HEARING BEFORE THE SUBCOMMITTEE ON INNOVATION AND TECHNOLOGY OF THE COMMITTEE ON SMALL BUSINESS UNITED STATES SENATE

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86B00338R000200230024-1
• Release Decision: RIFPUB
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• Document Creation Date: December 21, 2016
• Document Release Date: October 21, 2008
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• Publication Date: March 16, 1983
• Content Type: OPEN SOURCE

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PUBLIC LAW 97-219, THi SMALL BUSINESS
INNOVATION DEVELOPMENT ACT
HEARING
SUBCOMMITTEE ON
INNOVATION AND TECHNOLOGY
COMMITTEE ON SMALL BUSINESS
UNITED STATES SENATE
NINETY-EIGHTH CONGRESS
FIRST SESSION
ON
PUBLIC LAW 97-219, THE SMALL BUSINESS INNOVATION DEVELOPMENT
U.S. GOVERNMENT PRINTING OFFICE
18-5010 WASHINGTON : 1983
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COMMITTEE ON SMALL BUSINESS
LOWELL WEICKER, JR., Connecticut, Chairman
BOB PACKWOOD, Oregon
ORRIN G. HATCH, Utah
RUDY BOSCHWITZ, Minnesota
SLADE GORTON, Washington
DON NICKLES, Oklahoma
WARREN RUDMAN, New Hampshire
ALFONSE M. D'AMATO, New York
BOB KASTEN, Wisconsin
LARRY PRESSLER, South Dakota
SAM NUNN, Georgia
WALTER D. HUDDLESTON, Kentucky
DALE BUMPERS, Arkansas
JAMES R. SASSER, Tennessee
MAX BAUCUS, Montana
CARL LEVIN, Michigan
PAUL E. TSONGAS, Massachusetts
ALAN J. DIXON, Illinois
DAVID L. BOREN, Oklahoma
ROBERT J. DOTCHIN, Staff Director
ANNE H. SULLIVAN, Professional Staff Member
ALAN L. CHVOTKIN, Minority Chief Counsel
SUBCOMMITTEE ON INNOVATION AND TECHNOLOGY
WARREN RUDMAN, New Hampshire, Chairman
BOB PACKWOOD, Oregon MAX BAUCUS, Montana
(I1)
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CONTENTS
Statement of Senators: Page
Rudman, Hon. Warren, a U.S. Senator from the State of New Hampshire. 1
Tsongas, Hon. Paul E., a U.S. Senator from the State of Massachusetts...... 2
Statement of:
Evans, Adm. S. J., Assistant Administrator for Procurement, NASA,
accompanied by C. Thomas Newman, NASA Comptroller; and Francis
C. Schwenk, NASA SBIR Manager ................................................................... 4
March 16, 1983:
Morning session ........................................................................................................ I
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PUBLIC LAW 97-219, THE SMALL BUSINESS
INNOVATION DEVELOPMENT ACT
WEDNESDAY, MARCH 16, 1983
U.S. SENATE,
SUBCOMMITTEE ON INNOVATION AND TECHNOLOGY,
SMALL BUSINESS COMMITTEE,
Washington, D.C.
The subcommittee met, pursuant to notice, at 9:30 a.m., in room
SR428A, Russell Senate Office Building, Hon. Warren Rudman
(chairman of the subcommittee) presiding.
Present: Senators Rudman and Tsongas.
Staff present: Lee Mercer, professional staff member; Anne H.
Sullivan, professional staff member; Dorothy C. Olson, calendar
clerk.
STATEMENT OF HON. WARREN RUDMAN, A U.S. SENATOR FROM
THE STATE OF NEW HAMPSHIRE
Senator RUDMAN. The Subcommittee on Innovation and Technol-
of the Senate Small Business Committee is now in session.
his subcommittee has oversight responsibility with respect to the
Innovation Development Act of 1982, which has been very enthu-
siastically received around the country. In fact, conferences being
held around the country are sellouts. They cannot accommodate
the number of people who are attending these conferences. There
are groups forming in every State in this Nation to participate in
this program. The people who are attending these conferences are
not Rube Goldbergs. They are not people who are without back-
ground. They are mostly extraordinarily talented engineers and
scientists, many of whom have come out of university laboratories.
What they do they do very well, and I expect that we will see an
enormous fallout, in terms of private investment and jobs, from
this program.
NASA should be one of the best programs, but it will probably be
one of the worst. We had anticipated the fiscal year 1983 program
to be around $11 million. We are now told it will only be $3.3 mil-
lion. We have a GAO report which I can tell you for the record, as
one who understands the English language, is probably one of the
greatest collective nonsequiturs I have ever seen in my life. It's
finding with respect to the NASA shuttle program is totally unsup-
ported and is conclusionary in nature.
We invited OMB to testify this morning, but they have declined.
On the March 4, 1983, Frederick Khedouri, an Associate OMB Di-
rector, said in a letter to Berkley Bedell, chairman of the House
Small Business Subcommittee on General Oversight that "David
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Stockman gave a personal commitment to Senator Rudman that
OMB would insure that all Federal agencies made a good-faith
effort to carry out the law to achieve the purposes that Congress
intended." What is clear is that Congress certainly did consider
that the Space Shuttle would be included in NASA's R&D base and
so did NASA. I have transcripts of testimony before the committee
that I think will indicate that.
OMB has chosen not to testify, and I do not blame them for not
being here. They ought to be embarrassed. But what this really
proves to me is something I have suspected for a long time: The
President of the United States does not run the country; Congress
does not run the country; the bureaucracy runs the country.
I will call on the witnesses from NASA, but first I will call on
my colleague, Senator Tsongas, if he wishes to make any opening
remarks.
Thank you very much for being here, Paul.
STATEMENT OF HON. PAUL E. TSONGAS, A U.S. SENATOR FROM
THE STATE OF MASSACHUSETTS
Senator TSONGAS. The last time I was in this room, Senator
D'Amato was here blasting the administration. Now you are here
doing it. To be bipartisan, I have to be critical then.
I would like to submit for the record a statement that I have.
You really do get the impression that what we are getting is lip
service on this initiative. The thing gets passed through the Con-
gress without any serious opposition. There is a Rose Garden cere-
mony, and the President says Small Business is the "tonic" that
will help "cure" America-however he phrased that. Clearly,
NASA goes out of its way to see a definition of research and devel-
opment that cuts their commitment to the program from $11 to
$3.3 million.
Now, we are all adults here. I do not know who is kidding whom.
What I am bothered by is not so much the definition, because I
think that is arguable, but the fact that NASA went out of its way
to contact the GAO and get an opinion with the obvious objective
of reducing their commitment beyond the numbers that we all
talked about.
Unfortunately, I have a conflict of committees at 10 o'clock. But
I want to know what the President knew about all this, is he aware
of the 75-percent cut, and why NASA found it important to initiate
the definition of research and development. If we are going to get
stalled on this thing, I do not see the point. The Congress has
spoken-however illegitimate, ill conceived some may perceive that
speaking to be is irrelevant. There are such things as laws, and I
would hope we get some answers today.
I would say to the chairman, if these agencies are going to play
this game, they should be brought before the committee. To use the
President's terminology, if they cannot see the light, we will make
them feel the heat.
I think everyone agrees that innovation and small business are
virtually synonymous. Here we are trying to promote it, and rather
than being assisted by the administration or some agencies, we are
being thwarted. So I would ask that the statement I have here
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today be included in the record. I am fascinated to look forward at
what they are coming up with.
I do not accept the notion that somehow the President does not
run the country. I think we do, and I think he does. I, for one, have
no stomach to turning it over to any bureaucracy, whether it is
under a Republican or a Democratic administration. So I am look-
ing forward to the testimony.
Senator RUDMAN. Thank you very much. I would just add to your
comments that this effort, which appears at this point to have been
successful, was preceded by an effort on the appropriations bill for
fiscal year 1983, in which we discovered a footnote which had been
worked out between the staff of that committee and some of the
NASA witnesses that are here this morning that was going to
reduce it to $1.5 million. At that time there was no discussion of
this particular reason for it, but simply that it was too much to
start out with and there had to be more of a transition. Of course,
the transition was worked out in the legislation. It eventually goes
to 1.25 percent, starting out at two-tenths of 1 percent.
I call on the witnesses. I believe we have Mr. Evans here this
morning and others from NASA. I would ask them to come for-
ward, Mr. Schwenk and Mr. Newman.
Senator TSONGAS. Mr. Chairman, while they are coming up I will
say, as long as you have a Congress and an administration, irre-
spective of parties, you are always going to have the problem of
any administration looking at the Congress as interlopers. I think
it is the nature of the beast. If you were President or I were Presi-
dent, we would have the same attitude. The problem is not going to
go away; we are just going to have to be continually fighting it.
[The prepared statement of Senator Tsongas follows:]
STATEMENT OF HON. PAUL E. TSONGAS, A U.S. SENATOR FROM THE STATE
OF MASSACHUSETTS
Mr. Chairman and Members of the Committee, I would like to thank the Chair-
man for the opportunity to make a brief statement.
First, let me say that it is my understanding that the National Aeronautics and
Space Administration has done a good job of implementing the small business ear-
marking program required by the Small Business Innovation Act. I would like to
commend those before the Committee today for the efforts that have been taken to
date.
My primary concern is with the level of funding NASA intends to commit to the
Small Business Innovation Program. It is my understanding that NASA has sought
an opinion from GAO and contends on the basis of that opinion that its commit-
ment to this important program should be reduced from roughly $11 million to $3.3
million. I would like to register my strong objection to that reduced commitment,
and note that I am surprised by the steps NASA has initiated to reduce its commit-
ment to the program.
Much will be said today on how research and development should be defined and
on the merits of GAO's assessment of accounting distinctions and NASA's use of
them.
These are important considerations, but I would like to raise some more funda-
mental concerns.
During the entire debate in the Senate on this bill, it was assumed by all parties
that roughly $11 million would be contributed by NASA. The percentages of R&D
budgets earmarked in the bill and all negotiations were based on this assumption.
Even SBA's initial release on the SBIR program showed a similar level of commit-
ment from NASA.
Then after the President's Rose Garden ceremony where the commitment of the
Administration to small business was underscored, NASA goes to GAO seeking an
opinion that would reduce its level of commitments.
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Does the President know you sought a ruling to cut this program by 75 percent
from the levels the President was told would be there?
Why does NASA seek to reduce its participation in this program? Does it doubt
the merits of the program?
In my opinion, we have a case here where all parties understood the nature of the
commitment, and NASA now seeks to use a technicality to renege on its portion. I
fail to see why. And should we all agree on the appropriateness of the definitions
NASA puts forward for S&D, which I am not fully prepared to do, the question still
stands-why are you seeking to reduce your participation in this important pro-
gram?
Surely it cannot be because the Space Shuttle program is so old-hat that there is
no innovation to be gained from expenditures for its purposes.
If we accept the argument and definitions you offer today, perhaps we need to
consider earmarking a greater percentage of the R&D budget that remains.
I look forward to a resolution of this matter. I think it is possible to accept the
technical point made here today without endangering the level of commitment.
That is my hope.
I thank the Chairman and members of the Committee.
STATEMENT OF ADM. S. J. EVANS, ASSISTANT ADMINISTRATOR
FOR PROCUREMENT, NASA, ACCOMPANIED BY C. THOMAS
NEWMAN, NASA COMPTROLLER; AND FRANCIS C. SCHWENK,
NASA SBIR MANAGER
Admiral EVANS. Thank you, Mr. Chairman. With your consent, I
will summarize my testimony and I would request that my full
statement be placed in the record.
Senator RUDMAN. We appreciate that, and your entire statement
will be placed in the record without objection.
[The prepared statement of Admiral Evans follows:]
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National Aeronautics and
Space Administration
Committee on Small Business
United States Senate
Statement by:
Stuart J. Evans
Assistant Administrator
for Procurement
Hold for Release Until
Presented by Witness
March 16, 1983
25th Anniversary
1958-1983
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HOLD FOR RELEASE UNTIL
PRESENTED BY WITNESS
STATEMENT OF
STUART J. EVANS
ASSISTANT ADMINISTRATOR FOR PROCUREMENT
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
BE FORE
THE COMMITTEE ON SMALL BUSINESS
UNITED STATES SENATE
By letter of February 22, 1983, you invited NASA to appear
before this Committee to set forth the steps the Agency has taken
to put into effect the Small Business Innovation Research (SBIR)
Program established by P.L. 97-219 on July 22, 1982. You further
expressed a particular interest in the amount of funds designated
for the program and the nature of the solicitation that NASA will
promulgate. We are pleased to respond and appreciate the
opportunity to appear today.
Accompanying me today are Mr. Charles T. Newman, NASA
Comptroller, and Mr. Francis C. Schwenk, NASA SBIR Manager.
Over its twenty-five year life span, I believe NASA has been
recognized as one of the leaders in Federal research and
development and innovation in many fields of science, heretofore
untried. From the creation of the Agency in 1958, the operations
and results of the United States in space and in aeronautics have
been based upon a partnership of Government, the science and
educational communities and the industrial sector. NASA has
consistently sought private innovation and placed great reliance
upon the private sector of the country for the development and
execution of the programs we have carried out. This reliance is
best illustrated by the fact that year after year approximately
85 percent of the funds authorized and appropriated by the
Congress for NASA have flowed to the private sector through the
process of procurement. We thus view the Small Business
Innovation Development Act of 1982 as a specific program
paralleling Agency activities which have gone on for years.
Since enactment of P.L. 97-219, we have been engaged in two
parallel efforts: (1) working with the Small Business
Administration in its development of policy direction required by
Section 4 of the Act and (2) laying the ground work for
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execution of the Small Business Innovation Development Program
within NASA itself. In fact, an implementation planning meeting
was held on July 23, 1982, one day following enactment of the
bill, after which we set about creating an organization within
NASA to execute this program as promptly and efficiently as
possible.
In the conduct of all its operations, NASA exercises a
centralized, control, direction, and review of Agency activities
while consistently providing for decentralized execution of all
Agency operations. Under this management style, 96 percent of
all NASA procurement activities take place in the eight NASA
centers. In structuring our SBIR program, we pursued this style
of management by establishing a central program management office
at NASA Headquarters for direction, control, review, and
reporting and simultaneously providing for execution of contracts
and subsequent administration through our eight centers. On
December 13, 1982, NASA's Administrator officially established
our Small Business Innovation Research Program Office within the
Office of Aeronautics and Space Technology at NASA Headquarters.
This new program office was given full responsibility for
implementing and managing the Agency's SBIR program while
ensuring the participation of NASA centers and program offices in
the selection of research topics and in the recommendation and
management of project awards. The program office published its
implementation plan on December 17, 1982, and simultaneously
issued a request to all NASA centers for SBIR research topics.
In accordance with the Small Business Administration's
Policy Directive 65-01, NASA informed that agency, by letter of
January 26, 1983, of the topics to be included in our program
solicitation and its target release date. A meeting of SBIR
focal points from the centers and program offices was convened at
NASA Headquarters February 1 and 2 in order to make final deter-
minations on topics and subtopics and clarify implementation
issues.
Concurrently, NASA has proceeded with development of its
SBIR Program Solicitation following the guidelines set forth by
the Small Business Administration in its Policy Directive 65-01.
The solicitation has been forwarded to the printers, and we
anticipate its release by the end of March. This date has been
coordinated with the Small Business Administration and released
to the public in an SBA Presolicitation Announcement. We have
tried to schedule our Program Solicitation so as to allow
sufficient time for the development of comprehensive topics
while still providing sufficient time for proposal preparation,
Government evaluation, and award of Phase I contracts in fiscal
year 1983.
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NASA will distribute 15,000 copies of its Program
Solicitation using the Small Business Administration's
Procurement Automated Source System (PASS), which now contains
approximately 13,000 research and development firms, as well as a
source list developed by NASA of firms that have requested copies
of our SBIR Program Solicitation. NASA's Program Solicitation
reflects our philosophy of centralized program management and
decentralized program execution. Specifically, it requires
submission of all proposals to NASA Headquarters, where the SBIR
Program Office will conduct an initial screening to determine
basic qualification factors such as whether the firm has
certified that it is a small business and has met the
proposal-size limitations.
Proposals will then be sorted. by subtopic. Each subtopic
has a designated manager, an expert in that technical area,
located at a NASA center. All centers are involved in this
program, with a topic list of 26 major areas and a total of 210
subtopics. Proposals will be sent to the appropriate topic
manager, who will initially review them to determine if they are
in fact responsive to the topic designated by the offeror and, if
so, then have independent technical evaluations performed by
scientists or engineers knowledgeable in the topic area. These
evaluations will be in accordance with the factors listed in
Section 5.2 of the Program Solicitation.
1. The scientific/technical quality of the Phase I
research proposal and its relevance to the proposal's
stated objectives, with special emphasis on its
innovation and originality.
2. Qualifications of the principal investigator, other
key staff, and consultants, if any, and the adequacy of
available or obtainable instrumentation and facilities.
3. Anticipated benefits, technical and/or economic,
including potential commercial application, of the
proposed research (Phase I and Phase II), if
successful.
4. Adequacy of the proposed work plan to show progress
toward meeting the objectives of the Phase I effort.
The individual reviews will be consolidated, and recommendations
will be forwarded to the SBIR Program office at NASA
Headquarters. A board will review all recommendations and make
final selections based on the recommendations and on overall
considerations such as possible duplication of other research and
program balance. The center procurement offices involved will
then be directed to award Phase I contracts.
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9?
Since SBIR is a new program for NASA, we have no base from
which to predict the volume of proposals that will result. We
have, however, planned as much as possible to handle the proposal
process efficiently, effectively, and in such a way as to
minimize the effort required by offerors. For example, we have
eliminated the need for all offerors to read and analyze numerous
required contract clauses and provisions and complete intricate
certifications and representations by summarizing simply and in
general terms in the solicitation the required clauses and
virtually eliminating the certifications. Only successful
offerors will be required to master the detail requirements.
In summary, NASA has responded actively and positively to
set up a SBIR Program that is responsive to the legislation, the
needs of the small business research and development community,
and NASA's own mission needs.
I will now address the second matter of interest to the
Committee - namely the amount of funds designated for the FY
1983 SBIR Program.
On July 4, 1982, upon the successful lahding of Columbia at
Edwards Air Force Base, California, after a ten year period of
development, the test and evaluation flights of the national
Space Transportation System were completed and the President
declared the system operational. The system is now a national
Space Transportation System operated to fulfill national and
international, Government and commercial needs for space
transportation. The first operational flight of Columbia
occurred in November 1982, successfully deploying two commercial
payloads into orbit: a Satellite Business System Inc. SBS-B
Communications Satellite and the TELESAT-E Communications
Satellite.
With the national Space Transportation System operational,
the character of the Agency in the short term has changed in many
respects to where a substantial portion of Agency effort will be
directed toward assuring regular STS flights on an increasing
basis. The budget for NASA for fiscal year 1983, submitted on
January 20, 1982, anticipated a successful completion of the
design, development, test, and evaluation phase of the STS
program and substantially reflected the operational character of
the Space Transportation System as well as those systems directly
supporting such operations.
This change in the character of the FY 1983 budget request
is further clearly reflected in the 1983 NASA Authorization Act,
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10
P.L. 97-324 and the House Science and Technology Committee Report
97-502 accompanying H.R. 5890.
The Small Business Innovation Act of 1982 requires among
other provisions, in section 4(f)(1) that:
"Each Federal Agency which has an extramural budget for
research or research and development in excess of
$100,000,000 for fiscal year 1982, or any fiscal year
thereafter, shall expend not less than .2 per centum of
its extramural budget in fiscal year 1983, or in such
subsequent fiscal year as the agency has such budget
not less than .6 per centum of such budget in the
second fiscal year thereafter, not less than 1 per
centum of such budget in the third fiscal year
thereafter, and not less than 1.25 per centum of such
budget in all subsequent fiscal years with small
business concerns in connection with a small business
innovation research program which meets the
requirements of the Small Business Innovation Act of
1982 and regulations issued thereunder.... Provided
further, that a Federal Agency shall not make available for
purposes of meeting the requirements of this subsection an
amount of its extramural budget for basic research or
research and development which exceeds the percentages
specified herein..."
Research and research and development is defined in Section
4(e)(5) as:
The term "research" or "research and development" means any
activity which is (A) a systematic intensive study directed
toward greater knowledge or understanding of the subject
studied; (B) a systematic study directed toward applying new
knowledge to meet a recognized need; or (C) a systematic
application of knowledge toward the production of useful
materials, devices, and systems or methods, including design
development, and improvement of prototypes and new processes
to meet specific requirements."
The SBIR Program required to be established under Section
4(f)(1) is specifically defined in section 4(e)(4) as:
"the term 'Small Business Innovation Research Program' or
'SBIR' means a program under which a portion of a Federal
agency's research or research and development effort is
reserved for award to small business concerns through a
uniform process having -
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"(A) a first phase for determining, insofar as possible,
the scientific and technical merit and feasibility of ideas
submitted pursuant to SBIR program solicitations;
"(B) a second phase to further develop the proposed
ideas to meet the particular program needs, the
awarding of which shall take into consideration the
scientific and technical merit and feasibility
evidenced by the first phase and, where two or more
proposals are evaluated as being of approximately equal
scientific and technical merit and feasibility, special
consideration shall be given to those proposals that
have demonstrated third phase, non-Federal capital
commitments; and
"(C) where appropriate, a third phase in which
non-Federal capital pursues commercial applications of
the research or research and development and which may
also involve follow-on non-SBIR funded production
contracts with a Federal agency for products or
processes intended for use by the United States
Government."
Finally, the statute defines the term "extramural budget" in
Section 4(e)(1) as:
"the term 'extramural budget' means the sum of the total
obligations minus amounts obligated for such activities by
employees of the agency in or through Government-owned,
Government-operated facilities, except that for the Agency
of International Development it shall not include amounts
obligated solely for general institutional support of
international research centers or for grants to foreign
countries;"
NASA believes the language of the statute, including the
purposes set forth in Section 2(b), is clear on its face as to
the intent of this legislation.
In the Agency's opinion, P.L. 97-219 requires the
establishment of a specific small business set-aside program for
the purpose of increasing small business participation in Federal
research and development programs. It is equally clear that the
character of the Small Business Innovation Research Program
defined in the law requires a portion of a Federal agency's
research or research and development effort be placed with small
businesses in two specific phases of research or research and
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development with a third phase involving non-Federal capital for
pursuit of commercial applications or non-SBIR funded production
of Government needs.
In preparation for the execution of the Small Business
Innovation Research Program required by P.L. 97-219, NASA has
reviewed and analyzed P.L. 97-272, making appropriations for FY
1983 to determine accurately the Agency's research effort
authorized and appropriated for FY 1983 and that portion thereof
applicable to the set-aside provisions of P.L. 97-219.
The appropriation structure of the National Aeronautics and
Space Administration is such that "research and research and
development", as defined in the Small Business Innovation
Development Act, is not the total of the appropriation titled
Research and Development and is so recognized by the Chairman of
the Senate Subcommittee for HUD and Independent Agencies
appropriations. On September 24, 1982, the Chairman of the
Senate Appropriations Subcommittee on HUD and Independent
Agencies introduced consideration of H.R. 6956 (making
FY 1983 appropriations for HUD and Independent Agencies) with the
following comments:
"Mr. President, in reference to this small business R&D
issue. I intend, at a later point, to accept an
amendment to strike the Senate proviso. In agreeing to
this action, I would like to note that NASA is in a
somewhat unique position for two reasons. First, much
of the NASA appropriation is committed to programs
begun in earlier years, including the Space Shuttle,
which is operated as a national system for various
users. Further, a considerable portion of the
appropriations account labeled 'research and development'
for NASA is actually for work that is not of a research and
development nature. For this reason, the bill language
under the heading 'research and development' refers to
'operations, services, minor construction, maintenance,
repair, rehabilitation and modification of real and personal
property; tracking and data relay satellite services as
authorized by law; purchase, hire, maintenance and operation
of other than administrative aircraft, necessary for the
conduct and support of aeronautical and space... activities.'
Although I realize that final implementation of rules and
regulations are presently being developed by SBA, OMB and
the effected agencies, including NASA, it is my view that
the provisions of Public Law 97-219 were intended to apply
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only to the true research and development activities funded
under this heading."
NASA has only three appropriation accounts. The Research
and Program Management account provides funds for the salaries,
benefits, and travel of the civil service workforce, and other
administrative expenses; the Construction of Facilities account
provides funds for construction, repair, rehabilitation and
modification, minor construction, and planning and design of
facilities; and all other requirements are funded in the Research
and Development account. The Research and Development
appropriation language states, "For necessary expenses, not
otherwise provided for, including research, development,
operations, services, minor construction, maintenance, repair,
rehabilitation and modification of real and personal property;
tracking and data relay satellite services as authorized by
law; ...etc."
Consistent with the language of the NASA appropriations
statutes, the emphasis of the work funded by the research and
development account over the years has shifted from one primarily
directed toward research and development to one primarily
directed toward production and operation of the Space Transporta-
tion System and associated tracking and data acquisition
networks. This shift, which has accelerated with the completion
in FY 1983 of the Space Shuttle Design, Development, Test and
Evaluation program and the beginning of the operational shuttle
era, is well recognized. The report of the House of Representa-
tives committee authorizing appropriations to NASA for FY 1983
(H.R. 97-502) states, "NASA faces a major challenge in shifting
the organizational and institutional bias from a research and
development character to an operational character." In FY 1983
and subsequent years, a major portion of the NASA "Research and
Development" account, including most of the Space Transportation
Systems and the Space Tracking and Data Systems programs, does
not qualify as research and development under the definition set
forth in the Small Business Innovation Development Act.
The Administration's budget for NASA submitted to the
Congress in January 1983 for the fiscal year 1984 gives full
recognition to the current change in emphasis from research and
development to production and operation of the Space
Transportation System and associated tracking and data
acquisition networks.
The Special Analysis of the budget addresses this change in
the following manner:
"Now that the Space Shuttle is in its operational phase, it
is no longer appropriate to classify all of NASA programs as
R&D. Therefore, the amounts shown for 1982, 1983, and 1984
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for NASA R&D exclude funding for Shuttle production and
operation, tracking and data acquisition activities, and
related institutional support...."
"Space Transportation -- With the initiation of Space
Shuttle operations in November 1982, the major R&D phase of
the Shuttle program has been concluded. A fully operational
and cost effective Shuttle is essential to exploit space
effectively and to help maintain U.S. leadership in space
throughout this century...."
"Table K-6 NATIONAL AERONAUTICS AND SPACE
ADMINISTRATION--RESEARCH AND DEVELOPMENT
1982 1983 1984
actual estimate estimate
Conduct of R&D:
Space transportation systems
890
117
183
Space science
582
752
779
Space and terrestrial
applications
319
398
289
Aeronautical research and
technology
258
313
300
Space research and
technology
118
131
138
Tracking and data
acquisition
12
8
22
Research and program
management
905
787
762
Total conduct of R&D
3,084
2,506
2,473
Total conduct of basic
research, included above
(538)
(605)
(682
R&D facilities
92
160
156
Total obligations
3,176
2,666
2,629
OUTLAYS
Conduct of R&D
3,220
2,386
2,421
R&D facilities
109
136
129
Total outlays
3,329
2,522
2,550
Accordingly, our analysis of P.L. 97-272 and our budget
justification lead us to conclude that approximately $1.6B of the
total of $5.5B appropriated under the title Research and
Development is in fact for research and research and development
as defined in P.L. 97-219 and thus the base from which the
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set-aside percentages specified in P.L. 97-219 are to be
applied. The basis for this conclusion is summarized in the
enclosed schedule.
Faced with the necessity for interpretation of two recent
statutes, P.L. 97-219, "The Small Business Innovation Development
Act of 1982", enacted into law on July 22, 1982, and P.L. 97-272,
"The HUD and Independent Agencies Appropriation Act of 1983"
enacted into law on September 30, 1982, the Agency sought an
advance opinion by the Comptroller General of the U.S. on
November 8, 1982.
In order to respond fully to P.L. 97-219, NASA proceeded
with all deliberate speed to establish and execute a SBIR program
consistent with the Agency's interpretation of the program at a
funding level of $3.3M while remaining prepared to allocate an
additional amount of $7.8M to be added to the FY 1983 Agency SBIR
program should the GAO interpret these statutes in a different
manner.
On March 3, 1983, the Comptroller General rendered an
advanced decision (B209790) on NASA's interpretation of Public
Laws 97-219 and 97-272. The digest of this decision states:
"In calculating its 1983 set-aside for small business
innovation research program, NASA should apply definition of
'research and development' that appears in Small Business
Innovation Development Act, Pub. L. No. 97-219, 96 Stat.
217, July 22, 1982, to its budget for Fiscal Year 1983
without regard to appropriation heading 'Research and
Development.' Since Congress clearly appropriated funds for
certain operational activities under that heading, it would
be contrary to congressional intent for set-aside to be
based on amounts not available for research and
development."
Mr. Chairman, my formal testimony is concluded. I will now
be pleased to answer any questions you or members of the
Committee may have.
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Admiral EVANS. Mr. Chairman and members of the subcommit-
tee, by letter of February 22, 1983, you invited NASA to appear
before this committee to set forth the steps the Agency has taken
to put into effect the small business innovation research program
established by Public Law 97-219 on July 22, 1982. You further ex-
pressed particular interest in the amount of funds designated for
the program and the nature of the solicitation that NASA will pro-
mulgate. We are pleased to respond and appreciate the opportunity
to appear today.
Accompanying me today are Mr. C. Thomas Newman, NASA
Comptroller, and Mr. Francis C. Schwenk, NASA SBIR Manager.
Since the enactment of Public Law 97-219, we have been en-
gaged in two parallel efforts: One, working with the Small Business
Administration in its development of policy direction required by
section 4 of the act, and two, laying the groundwork for the execu-
tion of the small business innovation program within NASA itself.
In fact, an implementation meeting was held on July 23, the day
following enactment of the bill, after which we set about creating
an organization within NASA to execute this program as promptly
and efficiently as possible.
In the conduct of all its operations, NASA exercises a centralized
control, direction, and review of Agency activites, while consistent-
ly providing for decentralized execution of Agency operations.
Under this management style, 96 percent of all NASA procure-
ment activities take place in the eight NASA centers. In structur-
ing our SBIR program, we pursued this style of management by es-
tablishing a central program office at NASA Headquarters for di-
rection, control, review, and reporting and simultaneously provid-
ing for the execution of contracts and subsequent administration of
contracts through our eight centers. On December 13, NASA's Ad-
ministrator officially established our small business innovation re-
search program office within the Office of Aeronautics and Space
Technology at NASA Headquarters. This new program office was
given full responsibility for implementing and managing the Agen-
cy's SBIR program, while insuring the participation of NASA cen-
ters and program offices in the selection of research topics and in
the recommendation and management of project awards. The pro-
gram office published its implementation plan on December 17 and
simultaneously issued a request to all centers for appropriate SBIR
research topics.
In accordance with the SBA's policy directive 65-01, NASA in-
formed that agency by letter of January 26 of the topics to be in-
cluded in our program solicitation and its target release date. A
meeting of SBIR focal points from all the centers and program of-
fices was convened at NASA Headquarters on February 1 and 2, in
order to make final determination on topics and clarify any details
of implementation
Concurrently, we proceeded with the development of our pro-
gram solicitation, following the guidelines set forth by the SBA.
The solicitation has been forwarded to the printers, and we antici-
pate its release at the end of this month. This date has been coordi-
nated with the Small Business Administration and released to the
public in an SBA presolicitation announcement. We have tried to
schedule our program solicitation so as to allow sufficient time for
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the development of comprehensive topics, while still providing ade-
quate time for proposal preparation, evaluation, and award of
phase I contracts in fiscal year 1983.
We will distribute approximately 15,000 copies of this solicita-
tion, using the SBA's procurement automated source system, which
now contains approximately 13,000 R&D firms, as well as through
a source list we developed. NASA's program solicitation reflects
our philosophy of centralized program management and decentral-
ized program execution. Specifically, it requires submission of all
proposals to our headquarters, where the program office will con-
duct initial screening to determine the basic qualification factors,
such as whether the firm has certified that it is a small business
and has met the proposal-size limitation.
Proposals will then be sorted by subtopic, and each subtopic will
have a designated manager, an expert in that technical area locat-
ed at one of the NASA centers. All centers are involved in this pro-
gram, with a topic list of 26 major areas and a total of 210 sub-
topics. Proposals will be sent to the appropriate topic manager,
who will initially review them to determine if they are, in fact, re-
sponsive to the topic designated by the offeror and, if so, have inde-
pendent technical evaluations performed by scientists and engi-
neers knowledgeable in that particular area. These evaluations will
be conducted consistent with the factors listed in the program so-
licitation.
Individual reviews will be consolidated, and recommendations
will be forwarded to the SBIR program office in NASA Headquar-
ters. A board will review all recommendations and make final se-
lections based on recommendations from the centers and on overall
considerations such as possible duplication of other research and
program balance. The center procurement offices involved will
then be directed to award phase I contracts for those proposals se-
lected.
Since SBIR is a new program for NASA, as it is with most other
agencies, we have no base from which to predict the volume of pro-
posals that will result. We have, however, planned as much as pos-
sible to handle the proposal process efficiently, effectively, and in
such a way as to minimize the effort required by offerors. For ex-
ample, we have eliminated the need for all offerors to read and
analyze the numerous required contract clauses and provisions and
complete certifications and representations by summarizing simply
and in general terms, in the solicitation of the required clauses.
Only successful offerors will be required to execute specific detailed
requirements.
In summary, I believe we have responded actively and positively
to set up an SBIR program that is responsive to the legislation, the
needs of the small business research and development community,
and NASA's own mission needs.
I would now like to address the second matter of interest to the
committee, namely, the amount of funds designated for the fiscal
year 1983 SBIR program.
On July 4, 1982, on the landing of Columbia at Edwards Air
Force Base, Calif., after a 10-year period of development, the test
and evaluation flights of the national Space Transportation System
were completed, and the President declared the system operational.
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The system is now a national Space Transportation System, operat-
ed to fulfill national and international, Government and commer-
cial needs for space transportation. The first operational flight of
Columbia occurred in November 1982, successfully deploying two
commercial payloads into orbit.
With the national Space Transportation System becoming oper-
ational, it has changed the character of the Agency in the short
term in many respects to where a substantial portion of the Agen-
cy's effort will be directed toward assuring regular Space Transpor-
tation System flights on an increasing basis. The budget for NASA
for fiscal year 1983, submitted on January 20, 1982, anticipated the
successful completion of the design, development, test, and evalua-
tion phase of the system and substantially reflected the operational
character of the Space Transportation System, as well as those sys-
tems directly supporting such operations.
This change in character of the fiscal year 1983 budget request is
further clearly reflected in NASA's 1983 Authorization Act, Public
Law 97-324, and the House Science and Technology Committee
report accompanying that bill.
In NASA's opinion, Public Law 97-219 requires the establish-
ment of a specific small business set-aside program for the purpose
of increasing small business participation in Federal research and
development programs. It is equally clear to us that the character
of the Small Business Innovation Research program defined in the
law requires a portion of a Federal agency's research, or research
and development, effort be placed with small business firms in two
specific phases of research, or research and development, and a
third phase involving non-Federal capital for pursuit of commercial
applications or non-SBIR-funded production of Government needs.
In preparation for the execution of the small business research
program required by the legislation--
Senator TsONGAS. Mr. Chairman, could I interrupt just for a
moment? The Foreign Relations Committee is being briefed on El
Salvador at 10.
Senator RUDMAN. Would you like to ask a question at this point?
Senator TsoNGAS. Just one point. The statement says that NASA
believes the language of the statute, including the purposes set
forth, is clear on its face as to the intent of this legislation. Did
anyone contact the sponsor of the legislation to find out what he
had in mind when legislation was adopted?
Admiral EVANS. The statement is based on the legislative histo-
ry, the hearings that have been held, the committee reports, and
the language of the statute itself, plus the knowledge that it came
from the research for national needs program of the National Sci-
ence Foundation, followed by their own SBIR program.
Senator TsONGAS. Mr. Chairman, having read through this as
quickly as I could, it is pretty obvious that NASA feels they did
what is proper. I do not happen to share that view. Perhaps it
might be an alternative to go back. There are a number of vehicles
coming up we can attach legislation to. We can perhaps change
NASA s percentage or perhaps even raise it above everybody else's,
as sort of a lesson. If we are not going to be listened to, I could just
as easily stay at home with my children rather than come in here.
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I think beyond the specific issue of small business, which is im-
portant obviously, there is another issue. That is the role between
the administration and the Congress, and whether what we do here
is important and whether an attitude is going to be allowed to con-
tinue that if you are really clever, you can figure out ways around
congressional intent. I think that is a very corrosive kind of atti-
tude, and I would hope that we would address it; I think it is unfor-
tunate that people have to come up and explain it. Because you ob-
viously are the recipients of the irritation, I do not intend that
should be the case, but I do think there is another issue that goes
beyond your particular roles that we have to give some thought to.
It has happened in a number of places. It happened under Presi-
dent Carter. It happened before he came along. I think to the
extent we allow it to continue, we really do undermine the founda-
tion of the separation of powers. I thank the chairman.
Senator RUDMAN. Thank you very much. To answer your ques-
tion, the answer is no, the sponsor was not contacted. As as matter
of fact, only due to staff of mine who happened to be looking at the
HUD appropriations did we suddenly discover-we would not be
here today; it would have been over-that there was a very fine
footnote which had been worked out which had reduced the pro-
gram to $1.5 million.
No one came and talked to me about it, for obvious reasons. Had
they come and talked to me about it, there would have been a
problem; There was a problem, and there is going to be more of a
problem before this whole episode is over.
Thank you very much, and I appreciate your attending.
Why don't you proceed, Admiral.
Admiral EVANS. Thank you.
In preparation for the execution of the small business innovation
research program, required by Public Law 97-219, NASA_ has re-
viewed and analyzed Public Law 97-272 making appropriations for
fiscal year 1983, to determine accurately the Agency's research
effort authorized and appropriated for fiscal year 1983 and that
portion of it applicable to the set-aside provisions of the SBIR pro-
gram.
The appropriation structure of the National Aeronautics and
Space Administration is such that research and research and devel-
opment, as defined in the Small Business Innovation Development
Act, is not the total of the appropriation titled "Research and De-
velopment" and is so recognized by the chairman of Senate Sub-
committee for HUD-Independent Agencies' appropriations.
NASA has only three appropriation accounts: The Research and
Program Management account provides funds for the salaries,
benefits, and travel of the civil service work force and other admin-
istrative expenses; the Construction of Facilities account provides
funds for construction, repair, rehabilitation and modification,
minor construction, and planning and design of facilities. All other
requirements are funded in the Research and Development ac-
count. The Research and Development appropriation language
states:
For necessary expenses not otherwise provided for, including research, develop-
ment, operations, services, minor construction, maintenance, repair, rehabilitation,
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and modification of real and personal property; tracking and data relay satellite
services as authorized by law; * * * and so forth.
Consistent with the language of the NASA appropriations stat-
utes, the emphasis of the work funded by the Research and Devel-
opment account over the years has shifted from one primarily di-
rected toward research and development to one primarily directed
toward production and operation of the Space Transportation
System and associated tracking and data acquisition networks. This
shift, which has accelerated with the completion in fiscal year 1982
of the Space Shuttle design, development, test, and evaluation pro-
gram and the beginning of the operational status of the Shuttle is
well recognized. The report of the House of Representatives com-
mittee authorizing appropriations to NASA for fiscal year 1983
states:
NASA faces a major challenge in shifting the organizational and institutional bias
from a research and development character to an operational character.
In fiscal year 1983 and subsequent years, a major portion of the
NASA Research and Development account, including most of the
Space Transportation System and the Tracking and Data Systems
programs, does not qualify as research and development under the
definition set forth in the Small Business Innovation Development
Act.
The Administration's budget for NASA submitted to the Con-
gress in January 1983 for fiscal year 1984 gives full recognition to
the current change in emphasis from research and development to
production and operation of the Space Transportation System and
associated tracking and data acquisition networks. The special
analysis of the budget addresses the change in a like manner.
In view of this, our analysis of Public Law 97-272 and our budget
justification lead us to conclude that approximately $1.6 billion of
the total of $5.5 billion appropriated under the title "Research and
Development" is, in fact for research and research and develop-
ment as defined in Public Law 97-219; and, thus, the basis from
which the set-aside percentage is specified in that law are to be ap-
plied.
Faced with the necessity for interpreting two recent statutes,
namely the Small Business Innovation Development Act of 1982,
enacted on July 22, 1982, and Public Law 97-272, the HUD and In-
dependent Agencies Appropriation Act of 1983, enacted on Septem-
ber 30, 1982, the Agency sought an advance opinion of the Comp-
troller General of the United States on November 8, 1982.
In order to respond fully to Public Law 97-219, NASA proceeded
with all deliberate speed to establish and execute an SBIR program
consistent with the Agency's interpretation of the program at a
funding level of $3.3 million, while remaining prepared to allocate
an additional $7.8 million to be added to the fiscal year 1983
Agency SBIR program should the General Accounting Office inter-
pret these statutues in a different manner.
On March 3, 1983, the Comptroller General rendered an advance
decision, No. B209790, on NASA's interpretation of the two public
laws. The digest of this decision states:
In calculating its 1983 set-aside for small business innovation research program,
NASA should apply the definition of research and development that appears in Small
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Business Innovation Development Act, Public Law 97-219, 96 Stat. 217, July 22, 1982,
to its budget for fiscal year 1983 without regard to appropriation heading research and
development. Since Congress clearly appropriated funds for certain operational
activities under that heading, it would be contrary to congressional intent for set-aside
to be based on amounts not available for research and development.
I would like to summarize, Mr. Chairman, by saying that in re-
flection over our 25-year history-and it is our 25th anniversary-
we will proceed on this program with the same measure of enthusi-
asm, the same measure of imagination, and the same measure of
thoroughness that has characterized the Agency's performance in
the past. It is my expectation, and I am certain I am joined by Mr.
Schwenk, our program manager, that, contrary to your feelings, it
is probably going to be the best program in the Government, with-
out reservation. That concludes my formal testimony, Mr. Chair-
man.
Senator RUDMAN. Thank you very much, Admiral Evans.
Admiral, referring to that same House report that you referred
to in your testimony, the 1981 report of the House Committee on
Science and Technology concerning the history of NASA, I think
one thing is very certain from that report. I would like to go over it
with you. It is certain that all costs of operation for the Shuttle
over the planned 12-year operational period are supposed to be re-
coverable by NASA from the private sector.
The report states, "As a matter of policy, research and develop-
ment costs will not be recovered." My question is: Are we now in a
phase of the Shuttle where all current costs of the Shuttle are
going to be recovered from the private sector?
Admiral EVAN. All current costs will not be recovered, sir. We
are in the phase where we are accelerating production, in view of
an increased operational flight rate, over the years to satisfy the
needs of both Government and national and international require-
ments for space transportation.
Senator RUDMAN. The intent of Congress, clearly, Admiral
Evans, is that if the cost is operational then it should be recovered
from the private sector. If the cost is research and development, it
is not to be. Now, you are saying that for purposes of this bill, it is
operational. Is that correct?
Admiral EVANS. I am saying that the Shuttle is operational, yes,
sir.
Senator RUDMAN. If it is operational, why are we not recovering
all the costs from the private sector?
Admiral EVANS. We have already begun to recover some of the
costs.
Senator RUDMAN. That is not my question. Are we going to re-
cover all of the cost of these Shuttles from here on out from the
private sector?
Mr. NEWMAN. The answer is "No," and the reason the answer is
no is that basically not all missions are for the private sector. A
large number of missions are, in fact, for Government agencies.
Those are funded by the agencies that use them. The second major
point is that we are in the early phases of operation, and as in any
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new system, the early phases cost considerably more on a unit
basis than do the later phases. The charging policy in the early
part of the program does not fully recover even the portion of the
costs attributable to the private sector users.
Senator RUDMAN. At what point will you be recovering all of the
operational costs from private sector users? Which flight?
Mr. NEWMAN. I cannot give you a flight number. The policy that
we have adopted runs through about 1988.
Senator RUDMAN. It seems to me that, judging by your answer,
what you are really saying is that although it is operational, it still
has some research and development characteristics attached to it.
Mr. NEWMAN. So far as the operations are concerned, it still has
what any industrial manufacturing operation would have, a learn-
ing curve.
Senator RUDMAN. Which is associated with research and develop-
ment, is it not?
Mr. NEWMAN. Which is really associated primarily with quantity
of operations. You learn by doing, in other words.
Senator RUDMAN. So what you are saying is, it is no longer re-
search and development; it is operational? You cannot have it both
ways, Mr. Newman. It is either one or the other.
Mr. NEWMAN. The Shuttle operations are essentially an oper-
ational effort.
Senator RUDMAN. We may disagree, but if that is true, then you
ought to be recovering every dime at this point, according to that
House report and according to the law. You know the law as well
as I do. Now, why you are not, there may be a good reason for it. I
am not suggesting that there is not a good reason. But if in fact it
is operational and not research and development, then it ought to
be recovered 100 percent from the Government users who use it
and from the private sector. If it has any research and develop-
ment characteristics to it at the present time, then at least that
amount ought to be allocated under this program. I do not think
you can have it both ways.
Mr. NEWMAN. There are two major efforts, in relation to the
Shuttle, which we have included in the $1.6 billion. One of those is
the development of a filament-wound case with a solid rocket boost-
er to improve the performance of the Shuttle, and that we agree is
appropriately research and development. The other is the modifica-
tion and development work associated with making the Centaur
upper stage operable with the Shuttle, and we have included that.
Senator RUDMAN. You are aware of the fact that the subcommit-
tee made the suggestion in the unsuccessful negotiations that pre-
ceded this hearing to compromise this issue and to consider a cer-
tain portion of this Shuttle as research and development to recog-
nize the very point I have just made and to have the figure midway
between what you have finally agreed on and what the committee
originally thought: Between the $3 and the $11 million. You are
aware of that?
Mr. NEWMAN. Only loosely. I knew there was some--
Senator RUDMAN. Well, I will make sure you are aware of it. I
will give you the correspondence after the hearing.
Admiral Evans, let me just go over the history of NASA's testi-
mony before the Senate and the House on what was S. 881. On
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July 15, 1981, Leroy Hopkins, Deputy Director of Procurement, ap-
peared before the Senate Small Business Committee on Innovation
and Technology, this subcommittee. He stated, and I will quote
from the record, "NASA is a research and development agency en-
gaged wholly in high-technology efforts." In arguing against the
legislation, from NASA's point of view, at no time did he mention
the fact that the bill would not apply to NASA's Shuttle activities
because of their non-R&D nature. We cited the figures in that
hearing on NASA's budget. At no time was that even discussed. He
talked only of plans already made for future appropriations, and of
NASA's belief that it was already doing enough for small business.
Additionally, he talked of NASA's mission, offering the opinion
that NASA was not set up to offer "support" and "assistance" to
the small business community in the manner of the National Sci-
ence Foundation.
Can you tell me, if this was such a concern, why this committee
at least was not given the benefit of an understanding that while
we were looking at a figure of x, you were looking at a figure that
was considerably less than x? Why did he not make that clear,
since obviously this is something you must have known at the time.
Admiral EVANS. I would be happy to respond, sir. That was on
July 15, 1981, which was fiscal year 1981. The Shuttle research and
research and development effort did not conclude until fiscal year
1982. At the point of testimony, either before this committee on the
15th of July or my testimony on the 15th of September before a
corresponding subcommittee in the House of Representatives, simi-
lar statements were made. At that point of time, discussing the
fiscal year 1981 budget which we were in, those statements were
quite true. In his testimony, further, Mr. Chairman, Mr. Hopkins
stated and I quote:
Further, we believe that these percentages, as are all other socioeconomic goals
imposed upon total appropriation amount, do not consider the extent to which au-
thorizations/appropriations are available for this purpose. For example, in fiscal
year 1980, NASA research and development appropriations, including supplemental
appropriations for the Space Shuttle, totaled $4 billion. It comprised some 12 major
categories broken down into an excess of 100 program line items. Of approximately
89 percent, or of $3.6 billion, placed with business, $2.8 billion, or 77 percent, consti-
tuted major contracts or funding actions on existing major programs, such as the
Space Shuttle, Spacelab, Shuttle upper stages, Delta, Atlas, Centuar, and Scout ve-
hicles, Space Telescope, Galileo, Landsat, Deep Space Network, and the Space Flight
Tracking and Data Network. In the execution or continuation of such programs
under the 1980 authorization and appropriation acts, little, if any, latitude exists for
the application of the funds involved for other p rposes as contemplated by this bill.
This is the same testimony which you quoted from.
Senator RUDMAN. But Admiral, he did not give us a figure that
was so enormous. He went over that information, I remember it,
but he did not indicate that you were going to be taking about 60
percent of what we thought was your R&D budget out of the total.
Let me go to your testimony. I have his right here, but let us talk
about your testimony on the 26th of January 1982. This is very in-
teresting, and I would like you to just listen to it carefully. I am
sure you have reviewed it before today, but I am going to quote it
to you.
Your testimony was with respect to the House counterpart to S.
881. It was before the House Committee on Science and Technol-
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ogy. The original House bill, as you know, provided for an alloca-
tion of 3 percent of the agency's R&D budget to its SBIR program,
which I thought was too high Government-wide. It was too high for
NASA, too high for Defense. It was much too high. I fought suc-
cessfully, with the support of the administration, to reduce it to the
1.25 percent and then, further, to stage it over a number of years
starting at two-tenths of 1 percent.
You did not mention at that time that the program would not
include the Shuttle activity, but rather I think you assumed that it
would, and let me quote your words to you. Your testimony was to
the effect that in the fourth year, under the House legislation,
NASA's SBIR program would grow to "some $180 million" under
the 3-percent program. That is the amount which would result
from the application of 3 percent of NASA's projected R&D budget
4 years hence, with no exclusion whatsoever for the Shuttle pro-
gram.
It seems to me strange that the exclusion was not mentioned at
that time, inasmuch as you now argue that 1983 is the year in
which all of the program has switched to operational. When you
testified before the House committee, you used the figure of $180
nillion, which I think was correct. That was 3 percent of your
entire R&D account. It seems to me that at the time you were
aware, and you certainly must have been aware in January 1982,
of the nature of the change in the Shuttle program. It seems to me
that you should have used a far lower figure or, conversely, that
figure was correct at the time and your statements here this morn-
ing are incorrect.
Again, I do not think you can have it both ways. I would like you
to tell me why you used that $180 million figure. It is very accu-
rate; it is 3 percent of your total R&D budget.
Admiral EVANS. At that point in our testimony, were we testify-
ing, as I recall, on H.R. 4326, were we not? I believe it was.
Senator RUDMAN. That is correct, 4326, which had 3 percent.
That is correct.
Admiral EVAN. At that point in time, we had a bill not a stat-
ute. There were differences between S. 881 and H.R. 4326, some
marked differences in a range of areas.
Senator RUDMAN. None in definition, Admiral Evans. The defini-
tions were the same.
Admiral EVANS. The figure, as I recall $180 million, is a flat
projection coming off the total budget figure at that time. In Janu-
ary 1982, we were still in DDT&E, as I mentioned, on the Shuttle.
Granted, we were forecasting using percentages. We do not know
what our budget will be 4 years hence. We do not know at all what
our budget will be.
Senator RUDMAN. But that is only 3 months before you now tell
us the Shuttle has gone operational. That is 3 months before your
testimony this morning says that your Shuttle is operational. It
seems to me you knew it then. You should have said to the House
committee: Understand that 3 percent of-and whatever the figure
would be-would be a great deal less than $180 million. I just claim
that the testimony was either right then or was wrong then, and
maybe it was wrong and maybe you are right this morning. But it
surely, would you not agree with me, would be inconsistent?
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Admiral EVANS. I disagree that it is inconsistent, Mr. Chairman.
Senator RUDMAN. We will let the record speak.
Admiral EVANS. I should also say that in terms of knowing for
certain that the Shuttle would be operational in July 1982, that we
thought Challenger would fly in January 1983. We are now in the
middle of March 1983: We have come to recognize that, in the char-
acter of the endeavors in which we engage, there is a degree of un-
certainty. This is why we go at things with a high measure of en-
thusiasm, on the one hand, tempered by as much realism, caution,
and conservatism as we can.
Senator RUDMAN. So your answer is, I guess, that in January of
1982, before that committee, you calculated 3 percent of the entire
R&D budget because in January 1982 you were not certain that the
Shuttle would be operational by July?
Admiral EVANS. I think I am saying two things. The certainty we
had at that point was the fiscal year 1982 appropriations. The
budget for fiscal year 1983 was introduced on January 20, 1983.
This testimony was on January 26, as I recall, in the budget. I have
stated this morning that the budget submitted at that point in time
did reflect the anticipated change in the character of the Shuttle
operations. It was not to say that it was going to occur with a cer-
tainty. It happened to occur on the July 4, with the STS or the
final test evaluation flight. It has changed, in the short term, the
character of our agency.
Senator RUDMAN. So you believe, and your testimony here this
morning, Admiral, would be that it would be an unfair conclusion
on the part of this subcommittee to conclude that after the bill
became law, NASA then had to find a way-for whatever problems
you have, and I have no doubt you have problems-to get a large
chunk of this money out from under this program, and this was the
way that was found 6 months later. You would say that would be a
totally unfair conclusion in the light of that testimony?
Admiral EVANS. Yes, I would.
Senator RUDMAN. Let me just back up a bit. Assuming that is so,
at the time you went to the Senate appropriations subcommittee
that deals with your budget, the HUD subcommittee, and asked
that it be reduced to a $1.5 million program from the $11 million
that we thought it was going to be, why did you not mention the
change in the character of the Shuttle at that time?
Admiral EVANS. Mr. Chairman, I have no personal knowledge of
this: I have no personal knowledge that we went to that subcom-
mittee and requested that.
Senator RUDMAN. You are telling me that this was an issue of
the subcommittee itself, without any contact from NASA? I hope
you consider your answer carefully.
Admiral EVANS. I did not say that. I said I have no personal
knowledge of that.
Senator RUDMAN. None of your staff discussed that with the com-
mittee of the Senate Appropriations Committee?
Admiral EVANS. Do you mean my staff or the agency's?
Senator RUDMAN. Your staff.
Admiral EVANS. My staff, that is correct.
Senator RUDMAN. Admiral Evans, on March 9, 1983, the Admin-
istrator, James Beggs, made his statement to the Senate Commerce
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26
Committee, Subcommittee on Science and Technology. In describ-
ing the budget request for fiscal year 1984, he said:
The total request is $7.1 billion, of which $5.7 billion is for research and develop-
ment, $150 million for construction of facilities, and $1.25 billion for research and
program management.
In that statement, the Shuttle is included in R&D. How can you
claim this morning that it is R&D for one purpose but not for an-
other?
Admiral EVAN. In my statement, Mr. Chairman, I mentioned
that NASA has three appropriation accounts, one entitled Re-
search and Development, one entitled Construction of Facilities,
and one entitled Research and Program Management. Those are
the exact terms that the Administrator used in addressing the ac-
counts structure of NASA within its context of the budget. The
budget was submitted in the same accounts structure it has, here-
tofore, had, namely those three appropriation accounts. I see no in-
consistency whatsoever.
Senator RUDMAN. It seems to me, Admiral Evans, that at the
very least we have a real problem here with definition. I think that
if the Congress is being asked to appropriate money for R&D, it
ought to be R&D. If it is operations, it ought to be operations. I
expect we will be addressing that.
I also do not understand at all Mr. Beggs' testimony at that same
time, essentially saying that the Shuttle is not already 100-percent
operational in light of your testimony this morning, because you
are essentially saying it is 100-percent operational.
Admiral EVANS. I do not believe we said that, Mr. Chairman.
Senator RUDMAN. We will go look at the record, and I will supply
it to you.
Mr. NEWMAN. Excuse me, Mr. Chairman. The explanations given
for the request for research and development clearly spell out the
amount that is for Shuttle operations. The description of the con-
tent of the program clearly identifies that it does include the oper-
ational aspects, the production of the vehicles, and all the other ac-
tivities associated with both the Shuttle operation and with the re-
search and development activities that we conduct.
Senator RUDMAN. I do not have too much more. I want to refer
to a statement by the President, when he addressed the issue of the
Nation's R&D effort. At his request, the Executive Office of the
President, Office of Science and Technology Policy issued a report
on the administration's aeronautical research and technology
policy in 1982. With respect to the Shuttle system, the report
stated:
The flexibility of launch mode, the all azimuth launch, rapid turnaround-1 or 2
days-are still in the development stage.
Of the six categories of aeronautics technology listed for further
research and development effort, the Space Shuttle is specifically
listed in five of those. It is listed in the following categories: aero-
dynamics, materials and structures, propulsion, flight control, and
technology integration. The only category the Space Shuttle is not
specifically mentioned in is that dealing with subsystems and sup-
port.
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Of the greatest importance is the fact that in the discussion of
the categories of R&D, the report makes the finding that NASA
has absolutely no involvement in operational systems. That is very
interesting, in light of the testimony this morning. Somebody ought
to tell the President that this is not what is happening. Maybe that
is not what ought to happen, but at least the President and NASA
ought to be consistent.
The importance of this finding is not limited to NASA's Shuttle
program. The category in which the administration places NASA's
Space Shuttle program corresponds to a category of DOD research
known as advanced development. Not only is DOD including ad-
vanced development in its SBIR program, which is proper, but
there are at least two categories below that which are also included
in DOD's SBIR program. I suspect that if NASA is successful in its
argument, DOD would, presumably, be justified in cutting its pro-
gram by approximately 50 percent. This, of course, is one of our
concerns.
Admiral EVANS. May I respond to that, sir?
Senator RUDMAN. In a moment. Those watching the situation at
NASA have long held that NASA is perhaps a stalking horse for
DOD in this particular case. If that were the case, congressional
intent would be clearly frustrated. It seems to me that different
parts of the administration are saying different things.
You may respond.
Admiral EVANS. I said previously that NASA has three appropri-
ation accounts. One is entitled: "Research and Development"-we
can discuss, I suppose, whether the title of that reflects the charac-
ter of the authorization and appropriations in it-one entitled:
"Construction of Facilities," and one entitled: "Research and Pro-
gram Management."
If I examined the Department of Defense and focused directly on
their RDT&E appropriation, it is all research and development. It
is listed in eight categories, starting with basic research, applied re-
search, advanced development, engineering development, right up
through category 8. That is one appropriation. They also have pro-
curement accounts for procurement of aircraft, construction of
ships, procurement of tanks. That is part of our appropriation ac-
count entitled "Research and Development." Again, I will not com-
ment upon whether the title is that accurate or not.
If I were to draw the inference that you are saying because this
appropriation is entitled "Research and Development," it should
cover the entire thing, then I would question whether the construc-
tion of a new Nimitz carrier is not within the same analogy of re-
search and development, or this year's production of the F-16, or
the F-18, or the F-14, or the A-6, whether that is not equally re-
search and development under the position being taken by this
committee today.
Senator RUDMAN. I do not think that is the position being taken,
but obviously we disagree. The purpose of this hearing was not to
have you convince me or me convince you. The purpose of this
hearing this morning was to have a record that we intend to make
some use of.
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? 28 ?
I want to read to you, to conclude the hearing, from Spinoff 1982,
a very nicely produced document that is circulated to the Congress
and the public by NASA. It says that:
The next 3 years will be a "breaking-in" period for the Shuttle, the principal ele-
ment of NASA's Space Transportation System. It will be a time for learning more
about the system's capabilities and limitations and for developing technology to
make possible the advanced missions contemplated. During this period the Shuttle
will begin regular operations at modest frequencies, averaging about 10 flights a
year.
It seems to me that the first time, Admiral Evans, that we heard
about such a large section of the Shuttle not being R&D was about
the time that this bill became law. Do you have any recollection of
this contention, this separation of your internal R&D account being
made other than for purposes of this law?
Admiral EVANS. I think Mr. Newman is perhaps more qualified
to address this than I.
Mr. NEWMAN. We have had discussions over at least 2 or 3 years
with several of the congressional people, as well as the OMB, about
the content of the program. In fact, we made some structural
changes in the way we present the program to more clearly identi-
fy the operational aspects in case people should want to break
down any future action.
There is another point I think I would like to make. When you
read the statement you read and you referred to those categories of
technology for advanced development on the Shuttle-I am not
sure of the statement you were reading, but the categories were ex-
actly those we used in our space research and technology program,
and that program we have included in total in the amount which is
used in computing the base for the SBIR. We have also included
the major development of the solid rocket booster improvement,
and we have also included the major development of the Shuttle
upper stage, the Centaur, for use in the Shuttle. In that sense, I
think we have included the advanced developmental aspect.
Senator RUDMAN. I would point out to you that your own en-
abling act probably ought to be changed, because the National
Aeronautics and Space Act of 1958 states what the purposes of the
agency are. It says, amongst others, "the development, construc-
tion, testing, and operation for research purposes of aeronautical
space vehicles."
Admiral Evans, let me simply say that the hearing proved exact-
ly what I wanted it to prove. We will just take your testimony here
this morning and compare it to the testimony of yourself and
others from NASA before other committees.
I just want to say to you that I think in order for Government to
operate, it has to operate with good faith and good will. I believe
that NASA, and possibly correctly, did oppose this bill or argued
against it. When it finally became law, it decided that it must find
a way to exclude some of the coverage of the law and evidently has
been successful in doing so. Now, that may be fine for NASA. How-
ever, NASA is part of this administration. This administration has
many close questions here-I will not mention them; you know
them. We do not operate in an atmosphere of good will when many
of us feel, rightly or wrongly, that NASA has been engaged in con-
duct here that has been designed to thwart. the will of the Con-
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gress. That is how many of us feel. I have been a supporter and a
friend of NASA for a long time. I shall no longer be a friend and
supporter of NASA's program, because frankly, sir, I think NASA
has engaged in duplicitous conduct in this particular affair. I thank
you very much.
The hearing is adjourned.
[Whereupon, at 10:30 a.m., the committee recessed, to reconvene
at the call of the Chair.]
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