COMMITTEE ON ARMED SERVICES

SUBCOMMITTEE ON DEFENSE TECHNOLOGY, ACQUISITION,

AND INDUSTRIAL BASE

Statement of

John H. Gibbons

Assi stant to the President

for Science and Technology

May 18, 1993

Chairman and Members of the Committee, I appreciate the opportunity to talkwith you this morning about an important and timely issue: the technology andindustrial base we need for national security, and how that requirement fitswith the technology policies we need to build a strong economy. The point Iwant to stress today is that the fit is remarkably good, and it is high time totake advantage of it.

With th e end of the Cold War, the biggest challenge for our country's nationalsecurity is no longer the threat of global military conflict, but is insteadthe challenge to restore U.S. economic competitiveness and raise livingstandards for all Americans. This gives a new urgency to technology policiesthat can nurture the Nation's civilian economic strength. At the same time,declining defense budgets create the imperative to do more with less money inthe area of national security, and to assist our defense industries and workersin making the transition to a civilian-oriented competitive economy.

To meet these challenges, the President has developed an economic plan thatincludes both a major investment in civilian technologies as a catalyst for long term economic growth, and a coordinated $1.7 billion defense conversioninitiative. These are important initiatives both in terms of our country'seconomic recovery and growth, and in terms of our long term national security.Before I go into more description of these programs, however, I would like tomake a few general points about defense conversion and U.S. competitiveness.

Much as we welcome the end of the Cold War, some of our people and communitiesare having a very tough time of i t in making the transition to a post-Cold Warworld. Hundreds of thousands of defense workers have lost their jobs, scoresof communities are hard hit, and many defense companies are struggling to findnew customers. The hardships are greater than we mi ght have expected,considering the relative size of the defense cutbacks, because our economy isburdened with more debt and higher unemployment than in times past, and we facemuch tougher international competition.

The workers and communiti es that have lost their economic lifeline deservefirst class help in the form of retraining, reemployment, and communityeconomic redevelopment programs. The Clinton Administrations's defenseconversion package includes over $600 million in transition a ssistance, much ofit directed to ex-service men and women for education and career changeopportunities. Help is also available to workers laid off from defenseplants, and to communities affected by military base closings and cutbacks inthe defense i ndustry.

But without healthy growth in the local and national economies, there is alimit to what even the best retraining and community redevelopment planning cando. In the long run, the best conversion strategy is the broadest --investment in programs that can promote technology advance, support the growthof high-performance, knowledge-intensive industries, and ultimately createwell-paid jobs.

Defense conversion, broadly defined, is an integral part of PresidentClinton's vision f or using science and technology as an engine of economicgrowth. The President's technology initiatives call for a bold advance fromthe tradition that limited Federal policy to support of basic science ormission-oriented research in defense and a few n ondefense areas, mainly healthand space. The end of the Cold War has freed us to focus on national needsother than defense. We no longer need to justify government investments intechnology on the grounds of military necessity. At least as important aregovernment/industry partnerships to improve industrial performance and to servecritical human needs--health, education, environmental quality.

With this in mind, President Clinton has announced the intention of shiftingfrom the present rati o in Federal R&D spending, which is 41 percentcivilian and 59 percent military, to more than 50 percent civilian and dual useby 1998. Part of the that plan is to greatly expand the Commerce Department'sAdvanced Technology Program (ATP) over the ne xt few years. Established byCongress in 1988 and first funded in 1990, the ATP shares the costs withindustry R&D projects that are defined and led by industry and are selectedthrough merit-based competition. ATP is funded at $68 million this year . Inhis vision statement of February 17, President Clinton set a goal of raisingthat amount tenfold by 1998.

This increasing support for the Commerce Department's industrial partnershipsis an essential feature of the thrust to a more civilia n-oriented Federaltechnology policy. But defense-based dual use technology development isexpected to remain an important part of both our economic and militarystrategy, as President Clinton signalled when he truncated the title of theDefense Advanced Research Projects Agency (DARPA), restoring the original nameof Advanced Research Projects Agency, or ARPA.

R&D programs that support dual use technologies have an important place inthis vision. This subcommittee, under your leadership, Mr. Chairman, hasshown a deep understanding of the benefits and potential of dual use technologyand has done a great deal to make it a reality. A closer integration of thedevelopment of civilian and military technologies can greatly benefit both, and is entirely practical technically. The abundant synergies between military andcommercial technologies mean that Federal support of R&D for militarypurposes can be shaped to advance civilian technologies, at the same time andwith the same investmen t of public money.

The $1.7 billion defense conversion initiative that the President announced inMarch contains a $500 million investment package for developing criticaldual-use technologies and supporting state and local efforts to commercial izeand deploy up-to-date technologies. This Technology Reinvestment Project, orTRP, represents a new partnership between government and industry. It has thedual aims of making the latest and best technologies available to the militaryat affordable c ost, and at the same time strengthening the competitiveperformance of American commercial companies--with an eventual payoff down theroad of creating high-quality jobs.

This dual use approach is something different from and more than thetradit ional notion of a spinoff from military to commercial technologies. Itmeans designing the R&D for truly useful and marketable results in thecommercial world. And it means that companies involved in dual use R&Dpartnerships must have sound pla ns for eventually commercializing thetechnologies.

Defense stands to gain a great deal--perhaps even more than the civilian sideof the economy--from the dual use approach. We have entered an era of leanerbudgets for defense. Defense planner s know that the way to get the most out ofshrinking dollars is to buy as much as possible from commercial manufacturerswho, under the discipline of the market, must give their customers goodvalue--high quality, reliable products embodying the latest an d besttechnologies at competitive prices. Dual use R&D is only a part of thepicture. The plan is not going to work without reform of procurement laws andregulations, allowing the military to buy from the best and most economicalsuppliers.

While the dual use approach is not so central to the interests of commercialcompanies, they too will benefit greatly. On the whole, defense spending is arelatively modest and declining part of the U.S. economy; this year it is about$290 billion out of a gross domestic product of $5.5 trillion. But defenseremains an exceptionally important purchaser for some high technology products,especially ones that are in early and risky stages of development, such asnight vision devices and packet switched communications. Defense weighs inespecially heavily in research and development.

ARPA has been given the responsibility for most of the technology programs inthe defense conversion package which Congress passed last year, and which theClinton Administration is now aggressively implementing. Besides the $600million-plus for first aid to workers, ex-servicemembers, and communities, thepackage also includes over $800 million for investments in dual use technology.The Technology Reinvestment Project, jointly operated by ARPA and four otheragencies, accounts for most of this--nearly $500 million.

The TRP consists of programs to improve manufacturing engineering education;support industry-led partnerships to develop technologies wit h the potential tobecome commercial products and processes within five years; fund regionaltechnology alliances that encourage companies to share information andtechnology, and thus develop new products and markets; and supportmanufacturing extension programs run by states and universities to help smallfirms make better use of technology. All the programs require matching fundsand merit-based selection.

In taking charge of the TRP, ARPA shouldered some familiar responsibilitiesand took o n some that were entirely new to the agency. ARPA has plenty ofexperience with development of advanced technologies, including some recentventures in R&D partnerships with industry to develop dual usetechnologies. On the other hand, ARPA's specia lty has been management ofR&D in high risk projects with a potentially large payoff, rather than themore incremental, applications-oriented R&D that also forms part of the TRPpackage. Finally, ARPA had little or no experience with another prom inentfeature of the package, technology extension services to small and medium-sizedmanufacturers.

ARPA's creative response was to call on other agencies that had moreexperience than itself in various parts of the TRP package, and set up afive -agency council to jointly administer the program. The other agenciesinvolved are Defense Programs in the Department of Energy, the NationalInstitute of Standards (NIST) in the Department of Commerce, the NationalScience Foundation, and NASA, with ARP A as chair. The most unusual feature ofTRP is that the agencies are acting as a unit. They are accepting proposalsfor all the component programs at the same time, will evaluate the proposalstogether, and will parcel out management of each of the resu lting agreements tothe agency with the best capability and most experience in that field. For1994, the Clinton Administration has decided to shift primary responsibilityand funding for technology extension programs to NIST, with the aim of buildinga nationwide network of industrial extension agencies over the next few years.But TRP will continue to operate as a unit.

When President Clinton announced his Defense Reinvestment and ConversionInitiative on March 11, including an invitation to ca ll for information aboutthe technology programs at the 1-800-DUAL-USE number. The response wasoverwhelming--more than 8,000 calls in the first four weeks. Then, ARPA andthe other agencies kicked off the TRP program the week of April 12 with WhiteHou se briefings in five cities, starting in New York and ending in Los Angeles.Again, interest ran extremely high. More than 5,000 people attended the firstweek's briefings, and a second series in eight more cities continued to drawthousands of represent atives from business, state and local agencies, anduniversities. At times, questioners formed lines eight-deep at microphones,patiently waiting their turn.

Secretary of Energy Hazel O'Leary and I opened the first meeting in New York;Presiden t Clinton addressed the audience by satellite and Governor Mario Cuomoand several Members of Congress took part. I can report that the atmospherewas charged. There were plenty of tough questions, but there was alsotremendous enthusiasm at the prospec t of partnering with the Federal Governmentto help make American companies more competitive and manage defense conversionin collaborative, constructive ways.

Dual use technology investments, as important as they are, cannot on their owncreate t he synergy between our civilian and military sectors that is soimportant to achieve.

As you well know, a thicket of procurement laws and regulations has grown upover the past decades--for the well-intentioned purpose of preventing waste anda buse in defense contracts. But the result has been to burden militaryproduction with extra costs and keep it apart from commercial production.

Added to that are detailed military specifications and standards that applynot just to products but to the process of manufacture as well. Thesestandards are more often than not different from commercial practice -- infast-moving fields such as microelectronics they are sometimes years behind.No wonder that some commercial companies refuse to do b usiness with themilitary, and those that do often wall off their defense production.

The Clinton Administration is committed to a thorough review and reform ofprocurement policy, especially in the Department of Defense, and will promotethe use