

project that fails in terms of ex post objectives nonetheless yields extremely useful technical insights that translate into economic rewards as subsequent 

projects profit from earlier learning.

• ATP has now over a decade of experience. It has been the subject of extensive, 

impartial, and thorough reviews by a wide variety of leading scholars. Now the 

Department of Commerce has concluded that it is a useful program. Although 

much is still being learned about the nature and risks of high tech innovation, 

I believe that it is time to stop treating ATP as an experiment. Instead, it is 

time to promote continued prosperity and future economic security in the 

United States by funding the program at a level appropriate to its important 

mission. One guide to identifying such level is to analyze the relative resources 

available to ATP and SBIR, in comparison with their relative documented effectiveness in achieving critical national goals. I believe ATP is the more effective 

program of the two, and thus that it should be funded at a level closer to that 

of the SBIR program.

Finally let me note that this Committee might want to explore the potential role 

of ATP in the S&T component of the nation’s counterterrorism effort. I am co-chair 

with Richard Klausner of a project of the Academies of Science and of Engineering 

and of the Institute of Medicine to explore the role of S&T in counterterrorism. Our 

report is on schedule to be released in early June. I believe that report will make 

evident the kind of role ATP could play in this context, based on the diverse forms 

of innovation that are needed from the private sector in partnership with the public 

sector. When our Academies’ study is complete, I would be happy to explore this 

idea further. 

Finally I want to acknowledge and thank Dr. Philip Auerswald and Brian K. Min 

for their contributions to the preparation of this testimony. 

Thank you.

The CHAIRMAN. Oh, boy. You answered all of my questions. 

Mr. Donnelly. 

STATEMENT OF SCOTT DONNELLY, SENIOR VICE

PRESIDENT FOR GLOBAL RESEARCH, GENERAL

ELECTRIC COMPANY 

Mr. DONNELLY. Thank you, Mr. Chairman, Senator Allen. In 

fact, he has given my testimony, so I will briefly summarize it. 

35

GE, certainly we are appearing on behalf of support of the NIST 

ATP programs. We have had the opportunity over the last few 

years since the inception of the program to participate in a number 

of technologies that are certainly very early on in their technical 

life cycle, just coming out of basic research, in areas as widely 

ranging as health care, generation of electricity, and the consumption of electricity. 

ATP for us has generated I think a unique environment that encourages collaboration between universities and academic settings, 

the government, as well as private sector businesses such as ourselves, as well as other large and small companies alike. 

The nature of the program has been very supportive in terms of 

providing some funding for very early things. We look primarily at 

the role and responsibility of academia and nonprofit institutions 

to do the basic research. We obviously spend most of our research 

money in the adaptation of that technology and turning that to 

commercially beneficial products and services. 

The nature of most of the programs funded under the ATP is 

such that these technologies are probably at least a decade from 

having a commercial revenue stream. So even though they may be 

large companies involved in the program, we still have a responsibility on the financial side to our shareholders, and we recognize 

that these programs, of which we actually cost-share a great deal 

of the funding, that these are not technologies that are going to 

show up as commercial benefit for some number of time. 

I would also like to address the various reforms that have been 

proposed by the Department of Commerce. I have the exact same 

view as the others in terms of university involvement. In fact, we 

have had several universities participate as part of our AT programs. These universities bring that ability and in many cases the 

researchers who have participated in the basic research, and it is 

quite logical for them to participate as part of these program teams 

to make sure that we are efficient in how we take that basic research and demonstrate its feasibility for the commercial sector. 

As to the issue of leadership, I see no reason why a university 

should not be able to lead one of these. I think it is simply a practical matter that any team should decide whether it is more appropriate for the university or the private sector to be responsible for 

the program in total. I feel the same about the intellectual property. That should be a fair and reasonable negotiation between all 

parties and no one should be exempted from that. 

In terms of large firm participation, I think large firms actually 

bring a different perspective and a lot of value to add to an AT program. Companies like ourselves are actually quite good at understanding very early technology and providing requirements and 

feedback to universities and small companies on how that technology should be developed to make sure that it is going to hit the 

mark once it gets to the marketplace. 

So in that regard, certainly I think exempting large firms would 

deny the program the opportunity to have participants who in fact 

have proven to be very adept and successful at that translation of 

technology in the past. 

Most of our programs have been ventures where we have been 

teamed with other companies in academia. Over 80 percent of 

36

those have been the case in fact. We certainly have no objection 

whatsoever in sort of a mandate that would require a large firm 

not to go it alone, but to have partners in either small companies 

or academia, as that has been our practice in general. 

At the risk of piling on in terms of this issue of royalties, I see 

this as a very, very difficult topic. We work with universities. Negotiating and funding collaborations and trying to understand royalty 

payoffs and how those things would work in very early basic research, these are very, very difficult to do. The nature of these 

technologies—and in fact the later reform suggesting that these 

technologies and funds should only be used for that translation of 

basic research to validation would in my mind make it virtually impossible to go back and assign a value or understand where you 

apply that 5 percent and whose revenue would be extremely challenging. 

In fact, most of these technologies—a company like ourselves 

could spend $100 million in bringing a product to market and it 

could be that 5 years earlier a million dollars of NIST ATP money 

was spent. To try to assign a 5 percent royalty or any value to that 

would be extremely difficult and frankly, I think, beyond the philosophical opposition, an administrative nightmare to try to ascertain 

where to assess that royalty stream. 

The last in terms of project review and evaluation I think is 

quite logical. It has been, I think, frankly a very fair evaluation 

process. There are some great people that work on evaluating these 

proposals and programs, and to the extent they would look for 

more industrial participation or for other agencies we are fully in 

support of that. I think it has actually been a very well-run and 

very well administratively applied evaluation process. 

So with that, I want to thank you. 

[The prepared statement of Mr. Donnelly follows:]

PREPARED STATEMENT OF SCOTT DONNELLY, SENIOR VICE PRESIDENT FOR GLOBAL

RESEARCH, GENERAL ELECTRIC COMPANY

Thank you Mr. Chairman and Members of the Commerce Committee: 

My name is Scott Donnelly and I am the Senior Vice President for Global Research for the General Electric Company. I am appearing today on behalf of GE to 

express my full support for the National Institute of Standards and Technology 

(NIST) Advanced Technology Program (ATP). 

There is no better time to focus on strengthening technology leadership in the 

U.S. through collaboration among U.S. businesses, universities and government organizations. The NIST ATP is the best example of this type of collaboration in meeting our nation’s competitive challenges and technology needs. 

In the past several years, world-wide technology and innovation has exploded. 

This creates a large demand for the innovation process to have significantly more 

speed than just a few years ago. The NIST ATPs addresses this important factor, 

and excels at bringing technology to market very quickly. 

We believe that when the government identifies areas of social and economic need 

that are strategic for the nation as a whole—but is highly risky for short-term commercial return—then joint government-industry collaboration makes sense. By sharing risks between government, universities and the private sector, U.S. Industry is 

able to take more chances, which results in breakthrough technologies that wouldn’t 

have been viable for any of the three to try it alone. Successful examples of NIST 

ATPs where GE has participated range from new technologies aimed at improved 

health care through medical diagnostics, to highly efficient energy sources, to nextgeneration lighting. 

The NIST ATP is not the only government program to share risks between the 

public and private sectors, but we believe it is the best program of its kind because:

37

• It focuses on industry- and market-driven programs that are selected based on 

merit;

• It has successfully stimulated customer, manufacturer and supplier alliances 

aimed at accelerating time to market;

• It employs a rigorously open, competitive process with market and economic impact factored into the selection criteria;

• Demonstrated willingness to work with industry to structure mutually acceptable terms and conditions (i.e. minimize cost accounting burdens and establish 

realistic intellectual property terms);

• NIST has assigned competent Technical Program Managers to add value to the 

industry-led programs;

• To measure performance, NIST has established metrics of evaluation to assess 

the success of the programs, as well as the return on investment by all parties.

I would like to address the proposed rule changes for NIST ATPs proposed by the 

Department of Commerce, but first, let me begin with a brief overview of our company so you can have an understanding of how our research and technology fits into 

our company. 

GE is a diversified technology, manufacturing and services company with a commitment to achieving technology leadership in each of its key businesses, including:

• Aircraft Engines 

• Appliances 

• Capital Services 

• Industrial Services 

• Lighting 

• Medical Services 

• NBC 

• Plastics 

• Power Systems 

• Specialty Materials 

• Transportation Systems

GE Global Research is the cornerstone of research and development for GE. From 

our beginning more than 100 years ago, we have been and continue to be one of 

the most diversified industrial laboratories in the world. We have more than 2,100 

technologists representing the full spectrum of scientific disciplines with more than 

750 PhDs. 

Now I would like to share our thoughts on all of the proposed reforms for NIST 

ATPs: 

Reform #1: University Leadership of ATP Joint Ventures 

GE supports this proposal. We have partnered with numerous universities for 

NIST ATPs, and we understand with the benefits and capabilities that university 

research partners add to the programs. Not only do academic research partners 

bring new ideas into a company’s research programs, they are also a source for our 

future workforce. All funding that is committed to universities is ultimately educating future scientists. 

It is important that administration recognized that there is increased value when 

universities and companies work together, rather than either working in a vacuum. 

Reform #2: University and other Non-Profit Organization Ownership of 

ATP-Funded Patents 

GE supports the rights to intellectual property (IP) for those who make inventions 

and discoveries. Universities and non-profits should have the ability to negotiate IP 

terms when collaborating with companies and other research partners. 

Reform #3: Retain Large-Firm Participation in ATP Joint Ventures 

GE supports this proposal as this is a common practice for GE. We have 

partnered in 83 percent of NIST ATPs in which we participate. We see this proposed 

reform as a positive contribution to the program that will allow large corporations 

like GE to offer commercialization and technology expertise to small- and mediumsized companies and universities that don’t typically have this type of experience. 

We have found this approach successful, because some of our small company partners have been suppliers and other business affiliates that strengthens our relationships and creates a win-win situation for all involved. 

38

Reform #4: Royalties on Government Investments in Profitable ATP Ventures 

This proposed reform would modify ATP statue to require recipients of ATP 

awards to pay an annual royalty to the federal government of five percent of any 

gross revenues derived from a product or invention supported by or created as a result of ATP funding. It is intended that these royalties would be ‘‘reinvested’’ in the 

ATP. 

We are concerned that this rule change introducing ‘‘recoupment’’ as a means to 

stablize NIST ATP funding will render the program ineffective in stimulating the 

development of high-risk technology with real commercial potential. 

One of the primary goals of the NIST ATP programs have experienced successes 

in bridging the gap between basic technology research and market implementation. 

The recoupment clause may erode participation from companies, which would remove their valuable cost share funding, commercialization, technical expertise that 

complements and often enables smaller sized companies’ participation in NIST ATP. 

NIST ATP funding represents a very small portion of a research organization’s 

total R&D spending. To use GE as an example, in 2002 we will receive about $4.4 

million in NIST funding, which was two-tenths of one percent of our company’s total 

R&D budget. These funds are not going to further product development for GE. We 

use these funds to help our customers, suppliers and research partners with technology breakthroughs that they could not accomplish alone. 

Secondly, the recoupment is based on 5 percent of gross revenue, which raises 

many serious issues. How would the Department of Commerce calculate the ‘‘government royalty’’ for an ATP. Often an ATP is focused on a specific, high-risk technical hurdle associated with a key component, process or subsystem. This component is then part of a larger system. The component may only be a small percentage 

of the total system cost. How could anyone agree on a fair and consistent formula 

to calculate the royalty fee owed to the government? This creates an administrative 

nightmare and adds additional expenses that would take away funding from the research programs. 

In addition, to calculate the royalty on ‘‘gross revenues’’ would place undue pressures on industry to pay the government even if they are not making a profit. This 

would be difficult for GE, but it would be devastating for the smaller firms. 

Reform #5: Ensuring that ATP Funding is Used Only to Support Removal 

of Scientific or Technological Barriers to Product Development 

GE supports this proposal. In our company NIST ATPs are part of our Global Research labs, not the GE businesses. Research funded by NIST should be aimed at 

taking basic research and validating it, not product development or marketing. 

In fact, this supports my previous point regarding recoupment. It would be practically impossible to correlate validation of scientific research with profits generated 

from specific products or services. 

Reform #6: ATP Project Review and Evaluation Process 

GE supports this proposal and fully supports the peer review process. Enhanced 

assessment of technologies supported in the private sector would add value to the 

process and lessen the chance of duplication of effort. 

In conclusion, we would like to emphasize that NIST ATPs are highly valuable—

not only because they meet national priorities and industry needs with the right 

sense of urgency—but they also allow GE to form strong R&D partnerships and 

mentoring relationships with smaller businesses that wouldn’t typically have the resources to participate in such high-risk technology development. NIST ATPs have 

GE’s full support, and we thank the Chairman and this Committee for their commitment to ATP. We applaud the administration’s efforts to address concerns and improve the program, and we appreciate the opportunity to provide input into the 

process. 

I thank you, Mr. Chairman, for the opportunity to testify today and I welcome 

any questions.

The CHAIRMAN. I cannot thank this panel enough, because your 

presentation is outstanding. I was arguing with the staff about 

recoupment and they were trying to explain to me the position of 

the administration and I still could not understand it. I am glad 

to see you three cannot either. 

39

Dr. Bement, that is no reflection on you, sir. We appreciate your 

leadership. He is our Director of NIST and we are proud of him. 

He is working hard, and we are glad he is here. 

I just got briefed, Senator Allen, by a group back from China. I 

have been there in 1976, 1986, 1996, last year. What we have got 

going on in the Middle East is nothing compared to making friends 

and making sure we have a positive influence there in China, because a billion 300 million—there are just not as many Americans 

as there are Chinese and the only way we are going to survive is 

the superiority of our technology. 

These three folks there are leading the way for that, and NIST 

and ATP is leading the way. That is, our first line of defense and 

security is technology. Secretary Rumsfeld understands that. 

Ms. Armstrong, I am jealous. I will never forget sending my man 

up to Richmond, Virginia, for Governor Albertus Harrison. We had 

a red hot industrial development. Now I see what Governor Allen 

and you have got there. Every time I go to Dulles Air Base I say, 

how stupid I could have been. You folks are way ahead of anybodyelse—Research Triangle and anything else. I mean, it is outstanding and we commend you on your leadership and what you 

are doing out there. That is very good. I appreciate it. 

Senator Allen. 

Senator ALLEN. Thank you, Mr. Chairman. Thank you for your 

compliments of Virginia. As Governor I was envious of South Carolina and what you had done there as a State. In fact, the person 

I selected to head up our economic development effort was there, 

had been there with Carol Campbell, Wayne Sterling. We put together a good team, and South Carolina has done a great job. 

I agree very much with your views as far as how Americans will 

compete and succeed in the future. We have to have the right policies here in this country—good science-based regulations, good probusiness tax policy, investment in research. The key will be knowledge and having the best, most knowledgeable individuals who 

have a good work ethic, but are innovative in improving our lives. 

That is how we will have better quality in our manufacturing, communications, and all aspects of our economy. 

I would like to ask Ms. Armstrong the follow-up questions. You 

mentioned the universities, and I will not try to explain what the 

logic of the recoupment aspect is. I am sure it is the logic of keep 

using those funds to fund others in the future. I would guess that 

is the logic of it. But I think as a practical matter these three witnesses have shown the practicality of it and probably or possibly 

an improper incentive or factor to put into the calculations or determination as to who does receive ATP funding. 

Regardless of that, on the universities aspect of this, especially 

with the CIT, when I was Governor the CIT was under the Secretary of Education. I moved it to Commerce and Trade because I 

wanted it to be job-oriented, not that the universities and education 

is not important. Subsequently, with the creation of a Secretary of 

Technology, logically it was put into that secretariat. 

Now, the issue on the universities aspect of this. Universities in 

some cases, not all cases, can be useful partners and they have 

their own patent, intellectual property efforts, their patent and 

trademark, so to speak, offices there. 

40

Now, one of the reforms focused on here is to allow greater university participation in the ATP program. Now, according—and it 

may not be right but according to the National Research Council 

report last year, it said: ‘‘176 universities have been involved in the 

program, participating in over half, 56 professional, of the programs 522 projects.’’

Now supposedly there is a thread in here that there is some sort 

of barrier to university participation in ATP. So I would ask you, 

Ms. Armstrong or if Mr. Donnelly or Dr. Branscomb would want to 

join in, what are the existing barriers to universities’ participation? 

Ms. ARMSTRONG. I will take a stab at it. In Virginia the universities own, hold their IP and they license it, and there is the perception that in the ATP program that the results of the research 

must be owned by the company. So we have an administrative barrier. There have been some ways around it, which is how we have 

managed to have universities participate. But I believe that it is 

a specific Virginia rule, which a lot of other States have as a result 

of some of the Bayh–Dole regulations. There are some States that 

have changed those regulations—I believe Arizona is one of them—

and have made the licensing of the IP that is developed in the universities much more available and allow the companies to own it. 

Senator ALLEN. Dr. Branscomb? 

Dr. BRANSCOMB. I cannot speak to Arizona law. But on the issue, 

I know that—and I talked to the vice president for research at Cornell, who is very concerned about this particular element. He says 

there is no way Cornell can participate if they put their faculty into 

the program and they invent stuff and then they do not own the 

invention and they are not even allowed to negotiate with their 

countries partners what the ownership will be. 

It seems to me that the right answer is to get the Federal Government out of the particular debate and leave it up to the companies and the university to work it out. If they cannot work it out, 

they probably are not ready to work together anyway. 

The other issue—and I am delighted that you pointed out, Senator Allen, that half of these ATP programs already have universities involved in them. My understanding of what sometimes happens is there is a university, there are companies in the same city, 

they talk to each other, the people in the same areas, the engineers 

and the industry people. They are talking about interesting technologies. They know something about what everybody is doing, and 

the idea comes up, let us think about doing something together. 

I think very often the university people actually sit down and 

work out what the technical strategy might be, then the company 

picks it up and puts it in a proposal that includes the university. 

All this particular reform does as far as I can see is a fairly simple 

and in some sense purely administrative thing, which is to say if 

a university is thought to be by the companies the right group, has 

the right person, the right leader there ready to put the consortium 

together and work out, negotiate the details, why not let that happen. 

It does not change anything as far as I can see in either the criteria for deciding whether they get an ATP award nor does it 

change anything on the expectations that the Congress and the 

government are entitled to have for what the outcomes would be. 

41

It is a question of not forcing the university to pretend it did not 

ghostwrite the proposal, which I think sometimes they actually do. 

Senator ALLEN. So you would support this aspect of the proposal? 

Dr. BRANSCOMB. Sure. I am not at all afraid of—maybe the NIST 

will get accused of pork by letting universities in. My understanding is the company is pretty good at pork, too, and I do not 

think NIST is ever good at pork. I have never seen NIST do a piece 

of pork. In fact, I think the reason they have trouble selling the 

ATP program politically is they have leaned so far over backwards 

to make sure that there is no pork that they are not even willing 

to talk to politicians. 

I at one time advocated putting the headquarters office for ATP 

down in the Commerce Building so that Mary Goode could teach 

them how to talk to politicians. Now I think we have got a really 

good team at NIST and in the Department and that is not necessary. But this is not a pork problem and it really is—these 

projects really are high tech projects. They really call for brainy 

people being involved. Not many companies have the depth of highlevel competence technically that some of the better universities 

have in their midst. 

Senator ALLEN. Thank you for explaining it. I assume that all 

three of you, including you, Ms. Armstrong—and that is why I 

asked you first, because before you were there, but nevertheless the 

CIT has been under these different secretariats. You all three 

would agree with the proposals from the Secretary of Commerce insofar as the universities aspects, right? 

Mr. DONNELLY. Absolutely. 

Ms. ARMSTRONG. Yes. 

Dr. BRANSCOMB. It seems to me consistent also with the spirit of 

the Bayh–Dole Act, which goes back to 1980, and a huge amount 

of the technical revitalization of this country has come about 

through Bayh–Dole and the basic philosophies that it contains. 

Senator ALLEN. Thank you. Thank you all. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Dr. Branscomb is heading up the 

counterterrorism panel over at the National Academy of Sciences. 

A role for ATP now in homeland security; do you see a role? If any, 

what would that role be? 

Dr. BRANSCOMB. I think that could be quite plausibly a role. Of 

course, we have not finished our study. We are shooting to get it 

out in early June. But we are certainly going to identify in that 

massive study a very large number of technologies that lie just over 

beyond what is now commercially reachable. Many of them will 

have the feature that, while everywhere we can for homeland security we will look for dual use technologies so there can be a commercial market to help make it available to the country for homeland security purposes, but I think it will be a feature of many of 

these homeland security projects that, number one, they need innovative companies to do the actual development; number two, there 

is a weak or questionable or unknown or in some cases nonexistent 

commercial market and there is a big public interest involved in 

them. 

So it seems to me just, I do not see these programs as any different from other ATP projects. They will have the characteristic 

42

of being very high tech, very early stage, markets yet not well identified, and requiring technical exploration, and in many cases involving the skills companies have. 

So I look around the government, where do we have really good 

experience with public-private partnerships at doing things with 

industry that the country badly needs? This program looks to me 

like the one that has the best track record. 

The CHAIRMAN. Very good. The appearance of each of you has 

been most valuable here this morning. 

The record will stay open with respect to questions, and the 

Committee will be in recess until the call of the chair. Thank you 

very, very much. 

[Whereupon, at 11:05 a.m., the Committee was adjourned.] 

(43)

APPENDIX

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN MCCAIN TO

HON. SAMUEL BODMAN

Question 1. The ATP program has consumed a tremendous amount of management time, not only of NIST’s, but also the Department’s. One of my concerns with 

the program is that other managerial areas of the laboratories are not receiving the 

proper attention. Congressman Udall and I wrote to the Secretary last year concerning the deteriorating conditions of the NIST laboratories in Boulder, Co. The 

Secretary responded to this letter stating that he would have the NIST update its 

facilities plan and that it would be provided to the Congress as soon as it is available. We have noticed that a report on proposed changes to the ATP program has 

been completed within that time frame.

a) Can you provide us with a date as to when we can expect to receive this updated facilities plan?

Answer. Elements of NIST’s Boulder Construction Plan are reflected in the President’s FY03 Budget submission to Congress. In particular, the budget requests 

$11.8M for the first phase of a new Central Utility Plant (CUP) as well as $5.5M 

for the installation of upgrades to the facilities’ Primary Electrical Service.

The current Boulder renovation plan, subject to future budget priorities, is to renovate Building 1 (multiple wings), Building 2, and Building 4, phased in over a tenyear period.

Question 2. The Energy bill that is currently under consideration by the Senate 

contains a provision that allows NIST to hold a portion of the ATP competitions in 

thematic areas designed to develop and commercialize enabling technologies to address climate change. The bill also contains provisions for NIST to develop a program to support the implementation of new ‘‘green’’ technologies and techniques at 

the more than 351,000 small manufacturers.

a) What are your thoughts on these provisions?

Answer. Since the ATP provision was dropped from the version of the Energy Bill 

(S. 517), this response will not comment on that provision. Section 1364, titled Technology Development and Diffusion would give the Manufacturing Extension Partnership (MEP) the opportunity to increase the adoption of green technologies by 

small and medium sized manufacturers by helping them to overcome the technical 

issues associated with the insertion of these new technologies.

Currently, MEP provides small and medium sized manufacturers with technical 

assistance to improve their energy efficiency and reduce their impacts on the environment. This is important because manufacturers consume more than 25 percent 

of the natural gas used in the U.S., and they have been especially hard hit by the 

rising cost of energy. A few examples of MEP results include:

• Klune Industries of Spanish Forks, Utah, eliminated 1 million pounds of CO2, 

7,700 pounds of SO2, and 3,300 pounds of NOx, and conserved 600,000-kilowatt 

hours of electricity by converting to MEP’s recommended lighting technology.

• In Maine, the NIST affiliate helped Naturally Potatoes, a small producer of potatoes, to conduct an energy audit and find ways to save nearly $364,000 in 

annul energy costs.

• NIST’s New York affiliate helped Akron Agway reduce energy costs 46 percent 

while slicing processing time by two thirds by introducing new drying oven technology to the company.

• MEP can also help companies meet the challenges of getting customer acceptance of new products, their performance, and associated price adjustments.

Aspects of an assistance program for ‘‘Green Manufacturing’’ could include:

—Developing and disseminating assessment tools to help companies conduct 

cost benefit analysis on different green technologies and existing capital equipment.

44

—Positioning MEP services in the marketplace to help educate technology development companies to produce products and services that are properly scaled to 

meet the demands of small and medium sized manufacturers. 

—Helping small and medium sized manufacturers:

—Identify sources of funding to underwrite the cost of acquiring new capital 

equipment needed for the conversion to green technologies. 

—Implement the conversion to green technologies including testing and production ramp-up. 

—Identify and take advantage of the available tax relief and 

incentiveprograms. 

—Train company employees in the use of green technologies including energy 

efficiency work practices. 

—Develop and implement marketing strategies to gain customer acceptance 

of new products that may look and behave differently yet meet customers’ functional 

requirement.

Question 3. Can you provide the fiscal year carryover balances for ATP for the 

past ten years? 

Answer. The following are ATP’s carryover balances for fiscal years 1990–2001.

FY Carryover into following year 

1990 $9.3M 

1991 $35.4M 

1992 $42.4M 

1993 $49.2M 

1994 $168.1M 

1995 $136.4M 

1996 $41.7M 

1997 $15.1M 

1998 $33.1M 

1999 $67.7M 

2000 $50.4M 

2001 $31.1M 

Question 4. The President’s budget would cut federal funding to all MEP centers 

that have been in existence longer than 6 years. However, Congress eliminated this 

six-year limit in P.L. 105–309, Technology Administration Act of 1998. Were there 

any additional reasons for recommending this cut? 

Answer. In making the decision regarding funding for MEP, the Administration 

had to weigh several factors. In times of war, tough budget choices must be made 

and this was one of those tough decisions, especially in light of MEP’s success at 

delivering services to small and medium sized manufacturers. However, given the 

MEP centers’ success in improving productivity and efficiency, we felt that increasing fees for service should be the direction in which the program heads. The benefits 

of seeking MEP assistance, such as improved productivity and efficiency, should outweigh the increased cost of the fees. 

Question 5. The President has proposed elimination of the Partnership for a New 

Generation Vehicle program, which was a 10-year government/industry partnership 

for research on a light-duty-vehicle, and instead proposed his Freedom Car Initiative at the Department of Energy. Can you discuss whether the research that was 

being conducted under this program at the various agencies has been eliminated 

also? 

Answer. Although there will be no multi-agency coordinated R&D program in the 

agencies after the termination of the PNGV Program, each agency participating in 

the PNGV is able to continue their R&D work as appropriate to their mission and 

budget guidance. We do not have specific project information for the other agencies. 

Within the DoC, NIST has 78 automotive related measurements and standards activities currently in process. Although many of these were never specifically directed 

to the PNGV roadmap requirements, all are high priority projects needed by the 

auto industry and the major suppliers.

b) Also, the Washington Post is reporting the prototype of a ‘‘one-liter Volkswagen’’ which gets 239 miles per gallon. How does this vehicle compare to the 

vehicle that was envisioned in the Partnership for a New Generation Vehicle 

program?

Answer. Volkswagen, AG has not released any details or specifications with respect to the vehicle we think is referenced in the Washington Post. The only 

information we can obtain is from a photo in the 4/22/02 Automotive News 

45

which shows F. Piech and B. Pischetsrieder in a front-to-back configuration vehicle. This appears to be a very small, two seat, vehicle, which may have a 1-

liter diesel in a hybrid powertrain. If this is the vehicle in question, it differs 

significantly from the mid-size, 5-passenger sedan used as the basis for the 

PNGV R&D roadmap plan. Without details of the vehicle body and powertrain, 

it is impossible to provide item-by-item comparisons. 

Question 6. One reform advocated by the Administration is that recipients of ATP 

awards should pay an annual royalty of 5 percent of any gross revenue derived from 

the product up to 500 percent of the original funding received by the award recipient. Do you believe that this recoupment plan can be used as an initial step to turning ATP into a self-sufficient program? 

Answer. The recoupment plan as proposed in ‘‘Reform with a Purpose’’ could be 

considered the initial step to turning ATP into a self-sufficient program. Under certain terms and conditions, and not in an effort to penalize success, it is fair and 

reasonable to require a direct repayment based on the initial Federal share if a company is profitable and nets considerable gains from a technology developed under 

ATP. As such, the financial returns that would stem from ATP projects could potentially transform ATP into a self-sustaining program and thus optimize Federal investment. 

Question 7. The ATP program recently announced that Advanced Cell Technology 

Group had won an award for ‘‘Transdifferentiation of Adult Somatic Cells.’’ Advanced Cell Technology Group has also announced their efforts in the cloning of humans. Can you elaborate what steps are being taken to ensure federal funding is 

not being used for human cloning activities at this company or any other ATP 

award recipients? 

Answer. The ATP award to ACT will fund research using human somatic cells. 

Somatic cells are cells such as skin or liver cells, and are neither sperm nor eggs. 

The ACT award aims to use somatic cells to develop transdifferentiation technology 

that could ultimately lead to the production of replacement cells for patients suffering from diseases such as Parkinson’s, Alzheimer’s and diabetes.

Through its cooperative agreement, the ATP has imposed stringent award conditions on ACT that are designed to ensure that the award funds are solely used for 

transdifferentiation research involving human somatic cells. Included in these 

award conditions is a requirement that ACT demonstrate prior to the release of 

funds that its accounting system will adequately segregate and track ATP expenditures.

The Department of Commerce’s Office of Inspector General has completed an 

independent survey of selected aspects of the ACT award and is completing work 

to ensure that ACT has policies and procedures in place that will allow its financial 

management systems to adequately segregate and track federal funds and comply 

with ATP’s award conditions. In addition, high-level technical, administrative, and 

legal officials at the Department have reviewed the ACT award, and are satisfied 

that the award issued to ACT is in compliance with all Presidential policies, statutes, regulations, and guidelines for the use of human subjects in federally funded 

research.

In addition, the ATP Human and Animal Subjects Advisor has been assigned as 

a special regulatory and technical advisor to this award. In addition to his normal 

oversight duties, this individual will attend all meetings, and site visits with ACT 

and its subcontractors; review quarterly technical reports; review all business reports; review all correspondence involving ACT; ensure that ACT is in full compliance with Federal guidelines on the use of human and animal subjects in Federally 

funded research. Further this advisor will provide written quarterly progress reports 

to the ATP Director, senior ATP management, and the Project Management Team 

on ACT’s technical progress and compliance with applicable Federal regulations.

As ATP and NIST monitor this award, we will continue to strengthen the oversight activities as warranted.

Question 8. The families of the victims of the September 11 terrorist attacks in 

New York and professional associations have requested that NIST study the technical causes of the World Trade Center collapse.

a) Do you believe that Congress should establish a specialized team that would 

be analogous to the National Transportation Safety Board, to investigate the 

collapse of large buildings?

Answer. At this time we are not prepared to comment on the need for a ‘‘specialized team’’ analogous to the NTSB to investigate the collapse of large buildings. 

NIST has put in place a very thorough response plan to the collapse of the World 

Trade Center Buildings. This plan is different from and responsive to the efforts of 

46

the Building Performance Assessment Team, or BPAT, led by the American Society 

of Civil Engineers (ASCE) and sponsored by the Federal Emergency Management 

Agency, FEMA. The NIST response plan addresses all major recommendations contained in the BPAT report. NIST has also identified other critical issues that need 

study, especially in areas that impact life safety and engineering practice.

The NIST proposed response plan consists of three key program elements including an investigation to be conducted in parallel. These are:

• First, a 24-month building and fire safety investigation into the collapse of the 

Twin Towers (WTC I and 2) and WTC 7. The goal of this program element is 

to investigate the building construction, the materials used, and the technical 

conditions that combined to cause these disasters following the initial impact 

of the aircraft. While WTC 4, 5,and 6 will not be investigated specifically in this 

phase, what we learn in examining WTC 1, 2 and 7 would benefit buildings of 

all designs.

• Second, a multi-year research and development (R&D) program to provide the 

technical basis to support improved building and fire codes, standards, and 

practices. This program element addresses work in critical areas such as structural fire safety, prevention of progressive collapse, and equipment standards 

for first responders. It includes BPAT recommendations for WTC 3, 4, 5, and 

6, Bankers Trust, and peripheral buildings as well as recommendations for future studies to address specific issues of broader scope not covered by the BPAT. 

The program outputs and recommendations will support the voluntary consensus process that is used to develop building and fire codes and standards in 

the United States.

• Third, an industry-led dissemination and technical assistance program (DTAP)

that will provide practical guidance and tools to better prepare facility owners, 

contractors, designers, and emergency personnel to respond to future disasters. 

The DTAP will also be an important complement to the R&D effort to demonstrate and gain acceptance of proposed changes to practice, standards, and 

codes. This program element addresses BPAT recommendations for the training 

and education of stakeholders.

We have shared the overall response plan approach extensively with public and 

private sector organizations and have welcomed their inputs since the middle of October 2001. The plan was modified in January 2002 when FEMA requested NIST 

to initiate an investigation under NIST’s unique legislative authorities to conduct 

structural and fire investigations. This request was in direct response to a growing 

demand for a broad-based federal investigation into the World Trade Center disaster from technical experts, industry leaders, and families of building occupants 

and first responders who lost their lives on September II, 2001. We continue to revise the plan as more technical information becomes available and to be responsive 

to the suggestions and needs of these many stakeholders. We will continue to keep 

the Committee informed as we continue to update the investigation and response 

plan.

Question 9. Over the years the U.S. economy has become reliant upon a steady 

flow of technologies for continuous economic development. The U.S. government is 

investing over $40 billion in civilian R&D. Can you update the Committee on the 

progress made on technology transfer at the federal laboratories? 

Answer. Please refer to Question #13. 

Question 10. As part of NIST investigation of the World Trade Center, you have 

mentioned the development of ‘‘intelligent’’ buildings. Can you elaborate on how 

such a system would work? 

Answer. An ‘‘intelligent’’ building is one in which the automation and control systems used for environmental comfort control, fire detection, access control, lighting, 

and elevator control are integrated so that they can exchange information and interact with each other. This kind of integration is useful for energy management and 

to improve response to emergency situations. For example, the detection of a fire 

can cause changes in the ventilation system, lighting, elevator, and access control 

systems to aid evacuation of the building.

Intelligent building systems can also permit interaction between the building and 

outside service providers. In the future, these systems will be used to interact with 

utility providers to manage loads, provide a way for service companies to help the 

building owner maintain the facilities, and also to provide access to critical information about the building and its occupants to police, fire and others responding to 

an emergency in the building.

47

NIST’s Building and Fire Research Laboratory (BFRL) has been working with industry for approximately fifteen years to develop communication standards and 

other technology that will enable widespread use of these integrated building systems. BFRL research also involves automated detection of faults in building control 

systems and other technologies that can take advantage of the information that can 

be available because of the integration. Today there are hundreds of thousands of 

building control products installed around the world that use technology based on 

BFRL’s work in this area.

Question 11. With the growing demand for communication services and foreign 

competition in satellite launch services, what do you see as the future of the U.S. 

commercial launch industry? 

Answer. Although there is a healthy demand for satellite-based telecommunications services, this demand has not translated into a dramatic increase in demand 

for launch services, due to several factors. First, the traditional geostationary orbit 

(GEO), fixed satellite services market has been satisfied by larger and more capable 

satellites, so that it has been possible to meet growing consumer demand without 

a significant increase in the overall number of satellites launched. Second, the satisfaction of demand for wireless services by terrestrially based systems has led to the 

financial troubles of several low earth orbit (LEO) satellite constellations which 

could have otherwise stimulated a large increase in demand for LEO satellite 

launch services.

Programs for development of new launch vehicles, such as EELV, had been predicated, at least in part, upon the expectation that there would in fact be a significant 

increase in launch services demand. Consequently, there is growing evidence of 

oversupply in the international launch services market, resulting in financial difficulties for U.S. launch providers.

Near-term commercial development of reusable space vehicles has also been adversely affected by the apparent overcapacity of launch services. However, if new 

reusable vehicles can eventually be developed in the U.S. to provide launch services 

with dramatically lower cost, higher safety/reliability, and greater capability, the 

U.S. launch industry could benefit in two important ways. First, U.S. providers utilizing these new vehicles would be highly competitive in the international marketplace. Second, new vehicles might enable development of large new markets that 

would greatly increase overall demand for launch services.

NASA’s Space Launch Initiative represents a major effort to create new technologies that can be applied to development of reusable launch vehicles by early in 

the next decade, with commercial as well as government applications. One or more 

of the remaining private entrepreneurial reusable vehicle development efforts may 

succeed even earlier in producing commercially profitable orbital launch services. Finally, there may be considerable commercial promise in suborbital reusable vehicles 

under development both in the U.S. and elsewhere. Although suborbital vehicles 

would not travel to—or generally place payloads in—orbit, they might provide a 

near-term financial bridge between today’s expendable launchers and tomorrow’s orbital reusable vehicles. Commercial markets enabled by suborbital vehicles might 

provide at least some U.S. launch providers with revenues sufficient to sustain them 

during that period.

Question 12. The Technology Administration Act of 1998 created the Office of 

Space Commercialization within the Department of Commerce. NASA is currently 

pursuing a number of commercialization activities. Can you comment on any involvement that your Office of Space Commercialization has had with NASA on commercializing the International space Station? 

Answer. The Office of Space Commercialization (OSC), which as you note in your 

question was authorized by Congress in 1998, is working with NASA in a number 

of areas, including commercialization of the International Space Station (ISS). As 

you are likely aware, the space policy of the Administration is handled in large part 

through the National Security Council- and Office of Science and Technology Policyled Space Policy Coordinating Committee, often referred to as the Space PCC. 

Under that larger umbrella, the Office of Space Commercialization serves as a colead (along with representative from the Intelligence Community and from the Department of Defense) of a sub-team on commercial strategy. Although the primary 

focus of that sub-team has been commercial remote sensing, at the suggestion of 

OSC, the group’s agenda also includes the issues of advertising, entertainment and 

tourism aboard the ISS.

OSC, both on its own and as a representative of other Commerce bureaus such 

as the International Trade Administration, has worked with NASA on a draft plan 

to address these issues as they relate to ISS.

48

Apart from ISS, OSC is also engaged in activities related to NASA’s Space Launch 

Initiative, and has proposed to NASA leadership that OSC host events in partnership with NASA that will focus on what the Space Launch Initiative has to offer 

businesses that are outside of the usual space-based business interests, but which 

could begin to use space transportation for commercial purposes.

For further information, I would refer the Committee to the report to Congress 

submitted by OSC in February 2001.

Question 13. The Office of Technology Policy (OTP) is one of the only offices in 

the federal government charged with conducting analysis, formulating policy, and 

advocating national policies to maximize technology’s contribution to U.S. competitiveness and economic growth.

a) What areas of technology policy development is OTP currently focused upon?

Answer. As you note, the Office of Technology Policy (OTP) is one of the few offices in the federal government charged specifically with providing policy guidance 

to enhance the environment for technology and innovation in this country. I would 

further contend that it is the only office at the federal level that is concerned with 

the entire process of technological innovation—how technology gets developed, and 

how the results of research and technology development make their way to the marketplace or get deployed throughout the economy. The conversion of research and 

technology development into wealth-generating, productivityenhancing products, 

processes, and services strengthens our country’s competitive advantage, brings 

value to society and contributes to global prosperity and stability.

Currently, OTP is focused on pursuing a number of concrete policy objectives important to strengthening and serving the priorities of the Under Secretary for Technology, the Secretary of Commerce and the President of the United States.

These objectives are focused in three critical areas:

I. Supporting technology’s contribution to the nation 

II. The business climate for innovation 

III. Building a workforce for the knowledge economy

Supporting Technology’s Contribution to the Nation. 

Technology Transfer 

• OTP has a statutory responsibility to report to the President and the Congress 

on the status of technology transfer activities by the federal laboratories. In accordance with the StevensonWydler Act (as amended in 1986), OTP has prepared periodic biennial reports for the President and Congress on this topic 

since the late 1980s. (OTP’s May 2000 report in this series, ‘‘Tech Transfer 

2000: Making Partnerships Work,’’ was well received by the policy community 

and was a basis for congressional testimony in that year.) More recently, the 

Technology Transfer Commercialization Act of 2000 enlarged the reporting process in number of ways, making OTP responsible for preparation of an annual 

report to 0MB on the Department of Commerce’s plans, activities, and achievements for tech transfer by its federal labs and for an annual summary report, 

authored by the Secretary of Commerce, for the President and Congress, on best 

practices and effective approaches for tech transfer in evidence at all the federal 

labs. This federal-wide reporting responsibility places OTP in an important role 

to observe and comment on current federal technology transfer trends, assess 

the effectiveness of prevailing policies and programs, and provide informed recommendations on any changes that may be needed in federal tech transfer policies.

• OTP continues to chair and coordinate the activities of the Interagency Working 

Group on Technology Transfer (IWGTT). This longstanding group is comprised 

of senior policy and technology transfer professionals from all federal agencies 

with federal laboratory facilities. The IWGTT meets monthly to discuss current 

issues about federal tech transfer laws and policies and to develop recommendations pertaining to pending legislation or other policy matters. Because technology transfer happens in differing circumstances across the agencies and numerous federal labs, the IWGTT plays an important role in identifying issues 

and policy solutions of common interest.

• As the U.S. Government representative to the Organization for Economic Cooperation and Development’s (OECD) Working Group on Innovation and Technology Policy, OTP routinely coordinates with U.S. agencies, universities, and 

businesses to formulate the U.S. position on various technology transfer issues. 

Recently, OTP led the development of the U.S. response to an OECD study on 

publicly funded research organizations’ licensing activities. OTP worked with 

49

U.S. government agencies and universities (through the Association of University Technology Managers) to prepare the U.S. response. 

Economic Growth 

• With the growing interest in high-tech business clusters, state and local government leaders want information that identifies critical elements commonly found 

in successful state and regional technology environments and help identifying 

the presence of these elements in each of the states. To meet this need, OTP 

publishes ‘‘The Dynamics of Technology-Based Economic Development: State 

Science & Technology Indicators’’, a data tool that provides metrics on science 

and technology assets in the 50 states. State and federal leaders have indicated 

this information will be valuable to state and local economic development officials across the country as they develop and implement their technology initiatives.

• Recognizing the critical need for economic stability in the Middle East and 

North Africa, OTP helped create, develop and launch the Middle East Business 

Development Initiative working with ITA, BIS, NIST, NOAA and NTIA. This 

initiative is designed to promote partnerships between U.S. and Middle Eastern 

and North African businesses in order to strengthen the international coalition 

against terrorism, expand business opportunities for American companies, and 

improve prospects for mutually reinforcing commercial growth and stability.

• Important trading partners such as Russia are seeking to actively pursue technology-led growth strategies and seek guidance and best practices from the 

United States. OTP recently hosted a roundtable that explored the venture capital (VC) environment in Russia. A number of U.S. VC and investment experts 

provided insight to a group of Russian investors, entrepreneurs and policy makers. 

Cybersecurity 

• In collaboration with NIST, and at the request of the Bureau of Industry and 

Security, OTP is contributing to the President’s Critical Infrastructure Protection Board. The Board has launched a series of Cybersecurity Board Policy Reviews, and OTP has been asked to contribute to its outreach strategy. This 

strategy will involve the IT business community in the development and execution of the recommendations delivered by the Board in its National Strategy to 

Secure Cyberspace.

• OTP is also focused on providing support to the Office of Homeland Security as 

it seeks to work with the numerous private sector providers of security technologies. OTP’s understanding and relationships with the U.S. IT community 

are valuable in leveraging private sector contributions in meeting the President’s national security objectives.

• OTP is playing a leading role in the revision of the OECD Guidelines for the 

Security of Information Systems and Networks. The revision of these Guidelines 

reflects a dramatic increase in the importance of a methodical, global approach 

to securing the information infrastructure that serves as the foundation for 

business, communication and government. 

The Business Climate for Innovation 

Understanding Broadband Demand 

• OTP has played a leading role in examining the policy debate surrounding the 

availability and deployment of broadband technologies in the United States. 

OTP has taken up the challenge that, despite widespread availability, only a 

fraction of American consumers have chosen to subscribe so far—just 10 percent 

by some estimates. There are numerous market and regulatory forces at work, 

and OTP has convened experts for in-depth discussions on two factors: 1) the 

market and policy issues impacting online, digital entertainment; and 2) the potential for broadband business applications to catalyze demand. A third discussion is planned to explore the impact of e-learning and tele-medicine on 

broadband deployment. 

The Environment for Innovation in America 

• OTP is also conducting a series of roundtables examining changes in the U.S. 

innovation system at the start of the 21st century. The Innovation in America 

roundtable series brings together national experts in R&D and innovation from 

U.S. industry, universities and government laboratories to explore the changing 

innovation landscape; to inform R&D policymakers, practitioners and managers; 

and to identify trends and understand their implications for national R&D and 

50

innovation policies and programs. This effort serves as a foundation for substantive follow-up with key stakeholders within government, the private sector 

and academia regarding improvements in the regulatory environment for innovation and best utilization of federal R&D resources. 

Biotechnology 

• The U.S. Government does not currently collect comprehensive quantitative information about the emerging biotechnologies that are transforming and creating industries. Recognizing that making good public policy requires factual information, OTP is leading an interagency effort to develop and deploy the first 

comprehensive survey of U.S. firms using and manufacturing biotechnology 

processes and products. Information collected about capitalization of the industry, number of firms and employees, and regulatory and workforce barriers to 

industry growth and competitiveness can provide a foundation for future data 

collection efforts by the Census Bureau and the National Science Foundation.

• OTP also is working with private-public groups to identify barriers and propose 

solutions to biotechnology firms’ response to national homeland defense requirements for certain biotechnology products (such as vaccines, bio-threat detectors, 

and treatments). 

E-Commerce Development and Growth 

• OTP is engaged on a number of relevant policy issues that affect the electronic 

marketplace, working with industry and others in the Administration. These include:

—Online Privacy 

—Internet Taxation 

—Online Gambling 

—Digital Rights Management 

International Competitiveness 

• In April 2002, the Under Secretary for Technology co-chaired with China’s Ministry of Science and Technology a roundtable on business and university collaboration in China. The U.S. technology businesses participating in the roundtable 

then joined the Under Secretary in a meeting with China’s Minister of Science 

and Technology. The meeting provided a unique opportunity for the U.S. companies to discuss with the Minister various impediments they encounter in China. 

The United States and Chinese agreed to pursue expanded cooperation in 

standards, intellectual property rights enforcement as well as venture capital 

development.

• In April 2002, the Under Secretary for Technology also met with senior science 

and technology officials in Japan. An agreement was reached to pursue a regular dialogue on technology policy issues. Through this dialogue, the Technology 

Administration expects to accelerate the exchange of information, identify best 

practices and gain increased insight into Japan’s evolving strategy to promote 

technological innovation.

• The Assistant Secretary for Technology Policy recently completed consultations 

with European Union (EU) officials to pursue greater collaboration in establishing policies conducive to the growth of e-commerce. This builds upon substantial OTP outreach to industry, which provides OTP insight in the opportunities and challenges facing U.S. e-commerce and IT firms that are seeking to 

establish or expand operations in the EU.

• OTP serves as the Secretariat for the U.S.-Israel Science and Technology Commission, a binational initiative that helps stimulate economic developing by promoting the use of technology in both countries through collaborative science and 

technology programs. Activities include joint ventures between U.S. and Israeli 

private sector firms and ongoing dialogue to help reduce commercial impediments and harmonize standards and regulations. Each government provided 

funding ($15 million in the mid–90s) to support this program.

• OTP supports U.S. technology development and technology-led economic growth 

by working with U.S. businesses to promote international partnerships. OTP 

normally pursues such activities through bilateral and multilateral initiatives 

with foreign governments (e.g., Egypt and Israel) and typically include direct 

participation from each country’s private sectors. OTP was recognized in a May 

31, 2001 cable from the U.S. Embassy in Cairo for its efforts in promoting public-private partnerships. The cable (Cairo 3326) notes that the TA-led Technology Subcommittee under the bilateral arrangement, the U.S.-Egypt Partnership for Economic Growth and Development, ‘‘has arguably been the most sucVerDate 0ct 09 2002 07:48 Feb 24, 2005 Jkt 090577 PO 00000 Frm 00054 Fmt 6601 Sfmt 6621 S:\WPSHR\GPO\DOCS\90577.TXT JACK PsN: JACKF
51

cessful subcommittee in recent years’’ and ‘‘its strong private sector participation sets it aside’’ from other bilateral efforts and has contributed to its success. 

Building A Workforce for the Knowledge Economy 

IT Workforce 

• Based on the success of OTP’s prior work on IT work force issues, OTP was assigned to fulfill a Congressional mandate under the American Competitiveness 

in the 21st Century Act to conduct a review of existing public and private hightech workforce training programs in the United States, and submit a report to 

Congress on the study findings.

On behalf of the Secretary, OTP is conducting this review and will develop a report exploring: information technology (IT) worker demand in terms of education 

and skill requirements, the employer role in IT worker training, types of programs 

through which IT workers acquire their education and skills, key elements of successful programs, and the strengths and weaknesses of different IT education and 

training program models. The review process will include: data analysis and literature review; request for comments from employers, IT workers, and IT education and training providers; expert round tables; and site visits. 

Global S&T Workforce 

• The office is also undertaking a study of the S&T workforce issues in the G–

7 nations, which budget and spend almost 70 percent of the world’s R&D. The 

objective of the study is to determine the policies and approaches adopted by 

the countries in developing and sustaining their technology workforce base. This 

study will look at the technology workforce ‘‘system’’ from three thematic perspectives—worker development, labor availability, and globalization of the 

workforce. This research can serve as input to discussions on national competitiveness, innovation, and technology policy. 

GO4IT 

• The Technology Administration maintains the GO4IT website for information 

technology workforce initiatives. Through the web site, which contains more 

than 300 resources, visitors can learn about high-tech workforce initiatives 

across the country, tap valuable information resources, and network with other 

people who can offer insight and opportunities for collaboration. For example, 

companies can explore ways that other companies have used to develop a skilled 

workforce. Individuals can get information on scholarships, internships, training, and job banks. State and local government agencies can find out what other 

governments are doing to build a high-tech workforce. 

GET TECH Campaign 

• OTP teamed with Women in Film and the National Association of Manufacturers to develop the GET TECH Campaign aimed at encouraging teens to prepare 

for high tech careers. Launched in October 2000, the campaign features radio 

and television public service announcements and a fun, interactive technical careers web site for teens. In the campaign’s first three months, the television 

public service announcements were aired a total of 4,848 times on 300 stations 

in 172 cities across the country. The web site had a total of 200,000 hits and 

the toll free number received requests for over 40,000 GET TECH kits sent to 

both students and teachers. 

National Medal of Technology 

• OTP has maintained a long-term effort to promote the National Medal of Technology laureates as role models who can inspire young Americans to prepare for 

and pursue careers in science and technology. This Presidential Medal is awarded annually for technological achievement and is administered by OTP. 

b) How successful has OTP been in getting the federal government to adopt its 

policy recommendations? 

Answer. While it is difficult to ascribe traceable and direct impacts on national 

policy to any specific agency within the Federal Government, OTP has successfully 

contributed to U.S. policy decisions. OTP analysis and recommendations—often 

made through discussions with other policymakers in the Executive and Legislative 

branches and foreign governments—have resulted in policy and procedural changes 

that promote business innovation and adoption of new technologies. 

52

OTP Contribution to Specific Accomplishments 

Promoting Investment in Technology 

• The Economic Stimulus package signed into law on March 9fu, 2002 contains 

an immediate expensing provision that will provide incentive for investments in 

technology and other capital expenditures. OTP provided insight on the positive 

impact this would have in the technology industry. 

Collaboration with the President ‘s Council of Advisors on Science and Technology 

• PCAST has established official panels on science and technology investment and 

on the technical infrastructure for the 21st century. As part of their work, 

PCAST working groups will use OTP’s analysis and information about market 

demand for broadband, the dynamic of corporate innovation partnerships in 

America, and federal laboratories’ experiences with technology transfer. PCAST 

has requested transcripts from all 3 Innovation in America roundtables and has 

asked OTP to participate in working group deliberations. 

R&D Trends 

• OTP was the first Federal agency to identify the impact of rising Federal R&D 

expenditures on health and flat or declining Federal R&D investments in the 

physical sciences, mathematics and engineering on the overall balance in the 

Federal R&D portfolio. The Office has also analyzed the impact this has on U.S. 

competitiveness, technological innovation, and the production and availability of 

highly skilled scientists and engineers for the U.S. workforce. OTP has worked 

with the White House Office of Science and Technology Policy, the Director of 

the National Science Foundation, and the Director of Defense Research and Engineering to raise the visibility of the issue. Today the issue of balance in the 

Federal R&D portfolio is recognized by the Administration and Congress as an 

important science and technology policy issue.

• Recognizing the enormous importance of innovations in biotechnology, OTP developed and implemented a strategy to strengthen the Commerce Department’s 

interaction and advocacy with biotechnology companies. OTP coordinated a public relations campaign (including articles in the industry newsletter) and led development of an interagency biotechnology group to provide rapid, coordinated 

Administration response to emerging policy issues. At the request of USG policymakers, and in cooperation with scientific and industry groups, OTP also develops and sponsors a series of educational forums about significant emerging 

biotechnology policy issues. 

Intellectual Property 

• TA participated in an initiative chaired by the White House Committee on 

International Science, Engineering, and Technology to improve the Intellectual 

Property (IP) Annex used in international S&T agreements. OTP worked with 

other agencies to reach consensus on an IP annex text and procedures for new 

S&T agreements. The result should be improved consistency in the U.S. approach to IP with foreign partners and with rights of the U.S. government. This 

new mechanism will also encourage commercialization of technology consistent 

with the Bayh-Dole Act and Executive Order 12591 and facilitate the negotiation and approval of international S&T agreements. 

Technology Transfer 

• The 1980 Stevenson-Wydler and Bayh-Dole Acts provide the essential national 

policy framework for technology transfer by the federal laboratories and federally funded researchers (such as at universities). Both of these laws have been 

fine-tuned through significant pieces of amending legislation since the mid–

1980s—the most recent of which is the Technology Transfer Commercialization 

Act of 2000. OTP (and its predecessor office) played a key role in conceptualizing, crafting, and advocating much of this legislation throughout its history. 

The Stevenson-Wydler and Bayh-Dole policy framework for tech transfer was 

path-breaking in its concept, which many of our international trading partners 

are now seeking to emulate.

• OTP led the effort to establish a more complete and uniform reporting system 

for technology transfer activities at Federal laboratories.

• OTP was instrumental in securing legislative provisions that streamline and expedite the licensing of Federal technology while, at the same time, protect the 

public interest in the technology.

• OTP conducted roundtable discussions with Industrial Research Institute members to solicit industry perspectives on the efficacy of Federal technology transVerDate 0ct 09 2002 07:48 Feb 24, 2005 Jkt 090577 PO 00000 Frm 00056 Fmt 6601 Sfmt 6621 S:\WPSHR\GPO\DOCS\90577.TXT JACK PsN: JACKF
53

fer efforts, laying a foundation for future efforts to improve government-industry collaboration. These roundtables provided key input to OTP’s 1996 congressionally mandated biennial report ‘‘Effective Partnering: A Report to Congress 

on Federal Technology Partnerships.’’

• OTP led the multi-agency National Technology Initiative (NTI), which convened 

16 town meetings across the country that brought together thousands of representatives from high-tech industry, Federal laboratories, universities, and 

government. Each meeting was designed to address regionally significant areas 

of technology, and the broad issues of cooperative R&D, financing technology, 

and manufacturing excellence. These conferences also served as a showcase for 

capabilities at the Nation’s Federal laboratories and encouraged businesses to 

take advantage of them. In the two years following the NTI, cooperative R&D 

agreements between Federal laboratories and businesses more than doubled. 

Supporting E-medicine 

• OTP negotiated modifications to legislation developed by the Food and Drug Administration that would have held c-pharmacies to a higher standard of 

verification than is required of traditional ‘‘bricks-and-mortar’’ businesses. OTP 

also worked to eliminate language that would have adversely affected other cmedicine applications, such as medical consultations and diagnoses made over 

the Internet. 

Workforce Issues and the H-lB Visa Process 

• OTP’s forthcoming report on the IT workforce will provide valuable information 

to policy-makers and others who invest in high-technology education and training.

• Working closely with officials from the Department of Labor and U.S. industry, 

OTP influenced the development of the H-I B visa program regulations implementing the American Competitiveness and Workforce Improvement Act of 

1998. OTP’s goal was to minimize the burden of these regulations on the business community seeking access to highly skilled, foreign workers. 

Accounting Rules for the Knowledge-Based Economy 

• OTP worked with the SEC and the Financial Accounting Standards Board 

(FASB) to discuss the growing importance of intangible assets (such as R&D 

and goodwill) in the knowledge-based economy. By helping to define the farreaching implications of proposed accounting rules for intangible assets, OTP 

and other interested parties facilitated a reexamination and amendment of U.S. 

accounting rules. 

Impact in International Fora 

• As the U.S. Government representative to the Asia Pacific Economic Cooperation Industrial Science and Technology Working Group, OTP coordinated the 

development of the APEC strategy on infectious diseases, which was adopted by 

the APEC Heads of State at the October 2001 Leaders Summit.

• OTP wrote the APEC Agenda for Science and Technology Cooperation in the 

21st Century, and won endorsement by Heads of State. The Agenda sets forth 

principles and the primary areas for cooperation among the 21 APEC member 

economies.

• OTP has been instrumental in bringing to Federal policymakers and business 

leaders critical and detailed information on the aggressive technology strategies 

of foreign governments, and key foreign industrial competitors. These analyses 

detailed the national technology plans, policies, programs, and investments of 

more than 20 advanced and newly industrializing countries in Asia, Europe, 

North America, and elsewhere. OTP’s groundbreaking work in ‘‘Globalizing Industrial Research and Development and The New Innovators: Global Patenting 

Trends in Five Sectors’’ assessed the extent to which R&D and technology have 

become globalized, and how newly emerging competitors are growing into technological prominence in some fields.

• OTP staff has played critical roles on U.S. interagency teams negotiating bilateral framework Science and Technology Agreements (e.g., the U.S.-EU Science 

and Technology Agreement, the U.S.-Japan Science and Technology Agreement) 

and other bilateral R&D projects with Japan and China. Among OTP’s goals in 

this work are ensuring equitable intellectual property rights provisions and administrative arrangements conducive to U.S. private sector participation.

c) What metrics does the Department of Commerce use to measure OTP’s performance?

54

Answer. OTP’s principal activities and targeted outcomes are captured in the Department’s GPRA plan (see FY 2003 Annual Performance Plan, Technology Administration chapter) as a single performance goal: ‘‘Provide leadership in promoting national technology policies that facilitate U.S. preeminence in key areas of science 

and technology and leverage technological innovation to strengthen American global 

competitiveness.’’ This goal arises naturally from the mission Congress gave the office in the Stevenson-Wydler Act (15 USC Sec. 3710 (a) and (b)).

OTP’s performance goal is orchestrated through a series of strategies and action 

steps for FYs 2002, 2003, and beyond, each of which have associated performance 

metrics. In general, the performance goal is achieved through OTP-initiated activities in three primary action areas:

I. Outreach: Engage U.S. industry and the nation’s S&T community on salient 

issues and policy needs.

II. Analysis and Education: Prepare timely, value-added analyses and educate 

policymakers about the nation’s resources, competitiveness, and capabilities for 

research and development (R&D) and innovation.

III. Advocacy: Advocate policies, programs, and partnerships to promote U.S. innovation and enable technology-led economic growth.

OTP’s current performance plan specifies several dozen specific activities across 

these three areas that grow from the office’s statutory responsibilities (such as periodic reports to the President and Congress on the status of federal technology transfer policies and programs), ongoing attention topics for policy analysis/development 

(such as reviewing/revising existing federal guidelines for U.S. federal lab tech 

transfer agreements involving foreign parties, educational initiatives to encourage 

the interest and participation of young students in science and technology, state/regional/local initiatives to strengthen the contribution of science and technology activities to economic development), and new initiatives to address issues of emerging 

importance (such as analyzing the policy implications of the globalizing R&D system 

and efforts of many of our international trading partners to modernize and strengthen their own capabilities for new technology based innovation). 

Generally, Secretary Evans and I both place a high priority on the ability of all 

the divisions and offices within the Department to work together in pursuing our 

overall mission to serve U.S. industry and strengthen the nation’s economy. New 

technologies and the opportunities for economically significant innovation based on 

them clearly cross many organizational boundaries and have implications for many 

federal agencies. OTP has a unique ability to contribute beyond its own immediate 

objectives and priorities, to provide value by working effectively with other offices 

within Commerce and in other agencies. I believe that OTP recognizes these opportunities and is working hard to pursue them in advantageous ways. 

Question 14. The President’s FY03 budget recommends terminating the Experimental Program to Stimulate Competitive Technology (EPSC0T), which was designed to build the science base of states that have traditionally been underrepresented in federally sponsored research and development.

a) What was your rationale for ending this program?

b) Are there parts of this program that you would recommend continuing as 

part of the Technology Administration or in another government agency?

Answer. EPSCoT was structured and operated as an experimental program, designed to provide information about policy tools that work effectively to stimulate 

tech-led economic development (TLED). As such, EPSCoT grants (which were given 

in 1998 and 1999) were never intended to create any permanent entitlements. All 

projects were of limited duration with the expectation that the sponsored activity 

would be sustained by other organizations at the end of the grant life.

TA’s current work in TLED builds on three things: (1) our mission of advocating 

policies that support tech led economic development, (2) the expertise garnered from 

lessons learned in administering the EPSCoT program and (3) the evaluation’s recommendations.

Specifically, TA is leveraging its existing resources and those of other federal 

agencies to sponsor a series of national training and education events that will provide regions and communities with instructional tools that address a variety of techled economic development issues. TA’s experience gained in EPSCoT and other techled economic development work is a critical asset in matching relevant technical expertise with community goals and potential.

Examples of activities under consideration include: workshops on how angel investor and entrepreneur networks can support technology transfer and technology-led 

55

economic growth, and ways to improve telecommunications infrastructure—such as 

establishing consortiums of users to facilitate high-speed access at reduced prices.

In these outreach efforts TA will remain guided by the following principles:

• TA will ensure that the states and regions served by these activities will be consistent with those eligible for the EPSCoT program, and participants will include state and local governments, regional organizations, institutions of higher 

education, business organizations, non-profit organizations, tribal governments, 

and federal laboratories.

• The ongoing outreach work in tech-led economic development will remain integral to TA policy responsibilities regarding domestic technological innovation, 

transfer, and commercialization.

• TA staff will, as resources permit, provide ongoing advice and technical assistance.

• TA will continue to recognize that local entities are in the best position to determine what strategies should be implemented in each state; TA recognizes that 

different states and communities will identify different approaches, priorities, 

and needs.

• TA’s work with EPSCoT states will continue to complement its data development and dissemination efforts—like the State Science and Technology Indicators report, which is a guide for those in the public and private sectors who are 

looking for a consistent set of metrics from which to formulate their own science 

and technology strategies and economic development goals.

Finally, our ongoing work outreach work—with former EPSCoT states and others—will support two major themes of the DoC Mission: (1) build for the future and 

promote U.S. competitiveness in the global marketplace by strengthening and safeguarding the Nation’s economic infrastructure; and (2) keep America competitive 

with cutting-edge science and technology and information.

Question 15. Several years ago, it was proposed that the National Technical Information Service be eliminated. What are the current plans for the service? Are you 

planning any changes in its operation? 

Answer. NTIS has operated profitably for three consecutive years, generating cumulative net earnings of $5.2 million over the period FY 1999–2001. While its basic 

core mission is to collect, preserve and sell scientific and technical publications, I 

am pleased to report that federal agencies continue to make significant use of its 

infrastructure and expertise for distributing specialized information packages, such 

as multi-media training materials, to their own constituents.

For many years, NTIS’ business model was to distribute information about the 

materials in its collection through information aggregators who would sell access to 

many databases, including the NTIS Bibliographic Database, through paid subscriptions. NTIS would receive a portion of their revenue to the extent it was derived 

from the NTIS Bibliographic Database. This worked well in the pre-Internet days 

when NTIS had no practical way to reach the vast community of research scientists. 

The downside of this approach, however, is that it only provides information about 

the NTIS collection to those who can afford such subscription services—mainly business, industry, and universities.

NTIS is implementing a new business model in which it will post a significant 

portion of the Database on the World Wide Web, refer users to web sites of the 

source agency where a desired document may be downloaded for free, and allow 

users to download for free any document in our collection for free if NTIS has it 

in electronic image and it is less than 20 pages or, if larger than that, for a flat 

fee of $8.95. NTIS is hopeful that this will expand its customer-base and that revenue from downloads and orders for paper products from new customers will more 

than offset any revenue losses.

Question 16. You mentioned in your statement that you are optimistic that adoption of the Malcolm Baldrige criteria for performance excellence will spread across 

the education sector. What are your plans for implementing the Baldrige criteria at 

the Department of Commerce? 

Answer. Although the Department as a whole has not assessed its activities specifically using the criteria prescribed by the Malcolm Baldrige National Quality 

Award Program, the administrative and operational issues that the Baldrige criteria 

address are the focus of various management reforms under way at Commerce.

Central to this effort is the Department’s ongoing implementation of the Government Performance and Results Act (GPRA). Under GPRA, Commerce establishes 

long- and short-term goals and targets through its five-year Strategic Plan and AnVerDate 0ct 09 2002 07:48 Feb 24, 2005 Jkt 090577 PO 00000 Frm 00059 Fmt 6601 Sfmt 6621 S:\WPSHR\GPO\DOCS\90577.TXT JACK PsN: JACKF
56

nual Performance Plans (APP), and evaluates its success in achieving those goals 

and targets in the Annual Program

Performance Reports. These regular assessments help to ensure that our daily operations mesh with our strategic goals and further the mission of the Department.

While preparing the fiscal year (FY) 2003 APP, we thoroughly evaluated our existing performance measures to determine whether they optimally reflect program objectives and the needs of our clients. This exercise resulted in substantial changes 

being made. One of the areas most significantly affected was Departmental Management (DM), which provides policy and administrative oversight for many of the 

management functions addressed by the Baldrige criteria. These functions include, 

among others, human resources, safety and security, information technology, financial management, and acquisition management. The Department has made management reform a priority by adapting DM performance measures and targets to incorporate the five cross-cutting initiatives established in the President’s Management 

Agenda.

The resulting blueprint is guiding many of our efforts to: structure and train our 

workforce to provide the best quality service possible to the American taxpayers; 

link the performance of senior managers to organizational goals; maximize the effectiveness with which we employ information technology to enhance program performance; review the extent to which activities could more efficiently be carried out by 

the private sector; and ensure accountability for public funds through sound financial management. As we seek to improve our operations, I have encouraged our bureaus to include self-assessments among the tools used to achieve that end. The National Institute of Standards and Technology, as an example, has relied on the 

Baldrige criteria to do so.

Through these initiatives and other attempts to strengthen performance, we hope 

to achieve the same level of excellence as that sought through the Malcolm Baldrige 

National Quality Award Program. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. ERNEST F. HOLLINGS TO

HON. SAMUEL BODMAN

Question 1. At the hearing, you and I discussed the deterioration of some of 

NIST’s scientific facilities. Please provide the Committee with information regarding 

the specific repairs needed, as well as the associated costs for NIST facilities in Gaithersburg and Boulder. 

Answer. Elements of NIST’s Boulder Construction Plan are reflected in the President’s FY03 Budget submission to Congress. In particular, the budget requests 

$11.8M for the first phase of a new Central Utility Plant (CUP) as well as $5.5M 

for the installation of upgrades to the facilities’ Primary Electrical Service. In addition NIST’s FY 2003 budget request includes $l5M for ‘‘fitup’’ of the Advanced Metrology Laboratory and $22M for safety, capacity, maintenance, and major repairs 

(SCMMR).

The current Boulder renovation plan, subject to future budget priorities, is to renovate Building 1 (multiple wings), Building 2, and Building 4, phased in over a tenyear period.

Question 2. ATP projects funded between 1990 and 1991 were subject to the 

recoupment provisions in the original ATP law.

(a) How much was spent on the 39 projects to which recoupment applies?

Answer. These 39 projects received $130 million in federal funding.

(b) How much of the cost of these projects has the Department recovered?

Answer. No funding has been recouped from these projects.

Question 3. The National Academy of Sciences’ National Research Council, in its 

June 2001 study The Advanced Technology Program: Assessing Outcomes, recommended that ATP concentrate a significant proportion of the awards in thematic 

areas. There are a number of areas—such as enhancing homeland security or reducing energy dependence—where fundamental breakthroughs in enabling technologies 

could make a significant impact on problems facing this nation.

(a) Is the Department considering any thematic competitions for FY 2002 or FY 

2003? Why or why not?

Answer. NIST has not to date administered competitions for awards on a ‘‘thematic’’ basis. However, we have announced (by a Federal Register notice in Docket 

No. 020328074–2074–0 1) that the FY 2002 proposals we receive may he distributed 

for review to technology-specific source evaluation boards. 

57

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN B. BREAUX TO

HON. SAMUEL BODMAN

Question 1. There is an executive order that directs executive departments and 

agencies to make available federal buildings and lands for the siting of mobile service antennas.

What steps have you taken or are you considering to carry out this directive, and 

who has the responsibility for ensuring that the wireless industry has access to federal property pursuant to this executive order? 

Answer. In August 1995, President Clinton directed the General Services Administration (GSA), in consultation with the other Executive Branch agencies, to develop procedures to facilitate access to Federal property for the siting of commercial 

radio antennas. In February 1996, Congress mandated similar action by federal departments and agencies in section 704(c) of the Telecommunications Act of 1996.

In June 1997, GSA issued guidelines and procedures to assist federal agencies in 

complying with the Presidential order and their statutory obligations (Placement of 

Commercial Antennas on Federal Property, 62 Fed. Reg. 32611 (June 16, 1997)). 

Those procedures, among other things, require agencies to provide a preliminary 

written response to an antenna siting request within 60 days. Furthermore, the 

GSA guidelines provide that siting requests from ‘‘duly authorized telecommunications service providers should be granted unless there are unavoidable conflicts 

with the [agency’s] mission, or current or planned use of the property or access to 

that property.’’

The Department of Commerce is complying fully with the GSA guidelines. The responsibility within the Department for antenna siting lies within the Office of the 

Chief Financial Officer and Assistant Secretary for Administration. To date, the Department has not received many siting requests because we do not own or control 

a significant proportion of federal buildings or lands. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN MCCAIN TO

ANNE ARMSTRONG

Question 1. You mentioned that Virginia’s Center for Innovative Technology is a 

state funded non-profit organization. What activities does your non-profit status 

allow you to perform that you would not be able to perform if you were a state agency? 

Answer. CIT was set up as a non-profit for a variety of business and organizational reasons. First, as a non-profit, we can have the oversight of a Board of Directors, drawn from government, industry and academia. Second, we have the legal 

ability to keep business proprietary information confidential, as we are exempt from 

FOIA, and thus can deal with business proprietary information. Third, we are not 

state employees and are more flexible to tailor our programs and our staff to market 

imperatives. 

Question 2. In your testimony, you stated support for five of Secretary Evan’s six 

recommendations for reforming the ATP. Are there any other suggestions that you 

would like to offer? 

Answer. We would like to offer our services in helping to market the program. 

We have suggested that improving the dialogue with the states could help bring 

more applicants, more small businesses and more consortia with industry and academia into the pipeline. We have seen improvements in our companies’ participation 

over the past couple of years that we have focused on this opportunity. In fact, we 

are in the preliminary stages of formulating a states’ ATP pilot program that would 

allow for the germination of more high tech ideas at the local level. 

Question 3. You stated that ‘‘most federal and state programs would benefit from 

additional marketing in order to expand the pool of potential applicants.’’

a) How important a role does marketing provide for CIT?

Answer. Building awareness is a big issue for CIT. On the one hand, our stakeholders want to know that we are being the most cost-effective stewards of their 

money, but on the other hand they want us to broaden awareness of our programs. We devote about 10 percent of our budget to ‘‘program communications’’ 

as we seek to broaden awareness of our programs among likely clients while 

devoting maximum funds to service and program delivery.

b) Do you think that a new marketing strategy in needed for ATP?

Answer. ATP has been fairly aggressive in their outreach to Virginia and the 

DC metropolitan area, which is the environment in which we operate. Any program could benefit from increased exposure, particularly to its target audience. 

58

Leveraging the outreach ability of state organizations could be an add-on to 

ATP’s existing marketing strategy. However, it is not a uniform approach, since 

the states have a variety of different organizations and approaches to science 

and technology-based economic development. CIT would very much like to become a marketing or outreach arm of ATP and would encourage the open discussion of how best to accomplish mission. 

Question 4. Why would you support the granting of intellectual property rights 

to universities, non-profits with a mission of education, and not supported 

recoupment for a government agency, whose non-profit mission is directly for the 

public good? 

Answer. We support the granting of IP rights to universities as a means of removing administrative barriers to participating in ATP projects. The guidelines of the 

projects should focus on the outcomes, which are early-stage high-risk projects with 

future market potential. Universities as sole applicants should probably not receive 

ATP monies—they need the industry connection and market potential. We do not 

support recoupment because recoupment can change the nature of the projects funded. If project managers focus on the potential for recoupment, they will lean away 

from funding the earlier stage, higher risk research. If the technology is successful, 

and years later leads to new product lines or new businesses, the government will 

recoup its investment in tax revenues. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN MCCAIN TO

DR. LEWIS BRANSCOMB

Question 1. You have mentioned your agreement with ATP funding technology 

prior to product development. How would you distinguish which activities are product development and which ones are not, given the shorten development cycles and 

the technical nature of some technologies today? 

Answer. Your question raises two issues, the effect of shortened product cycles in 

competritive industries and the distinction between early stage technology development and product development. I will address them in turn. 

Effect of shortened product cycles: 

The point raised concerning shortened development cycles is valid and highly relevant in this context. Before addressing that point specifically, let me offer a more 

general response. The shortening of product cycles is a real phenomenon in the core 

businesses of established companies. The fact that in the 1980s .Japanese manufacturers were able to turn around incremental improvements in their products faster 

than many US firms was a significant contributor to their superior competitiveness 

at the time. When mature firms are challenged by a competitor with shorter product 

cycles, their normal reaction would be to shorten their own by being less ambitious 

with their own technology injection and to rely more on outsourcing components and 

subsystems (or even whole new products which they re-label and sell). 

But these were incremental improvements, not the radical technologies in which 

ATP is intended to invest. ATP addresses a different industrial situation: new technology leading to new markets. If an ATP grantee is the first firm to create a product for a previously non-existent market there is no crush on product cycle time except for the obvious fact that the longer it takes to get to market successfully, the 

more expensive it is. And there is always the risk that some other innovator will 

get there first. In many of the product cases of firms that received ATP grants and 

were ultimately very successful with breaking open new fields with new technology 

it took up to 10 years to mature the technology and create a truly viable, growing 

business. Short product cycles are not typical in radical high tech innovations. 

Distinguishing early stage technology development from product development 

In the ‘‘mainstream’’ economy, design and production technologies usually evolve 

incrementally. Little research is required. Product development incorporates most of 

the limited R&D needed. Firms with established products serving known customers 

have strong incentive to advance such work. The mandate of ATP is not to support 

this sort of incremental product development, but rather to support further development of promising, but not yet commercially mature,, science-based technologies. In 

the areas in which ATP invests, before product development can begin, the science 

(research) on which the invention or product concept was based must be shown to 

be practical in a product design whose manufacturing process is reasonably well understood. In other words, the technology must be ‘‘reduced to practice.’’ In the course 

of this work, whose costs ATP might share with an applicant firm, the product specVerDate 0ct 09 2002 07:48 Feb 24, 2005 Jkt 090577 PO 00000 Frm 00062 Fmt 6601 Sfmt 6621 S:\WPSHR\GPO\DOCS\90577.TXT JACK PsN: JACKF
59

ifications are quantified in order that the match of the product to its intended market can be verified. 

Thus the R&D that precedes product development is market sensitive, and may 

require iterative changes in market specfications and product specifications. Before 

final product development leading to production can begin, this iterative process 

must have converged to some specific outcome. To be sure the lines are not sharp, 

but, as the Booz Allen research we sponsored shows, industrial R&D executives 

have little difficulty in distinguishing them. In larger firms with corporate research 

laboratories these two phases are typically distinguished organizationally. The technology reduction to practice may be done by the corporate research laboratory (financed by the risk funding provided to the laboratory out of corporate profits), while 

the product development is done in an operating product division (financed out of 

a business case predicting product revenue). In smaller firms that do not have a distinct, centrally funded corporate laboratory, the organizational distinction is not so 

clear, but financially the two activities—early stage technology development (ESTD) 

and product development for production—are still distinct. 

In some industries, notably some biotechnology and pharmaceutical products, the 

research phase tends to be quite intensive and risky while manufacturing is a relatively modest challenge. In this situation, much of what might he called product 

development in other industries is in fact hard to distinguish from research to reduce the product technology to practice. That is, once the biological scientists have 

demonstrated evidence of medical efficacy and safety in animal experiments, the 

product may be said to have been ‘developed.’ However, in order to gain approval 

from the FDA to produce the drug, it may be necessary to go back to the research 

lab repeatedly. Here it is truly hard to make a clean separation between research 

to reduce the technology to practice and the development work to ready the product 

for manufacturing. 

Finally, let mccall attention to the special case of software products, the products 

of the so-called ‘‘dot.com’’ industry. While it is commonplace to refer to all IT products as comprised of ‘‘technology’’ very little if any computer science research is required for software products. Those software products that can truly be called ‘‘hightech innovations’’ may indeed be radical innovations, but they are usually market 

or business model innovations, not those based on science in the way most ATP 

products are. In this situation there is very little R&D and very little manufacturing. Product development consists largely of writing the software code and then 

refining it to adapt to market signals and discovery of errors (‘‘bugs’’). 

Question 2. You mentioned that the government should not attempt to become a 

public venture capitalist. At the same time, you mentioned that the government 

should identify entrepreneurs and share with them the risks of reducing their ideas 

to practice in the context of a promising commercial market. If the government is 

to share in the risk with entrepreneurs with taxpayers’ funds, what should the taxpayers expect in return? 

Answer. The argument against ATP engaging in public venture capital has two 

parts: 

Firstly, 96 percent or more of private venture capital invests during or after product development and market entry—the area in which ATP does not invest. 

Secondly, even if this were not a constraint, government agencies cannot expect 

to use the management tools private VC firms find essential, using a board seat and 

their equity to participate actively in management, even to the point of removing 

the CEO when necessary. 

When sharing with entrepreneurs i.e. company management—the cost of highrisk but highly promising new technology development, the Government should expect to see the emergence and diffusion of new technology, embodied in products 

and services, that creates new growth areas of the economy and, in the process, 

adds to technical knowledge that can find its place in other applications not foreseen. To the extent that ATP can stimulate Schumpeterian growth that might not 

have happened otherwise (or least would have been significantly delayed), the practical return to taxpayers is in tax revenues; the technical return is in new and useful technology; and the social return is in new employment, new wealth and new 

products that serve the public. 

Question 3. You mentioned in your statement that venture capitalists are not in 

the R&D business. You later mentioned that venture capitalists do support firms 

that are bringing radical new technologies to market. Where do you draw the line 

as to what is in the R&D business versus bringing technologies to market? 

Answer. Something like 4 percent of VC investments (in 1998) are in ‘‘seed’’ ventures, which like Angel investments and ATP projects are to finance the R&D required to reduce to practice a research-based technical idea with commercial promise. But the other 96 percent (early stage and later investments) is also essential 

60

for successful commercial innovation. Venture funding is the most promising instrument for taking the next step after Early Stage Technology Development. It is specifically designed to finance the rapid growth of a new business element and to 

liquify the equity assets of all the participants in a venture either by an Initial 

Product Offering (IPO) or by a merger or acquisition which accomplishes the same 

end. VC funding is used for all the financial requirements of the firm (i.e. from legal 

fees to Super Bowl ads) including but by no means restricted to R&D.

Question 4. You have noted that you are in strong support of university lead ATP 

consortium projects, and the right for universities able to negotiate patent rights 

with firms. Do you, in any way, see drawbacks from these two reforms? 

Answer. I see few drawbacks. However there are a few situations for which ATP 

managers should be on the lookout: (a) a consortium, led by a university, in which 

the industry partners have joined for largely cosmetic reasons, for example to help 

participating firms curry favor with the university; (b) a university that assembles 

a consortium to work on a technology is that so immature that the work to reduce 

the technology to practice in environment of a real or prospective market cannot be 

started and the university is simply looking exploratory or basic research funds 

without a clear commercial concept and identified market. On the issue of university 

developed intellectual property (IP) it is only common sense for government to leave 

that question to the parties (university and business) to resolve. 

Question 5. In your testimony, you discuss the iterative process of bringing new 

technology to market as a commercial product. Are there other government programs, besides ATP, that also play a role in helping companies commercialize technology? How do these programs compare to ATP in effectiveness? 

Answer. ATP is devoted to private commercial markets, so we can exclude from 

the markets in this question those that are created by government (DoD, NASA, nuclear weapons related research in DOE). The only other program that is not technology specific and seeks to encourage research-based commercial innovations is 

SBIR. A number of agencies, however, engage in R&D funding to private firms to 

develop technologies that the Congress and the President believe serve a public interest in ways that market incentives alone will not adequately address. Examples 

include genomic research, computer security, environmental pollution mitigation 

technologies . . . . Some of such programs do look fund R&D intended to define an 

economically attractive technology, such as the public-private partnership with the 

auto industry and other firms to accelerate the commercialization of fuel cells or 

other alternative power plants for cars. 

SBIR is a much more generously funded program than ATP because it is funded 

by mandatory set aside of agency R&D funds to be spent with small businesses. 

Thus no member of Congress has to vote for a line item budget for SBIR. But there 

are SBIR ‘‘mills’’—firms that exist only to compete for SBIR funds and pay little attention to commercialization. ATP does a much more careful job of avoiding investing in product development and a the same time insuring that there is a high likelihood of commercialization if the R&D is successful. 

Question 6. One concern about ATP is that in the past it has been a corporate 

welfare program that helped large companies bring technology to market, while 

leaving small business at a disadvantage in applying for grants. If Fortune 500 

firms are forced to be parts of joint ventures with smaller firms, will that resolve 

this problem or do other reforms have to be initiated? 

Answer. As our case study of GE’s research on amorphous semiconductor technology shows, there are circumstances in which it makes economic sense for ATP 

to participate in funding entities within even the largest firms. Such cases usually 

involve scientific work in the large firm whose application lies outside the core business interests of the firm. In this situation the technical advocates within the firm, 

usually in central corporate research departments, are in a similar position to a 

high-tech entrepreneur seek to start up a new high-risk, high tech business. 

But I well understand the political difficulty of defending this rather special situation. I do not think the economic benefits of allowing large firms to be funded solo 

by an ATP project outweigh the political price paid for keeping this possibility in 

the program. Thus I support the Commerce Secretary’s proposal. 

Question 7. Why would you support the granting of intellectual property rights 

to universities, non-profits with a mission of education, and not supported 

recoupment for a government agency, whose non-profit mission is directly for the 

public good? 

Answer. This is a two part question, in my opinion not logically connected. I support allowing universities and firms to negotiate the property rights for inventions 

that might arise in an ATP project for two reasons. 

(a) First, the Congress passed the Bayh-Dole Act for good reason in 1980, granting 

all institutions that perform R&D for the government to own the intellectual propVerDate 0ct 09 2002 07:48 Feb 24, 2005 Jkt 090577 PO 00000 Frm 00064 Fmt 6601 Sfmt 6621 S:\WPSHR\GPO\DOCS\90577.TXT JACK PsN: JACKF
61

erty (IP) subject to a royalty free license for the government. Many studies have 

shown that protected IP is more likely to be made available to the public (through 

commercialization) than is government sponsored, commercially valued R&D put 

into the public domain. The Bayh-Dole act applies both to commercial firms and to 

non-profit institutions. Thus it is entirely appropriate for ATP projects to allow the 

grantees to own the IP. 

(b) Once that is established, it is entirely consistent with our free market principles that the parties should determine among themselves the appropriate division 

of the lP generated under the project. In free markets will well informed participants this should yield the economic optimal outcome. 

The second half of your question asks whether recoupment to a government agency is not merited since the agency’s non-profit mission is directly for the public good. 

My answer is very simple. The costs of the vast majority of government services to 

the public are shared by the citizenry through taxes they vote to impose on themselves because they realize that markets allocate capital very efficiently for some 

goods, but not others. In a limited number of cases the government does make a 

charge for a service, such as entry fees to national parks or the sale of stamps to 

access distance independent mail service. Here the logic is that Congress concludes 

that the market is not sufficient to generate the revenue needed to create or preserve national parks, but nevertheless all citizens do not benefit equally and those 

who enter national parks are willing to pay a modest participation fee. 

But recoupment is a special ease. Recoupment might be considered when government activity creates economic value responsive to a competitive market, and the 

government then chooses to collect some or all of the profits. In socialist countries 

this is an entirely familiar, even dominant model for economic activity. In our economic system I believe it is inappropriate to apply the socialist model. Any government program capable of competing with market forces in generating revenue 

should be seriously questioned. If recoupment is sufficient to pay for the investment 

that is a sufficient test to convince me that the program should not have been initiated in the first place. 

But the ATP program does not pass the critical test. If it invests in early stage 

technology development (ESTD) that markets will not finance because the risks are 

too high and the appropriability is too low, it will not be able to recoup its costs 

if the recoupment is calculated on the economic returns from the ESTD alone. If 

the recoupment is calculated on product development which is 100 percent funded 

by the firm (since ATP does not invest in commercial product development) a serious inequity results. Of course the consequence of a recoupment fee on investments 

made with only private capital, no rational firm will participate in the ATP program. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN MCCAIN TO

SCOTT DONNELLY

Question 1.

a) Are you aware that ATP funding should be a source of ‘‘last resort’’ for its applicants?

b) What verification did you have to provide to the ATP program to demonstrate 

that you had sought funding elsewhere?

Answer. NIST ATP requires applicants to describe efforts they have been made 

to get internal funding and/or external private financing and how ATP funding will 

change scope, scale, and/or timing of proposed research effort. GE has appreciated 

this requirement and has always provided an explanation as to why NIST ATP 

funds are needed. In general GE seeks NIST ATP funding for high technical risk 

projects where no other government funds exist and that GE would not fund on its 

own. In addition, the ATP funds serve as a powerful incentive to rally outside R&D 

collaborations with companies who on their own would not come together. 

In the case of GE’s recent CY01 PM MRI NIST ATP win the GE technical team 

had requested funding for this project from management annually since 1997, and 

had received limited feasibility funding to see if the program had merit. However, 

funding sufficient for the total program has not been received because the project 

is viewed as too high a technical risk and was targeted for a relatively low population group, which does not meet business investment criteria. 

Program support was also requested in 2001 from GE Global Research and GE 

Medical Systems management. Program dollars were committed as part of a total 

NIST ATP program. However, these funds are conditional on receiving NIST funding. If a NIST award is not granted, then the cost share dollars will be reevaluated 

62

in light of the program risks. Previous history leads us to believe that without NIST 

funding, this program will not meet the cutoff for full internal funding, and while 

it may receive some level of decreased support, it will not be enough to sustain its 

development in time to ward off foreign competition, if at all. 

A related proposal entitled ‘‘Compact Permanent-Magnet MR Imager’’ was submitted for potential funding on August 22, 2000 to the U.S. Army Medical Research 

Acquisition Activity. Although this program has various differences from the one 

submitted to NIST, they both included the development of a more cost-effective, 

high-quality imaging system using permanent magnets. The Army proposal was not 

viewed as meeting the needs of the government’s defense priorities and was not 

funded. NIH was considered as a funding source but typically funds clinical research. The nature of our proposal is more suited to meet the priorities of NIST 

than that of the Defense or other federal programs. The ATP defining criteria, while 

demanding, provides an outstanding mechanism for a high-risk, high-impact program, where the technology enabled provides a clear roadmap leading to subsequent 

commercialization. 

Question 2. It was recently reported that GE’s last quarterly income was $2.5 billion on revenue of $30.5 billion. GE invested $2.3 billion in R&D in 2001. In October 

of last year, GE won an ATP award as a single applicant for a project entitled, ‘‘Affordable Open MRI for Unserved Markets’’. In this project, GE was providing $2 

million and ATP providing$830,000.

a) Given GE Capital, the financial arm of GE, enjoys a credit rating of AAA 

from Standard and Poors, why was GE not able to provide funding for the additional $830,000?

Answer. NIST ATP funding represents a very small portion of a research organization’s total R&D spending. To use GE as an example, in 2002 we will receive a 

total of $4.4 million in NIST funding, which is two-tenths of one percent of our company’s total R&D budget. These funds are not going to further product development 

for GE, they are for research. The purpose of going to the federal government for 

additional funds is generally to leverage our investment, in order to surpass technical hurdles and to make the project technically feasible for product development.

b) A description of the project on the ATP website states ‘‘in fact, the project 

might not be pursued at all otherwise because of the high risk involved’’. If ATP 

funding was not granted, would GE have pursued this project?

Answer. For GE, the research drives the pursuit of ATP we are not creating 

projects at the Research Center in order to access ATP funds. We look to government programs such as NIST to supplement our own investment.

c) What benefits did GE get from the ATP program that it didn’t have before?

Answer. NIST ATPs have allowed GE to form strong R&D partnerships and mentoring relationships with smaller businesses that wouldn’t typically have the resources to participate in such high-risk technology development. We also benefit 

from working with the highly-skilled and talented Technical Program Managers at 

NIST. These Technical Managers add real value to the industry-led programs. ATP 

is a very well-run and professionally managed program.

d) What additional sources of funding were considered prior to applying to the 

ATP program?

Answer. Please see answer to question #1. As stated, GE often investigates numerous alternative funding options for its targeted high-risk technical projects. In 

the case of the MRI program we sought US Army and considered NIH funding. In 

both cases the program did not fit the Agency’s investment criteria.

Question 3. One concern of this Committee is the decrease in R&D funding by private industry during this recession. Could you please explain how GE allocates its 

R&D funding, and what factors will lead the company to invest its own money, instead of applying for an ATP grant, into a research project? 

Answer. We are proud to report that at General Electric Company we are increasing our investments in research and development. We have identified several areas 

of emerging technologies to focus on including: molecular imaging, nanotechnology, 

photonics and alternative energy. As we stated above, ATP grants represent twotenths of one percent of our company’s total R&D budget. 

Question 4. Why would you support the granting of intellectual property rights 

to universities, non-profits with a mission of education, and not supported 

recoupment for a government agency, whose non-profit mission is directly for the 

public good? 

Answer. First, we believe that the federal government has an important role in 

spurring innovation and that role is not as a loaning institution but as a partner 

63

in the research enterprise—public sector, private sector and academia. We believe 

that this commitment and the investment made by the Federal government is directly linked to the prosperity of the US economy. One might look at governmentsponsored research in the computer sciences that brought us the Internet as an example, or, the advances in medical sciences that we may not have without the National Institutes of Health and its partners. 

As stated in my testimony before the committee, one of the primary goals of the 

NIST ATP programs that has experienced success is in bridging the gap between 

basic technology research and market implementation. The recoupment clause may 

erode participation from companies, which would remove their valuable cost share 

funding, commercialization, technical expertise that complements and often enables 

smaller sized companies’ participation in NIST ATP. 

Secondly, the recoupment is based on 5 percent of gross revenue, which raises 

many serious issues. How would the Department of Commerce calculate the ‘‘government royalty’’ for an ATP. Often an ATP is focused on a specific, high-risk technical hurdle associated with a key component, process or subsystem. This component is then part of a larger system. The component may only be a small percentage 

of the total system cost. How could anyone agree on a fair and consistent formula 

to calculate the royalty fee owed to the government? This creates an administrative 

nightmare and adds additional expenses that would take away funding from the research programs. 

In addition, to calculate the royalty on ‘‘gross revenues’’ would place undue pressures on industry to pay the government even if they are not making a profit. This 

would be difficult for GE, but it would be devastating for the smaller firms. 

With regard to intellectual property (IP) rights for universities, GE supports the 

rights to IP for those who make inventions and discoveries. Universities and nonprofits should have the ability to negotiate IP terms when collaborating with companies and other research partners.

Æ