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National Science Foundation/Office of Science and Technology Policy

Recommendations and Actions

NSF02: Use the Federal Demonstration Project to Increase Research Productivity

BACKGROUND

In the mid-1980s, the nine campuses of the Florida State University System and the University of Miami joined with five federal agencies (National Science Foundation, Department of Energy, National Institutes of Health, U.S. Department of Agriculture, and the Office of Naval Research) to experiment with reducing administrative overhead on research grants. They wanted to simplify administrative procedures without compromising financial accountability so that Principal Investigators (PIs) would have more time for research activities. The Florida demonstration was so successful that in 1988, it was broadened to 50 universities and 10 federal agencies as the Federal Demonstration Project (FDP). The participating universities were selected through a competitive process managed by the National Academy of Sciences.

FDP was developed cooperatively by federal agencies and researchers. Interested agencies and universities have joined together to find ways to make grant award and administration work better. FDP has no formal status and no operating budget. FDP is organized into a Committee of the Whole which meets once a year to exchange information and set the future agenda, and a steering committee that meets four times a year to provide coordination. A federal Interagency Assessment Committee (IAC) created by the Office of Management and Budget (OMB) oversees the project. The Government- University-Industry Research Roundtable of the National Academies of Science and Engineering and Institute of Medicine serves as a neutral convener for discussion of issues relating to FDP.[Endnote 1] FDP demonstrations, designed by several task groups, include formal evaluation which allows OMB to determine the value of recommended changes. FDP is planning a one-day meeting in the fall of 1993 to identify critical issues of research administration to be addressed in the next several years.

Four demonstrations were included in the Florida phase, the first of which gave institutions the authority to manage project budgets without getting prior approval for moving funds between budget line items. The second demonstration allowed grantees to incur costs at their own risk up to 90 days before formal issuance of the grant without prior approval. A third allowed no-cost extensions of up to 12 months, and the fourth and final demonstration allowed grantees to carry forward unobligated grant funds to the next funding period.

On the basis of the experience in Florida, OMB authorized all federal agencies, on an optional basis, to use the streamlined procedures. The impact of the four experimental procedures also was formally evaluated in 28 universities in addition to those in Florida.[Endnote 2 ]Responses from 2,501 PIs indicated that the streamlined procedures saved an average of 52days per year. That represented 38.5 person-years of effort for the 2,501 investigators.[Endnote 3] Eighty nine percent of that time was reinvested in scholarly activity and 73 percent in research. The study's authors assert that if these findings were extrapolated to all federally funded PIs, reinvestment in research, as a result of using the simplified procedures, would increase substantially.

The next demonstration evaluated the effectiveness of equipment screening regulations. OMB Circular No. A-110 (Responsibilities for Disclosure with Respect to the Budget) requires procurement procedures "to assure the avoidance of purchasing unnecessary or duplicative items.''[Endnote 4 ]Subsequent A-110 audits prescribed a two-level screening process based on cost of equipment as well as a requirement for centralized inventories and proof of screening.

The FDP studied the value of the formal equipment screening process for meeting the objective stated in A-110.[Endnote 5] In a one-year period, the 31 participating institutions performed over 4,900 separate screenings involving almost $83 million worth of equipment. Two screenings resulted in matches, avoiding the purchase of $18,881 worth of equipment. The study concluded that the cost of the time spent by PIs and administrators (estimated at $195,413) was more than 10 times the savings accrued as a result of equipment screening.

That estimate did not include the cost of developing and maintaining the screening systems. The study also found that PIs, independent of screening requirements, used university systems and informal networking to find opportunities to share equipment when it benefited their research and that such inquiries were made before a procurement request was ever submitted for screening.

The Commonwealth of Virginia performed a study of administrative decentralization in higher education.[Endnote 6] The purpose of the study was to identify administrative functions that could be delegated to the universities. Universities that met standards for financial management and management efficiency were relieved from following selected procedures. Given a positive incentive, all universities in the state improved their financial management, and all but one qualified. An additional, unexpected success was the qualification of the two major teaching hospitals. In response to the incentives, they brought very complex financial systems into compliance with the standards.

FDP has been able to recommend regulatory changes that simplify administration of research grants and allow university researchers to spend more of their time on productive research. Although OMB has modified Circular A-21 (Cost Principles for Educational Institutions) and is in the process of modifying A-110 as a result of the initial demonstrations, there is no set place in the federal government to receive FDP recommendations. This process of developing procedures that simplify research administration without reducing accountability should be continued.

ACTION

The Federal Demonstration Project, in cooperation with OMB, should define a systematic means to select participants and to introduce those procedures that are shown to be effective into federal regulations.

A formal certification process for including organizations in FDP should be established. Certification criteria should be based on official audits of university financial statements, and on internal controls based on audits conducted in accordance with OMB Circular A-133 (Audits of Institutions of Higher Learning and Other Nonprofit Institutions) and cognizant audit agencies as necessary. The focus should be on operating procedures that prevent misuse of funds. Those universities whose procedures provide a reasonable assurance of accountability and control of financial expenditures for federal activities would be allowed to participate. Periodic recertification should be required, and the process of applying for certification should be formalized and perpetuated in OMB Circular A-110.

The IAC should define the certification criteria to be included in OMB Circular A-110. Examples of standards are: (1) an unqualified audit opinion from the designated auditor; and (2) no significant audit deficiencies, including compliance findings, to the university as a whole and relative to federally assisted activities.

The current structure of FDP should be used to approve and evaluate demonstrations and to present results to OMB. A central point within OMB should be designated to receive suggestions.

FDP should be used as a model for testing new procedures. FDP is currently serving as an effective interagency reinvention lab for administration of research grants. It is a model for an approach that could be used for testing and evaluating other changes to federal procedures. Interested parties organize to suggest changes and to implement them on a limited basis so that risk can be controlled and results studied. The new procedures would be subjected to a formal evaluation and implemented more widely only if they prove beneficial.

IMPLICATIONS

FDP provides a model for simplifying administrative research grant procedures without eliminating accountability. Because administrative costs are reduced, more federal grant money can be spent on research. The certification process will help assure qualified participants, and IAC will provide the necessary oversight.

FISCAL IMPACT

Using streamlined procedures allows the federal government to fund research instead of paperwork with its grant money. Implementation of the procedures in the four initial demonstrations has been estimated to add 158 years of research activity per year at no cost.[Endnote 7]

ENDNOTES

1. Research Roundtable, What is the Federal Demonstration Project? (Washington, D.C., August 1991).

2. Productivity/Assessment Task Group of the Federal Demonstration Project (PATG), The Impact of the Use of Expanded Authorities with in the Federal Demonstration Project (February 1991).

3. Ibid., p. 3.

4. U.S. Office of Management and Budget, Circular No. A-110 Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations (Washington, D.C., 1976) attachment O, paragraph 3.c.

5. Federal Demonstration Project, Report of Task Group Five on Equipment Screening Study (Washington, D.C., December 1991).

6. Finley, Donald J., Administrative Decentralization in Higher Education (Richmond, Virginia, May 1988).

7. Productivity/Assessment Task Group, p. 3.

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