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Frank D. Newbury, economic and management consultant, formerly
Assistant Secretary of Defense (Research and Engineering)

a g n it u d e o f


esearch and


ev elo pm en t


c t iv it y

The National Science Foundation Annual Report for 1956 gives
Federal Government obligations for research and development for
3 fiscal years, as shown in exhibit I.
E x h ib it I
[Millions of dollars]
of Defense
1, 532

All other




These figures for the Department of Defense do not include the
several billions of planned obligations of development programs that
are funded by “Procurement and production” appropriations which
are discussed in a later paragraph of this paper.
A recent survey of industry expenditures for research and develop­
ment made by the McGraw-Hill Publishing Co. and presumably in­
cluding work done by industry for the Federal Government with
government funds, developed these figures for 3 calendar years:
M illio n a

195 5
195 6
6, 096
1957 (planned)_____________________________________________________ 7,319

Going back to earlier years, research and development activity has
shown still greater increases. According to the National Science
Foundation, Federal expenditures in 1940 accounted for only 1 percent
of the Federal budget, while in 1955 Federal outlays accounted for
3 percent of a much larger total budget.1
Private-industry expenditures for research and development in­
creased at a slow, annual rate of approximately $15 million between
1920 and 1939. B ut between 1939 and 1953 these expenditures in­
creased at an annual average rate of roughly $300 million a year.2
I t is not permissible to combine the above figures for government
and industry expenditures, because the figures are not mutually ex1 N a tio n a l Science F o u n d atio n S ixth A nnual R eport, 1956, p. 4.
2 T h ese a n n u a l ra te s a r e calcu lated from a c h a r t in S pecial R ep o rts on M ajor B usiness
P roblem s, T h e New W orld of R esearch, M cG raw -H ill P u b lish in g Co.




elusive. Also, figures compiled by different organizations are based,
usually, on different definitions of development and research. In
some cases, research figures include expenditures for product develop­
ment, and development figures may not include total development.
The Department of Defense has been, until recently, a flagrant offender
in this respect. Figures of planned obligations or expenditures for
m ilitary research and development, given out as total obligations
or expenditures, have been limited to the budget or expenditure
figures funded by the budget category of “Research and development.”
These figures have omitted a major part of military development
activity which is funded by “Procurement and production” appro­
A t the congressional hearings on the fiscal year 1957 budget, real
total figures were presented by the Department of Defense, as shown
in exhibit II.
E x h i b i t II
[Millions of dollars]
Fiscal year Fiscal year Fiscal year Fiscal year
Included in research and development appropriations. _
Included in procurement and production appropriaActivities supporting research and development
(largely military payroll not included above)............



1, 747.0











3, 769.1

5,190. 9

5, 318. 5

On this more complete basis Department of Defense planned obliga­
tions amounted in fiscal year 1955 to more than 5 percent of the total
Federal budget instead of the 3 percent stated by the National Re­
search Foundation.
F or the reasons given, it is difficult to do more than guess at the
real total of private and Government expenditures for research and
development in the United States. A conservative guess for the
calendar year 1957 would be a rounded figure of $9 billion. Possibly
a better figure can be arrived at through panel discussion.
On the basis of this $9 billion, 55 percent of total research and
development activity is accounted for by the Department of Defense.
Magnitude o f basic research activity

There is a general impression that in the United States too small
a p art of total expenditures for research and development is devoted
to basic or fundamental research. Available figures justify this
The National Science Fundation reports th at private industry spent
$150 million for basic research in calendar year 1953, and th a t the
Federal Government spent $117 million for basic research in fiscal
year 1954.
The Hoover Commission report to the Congress on research and
development, issued May 1955, stated :
Out of about $2j400.million Federal expenditures proposed
by the budget for fiscal year 1956 on research and develop­
ment work, probably less than $130 million is to be devoted
to basic research.



The total figure of $2.4 billion obviously does not include develop­
ment funded by Department of Defense procurement and productions

ffect of


r ic e


ncrease o n



il it a r y


esea rc h a n d


evelopm ent

x p e n d it u r e s

There has been considerable emphasis on price increases over the
past few years as a reason for increasing expenditures by the Federal
Government. I t may be of interest to look at the size of this factor
in the field of military research and development.
The Department of Commerce price deflators which are used to
reduce the several categories of gross national product to a constant
price base may be used to reduce military research and develop­
ment expenditures to a constant 1947 price level, and so eliminate the
factor of price increase.
In exhibit I I I the price deflator used is the deflator for Federal
Government purchases of goods and services. The deflators shown
for fiscal years are the average of the deflators for the two appropri­
ate calendar years.
E x h i b i t I I I . — M ilita r y resea r ch and d evelop m en t program s

[Millions of dollars]
At current

Fiscal year

1955................. .......... ....................................................
1956.................................................... ............ ..................
1957__________________ _______ _______ _____ ________



i 131.0

At 1947


Ratio at

i Estimated.

The price increase from 1955 to 1957 was about 8 percent. Using
the same method of measurement, the price increase from fiscal year
1953 to fiscal year 1957 was 11.4 percent.
Department of Defense research and development planned programs
increased 42 percent from 1955 to 1957 at constant prices and an addi­
tional 8 percent because of price increase.

r g a n iz a t io n

fo r



esea rc h

epartm ent




evelopm ent in



This discussion of the organization of research and development
activity will be confined to the organization in the Department of
Defense because military research and development is much the
largest research and development activity in the Federal Government,
because it presents the most difficult problems, and because it offers
the greatest opportunity for remedial action.
The historical development of the organization of advanced types
of research and development within the M ilitary Establishment may
be divided conveniently into three different organizational periods:
(1) 1941-45: The period of the Office of Scientific Research and De­



(2) 1946-53: The period of the Research and Development Board
(3) 1953-57: The period of the Assistant Secretaries of Defense under
Organization Plan No. 6
Office of Scientific Research and Development, 191(1-1(5
Research and development for general m ilitary application within
the M ilitary Establishment started with the organization of the N a­
tional Defense Research Committee in June 1940, with Dr. James
Conant, then president of H arvard University, as Chairman. W ithin
a year, in June 1941, the NDRC was superseded by the OSRD—the
Office of Scientific Research and Development—with Dr. Vannevar
Bush as Chairman.
Significantly, OSRD was organized as a p art of the Office of Em er­
gency Management of the W hite House. I t was not a p art of the
M ilitary Establishment, but coordination with the W ar Department
and the Navy was provided for by m ilitary representation on the
official board and on the numerous committees and panels of the
Board. Also, Dr. Bush was Chairman of the Jo in t Committee on
New Weapons and Equipment of the Jo in t Chiefs of Staff, and was
expected to coordinate the related activities of JC S and OSRD.
The OSRD produced a remarkable record of achievement under
conditions that prevailed during the war years of 1941^5, but which
no longer prevail. Two illustrations may be cited: The OSRD was
given authority—and funds to go with it—to initiate research projects
and development projects independently of the military departments.
This was an important factor in the success of OSRD. Under the
conditions then existing there was no competition or conflict between
the OSRD and the m ilitary in this new activity of applying scientific
principles and information to the development of radically new types
of m ilitary equipment.
By the end of the war OSRD had over 2,000 contracts with indus­
trial and academic organizations, and was spending funds of its own
at the rate of $175 million a year, a truly modest sum considering its
accomplishments and the size of current expenditures.
Research and Development Board , 191(6-53
W ith the end of the war, OSRD rapidly disintegrated. Personnel
hurried back to more congenial civilian tasks; appropriations ceased.
A t the initiative of the Navy, a Jo in t Research and Development
Board was established in June 1946 by joint action of the Secretary of
W ar and the Secretary of the Navy. Interestingly, the structure of
this Joint Board did not grow out of the structure of O SR D ; it was
patterned on the Jo in t Chiefs of Staff Committee on New Weapons
and Equipment—a military rather than a civilian agency.
This Joint Research and Development Board was granted broad
authority. By its charter, the Board could decide im portant ques­
tions without recourse to higher m ilitary authority, and could issue its
decisions as “orders” of the two Secretaries. B ut before the Joint
Board could get into operation and could test this broad authority, it
was superseded by an agency with more limited powers, under the
provisions of the National Security Act of 1947.
The National Security Act of 1947 and its revision in 1949, created
and strengthened the Department of Defense. The act created two
boards—the Research and Development Board and the Munitions



Board. Broadly, the Eesearch and Development Board was respon­
sible for research and development activities up to the point of the
availability and approval of the equipment for service use. The Mu­
nitions Board, among other duties, was responsible for the procure­
ment, production, and supply of equipment for service use and for
inventory stocks.
Although the act provided that the two boards were “subject to the
authority of the Secretary of Defense,” the Boards operated, largely,
as independent agencies. P artly because of this attempted independ­
ence and, more importantly, because of a complicated committee
structure, lack of prompt action, even when the Chairman of the
Board had the necessary powers, and lack of cooperation by the mili­
tary departments, the Research and Development Board never real­
ized the hopes of its sponsors.
Near the end of its career in 1953 the Research and Development
Board had over 100 active committees, panels and working groups,
on which over 2,000 names were listed. The full-time staff of the
Board consisted of 260 civilians and 16 m ilitary personnel and over
350 part-time consultants.
Under the complicated and rigid committee structure of the Re­
search and Development Board, and lack of cooperation of the mili­
tary departments, effective coordination of military department de­
velopment programs and the elimination of unnecessary development
projects proved to be well-nigh impossible.
The m ilitary departments dominated the committees of the Board.
The military representatives on committees, panels and working
groups were expected to sit in judgment on the acts of their superior
officers: To sit m judgment on projects previously approved by their
departments. This is not done in a military organization; and pro­
grams and projects submitted to Research and Development Board
committees for review were seldom disapproved. When a new Sec­
retary of Defense came into office in 1953, the Research and Develop­
ment Board and the Munitions Board had been discredited by their
records and were on the way out.
The Assistant Secretaries of Defense , 1953-51
In February 1953 a committee was appointed by Secretary Wilson
to review the organization of the Department of Defense and to make
recommendations. Nelson A. Rockefeller was Chairman. The report
of this committee was approved and became effective June 30, 1953,
as Organization Plan No. 6.
Among other major changes, the plan abolished the Research and
Development Board and the Munitions Board and substituted addi­
tional Assistant Secretaries of Defense to take over the duties of the
two Boards.
The President in his letter transm itting Organization Plan No. 6 to
Congress, emphasized two objectives of the new organization:
The first objective is clarification of lines of authority
within the Department of Defense so as to strengthen civilian
responsibility. Our second objective is effectiveness with
economy. [Italic added.]
Under Organization Plan No. 6 an Assistant Secretary of Defense
for Research and Development took over the major p art of the func­



tions, organization structure, and personnel of the superseded Research
and Development Board. The plan also provides an Assistant Secre­
tary of Defense for Applications Engineering—a new position.3 U n­
fortunately, neither the Rockefeller Committee nor the Secretary of
Defense clearly defined the division of responsibilities between these
two offices, in the field of review and approval of development pro­
grams and projects; and this uncertainty remained a cause of con­
troversy and confusion until the two offices were consolidated, during
the spring of 1957 into one office of “Research and Engineering.”
From June 1955 until the time the two offices were consolidated, in
the spring of 1957, the following division of responsibility for the
review coordination and approval (or disapproval) of research and
development programs and projects was established by the Secretary
of Defense:
P a rt 1. Responsibility for the review and approval of all re­
search programs and projects rested with the Assistant Secretary
of Defense (Research and Development).
P a rt 2. The review and approval of development programs and
individual projects funded by research and development appro­
priations was the joint responsibility of the two Assistant Secre­
taries of Defense (for Research and Development and for E ngi­
neering) .
P a rt 3. The review and approval of development programs
and individual projects funded by procurement and production
appropriations was the sole responsibility of the Assistant Secre­
tary of Defense (Engineering).
This division of responsibilities was by no means ideal but it was the
best arrangement on which agreement could be reached, and was far
better than previous arrangements. I t was not until the above ar­
rangement was established in June 1955, that the major part of the
m ilitary development program that was funded by procurement and
production appropriations was officially recognized and subjected to
technical program review by either the Assistant Secretary of Defense
(Research and Development) or by the Assistant Secretary of Defense
The two Assistant Secretaries followed different policies and estab­
lished different procedures for carrying out their review responsi­
I t was stated th at when the new Office of Assistant Secretary of
Defense (Research and Development) was organized in 1953, this
Office took over the major p art of the functions, organization struc­
ture, and personnel of the superseded Research and Development
Board. And an important p art of this RDB organization structure
was the structure of committees and technical advisory panels of the
RDB. The policy of military representation on the committees set
up for review and coordination of m ilitary programs was continued.
In this matter, little attention was paid to carrying out the Presi­
dent’s expressed desire “to strengthen civilian responsibility” and to
“increase effectiveness with economy” in the new organization.
In the first two parts of review responsibility listed above, for
which the Assistant Secretary of Defense (Research and Develop­
8 L a te r th is title w as changed to A ssista n t S ecretary of D efense (E n g in e e rin g ).
s h o rte r title w ill be used in th is paper.

T h is



ment) was either solely or jointly responsible, the Research and De­
velopment Office took the lead and the coordinating-committee struc­
ture with military representation was employed.
In connection with the third part of this review responsibility for
which the Assistant Secretary of Defense (Engineering) was solely
responsible, a new procedure was worked out in cooperation and
agreement with the three military departments. In this procedure
there were no committees and no voting by m ilitary department rep­
resentatives. Action was entirely within and by the staff of the As­
sistant Secretary of Defense (Engineering) and of other interested
Assistant Secretaries of Defense. This procedure was designed to
carry out the President’s policy of stronger civilian responsibility,
and effectiveness with economy.
This past history is important and pertinent only because of what
has happened since in the recent organization of the combined Office
of Research and Engineering. W ith only one Office of Research and
Engineering, the need to distinguish between development funded by
research and development appropriations and development funded
by procurement and production appropriations exists no longer.
One review and approval procedure can now be used for all develop­
ment programs and individual projects. B ut both procedures are
being used with continued duplication of effort.
Experience over the past 10 years has demonstrated the futility of
expecting effective and economical control of research and develop­
ment programs and expenditures if the m ilitary departments are
permitted to sit as judge and jury in the review and approval pro­
cedure of their own military programs.
The relative success of the completely civilian review procedure
developed by the former Office of the Assistant Secretary of Defense
(Engineering) shows that m ilitary representation in an official form
as it exists in the coordinating committees is not necessary for ef­
fective reviews.
Another example of the comparative success of a completely civil­
ian review and approval agency is provided by the organization and
operation of the Ballistic Missile Committee of the Office of the
Secretary of Defense. This Committee has no military representa­
tives. The Chairman is the Special Assistant for Guided Missiles
and the membership consists of the interested Assistant Secretaries
of Defense.
I f the Assistant Secretary of Defense (Research and Engineering)
desires to retain the existing coordinating committees as advisory
committees to consider questions of a general nature or for any pur­
pose other than the review of research and development programs
and projects, the existing charters of the committees should be changed
to specifically exclude voting action on research projects and develop­
ment projects. This review function should be the sole responsibility
of the appropriate office directors within the office of the Assistant
Secretary of Defense and should be carried out according to existing
office procedure.
Another practical requirement for effective control of research and
development programs and expenditures is close cooperation between
the Assistant Secretary of Defense (Research and Engineering) who,
is responsible for technical or program approvals, and the Assistant'
Secretary of Defense (Comptroller) who is responsible for all fund­



ing approvals. Funds for a program or project should be approved
by the Assistant Secretary of Defense (Comptroller) only after a
program or project has received technical approval, or approved
conditionally, subject to such approval.



re p a r a t io n




il it a r y



y The effective control of m ilitary research and development is only
a part—although a very im portant p a rt—of the larger problem of
the control, of total m ilitary expenditures. And much of the difficulty
of the problem has been centered in the way in which the m ilitary
budget has been determined in the past.
The usual way of establishing the size of the m ilitary budget has
been for each military department to determine its own needs, in­
variably on the high side, and to submit these estimates to the Secre­
tary of Defense for approval. There follow months of negotiation
and revisions to bring the military estimates down to some lower
figure which the President will accept. Even when “guidelines’’ have
been announced in advance by the Secretary of Defense, the m ilitary
departments have not accepted such limiting figures as final.
The results of this procedure are an excessive waste of time, effort,
and money, and a final budget figure that is usually higher than really
desired by the Secretary of Defense and the President.
The British procedure in this m atter is much more sensible. The
size of the m ilitary budget is determined jointly by the Chancellor
of the Exchequer and the Minister of Defense and when this ceiling
figure is announced work on the budget is started. This figure is
then accepted as final and binding by the M ilitary Establishment.
The Secretary of Defense announced recently th a t in the prepara­
tion of the fiscal year 1959 budget the military departments will for
the first time have an “obligational authority” appropriation and
budget expenditure ceiling set m advance.
This step represents a major improvement in the determination
of the size of the budget and in the more effective control of military
A P r o g r a m fo r B a s ic R e s e a r c h
When pressure is applied to reduce m ilitary research and develop­
ment expenditures, as during the recent session of Congress, there is
danger that basic research programs will suffer unduly. I t is only
natural that when funds are reduced the m ilitary departments will
give preference to equipment development; and then to applied re­
search having near-term application to m ilitary needs.
The amount of funds that can be sensibly used for basic research
projects is relatively small. How much money is spent by the D epart­
ment of Defense on basic research projects is not known with accuracy.
The amount has been estimated at something between $20 million and
$50 million. Even this higher amount is a minor sum when compared
with the more than $5 billion that was available for research and
development during fiscal year 1957.
I propose th at the Secretary of Defense have a basic research fund
th a t can/be used only for basic research projects. A fund of from
80 to i00 millions would be ample and need not appreciably affect
applied research or development programs.



The Secretary of Defense now has a separate fund called an emer­
gency fund that is supposed to be used only for unforseen emergency
research or development projects. Actually this fund is used as a
supplemental fund for any kind of research or development project
that appears to be desirable.
W ithout any change, except in name, this emergency fund could be
used as a basic research fund, or an additional restricted fund could
be established. An added feature of considerable value would be
authority delegated to the Assistant Secretary of Defense for Research
and Engineering to initiate basic research projects, that might not be
of immediate interest to any one of the military departments. The im­
portant objective of this plan is to preserve reasonable activity in basic
research under conditions of limited research and development funds.
An adequate basic research program can be assured only by setting
up a restricted fund that can be used only for funding basic research.