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Question. So we are going to let compensation for PTO management go up, what else do we expect to get out of it?

Answer. Maximum levels would be established in the legislation for salaries for the COO and the other officers of the USPTO, consistent with those paid for comparable positions in the Executive Branch. The purpose of the legislation is to improve the efficiency and cost effectiveness of the portion of the PTO that examines patent and trademark applications and disseminates information about patents and trademarks so that the USPTO will be able to operate more like a business. More flexible procedures in connection with personnel management and procurement would be available to the COO to meet the goals that are set by the COO and the Secretary of Commerce in an annual performance agreement.

Question. Will you, the Secretary of Commerce, still have a management and oversight role for PTO if it becames a "Performance Based Organization?"

Answer. The COO and the Secretary of Commerce would enter into an annual performance agreement establishing for the USPTO clear management objectives, measurable goals, customer service standards, and specific targets for improved performance. These would be used as the basis for the Secretary of Commerce to evaluate the performance of the COO to determine whether to award a bonus and, if so, the amount of the bonus. The Secretary also could dismiss the COO for misconduct or failure to meet the performance standards established in the annual performance agreement. In addition, the USPTO would be under the policy direction of the Under Secretary for Intellectual Property on patent and trademark matters and would still be subject to governmentwide regulations, rules, policies, and procedures, unless specific waivers were granted.

Question. The Judiciary Committees created this Patent surcharge for deficit reduction purposes back in 1990, and now the House Judiciary Committee is proposing to give these fees back to the PTO. What is the Administration's position on this surcharge issue?

Answer. The Administration opposes the surcharge fee provisions incorporated in H.R. 400 and continues to support the concept of using patent surcharge fees for deficit reduction. However, we are willing to work with the Committee on this issue in the context of establishing PTO as a PBO.

ADVANCED TECHNOLOGY PROGRAM

Question. The ATP is sometimes criticized for contracting with large firms as well as small ones to help the country develop next-generation technologies. Yet other federal technology programs contract with large companies when they have the best proposals for meeting a public mission. NASA aeronautics, for example, contracts with Boeing, General Electric, United Technologies, and others. DARPA, the Energy Department, and USDA also contract with large firms. They're often the ones with the technological expertise. Do you think it would be appropriate to restrict the ATP to only small companies when other Federal programs continue to fund the best proposals regardless of the size?

Answer. The ATP has always been "size-blind" when making awards. ATP competitions are rigorous but fair, and based entirely on technical and business merit. Small companies compete just as effectively as large companies. Since its inception, 47 percent of all awardees (single applicants and joint venture leaders) have been small businesses. Companies of all sizes have good ideas and the technical capabilities, but they may face disincentives for tackling high-risk, enabling technology development. ATP provides a process for independent review, approval, and seed funding that pushes large companies to take risks they would not have normally taken. Often the large company in a partnership is very valuable since it brings its unique capabilities for commercialization to the joint venture. Large companies are certainly as important to the Nation's R&D effort as small companies and for the ATP to make the necessary economic impact it will require the engagement of all companies both large and small.

Question. Please tell us more about the consultations you will now undertake regarding the ATP. With whom will you consult, and who will lead these consultations? What do you expect will come of these discussions?

Answer. Secretary Daley has asked the Commerce Department's Technology Administration (which includes the National Institute of Standards and Technology) to review and analyze several features of the Advanced Technology Program to ensure the continued strength and effectiveness of the Program. The topics to be considered include: the ATP budget process; the ratio of new projects to old; whether or not big companies should continue to be allowed to compete for ATP awards outside of research consortia; whether or not the ATP applicants should have first attempted to obtain private funding for their proposed projects; and whether or not those

states without an existing, strong R&D community should be given a better chance to participate in the program.

In gathering information for this study, the Technology Administration will draw on the comments and opinions of the scientific and technical research communities served by the ATP, including industry, universities and non-profit research organizations, and will use the existing studies of the ATP that document the effectiveness of the program under its current policies as background. The Department's goal in undertaking this review is to ensure that the ATP remains well-positioned to foster the high-risk, high-payoff technologies that can bring broad-based benefits to the nation's economy.

MANUFACTURING EXTENSION PARTNERSHIP (MEP)

Question. A number of the older Manufacturing Extension centers are now reaching the end of their original Federal funding. Yet we know that many small firms have yet to be reached by extension centers, and we know that private consultants continue to ignore this group of firms because they are so small.

What is the Administration's position regarding the so-called sunset, and how will you proceed on this issue?

Answer. Listed below are the centers affected by sunset in fiscal year 1998 and the dates on which they reach sunset: Great Lakes Manufacturing Technology Center (OH), January 1, 1998; South Carolina Manufacturing Technology Center, January 1, 1998; Mid-America Manufacturing Technology Center (KS), April 1, 1998; Michigan Manufacturing Technology Center, April 1, 1998; Minnesota Manufacturing Technology Center, August 1, 1998; and California Manufacturing Technology Center, August 1, 1998.

Congress previously granted a one-time, three-year waiver for the centers in Ohio and South Carolina that reached sunset in fiscal year 1995 and a one-time, one-year waiver for the centers in Kansas and Michigan that reach sunset in fiscal year 1997; in each instance the waiver was granted in the annual appropriations legislation. Without a modification of the sunset provision, centers will be forced either to shift their focus to larger companies that can provide sufficient business value to cover outreach costs or to close. Either way, small firms, especially those most in need, will be left without access to valuable technical assistance.

The NIST MEP was created by the passage of the Omnibus Trade and Competitiveness Act of 1988. At the core of this program are a network of not-for-profit MEP centers created with a 50 percent match in the first three years between Federal funds and state, local, and private sector funding. The Federal share decreases to 40 percent in year four and to 33 percent in the last two years of the six-year statutory limit on Federal funding defined in the sunset provision of the authorizing legislation.

The Department of Commerce is considering a proposal to seek a change in the authorizing legislation that will enable MEP awardees to reapply for Federal funding beyond the six-year limit imposed by current authorization law. Factors under consideration include merit-based criteria for reapplication and selection.

Congress included language in the conference report covering fiscal year 1997 appropriations which reflected their belief that the sunset_matter is most appropriately addressed through the authorization process. NIST concurs that this is a more effective solution than the piecemeal approach adopted previously for the MEP centers in Kansas, Michigan, Ohio, and South Carolina through the annual appropriations process.

Modification of the six-year limit on Federal funding does not mean that NIST intends to fund MEP centers in perpetuity. Centers would have to reapply and undergo a rigorous application process. NIST has the authority, and has exercised that authority, to terminate Federal funding to centers that are not performing up to MEP's published criteria of excellence.

Pending modification of the sunset provision in the authorizing legislation, the Administration's fiscal year 1998 budget submission to Congress proposes language to be included in the fiscal year 1998 appropriations legislation that would grant a one-time waiver for those MEP awardees facing sunset in fiscal year 1998 as follows: waive the six year funding limitation and authorize additional financial assistance; authorize funding for a period not to exceed two more years; funding rate not to exceed one-third of center's total annual costs; subject to positive evaluation of the center; subject to reapplication by the center and a successful review of the reapplication; and subject to Secretary of Commerce finding that continued Federal funding to that center is in the best interest of the program.

QUESTIONS SUBMITTED BY SENATOR PATRICK J. LEAHY

CIRCULATION AND SUBSCRIBER FIGURES

Question. Secretary Daley, several issues have been raised regarding the NTIS' World News Connection (WNC). I would appreciate your answers to the following questions:

The WNC replaced a paper publication known as the "FBIS Daily Reports." What were the monthly circulation numbers for the final year of "FBIS Daily Reports" and the monthly circulation numbers for the WNC since its inception?

In addition, what was the monthly paid subscriber numbers for the "FBIS Daily Report" and what are the monthly paid subscriber numbers for the WNC since its inception?

Answer. The requested figures are as follows:

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1 WNC is an electronic product, so we do not have figures for copies circulated.

WNC BUDGET

Question. The WNC operating cost is included in the NTIS budget for fiscal year 1998. What is the projected revenue for WNC in fiscal year 1998 and what is its projected operating costs? In addition, please provide the subcommittee with the projected revenue and cost figures for fiscal year 1996 and fiscal year 1997 and the actual revenue and cost figures for fiscal year 1996.

Answer. For fiscal year 1996, we projected $600,000 in revenue and $417,000 in costs. However, the program was inaugurated later in the year than we anticipated. The actual fiscal year 1996 revenue and costs were $97,922 and $376,211 respectively. Based on that experience, we projected fiscal year 1997 revenue and costs at $419,400 and $675,000 respectively. Our projections are on target. The projected revenue and costs for WNC in fiscal year 1998 are each $800,000. That is, WNC should break even in fiscal year 1998.

WNC MARKETING

Question. Does NTIS market the WNC? If so, what are the target subscriber goals that NTIS seeks to achieve in fiscal year 1998?

Answer. NTIS does market the WNC. The target subscriber goals for fiscal year 1998 are 800 individual subscriptions and 55 networked access subscriptions.

TRANSLATION COSTS

Question. The Department of Commerce has previously indicated that translation costs of articles included in the WNC are not borne by NTIS. Why does NTIS not incorporate this cost into the subscription rate for WNC? What is the estimated cost for this translation?

Answer. NTIS does not incur any translation costs with respect to WNC. Similarly, translation costs were not charged when the product was distributed in paper form. Such costs are borne by the Foreign Broadcast Information Service (FBIS), which is part of the Central Intelligence Agency (CIA), in accordance with its requirement to collect foreign open source literature for federal policy makers. NTIS is provided the data feed from FBIS, which consists of the translated articles, in order to make them accessible to the public. NTIS is unaware of the estimated costs for the translations. This question should be referred to FBIS.

SOURCES IN WNC VS. SOURCES IN "FBIS DAILY REPORT"

Question. What is the number of sources that were included in the "FBIS Daily Report" and what is the number of sources that are now included in the WNC? Answer. As NTIS did not produce the "FBIS Daily Reports," it is unaware of the number of sources included in the "FBIS Daily Reports." This question should be referred to FBIS. There are 3,442 sources included in WNC.

SUBCOMMITTEE RECESS

Senator GREGG. We certainly appreciate your time. Thank you for your courtesy, and we look forward to working with you. Secretary DALEY. Thank you, Mr. Chairman.

[Whereupon, at 2:53 p.m., Thursday, March 13, the subcommittee was recessed, to reconvene subject to the call of the Chair.]

DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED APPROPRIATIONS FOR FISCAL

AGENCIES

YEAR 1998

WEDNESDAY, MARCH 19, 1997

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

U.S. SENATE,

Washington, DC.

The subcommittee met at 2:05 p.m., in room S-146, the Capitol, Hon. Judd Gregg (chairman) presiding.

Present: Senators Gregg, Campbell, and Hollings.

SECURITIES AND EXCHANGE COMMISSION

STATEMENT OF HON. ARTHUR LEVITT, CHAIRMAN

OPENING REMARKS

Senator GREGG. Why don't we get started. I want to thank the chairman for joining us today. We would be happy to get your input, unless the ranking member wishes to give an opening statement.

Senator HOLLINGS. No; thank you.

Senator GREGG. OK. We are pretty casual here, and we are interested in your thoughts on what is happening at the Securities and Exchange Commission [SEC] and any other ideas you wish to bring to us.

Mr. LEVITT. All right. I have a brief, two-page statement.

Senator GREGG. However you want to handle it. You can submit it, read it, or just talk.

Mr. LEVITT. I'll skim it.

Senator GREGG. OK.

SUMMARY STATEMENT

Mr. LEVITT. Of course, I appreciate the opportunity to testify before you this morning on our fiscal year 1998 budget. The President's request for the SEC includes $317.4 million in fiscal year 1998, which puts us in a no-growth budget with respect to staffing levels, but would allow for an increase of $12 million above the Commission's fiscal year 1997 appropriation. Most of that is going toward mandatory increases in pay and related personnel benefits. The proposed appropriation would hold our staffing at the 1997 level of 2,797 full-time equivalents. I don't have to tell you about

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