Submission—Review of the External Earnings Targets Policy applying to the Science Authorities

On 18 December 2001, Michael N Barner FAA, Secretary (Science Policy) of the Australian Academy of Science, made the following submission to the Department of Industry Science and Resources on the review of external earnings target policy applying to the science authorities (CSIRO, ANSTO and AIMS).

Dr Robin J Batterham FAA
Chief Scientist
Department of Industry Science and Resources
GPO Box 9839
Canberra ACT 2601

Dear Robin

The Australian Academy of Science appreciates the opportunity to make a submission to your Review of the External Earnings Targets Policy applying to the Science Authorities (CSIRO, ANSTO and AIMS). The Academy believes that this Review is very timely and should assist not only CSIRO and the other agencies but Australian science more generally. I hope that the following comments are of assistance to you.

  1. The Academy of Science is of the view that whereas external earnings targets may well have been necessary more than a decade ago in order to effect a cultural change in government research agencies, external income is only one measure of performance, and a blunt one at that.
  2. The rationale for the policy of external targets for Government research agencies was soundly based at its inception and has engineered a stakeholder or end user dimension, with national socio-economic development outcomes, to the research agenda of the agencies.
  3. The Academy believes that the policy has had a significant and generally positive influence on the engagement of the research agencies with industry. However the Academy is concerned that such a strong focus on meeting a short term (annual) revenue target:
    • may distort the balance of research effort away from research that is more strategic toward that which is more applied/experimental development;
    • puts pressure on the agencies' relationships and capacity to collaborate with other organisations. (Anecdotally this appears to be particularly the case in CSIRO's engagement in CRCs and other collaborative ventures. However it is difficult to find specific examples for which the 30% target is the prime reason for the stated difficulties. Other factors and policies, e.g. CSIRO's reluctance to incorporate, or simply personal differences may be as relevant.)
    • influence commercial decisions in favour of a 'fee for service' structure rather than seeking a greater share of future income streams from royalty or licensing arrangements, or by taking equity positions.
    • may produce an incentive to charge less than full cost price for some projects (rather than lose the business), resulting in inappropriate subsidisation from appropriation or other sources;
  4. Implicit in the 30% (or equivalent target) is an assumption that a primary purpose and functions of the science agencies is to assist the growth of business through the solution of problems. The Academy is concerned that this is only one of the functions of the agencies, and not necessarily a primary function. The science agencies should be working towards 'benefit to Australia'. Helping business will help Australia, but it is not the only way!
  5. The Academy is also concerned that such a narrow but strong focus may be perceived to compromise independence of CSIRO's tax-payer funded strategic research. The growing skepticism in parts of society about 'contamination' of public interest research by shareholder-dominated/commercial interests is an important issue.
  6. It is important to Australia that agencies such as CSIRO can (and are perceived to) enunciate an independent research-based position on important issues of public policy and debate. For example, the contributions of CSIRO and AIMS to the wider debate on environmental issues such as climate change could be compromised by too close a relationship (by funding requirements) with particular players, e.g. big business. The Academy does not believe that this would be in Australia's best interests.
  7. Even within the important dimension of economic development and/or wealth creation the 30% target has ignored other (and potentially more important) measures to both CSIRO and Australia. Indeed, the Academy feels that CSIRO can be justifiably criticised (as you did in Chance to Change) for the slowness with which it has implemented policies and processes that encourage, facilitate and optimise the commercialisation of research outcomes. It would be simplistic to blame the existence of the target for this reluctance to embrace other and more appropriate commercialisation strategies such as spin-off companies. Nevertheless any future measure and targets set for CSIRO and the other agencies should encourage the rational management of intellectual property and facilitate the commercialisation of the intellectual property by the most appropriate means.
  8. Since 1988 both the research agencies and the environment in which they operate have changed significantly. The continuing appropriateness of the target as a driver of linkages with research users should be considered in terms of:
    • structural, operational and cultural changes within the agencies,
    • changes in Government science and industry policy, and particularly the current Government's science and industry policy agenda,
    • changes in public accountability/governance arrangements including introduction of a whole-of-Government outcomes-outputs focused performance management and reporting framework, and
    • changes in the market for and provision of R&D services in Australia and globally.
  9. The 30% target is more an indicator of demand than an indicator of performance. A new range of performance measures need to be developed and used to effectively measure the range of impacts that the agencies' research (and science more generally) should be having on the economic, cultural and social development of Australia. These indicators should be measures of effectiveness, price and quality rather than the present indicator which is primarily a measure of input.
  10. The Academy believes that the new performance indicators need to recognise that the research agencies are not only a resource for big business, but are also a resource for the Australian research sector, for the community, for small to medium sized enterprises and for government.
  11. Government research agencies must engage in research at the highest international standard and strengthen Australia's capacity to undertake fundamental and applied research in areas of national importance. Collaborations should be encouraged not only with those who can pay for the research to be undertaken, but also with universities which could benefit from the concentration of research infrastructure and expertise in the government research agencies.
  12. To be effective any new indicators need to be in place for a reasonable period in order to identify trends and to assess their effectiveness. This is particularly important in R&D where the time from the initial basic research to commercialisation or impact on public policy can be many years.
  13. The Academy would argue that to be effective any new indicators and particularly any targets need to be set on a sector-by-sector basis and not some flat rate across the whole of the agencies' activities. For example, it is reasonable to expect the mining industry should pay for expertise but that a lower rate should apply for public good research, e.g. climate change.
  14. It is important that the evaluation of the effectiveness of any indicators involves appropriate professional review and interpretation. Figures tell only part of the story. Their effective interpretation requires human review.
  15. Academy is aware of and strongly endorses CSIRO's plan to develop – within the context of the Government's outcome-outputs framework – a suite of performance indicators consistent with relevant Government policies and its own the Strategic Action Plan and Strategic Business Development Plan. The Academy believes that this process should:
    • deliver a balanced set of input, output and outcome measures that reflect the diversity of research outcomes and impacts that are relevant to the measurement of CSIRO's contribution to Australia;
    • provide opportunity for the Minister to review the outcomes-outputs and performance measures on an annual basis;
    • recognise/reinforce the ability of the organisation to respond to Government priorities (and nationally agreed priorities) and monitor its own strategic planning and performance evaluation;
    • facilitate the development of performance measures that are practical (in terms of the cost of collecting data and availability of data), useful to management in pursuing agreed strategic directions and comprehensive in terms of fulfilling the requirements of accountability, while recognising that not all benefits of research can be measured in quantitative terms or succinctly aggregated for reporting purposes; and
  16. If successful this exercise should be of interest to the assessment, monitoring and evaluation of the activities and outcomes of other contributors to Australian research including specifically the universities. The Academy is on record that the current 'performance indicators' used by DETYA to allocate research-related funding are extremely simplistic, lack any credible assessment of quality and are producing under desirable behaviour.

Please do not hesitate to contact me if you would like any of these views expanded or if there is further assistance that the Australian Academy of Science could give.

Yours sincerely

Michael N Barber FAA
Secretary (Science Policy)

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