I speak today on behalf of the Association of American Universities (AAU), an organization of sixty-two of the leading and largest North American research universities, and the National Association of State Universities and Land-Grant Colleges, an organization that represents two-hundred three. Since the inception of the National Science and Technology Council (NSTC) effort in September 1996, the AAU and NASULGC have strongly supported the Council's examination and definition of the government-university partnership. The health of this partnership is critically important to our memberships and, we believe, to the nation's prosperity. It is productive and important to reaffirm and refresh the common understanding of the partnership. Without a unified, high-level focus such as that provided by the presidential review directive, the nurturing and definition of the partnership would fragment by individual agency actions. The generation of common principles will be a template for agencies and universities on which to base their expectations and behavior. They will set the rules of the game and determine how it will be played. We have appreciated the opportunity for university involvement in the NSTC effort and the indications that such participation will continue to be encouraged. I want to emphasize that we view the PRD report as the beginning, not the culmination, of efforts to support the government-university partnership.

I would like to take a few moments to comment on specific sections of the PRD report.

Merit Review

We applaud the report's endorsement of merit review as the principal means for allocation of federal research dollars. We firmly believe that the consistent and expanded used of merit review will ensure that the American public reaps maximum gain from the partnership.

Linkage between Research and Education

We particularly appreciate the report's discussion of the integration of research and education as the basis of the strength of the American university system. It is critical to acknowledge and foster the dual role of students in research. Students who assist in federally sponsored research projects simultaneously satisfy educational requirements and goals of the programs while providing important contributions to the research achievements. It is not possible to characterize their efforts as either employee or student. We applaud the report's statement that a student should be eligible for support on a federal research grant on the basis of the benefits that the individual brings to the project, and not on whether he or she is defined as a student or as an employee.

Comments from many universities focused on the confusion in federal policy in this area and on the need to clarify and make parallel OMB Circular A-21 policy and IRS rules. For example, Circular A-21 permits reimbursement for tuition remission provided to graduate student researchers who participate in federally-sponsored grants, provided there is a bona fide employer-employee relationship between the student and the institution. We believe this distinction is false and that the language in Circular A-21 should clarify the fact that research and instruction are interwoven and can not be considered independently. Without such clarification, questions will remain as to whether tuition remission must be treated as taxable income.

AAU and NASULGC wish to be involved in further deliberations on this issue with OSTP and NSTC because it is a fundamental educational policy issue.

Cost-Sharing Policies and Practices

We agree with the three concerns the report identifies in cost-sharing policy:
(1) the lack of clarity about agency cost-sharing expectations creates difficulty;
(2) the federal requirement that institutions absorb the overhead costs associated with voluntary sharing in the direct costs of a research project can create a disincentive to voluntary contribution of faculty time; and
(3) limitations on institutional reimbursement of otherwise allowable administrative costs should be reviewed.

Follow-up efforts on the PRD report should identify specific solutions to these problems. Ensuring transparency in agency policies on cost sharing is necessary, but not sufficient by itself. We are concerned by a trend toward additional cost sharing imposed by agencies in an ad hoc manner, beyond the amounts traditionally volunteered. In addition, we believe that there is a need for greater clarity about the importance placed on cost sharing as a factor in grant review.

We urge review and change of agency practices that require inclusion of voluntary faculty time beyond that budgeted, in calculating indirect cost rates. The disincentive created to the contribution of voluntary faculty effort can only hamper the pursuit of productive research opportunities.

The cap on administrative costs imposed by Circular A-21 is an area of forced cost sharing that we hope will be reviewed in follow-up activities to the PRD report. The cap imposes a greater financial burden on university research efforts than may have been anticipated when originally implemented. It is difficult to understand why reimbursement of allowable costs is constrained, particularly in situations where universities contribute faculty effort.

We urge NSTC to form a group in which both of the organizations I represent, as well as the Council on Governmental Relations (COGR), are able to play a leading role in the review of agency cost-sharing practices, acknowledging our long-standing interest in and expertise with the issues. We fear that without being directly addressed, these issues will become an increasingly pernicious element in an otherwise productive and rewarding partnership.

Implementation

We urge NSTC to establish promptly specific mechanisms to move to the next phases of implementing the PRD report: finalizing the statement of principles, translating the report's highlighted concerns into specific policy recommendations, and working with agencies and universities to implement the recommended policies through changes to regulations and guidelines. We realize these next phases may be more difficult than the first part of the effort, but we urge NSTC to set as a target the completion of these tasks during the current Administration so that valuable momentum is not lost. We appreciate the sentiment in Neal Lane's transmittal letter indicating his commitment to changing federal rules and regulations to implement the policies recommended as a result of the PRD report.

As NSTC and OSTP refine the recommendations of the PRD report and move to implement them, we urge NSTC and OSTP officials to continue to draw on the talent of representatives of university partners through working groups or other appropriate approaches to address these issues. AAU, NASULGC and their member universities stand ready and eager to participate in this effort, along with our colleagues in the Council on Governmental Relations. We thank you for giving us the opportunity today to share our views and hope to continue the productive relationship that has characterized the first phase of this effort.