Testimony of

Dr. Cheryl L. Shavers

Under Secretary for Technology

Technology Administration

U.S. Department of Commerce

before the

U.S. House of Representatives

Subcommittee on Technology

March 9, 2000

Introduction

Thank you Madame Chairwoman and members of the Subcommittee. I appreciate the opportunity to meet with you today to discuss the Technology Administration's FY2001 budget request. We are looking forward to working with the Congress on authorizing legislation for the Technology Administration and its component agencies.

The Technology Administration includes the Office of the Under Secretary for Technology, the National Institute of Standards and Technology (NIST), the National Technical Information Service (NTIS), the Office of Technology Policy (OTP), and the Office of Space Commercialization. As you can see by the make-up of our organization, the Technology Administration is concerned fundamentally with the use of civilian technology in the United States and with technology's contribution to U.S. economic growth.

Technology Continues to Transform the U.S. Economy

With the 1990's now behind us, we continue to look forward to further economic expansion in the years ahead. At the Technology Administration, we believe that innovation has been and will continue to be crucial to America's economic expansion.

We can all agree that a number of new technologies that developed primarily from the innovations of the past half century have now begun to bring about profound changes in the way our marketplace functions. These innovations form the basis of the new economy. These innovations, in particular the Internet's rapid emergence, have brought forth an abundance of new small businesses, many of which are based primarily on the technological marketplace.

We have arrived at this particular moment through the continuous process of innovation, which continues in garages and back rooms even as we gather here today. Many of the developments we rely on can be traced to the development of the transistor following the Second World War. This development was the catalyst for an avalanche of innovative synergies. Following the development of the transistor was the microprocessor, which allowed for the new generation of small computers, and now the vast array of telecommunications satellites. These developments paved the way for the tremendous ability we now have to send and receive data, and ultimately to gather, store and retrieve information so as to assist us in our business endeavors.

It has been information technology that has defined the recent past. Even our common language has been affected, with Americans "surfing" the 'Net and the prevalence of "dot com" advertising. We can all recall something as recent as the Super Bowl, known world-wide as much for its commercials as for the actual game. The companies offering their products and services during this year's contest demonstrated the explosion of the information technology market. The reason is relatively simple: innovation is at the heart of productivity and economic growth.

One of innovation's key benefits is that it allows a reduction in the number of worker hours required to produce our goods and services. Despite this fact, in the robust economic conditions that have accompanied this period of technical innovation, many more job opportunities have been created than have been lost.

The interfaces between and among businesses and consumers are being altered by the expanding opportunities for e-commerce. The economic force unleashed by the Internet will be even more powerful within and among businesses, where past problems are being rectified by enhancing the availability and timeliness of information. We are currently seeing this process occur at some of the nation's larger and more established businesses. Industry, using the benefits of technology, is beginning to consolidate its supply chains through the use of the Internet.

While we have noted the ability of technology to increase productivity, we should not ignore the way that some technologies are driving the economy and our nation in a new direction. Dramatic advances in biotechnology, for example, are expanding our productivity across new industries and different industry sectors, ranging from agriculture to medicine. New developments are on the horizon which we have only begun to fathom. Nanotechnology holds tremendous promise, and the Global Positioning System is adding a completely new dimension to navigation and recreation. These developments can lead, along with new automotive technologies, to such things as a car that could literally drive itself, and know where you like to stop to pick up a gallon of milk on your way home. Such new productivity, across new industries, will allow us to continue our economic growth.

As we set our policies, we must continue to recognize that we are dealing with a globally interdependent economy. Although we have established ourselves as the preeminent economic power in the world at the turn of the millennium, all those here can recall a time, not long ago, when we struggled as a nation in the face of competition from Europe and the economies of the Pacific Rim nations. Free trade and globalization are circumstances which foster competition, and we are currently enjoying the benefits of that struggle.

As indicated in our budget documents which you have received, the Technology Administration plans to play a major role in helping America remain economically competitive. Our budget request includes funding that will allow us to continue assisting industry to move fully into the innovation age. Whether the request is geared toward nanotechnology research and partnerships at NIST or to helping our auto manufacturers and their suppliers use the Internet to enhance productivity, the overall goal remains the same: Keeping the American economy strong.

Our budget request for the Technology Administration overall totals almost $722 million, with the vast majority of that amount going to the National Institute of Standards and Technology. NIST's request totals $713 million, representing an increase of about $77 million over the FY2000 level. The Office of the Under Secretary and the Office of Technology Policy request is $8.7 million, which, I'm sure the Committee will agree, is a modest increase, totaling only $500,000 over our 2001 base. The budget highlights for the Technology Administration also show some of the expanded work we plan to do in exciting areas such as electronic commerce, computer security and nanotechnology, and I ask that the highlights be entered into the record at this point.

NIST: Supporting Industry through Technology Development, Measurements, and Standards

The National Institute of Standards and Technology (NIST) will celebrate its centennial in 2001. Over the past century, NIST has helped ensure America's technological superiority and economic prosperity through myriad achievements that have advanced the measurements, standards, and technology needed by U.S. industry to make world-class products. The budget requested for fiscal year 2001 will enable NIST to work on the cutting-edge science and technology infrastructure needed to strengthen and safeguard America's prosperity and ensure its industrial competitiveness in the 21^st century. The fiscal 2001 budget request is divided into three appropriations: $337 million for Scientific and Technical Research and Services, including $332 million for the Measurement and Standards Laboratories and $5 million for the Baldrige National Quality Program; $340 million for Industrial Technology Services, including $175 million for the Advanced Technology Program, $114 million for the Manufacturing Extension Partnership (MEP), and $50 million for a major initiative to establish an Institute for Information Infrastructure Protection (IIIP); and $36 million for the Construction of Research Facilities account, which funds construction, critical repair, maintenance, and safety upgrades of NIST's facilities.

As we enter the 21^st century industry forecasts indicate that business-to-business e-commerce transactions will continue to grow rapidly and may approach $3 trillion per year by 2003. This trend promises to have a broad economic impact by lowering production costs and raising productivity throughout the economy. Businesses increasingly are using e-commerce for a wide range of critical processes throughout the supply chain, from exchanging product design data to conducting financial transaction. The continued growth and efficient adoption of these practices require new infrastructural tools and capabilities. One of NIST's FY 2001 budget initiatives addresses this by proposing new funding for the acceleration to electronic commerce. This initiative will enable MEP to work with the U.S. Department of Agriculture and the Small Business Administration on an e-commerce outreach program. The MEP, in partnership with the states, will develop, produce, and distribute an e-commerce Jump-Start Kit and training curriculum; develop and test an e-commerce assessment tool and other materials; and begin work on e-commerce adoption kits.

US/OTP: Advocate for the U.S. Innovation Enterprise

The Office of the Under Secretary, with support from the Office of Technology Policy, is charged by Congress under the Stevenson-Wydler Act with developing and advocating federal policies that maximize technology's contribution to national economic growth, U.S. industrial competitiveness, the creation of high wage jobs, and a higher standard of living and quality of life for all Americans. US/OTP serves as a strong advocate for the U.S. innovation enterprise. We plan to enhance these capabilities in the near term.

Programs Requesting Funding Increases

In FY2001, we plan on continuing our efforts, with a new focus on four of the programs administered by US/OTP. Each program is requesting an increase of $125,000.

Technology Transfer

Our budget request includes a request for an increase in an area that I know is of interest to this Committee: the transfer of federal technology to the private sector to increase our economic competitiveness. The U.S. employs unique methods of transferring technology from federal R&D laboratories to the private sector, including Cooperative Research and Development Agreements (CRADAs) and patent licensing. TA has been responsible for assessing the government's use of government-industry partnerships since their inception 15 years ago. As this Committee well knows, the Stevenson-Wydler Technology Innovation Act requires TA to report on executive branch implementation of government-industry CRADAs. In addition, this Committee has stated in legislation that more complete data and analysis is needed for Congressional oversight of these programs, and a directive to provide such information and analysis appears in legislation currently under consideration by the Congress. TA is also responsible for advising and supporting Federal agencies in their use of these authorities, and leads an interagency working group that addresses cross-cutting issues relating to their use. Also through its more general policy responsibilities, TA has established relationships with industry users of these mechanisms that enable it to perform the reporting and assessment function from the perspective of the industry customers.

While the federal technology transfer programs are very active--more than 3,000 CRADAs in force in 1998; 500 patented licenses granted in 1998 generating almost $60 million in revenue--not enough information exists about the effectiveness of the programs in fostering development of new commercial technology. To improve its monitoring of the results of government-industry research partnerships, TA will use the additional funding to expand the breadth and depth of its reporting on agency technology transfer activities.

We hope to broaden the report to include measurements that help characterize laboratory management of intellectual property as well as CRADA activity. We will collect data that will give a qualitative understanding of the outputs and outcomes of these activities, including the involvement of foreign partners. During the National Science and Technology Council's (NSTC) Summit on Innovation last November, participants stressed that these types of improvements, which will require substantial coordination among R&D agencies, are very important to ensuring effective support to innovation through the federal technology transfer activities. Coordination is not a trivial objective, since each agency currently has its own data collection systems for these activities, dictated by its own unique mission and serving mainly its internal management needs. TA will work with the agencies to encourage the adoption of a uniform set of data to be collected and of a uniform reporting system. TA will increase its analytical capacity to address the data, as well as increasing and formalizing its procedures for gaining industry perspectives and assessing its experiences in partnering with Federal laboratories under these mechanisms.

National Medal of Technology

Another portion of our proposed FY2001 budget will be invested in improving our Medal of Technology Program. TA will work to increase the visibility and impact of the National Medal of Technology program by using its national network of connections with industry, federal R&D agencies, and state and local governments to:

· Increase the number of higher quality Medal nomination submissions.

· Expand media coverage of the Medal program to advance public understanding of technology and the importance technology plays in our lives and our economy.

· Utilize the Medal's prestige to encourage career choices in scientific and technological fields.

Increased funding will be used to leverage the prestige of the Medal, our nation's Nobel Prize for technology, to inspire young people to pursue careers in technology. This will be accomplished by conducting fora between medal awardees and elementary, middle and high school students who have shown an interest in science and math. These meetings, conducted in cooperation with associations of science teachers, schools which have won science contests, and other organizations, would be viewed on the Internet to gain wide distribution.

Space Commercialization

U.S. space industry sales totaled $35 billion in 1999 and are projected to increase during this calendar year. Satellites are increasingly important for global telecommunications networks, and satellite links directly and indirectly support a large portion of the $400 billion U.S. telecommunications market. With the end of the Cold War, technologies and capabilities that were originally developed for national security such as high resolution satellite imaging and the Global Positioning System (GPS) are being used for commercial applications. Just a few months ago, a firm licensed by the Department of Commerce's National Oceanic and Atmospheric Administration successfully launched and began operating the world's first commercial satellite capable of imaging the Earth at one-meter resolution. This type of imagery is being applied to mapping, agriculture, weather forecasting, environmental monitoring, oil and mineral exploration, and many other industries. The $8 billion commercial GPS market is growing rapidly for commercial and personal navigation, surveying, tracking, asset management, machine control, scientific research, timing and recreation. The U.S. is committed to modernizing GPS to better meet the growing user demands for a wide variety of military and civil applications. Last year, Vice President Gore announced a new initiative to phase-in two additional civil GPS signals to enhance the accuracy and reliability of GPS for civil, commercial and scientific applications worldwide. This year's Department of Defense budget request includes a total of $0.5 billion in FY2001 for GPS sustainment and modernization. This continues the modernization approved last year and further advances modernization by incorporating some of the new features on up to 18 additional satellites that are awaiting launch or are in production.

Commercial space is increasingly critical to U.S. interests, affecting national security and foreign policy as well as economic competitiveness. These issues are closely followed by TA's Office of Space Commercialization, the principal unit for the coordination of space related issues, programs and initiatives within the Department of Commerce. In 1998, Congress tasked the Office to: (1) promote commercial provider investment in space activities by collecting, analyzing, and disseminating information on space markets, and conducting workshops and seminars to increase awareness of commercial space opportunities; (2) assist U.S. commercial providers in their efforts to conduct business with the United States government; (3) act as industry advocate within the executive branch to ensure commercially available space goods and services are used to meet federal requirements; (4) ensure the U.S. government does not compete with U.S. commercial providers; (5) promote the export of space-related goods and services; (6) represent the Department of Commerce in developing U.S. policies and in negotiating with foreign countries to ensure free and fair trade in space commerce; and (7) seek removal of legal, policy and institutional impediments to space commerce.

The Office consists of a small staff covering a broad spectrum of national space policy issues, including launch vehicles and ranges, satellite navigation, satellite imaging, and satellite communications. The majority of their time is spent participating in the many complex and fast-moving policy-making processes affecting these areas. For FY 2001, the Office is requesting additional resources in order to expand the scope of its efforts to include more statistical analysis and direct promotion of the U.S. space industry. The new activities will enable the Office to better fulfill its statutory mission as envisioned by Congress. Specifically, the Office is seeking to engage in two new initiatives beginning in FY 2001.

Space Market Analysis. The Office will dedicate resources to pursue a concerted effort to collect, analyze, and disseminate data on space markets. Working closely with other agencies, Department of Commerce bureaus including the International Trade Administration (ITA) and the Census Bureau, and the private sector, the Office will compile a comprehensive, coordinated database of space industry statistics and trends, analyze the database, develop forecasts on future trends, and disseminate this information to government policy makers and to the public through freely available Internet updates. The market analysis effort will include a number of specific education and outreach activities mandated by Congress, such as workshops with industry and other federal agencies, to increase awareness of commercial space opportunities. The Department will also engage in targeted research and analysis, such as the ongoing assignment to support the management and modernization of the Global Positioning System.

Federal Use of Commercial Space Technology. The Office will initiate a pilot project to encourage federal agencies to adopt commercially available space technologies. The staff will identify areas where commercially available technologies can be applied to a broad range of government agencies to boost worker productivity and increase efficiency. For example, the integration of commercial satellite imagery and GPS data into Geographic Information Systems (GIS) could help policymakers make better informed decisions by presenting complex economic trends and information visually and in a geographic context. After identifying the two or three most promising opportunities, the Office will sponsor a series of workshops, seminars, and technology fairs involving government agencies and commercial firms offering space-based products and services. For example, an event featuring "Space Technologies for Law Enforcement" might involve representatives from the Departments of Defense, Justice, and Treasury and demonstrate innovative applications of satellite imagery, GPS, and mobile satellite services. In the first year, these venues will be kept small and hosted locally, but if the pilot project is successful and interest grows, the effort could expand to include regional technology fairs in cooperation with state and local governments across the United States. All activities will be coordinated with existing outreach efforts at NASA, NOAA, ITA and other agencies.

The ultimate goal is to convince federal procurement officers to adopt these new technologies in place of old techniques, thereby increasing operational efficiencies, saving taxpayer dollars and catalyzing the growth of U.S. commercial space businesses.

The Commerce Department is also proud to serve as the host for the Interagency GPS Executive Board (IGEB) Executive Secretariat. The IGEB, co-chaired by the Departments of Defense and Transportation, selected Commerce to physically house the Executive Secretariat, in part, because of the commercial importance of GPS. By adopting a home outside the DOD, the IGEB wanted to demonstrate to the world that GPS is not a purely military system but has growing commercial applications.

We at Commerce embrace this new role because it not only highlights the commercial importance of proper GPS management but also increases our agency's insight and influence in the rapidly evolving world of GPS policy. Commerce has also agreed to fund certain joint studies relating to GPS, in addition to a study done by ITA last year.

Partnership for a New Generation of Vehicles

PNGV is developing technologies to reduce National dependence on foreign oil and improve the competitiveness of the $300 billion U.S. automotive industry while protecting the environment. The Partnership between the government and the industry consortium known as USCAR aims to design and produce vehicles with up to three times the fuel economy of current vehicles while meeting stringent future emission requirements. PNGV has made great progress in developing the technologies to meet the fuel efficiency and emissions goals, but the radically different PNGV technologies will require dramatic technical and business changes in the 50,000 U.S. automotive suppliers that supply up to 70 percent of the parts used by the major auto manufacturers. Only a small portion of the Nation's automotive suppliers have been involved in or are aware of PNGV's research activities. Failure of the suppliers to adequately prepare for PNGV-driven changes could result in serious economic consequences for the Nation's automotive suppliers, their approximately two million employees, and many communities around the country--especially in the states of the Midwest--whose economies are highly dependent on the competitiveness of these firms. The changes could also significantly impact the U.S. fuels industry, which employs nearly 1.5 million Americans. TA will use the additional resources to assess the impact of PNGV technologies on the automotive supplier base, in partnership with interested stakeholders and state and regional economies, and to develop an outreach strategy to prepare the supplier base and fuels industry for PNGV challenges.

Conclusion

In summary, Americans and American business are doing well--and we are doing well, in large measure, as a result of our national investments in science and technology, and the innovation and competitiveness they yield. In this perpetual marathon that is global competition, now is the time to strengthen our national efforts. We must prepare ourselves to seize new opportunities and create fertile ground for economic growth--with a healthy business climate, a modern infrastructure, a world class work force, and a strong base in science and technology. Thank you.