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Supplement 2 

 Federal Funds for R&D and FS&T 



Distribution of Federal Funds for R&D as Currently Reported 



At present, the federal government invests about $70 billion annually to fi- 

 nance the conduct of R&D in industn, federal laboratories, academia. and indepen- 

 dent research organizations. Of the nearh- $"0 billion spent on R&D in Fiscal Year 

 199-4. federal science and technolog\- (FS&T), as defined by the committee 

 (B().\ II. .s). received between S35 billion and $40 billion, while the remaining por- 

 tion was de\()ted to demonstration, testing, and evaluation of major systems. 



In Fiscal Year 199-4. about 45 percent of the federal R&D fimds went to indus- 

 try 25 percent to the federal governments own laboratories (not including 

 FFRDCs). 1" percent to institutions of higher education, 8 percent to FFRDCs. and 

 about 5 percent to other nonprofit or nonfederal research institutions.' 



Based on standard current definitions, the federal government funds about 36 

 percent of all R&D in the United States." In recent years, the federal government has 

 supplied about 00 percent of the fimds that support R&D in educational institu- 

 tions, almost 20 percent of the funds for R&D in industry-, and essentially all of the 

 support for R&D in federal laboratories ' Thus, it is apparent that federal funding 

 has been essential to R&D performance in all three sectors. 



The Usefulness of Thinking About a Federal R&D "Portfolio" 



The federal government invests in a highly diversified portfolio of R&D in 

 many disciplines and for many purposes. This portfolio includes programs and 

 projects with wideh different expected risks and pay-off horizons, is the responsibil- 

 it\ of main federal departments and agencies, and is pursued in a varien- of institu- 

 tions \() single decision-making model is appropriate to investments in all ele- 

 ments of the portfolio: in fact, the different elements in the portfolio are e.stablished 

 in quite different wa\ s and at different levels. The federal government has not 

 worked with a federal budget as such; instead, total annual spending on R&D by 

 the federal go\ernment has resulted from the aggregation of the results of decisions 

 made b\ separateh compiling the budgets of the diverse departments and agencies. 



The Nature of the Contemporary Federal R&D and FS&T Portfolios 



In this section, the committee summarizes its understanding of the salient 

 features of the contemporary federal R&D and FS&T portfolios. Tlie R&D data are 

 taken largeh from standard statistical sources, and, unless otherwise noted, are 

 presented using the categories and definitions employed by the Division of Science 

 Resources Studies of the National Science Foundation. The FS&T data were devel- 

 oped by the committee, and their derivation is discussed in Box II. 3- Several ques- 

 tions about the FS&T budget concept are addressed in Box II. 4. 



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