The establishment of such an office as the Office of Science and Technology to deal with major issues in the area of science and technology is one which has the endorsement of the National Science Foundation and specifically the National Science Board.

As I see it, the broad picture of overall functional responsibilities in the executive branch at the present time are composed essentially of the following:

1. Special Assistant to the President for Science and Technology who is always available to the President to give his expert advice on any matters dealing with science and technology and to serve as a focal point on matters of science and technology of concern to individual agencies of Government as well as within the Executive Office of the President.

2. The President's Science Advisory Committee which is available to the President and to the Special Assistant on matters calling for expert skill and judgment in scientific research and development. This has all the advantages of a committee appointed from outside the Government therefore, calling upon the highest research competence available throughout the country.

3. The Federal Council for Science and Technology, consisting of senior representatives of the eight agencies principally concerned with research, which provides the executive branch of the Government with a forum and a mechanism for the coordination, at a high level, of science and technology programs in which two or more agencies participate.

Being advisory to the President, it is able to consider national programs in science and technology horizontally along the Government structure, such as oceanography and atmospheric sciences.

It may also consider projects for the future of research and development programs in the Government as seen by the participating Federal agencies, as well as consideration of common procedures to secure desirable research and development objectives.

4. National Science Foundation. As provided in the NSF Act, the National Science Foundation should and would continue to consider and recommend policies for the strengthening of basic research and education in the sciences throughout the country, to make studies regarding trends in these most important areas and also to advise regarding the implications of Federal programs for research and development upon the research and educational institutions of the country.

In particular, it is in favorable position to consider the relationships between the Federal Government and colleges and universities as well as other institutions where basic research is conducted.

I should also mention, not strictly within the Government, the advantage that the Science Foundation has and also these other offices I have mentioned in the National Academy of Science and the Research Council, which as you know has the statutory function of advising the Government on scientific matters and is the highest authority we have on such affairs. So they also can provide inputs to the National Science Foundation in the area of science and to these other bodies.

5. Finally, the proposed Office of Science and Technology is in position to offer to the President the full-time services of a group of in

dividuals of broad background and good judgment, competent in research and development and representative of major sectors of the economy, who have had direct experience in or with the Government. Such a group, in my opinion, should be able to serve a need not fulfilled by any other group as presently constituted.

In summary, I am happy to record my endorsement of Reorganization Plan No. 2 as a well-considered and constructive step for the administration of science and technology affairs in the Federal Government and for assistance to the President in resolving such major issues as may be undertaken by the new Office.

Chairman DAWSON. Mrs. Granahan?

Mrs. GRANAHAN. No questions, Mr. Chairman.
Chairman DAWSON. Mr. Meader?

Mr. MEADER. Dr. Waterman, I wanted to ask about a provision that is included in the defense appropriation bill which will come up for consideration in the House this afternoon providing for a 15-percent limitation on indirect costs on defense research grants.

Do you have any views on the desirability of such a provision? Dr. WATERMAN. Yes; I do. This is a subject which the Foundation has given a great deal of attention to. We feel as follows: that, if the country is to expect the quality and quantity of basic research from the institutions where basic research is conducted like colleges and universities, it must come closer to paying the indirect costs to those institutions.

The situation is being reached in most colleges and universities now where they simply can't take on the conduct of more research, which is in competent hands and very valuable, unless the Federal Government can come closer to paying the indirect costs to them associated with the direct research costs.

Mr. HOLIFIELD. Administrative costs?

Dr. WATERMAN. Administrative costs, that's correct. We have made studies of what these costs amount to. On the average, they are roughly double this 15-percent limitation. So what we are really doing

Mr. SMITH. Doesn't this depend on how they keep books on direct costs?

Dr. WATERMAN. Of course, yes. The amounts vary considerably. I was speaking of averages.

Mr. SMITH. Some may need 30 percent, depending on how they keep books; and others may only need 10.

Dr. WATERMAN. There are not many of the latter. I am talking about averages now. As you know, the Department of Defense in its contracts pays according to a negotiated rate according to regulations established by the Bureau of the Budget. In that, a negotiated rate is arrived at.

Mr. MEADER. That is circular A-21?

Dr. WATERMAN. A-21; that is the one. Just a casual inspection of the rates established under this circular and used by the Department of Defense and the Atomic Energy Commission will show you that the indirect costs run very much higher than this figure of 15 percent.

Mr. MEADER. Has the study of the National Science Foundation been published as yet?

Dr. WATERMAN. It is in the process of publication.

Mr. MEADER. When do you expect it will be available?
Dr. WATERMAN. I am not sure; within a week or so.

Mr. MEADER. I notice that the American Council on Education on February 17, 1962, in an open letter to Mr. Fogarty, chairman of the HEW Subcommittee of Appropriations, quoted rather extensively from that study. I wondered how they were able to quote from it if it hadn't been published.

Dr. WATERMAN. We allowed them to see it in its prepublication form. It is now in the process of publication and should be out before very long.

I think this is a very serious matter, gentlemen, because if we are indeed to try to keep leadership in science, we just must see to it that the important scientific problems are solved and that the extremely competent research men we have are enabled to work on programs for the Federal agencies and in the interests of science for the country.

Of course when we do it, we are also training advanced scientists. But I can assure you that the universities simply can't do that unless the costs to them come closer to meeting the actual figures.

I have given you average figures. What it amounts to right now is that if this went into effect throughout, on the average the universities would have to pay 50 percent of the operating costs to them, which would mean that many can't do it. They would have to drop a lot of this work.

So it would be a very serious thing. I am sure the universities would be very much concerned and alarmed.

Mr. MEADER. Mr. Chairman, if you will indulge me, on this subject I received these figures from the University of Michigan this morning. For the fiscal year 1961, the University of Michigan had a total of $17.3 million worth of direct costs of federally financed research contracts and grants, of which $10.3 million were from the Department of Defense and $7 million were nondefense.

In the same fiscal year, according to Federal Government auditorsand I understand the Signal Corps audited all the contracts for themselves and the other Federal agencies-the university had a total of indirect costs for the administration of these Federal contracts and grants of $5.9 million, of which $4.4 million were reimbursed by the Federal Government, leaving approximately $1.5 million worth of indirect costs for which the University of Michigan was not reimbursed. Dr. Waterman, I would like to ask one other question and it perhaps may not be specifically related to your organization, but I think it is in the area. I wonder if you would agree with me that the Federal Government's contribution to research on a portion of the budget of the institutions of higher learning, which is now represented by Federal funds, is not a very serious matter as it may affect the future course of education and scientific research in our institutions of higher learning; that the Federal Government's funds may in some way distort the research program of a university and cause them to devote man-hours and other funds that they may have to a project which they might think was of lesser priority than some other projects on which they felt very useful exploration could be conducted?

I would appreciate your comments on the impact on our institutions of higher learning and the impact on scientific research of these huge contributions from the Federal Government in this field.

Dr. WATERMAN. That is a very interesting question, and of course a very important one. We and the National Science Board have watched this very closely. In the first place, most agencies, I think without exception, make the grant or the contract to the institution for the man or the group which is going to do the work.

When the application comes to a Federal agency it comes with the endorsement of the head of the institution or a responsible representative of the institution.

My first point is perhaps a formal one, that this is a matter within the control of the institution, therefore. The institution puts the stamp of approval on the application and the institution gets the grant for the person.

So, in principle at least, the head of the institution has this under control. This is not to say, there may not at times be pressures to do these things.

On the other side of it, we have looked rather carefully into the amount of money which is going from the Federal Government to colleges and universities for research right in the educational scheme of things-that is to say, for the regular faculty doing the kind of research they would normally do.

About half of the money which goes to the colleges and universities-I am now speaking about totals-about half of the money which goes to colleges and universities goes from the Federal Government strictly to the educational side. That is to say, it is consistent with the role of the university.

Most of the rest of the money goes to large research centers which have been set up with the approval of the institution, where the Federal Government would finance construction of a facility and give them a large budget to do research and development of particular interest to the Federal Government-that kind of thing. We in our studies call these research centers.

They have large budgets on the whole. So most of the money which is not concerned with the educational side of universities goes to these research centers. Some does go into development of less concern with education here and there, but by and large not a great deal.

Mr. MEADER. Would it be your understanding if Reorganization Plan No. 2 became effective that the Office of Science and Technology and its Director would have responsibility over both of these areas that I have been inquiring about, namely, a matter of indirect costs and the matter of impact of Federal contributions upon institutions of higher learning?

Dr. WATERMAN. I should say such questions that cannot be resolved at a lower level would certainly come to this office. On the studies of the effect of research and development on colleges and universities, I believe this to be a National Science Foundation responsibility. It is so stated in our act. We had a report a few years ago

Mr. MEADER. That particular would not be affected by Reorganization Plan No. 2?

Dr. WATERMAN. I believe not. Of course any recommendations we made would go to the President, and if he chose, he could refer the matter to the new Office of Science and Technology. But I believe we should take the initiative. We have a great deal of information on the subject. We are watching it closely.

I think I have given you the most relevant answer. If you asked me, Are the universities going to be thrown out of joint by so much support of science? that is another question.

I believe they have to do so because the country and the world are becoming scientific minded and we have just got to do these things to maintain any type of leadership.

If we do, it must get into our education scheme and therefore is quite normal for the universities to proceed to emphasize this training and research.

At the same time, as has already been shown, by the very fact that science is getting this support the university is able to put other funds with their other departments. I believe by force of example in the matters of salaries and opportunities for research, in the long run this may be the quickest way of improving the general caliber of work throughout the institutions.

But that is a different kind of question, I think you will agree.
Mr. MEADER. That is all, Mr. Chairman.

Chairman DAWSON. Mr. Smith?

Mr. SMITH. In other words, the Federal Government is probably controlling the curriculum more through research grants than it would if it faced the problem directly and established a formula for Federal aid to education.

Dr. WATERMAN. I don't know that I would put it that way.

Mr. SMITH. I know you wouldn't because it is offensive to Congress, you see. We haven't faced the problem. We pretend there is no Federal aid to education so we appropriate billions of dollars or millions of dollars for research.

Dr. WATERMAN. I had a slightly different point of view in mind. The advantage of the present system is that the scientists of the country have a say in what the country is going to do about science. They apply directly, and the work is appraised by their colleagues in science. So the physicists of the country have some say for the first time as to what aid is going to the field of physics; and the same with chemistry, biology, and the rest.

Mr. SMITH. But if we approached it directly and established a formula and gave a university the money to do as it pleased with, it would have more say than it does now.

Dr. WATERMAN. The scientists wouldn't. You see, then the emphasis would be on the growth and strength of the institution, not necessarily its physics or chemistry or biology. This would be more involved and it provides a different point of view.

Mr. HOLIFIELD. You are talking about the grants now, the scholarship-type grants?

Dr. WATERMAN. Research grants, not scholarships.

Mr. HOLIFIELD. You are not talking necessarily about a research program which the Government wants done and in which it solicits the interest of different universities?

Dr. WATERMAN. Yes; that is true, too. But in a science program, we are interested in making the country strong in research, not programs for other reasons.

Mr. SMITH. I think you are substantiating what I am saying. Through this method we are controlling what a university is going to put the emphasis on.