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Economics References - Senate Standing Committee - CSIRO: The case for revitalisation - Administration and funding of rural research - Report, December 1994


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The Parliament of the Commonwealth of Australia

CSIRO

THE CASE FOR REVITALISATION

ADMINISTRATION AND FUNDING OF RURAL RESEARCH

SENATE ECONOMICS REFERENCES COMMITTEE

DECEMBER 1994

Commonwealth of Australia

ISBN 0 642 22263 0

This document was produced from camera-ready copy and was printed by the Senate Printing Unit, Parliament House, Canberra

MEMBERS OF THE COMMITTEE

Senator A B Ferguson, LP (SA), Chairman (from 10 October 1994)

Senator B K Childs, ALP (NSW), (Chairman until 9 October 1994)

Senator B R Bums, ALP (Qld) Senator H G P Chapman, LP (SA) Senator J R Coulter, AD (SA) (until 10 November) Senator A W Crane, LP (WA) (from 10 October 1994)

Senator J R Devereux, ALP (TAS) (until 9 October 1994) Senator S M Murphy, ALP (TAS) Senator J H Panizza, LP (WA) Senator S Spindler, AD (VIC) (from 14 November)

Secretary: Robert Diamond

Research Staff: Pippa Carron

Executive Assistant: Gail Mclnemey

The Committee's Address is: The Secretary Senate Economics References Committee

Parliament House Canberra ACT 2600 Phone: (06) 277-3540 Fax: (06) 277-5719

TERMS OF REFERENCE

The adequacy and appropriateness of the operation, funding and resourcing of research relating to rural industries by the CSIRO, in particular:

(a) the structure and administration of the CSIRO; (b) sources and adequacy of research funding; (c) the need for countercyclical Government funding to maintain long term research;

(d) the influence of private funding on effectiveness and direction of research; (e) the cost benefit of rural research; (f) the adequacy of the structure of commercialisation of

research results; (g) the costs and benefits of commercialisation and the distribution of those costs and benefits between the divisions; (h) the effectiveness of communication between CSIRO and the

community; and (i) any other matter bearing on rural research within the CSIRO.

CONTENTS

Membership of the Committee iii

Terms of Reference iv

Appendixes viii

Abbreviations ix

Conduct of the Inquiry x

Recommendations xi

Preface xv

Chapter 1 1

STRUCTURE AND ADMINISTRATION OF CSIRO 1 Current Structure of CSIRO 1

Criticisms of CSIRO's Structure 3

Administration of CSIRO 9

Alternative Structures 16

CSIRO’s Current Position 17

Conclusions 19

Recommendations 20

Chapter 2 23

SOURCES AND ADEQUACY OF RESEARCH FUNDING 23 Funding of CSIRO Research 23

CSIRO's Priority Setting Process 24

Rural Research in Australia 26

CSIRO Funding of Rural Research 27

Consequences of Reduced Funding for Rural Research 29 Need for a Sustained Effort in Agricultural Research 34 Other Sources of External Funding 36

Value of the Rural Sector 37

Conclusions and Recommendations 38

v

C hapter 3 41

IAPP RESTRUCTURING PROPOSAUS 41

CSIRO Policy 41

IAPP Restructuring 41

Wool Technology Move From Ryde to Geelong 45

Sale of Long Pocket Site (Brisbane, Qld) 47

Sale of Longford and Arding Field Research Stations (Armidale, NSW) 49

Sale of Yalanbee Field Research Station (Bakers Hill, WA) 54 Current Status of the Proposals 57

Conclusions 57

C hapter 4 59

COUNTERCYCLICAL FUNDING 59

C hapter 5 63

EXTERNAL FUNDING 63

Funding Targets 63

Loss of Control 64

Fundamental Versus Applied Research 66

Grant Applications and Reporting Requirements 68 Bias in the Direction of Research 69

Dilemmas Faced by Scientists 70

Effect on Stability of Research Teams and Employment 71 Expenditure of Appropriation Funding 72

Publication and Collaboration 73

Conclusions and Recommendations 74

C hapter 6 77

COMMERCIALISATION OF RESULTS 77

Adequacy of Structure for Commercialisation 77

Benefits and Costs of Commercialisation 79

Distributions to Divisions 82

Conclusions and Recommendations 83

Chapter 7 85

COMMUNICATION 85

CSIRO Communicators 86

Internal Communications 90

Communication with the Rural Sector 91

Conclusions and Recommendations 92

Chapter 8 95

THE CSIRO SCIENTIST'S PERSPECTIVE 95

Science as a Career 95

Morale in CSIRO 99

Science Culture in Australia 101

Conclusions and Recommendations 103

vii

APPENDIXES

Appendix I LIST OF ORGANISATIONS AND INDIVIDUALS WHO MADE SUBMISSIONS 105

Appendix II LIST OF PUBLIC HEARINGS, BRIEFINGS AND INSPECTIONS 111

Appendix III LIST OF WITNESSES 113

Appendix IV MINISTERIAL GUIDELINES 119

Appendix V '

STRUCTURE OF CSIRO 121

Appendix VI ALTERNATIVE STRUCTURE FOR CSIRO 123

Appendix VII CSIRO BOARD REVIEW - TERMS OF REFERENCE 131

Appendix VIII CSIRO PRIORITY SETTING PROCESS 133

Appendix IX EXTERNAL FUNDING BY CSIRO SEO SUB-DIVISION 135

viii

ABBREVIATIONS

AAHL ABARE ACCRA ACIAR

AHRL AIMS ASTEC ANSTO

AWRAPO

Australian Animal Health Laboratory (Geelong) Australian Bureau of Agricultural & Resource Economics Australian Cotton Growers Research Association Australian Centre for International Agricultural Research

Animal Health Research Laboratory (Parkville) Australian Institute of Marine Science Australian Science & Technology Council Australian Nuclear Science & Technology Organisation

Australian Wool Research & Promotion Organisation (previously the WRDC) CRCs dse DWT

CIS LAPP IPPP INRE

USE IWS NFF PSU

QDPI RIRFs SEO UNE

WRDC

Co-operative Research Centres dry sheep equivalent Division of Wool Technology Geographic Information Survey

Institute of Animal Production & Processing Institute of Plant Production and Processing Institute of Natural Resources and Environment Institute of Information Science & Engineering

International Wool Secretariat National Farmers Federation Public Sector Union Queensland Department of Primary Industry

Rural Industry Research Funds Socio- Economic Objective (classification) University of New England Wool Research & Development Corporation

(now AWRAPO)

CONDUCT OF THE INQUIRY

On 7 June 1994, the Senate referred this matter to then Standing Committee on Industry, Science, Technology, Transport, Communications and Infrastructure for inquiry and report by the last sitting day of 1994. On 10 October 1994, by order of the Senate, the Committee's name was changed to the Economics References Committee. The Terms of Reference were primarily focused on rural research.

The Terms of Reference were advertised in national newspapers and submissions called for by 1 July 1994. The Committee received 166 submissions from a range of individuals and organisations representing all states of Australia except Tasmania (see Appendix I). Many of the submissions were from areas most affected by proposed changes to CSIRO. Almost all of the submissions received were from or about the rural institutes of CSIRO.

Many submissions came from CSIRO scientists who sent them in a personal capacity (70). One submission was received from the Chief Executive of CSIRO, 4 from CSIRO Advisory Committees, and 2 from CSIRO Union branches. Four submissions came from Cooperative Research Centres, 12 from universities, 12 from companies and corporations, 36 from community and business associations, 6 from graziers, 4 from government organisations, 2 from journalists, 5 from Members of Parliament, and 8 from private individuals. Several of the

submissions were signed by large staff sections of two CSIRO Divisions, Wool Technology and Entomology.

The Committee held public hearings in Canberra (3 times), Sydney, Annidale, Brisbane, Perth and Melbourne. Oral contributions were taken from 46 witnesses or groups of witnesses and 1647 pages of evidence were taken. The Committee visited rural field stations outside Armidale (Longford, Arding and Chiswick) and Perth (Yalanbee). It carried out inspections in Canberra at Black Mountain

(Division of Entomology), Armidale at Chiswick (Division of Animal Health), Brisbane at Long Pocket (Divisions of Tropical Animal Production and Entomology) and St Lucia (Division of Tropical Crops and Pastures), Perth at Floreat Park (Centre for Mediterranean Agriculture) and Geelong at AAHL

(Division of Wool Technology and Division of Animal Health).

RECOMMENDATIONS

Chapter One - Structure and Administration

1. The Committee recommends that the Board of CSIRO must take a stronger role in the leadership of CSIRO. Accordingly the Board's current review of the management structure should, as a priority: • restructure the CSIRO to reduce the layers of management,

including the need to modify or eliminate the Institute structure;

. introduce a 'business line' model of structure based on having direct communication with the workplaces within CSIRO;

. institute a similar mechanism for staff appointments to the CSIRO Board as applies under the Australian Broadcasting Corporation Act 1983;

. set up a new administrative structure around the Chief Executive Officer to replace the Executive Committee based on the Board leaving internal administrative matters to the Chief Executive Officer and such new structure;

. introduce a world best practice program of management across the Organisation, including industrial participation;

. clarify its formal reporting mechanism to the Minister; and

. as part of this process of streamlining of administration, report on how excessive accountability can be reduced. (Paragraph 1.82)

2. If the CSIRO Board is unable to address the foregoing reforms in its report, the Minister for Industry, Science and Technology should consider establishing an independent assessment of the above proposals. (Paragraph 1.83)

Chapter Two - Funding

3. The Committee recommends that CSIRO re-instate the high priority ranking of rural research and ensure that the share of appropriation funding of rural research is increased commensurate with that ranking. (Paragraph 2.61)

4. The Committee recommends that the Government commission an independent study of the system of rural levies, which would focus on:

. (i) how they are applied to research in both the on-farm and post­ farm sectors, and; . (ii) how the system could be expanded to include industries not currently contributing to, but benefiting from, CSIRO research.

(Paragraph 2.62)

Chapter Three - ΙΛΡΡ Restructuring Proposals

5. The Committee recommends that the Division of Wool Technology postpone any decision to amalgamate its two laboratories until the question of the direction of wool industry funding becomes more clear. (Paragraph 3.26)

6. The Committee recommends that CSIRO retain the site and infrastructure at Long Pocket. The Committee further recommends that CSIRO direct appropriation funding towards the half-life refurbishment of facilities at Long Pocket within the next three years. (Paragraph 3.34)

7. The Committee believes that Longford and Arding should be retained by CSIRO for continued field research and recommends that the CSIRO Board immediately make public its decision not to sell either property. (Paragraph 3.53)

8. Further, the Committee recommends that the Commonwealth Government provide adequate Landcare funding to allow vegetation rehabilitation work to be carried out on Longford and Arding. (Paragraph 3.54)

9. The Committee believes that Yalanbee should be retained by CSIRO for continued field research and recommends that the CSIRO Board immediately make public its decision not to sell all or part of the property. (Paragraph 3.62)

xii

10. The Committee recommends that CSIRO, in collaboration with industry and government, formulate a package of mechanisms to buffer research programs from wide fluctuations in rural industry research levies. (Paragraph 4.9)

Chapter Four - Countercyclical Funding

Chapter Five - External Funding

11. The Committee recommends that the CSIRO Board conduct an assessment of the way in which the 30% funding target has altered the ratio of fundamental to applied research. (Paragraph 5.49)

12. The Committee believes that, in some sections of CSIRO, the demands of obtaining external funds are placing considerable stresses on scientists and that this is hampering their research. The Committee recommends that CSIRO address this problem by developing multidisciplinary teams within Divisions to

assist with obtaining and retaining external funds. The Committee further recommends that management play a stronger role in external fund raising. (Paragraph 5.50)

Chapter Six - Commercialisation

13. The Committee recommends that the CSIRO Board commission a study to determine further ways in which CSIRO can limit its legal liability arising from commercialisation of its research. (Paragraph 6.28)

14. The Committee recommends that CSIRO clarify its respective roles in 'commercialisation' and 'development' and make its policy in these areas clear to its staff and its stakeholders. (Paragraph 6.29)

15. The Committee recommends that CSIRO examine ways in which its research results can be transferred to the rural sector, given the demise of state extension services. (Paragraph 6.30)

xiii

Chapter Seven - Communications

16. The Committee recommends that the role and responsibility of CSIRO 'communicators' be more clearly defined and that CSIRO ensure that people employed as communicators either have the necessary skills to do the task or that they receive appropriate training for the position. (Paragraph 7.32)

17. The Committee recommends that CSIRO ensure that those scientists who are required to communicate regularly with stakeholders and the public have the necessary skills to do so. (Paragraph 7.33)

18. The Committee recommends that CSIRO review the procedures used for approval of media releases with a view to increasing the speed with which they can be issued. (Paragraph 7.34)

Chapter Eight - The CSIRO Scientist's Perspective

19. The Committee recommends that the CSIRO Board address the problems of employment insecurity, poor conditions of employment, low career status, excessive accountability, stresses of fund-raising, ineffective industrial participation and low morale among it rural research staff as a matter of urgency. (Paragraph 8.28)

xiv

PREFACE

BENEFITS AND COSTS OF RURAL RESEARCH

The international identity of Australia is synonymous with agricultural production. Throughout the world Australia is known for its high quality exports of wheat, wool, beef, lamb, grains and cereals, as well as a multitude of other specialist agricultural products. While Australia is also now becoming

competitive in areas of information technology and manufacturing, by nature of its vast natural resources it will always gain high returns from primary production and post-farm commodities.

Australia has gained this leading position in agricultural production not just through its natural resources, but through a very high level of competency and dedication to rural research and development by its major public research organisation, the Commonwealth Scientific and Industrial Research Organisation

(CSIRO).

Over many years CSIRO has had a strong international reputation in a range of fields of scientific endeavour. However, it has been rural research which has served the nation particularly well. Rural research, and its successful application, has assisted farmers to overcome the specific difficulties of Australia's unique

natural environment and often harsh climate. Since its inception, research emanating from CSIRO has enabled farmers to increase production, reduce costs, counter the detrimental effects of parasites and disease and, in more recent years, work towards rehabilitating land degraded by past agricultural practices.

The outcomes of this research can be measured in a number of ways. These include the direct economic indicators of increased profits, numbers of patents and returns through licence fees, and indirect indicators of perceived 'public good'. Although benefit-cost analyses have limitations, they can be usefully

applied to assess the flow of economic benefits accruing from specific research.

Cost-benefit studies on CSIRO research have been conducted by a number of other government organisations, including the Australian Bureau of Agricultural and Resource Economics (ABARE) and the Bureau of Industry Economics (BEE), as well as by private organisations. These studies have shown that, in

agricultural areas, CSIRO research frequently generates a high to very high

return on investment.1 Net returns include both specific benefits to agricultural industries and more broader benefits to rural communities and to the environment. In addition, reciprocal international benefits arise through Australia's contributions through such organisations as the Australian Centre for International Agricultural Research (ACLAR).

With increasing international competition, and expanding markets in Asia, it is vitally important that Australia maintain its reputation as a provider of high quality food and animal products. It can only do this with the strong support of high quality scientific research.

Evidence, pp. 22, 361, 426.

Page 1

Chapter 1

STRUCTURE AND ADMINISTRATION OF CSIRO

Current Structure of CSIRO

1.1 CSIRO is an independent statutory authority which operates under the Science and Industry Research Act 1949, and subsequent amendments. It comes within the Industry, Science and Technology ministerial portfolio. Ministerial Guidelines were issued in 1988 (Appendix IV). CSIRO's primary functions are:

. to carry out scientific research - to assist Australian industry and to further the interests of the Australian community; - to contribute to national and international objectives and

responsibilities of the Commonwealth Government; . to encourage or facilitate the application and use of the results of its own or any other scientific research.

1.2 The current organisational structure was established through amendments to the Act in 1986, which had stemmed from recommendations of the Birch Report (1977) and the Astec Review (1985). Following this, CSIRO commissioned a review of its management structure by McKinsey & Co in 1987

and a review of the operation of corporate administrative functions by Papas, Carter, Evans & Koop in 1988.1

1.3 In these reviews it was envisaged that the Institutes would enhance the opportunities for interdisciplinary research among divisions. The key role of the Institute Directors was to add value to the way in which the Divisions operated.

1.4 CSIRO is governed by a Board comprising not less than 8 and not more than 10 members, all of whom are external to the Organisation except the Chief Executive. The Board's functions are:

• to ensure the proper and efficient performance of the functions of the Organisation;

1 Evidence p. 12.

Page 2 CSIRO RURAL RESEARCH

. to determine the policy of the Organisation with respect to any matter; . to give directions to the Chief Executive under sub-section 10A(3); and . such other functions as are conferred on it by the A c t2

1.5 The Board has an over-riding role in strategic policy determination in CSIRO and is accountable to the Minister.3

1.6 CSIRO operates with three main levels of administration: Head Office, Institutes and Divisions. Each level has its own management and administrative structure. Research is carried out in 35 Divisions, which may be spread over more than one site. The Divisions are grouped into six Institutes, as set out in

Appendix V. Each Institute has a broadly constituted Advisory Committee which provided external advice on research directions. Divisions may also have an advisory Committee.

1.7 The Office of the Chief Executive was moved from Canberra to Melbourne in 1993 to increase interaction with business and financial communities. Head Office and the Corporate Services Department are thus now spread over two sites. The Chief Executive is currently Dr John Stocker. His term expires in March 1995 and he has publicly announced that he will not be available for reappointment.

1.8 There are two corporate management sections: the Corporate Business Department which coordinates consideration of commercial matters that require an Organisation-wide approach, the strategic planning processes, and international and public affairs; and the Corporate Services Department which assists with Government business and policy matters and corporate finance, human resources, property management, information technology and information

services.

1.9 The Directors of the six Institutes and of the Corporate Business and Corporate Services Departments are accountable to the Chief Executive. The Executive Committee, which comprises the Chief Executive, Corporate Directors, and Institute Directors, takes corporate decisions on management

issues and prepares proposals for consideration by the Board.

2 Evidence, p. 12. 3 Evidence, p. 10.

STRUCTURE AND ADMINISTRA TION OF CSIRO Page 3

1.10 According to the CSIRO submission, the organisation has 'adopted and evolved management structures and practices to suit the needs of a contemporary research organisation and the changing demands upon it. The Institute structure ... has been used to group research activities along business system lines, and has

enabled both increased flexibility and sharper focus'.4 In 1992, CSIRO commissioned a report on Rural Industries which was chaired by Dr Kevin Foley. This report 'affirmed the structure, role and importance of the Institutes'.5

1.11 CSIRO is formally involved in 43 of the 51 Cooperative Research Centres (CRCs). It is involved in all 12 CRCs dealing with agriculture and rural-based manufacturing.

1.12 Further information about CSIRO's administrative structure, and its mission and goals, can be found in its Annual Report. Information about CSIRO's structure by Staff Category can be found in the CSIRO Data Book.

Consolidation o f Sites

1.13 Since 1989, CSIRO has had a policy of rationalisation of property and site administrations and reduction in the number of rural locations and field sites. This policy has seen a reduction in the number of sites it occupies from 106 to 70, and the process is continuing. Site administration is being consolidated, particularly were two or more divisions are co-located. In some Divisions,

administrative links are being made with other research organisations.

1.14 The Institute of Animal Production and Processing has suffered acute financial pressures for some time and in early 1994 put forward a comprehensive set of recommendations which would allow the concentration of animal health and wool research at Geelong and tropical plant and animal research in Brisbane.

The details of the Institute's restructuring proposals, which formed the major reason for this inquiry, are listed in Chapter 3.

Criticisms of CSIRO's Structure

1.15 In its submission to the Committee, CSIRO maintained that the Organisation had evolved through a number of reviews and currently satisfied the

4 Evidence, p. 10. 5 Evidence, p. 13.

Page 4 CSIRO RURAL RESEARCH

needs of the Organisation. The submission stated: 'CSIRO's structure and administrative arrangements are a sound basis for managing the Organisation to deliver for the benefit of the nation'.6 This view was affirmed by the Chief Executive, Dr John Stocker, in oral evidence to the Committee on 2 August

1994, although he also stated that the Board was 'constantly internally reviewing the way in which we go about doing things' and that it was 'committed to continuing this process of review and inquiry to see whether [its] structure is indeed the one that bests serves [its] clients'.7

1.16 This position was in marked contrast to most other submissions to the Committee. In these submissions, which primarily came from scientists in the rural Institutes, or people involved in rural industries, there was almost unanimous view that the structure of CSIRO was archaic, hierarchical and top- heavy. Most of the criticism was directed at the Institute level, and strong arguments were put to the Committee that not only had the Institute structure not been a success, it had actually been most unhelpful to the Organisation. Most

submissions suggested abolishing the Institute level of management.

1.17 Criticisms were also made of the Board and the way it had operated. The Chief Executive claimed that he had conflicting roles in relation to reporting requirement to the Minister and the Board, although the CSIRO Act does not support this claim. Several submissions suggested that CSIRO's heavy emphasis on line management had filtered down to the Division level resulting in the creation of too many managers there also.

1.18 The Chief Executive, in response to a specific question on restructuring replied: ' ... I think we could take a hard look at flattening the structure and having one less layer of management'.8

The Board

1.19 There were four major criticisms of the CSIRO Board presented in evidence to the Committee. Firstly, although it is ostensibly similar to the board of any private enterprise, this is not in fact the case in practice. In theory the Board answers to the Minister but in reality it does not answer to anyone. Staff of the Division of Entomology argued that: 'If the Board is to exist, then its

6 Evidence, p. 13. 7 Evidence, p. 13. 8 Evidence, p. 1636.

STRUCTURE AND ADMINISTRATION OF CSIRO Page 5

members must have the same responsibilities, legal obligations and accountability as those associated with any large corporation. Currently there is no mechanism by which the Board is directly accountable to its stakeholders, including staff and client groups'.9

1.20 Secondly, the Board appears to be involved to a far greater extent than necessary in the day-to-day running of CSIRO, taking too much non-essential control over administration. Several submissions claimed that tire Board was too willing to intervene in management, and that this was especially so of its

chairman, Professor Adrienne Clarke. An example given was that senior appointments to CSIRO are handled by the Board, not by the Chief Executive Officer.10

1.21 However, when asked during a public hearing did the Board play 'almost a quasi-management role', the Chief Executive answered 'No'.11

1.22 Thirdly, it was suggested that, because members are only part-time and have responsibilities to other companies and institutions, they suffer a conflict of interest between their CSIRO obligations and their other corporate commitments. A number of Board members have recognisable divisions of loyalties and there

are not the usual checks and balances which exist in private enterprise.

1.23 Fourthly, the composition of the Board was criticised in that it does not have a staff representative, other than the Chief Executive Officer, and recommendations were made that it should.

1.24 A Senior Research Fellow, Dr D F Waterhouse, provided the following analysis of the role and functioning of the Board in comparison with CSIRO's previous governing body. 'At that time the governing body (the Executive) consisted of five full-time scientists, together with a number of part-timers to

broaden the personal expertise base. The 5 full-time members of the executive, who were ultimately responsible for CSIRO policies, were dependant for their reputation and future upon the continuing outstanding success of CSIRO through its scientific output. Now, except for the single Chief Executive Officer, this does

not apply to any other member of the Board and, over time, I believe that the decisions of the Board clearly reflect this situation - with few of the early members, now secure in their continuing activities elsewhere, having to live with

9 Submission 130. 10 Evidence, p. 266. 11 Evidence, p. 96.

Page 6 CSIRO RURAL RESEARCH

the consequences of their policy decisions. I believe that there would be great merit in reverting to the earlier method of governance of CSIRO'.12

The Chief Executive Officer

1.25 The CSIRO Act creates the position of Chief Executive Officer whose role is to conduct the affairs of the Organisation 'in accordance with any policies determined, or any directions given, by the Board'.13 The Chief Executive Officer is thus responsible to the Board which is in turn responsible to the Minister. However, in evidence Dr Stocker said:

The Science and Industry Research Act defines a structure which I believe could potentially become a triangular structure with confused reporting arrangements. I hasten to add that I do not think that that has occurred during my time as Chief Executive of the Organisation, but I believe that the relationship

of the Chief Executive directly to the government and also to the Board is not an optimal set of reporting relationships because one could potentially be serving two masters. In my view it is an instability and a point of weakness in the Act, and I believe that the view is shared by most members of the CSIRO Board and a number of members of the Executive.14

1.26 The Committee believes that this matter must be clarified by the CSIRO Board.

The Executive Committee

1.27 The Executive Committee comprises the Chief Executive, the six Institute Directors and two Corporate Directors. The major criticism of the Executive Committee stems from the fact that six of its members have a conflict of roles, (they are line managers to their Institutes while having a broader corporate responsibility). Suggestions were made that the Executive Committee was dysfunctional, that it preoccupied itself with housekeeping matters and it failed to

12 Submission 56. 13 Science and Industry Research Legislation Amendment Act 1986, S. 10A (3). 14 Evidence, p. 1638.

STRUCTURE AND ADMINISTRA TION OF CSIRO Page 7

adequately address corporate issues, frustrating the Board and forcing it to assume an executive role.15

Institutes

1.28 There was overwhelming evidence presented to the Committee that the three Institutes in the rural and natural resources areas of CSIRO had failed to fulfil the role envisaged for them of enhancing business systems. The changes which came as a result of the Birch and ASTEC reports have not helped the

administration of CSIRO. The position of Institute Director 'placed additional barriers between the research workers and the administration. They did not have the authority of the former executive, and researchers could never feel that views expressed to directors was transmitted in the form they intended. Now, with a

Board of part-time members, each with agendas and allegiances outside the Organisation, the situation is much worse'.16

1.29 The primary role of the Institutes should have been in matters of business systems and strategic vision, but instead the Institutes have become increasingly involved in internal management matters (that is, the management of Division Chiefs). The Institutes have immersed themselves in accountability and review,

generating a vast amount of paperwork without clear and worthwhile objectives. Lines of demarcation between Institutes and Divisions actually hindered the ability of researchers to address the problems of their clients. The case where the IAPP 'forgot' that the Division of Entomology (in the IPPP) shared the Long

Pocket site in formulating its restructuring proposals was not an isolated occurrence.17 1 8

1.30 As was the view of many witnesses, ACIAR suggested that 'there is urgent need for the Institute concept to be rigorously reviewed, and if it is found lacking for it to be modified or replaced in favour of a 'clean slate' approach'.15 The NSW Farmers Federation stated that R&D Corporations find CSIRO

'expensive, inflexible and bureaucratic' and recommended removal of the Institute level of administration.19

15 Evidence, p. 265. 16 Evidence, p. 910. 17 Submission 33. 18 Evidence, p. 193.

19 Evidence, p. 409.

Page 8 CSIRO RURAL RESEARCH

1.31 The vertical structure of CSIRO does not allow it to communicate well with the corporations its serves because they have a more horizontal structure. As described in evidence by Professor Gerry Freed: 'The newer structures [of other organisations], which are very parallel and involve a lot of people working together across disciplines, seem to be working much better. It is difficult for CSIRO to fit in with those because it has a culture which is based on a very vertical command structure. When it tries to interface with a very horizontal command structure ... the mismatch at the intersection causes a great deal of difficulty in coming up with common objectives and commonsense ideas of value and achievement. As the corporate evolution is not going to change, CSIRO has to change in order to match it better'.20

1.32 One of the major problems arising from the Institute system is the conflict for Institute Directors between line management and the corporate needs of the Organisation. The three Institutes relating to natural and rural resources (LAPP, IPPP and INRE) all contain research covering plant and animal industries and the environment. According to one Division Chief, 'this creates a total administrative nightmare because each director's job is essentially a line management job, yet none has total control or influence over the research for the industries identified in their titles. Furthermore, each has significant slabs of research which are notionally the principal responsibility of another Director'.21

1.33 To some, Institute Directors were inserted into an existing structure, without a sufficiently defined role and therefore need to justify their existence. This has meant that '[Division] Chiefs and Institute Directors struggle for position, independence and power. The conflicts are public and negative to morale'.22

1.34 An attempted solution to this was the creation of Multi-Divisional Programs, with one Director chosen as the 'lead Director'. There are currently 32 such Programs listed in CSIRO's Operational Plan 1994-95, five of which are under the lead-Directorship of IAPP or IPPP. While this initiative has been strongly supported by Division Chiefs, conflicts have arisen because Directors have been driven by line management rather than by their corporate responsibilities.

1.35 For Divisions such as Entomology, which is arbitrarily within IPPP, the Institute system fails to take into account the very broad customer base to which

20 Evidence, p. 573. 21 Evidence, p. 263. 22 Submission 19.

STRUCTURE AND ADMINISTRATION OF CSIRO Page 9

the Division applies. The Division Chief believes that it is counterproductive and frustrating for the Division to be confined to a plant industry based Institute without effective linkages to those research groups elsewhere in CSIRO and in industry to which its work has obvious relevance. '[It] is not so much a question

of which of CSIRO's Institutes should Entomology belong to. Rather, it is a question of why have line management based Institutes like those which are currently struggling to find a role in adding value to R&D within CSIRO at all. I am not able to identify any instance of the IPPP adding value to Entomology, nor

other Divisions in IPPP'.23

Administration of CSIRO

1.36 It was stated to the Committee that in particular Divisions 'a significant number of staff no longer have confidence in either management or the management structure'.24 The criticisms of CSIRO administration can be classified in three broad areas: firstly, scientists argued that they were over­ managed and under-resourced; secondly, there were claims that CSIRO

management systems were old fashioned and inefficient; and thirdly, there are problems with promoting scientists to management positions.

1.37 While there may be many management problems in CSIRO25, a large number of these stem from the excessively hierarchical structure of the Organisation. The presence of too many people in the management chain has led to gratuitous management.26 Over the last 10-15 years there has been a change

from responsibility to being continually pressed for accountability which has contributed strongly to current staff problems.27

1.38 To scientists, managers seem to have forgotten what it is like to work on experimental research; they have forgotten the constraints of time and uncertainty in obtaining research results. Senior management is concerned with short-term, revenue earning, technological issues to the virtual exclusion of long term problems.28

23 Evidence, p. 265. 24 Submission 138. 25 Evidence, p. 159. 26 Submission 67.

27 Submission 138. 28 Submission 65.

Page 10 CSIRO RURAL RESEARCH

1.39 Many CSIRO scientists felt that having such a large bureaucracy not only wasted valuable research funds, but was counter-productive to good research. In overseas research institutes 'the prevailing sentiment seems to be that if you have talented, creative, dedicated people carrying out research it would be exceptionally ill advised to attempt to over-manage them'.29

1.40 One scientist pointed out that: 'Within CSIRO, research is required to operate at international standards with high degrees of innovation and accountability ... CSIRO management are allowed to operate very comfortably within a management system that is probably 25 to 30 years out of date ... with no requirement to achieve international standards of management'.30

1.41 However, this was not the view of the Chief Executive Officer who explained in evidence to the Committee: 'these days we are taking very seriously the principles of TQM, of total quality management, and we have a quality group at head office specifically looking at this issue. The first manifestation of our adopting a total management quality approach is in our commercialisation function where we have adopted the ISO 9000 standard for quality [for the Commercial Practice Manual]',31

1.42 Both science and management appear to have suffered through the CSIRO practice of promoting scientists to management positions. This has arisen because senior managers are paid more than scientists and 'scientists, often good ones, have been 'rewarded' by being promoted into the many management positions created by the new structure. As a result CSIRO has lost good

scientists and gained poor managers'.32 'Managers are seen as better people at the same level as scientists with the provision of fringe benefits as a reward for dropping research responsibilities'.33

1.43 'Today, promotion for scientists in CSIRO is much more readily achieved by personnel management than by the performance of high quality science. Erosion of the esteem placed on the performance of high quality science is undermining the research endeavours of CSIRO scientists. The science culture of CSIRO has been replaced by a management culture'.34

29 Evidence, p. 839, see also p. 1100. 30 Evidence, p. 1262. 31 Evidence, p. 81. 32 Evidence, p. 1100. 33 Evidence, p. 1262.

34 Submission 67.

STRUCTURE AND ADMINISTRA TION OF CSIRO Page II

1.44 The Committee believes that it is regrettable that the only way in which an outstanding scientist in CSIRO can be given appropriate recognition is through promotion out of the research system and into the management stream. In other areas of business and industry changes have

been made to allow experts to be given appropriate remuneration while retaining them in their functional roles.

Line Management

1.45 Each Institute has a Director and administration staff, the number of which vary between 7 and 21. Each Division has a Chief, Assistant Chief and associated administration staff. Below that there are Program Managers and below that there are Project Leaders. Finally there are the research scientists and

technical officers. If the Division operates across several sites there is also an Officer in Charge and associated site administration officers. Recently a new level has been introduced: at Floreat in Perth there is now a Centre for Mediterranean Agricultural Research which is an association of five Divisions

but which has its own Head and administrative staff.

1.46 In addition to line management commitments to CSIRO, additional obligations to CRCs, Multi-Divisional programs, external funding bodies and other research organisations such as State Departments of Agriculture, means that a scientist may be responsible to 4 or more managers, with associated

administrative duties. This leads to 'a reduction in research effort, a lack of productivity and a depressing effect on research efficiency'.35 One Principal Research Scientist listed 9 different groups to which he was responsible and concluded 'this fragmentation of management ... severely restricts my efficiency

to undertake useful research'.36

1.47 The extended line of management means that scientists now spend a considerable amount of time reporting to management requests. Decisions come from the top down and staff have little input into the management of the Organisation. 'This long chain of command has lead to a situation where no one

actually takes responsibility for a decision but every thing is accounted for by detailed and multiple checking of actions'.37

35 Evidence, p. 1331. 36 Submission 145. 37 Evidence, p. 1261.

Page 12 CSIRO RURAL RESEARCH

1.48 Although there is now a comprehensive administrative structure above the research scientist they now, more than ever, must take responsibility for the administration of their own research programs. As described in evidence: 'This includes ordering, travel, checking of budgets against expenditure, etc. All of these activities have to carried out by the research units and administration only acts as a checking and book keeping service. The local administration activity is further examined at the Divisional level, if the group is operating at a remote site

... The contribution the Institute and Corporate services makes to the process is unknown at the research unit level'.38

1.49 The combined effect of external funding requirements and excessive line- management demands means that some scientists in the rural Institutes are spending too much time on administration, to the detriment of their research programs.

Cost o f Administration

1.50 About 40% of staff in CSIRO are not involved in research. Some of these people are technical support staff, but a large number perform general administration and service functions. Head Office and Corporate Service staff comprise 5% of total staff at a cost of about $32m per annum. However, as shown in Table 1.1 (at Paragraph 1.52), executive and corporate staff actually cost the same or more, in the case of the Chief Executive's Advisory Unit, than research staff per person despite the fact that they do not have research program costs associated with their sections.39 The high financial burden of management angers staff who are continually told to reduce research costs or face redundancy.

1.51 Scientists are bitter because 'management and administration has first call on CSIRO's Appropriation funds. As a result they are insulated from external funding perturbations which apply at the margin, but which are crucial for determining whether or not research is done. As the Appropriation crumbs become even more meagre, bench scientists and technical support staff will become even more marginalised'.40

1 52 The submission by the NSW Farmers' Association argued that there have been no efficiencies generated in Head Office or in Administration duties over

38 Evidence, p. 1261. 39 Evidence, p. 1297. 40 Submission 29.

STRUCTURE AND ADMINISTRA TION OF CSIRO Page 13

the last 8 years. In the IAPP, the proportion of administrative staff has increased from 11.3% in 1987 to 13.2% in 1993. The submission also relayed comments from some of the major Rural Industry R&D Corporations that CSIRO administration lack flexibility, had exorbitant overhead costs, and that the IAPP restructuring proposals did not consider the option of a significant reduction in

staff at Institute headquarters. 41

Table 1.1 - Funds per Staff Member in Each CSIRO Institute and Corporate Section in 1993-94 (Source: Evidence, p. 1297).

institute S ’000

Information Science and Engineering 93 Industrial Technologies 96

Minerals, Energy and Construction 93

Animal Production & Processing 74

Plant Production and Processing 84

Natural Resources & Environment 100

Corporate Services Department 94

Chief Executive Advisory Unit 114

Accounting Systems

1.53 The accounting system used by CSIRO was criticised as being inflexible and results in the rigid compartmentalisation of research subjects simply for accounting purposes. The following example was given:

... direct research on pasture plants is no longer acceptable in the Division of Animal Production in Western Australia as it does not involve work on animals! Conversely, if work on pastures is done in the Division of Plant Industry it cannot

involve the all important interaction with grazing animals. The result of this stupidity is that research on pastures, which are the basis for the whole wool industry and an important

41 Evidence, pp. 413-6.

Page 14 CSIRO RURAL RESEARCH

component of sustainable farming systems, is being neglected in CSIRO.42

Move o f Headquarters to Melbourne

1.54 In 1971 the head office of CSIRO was moved from Melbourne to Canberra, so that senior scientists could lobby at the seat of Government. In 1993, with Dr John Stocker as Chief Executive, this decision was reversed and Head Office moved back to Melbourne so that the Executive could be closer to

stakeholders. However, while the first move was complete, the second was not and the consequence has been that Head Office operates from both Melbourne and Canberra. Attempts have been made to sell the former Headquarters building in Campbell, but all offers have been 'substantially below valuation'. This is partly because 'the original conditions set by the Executive Committee were that the price received for the property should cover removal costs to Black Mountain and other CSIRO sites ... and their refurbishment, as well as contributing a significant return to research'.43

1.55 The move by the Executive from Canberra to Melbourne has been viewed most cynically by both CSIRO staff and outsiders for two reasons. Firstly, while Divisions have been asked to cut back on the number of sites to reduce overheads, Corporate Headquarters have expanded to two sites. Staff believe that headquarters should consolidate so that the Corporate Services

section, which is still in Canberra, is united with the Executive which it serves in Melbourne. Secondly, if stakeholders were more important to lobby than the Government (itself a questionable point), what was so special about stakeholders in Melbourne? What about stakeholders in Sydney, or Brisbane? 44

1.56 The Committee questions the wisdom of retaining two sites for corporate headquarters at a time when consolidation of sites is being used as a budgetary measure, particularly in the rural Divisions. To those outside the Organisation this appears to be a double standard. To those in the rural Divisions who are suffering both budgetary cuts and relocation it is a double standard which is difficult to accept.

42 Submission 8. 43 Evidence, p. 15. 44 Evidence, pp. 358, 876, 1259, Submissions 56, 82 & 88.

STRUCTURE AND ADMINISTRA TION OF CSIRO Page 15

Industrial Participation

1.57 CSIRO's policy on industrial participation is outlined in its CSIRO Industrial Participation Plan 1989. Industrial participation means 'the processes and practices that lead to a greater degree of employee influence at the workplace and at the organisational level' and employee participation is defined

as 'an approach to work structures and relationships within an enterprise or group activity which embraces information sharing, work reorganisation, joint consultation and, where appropriate, joint decision making and self management'.45

1.58 According to the WA Branch of the PSU: 'the status of industrial participation in CSIRO is that it is observed more in the breach than in practice. After an initial flourish, responsibility for implementing the Industrial Participation Plan has been left with the Chief of each CSIRO Division. Their

commitment varies from active support and encouragement to derision and subversion'.46

1.59 In a submission critical of the LAPP'S handling of the restructuring proposals, it was claimed that management procedures were 'in direct contradiction with clearly stated Industrial Participation guidelines' and that staff had 'unanimously passed a vote of no confidence in the Institute management and

its handling of the current budget crises'47

1.60 The Committee considers that there is a lack of good management practice in CSIRO and that the degree of dissatisfaction among scientists of the progress of industrial participation has contributed to low morale among some staff. The Committee considers that the Chief Executive's reference to TQM had

the effect of being a tokenist response when all the evidence was of a non- involved workforce in decision-making. All the evidence examined by the Committee, in relation to the three rural Institutes, revealed that the Board had an inadequate approach to industrial participation with low levels of industrial

democracy. The Committee believes that the CSIRO Board must introduce a world best practice program across the organisation as a priority.

45 Evidence, p. 1331. 46 Evidence, p. 1332. 47 Submission 105.

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Alternative Structures

] .61 Acting on the strong belief that the management structure of CSIRO needs to change, the Manager of Planning and Resources (CSIRO Corporate Services), Malcolm Robertson, presented an alternative model for the Committee's consideration. The key features of this model were:

. The institution currently known as CSIRO should change to an umbrella organisation made up of a number of semi-autonomous research institutes (referred to as 'corporate institutes'). The new body would be more concerned with national science policy and

strategic matters. Its leader would be the Chief Scientist of Australia. . The Institutes in CSIRO should be abolished and replaced by a set of new organisations structured around a national cohesion of

research activity directed towards the needs of the nation in particular industries or community interest areas. . The CSIRO Act should be revised to reflect these changes but in order to maintain flexibility the number of corporate institutes should

not be specified. . The leadership group must be revised and replaced with a 'group executive' model in which group executives are appointed for a term to the top management team to run corporate CSIRO, to advise the

government on national research issues, to develop broad policies and practices which establish the parameters within which the 'corporate institutes' would operate. • The group executives would not manage the institutes as these

business units would be autonomous within the framework of CSIRO and would have their own chief executives.48

1.62 Details of the this proposal and of a proposal for an 'Australian Science System' by the same author are given in Appendix VI.

1.63 A model similar to that proposed by Robertson was submitted, formally or informally, by at least three Division Chiefs. The main components of this model were: the abolition of line management oriented Institutes; the abolition of the Board; the creation of some 10-15 business units; and replacing the executive

Committee by a full time chairman and Chief Executive, supported by several full time Executive Committee Members and several part-time members. The

48 Evidence, pp. 236-7

STRUCTURE AND ADMINISTRA TION OF CSIRO Page 17

proposers of this structure pointed out that the model has features similar to the structure 'which served CSIRO so well from 1927 until the ASTEC review in 1985 imposed a Board structure on CSIRO'.49

1.64 The Committee makes no specific recommendation other than at paragraph 1.83 as it only examined three Institutes.

CSIRO's Current Position

1.65 In October 1994, the Board announced that it was undertaking a review of CSIRO's structure. This announcement became known to the Committee through a circular to staff dated 25 October 1994 by the Chairman of the CSIRO Board, Professor Adrienne Clarke. The circular stated that, in addition to the

search for a new Chief Executive, 'the other major issue occupying the Board's time is an examination of CSIRO's approach to doing business and of its management structure ... This examination is a logical step after some seven years experience with the current CSIRO structure'.50 It will be carried out by a

'Board team', chaired by Professor Clarke and it is expected that

recommendations will be formed by February 1995.

1.66 Those on the Review Committee are: the retiring Chief Executive, Dr John Stocker, Dr Bob Prater, Director of the Institute of Information Technology and Communications, Mr Sandy Hollway, Head of the Department of Industry, Science and Technology, Dr Max Richards, Managing Director of Aberfoyle Ltd,

Mr Doug Shears, Executive Chairman of ICM Australia Pty Ltd, and Dr Michelle Smyth. The terms of reference are given in Appendix VII.

1.67 This announcement flies in the face of strong representations to the Committee by the Chief Executive that CSIRO had suffered too many reviews.51 It also contradicts evidence given to the Committee by the Board Chairman, who stated on 3 November 1994 that, until a new Chief Executive was appointed, the Board would not be making any decisions of significance.52

1.68 According to Scitec reporter Jane Ford, 'CSIRO staff are generally sceptical about the review and believe it is not addressing the real issues, one of

49 Evidence, p. 267. 50 Letter dated 25 October 1995 Chairman’s Message to Staff. Signed by Adrienne E Clarke, Chairman, On behalf of the Board, CSIRO Australia. 51 Evidence, pp. 11, 52, 955-6. 52 Evidence, pp. 1443-4

Page 18 CSIRO RURAL RESEARCH

which is a serious lack of communication within the organisation. It is also being done in too much haste and in a policy vacuum'.53

1.69 The terms of reference of the review are very general and are so unfocused as to be almost incomprehensible. In evidence to the Committee, Professor Clarke claimed that the terms of reference, in essence, referred to the way that CSIRO can 'work with the government in the most effective way to identify the goals of the organisation'54 Yet the terms of reference centre on delivering new knowledge to CSIRO's customers. The terms of reference in fact have very little to do with examining the structure of CSIRO, although the last point suggests that structural changes may somehow occur if they were found to be needed.

1.70 More importantly, the terms of reference do not indicate that the Board has, since the commencement of Professor Clarke's appointment, already conducted a number of reviews of CSIRO's structure. As stated by professor Clarke in evidence to the Committee: 'In 1992, when I became Chairman of the organisation, the board went into a two-day meeting program to look at where we were and to look at how well this structure has served us, ... And from that we instituted a series of individual reviews and information seeking, which has

culminated in another Board retreat earlier this year, which was followed by a Chief Executive's retreat with his senior management, ... as a result we have a committee that will report in February [1995]'.55

1.71 CSIRO has therefore been thinking about changing its own structure for more than two years. There has been a series of reviews within CSIRO which have led, not to any change of structure, but have led to a proliferation of corporate managers and administrators. The real problem, the fact that CSIRO has an archaic, hierarchical, top-heavy management system, has not been addressed, and there appears little likelihood that the latest review committee will recommend any significant change because it is constrained by terms of reference which focus yet again on the needs of CSIRO's clients while neglecting the needs

of its own scientists.

1.72 Scientists are frustrated by endless reviews of CSIRO. One scientists noted: 'In the twelve months from 1993, my own area of research was formally reviewed no fewer than four times: once at the Project level by an external funding body, once at the Program level by the Division, once at the Division

53 Scitech, November 1994 p.9. 54 Evidence, p. 1434. 55 Evidence, p. 1434.

STRUCTURE AND ADMINISTRA TION OF CSIRO Page 19

level by the Institute and a fourth time at the Project and Program level in the guise of a strategic planning workshop. On each of these occasions, essentially the same information was provided, with essentially the same favourable outcome. With these requirements on top of the reporting responsibilities ...

science too often has to play a secondary role'.56

1.73 In a letter to the Committee from a University lecturer who had conducted a review within the IPPP, it was stated that: 'CSIRO has been reviewed, and reviewed itself, ad nauseam. ... One of the statements we heard frequently from people we interviewed for this review was that they hoped

CSIRO would take some action when it was completed because they were sick of CSIRO reviewing itself without any action being taken. It appears that their fears were well founded'.57

Conclusions

1.74 Taken overall, the evidence presented to the Committee suggested that CSIRO has been governed by an ineffectual Board. The Committee found that the Board has failed to ensure an appropriate management system for CSIRO and has allowed administration to proliferate at the expense of scientific research.

The Board has conducted a series of reviews but has failed to see that, in at least three of its six Institutes, the structure is now possibly acting as an impediment to good management within those Institutes and to collaboration between Institutes. The Board has allowed an inefficient and hierarchical structure to remain too

long and has failed to keep pace with changes in worldwide management practices.

1.75 The Committee is concerned about evidence that the Board has taken an intrusive role in matters of administration that should be left to the Chief Executive Officer and Executive Committee.

1.76 As outlined in Chapter Six, the Committee concluded that the Board failed to provide an adequate structure for commercialisation of research in CSIRO. The Committee notes that CSIRO has recently attempted to increase its expertise in commercialisation, but it is the Committee's view that the Board needs to examine other ways of securing CSIRO's commercial position.________

56 Evidence, p. 815. 57 Letter to the Committee dated 10 August 1994 from J M Scott, Senior Lecturer, University of New England.

Page 20 CSIRO RURAL RESEARCH

1.77 The Committee believes that the Board has neglected the employment conditions and morale of its staff. This matter is considered in detail in Chapter Eight. The fact that there has been no CSIRO staff representative on the Board has contributed significantly to a lack of adequate communication between the Board and its staff.

1.78 In comparison, the Australian Broadcasting Corporation (ABC) has about the same number of staff who have similar functional roles of creativity and independence. Its Board has one staff-elected member. Using this model, the Committee considers that the CSIRO should have similar staff

representation on its Board.

1.79 The Committee is of the view that the Board has allowed excessive responsibility in policy formation to be assumed by the Executive Committee. Because of the conflicting roles placed on Institute Directors, the Executive Committee does not function satisfactorily.

1.80 The Committee is strongly of the view that, at least in the rural and natural resources, the current structure of the Institutes has ceased to be functional and, in some instances, may in fact be an impediment to the proper functioning of Divisions within those Institutes. The Committee concludes that the widespread discontent within the IAPP is symptomatic of this unhelpful structure and management inefficiencies. The Committee is unanimous in its belief that CSIRO must move towards compacting its structure.

1.81 The Committee believes that scientists in the rural Institutes of CSIRO are over-managed and have an excessive load of administrative responsibilities.

Recommendations

1.82 The Committee recommends that the Board of CSIRO must take a stronger role in the leadership of CSIRO. Accordingly the Board's current review of the management structure should, as a priority:

• restructure the CSIRO to reduce the layers of management, including the need to modify or eliminate the Institute structure;

• introduce a 'business line' model of structure based on having direct communication with the workplaces within CSIRO;

STRUCTURE AND ADMINISTRATION OF CSIRO Page 21

. institute a similar mechanism for staff appointments to the CSIRO Board as applies under the A u stra lia n B roadcastin g C orporation A c t 1983;

. set up a new administrative structure around the Chief Executive Officer to replace the Executive Committee based on the Board leaving internal administrative matters to the Chief Executive Officer and such new structure;

. introduce a world best practice program of management across the Organisation, including industrial participation;

. clarify its formal reporting mechanism to the Minister; and

. as part of the process of streamlining administration, report on how excessive accountability can be reduced.

1.83 If the CSIRO Board is unable to address the foregoing reforms in its report, the Minister for Industry, Science and Technology should consider establishing an independent assessment of the above proposals.

Page 23

Chapter 2

SOURCES AND ADEQUACY OF RESEARCH FUNDING

Funding of CSIRO Research

2.1 Funding of CSIRO research is divided into two main sources:

appropriation (federal government) and non-appropriation funding, which may come from many sources, but mainly comes from industry groups. In 1993-94 CSIRO had a total appropriation funding of $456.lm. This was an increase over the previous year of $1.8m. Total external revenue was $241.6m, an increase of

$16.4m over the previous year. External revenue as a percentage of total revenue was 34.6% (up from 33.1%).’

2.2 Over the ten year period from 1983-84 to 1993-94 CSIRO's appropriation rose from $332m to $467m. However in real terms, appropriation funding declined by almost $100m during that period, from $562m to $467m in (in 1993/94 dollars). During this time rural industry research levies increased in real

terms by about $60m annually and matching Commonwealth funds increased by about $50m so that the decrease in appropriation funding was largely offset by increasing RIRFs funds.1 2

2.3 The Minister for Industry Science and Technology, The Honourable Senator Peter Cook, has stated that 'the base level funding for CSIRO has been increased from $418.9m in 1993-94 to $442.3m in the 1994-95 budget. During the 1991-94 triennium, in addition to base level funding, there were three special allocations by the Commonwealth to CSIRO to replace outdated equipment and upgrade building assets. These allocations were clearly intended to apply to that triennium only. In the 1994-95 budget, however, the Government decided that

CSIRO would permanently retain part of these special one-off allocations, thereby increasing the base level funding for the Organisation. As a consequence, CSIRO's 1994-97 triennium funding represents a real increase of about $20m per annum in base level funding'.3

1 CSIRO 1993-94 Annual Report. 2 Evidence, p. 408. 3 Letter from Minister for Industry, Science and Technology to Committee dated 4 December 1994, p.l.

Page 24 CSIRO RURAL RESEARCH

2.4 As with other government instrumentalities, CSIRO has been subject to the Government's efficiency dividend. This had been applied to the whole of CSIRO but recently the Government agreed to exempt its research programs from the dividend.

2.5 Although most submissions discussed the level of rural research only, several submissions recommended that CSIRO's appropriation should be restored to the 1984 level and then maintained in real terms. The NSW Farmers Association, for example, recommended 'that in recognition of the importance of the basic research capability of CSIRO, the commonwealth commit to a maintenance or increase in real terms of CSIRO core appropriation funding'.4 The NFF urged the government to 'increase the aggregate level of research funding to maintain the CSIRO's research and performance of strategic and pre-competitive research and to enhance its ability to support industry in competing in the global market'.5

CSIRO's Priority Setting Process

2.6 As the bulk of CSIRO's federal appropriation is a one-line budget the amount allocated to each section of CSIRO is at the discretion of the Board. The processes used to assess potential research areas in terms of their 'attractiveness and feasibility' is based on comprehensive industry sector data and analysis of natural resource and environmental issues. The results are then 'subject to the expert judgement of senior management and external advisers in order to arrive at the relative returns to Australia from research in sixteen broad socioeconomic

purposes. CSIRO’s role in each area is then assessed against this view of national research needs'.6

2.7 One of the key criteria in determining priorities is the existence of 'receptors' for the results of CSIRO's research and the Organisation is currently in the process of improving customer profiles. Through this process CSIRO identifies changes that need to be made in the direction of appropriation and, consequently, external funding.

2.8 As part of this process, and to increase the Organisation's ability to react quickly to new research requirements, CSIRO has a 'priority levy' of 1.5% which

4 Evidence, p. 421. 5 Evidence, p. 121. 6 Evidence, p. 13, see also p. 1307.

SOURCES AND ADEQUA CY OF RESEARCH FUNDING Page 25

is applied to all Divisions, pooled and redistributed. The amount available for distribution currently stands at about $5.5 million per annum and is used to move funds quickly to important new areas of science or technology.

2.9 Priorities are first assessed by the Executive Committee which then makes recommendations to the Board. At its June 1993 meeting the CSIRO Board considered the research priorities which had been recommended by the

Executive Committee for the triennium commencing on 1 July 1994. After considering these recommendations the Board 'agreed that minerals, environmental and rural research continued to provide a high return to Australia'.7 (See also Appendix VIII)

2.10 However, the Board also felt that manufacturing and information and communication industries provided a high return and noted that, at that time, those two sectors had not been 'receiving a level of resources commensurate with their importance to Australia'.8 So the Board decided to promote those two areas

at the expense of rural and environmental. The final three chosen were therefore minerals resources, manufacturing industries, and information and communication industries.

2.11 Is essence, the Executive Committee chose three priority areas and the Board replaced two of them with two others. One of those dropped was rural research. The other, environmental research, is almost invariably linked with rural research. This meant that despite the fact that CSIRO gives it a high ranking

in it's prioritisation process, funding for the two rural-related Institutes would be reduced over the next funding triennium.

2.12 In a report on southern Australian agricultural business systems, conducted by a 5-person CSIRO team in 1993, research priority setting mechanisms which could take into account the likely contribution of research and development to various parts of the business system were examined. The report

concluded that 'there is a perceived need to improve the priority setting framework in CSIRO'.9 In essence, the report recommended a detailed, more objective and less arbitrary system of assigning numbers to the 'subjective' components of 'attractiveness' and 'feasibility' and separating facts such as the

size of industries, and level of exports and imports. This recommendation was

7 Submission 70, Appendix 1, p.l, see also Evidence, p. 1307. 8 Submission 70, Appendix 1, p.l. 9 Research fo r Southern Australian Dryland Farming: A Business System Approach CSIRO IPPP August 1993, p.2.

Page 26 CSIRO RURAL RESEARCH

based on the premise that R&D which was likely to be of greater net value to Australia should be funded over that with lesser net value.10

2.13 In addition, the Committee is concerned that while priority setting by the criteria of attractiveness and feasibility may work well for three-year applied or commercial projects, it may be quite inappropriate for longer-term strategic research. Strategic research should surely be determined by the criterion of importance to the nation.

Rural Research in Australia

2.14 Rural research is carried out in Australia by a variety of organisations: State Departments of Agriculture and Primary Industries, Universities and Cooperative Research Centres, as well as CSIRO. These organisations receive funding directly through government appropriations and indirectly through other interested bodies. The major source of funding for the rural sector comes from grower levies which are directed through each industry's specific Rural Industries R&D Corporation to research organisations. Rural Industry Research Funds

(RIRFs) are not for CSIRO specifically: CSIRO is generally required to compete for these funds on the same basis as other rural research service providers.

2.15 Growers are usually levied on the gross value of their production and, in most instances, the funds are then matched by the Commonwealth on a dollar- for-dollar basis up to a level of 0.5% of production of each industry. Because production may vary considerably, and trends in commodities cause changes in product value, the total amount levied in any particular industry may vary considerably from year to year. The fact that the Commonwealth then matches the levied amount, means that fluctuations in funding are exacerbated.

2.16 With fiscal restraints affecting all enterprises in Australia during the recession many public research organisations have decreased their contribution to rural research. This has been paralleled by the closure of private laboratories.11 State governments, in particular, have made cutbacks to agricultural services,

especially field extension services, and some have made quite marked

10 Letter from J M Scott to the Committee dated 10 August 1994, UNE. 11 Evidence, p. 446.

SOURCES AND ADEQUACY OF RESEARCH FUNDING Page 27

reductions.12 However, despite the recent downturn in the rural sector, growers have still been keen to maintain the level of their contribution to rural research.

2.17 The Committee notes that 'in stark contrast to the proposed funding directions in Australia, the New Zealand government has recently announced increased spending on research ($77m over three years), with the majority of the

new funding targeting public good research, production and processing of plant and animal products and environmental management'.13

CSIRO Funding of Rural Research

2.18 For many years CSIRO has strongly funded rural research because of the need to improve production and processing in agricultural industries and because there was strong financial support from specific rural industries. Australia's agricultural problems are for the most part unique and work carried out

elsewhere in the world cannot usually be applied to this continent. Many rural industries have realised this and have strongly supported a system of grower levies for more than 50 years.

2.19 Of the 35 CSIRO Divisions, just over half (18) are rural based. In 1993­ 94, the proportion of CSIRO's total expenditure allocated to rural based Institutes was 52.95%. Over the period 1987-88 to 1993-94 this percentage

peaked at 54.65% in 1990-91 and was at its lowest in 1992-93 at 50.33%.14 In addition, CSIRO is a participant in all 12 of the CRC's in the agricultural sector with a total contribution of about $90 million.15

Appropriation Funding

2.20 The proportion of appropriation funds allocated to the Institutes of Animal Production and Processing (LAPP) and the Institute of Plant Production and Processing (IPPP), which account for the majority of CSIRO's research in the rural sector over the period 1989-90 to 1996-97 is given in Table 2.1.

Appropriations peaked in 1991-92 at 36.9% and will drop to 34.2% by 1996-97. This represents a difference in appropriations of $4.9m. The net effect will be a

12 Evidence, p. 17. 13 Submission 135. 14 Submission 70, Attachment 10. 15 Evidence, p. 18.

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reduction of 6.8% for the IAPP and a reduction of 9.2% for the IPPP in the current triennium. Other Institutes received modest or significant increases.16

External Funding

2.21 Over the period 1990-91 to 1993-94 the amount of sponsored research (external funding) increased strongly in some areas, including plant production and processing, environmental research and rural manufacturing. But in other areas, such as animal production and processing, it increased only slightly and, owing to the rural recession, there was a considerable decrease in some industries, notably wool industry funding which dropped from $6.1m in 1989-90 to $ 1.4m in 1994-95.17

Competition fo r Funds

2.22 Over the last 5-8 years there has been increased competition for rural funds from the universities and state departments of agriculture because of a change in their roles and a move towards sponsored research. For example, between 1991-92 and 1992-93 the proportion of total wool R&D funds allocated to CSIRO dropped from 54.9% to 53.8%, meat R&D funds dropped from 28.2% to 10.9% and grains dropped from 16.0% to 12.7%.18 In some Divisions, such as Animal Production, there has been a deliberate decision to obtain external funding from secondary rural industries, such as intensive livestock and manufacturing.19

2.23 The NSW Farmers Association suggested that CSIRO was 'attracting a reduced proportion of total rural R&D Corporation research funding, both because the R&D corporations are increasingly involved in applied research, and also because of the high cost, and inflexible bureaucratic structure of the CSIRO'.20

2.24 Competition for funds was now becoming international. The Division of Wool Technology told the Committee at an informal briefing that Australian

16 Submission 107. 17 Evidence, p. 304. 18 Evidence, p. 418. 19 Evidence, p. 304. 20 Evidence, pp. 425-6.

SOURCES AND ADEQUACY OF RESEARCH FUNDING Page 29

RIRF funds were being allocated to research organisations in New Zealand now as well as Australia, but that funds were not flowing back the other way.

Erosion o f Research Funds

2.25 The suggestion was also made to the Committee that funds available for research in CSIRO were being eroded by the increasing burden of administration and corporate management, coupled with an increased devolution of administrative support function to the Divisions. In 1992-93, Institute support

cost the Organisation $26.6m and corporate support cost $49.6m. Of this expenditure, 93.5% comes from appropriation funds. In the last triennium administrative staff numbers increased by 1.1%.21

Crisis in Rural Research

2.26 Thus a crisis in rural research funding within CSIRO has been brought on by the multiple effects of reduced appropriation funding, a downturn in the rural economy, increased competition from other public research organisations, an increased administration burden and, most importantly, a shift in the priority

ranking of rural research within CSIRO itself.

Consequences of Reduced Funding for Rural Research

2.27 The Committee received many submissions which argued that the crisis in rural funding had come just at the point when the agricultural sector was at its greatest need. In particular, given that that the benefits of rural research were still enormous, the devaluation by CSIRO in its priority ranking of rural research was believed to be shortsighted and was difficult to understand. The actions of the CSIRO Board resulted in the frequent comment that 'funding allocations made by

CSIRO are not consistent with their own national research priorities' and that 'while rural research appears to have high priority, funding cuts continue to be made'.22

21 Submission 135. 22 Evidence, p. 1193.

Page 30 CSIRO RURAL RESEARCH

Direction o f Research

2.28 A major concern arising from a reduction in appropriation funding in the rural sector centres on the fact that it is usually appropriation funds that support longer-term strategic research. As expressed by ACIAR: 'It is this work which will set the scene for the last five years of the 90s and then beyond 2000, and this is what CSIRO is really all about. The strategic research currently underway in the rural and natural management sectors has contributed very significantly to the nation's economic well-being - particularly in the 'public good' areas (sustainable

development of agriculture, forestry and fisheries, land-care, clean foods, etc)'.23

2.29 Scientists were also concerned that if appropriation funding for rural research declined, the ability to conduct strategic research which would form the basis for applied research in the next decade would be severely hampered. 'We are using up our intellectual capital because there are insufficient funds and

opportunities to conduct ground breaking research'.24

Demise o f Research Programs .

2.30 Because reductions in funding are occurring in other organisations as well, the overall ability to carry out some types of research in Australia will ultimately disappear. Already, 'our ability to do certain types of work in Australia is shrinking to almost vanishing point'.25 This will in the long term have a major effect on both particular rural industries and the whole agricultural sector.

2.31 Funding from the beef industry, for example, has been decreasing over the last few years as projects have come to an end new ones are not being set up. The Division of Tropical Animal Production has suffered perpetual funding cuts

over the last seven years, the aggregate of which is now having a very detrimental effect on research programs and the Division is losing important scientists 26

2.32 From 1989-90 to 1994-95, external funding from AWRAPO to the Division of Animal Production declined from $6.1m to $1.4m. The Division has thus been forced to make cuts to every area of research in recent years. The

23 Evidence, p. 193. 24 Evidence, p. 1295. 25 Evidence, p. 313. Discussions with the Division of Tropical Animal Production, Long Pocket, Brisbane,

Friday 16 September 1994, Secretariat Notes.

SOURCES AND ADEQUACY OF RESEARCH FUNDING Page 31

Division Chief, Dr Oliver Mayo, noted: 'We have wound back our strategic work in nutrition, in reproductive physiology, in climate physiology and in mineral nutrition. ... Perhaps the only area that has not been cut is sheep breeding based on quantitative genetics'.27

2.33 Resources in the Division of Animal Health have been eroding for some time:

... three years ago the Division had 36 projects and 52% of its budget derived from outside sources. Since that time there has been a sharp decline in funding from the then Wool Research and Development Corporation (close to $1 M in one year was

lost), as well as a constant decline in appropriation funding due to factors such as efficiency dividend, award restructuring and CSIRO research priority levies. Corrections in the number of staff, mostly administration and support services, have been

made in the past two years and we have reduced to 24 projects with a total of approximately 44% external funding. Unfortunately we are faced yet again with a serious decline in resources in the coming financial year, some in external funding

but most in appropriation'.28

2.34 The Division has thus been forced to consolidate sites in an effort to avoid further redundancies of scientists and is currently in the process of moving its Parkville laboratories to the AAHL building in Geelong.

2.35 The Division of Forestry has been one of the hardest hit by reductions in funding. As stated by the former Division Chief:

Although forest products makes up a very large segment of primary industry and Australia still imports forest products to the extent of $3 billion per annum there has been until recently no industry supported research fund, and the Division has been

quite unable to meet the requirement of 30% external funding. Many significant areas of research are now being neglected, not only by the federal government but also by the state forest services, which in several states have been very seriously

depleted, and this is at a time when there are serious efforts to

27 Evidence, p. 313. 28 Evidence, p. 1354.

Page 32 CSIRO RURAL RESEARCH

replant trees and a need to understand their role in the Australian environment. ... In the face of this we have seen a reduction of staff available to do this work on a scale unequalled anywhere else in CSIRO. The Division is desperately in need of additional, and new resources.29

Loss o f Staff - Redundancies

2.36 Of the total of 400 staff retrenched from CSIRO in the past three years, 243 (61%) have come from rural Divisions. Under the current proposals a further 138 scientists and support staff will be 'lost' from the LAPP over the next three years.30

2.37 The Division of Animal Production has sustained considerable reductions in staff over the last 5 years. It is planned that, of a total of 340 staff, about 120 will be lost. Over 70 of these people have been shed already and, of these, about 20 were research scientists.31

2.38 If the current proposals within CSIRO proceed the Division of Entomology will have to shed between 30 and 50 staff, the equivalent of one of its six sections. As viewed by the Chief of the Division: 'This is intolerable, given the critical importance of the Division's research to Australia's economic and

social wellbeing. It is imperative to explore where these funds are being redeployed to, and what benefits will accrue for Australia from the proposed redeployment'.32

Loss o f Capital Investment

2.39 Over the ten year period from 1982-83 to 1992-93 there was a decline in the level of appropriation funding for capital expenditure from $112.6m to $35.3m.33 The infrastructure of CSIRO is now deteriorating, equipment is

obsolete and prone to break-down, and the ability of scientists to undertake world-standard research is being compromised.

29 Evidence, p. 909. 30 Although none will be lost from IAPP headquarters which has a staff of about 20. 31 Evidence, pp. 305, 307, 313. 32 Evidence, p. 262.

1 Submission 130.

SOURCES AND ADEQUACY OF RESEARCH FUNDING Page JJ

2.40 Industry funding of CSIRO research is based on the concept of 'marginal funding'. That is, external funds provide for salaries, small capital items and operating expenses. However, the infrastructure required to conduct that research is not provided by external agencies and must be already in place within the

research organisation. Because appropriation funds have been decreasing, less money has been put into infrastructure and thus the ability of CSIRO to make use of external funds is being undermined by an eroded capital base. Thus a cycle has developed whereby reduced capital infrastructure reduces CSIRO's ability to

attract external fund which in turn reduces CSIRO's research role and value to the industry.

2.41 The strain of reduced capital expenditure finally falls on bench scientists many of whom work with inadequate laboratory space in outdated buildings. While they must be multiskilled and see to their own administration, some do not even have adequate access to desktop computers.34

Potential Inability to Honour Obligations

2.42 A number of submissions have pointed out that if CSIRO continues to reduce its rural research capacity, its ability to fulfil its obligations to other organisations will be seriously compromised. Such organisations include ACIAR and several of the CRCs.

2.43 The CRC for the Cattle and Beef Industry (Meat Quality), for example has an integrated program of research, education and technology transfer with core partners UNE, NSW Agriculture, Queensland DPI and CSIRO in a network of 10 sites in NSW, Queensland and Victoria. The CRC has a vested interest in

CSIRO resources at Armidale, Brisbane, Rockhampton, Prospect and Parkville. At each of these sites CSIRO has committed specific staff and infrastructure resources for the seven-year life of the CRC. In particular, CSIRO has committed the resources of both Longford and Arding near Armidale to the CRC, and to the

CRC for Premium Quality Wool. Should CSIRO sell these two properties, as it proposed, 'it is difficult to see how the CSIRO's contractual obligations ... can be honoured if half the land resources are dispersed'.35

34 Submission 128. 35 Evidence, p. 889.

Page 34 CSIRO RURAL RESEARCH

Need for a Sustained Effort in Agricultural Research

2.44 Many arguments were put to the Committee that Australia needed to at least maintain, and preferably increase its efforts in rural research in the public sector. These included the following points:

. Australia had a strong competitive advantage over many other agricultural exporting nations but competition is fierce and a strong research effort is needed to maintain Australia's advantage in international markets. . The whole of Australia will benefit from rural producers remaining

successful.

. Small cuts in research will significantly reduce Australia's competitiveness with a large impact on export earnings. . Local fundamental research is required to understand Australia's unique pest, disease and weed problems. . There is a growing demand for increased post-farm-gate research to

add value to Australia's agricultural commodities. . Continuing on-farm research is needed to adjust output to meet changing market requirements. . A large proportion of rural research is related to smarter processing,

production, manufacturing and services to the agricultural sector. Given the benefits of rural research, not to maintain it will result in undercapitalisation of one of Australia's existing strengths. . The levels of benefits and subsidies to agriculture in Australia are

lower than that provided to most other sectors and they are amongst the lowest in the world for many of Australia's major rural exports. . Australia should continue to put strong emphasis on agricultural research and development on the basis that we should do more of

what we do best and because there is vast potential for agricultural development opportunities in SE Asia. • The current problem should be seen as part of a cyclic phenomena and appropriate strategies developed to ride-out the down-turn until

improvements in the rural sector occur and funding constraints removed.

Small and Medium Enterprises

2.45 It is a desire of the federal government that small and medium enterprises in Australia be encouraged and supported, and CSIRO strives to form links with

SOURCES AND ADEQUACY OF RESEARCH FUNDING Page 35

a greater proportion of this business sector. However, as pointed out by the CPSU, 'the consequences of [the] recent funding decision are inimical to these objectives, given the current and foreshadowed contraction of rural research'.

On-Farm Versus Post-Farm Research

2.46 There is a growing demand for post-farm research to help maintain Australia's competitive position in international markets. This has become evident in the allocation of rural R&D funds with five Corporations investing more than 50% of their levies in post-farm research. This shift has resulted in a dispersal of

both government and external funds to food and fibre manufacturing industries. However, the change in emphasis has not been matched by business investment in the value-adding chain.

2.47 So while both CSIRO and industry have moved away from on-farm towards post-farm, some Divisions within the rural Institutes have a very large component of manufacture. The staff of the Division of Wool Technology point out that it is 'irrational that the proposed shift in funding away from rural

research, and from the LAPP in particular, will cause the greatest disruption to the Division of Wool Technology, a Division whose activities are focussed on one of the highest priority areas of the Australian economy'.36

2.48 NSW Farmers agree that because the Division of Wool Technology is almost exclusively involved with post-farm, its research should be classified as manufacturing, a sector which is listed by CSIRO as the second major priority after minerals.37

2.49 A private agricultural company submitted that: 'If it is intended that agricultural research funding is to be reduced in the production sector with greater emphasis being placed on the manufacturing sector (for agricultural products) then it is essential that the costs and benefits of that research are

equitably distributed between those sectors. In other words, if producer levies are to be applied to manufacturing research with little flow-on benefit to producers, then this must be avoided'.38 The submission suggests that it would be more equitable to apply some form of levy structure on the manufacturing sector.

36 Evidence, p. 356. 37 Evidence, p. 422. 38 Evidence, p. 462.

Page 36 CSIRO RURAL RESEARCH

2.50 In an analysis if the Meat Business System by the Meat Research Corporation it was found that 78% of the net value added in the whole meat system was added in the on-farm sector and yet in recent years the post-farm sector has received increasing R&D funding at the expense of the on-farm sector.39 This was endorsed by the Division of Tropical Crops and Pastures when the Division Chief, Dr Bob Clements told the Committee that the Division was at the mercy of the Meat Research Corporation which was diverting its resources away from pasture research towards processing. The Division has no alternative but to follow the market direction in research.40

Other Sources of External Funding

2.51 While some rural industries contribute more than 0.5% of the gross value of their production,41 others contribute little or none. Some, such as the forestry sector, have only just instituted a system of research levies. The wool industry provides a good example of an industry where one part pays levies that benefits

another part which does not. While wool producers are keen to sponsor research, their levies are used by the Division of Wool Technology almost entirely for wool processing and garment manufacture. This suits the growers because it helps ensure continued demand for their product, but it is the manufacturers who profit most from the added-on value.

2.52 A recent example occurred in the horse racing industry which does not pay a levy towards research. When a lethal and previously unreported virus broke out at a racing stable in Queensland it seriously threatened the local horse racing industry and associated organisations causing, in a short period of time, considerable economic losses. It was only through extremely prompt and competent work by CSIRO scientists at AAHL that the disease was identified so rapidly and its spread contained.

2.53 This one example suggests to the Committee that there are other profitable industries in Australia that currently benefit from CSIRO research without making an equitable contribution. Other such industries include dog racing and the equestrian industry generally.

39 Letter to the Committee dated 10 August 1994 from J M Scott, Senior Lecturer, University of New England. 40 Inspection of Cunningham Laboratory, Friday 16 September 1994, Secretariat Notes. 41 Evidence, p. 122.

SOURCES AND ADEQUACY OF RESEARCH FUNDING Page 37

2.54 There are other, non-rural industries which have also not paid their way in contributing to scientific research, but which have benefited from CSIRO. While the Committee supports the view that CSIRO must assist these industries, it also believes that a way should be found to encourage

manufacturing, service, mining and information industries to contribute more to research. While the Committee supports the view that CSIRO must assist these industries, it also believes that some mechanism should be applied to encourage them to contribute more to research. The Committee asks that the Minister consider this issue when developing the Government's

Innovation Program.

Value of the Rural Sector

2.55 The benefits to Australia's agricultural economy accruing from rural research are not disputed and many examples were put to the Committee. There are many arguments pointing to the need for Australia to continue its high investment in rural research. CSIRO itself gives it high priority ranking. Then

why has CSIRO, and other state government bodies, been able to so blatantly reduce their contribution to rural research?

2.56 The answer lies in the fact that the benefits of rural research are often dispersed, they often come many years after the research is completed and, most importantly, much of the research is in the area of'public good'. Furthermore, the contributions of organisations such as CSIRO are consistently undervalued

because it difficult, if not impossible in some instances, to put a dollar value on the outcomes of the research.

2.57 CSIRO has spent a large amount of effort in commercialisation and patenting intellectual property. It is easy to see why. These processes clearly put a dollar value on research and everyone can see exactly what the financial outcome has been. However, CSIRO has neglected to formulate some

mechanism whereby its 'public good' research can be assessed or, if it has devised one, it has failed to use it to justify the continued support of rural research.

Page 38 CSIRO RURAL RESEARCH

Conclusions and Recommendations

Priority Setting Process

2.58 CSIRO has evolved a complicated priority setting process. Considerable administrative resources and time have been devoted to this process and it has received external acclaim from organisations who have sought to use it too. The process is ostensibly objective. Research possibilities are evaluated in terms of their attractiveness and feasibility and a list of priorities derived through the process. Yet once this list is passed on to the Board, it is exposed to the views of Board members and changed according to those views. During the last triennial priority setting process the Board changed the recommendations of the Executive Committee to exclude two of the three priority areas, and replace them with two others. That is, the Board demoted rural research from the high priority level that the Executive Committee had recommended, even though it had agreed that rural research still provided a high return to Australia.

2.59 In demoting rural research, the Board made. a decision which was inconsistent with its own priority ranking process. Indeed, the Committee believes that the Board has acted in manner inconsistent with its own stated goal of serving the public interest by maintaining a research effort in areas o f national importance.

Priority Ranking o f Rural Research

2.60 The Committee agrees with the bulk of evidence put before it that: (i) the consequences of reducing rural research funding within CSIRO have already been, and will continue to be, extremely detrimental to some vital areas of rural research; and (ii) there are many important reasons why Australia, and in particular CSIRO, should continue to give funding of rural research a high priority.

2.61 The Committee recommends that CSIRO re-instate the high priority ranking of rural research and ensure that the share of appropriation funding of rural research is increased commensurate with that ranking.

SOURCES AND ADEQUACY OF RESEARCH FUNDING Page 39

Industry Contributions

2.62 The Committee believes that, firstly, because of the changing nature of rural research, and in particular the proliferation of post-farm research, the system of rural levies must be subject to a thorough examination. Secondly, there are a number of industries which currently do not contribute to research through a

system of levies, or any other mechanism, but which benefit from CSIRO. The Committee recommends that the Government commission an independent study of the system of rural levies, which would focus on:

. (i) how they are applied to research in both the on-farm and post-farm sectors, and; . (ii) how the system could be expanded to include industries not currently contributing to, but benefiting from, CSIRO research.

Page 41

Chapter 3

IAPP RESTRUCTURING PROPOSALS

CSIRO Policy

3.1 As stated in its submission, CSIRO's 'property management strategy is to consolidate and integrate its research efforts, resources and accommodation on a minimum number of major sites. An aim is to keep the number of rural locations and field sites to a minimum, to control overhead costs. Since 1989, when the policy was agreed, the number of sites occupied by CSIRO has been reduced

from 106 to 70, and the process in continuing'.1

IAPP Restructuring

3.2 The Institute of Animal Production and Processing (IAPP) is spread across 27 sites with about 1550 staff, including about 670 support staff. When the projected triennial budget became available to the Institute's Director, Dr Alan Donald, it was clear that there would be a shortfall in appropriation funds.

Funding difficulties were already being experienced through a decline in external funding, particularly from the wool industry.2 In addition, the need for the Institute to contribute 1.5% to the 'priorities levy' and the 'once-off contribution towards a legal settlement which was levied on all Divisions in 1994, had put

further financial pressure on the IAPP.

3.3 In evidence to the Committee it was suggested that the Institute was experiencing a funding 'crisis' and that losses of $500,000 per month were being sustained.3 Although this amount was never substantiated directly to the Committee by the Institute, the Director in a Statement to Staff dated 12 May

1994 stated: 'Financial projections indicated th a t, with current infrastructure and staffing levels, IAPP could experience a financial shortfall growing at a rate of as much as $0.5m per month'.

1 Evidence, p. 15. 2 Evidence, p. 942. 3 Evidence, p. 134.

Page 42 CSIRO RURAL RESEARCH

3 .4 As a result, the Director put forward a series of restructuring proposals to reduce the number of sites and thus save on recurrent expenditure. The restructuring proposals put forward by the IAPP are consistent with CSIRO's general policy of consolidation and would result in a concentration of animal health and wool research at Geelong, and tropical animal and plant research in Brisbane. CSIRO maintained that the sale of any properties would be discussed by CSIRO with key stakeholders before any decisions were made. In its

submission to the Committee CSIRO did not refer to the specific proposals made by the Institute.

3.5 The restructuring proposals had 9 components. Of these, the Committee received sufficient representations in submissions to consider four of them controversial (marked *):

. Division of Animal Health Laboratory at Parkville to move to AAHL at Geelong; • Relocation of the Division of Animal Health McMaster Laboratory from Glebe to Prospect; • * Disposal of the Ryde site in Sydney occupied by the Division of

Wool Technology and move staff to Geelong; . Disposal of some of the Glenthome site occupied by the Division of Human Nutrition; . * Disposal of the Long Pocket site in Brisbane occupied by the

Divisions of Tropical Animal Production and Entomology and redeploy activities to St Lucia (Brisbane) and Rockhampton; . * Disposal of the Longford and Arding field stations near Armidale; . * Disposal of the Yalanbee field station near Perth; • Disposal of the Badgerys Creek field station near Sydney; and • Reduction of poultry production research in Division of Animal Production at Prospect.

3.6 In a brochure produced by the Division of Animal Health to explain to its own staff the proposed transfer of the Division's Animal Health Laboratory from Parkville to Geelong, the other Institute proposals were listed and the following statement made: 'The net result of the process will be a net reduction of one hundred and thirty eight positions including only three research scientist positions

as the money saved is used to create sustainable research positions in priority areas. ... The restructure offers the best chance for survival of rural research in CSIRO [as] it minimises the number of jobs lost, especially research positions, and it will place us in a secure financial position within three years. ... The reductions would be achieved over three years by attrition (ie. normal turnover

IAPP RESTRUCTURING PROPOSALS Page 43

from retirements and resignations), voluntary redundancies and retrenchments (as a last resort)'.4

Status o f the 'Proposals'

3.7 In evidence to the Committee the Director of the Institute, Dr Alan Donald, emphasised that the restructuring proposals were just that - proposals; and that they had only been put forward as suggestions for discussion.

3.8 However, at the commencement of this inquiry, some of the proposals appeared to be firm decisions (such as the move from Parkville to Geelong by Animal Health5) and whenever the Committee discussed the 'proposals' with CSIRO staff, or external organisations or individuals, there were strong feelings that, if there had been no opposition put up, all the 'proposals' would have very

quickly become firm decisions. In fact, the Director admitted to the Committee in evidence that, 'in the absence of convincing other argument, we would probably have proceeded'.6

3.9 When the Committee visited each of the four controversial sites it was apparent that the 'proposals' were very real to the Divisional staff involved. In some instances projects had been held in abeyance (such as extensions to the woolshed at Arding) and at all places there was a general feeling of trepidation.

3.10 The WA Subdivision of the CSIRO PSU submitted that the 'current restructuring proposals ... were being announced and were to be implemented fait accompli from the tone and attitude of the Institute management team. Restructuring proposals were prepared over a six month period in secrecy and

staff were allowed only two weeks to comment. ... This manner of introducing change does not foster good and trusting relationships with senior staff. Consequently, the seeds of distrust are sown and is leading to the deterioration of research capacity'.7

4 Evidence, p. 1359. 5 Evidence, p. 950. 6 Evidence, p. 947. 7 Evidence, p. 1332.

Page 44 CSIRO RURAL RESEARCH

Cost/Benefit Analyses o f the Proposals

3.11 Throughout the course of the inquiry the Committee was unable to obtain detailed cost-benefit analyses of any of the proposals. Furthermore, CSIRO did not provide the Committee with any financial analyses that convincingly supported the proposed changes. Some information was provided about

Yalanbee, but it was not comprehensive.

3.12 Several of the sites proposed for sale were originally purchased either partially or totally with woolgrower funds (the Arding, Longford and Yalanbee properties and the Ryde laboratory site). Although CSIRO holds the deed titles for the properties, the Wool Council was adamant that any equitable interest gained from the sales should be returned to AWRAPO.8 This meant that the amount of profit available to CSIRO was unknown, which in turn meant that cost benefit analyses could not properly be carried out.

3.13 At the end of the inquiry it was clear that the Institute had put together a set of proposals without considering them in any great detail. While this may be one way of 'testing the water', the Committee believes it has caused considerable disruption to the Divisions involved and considerable angst to the staff of those Divisions.

Consultation with Stakeholders

3.14 Communication with stakeholders was at best poor and at worst non­ existent. The NSW Farmers' Association commented: 'prior to the restructuring proposals being released to CSIRO staff on May 25th, there were only two industry bodies informed of the imminent release of the proposals, and in the case of both of these - the Australian Wool Research Promotion Organisation and the NFF, the communication was essentially of a courtesy nature, advising that the proposals were about to be released'.9

3.15 When seeking assurances that growers' equity in the sale of the field stations would be returned to AWRAPO for reuse, the Wool Council was at first

8 Evidence, p. 220. 9 Evidence, p. 427.

IAPP RESTRUCTURING PROPOSALS Page 45

assured that they would be returned, then it was told that the proceeds of the sales 'would be subject to discussion'.10

3.16 While the Institute Director, Dr Alan Donald, claimed that he had known that wool industry funds had originally been used to purchase Arding, Longford, Yalanbee and the Ryde site occupied by Wool Technology, the fact that he did not involve the wool industry when the proposals were first formulated brings this claim into question, or indicates that he had little respect for an industry that

had provided considerable external funding to his Institute.

3.17 In the proposal to sell Arding and Longford, the IAPP failed to consider the involvement of two CRCs (Premium Quality Wool and Cattle and Beef Industry), both of which had long-term future commitments to research on the properties.

Wool Technology Move From Ryde to Geelong

3.18 The Division of Wool Technology previously existed as two different Divisions (the Ryde Laboratory in Sydney was the Division of Textile Physics and the Belmont Laboratory in Geelong was the Division of Textile Industry) and

the two laboratories still work in quite distinct areas of research. The site at Ryde was originally purchased with woolgrower funds. The Committee spent half a day at the Belmont Laboratories in Geelong.

3.19 The Institute now proposes to amalgamate the two sections of the Division by moving staff from Ryde to Geelong. The Institute Director believes the move is viable, although no figures were made available to the Committee. However, both the staff and the Chief of the Division believe that the move might

not be a sound proposal and that the analysis done to justify the move cannot be substantiated.

3.20 The staff of the Sydney laboratory argued in evidence to the Committee that the move would not deliver the benefits in terms of actual savings claimed. In addition, the submission claimed that:

• it would be very disruptive to vital wool industry programs; . it does not consider the demonstrated benefits of the Division's activities;

10 Evidence, p. 223.

Page 46 CSIRO RURAL RESEARCH

. the Division has never operated in deficit; . the two sections of the division are sufficiently distinct to warrant being kept apart; and . that each section of the Division are currently located close to their

stakeholders and that this should not change.11

3.21 The Chief of the Division, Dr Ken Whiteley, noted that if the site in Sydney was closed it would be very difficult to place everyone at Geelong, although this was disputed by the Institute Director who considered there was sufficient space.

3.22 Both the Staff and the Division Chief pointed out that a very large proportion of the staff at Ryde had already indicated that they would not move to Geelong and that, consequently, most research programs would suffer. It would take at least three years to recover from the move if a large number of personnel refused to go to Geelong.

3.23 In discussions with the Committee the Chief of the Division expressed the view that the decision as to whether Ryde was relocated to Geelong depended entirely on projections of the status of the wool industry.

3.24 At the moment it was impossible to make a decision because the figures were marginal. On current projections, if the move was made, in three year's time the only savings would be minimal administrative costs and, in view of the turmoil it would cause to the Ryde laboratory, it would be foolish to make a decision at this point. The two sections of the division benefit from where they are at the moment as each is nearest to its own industry stakeholders. Ryde also benefits from being close to the Division of Applied Physics.

3.25 Dr Whiteley believes that the Division must postpone the decision until it is clear which direction the industry will take. If the industry continued on the current trend of recovery, then there would be sufficient funds, and it would be logistically preferable to leave the Ryde laboratory where it was. If the industry reverts to a downturn then consolidation may be the only viable option.

3.26 The Committee is not convinced that the Division would benefit from moving the Ryde Laboratory to Geelong at this stage, particularly in view of the disruption that it would cause to ongoing programs. The Committee recommends that the Division of Wool Technology postpone any decision to

11 Evidence, pp. 331-404.

IAPP RESTRUCTURING PROPOSALS Page 47

amalgamate its two laboratories until the question of the direction of wool industry funding becomes more clear.

Sale of Long Pocket Site (Brisbane, Qld)

3.27 The site at Long Pocket covers approximately 11 hectares and is located in the Brisbane suburb of Indooroopilly. It is owned totally by CSIRO and is shared by the Divisions of Tropical Animal Production and Entomology, the latter occupying slightly less than half of the area. The site borders a facility

owned and operated by the Queensland Department of Primary Industry (QDPI). The Committee spent half a day inspecting Long Pocket and joined staff at an informal BBQ for lunch.

The Committee Visited Long Pocket Site on 16 September 1994. L to R: Dr Ian Wright (Assistant Chief, CSIRO Division of Tropical Animal Production), Senator John Coulter, Senator Grant Chapman, Senator Alan Ferguson, Dr Pippa Carron (Research Officer), Mr Robert Diamond (Committee

Secretary) and Mr Gary Garland (Business Manager). Photo: P Carron

Page 48 CSIRO RURAL RESEARCH

3.28 Long Pocket has been valued at $6-7m as a greenfield site. Its laboratories were constructed 25 years ago and were due for a half-life refit one year ago but this has not been carried out. The site at Long Pocket is considered by staff to be excellent for research but the facilities are in dire need of upgrading.

3.29 Any profit arising from the sale of Long Pocket would go to paying out redundancies and the cost of moving to another site (possibly Rockhampton), so the only savings made would be in recurrent administrative costs. The only benefit in leaving the site would be if all the current projects ceased. If CSIRO received more than $8m for the site it would be feasible to put another level on the Cunningham laboratory and move Animal Production there. Co-location with the Division of Tropical Crops and Pastures would offer some advantages, such

as savings in administrative expenses, but that Division is not prepared to move away from the University campus where they are currently located. Tropical Crops and Pastures owns the building but not the land at Cunningham.

3.30 The Long Pocket Site offers the following features:

. Cattle handling facilities currently used for the Cattle Tick Program and Rumen Digestibility Program. . The Isolation Building (Building 21) which is currently being used for experiments with blue-tongue virus. This building is a world

class, negative pressure animal handling facility. It was built in 1975 as a prototype for the AAHL facility in Geelong. Whereas the AAHL laboratory is very expensive to run, the Isolation building at Long Pocket is relatively cheap. If the Long Pocket site was sold, it is highly likely that the facility would never be rebuilt elsewhere as it would be too expensive owing to more stringent building standards. • A large laboratory building where a range of animal production

experiments are being carried out. • An artificially created rainforest. This rainforest which covers almost one hectare was established in the early 1970's as a way of using cattle effluent. It now has several hundred rainforest species,

many of which are used by local nurseries for seed-gathering, and it is heritage listed. • A Science Education Centre which is used extensively by Brisbane school children (two school groups are accommodated each day and

7000 students use the facility each year).

IAPP RESTRUCTURING PROPOSALS Page 49

• Glasshouses and laboratories used by the Division of Entomology for biological control experiments.

3.31 When the Committee visited Long Pocket, staff of the Division of Entomology explained that when the proposal to dispose of the site was first made the Division Chief, Dr Max Whitten, was not consulted and still has no idea where its staff would be placed if it was sold. 'It is estimated that relocation

of Entomology staff and their facilities, including Quarantine glasshouses ... would cost up to $8m'.12 Several months after the initial statement, there is still talk of selling the site but no definite alternative has been proposed, and no one outside the Division is assisting Entomology to look for alternative

accommodation. This lack of consultation has had a demoralising effect on staff.

3.32 Even after visiting Long Pocket, the Committee did not have a clear picture of the advantages of its sale. Because no firm alternatives had been proposed, no proper costing was able to be done. However, the disadvantages were clear. The Division of Tropical Animal Production would lose its high

security facility with little or no prospect of its replacement, the Division of Entomology would suffer an expensive relocation, and a very agreeable research site would be lost to CSIRO.

3.33 Evidence presented to the Committee, both in submissions and during private meetings at Long Pocket, suggests that CSIRO has handled the proposal to dispose of this site very poorly.

3.34 The Committee concludes that savings arising from the sale of Long Pocket and relocation of staff from the two Divisions using the site have not been demonstrated. The Committee also concludes that the high security facility has a value far in excess of its capital value and that, in all likelihood, it would not be replaced if the site was sold. The Committee recommends that CSIRO retain

the site and infrastructure at Long Pocket. The Committee further recommends that CSIRO direct appropriation funding towards the half-life refurbishment of facilities at Long Pocket within the next three years.

Sale of L o n g fo rd and A rd in g Field Research Stations (Armidale, NSW)

3.35 The Pastoral Research Laboratory (Division of Animal Production) manages three rural properties, Longford, Arding and the property on which the

12 Evidence, p. 1006.

Page 50 CSIRO RURAL RESEARCH

laboratory itself is situated, Chiswick. The Division of Animal Health also uses the Laboratory and field stations.

3.36 The Chief of the Division of Animal Production, Dr Oliver Mayo, presented evidence to the committee that the Division was undergoing a rationalisation of programs and was moving away from on-farm research towards post-farm work. The Division had obtained increasing levels of funding from secondary industry to achieve this objective. Because of this, and because staff numbers in the Division have been substantially cut, the Division Chief had decided that the Division could not maintain such extensive field resources for what would be a much smaller part of its research portfolio.13 The sale of Arding and Longford were thus proposed.

Longford

3.37 Longford comprises 974ha of prime grazing country with good access some 50km from Armidale west of the Divide. It was purchased for research into sheep breeding in 1963 by the then Division of Animal Genetics. The property has very long meteorological, environmental and pasture treatment records.

3.38 Longford is divided into about 40 large paddocks and 60 small paddocks, and has a comprehensive system of reticulated water to each paddock. The property has been managed on best-practice principles for many years. It has very good pasture and average carrying capacity of 12,496dse, much above the district average. Given that the New England district is in its fourth year of unseasonably low rainfall, the property was in very good condition when viewed by the Committee.

3.39 The property is a focal point for district primary producers who are involved in stud assessment and the maintenance of commercial relevance of the research flocks. The property assists in maintaining strong contacts with growers

and it is used by the University to run extension courses.

3.40 Some projects, such as the selection of breeds, are very long term. One research program is in its fifth year with four years left to run. Another project is coming to the end of a 20 year program which has resulted in a new breed of

sheep - a program which could only be carried out on a large field station where

13 Evidence, p. 305.

IAPP RESTRUCTURING PROPOSALS Page 51

the flock could be bred up to a commercial size. Much of the work that has been carried out at Longford has widespread commercial application.

3.41 The Committee spent half a day at Longford and inspected the cattle handing facility, lambing shed and surgery, shearing sheds, machinery sheds, hay sheds, grain storage silos and administration block, and looked over most of the paddocks.

Arding & Chiswick

3.42 Arding (325ha) and Chiswick (1495ha) were purchased in 1945 using monies accumulated in the war-time Wool Research Trust Account and the Wool Industry Fund. On 11 September 1947 the Commonwealth Government Gazette gave official notification of the acquisition of the land by the Commonwealth for

the CSIRO. Shortly after a laboratory, which became known as the Pastoral Research Laboratory, was built on the Chiswick site.

3.43 Extensions to the complex at Chiswick were completed in 1991 at a cost of $5.8m. A financial commitment to the extensions was made on the basis that the field research stations of Arding and Longford would continue to be available. The site is managed by the Division of Animal Production but facilities

are shared with the Division of Animal Health. Arding has a carrying capacity of 3,700dse and Chiswick ll,414dse.

3.44 At Arding the Committee inspected the paddocks, shearing shed, animal handling facilities and small laboratory. At Chiswick the Committee inspected the library and laboratories and was briefed on some of the research programs including parasite control and immunity, wool quality assessment, nutritional

deficiencies in sheep, gene mapping, sheep and cattle database management, and the use of remote sensing and GIS in land management.

Management Problems

3.45 There are two main management problems presenting on Longford and Arding. Firstly, much of the fencing on both properties is over 30 years old. While they are currently serviceable, they will need replacement sometime in the near future.

Page 52 CSIRO RURAL RESEARCH

3.46 Secondly, tree die-back is widespread in the New England area. Many mature trees have died recently or are dying on both properties and there is no tree regeneration, with the exception of an area at Longford which was not originally cleared. A small Landcare grant has been approved for work on a specific area at Arding. The Farm Manager has drawn up Landcare plans for Longford, which includes concentrated revegetation in some areas and extensive

tree planting over the whole property. However, CSIRO lacks both the funds to do the necessary work and the ability to de-stock some areas because of the pressure of requests to carry out experiments on the property. Landcare projects are essential to the long-term viability of all three properties

managed by CSIRO in the Armidale area and the Committee believes that CSIRO should use this opportunity to demonstrate to regional landholders the importance of the Landcare philosophy.14

Points on the Sale o f Longford and Arding

3.47 When the Committee held a public hearing in Armidale it was abundantly clear that the matter was of great concern to a whole range of people in the New England area. A large audience attended the hearing and representations were received from CSIRO scientists, graziers, CRC partners, the Rural Lands Protection Board, the Regional Veterinarian, the UNE Vice Chancellor, the District Chamber of Commerce, concerned citizens and even a local priest.

3.48 Every submission sent to the Committee from the New England area argued against the disposal of the two properties. A comprehensive list of the reasons for retaining the properties is given in the Committee's Transcript of Evidence.15 The most important points were:

• That recurrent savings from the sale of the two properties would only amount to about $50,000 per year. • That the properties were set up as research establishments with many small paddocks. A commercial purchaser would not want to

pay for this infrastructure. • If the properties were sold and, in the future, a decision made to purchase another property, the set-up cost of creating a similar establishment would be extremely high.

14 Inspection notes taken by Committee Secretariat, Friday 5 August 1994, Armidale. 15 Evidence, p. 757-760.

1APP RESTRUCTURING PROPOSALS Page 53

. It is not feasible to carry out experiments on leased land because of the establishment costs and, more importantly, because some experiments cannot legally be carried out on private property (such as the use of unregistered vaccines).

3.49 In putting forward the proposal to dispose of the properties the Institute maintained that they were underutilised16 yet the Officer in Charge of the Pastoral Research Laboratory, Dr Dennis Watson, documented a claim in great detail showing that there was full utilisation of the properties for experimental

research.17

3.50 Much of the research that is being carried out at Longford is a

collaborative effort with the Meat Quality and Premium Quality Wool Cooperative Research Centres. These groups were not consulted when CSIRO first proposed the sale of the properties. In addition, various other organisations have financial interests in the properties having contributed to their initial

purchase and their upkeep.

3.51 The New England area has a high concentration of agricultural scientists and a number of peak rural industry bodies have recently moved their headquarters to Armidale to take advantage of the proximity of good research facilities. As argued by several witnesses, 'proposals to reduce activities and

resources in the New England region will have the potential to reduce a critical mass of rural research scientists involving CSIRO, NSW Department of Agriculture, University of New England, and the recently established CRCs. This will impact on all organisations' ability to attract and retain well qualified staff in

a rural environment'.18

3.52 The importance of retaining CSERO's rural research capabilities in a rural environment was also emphasised in submissions to the Committee. The Vice Chancellor of the University of New England argued: 'the geographic location of major research centres is of critical importance in relation to the relevance of

their research outputs and their impact. Proposals to reduce activities in the New England region including disposal of assets and a shift towards metropolitan based research activities can only be seen as reducing the relevance of much of the CSIRO rural research effort'.19 In short: 'moving agricultural scientists to

16 See for example, Evidence, p. 948. 17 Letter to the Committee dated 9 August 1994. 18 Evidence, p. 642, also p. 752. 19 Evidence, p. 642.

Page 54 CSIRO RURAL RESEARCH

metropolitan laboratories does not facilitate better communication with stakeholders'.20

Conclusion

3.53 The Committee concludes that the case for disposing of the two properties is heavily outweighed by the case for retaining them. It is clear to the Committee that the field stations of Longford and Arding play a pivotal role in rural research in the New England Region. The Committee believes that L o n g fo rd and A rd in g should be retained by CSIRO for continued field

research and recommends that the CSIRO Board immediately make public its decision not to sell either property.

3.54 Further, the Committee recommends that the Commonwealth Government provide adequate Landcare funding to allow vegetation rehabilitation work to be carried out on L o n g fo rd and A rd in g .

Sale of Yalanbee Field Research Station (Bakers Hill, WA)

3.55 In a Statement to Staff, dated 9 September 1994 (and received by the Committee that day), it was stated that 'after an extensive period of consultation with staff and industry partners, CSIRO's Board has accepted some of the recommendations submitted to it on 30 August as part of the restructuring of the IAPP. The restructuring is intended to redress a foreshadowed $16m annual funding shortfall within the Institute'. Inter alia the Board had approved the recommendation to sell 'part of the Division of Animal production's 1150-hectare

Yalanbee field station'.

3.56 Yalanbee was purchased by CSIRO in 1962. More than 70% of the initial purchase cost came from wool grower levies and since then growers have frequently donated breeding stock for research. The property was initially used by CSIRO Divisions of Plant Industry and Wildlife Research, and then by the Division of Water Resources. In the last ten years it has been primarily used by the Division of Animal Production. Yalanbee is the only CSIRO field station in the Mediterranean climatic region of Australia and its associated animal laboratory at Floreat Park in Perth is the only CSIRO wool and sheep research

20 Evidence, p. 821.

IAPP RESTRUCTURING PROPOSALS Page 55

laboratory in WA. The Committee spent half a day inspecting Yalanbee and half a day in the Mediterranean Research Centre at Floreat.

The Committee visited Yalanbee Field Research Station on 7 October 1994. L to R: Dr Norman Adams (Program Manager, CSIRO Division of Animal Production), Dr Barrie Purser (OIC Division Animal Production), Mr Robert Diamond (Committee Secretary), Senator Alan Ferguson, Senator John Panizza, Mr

John Barrett Lennard (President, Stud Merino Breeders Association of WA), Mr Bill Sandilands (Grazier), Senator Grant Chapman, Senator John Coulter, Mr Mick Poole (Head, Centre for Mediterranean Agricultural Research), Mr Phil Bullock (Property Manager), and dog Mater a, named after Peter of 'West Coast Eagles'

fame. Photo: P Carron

3.57 Yalanbee is located at Bakers Hill, 70km from Floreat and daily travel to the site is easy. The property covers an area of 1150 hectares of which 300 hectares is virgin bush in rugged terrain. It is one of the largest farms in the district but it is too small to be commercially viable on its own as a sheep or

cattle property. On average some 3000 Merino sheep and 50 breeding cows are maintained there. Yalanbee operates at a net cost of about $127,000 per annum and the value of infrastructure is estimated to be $940,000.

Page 56 CSIRO RURAL RESEARCH

3.58 The are a large number of experiments being run on Yalanbee and it operates at full capacity almost all the time. Some experiments, such as the inbred sheep flock, have been conducted continuously there for almost 30 years. The work done on the property is applicable over all the Mediterranean climate regions of Australia. In addition to providing field research facilities, Yalanbee provides stock feed for the Floreat Park animal house and because it is so expensive to house sheep at Floreat, sheep are returned to Yalanbee as soon as possible.

3.59 Estimates of possible net returns of the sale of two sections of the property were $80,000 for Location 2762 (43.7ha) and $325,000 for the Bush Block (366.3ha).21 No estimates were provided for sale of the whole block.

3.60 If Yalanbee was sold, the Institute proposed that CSIRO would have access to WA Department of Agriculture facilities further away at Katanning for wether studies only. There were no proposals for ewes, cattle or the return of laboratory animals housed at Floreat to the field. The inbred flock, a great genetic resource, would probably have been abandoned.

3.61 As with Arding and Longford, arguments were put to the Committee that the sale of Yalanbee would be neither economic nor strategically desirable. The WA Pastoralists' and Graziers' Association claimed that relocating 'to a non- CSIRO site, such as that owned at Katanning, would increase annual operating costs by more than $100,000'.22 The sale of Yalanbee was strongly opposed by the WA Farmers Federation who claimed that it would 'damage the overall wool R&D effort'.23

3.62 It is clear to the Committee that the field station at Yalanbee has more than proved its worth as an adjunct to the Floreat Laboratory and that it is currently in great demand for field projects. The Committee believes that Yalanbee should be retained by CSIRO for continued field research and

recommends that the CSIRO Board immediately make public its decision not to sell all or part of the property.

21 Evidence, p. 1156. 22 Evidence, p. 1151. 23 Evidence, p. 1192.

ΙΛΡΡ RESTRUCTURING PROPOSALS Page 57

Current Status of the Proposals

3.63 During the final public hearing of the Committee, almost as an aside, the Institute Director, Dr Alan Donald, informed the Committee that a decision had been made not to sell any part of Yalanbee, and not to sell Arding or Longford24 The Director informed the Committee that the decision was 'not secret' but

neither had he issued a public statement yet.25 That is, a public statement had not yet been made but the decision was well known, at least within parts of CSIRO.

3.64 The Institute Director knew that the Committee was vitally interested in the future of those properties, that it had visited the properties at taxpayers expense and that, within four weeks, it would announce a finding on the

recommended future of those properties. To infonn the Committee in this way suggests that the Committee was being treated with contempt.

3.65 On the next working day after the hearing, the Committee's secretariat contacted the Officer in Charge of the Pastoral Research Laboratory at Chiswick, Dr Dennis Watson, to ask whether he knew of the Director's decision not to sell Arding or Longford. His reply was that he had heard about the decision 'progressively'. That is, the likelihood of the proposal coming to fruition had

decreased over the previous few weeks, with each new 'rumour' he had heard. Dr Watson had officially requested permission to make a public statement about the properties because the matter has caused so much consternation and heartache in the Armidale region, but the request had been denied.

Conclusions

3.66 The Committee is concerned about the decision processes associated with the property sales proposals. The Committee accepts that IAPP had to address its funding problems but the manner in which the Institute approached

the problem through proposed property sales was poorly thought through, caused great anxiety amongst staff and put offside the stakeholders who had originally contributed funds towards the purchase of the properties. As an example of decision making and communication, the property sale proposals left a great deal to be desired.

24 Evidence, p. 1601. 25 Evidence, p. 1631.

Page 58 CSIRO RURAL RESEARCH

3.67 The Committee does not accept the proposition that the proposals were only 'proposals'. Nor do the scientists and other staff located at the properties believe that anything other than decisions had been made. It was for this very reason that such a strong public voicing of their concerns was made. It is to be hoped that CSIRO's administrators and administrative processes will be more astute in assessing, communicating and negotiating such proposals in the future.

3.68 With some of the decisions now 'apparently' made (and indirectly made public), the Committee believes that these are the correct decisions in relation to the contentious property sales. Having made the decisions, the Institute should have conveyed them to the scientists involved, their stakeholders and to this Committee in a more timely and appropriate manner.

Page 59

Chapter 4

COUNTERCYCLICAL FUNDING

4.1 For many years rural industry R&D corporations have levied growers in various agricultural sectors on the gross value of their production as their contribution to scientific research. In most sectors, these funds are matched by a contribution from the Federal Government on a dollar-for-dollar basis. Linking a

federal contribution to industry levies has generally worked well but problems can arise when a particularly industry suffers an unexpected downturn. Because industry contributions are paralleled by government support, downturns are exacerbated and government funds are in fact lowest when most needed. Drops in funding translate directly to reductions in research staff and once staff are lost

it is difficult to replace them quickly when surplus funds are again available.

4.2 This effect has been well illustrated by the vicissitudes of the wool industry over the last decade which had a boom period in 1989-90 (when the levy peaked at about $20m) followed by a sharp downturn ($12m in 1992-93). Because the Division of Wool Technology is highly dependent on AWRAPO

funds (53% in 1993), its budget has suffered significant cuts. The Divisions of Animal Production and Animal Health, which received about 14-15% of their budgets from this source, have also been seriously affected. Although AWRAPO acted to even out fluctuations in the dissemination of its funds, reserves have

been largely used up and now the base level is much lower than a few years ago.1

4.3 A system of countercyclical funding is one way in which the detrimental effects of this nexus could be overcome and many submissions to the Committee advocated the adoption of such a system to cushion funding reductions and allow for the orderly redeployment of staff.2 However, working out a formula for countercyclical funding would not be easy.

4.4 One option would be to calculate the Government's contribution on the basis of a moving three to five year average.3 This would require government commitment to dollar-for-dollar research support on a long-term basis, whereas at present it is only assured until the completion of the 1995/6 calendar year. The

NSW Farmers Federation conclude that, using a three year rolling average, such

1 Evidence, p. 1007. 2 Evidence, pp. 333-4, 462-3, 660, 712, 840, 1006, 1219. 3 Evidence, pp. 424, 1219.

Page 60 CSIRO RURAL RESEARCH

a system would not have a great impact because the government component is only 50% of the total funds4

4.5 A number of other criticisms of countercyclical funding have been made. The CSIRO submission suggests that it should be 'approached with caution because of doubts on the accuracy of projections of future long-term levy income and concern that such funding may mask long-term decline in the viability of an industry'.5 The WA Farmers' Federation suggested that possible disadvantages include 'the risk of greater Government influence' and 'the risk of funding decisions becoming more discretionary compared to the existing neutral arrangements'.6

4.6 An alternative to countercyclical funding would be to encourage the industry involved to manage its own system of levy accumulation and investment to enable it to provide a more even flow of research funds. The NSW Farmers' Federation recommended that R&D corporations establish a strategy of holding

greater reserves.7 This would mean that R&D corporation boards would be required to determine appropriate levels of expenditure and saving, and counter criticism from industry stakeholders that reserves were too high and that monies were locked in for too long. The submission by the staff of the Division of Wool Technology's Sydney laboratory recommended that, in addition to holding greater reserves, A WRAP could borrow money against expected future funding.8

4.7 The Grains Research and Development Corporation (GRDC) accepts that industry has primary responsibility to ensure that long-term research funding levels are maintained and has a policy of building up strategic reserves when levy

receipts are relatively high. However, it also believes that 'Government policies need to take account of the economic and social value of industries temporarily affected by severe downturn'.9

4.8 In endorsing some change to the existing system, CSIRO suggests that 'implementation might be achieved with various mixes of RDC (AWRAPO)

4 Evidence, pp. 424-5. 5 Submission 70, Attachment 14. 6 Evidence, p. 1194. 7 Evidence, p. 409. 8 Evidence, p. 360.

9 Submission 154, p 19.

COUNTERCYCLICAL FUNDING Page 61

reserves and borrowings, government funding, increased levies on growers, or further reallocation of resources within CSIRO'.10

4.9 The evidence given to the Committee clearly indicates that a

comprehensive strategy is required to assist those industries most vulnerable to wide fluctuations in research levy income. Such a strategy should include both a system of countercyclical government funding, based on a rolling average, and a system whereby rural industry research corporations can accumulate reserves and

borrow in periods of economic downturn. The Committee recommends that CSIRO, in collaboration with industry and government, formulate a package of mechanisms to buffer research programs from wide fluctuations in rural industry research levies.

10 Submission 70, Attachment 14.

Page 63

Chapter 5

EXTERNAL FUNDING

Funding Targets

5.1 External funding has existed for many years in CSIRO, particularly in the rural sector where industries have made contributions to targeted research through grower levies to ensure that research relevant to their particular problems was carried out. In 1989, the Federal Government instructed CSIRO to achieve a

target for external funding of 30% overall. This directive was the result of increasing pressure during the 1980s to make public research agencies more relevant to the economic well-being of the nation. While industry relevance has always been a strong feature of CSIRO's rural research, the application of the

external funding target to other research areas was needed to strengthen ties between CSIRO and those industries. The target was achieved by CSIRO, as an average, in 1992-93.

5.2 External targets vary quite considerably within the Organisation, with the lowest in 1993-94 being 9% (the Australian Telescope) and the highest being 60% (Division of Wool Technology).A diagram showing the relative amount of

external funding by SEO Sub Division is given in Appendix IX.

5.3 Targets are subject to negotiations between Division Chiefs and Institute Directors, and between Directors and the Chief Executive. Division Chiefs may set different targets for program leaders and all members of staff are required to participate in the Organisation's Performance Planning and Evaluation Program

when targets are assessed and reviewed.

5.4 There is no doubt that the involvement of stakeholders through financial contributions has assisted CSIRO to direct its research in a practical and commercially relevant manner. A recent ASTEC report on the operation of the

external funding target concluded: 'there is clear evidence that external earnings targets have been a strong focus for beneficial change within CSIRO'.1 This was endorsed by industry in evidence to the Committee.2

1 ASTEC 1994 On Target? Review o f the Operation o f External Earnings Targets fo r CSIRO, ANSTO and AIMS. AGPS Canberra, p.iii. 2 Evidence, p. 496.

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5.5 Because relatively high levels of external funding have been a feature of some industry sectors, the government's 30% target has not resulted in much change in some Divisions over the last 10 years. For example, wool industry funding to the Division of Wool Technology peaked at about 65% of the total Divisional budget a few years ago, dropping to 50% more recently, but research in the Division has always been very applied so that there has been little difference in the way the Division has functioned since the implementation of the government's external funding target.3

5.6 However, the target has resulted in changes in some other Divisions and controversy has arisen over the extent to which CSIRO should tout for and accept external monies. As the proportion of external funding increases a number of things can happen:

• CSIRO may lose control over the direction of its research; . there is increased emphasis on applied research and a shift away from basic research; . more time is spent by scientists obtaining grants and satisfying

reporting requirements of external bodies; . high levels of funding from one source may result in an undesirable bias in the direction of research; . scientists may be faced with difficult conflicts of interest; • external funding is inherently unreliable and may lead to

employment instability; • a large amount of appropriation money may be spent in obtaining the external funding, and; . through confidentiality agreements, scientists lose their ability to

publish and to collaborate with other institutions.

Loss of Control

5.7 Possibly the most important disadvantage of the 30% external funding target is the fact that it has given some external agencies an inappropriate influence on the direction of research. To achieve an overall target of 30% for a Division, scientists must attract a much higher percentage of external funds to provide for administrative areas, and in fact need to achieve targets of 60-70%

for their own costs. While external funding pays for salaries and ongoing expenses, it does not pay for infrastructure. Costs associated with building

3 Evidence, pp. 397-398.

EXTERNAL FUNDING Page 65

maintenance and renovations, for example, must therefore come from appropriations or be deferred.

5.8 Thus, although only partially funding the project, the client directs 100% of the effort. A typical submission gave the following example:

During the last financial year I was funded, from external sources, to perform 3 projects through industry funding. These projects pay for approximately 30-50% of the CSIRO cost of performing the research but control totally the direction of the

research that is carried out within my group.4

5.9 The full consequences of large companies funding research is that industry directs the research, not CSIRO, and some funding bodies may end up having considerable power over research scientists.5 It was even suggested to the Committee that as a consequence of high levels of external funding CSIRO was

'losing its ability to set any research agenda despite the vast efforts of management to set out strategic plans for the organisation'.6

5.10 CSIRO spends a not insignificant amount of time setting priorities, establishing research directions and formulating strategic plans. In some Divisions, because such a large proportion of program funding is from external

sources, which ultimately controlled the direction of the research, time spent by senior management planning research priorities was perceived by some scientists to be almost completely wasted. Several Division Chiefs commented to the Committee that when external funding exceeded 50% they lost control of general

research direction.

5.11 On a broader scale, there is evidence that, through the combination of line management structures and external control of project funding, CSIRO control of the direction of its rural research is haphazard. CSIRO has not focused on the 3

national agricultural zones and seems to ignore the economic analyses repeatedly produced by the Bureau of Agricultural and Resource Economics for these zones, and so avoids developing widely accepted national objectives.7

5.12 To have the grand plans of management easily rendered ineffectual by external factors calls into question the purpose and effectiveness of management

4 Submission 145. 5 Evidence, pp. 160, 339. 6 Evidence, p. 1267. 7 Submission 98.

Page 66 CSIRO RURAL RESEARCH

in CSIRO. With the ability of bench scientists to conduct research and maintain their jobs being increasingly determined by outside agencies, it was suggested that management seems to be becoming superfluous.8

Fundamental Versus Applied Research

5.13 CSIRO has always carried out research across the full spectrum from fundamental research (directed at information gathering), through to applied and developmental research. The relative proportions of each have varied over time and between Divisions according to the subject matter of the research. However, the fact that almost all applied and developmental research has its foundation in fundamental research has never and will never change.

5.14 The need to achieve external earnings of at least 30% has led CSIRO to assess the most appropriate ratio of basic to applied research. In the LAPP, for example, it was considered appropriate that about 'one third of the research is in the developmental stage for industry application, another third is well focused

strategic research that should be ready for development within 2-4 years and a further third, although well focused on perceived industry needs, is of a more fundamental nature and will take 5-10 years before it can be applied'.9 In

Divisions having a high component of public interest, a greater proportion of basic research should be carried out.10

5.15 CSIRO argued that there appears not to have been any broad change in the balance between basic and applied research, citing both the Bureau of Statistics and a recent ASTEC report in support of this statement.11 Yet in submissions to the Committee there appeared to be a great concern that a high dependence on external funding has resulted in great pressure to do short-term, applied research, to the neglect of basic research.

5.16 This theme was a consistent feature of submissions from both CSIRO scientists and outside organisations. The view was widely held that, since the introduction of the 30% external funding rule, the capacity of CSIRO to conduct basic research had greatly diminished. In summary, many people believe that short term funding encouraged short term vision.

8 Submission 29. 9 Evidence, p. 21. 10 Evidence, p. 21. 11 Evidence, p. 19.

EXTERNAL FUNDING Page 67

5.17 A number of submissions also argued that because external funding bodies do not want to fund long-term basic research, and because external funding has increased considerably over the last 5 years, much of the applied work that is being done now has its foundation in basic research which was done

in the last decade.12 A number scientists expressed the view that the 'commercialisation culture' of CSIRO was now living on the intellectual capital developed over the last 10-20 years and that reductions in the level of basic science meant that CSIRO was not developing the intellectual capital for the next

generation of scientists to draw from.

5.18 In addition, the concern was raised that the pressure to operate on external funds has reduced the time available to maintain basic scientific skills.13 As expressed by one scientist:

External funds support applied science which wants quick, specific answers which will generate rapid commercial return, but the building blocks which can be used to construct those answers are found in fundamental taxonomy and biology

studies. In recent years these building blocks have been steadily eroded as experienced scientists retire and those disciplines do not gain support from either external or appropriation funding.14

5.19 In support of these concerns, the National Farmers Federation quotes the Australian Bureau of Statistics in estimating that overall basic and strategic research accounts for less than 20 per cent of government sector payments in agriculture and that the CSIRO Institutes IAPP and IPPP have reported that a

maximum of 10% and 20% respectively of their programs are devoted to basic or public good research.15

5.20 The ASTEC report in fact warns: 'manipulating an apparently simple parameter such as the external earnings target could change the very nature of an organisation by inappropriately changing the balance between public good and

commercial research'.16 Even CSIRO itself acknowledges that 'achieving the

12 Evidence, p. 339-340. 13 Evidence, pp. 124, 160,1008, 1102, 1333. 14 Evidence, pp. 1006-8. 15 Evidence, p. 124.

16 ASTEC ibid, p. xiv.

Page 68 CSIRO RURAL RESEARCH

target has engendered some tension between strategic (including basic strategic) and applied research effort'.17

Grant Applications and Reporting Requirements

5.21 A matter of concern frequently raised by scientists was the fact that, with an increase in external funding, came an increase in grant application work and reporting requirements. In some instances, scientists were finding themselves spending more time dealing directly with external funding agencies rather than with their own CSIRO line managers.

5.22 With the ever increasing pressure to obtain external funding (or face redundancy), there is a growing tendency among scientists to apply for numerous grants to insure against failure thereby increasing considerably their administrative work as different granting bodies have their own specific requirements for applications. This has meant that some scientists have become very good at selling themselves rather than their science.

5.23 In addition, where scientific staff previously had assistants to provide administrative support they now must do most of that work themselves and must therefore become more multiskilled. These factors, combined with an increased

administrative load, has meant that a large amount of time that was previously available for research was now spent in non-research activities. Estimates of time spent in non-research activities by bench scientists were between 20-30%. Division Chiefs and Program Managers, who previously did conduct some research, spend little or no time doing it now.18

5.24 According to one submission: 'activities which either did not exist 20 years ago or were performed by administrative staff include:

• applying for funding; • preparing regular reports for funding bodies; • participating in Divisional strategic planning; • participating in CRC strategic planning, budget estimates, etc; • supervision of CRC PhD students; • making travel bookings; • ensuring application of EEO provisions;

17 Evidence, p. 19. 18 Evidence, pp. 55, 863, 1042.

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. ensuring maintenance of health and safety standards; • photocopying; • collection and distribution of mail; • typing;

• adherence to commercialisation procedures; . adherence to Performance Planning and Evaluation procedures; . processing manuscripts for commercial sensitivity; . contributing to Divisional and CRC newsletters; and . increased communication with the media and stakeholders'.19

5.25 The Chief Executive Officer, Dr Stocker, emphatically denied that time spent in making grant applications and reports was wasted time. He argued that any time spent in this way was assisting scientists to focus their work towards the needs of industry.20 The Committee notes the Chief Executive's view and agrees that all scientists using external funds must be involved to some extent in

securing those funds and in complying with reporting requirements.

5.26 However, because the administrative structure of CSIRO is so strongly hierarchical, and because obtaining external funds is highly competitive, the Committee believes that the claims made by scientists are genuine: that they are spending too much time on administrative matters

and too little time on research.

Bias in the Direction of Research

5.27 While the nature of scientific research is inherently long-term, short-term external funding brings with it considerable pressure to produce results. This means that the direction in which a research project is headed may be influenced by the need to satisfy external agents rather than by the scientific indications of the project. In addition, although there is often a high risk that the original research proposal will need modification, experimental deviation from the

original protocol is not encouraged because funding bodies have provided finance for a specific proposal. To change it might engender a lack of confidence.21

5.28 There is also the additional concern that, through the increased push to be commercially relevant, projects are being assessed on their value as patentable

19 Submission 33. 20 Evidence, p. 1616, 21 Evidence, pp. 342, 1267.

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products. The emphasis of research is moving towards what is commercially viable rather than what might be relevant to an industry sector as a whole.22

5.29 In some Divisions, despite being given high priority, some programs are not able to compete effectively within current funding processes and are being neglected as a consequence. As lamented by the Advisory Committee to the Division of Soils: 'strategic environmental research, along with other public good and higher risk areas, appears to be disadvantaged within the priority identification system described because of the lack of readily identifiable external

'champions' prepared to fund this research'.23

5.30 The CPSU is concerned that because only large companies can afford to fund CSIRO research, 'Australian taxpayers are funding an organisation (CSIRO) which helps foreign multi-nationals gain a competitive edge over the Australian companies, which have funded CSIRO with their own taxes'.24

Dilemmas Faced by Scientists

5.31 External funding and the obligation of working for two or more supervisors brings with it additional pressures, conflicts of interest and the potential for scientists to lose objectivity. The type of dilemma faced by scientists dependent on external funding is exemplified by the following scenario:

You are a scientist and you have what seems like a very good idea. You write up a research proposal and submit it to a granting body suggesting a three year project. You really do need that money because your manager has told you that you will be made redundant if you can't obtain funding and your technical assistant will also lose his job. Being a good scientist you can't wait to see whether the grant will be obtained so you do some initial investigation. You find that the good idea just won't work. Then you find that the grant has been approved.

What do you do? Do you refuse the money - and lose your job? Or do you compromise your scientific integrity - either by going through the steps proposed even though you know this to be pointless, or by using the money to do something else?

22 Evidence, p. 1219. 23 Submission 45. 24 Evidence, p.160.

EXTERNAL FUNDING Page 71

5.32 The submission concluded: 'An insecure scientist is a tempted scientist'.25

5.33 The pressure to demonstrate progress as promised to funding agencies is so great that there is a strong temptation for scientists to be over-optimistic in their claims. This form of intellectual dishonesty leaves scientists in the same unenviable position as the previous scenario. According to one scientist the

current grants system leaves them 'struggling to survive in a duplicitous milieu'.26

Effect on Stability of Research Teams and Employment

5.34 With the requirement of a 30% external funding target comes a dilemma for CSIRO Divisions: as they become more and more successful in attracting external funds their research effort becomes more vulnerable to fluctuations in

the level of those funds.27

5.35 To CSIRO scientists, increasing the level of external funding also increases the level of employment insecurity. Their concern is that if they are not able to convince an external finding agency to provide support for priority areas

determined by management they, and not management, will be held accountable and face redundancy because of it. While management may take kudos from grant application successes, it is the bench scientist who suffers from the failures. Ironically, it is those people which form the raison d'etre of the Organisation whose jobs are the most vulnerable. Staff now feel they are viewed by

management as a cost rather than a valuable resource.

5.36 Evidence showed that lack of tenure and reliance on short-term external funding was affecting the performance of research scientists. Good research takes total commitment and ideas emerge in the minds of scientists not just while they are at their laboratory bench. If a scientist has long-term job security the

likelihood of 'brain-waves' occurring is much greater than if the scientists is concerned about job security and when the next package of funding is going to come.28

5.37 There is a widespread view that the success of a scientist is increasingly being measured in terms of their ability to convince external funding agencies to

25 Submission 68. 26 Submission 98. 27 Evidence, p. 424. 28 Evidence, p. 342.

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provide funds, rather than on their ability to conduct competent scientific research.

Expenditure of Appropriation Funding

5.38 The servicing of grant applications requires some funding from appropriation sources and when numerous grant applications are made the amount of appropriation money spent can be quite high. The recent ASTEC report highlighted this problem and was 'reluctant to recommend higher targets because of the risk (at least in the short term) that too much appropriation money could be diverted to achieve the target [which] would place at risk the intellectual capital and longer term research which is the key to the effectiveness of the organisations [CSIRO, AIMS and ANSTO], as well as adversely affecting research programs of national importance and public good'.29

5.39 Recently a report of the Auditor General found that CSIRO was not adequately identifying the cost of obtaining and managing external funds. The report commented 'adequate measures of the performance of CSIRO in managing its external funds generation activities have yet to be developed'.30

5.40 As put in one submission to the Committee: 'The RIRC's seem reluctant to fund integrated programs of research, leading to piecemeal and fragmented work. They refuse to meet the full cost of research, thus parasitising the infrastructure of CSIRO. A 1991 ASTEC report on funding the fabric of research also concluded that the external funding arrangements were leading to insufficient maintenance of research infrastructure.'31

5.41 Ironically, in reverse, industry sectors have complained that because CSIRO has such a large bureaucratic structure, too great a proportion of private funds were being used to support administration. The submission by the NSW Farmers cited an example where the Meat Research Corporation had taken over

a CSIRO Division in Queensland because the Corporation was funding a very

29 ASTEC ibid p. xiii. 30 The Auditor General Audit Report No. 1 1994-95 Project Audit. CSIRO - Follow-up o f an Efficiency Audit o f External Funds Generation. Australian National Audit Office AGPS 1994.

31 Submission 29, p. 2.

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large portion of the Division's budget, yet much of the funding was being taken up in administrative expenses.32

Publication and Collaboration

5.42 The excellence of scientific research has long been judged on the basis of peer review through national and international scientific publications in journals of high repute. As each scientist builds a reputation through publications, invitations to present papers at symposia and to visit other research

establishments follow. These universal criteria of assessment of scientific merit were once important, and still should be important for strategic research, but are being inexorably eroded by the short-term funding system and commercialisation.

5.43 O f concern to the CSIRO Division of the Public Sector Union (CPSU) was the fundamental philosophical division between market forces and scientific method. As explained in the CPSU submission:

Market forces do not just dictate costs and prices. They require commercial secrecy, competition and implicit or direct restraint on individuals or organisation in order to protect the commercial viability of an enterprise ... scientific method

implies disclosure, publication of research results, open comparison, peer review and transparency. The increasing incidents of commercial in confidence at research diminishes the ability of CSIRO to communicate precisely what research

and what benefit is arising from its activities.33

5.44 This sentiment was echoed by many scientists individually when they expressed concern that increased commercialisation of CSERO's science was hampering free communication and collaboration between scientists and open discussion of research findings and controversial issues.

5.45 Commercial-in-confidence agreements restrict scientists' ability to publish results in journals, to participate in conferences, to collaborate with peers, and to release information to media such as newspapers, radio and television. Commercial embargos placed on research findings not only frustrate scientists

32 Evidence, p. 419. 33 Evidence, p. 161.

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but severely limit collaboration with other researchers in the field. The combined effect is to hinder scientific progress.34

Conclusions and Recommendations

5.46 The 30% external funding target applies to CSIRO overall. Because some sections of CSIRO obtain little or no external funding, other sections must obtain over 50% to produce an average of 30%, and some sections in fact obtain much higher proportions, up to 100%. While some Divisions are well suited to very high levels of external funding, there are other Divisions where external funding has inadvertently but inappropriately taken control of research direction.

5.47 The 30% external funding target is deeply resented by some scientists because, while their jobs are perpetually at threat, the jobs of those people who manage them are not. Overwhelming evidence was given to the Committee, both in private and public session, of widespread concern within CSIRO that this level of external funding is creating a climate of employment uncertainty and loss of research control in some areas. .

5.48 The Committee believes that, while there have been significant benefits associated with the external funding target, particularly in focusing CSIRO towards the needs of industry, there also have been some considerable disadvantages. The Committee believes that CSIRO has not adequately addressed these negative aspects and, more importantly, has not sufficiently taken note of the concerns of its scientists. The Committee considers that CSIRO has taken a too rigid approach to external funding and should now have a more flexible attitude.

5.49 The Committee recommends that the CSIRO Board conduct an assessment of the way in which the 30% funding target has altered the ratio of fundamental to applied research.

5.50 The Committee believes that, in some sections of CSIRO, the demands of obtaining external funds are placing considerable stresses on scientists and that this is hampering their research. The Committee recommends that CSIRO address this problem by developing multidisciplinary teams within Divisions to assist with obtaining and

34 Evidence, pp. 334, Submission 138.

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retaining external funds. The Committee further recommends that management play a stronger role in external fund raising.

5.51 The Committee urges the CSIRO Board to take this new

management responsibility into account when it conducts the review recommended in Chapter One of this Report.

Page 77

Chapter 6

COMMERCIALISATION OF RESULTS

6.1 CSIRO has a responsibility to translate its research into practice for the ultimate benefit of Australia. This means not only turning research results into profitable industrial products or processes, but also includes ensuring that improved practices are adopted in rural industries, and socially beneficial

processes or services in public health and environmental protection are adopted.

6.2 Recently CSIRO extended the concept of 'adoption' of research results to one of full commercialisation and over the last 10 years the Organisation has become considerably more focused to this end both through its own commercial activities or through arrangements with other businesses. It is CSIRO policy to

involve industry groups in its research programs from their conception and considers time spent in this way to be essential.1

Adequacy of Structure for Commercialisation

6.3 It is now clear that CSIRO embraced commercialisation without being adequately prepared. The Organisation was commercially naive and lacked sufficient personnel with expert knowledge in commercial and legal practices. Senior scientists were thrown into commercial transactions without adequate

training and the Organisation was seriously understaffed in terms of corporate lawyers. Business managers were appointed with little or no experience in commercialisation or the business world.2 Problems arose in part from the fact that the decision to increase commercialisation came at a time when there was reduced appropriation funding and a devolution of costs to the Divisions.

6.4 In response, CSIRO disbanded Sirotech, its commercial arm which it had formed in 1983/84, in favour of the establishment of a Corporate Business Department and dispersion of commercialisation responsibilities to Institutes and Divisions. Most Institutes now have a commercialisation manager and most

Divisions have a Business Manager who works with research managers on the development of commercial arrangements. In addition, a comprehensive and confidential Commercial Practice Manual has recently been developed.

1 Evidence, pp. 1618, 1636. 2 Submission 108.

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6.5 However, while CSIRO states in its submission, 'there is now a considerable base of expertise and experience in commercialisation processes'3, this was debated in many submissions to the Committee. It was argued that CSIRO still lacks the expertise and funding to competently undertake both research and development at the level of commercialisation it now appears to be attempting. Further points made were that:

. producing policy documents does not turn scientists into experts in commercial activities; . diverting scientists and resources to commercial activities means that research inevitably suffers, unless additional funding was

provided;

. using scientists as commercial partners was not efficient, particularly if it involved the current practise of diverting the more senior and experienced research scientists; and . there was still a need for firm policies on, for example, law suits and

adequate resource allocation to commercialisation.

6.6 The question of resource allocation was raised in several submissions with the point being made that CSIRO's original brief was to do 'research' for the benefit of Australia but now it was being asked to carry out 'development' for the benefit of Australia without associated changes in its funding structure. These

submissions pointed out that that it was well recognised that developments costs were often of an order of magnitude many times greater that the original cost of research.4

6.7 The CPSU suggested that if the government was committed to commercialisation it should acknowledge the risks, provide adequate financial support and indemnify CSIRO for any losses arising from commercialisation during a determined period of transition.5

3 Evidence, p. 23. 4 Submissions 87,107,138. 5 Evidence, p. 156.

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Benefits and Costs of Commercialisation

Benefits

6.8 In some areas CSIRO has been spectacularly successful in the application and commercialisation of its research. For example, the Division of Wool Technology has made direct links with major companies overseas for the sale of its Australian made Sirolan-Laserscan and Sirofast systems of quality control and

Sirolan-LTD system of dyeing.6

6.9 There are other, less tangible benefits flowing from a commercial approach to technology transfer. Among these are that:

• it ensures a professional approach to the research program; . it ensures commitment of all parties; • it provides an early evaluation of the worth of a project; • it ensures a close working relationship between parties; and

. it frequently provides returns through royalties and licences.7

6.10 CSIRO does not seek to maximise the returns to itself, though a fair return on investment is expected. As yet, relatively minor amounts have been received from licences, royalties and equity holdings.8 The average amount for patents royalties and licence fees over the six year period from 1987-88 to 1992­

93 was $4.6m and the average for sale of new products and processes was $0.36m.9

Costs

6.11 The cost to CSIRO of its intense push towards commercialisation so far appears to be quite high. Suggestions have been made that, when infrastructure costs and losses through litigation are taken into account, they far outweigh any

profits. The example was given that CSIRO was spending about $5m annually maintaining its patents portfolio which brought in about $3m.10

6 Evidence, p. 364. 7 Evidence, p. 366. 8 Evidence, p. 24. 9 Submission 70, Attachment 21. Note: figures have been averaged.

10 Evidence, p. 1301, Submission 130.

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6.12 Some submissions argued that the push for CSIRO to increase its commercial involvement had not been achieved lightly and that the benefits were dubious. Disadvantages, such as the swing towards projects that offered high immediate commercial returns instead of long-term basic research where benefits are uncertain, were highlighted.11

6.13 Scientists in particular argued that CSIRO should be a research organisation, not a money making business, and that it was staffed by some of the best scientists in the world. It was not staffed by the best businessmen in the world.12

6.14 ACIAR was concerned that where CSIRO was involved in

commercialisation, the emphasis should be on ensuring that innovations were developed in Australia by local companies. Although CSIRO should receive benefits, this should not become an overriding factor if Australia's national needs were being adequately met.13

Litigation

6.15 The consequences of CSIRO's naive approach to commercialisation was two extremely expensive legal cases, Cassegrain and Charter Pacific, both of which were settled by mediation. The former cost $9.5m, of which some $3.5-4m was for legal costs.14 The cost of the latter has not yet been publicly disclosed. In evidence the Chief Executive, Dr John Stocker, assured the Committee that since that time commercial practices have been considerably improved. He did however point out that, as with any corporation, there was still the potential for some level of litigation.

6.16 However, news of the magnitude of these two payouts justifiably led to considerable concern among scientists, other organisations and the general public.15 ACIAR agued that the outcome of the two cases suggested that CSIRO should continue to do what it does best - strategic research for the national

good.16

11 Evidence, p. 12129, Submission 126?. 12 Evidence, p. 1103. 13 Evidence, p. 196. 14 Senate Estimates Hansards 15 November 1994, p.E39. 15 Evidence, pp. 787, 1104 & 1219. 16 Evidence, p. 196.

COMMERCIALISATION OF RESULTS Page SI

6.17 Scientists have been justifiably annoyed by the fact that all Divisions were levied to cover the legal expenses, yet had the joint venture been a success only the Division responsible would have benefited. After reductions in both appropriation and industry funding, this levy has been difficult for some scientists

to accept. In addition, despite the corporatisation of CSIRO, there was no management accountability for the massive litigation loss sustained, yet redundancies did occur among scientists.

6.18 Concerns were expressed that legal action against CSIRO was a major threat to the long term security of the Organisation. If CSIRO needed to be involved in the developmental side of science then more comprehensive business structures were needed. CSIRO is still unprotected against litigation and there

appears to be no limit to its liability which will in the end be borne by individual scientists, either through job losses or reduced research options.

Rural Sector

6.19 Many submissions to the Committee expressed the view that there was a very large component of public good in rural research, that agricultural research has a high benefit/cost ratio, that the public good component was not amenable to commercialisation, and that commercialisation in the rural sector should be left to

private enterprise. In rural industries, adoption of research results for grower benefits should be CSIRO's first priority and efforts to commercialise should not jeopardise that process.17

6.20 ACIAR expressed concern 'that there are considerable risks that the current pressure for the Divisions engaged in rural research to become more commercial (for what is recognised can rarely be more than a small return) will inevitably jeopardise what they have really been set up to do - namely, vital

public good research of national significance'.18

6.21 Concern was expressed that, because there had been a decline in State department of agriculture extension services, both CSIRO and RIRFs had been forced to search for another way to deliver the results of research to farmers. Both have developed a policy of seeking a portfolio of intellectual property

through patents. This is then used to develop products that can be sold back to

17 Evidence, p. 127. 18 Evidence, p. 196.

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the farmer. In essence, both CSIRO and RIRFs have spent farmers' research dollars to develop products that can be sold back to the farmers.

6.22 A good example of this is genetic livestock improvement. As argued by Dr R Woolaston: 'there is a strong argument that this type of research should only be funded through appropriation and Rural Industry Research Funds, so that the

costs can be directly apportioned to all producers and the community, the beneficiaries. A further charge for the provision of this information is neither appropriate nor practicable'. 19

Distributions to Divisions

6.23 CSIRO's policy is that, up to a threshold (set at $10 million in 1991) all monies received from equity sale or income are paid at the discretion of the Chief Executive to the Institute involved for allocation by the Director. Above the threshold, monies are shared between the originator's area and the Organisation corporately, based on a proportion agreed by the Chief Executive on the advice of the Directors.

6.24 This formula, while giving the impression of fairness, means that benefits of commercialisation largely flow to those Divisions where there are large private clients. Other Divisions, which have a diffuse client base, or which service industries with small to medium sized enterprises are at a disadvantage because of the fixed costs of interaction with each commercial entity.

6.25 In addition, several submissions commented on the fact that losses through recent legal settlements had been disbursed across the Organisation making 'victims of the innocent'.20 However, effective from 1993-94, CSIRO policy is that such costs are to be funded on a user-pays basis. 'There is provision for corporate support to be sought, when the cost is unavoidable or unreasonable to avoid, and when the cost item was unforseen at the time a balanced triennial budget was prepared, or when the cost item has since become of corporate

concern'21

19 Evidence, p. 820. 20 Submission 29. 21 Evidence, p. 25.

COMMERCIALISA TION OF RESULTS Page 83

Conclusions and Recommendations

6.26 The Committee concludes that CSIRO aggressively pursued commercialisation without first establishing a suitable structure and without adequately preparing its staff for commercial transactions. For this the Board and senior officers must be held accountable.

6.27 The Committee believes that to retain a high degree of relevance CSIRO must continue to pursue commercialisation. However, this must not be at the expense of sound scientific principles and fundamental research. The Committee recommends that CSIRO develop performance indicators

other than saleable intellectual property to assess the delivery of benefits of CSIRO research to the Australian community.

6.28 Despite recent lessons in litigation and despite the production of a Commercial Practice Manual, the Committee believes that CSIRO still does not have sufficient structures and mechanisms in place to prevent legal liability emanating from one area having a significant detrimental impact on

other areas of CSIRO. The Committee recommends that the CSIRO Board commission a study to determine further ways in which CSIRO can limit its legal liability arising from commercialisation of its research.

6.29 The Committee believes that the concepts of 'commercialisation' and 'development' have been confused by many people in CSIRO and outside the organisation. While the Committee believes that CSIRO has an active role in the commercialisation of its research (through licensing agreements,

patenting, etc), but that CSIRO should not play a strong individual role in development of marketable goods and processes. The Committee recommends that CSIRO clarify its respective roles in 'commercialisation' and 'development' and make its policy in these areas clear to its staff and its

stakeholders.

6.30 The Committee believes that CSIRO has not sufficiently upheld its role in the adoption of research findings in the rural sector, particularly in the light of the diminishing role of state agricultural extension officers. The Committee recommends that CSIRO examine ways in which its research

results can be transferred to the rural sector, given the demise of state extension services.

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7.5 In support of this claim a number of CSIRO scientists pointed to instances where very great efforts have been made to provide the public with information about scientific research.2 Honorary Research Fellow, Dr Max Day, asserted:

... that at all levels the Organisation does its utmost to make the community aware of its results. Whether you consider the regular Open Days, like BIOS in the ACT, or the Double Helix Clubs in schools around Australia, or the popular publications like Rural Research or Ecos, or the frequent and obviously successful visits of school classes to the research laboratories, it is difficult to see what more can be done.3

7.6 On the other hand, however, quite a number of submissions claimed that CSIRO was failing to communicate well, both with its stakeholders and the public, and internally with its staff. Most of the criticism stemmed from the low level of efficiency of CSIRO's communication structure and the lack of effectiveness of its 'communicators'.

CSIRO Communicators

Number and Structure o f CSIRO's Communicators

7.7 CSIRO has a large number of people working on communications. In addition to the 'communicators' employed by the Divisions, there is a Corporate Communication Head Office in Canberra (Limestone Avenue), a CSIRO Information Network in Lindfield, supported by Regional Managers in 6 states, an Education Office based in Canberra with Regional Managers in all states, and in some Institutes (including IAPP, IPPP and INRE) a Communications Manager. The IAPP, for example, has an annual budget of $190,000 per annum for two people.4

7.8 Despite the great number of people involved, many criticisms were received about the effectiveness of CSIRO's communications network and, in particular, quite a number of witnesses argued that there were too many

2 Evidence, pp. 334, 1009, 1104. 3 Evidence, p. 911. 4 Submission 89 (confidential).

COMMUNICA TION Page 87

communicators in CSIRO compared to the number of research scientists. Parallels were drawn between the number of staff journalists on a large daily newspaper, and their output compared to CSIRO's less impressive effort.5

7.9 The Honourable Murray Nixon, MLC, was particularly scathing in his comments:

Neither the CSIRO nor ultimately the taxpayer is getting much value from 150 supposedly specialist communicators costing $5.5 million and whose energies appear directed to unnecessary internal communications and the production of wasteful

brochures, internal magazines and video material... The CSIRO ... is signally failing to communicate its research achievements to the agricultural community.6

7.10 Recommendations were made to the Committee that the number of CSIRO's communicators should be more than halved, to no more than two per large Division, that the positions of Communication Managers at Institute and Division Level should be abolished, and that the Corporate Communications

office in Canberra should be disbanded.7

7.11 Journalist Julian Cribb suggested that CSIRO 'should replace its costly assemblage of glossy reports and publications with a high-quality popular science magazine (and CD-ROM) aimed at industry, students and the public'.8 With regard to the structure of communicator positions, Mr Cribb recommended that

all CSIRO communicators be centralised in a single unit with its own budget and reporting direct to the Chief Executive. While this suggestion may have some merit in terms of the development of skills and the creation of a career structure for communicators, the Committee believes that it is important for

each Division to have some degree of independence in communications.

7.12 Although it was suggested several times in evidence that CSIRO had about Ί50 communicators' this figure is wrong. In a letter of clarification from CSIRO to the Committee the following information was given.9 An audit of CSIRO's communications effort, completed in 1992, estimated that there are

5 Evidence, pp. 67, 1131, 1270. 6 Evidence, p. 1242. 7 Submission 89 (confidential). 8 Evidence, p. 1514.

9 Letter to the Committee dated 28 November 1994 signed by Marie Keir on CSIRO Publicity.

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fewer than 100 communicators in CSIRO out of a total of over 7000 staff. These communicators are located mainly in CSIRO's Divisions and Institute Offices to handle industry inquiries, prepare industry newsletters, scientific and industry seminars and publications and to respond to requests for information. Divisional communicators spend about 10 per cent of their time on public communication and only half of that would be devoted to efforts to persuade the mass media to publish articles about CSIRO.

7.13 CSIRO employs two journalists whose principal roles are in media liaison and another journalist who edits the CSIRO publication CoResearch. Other staff in the Corporate Public Affairs group, arrange exhibitions, business breakfasts, CSIRO's Annual Report and Strategic Plan, and education activities. In addition, CSIRO's Information network of 7 staff handles 40,000 public inquiries each year and offers support for CSIRO's public events in each city.

Qualifications o f Communicators

7.14 Strong evidence was presented to the Committee that all CSIRO 'communicators' should have professional communication qualifications - the main prerequisites being proven journalistic experience, a strong sense of what was newsworthy, and strong interpersonal networking ability.10 This isn't the

case now as a significant number of communicators either lack formal training or relevant experience in journalism external to CSIRO. This is because many of these positions have been filled by scientists to avoid redundancy and who do not have the necessary skills to communicate their research in an appropriate fashion to the wider public and to their clients.11

Media Statements

7.15 Communicators within CSIRO have the job of issuing media statements. However, these statements must be authorised before release by several people and often delays are so protracted that sometimes the information doesn't get out at all. For example, in the IAPP, 'media releases drafted by a Divisional Communicator [must] be approved by the scientists concerned, the Assistant

10 Submission 89 (confidential). 11 Evidence, pp. 1270.

COMMUNICATION Page H9

Chief Scientist, the Divisional Communications Manager and Chief Scientist and finally by the Institute Communications Manager and Institute Director'.12

7.16 Rebutting a similar criticism, the Institute Director, Dr Alan Donald wrote to the Committee: 'Because of their wide distribution, media releases are checked for scientific accuracy by competent research staff, by the Communications manager for effectiveness and sensitivity, and sent for

information and approval to the Divisional Chief and Institute Director. ... approvals rarely take more than a few days at most'.13

7.17 Journalist Ms Deborah Rice described in evidence to the Committee the frustration of trying to communicate with CSIRO. She maintained that CSIRO's poor record of media communications was across all sectors that she had dealt with, not just in the rural sector, and that it was a function of the unwieldy nature

of the Organisation's structure as well as the fact that CSIRO communicators did not know how to communicate effectively with the media.14

7.18 Despite the frustration felt by some journalists, CSIRO does manage to obtain a wide press coverage. 'In the six months March to August 1994, there were 338 articles generated by CSIRO in metropolitan papers, 22% of which dealt with agricultural research. There was extensive coverage in rural papers

over the sane period. These items did not include CSIRO's own publications, for example, the monthly CSIRO Business insert in the Business Review Weekly and the quarterly journal Rural Research. In the same six months there were 514 spots on radio and TV, 26% of which related to agriculture'.15

Statements by Scientists

7.19 Strong concerns were expressed to the Committee that, with the introduction of 'communicators', greater restrictions were now being placed on individual scientists thus reducing their ability to interact freely with the media, politicians and the general public.

12 Submission 89 (confidential). 13 Information provided by Dr A Donald to the Committee in response to comments made at Brisbane hearings, dated 3 November, signed by Marie Keir, Acting Principal Secretary, attachment p. 1.

14 Evidence, p. 1127. 15 Letter to the Committee dated 28 November 1994 signed by Marie Keir on CSIRO Publicity.

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7.20 More significantly, evidence was put before the Committee that 'rural research Divisions are being muzzled at virtually [all] levels by at least one Institute Director, thereby preventing their traditional free and open interaction with the media, politicians and other public figures - unless permission has been granted to do so'. ACIAR, in making this assertion, claims that it considers such practices 'highly counterproductive' and that they 'will serve only to isolate CSIRO from the community'. ACIAR recommends that 'the newly-introduced restrictions should be ... discarded as a matter of urgency'.16

7.21 The submission by the Australian Society of Plant Physiologists noted: 'the present dilemmas faced by Divisional Chiefs and their management committees were given an added poignancy by a directive from at least one CSIRO Institute that CSIRO Corporate Centre would formulate a response to your Senate Committee, and that Divisions were not to respond unilaterally. To

the best of my knowledge, the substance of that Corporate Centre response has not been revealed to Divisional Managers or Research Staff.17

7.22 The Committee believes that, with the exception of obvious legitimate restrictions on commercial-in-confidence matters, CSIRO scientists should have the ability to promote their activities as widely as possible and that the system of using specialist 'communicators' should not mean that all other scientists are forbidden to speak publicly.

Internal Communications

7.23 It was clear during the course of the inquiry, and particularly during inspections when members of the Committee spoke individually with CSIRO scientists at laboratories and field stations, that communications within CSIRO were unsatisfactory. This was particularly evident within the Institute of Animal Production and Processing. From the level of Division Chief downwards, concerns were expressed that decisions had been made by senior management without consulting scientists and, more importantly, with insufficient regard for their views.

7.24 The fact that, at the final public hearing of the Committee, after the tabling of 46 submissions, 14 of which were from CSIRO scientists themselves, the Chief Executive could claim that nothing of value to CSIRO had come out of

16 Evidence, p. 197. 17 Submission 98.

COMMUNICATION Page 91

the inquiry so far,18 illustrates the lack of regard with which senior management holds the opinions of its own bench scientists, the mainstay of the Organisation. Although acknowledging the intelligence of his scientific corps, Dr John Stocker's comment would indicate that there was little value in their ideas or their

concerns.

7.25 The Committee believes that this high level of disregard epitomises the attitude held by some senior managers and, in particular, by the Chief Executive Officer and the Board, that CSIRO should be governed in strict line management, from the top down. The Committee believes that this

attitude has led to distrust of senior management, and discontent and concern among research staff.

Communication with the Rural Sector

7.26 Lack of communication seemed to be a particular criticism of the rural sector in Western Australia where CSIRO scientists, the WA Farmers' Federation, the Member for the Agricultural Region, the Hon Murray Nixon MLC, and journalist Ms Deborah Rice, all maintained that CSIRO had failed to

communicate even adequately with primary producers.19

7.27 However, this was not the case in Queensland where witnesses maintained that rural communication had been good.20 This discrepancy may be partly explained by the fact that, in the past, a large amount of communication of CSIRO work was transmitted to the rural community via state agricultural

department extension services and, over recent years, these services have suffered considerable cutbacks. It is possible that the efficacy of CSIRO's communication with the rural sector may partly be a function of the efficacy of each state's extension services.

7.28 More importantly, however, was the strong criticism that arose from the poor level of communication emanating from the office of the IAPP Director in the matter of the Institute's restructuring proposals. The WA Farmers' Federation commented: 'CSIRO's public announcement about its intention to sell a number

of assets, which had been largely grower funded, prior to any proper consultation with AWRAPO or the Wool Council of Australia is proof that a serious problem

18 Evidence, pp. 1587, 1647. 19 Evidence, pp. 1128, 1196, 1242, 1270, 1301. 20 Evidence, pp. 1009, 1104-5.

Page 92 CSIRO RURAL RESEARCH

exists'.21 And the NSW Farmers' Association submitted: 'the recently announced restructuring proposal for the IAPP has been a case where the communication effort of the CSIRO has been found to be seriously deficient'.22

7.29 As discussed in Chapter 3, the Committee believes that the Director of IAPP showed poor judgement in allowing a set of 'restructuring proposals', which directly affected several important stakeholder organisations and Cooperative Research Centres, to become public knowledge before consulting properly with those organisations. The Committee also believes that the inefficient handling of the IAPP

restructuring proposals, through inadequate communication and consultation with staff, also contributed to a decline in the morale of some of those staff.

Conclusions and Recommendations

7.30 The Committee believes that in employing 'communicators' CSIRO has not adequately defined their role. Over the whole breadth of the Organisation, the position 'communicator' represents a wide variety of functions. The result has been that the output of each communicator has largely been a function of the specific skills of each individual communicator. While this has worked well in some Divisions, there are instances where communicators have been requested to fulfil roles for which they are not appropriately qualified and because the job of communicator has not adequately been defined expectations of their performance have varied. Thus to be competent and well respected communicators need a range of skills.

7.31 It has been made evident to the Committee that some communicators currently employed do not have the right mix of skills for the work that is expected of them. Moving scientists into the role of communicators in some instances has not been an effective means of communicating with the wider community. An effective balance may require scientific writers and commercial journalists working together, or commercial journalists with a strong scientific

background.

7.32 The Committee recommends that the role and responsibility of CSIRO 'communicators' be more clearly defined and that CSIRO ensure

21 Evidence, p. 1196. 22 Evidence, p. 427.

COMMUNICA TION Page 93

that people employed as communicators either have the necessary skills to do the task or that they receive appropriate training for the position.

7.33 The Committee believes that CSIRO has not adequately prepared its scientists for an increased role in external communications. Over the last 10 years there has been a dramatic change in the role that scientists must play towards funding agencies and towards the general public. If they are expected to

communicate with these groups on a frequent basis they must be given the skills which will make them more adequate to the task. The Committee recommends that CSIRO ensure that those scientists who are required to communicate regularly with stakeholders and the public have the necessary skills to do so.

7.34 The Committee believes that the current procedure used to approve media releases is cumbersome and causes unnecessary delays which can deny CSIRO important promotional opportunities. The Committee recommends that CSIRO review the procedures used for approval of media

releases with a view to increasing the speed with which they can be issued.

Page 95

Chapter 8

THE CSIRO SCIENTIST'S PERSPECTIVE

Science as a Career

8.1 CSIRO scientists in the rural Institutes raised their concerns about what they perceive as serious problems with science as a career. The concerns as expressed to the Committee relate to:

. recession induced cutbacks; . reduced appropriation funding in some areas; • difficulties of obtaining external funding in the face of declining agricultural commodities and prices; • redundancy among skilled scientists; . reduction in career opportunities for scientists in Australia; • increasing dependence on short-term funding;

• reduced periods of tenure; . erosion of basic wage; • payment of personal contributions to conference expenses; • decreased travel and accomodation allowances; and

• decline in support from state extension services.

8.2 While scientists may be employed on a tenured basis this does not have the connotation of security that it once had. The tenure award provides for indefinite employment, but redeployment and redundancy provisions exist and the use of these provisions by senior management has grown at an alarming rate

over the last few years. Redundancies have increased partly because of changes to research programs arising out of the 30% external funding target and partly because of inadequacies in CSERO's workforce planning. There is a strong perception among scientists at CSIRO that tenure does not equate with

employment security as it did in the past.

8.3 An increasing number of scientists are employed on a contract basis but these appointments are now made for a relatively short term (often 3 years) and there is little continuity. Continued employment depends on successful grant applications and therefore many careers are based on a temporary grants system

with an inherently uncertain future.

Page 96 CSIRO RURAL RESEARCH

8.4 A scientist is not fully trained until about 30 and in the current climate of 'voluntary' redundancies scientists are often faced with retirement at 55. Without the security of tenure, many excellent research scientists have left CSIRO for

universities or state agriculture departments, or for overseas.1 The average age of scientists in CSIRO is dropping and, while this is not a problem in itself, some Divisions are suffering a serious loss of corporate wisdom and experience. The era of 'world experts' is over because no one can pursue the same subject for long enough to become an expert.

8.5 Loss of government scientists is a considerable waste of taxpayer money because there is a minimum of 10 years training at public expense for each scientist. It takes at least three years to re-train a good scientist from one field to another. To commence an entire program from nothing would take at least five years before it was producing substantial results. Thus the community money

invested in scientists is enormous and care needs to be taken to preserve trained personnel.2

8.6 There is widespread belief that these conditions, and the reduced status of science in Australia, are now reflected in university entrance standards with agricultural science having one of the lowest TEE entry score requirements. This is evidence that the profession has little attraction and clever students are choosing different career paths. The consequence has been a decrease in the quality of students entering science in universities than in previous decades.

8.7 With such a high degree of employment insecurity, scientists themselves are pessimistic about their long term future and it is difficult for them to encourage the careers of young scientists into agriculture with any enthusiasm, which could affect Australia's tradition of excellence in research.

Conditions o f Employment

8.8 Evidence was presented to the Committee that conditions of employment of CSIRO scientists have declined over the last 10 years. In 1989, the salaiy of a CSIRO scientist was 40% less than it was in 1974 compared to the average male wage. Since 1989 there had been only a 16% 'catch up' pay rise. CSIRO

scientific and technical staff are denied the bonus payments and allowances made

1 Evidence, p. 1334. 2 Evidence, p. 332-3.

THE CSIRO SCIENTIST'S PERSPECTIVE Page 97

to equivalent salaried staff in the public service.3 At the Principal Research Scientist and Senior PRS level they are about $15,000 to $25,000 worse off than equivalent public servants in ABARE.4 While senior administrators, such as Divisional Administrative Officers and Business Managers, are allocated privately plated cars, even the most successful scientists are not.5

8.9 As the former internationally recognised system of peer review and publication is breaking down, scientists are concerned that excellence in rural science will be judged instead by economic and business criteria: the ability to attract and retain funding, the ability to commercialise products, and the ability to

avoid litigation.

Critical Mass o f Scientific Endeavour

8.10 In many areas of scientific research a critical mass of scientists is essential. Continued redundancy programs means that senior scientists are being lost from laboratories at an alarming rate. This is cause for concern because there is a large amount of scientific knowledge being lost to the public research

capability. In addition, the fact that senior scientists are leaving before retirement age means that far fewer scientists will move on to become Senior Research Fellows; retirees who work for a Division with no salary and who make an enormous ongoing contribution to their fields.

8.11 Loss of critical mass is self perpetuating. As programs get smaller the availability of skilled personnel in those areas decreases and it is becoming difficult to find good research scientists in some areas. They are just not there to apply for the jobs.6 As an example, in 5 years from April 1989 to June 1994,

there were only three people recruited at the research scientist level in the Division of Animal Production, and one of those people had come from overseas. As stated by the Division Chief, Dr Oliver Mayo: 'It is very hard to get people in certain areas because that research has shrunk so much.' 7

8.12 Because research is so highly specialised the loss of a single expert can mean the end of a major line of inquiry within a research project. In the Division of Entomology there is only one scientist with expertise in arboviruses and

3 Submission 33. 4 Submission 98, Attachment 2. 5 Evidence, p. 877, Submission 68. 6 Evidence, p. 348.

7 Evidence p. 313.

Page 98 CSIRO RURAL RESEARCH

vectors of livestock, and his future is very uncertain. There are only two other entomologists in Australia with any experience of biting midge taxonomy and vector competence studies and they are in state departments of agriculture in Darwin and Townsville. AAHL has no entomologist and has to rely on assistance from elsewhere in CSIRO.8

Scientific Rigour

8.13 The modem day researcher works in a much changed environment to that of even 10 years ago. The stresses of fund-raising, internal and external reporting requirements, industrial participation, enterprise bargaining and increasing

demands on accountability have created an environment where 'the urgent takes place over the important'. There is evidence of decreased standards of supervision and reduced performance standards, with research being delegated to inadequately trained staff. This is leading some CSIRO scientists to believe that the ultimate consequence of the current push towards commercialisation and user-pays may be a decline in the standard of scientific rigour.9

8.14 Many bench scientists are concerned that the traditional science philosophy of objectivity and intellectual honesty, and the ability to follow where science leads without fear or favour, is being undermined by the driving forces of commercialisation and the need to satisfy industry, seemingly regardless of the good of the nation.10 A particularly emdite submission from a CSIRO scientist summarised the situation as follows:

The mechanisms at work that are degrading objectivity and intellectual honesty in science include the proliferation on non­ science busy work that erodes time to think clearly and to do research; the pressures of too many reviews, inquiries, re­ organisations, mickey-mouse reports and checks on performance and accountability; the research grant system and the pressure for the popularisation of science. ...

Why does it all matter? It matters because they, along with other similar pressures, are gradually but inexorably destroying the traditional wealth-generating science-culture for which

8 Evidence, p. 1010. 9 Submissions 82, 98, 138. 10 Submission 98.

THE CSIRO SCIENTIST'S PERSPECTIVE Page 99

CSIRO has had world renown as a reliable performer for over half a century. The infiltration of CSIRO by operating ethics of business management, 'human resource' management, marketing, politics, and the mass media must be arrested and

reversed if CSIRO is to continue to bring home the bacon for Australia and the world in the long term.11

Morale in CSIRO

8.15 There is confusion and frustration in some sectors of CSIRO, and there has been a serious decline in morale in some Divisions. This observation comes from both within and outside the Organisation and was reported to the

Committee both at public hearings and during inspections. While two Division Chiefs reported during inspections that morale was high in their Divisions, this was not the image conveyed by the written submissions presented to the Committee by bench scientists.

8.16 Morale has dropped for three major reasons: employment insecurity, the increased load of administration and excessive accountability leading to a decline in the value of 'science', and the stresses of commercialisation. These factors may operate singularly or, more commonly, act together to severely demoralise staff.

8.17 There is low morale among juniors who feel they have no career path and among seniors who are facing retirement at 55. People in areas with high external funding continually face the prospect of redundancy through failing to obtain grants. One scientist pointed out that: 'in the 8 years since the introduction of the

Early Separation Incentive Scheme in 1986, continued staff reductions, and particularly involuntary redundancies, have damaged staff morale and created uncertainty about the future. This debilitating gradualism has gone on too long!'.12

8.18 Another important factor contributing to the low morale is the high level of administrative and bureaucratic activity. Apart from a seemingly endless series of reviews, there is the impression that laboratory work is undervalued and that advancement and rewards are only to be obtained by moving up through the

11 Submission 98. 12 Evidence, p. 846.

Page 100 CSIRO RURAL RESEARCH

layers of the bureaucracy. Managers are now paid more than the scientists they manage.13

8.19 Some staff in CSIRO are unsure what direction CSIRO is supposed to be taking, whether its role is to provide a service to the community or whether it is a business which produces commercial products, while others reject altogether the strong push towards commercialisation of recent years. Morale has dropped because scientists have been pushed into the world of commercialisation, and expected to become publicists for the Organisation without being adequately prepared. In particular, the fact that the settlement for the Cassegrain case was levied on all Divisions, and used by some to justify redundancies,14 brought into serious question CSIRO's role in commercialisation.

8.20 One scientist had this to say:

I have worked for the Organisation for 10 years. I arrived as an extremely enthusiastic young scientist ... I have seen a steady decrease in morale within parts of the organisation that I am in contact with. There is a crisis of confidence and spirit within a group who represent a highly committed and intelligent group of Australians ... They represent a resource that this country needs to harness and encourage, not to drive out of science and perhaps the country. If you are told that this crisis does not exist within the Organisation, then the speaker is either ill informed or out of touch with the Organisation at the working level.15

8.21 Scientific research is highly specialised and 'requires a high quality work force with high morale'.16 It takes years of training and experience for a scientist to achieve useable results. Most innovations are produced by small teams or

individuals working intensively on a particular problem. To be successful, scientists must have a strong dedication to learning and innovation. On one hand they must be independent in thought and action, yet on the other they must collaborate and cooperate with other scientists and with stakeholders. Scientific research takes energy and drive. Good scientists are innate problem solvers and need only to have their research questions answered to feel rewarded. As expressed by one scientist: 'For many of us, science simply isn't fun any more. It

13 Submission 68. 14 Evidence, pp. 1104, 1270. 15 Submission 145. 16 Evidence, p. 1333.

THE CSIRO SCIENTIST'S PERSPECTIVE Page 101

used to be that we thought ourselves lucky to do science - and get paid for it. But the fun has gone - and so have other compensations such as security of employment'.17

8.22 While scientists cannot be commanded to perform research, they need the strong support of the agency they work for to continue with confidence. The Committee believes that this support is lacking in some areas of CSIRO.

Science Culture in Australia

8.23 Australia seriously lacks a strong culture of science and scientific achievement. Many witnesses, both in evidence before the Committee and in private discussions expressed the view that Australia was losing its intellectual capital in science, that this was not being replaced, and that many of the

successful applications now being made by CSIRO, together with the Universities and other science institutes were based on this intellectual capital which had been built up over many decades.

8.24 Australia clearly needs to do much to improve the status of scientific endeavour. The responsibility for this falls on everyone: governments, public sector research establishments, educators, industry, and even the general public. The fact that Australia provides so little support for science and technology was

of concern to CSIRO scientists who held the view that:

... the responsibility for the appalling state of funding of science and technology R&D in Australia falls on all involved; government, industry, scientists and administrators. The level of funding compared to other developed countries is a disgrace. If

Australia wants to make its way in the world in the new industries of the 21st century it will need to rethink its policies for the support of R&D. We are losing scientists at an alarming rate ,..18

8.25 Australia's scientific capability is central to our future economic, social and environmental status. We must therefore develop a stronger support for scientific innovation, research and development. While the government must increase support for scientific research, the private sector must also be

17 Submission 68. 18 Submission 95.

Page 102 CSIRO RURAL RESEARCH

encouraged to invest in the nation's future. Australia historically has a low level of industry investment in this area.

8.26 The status of scientists in Australia must be improved through attitudinal change as well as increased funding. Government, industry and the community must work together to support a creative, long-term and innovative scientific culture, with strong links between the public research and development and the various industry sectors, and strong links with other nations. Rural research is a particularly important area for continued investment as agricultural production is an important renewable resource. It has had a very strong record of benefit to Australia over the last 50 years. It has assisted Australia to increase productivity well ahead of the economy as a whole.

8.27 The way for the future was expressed by the Chief Executive of CSIRO when asked what he would do if he was Minister for Science:

I would argue very vigorously that the nation gets an excellent return for its investment in science and technology, that there is a real need to recognise and continue to recognise the contribution of research and development in that innovation pathway, and that the privately funded research which I dwelt on a little bit at my previous hearing needs to increase very

sharply in Australia. The government needs to get its mind around ways in which that can be stimulated and it needs to maintain an unequivocal commitment to excellence, both in basic research funding and in the more applied areas.

I happen to think that both of those are enormously important in the national interest, and I would have thought that by the time my [hypothetical] appointment is announced in this new capacity it will be a time when CSIRO has a number of performance indicators against which it can report and justify a very strong case for a budget in each triennial negotiation. I have already indicated to you that I do not think that is the

situation at the moment, and I think CSIRO has needed to take this initiative to put in place a number of criteria agreed to by the government against which it can state what it has actually

THE CSIRO SCIENTIST'S PERSPECTIVE Page 103

achieved, and why what it achieves is important. I think that opportunity is now being seized.19

Conclusions and Recommendations

8.28 The Committee believes that there are serious problems with employment security in CSIRO. In some areas, this is hampering the efficiency of its research scientists and is a major cause of low morale among staff. The Committee is concerned that if the CSIRO Board

continues to ignore this situation scientists will continue to leave the Organisation to seek work elsewhere. The final result will be that the critical mass necessary for efficient research will be lost in many areas vital to Australia's agricultural economy. The Committee recommends that the

CSIRO Board address the problems of employment insecurity, poor conditions of employment, low career status, excessive accountability, stresses of fund-raising, ineffective industrial participation and low morale among it rural research staff as a matter of urgency.

8.29 The Committee considers that agricultural science in CSIRO is at the cross-roads. Overall funding is inadequate, morale is poor and CSIRO is not attracting the quality people it must have for the continued future of good scientific research. If something is not done fairly quickly, rural

research is likely to suffer further decline.

8.30 The Committee believes that for Australia to maintain and improve its rural research effort, funding for such research must be made more secure. This could be achieved by ensuring a specific percentage of GDP is allocated to rural research and through substantially increased private

research funding from post-farm research beneficiaries.

A B Ferguson Chairman

19 Evidence, p. 1633.

*

No.

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

APPENDIX I

LIST OF SUBMISSIONS RECEIVED FROM ORGANISATIONS AND INDIVIDUALS

Submission

R.B. Bradbury, Red Poll Society, Yarrambat

Australian Centre for International Agricultural Research, Canberra

Confidential

Rev Charles Abel, St Paul's Presbyterian Church, Armidale

Australia Fire Authorities Council, Mount Waverley

Country Fire Service South Australia, Keswick

Dr D L. Watson, Armidale

G.B. Taylor, Wembley Downs

Ms J.L. Ward, Kentucky

Graham Donald, Armidale

B.H.M. Agricultural Management Pty. Ltd, Pymble

Gordon T. Williams, Uralla

Kerry Greenwood, Invergowrie

Ian J. Kowalick, Stonyfell

Professor M.D. Rickard, Werribee

National Association of Forest Industries, Deakin

Oliver Mayo, Forest Lodge

Australian Mining Industry Council, Dickson

M.H. Julien, Brisbane

Graeme H. McIntosh, Adelaide

Allan Kermocle, Walcha

Mrs Mary Hope, Coleraine

J. Brian Lowry, Indooroopilly

Confidential

State

VIC

ACT

NSW

VIC

SA

NSW

WA

NSW

NSW

NSW

NSW

NSW

SA

VIC

ACT

NSW

ACT

QLD

SA

NSW

VIC

QLD

105

25 N.A.F. Franklin, Uralla NSW

26 D.H. Cameron, Armidale District Council, NSW Fanner's Association, Wollomombi via Armidale NSW

27 Dr John Brien, Macquarie University, Sydney NSW

28 Ms S.J. Eady, Uralla NSW

29 J.N. Matthiessen, Wembley WA

30 E.P. Fumival, Armidale NSW

31 John T. Williams, Armidale NSW

32 P.A. Wright & Sons Pty Ltd, Armidale NSW

33 Dr PM . Room, Indooroopilly QLD

34 Dr M.P.Hegarty, St Lucia QLD

35 Research Advisory Committee, CSIRO Division of Forestry, Pennant Hills NSW

36 Professor J.P. Quirk, Perth WA

37 G.C. & E. Green, Armidale NSW

38 G.B. McLean, Guyra NSW

39 Cliff Thompson, St Lucia QLD

40 Australian Cotton Growers Research Association, Wee Waa NSW

41 Annidale & District Chamber of Commerce Incorporated, Armidale NSW

42 Forestry Target Team of the South East (of SA) Economic Development Board, Millicent SA

43 Cotton Research and Development Corporation, Narrabri NSW

44 Aust Pro Tech, Welshpool WA

45 Advisory Committee, CSIRO Division of Soils, Caltowie SA 46 Wilson Corporate and Environmental Services Pty Ltd, Padstow NSW

47 Armidale Development Corporation, Armidale NSW

48 Ms D.J. Hill, Armidale NSW

49 CRA Limited, Melbourne VIC

50 James Lea, Duncraig WA

51 CSIRO Division - PSU, CSIRO Division of Wool Technology Geelong Laboratory VIC

106

52 Norman Adams, City Beach WA

53 Dr P. A. Jennings, Brookfield QLD

54 Malcolm Robertson, Red Hill ACT

55 Rob Davidson, Armidale NSW

56 Dr D.F. Waterhouse, Deakin ACT

57 Margaret Thompson, Maleny QLD

58 K.L.S. Harley, Brisbane QLD

59 Australian Superfine Wool Growers' Association, Mudgee NSW

60 Stephen C.J. Love, Armidale NSW

61 A.L. Chapman, Winnellie NT

62 Keith L. Taylor, Canberra ACT

63 James Ridsdill-Smith, Scarborough WA

64 Dr Neil C. Turner, Mount Claremont WA

65 Dr Michael J. Hill, Armidale NSW

66 Ian A. Barger, Armidale NSW

67 Ian Colditz, Armidale NSW

68 N.J. Barrow, Mt Claremont WA

69 Andrew Inglis, Wembley WA

70 CSIRO Australia, Parkville VIC

71 Dr Kevin A. Ward, Woodford NSW

72 Dr Wendy M. Milne, Canberra ACT

73 Julian Cribb, Press Gallery, Parliament House, Canberra ACT

74 Construction Industry Development Agency, Sydney NSW

75 Ridley Corporation Limited, Gladesville NSW

76 Sir Russel Madigan, Melbourne VIC

77 K.C. Hamilton, Great Bay TAS

78 Dr R.R. Woolaston, Armidale NSW

79 Professor Gerry Freed, Sydney NSW

80 Professor B.G. Thom, Vice Chancellor, UNE, Armidale NSW

81 Penelope Greenslade, Hawker ACT

82 Ron M. Hoskinson, Prospect NSW

83 Bio-Care Technology Pty Ltd, Somersby NSW

107

84 Australian Egg Industry Association, Kogarah NSW

85 The Cattle and Beef Industry CRC, Armidale NSW

86 Ms K.R. Gaull, Subiaco WA

87 John K. Scott, Floreat WA

88 K.H.L. Key, Canberra ACT

89 Confidential

90 Armidale Rural Lands Protection Board, Armidale NSW

91 Professor H. Crozier, Bundoora VIC

92 The Pastoralists & Graziers Association of WA, Belmont WA

93 Uralla Shire Council, Uralla NSW

94 Confidential

95 Steven S. Davis, Maroochydore QLD

96 Tropical Beef Centre, North Rockhampton QLD

97 Abbott Laboratories, North Ryde NSW

98 The Australian Society of Plant Physiologists, Canberra ACT

99 Wool Council of Australia, Canberra ACT

100 Colin Hill, Wichelsea VIC

101 Judi Moylan MP, Canberra ACT

102 Monaro Merino Association, Jerangle NSW

103 Western Australian Farmers Federation, East Perth WA

104 Mallinckrodt Veterinary, North Ryde NSW

105 John Lowenthal, Parkville VIC

106 Shannon Vale Landcare Group, Glen Innes NSW

107 Dr Barrie Purser, Wembley Downs WA

108 Dr Richard Milner, Canberra ACT

109 Dr M.F. Day, Canberra ACT

110 Cooma Rural Lands Protection Board, Cooma NSW

111 Dr Colin White, Duncraig WA

112 Dr M.J. Hill, Dr P J. Vickery, Dr K.L. King & Dr K.J. Hutchinson, Armidale NSW

113 Hon Murray Nixon, MLC, West Perth WA

114 CSFR.0 Division of the PSU, North Melbourne VIC

108

115

116

117

118

119

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

136

137

138

139

140

141

142

143

Dr Hugh Dove, O'Connor ACT

Ross W. Hansen, The Gap QLD

Tablelands Wingless Grasshopper Committee, Holbrook NSW

National Farmers' Federation, Barton ACT

Staff of CSIRO Division of Wool Technology, Ryde NSW

Professor F. Gibson & Professor G.B. Cox, Canberra ACT

Grain Elevators Board, Melbourne VIC

NSW Farmers' Association, Sydney NSW

Dale Park, Baggingarra WA

Michael J. Muller, Indooroopilly QLD

AWA Limited, North Ryde NSW

Dr M.J. Whitten, Canberra ACT

Tenterfield Rural Lands Protection Board, Tenterfield NSW

Dr Stephen Trowell, Canberra ACT

Dr J.R. Donnelly, McKellar, and ACT

Mr W.R. Slade, Bayview NSW

Industrial Participation Committee of the CSIRO Division of ACT Entomology, Canberra

Dr Fred H.W. Morley, Brighton VIC

Dr Susan McClure, Wollstonecraft NSW

Dr Leslie N. Jones, Belmont VIC

Australian Dried Fruits Association, Mildura VIC

Staff of the Biotechnology Section, CSIRO Division of ACT Entomology, Canberra

E.N. Monks, Crawley WA

Rural Industries Research & Development Corporation, Barton ACT

Duncan Peter, Sorrento WA

North Australia Beef Research Council, Spring Hill QLD

Coffs Harbour National Park Support Group, Bonville NSW

Dr R.A. Dynes, Wembley WA

Camden Haven Protection Society, Laurieton NSW

Cooperative Research Centre for Premium Quality Wool, NSW Armidale

109

144 A.C. Schlink, Woodlands WA

145 Dr D.G. Masters, Kalamunda WA

146 Compass Farm Feeds Pty Ltd, Mt Compass SA

147 Dr G.B. Martin, Brisbane QLD

148 WA Sub-Division of CSERO Divison CPSU, Perth WA

149 Queensland Government QLD

150 The Australian Veterinary Association, Artarmon NSW

151 Stud Merino Breeders Association of WA, Claremont WA

152 Mr Ray Chappell, MP, Member for Northern Tablelands, NSW Armidale

153 Dr Martin van Houtert, Uralla NSW

154 Grains Research and Development Corporation, Canberra ACT

155 The Australian Institute of Agricultural Science, Parkville VIC

156 Hon Barry House, MLC, Member for the South West Region, WA Bunbury

157 Mike Cashmore, Kambah · ACT

158 Dr Christopher B. Hudson, Goodman Fielder, Gladesville NSW

159 Mr Graeme Campbell, MHR, Federal Member for Kalgoorlie WA

160 Confidential NSW

161 Dr John J. Lowke, West Lindfield NSW

162 Sir Rupert Myers KBE FTS, Parkville VIC

163 Australian Macadamia Society, Lismore NSW

164 John F. Stephens, Wahroonga NSW

165 Ms Deborah Rice, Perth WA

166 Queensland Produce, Seed & Grain Merchants' Association, QLD East Greenmount

110

A PPEND IX II

LIST OF PUBLIC HEARINGS, BRIEFINGS AND INSPECTIONS

Public Hearings were held as follows:

2 August 1994 Canberra

3 August 1994 Sydney

4 August 1994 Armidale

2 September 1994 Canberra 15 September 1994 Brisbane 6 October 1994 Perth

3 November Melbourne

11 November Canberra

Briefings and inspections were as follows:

Briefings:

30 June 5 August 16 September

7 October

2 November

CSIRO Division of Entomology, Black Mountain, Canberra Pastoral Research Laboratory, Chiswick, via Armidale Division of Tropical Animal Production and Division of Entomology, Long Pocket, Brisbane

Centre for Mediterranean Agricultural Research, Floreat Park, Perth Division of Exploration and Mining, Floreat,Perth Division of Wool Technology, Belmont Division of Animal Health, AAHL, Geelong

Inspections:

30 June 5 August

16 September

7 October

2 November

CSIRO Division of Entomology, Black Mountain, Canberra Longford and Arding Field Research Stations, via Armidale Pastoral Research Laboratory, Chiswick, via Armidale Division of Tropical Animal Production and

Division of Entomology, Long Pocket, Brisbane Yalanbee Field Research Station, Bakers Hill, via Perth Centre for Mediterranean Agricultural Research, Floreat, Perth Division of Wool Technology, Belmont

Division of Animal Health, AAHL, Geelong

il l

Dr Oliver Mayo

3 August 1994 - Sydney

Scientist

Dr K.A. Ward Scientist

Staff of the Division of Wool Technology (Rvde Site)

Ms A.F. Roczniok Scientist

Mr W.F. Bailey Scientist

Dr B.V. Holcombe Scientist

New South Wales Farmers Association

Mr M. Keogh Executive Officer

Abbot Laboratories. Agricultural Products Division

Mr M. Tichon Research and Development Manager,

Pacific and Far East

BHM Agricultural Management Ptv. Ltd.

Mr B.H. McRae Managing Director

Mallinckrodt Veterinary Ltd.

Mr R.M. Sargent Science and Technonogy Manager

Wilson Corporate amd Environmental Services Ptv. Ltd

Mr R E. Wilson

AWA Ltd

Mr B.E. Cooper

Prof G.A, Freed

Managing Director

Corporate Marketing Manager

Executive Director, Australian Centre for Innovation and International Competitiveness, Faculty of Engineering, University of Sydney

114

2 September 1994 - Canberra

Dr M.F.C. Dav

CSIRO Australia

Honorary Research Fellow

Dr J.W. Stocker Dr A.W. Blewitt Dr A.D. Donald

Dr R.M. Green

Dr J.C. Radcliffe

Chief Executive Officer Director, Corporate Services Director, Institute of Animal Production and Processing, Dickson, ACT Director, Institute of Natural Resources

and Environment, Dickson, ACT Director, Institute of Plant Production and Processing, Dickson, ACT

15 September 1994 - Brisbane

Mr M.J. Muller Scientist

Queensland Department of Primary Industries

Mr S.G. Coffey Director of Research and Extension

Mr R.W. Hansen Scientist

Dr G.B. Martin Scientist

116

6 October 1994 - Perth

Ms D.T. Rice Journalist

Pastoralists and Graziers Association

Mr B. Court Ms L.A. Johnston

Chairman, Wool Committee Deputy Chairman, Economics Committee

Western Australian Farmers Federation

Mr A. Clarke Senior Vice-President, Wool Section

Mr D.H. Park Grazier

Hon M.D. Nixon Member for the Agricultural Region

in the Legislative Council of WA

Dr A.C. Schlink Scientist

Dr C.L. White Scientist

Community and Public Sector Union

Mr J.A. Adeney President, WA Subdivision

CSfRO Division

117

3 November 1994 - Melbourne

Prof M.D. Rickard Scientist

Dr C.M. Adam Director, CSIRO Institute of Industrial

Technologies, Parkville, Vic

Dr F. Morlev

CSIRO Australia

Academic

Prof A.E. Clarke

CRA Ltd

Chairman, CSIRO Board

Dr I.G. Gould Group Executive, Physical Resources

11 November 1994 - Canberra

Mr Graeme Camnbell MP. Member for Kalgoorlie

Mr J. Cribb Journalist and Member of the CSIRO

Rural Sector Advisory Committee

Mr. Steven Lack

CSIRO Australia

Manager, Planning and Policy, Grains Research & Development Corporation

Dr J.W. Stocker Dr A.D.Donald

Dr J.C. Radcliffe

Mr L. Bevege

Dr A.W. Blewitt

Chief Executive Officer Director, Institute of Animal Production and Processing, Canberra Director, Institute of Plant Production

and Processing, Dickson, ACT General Manager, Public Affairs, Corporate Business Director, Corporate Services

118

APPENDIX IV

MINISTERIAL GUIDELINES FOR CSIRO

The following guidelines for CSIRO are to be read in the context of the functions of the Organisation, and the responsibilities of its Board, as set out in the Science and Industry Amendment Act 1986.

1. CSIRO's main task will be the conduct of strategic and applied research in support of national economic, social and environmental objectives.

2. CSIRO will ensure that research activities in ares of significance to national economic development receive preferential support.

3. CSIRO's research priorities will be planned with due regard to the industry and research policies and priorities of the Government.

4. CSIRO will pay particular attention to strengthening means of ensuring that its research results are exploited to the greatest benefit of the Australian community.

5 CSIRO will maintain procedures to ensure effective communications between the Organisation, other publicly funded research institutions, the users and beneficiaries of its research and the general public.

6. CSIRO will maintain a distribution of effort in accord with the

Government's policies and priorities in relation to research in support of existing industries, and research which will contribute to future balanced national development.

7. CSIRO will establish procedures to identify promising areas of research as part of its strategic planning process.

8. CSIRO will give greater attention to assessing the potential value of research before it is performed, and will strengthen procedures to evaluate research programs during their performance and after their completion.

9. CSIRO will maximise the proportion of its overall expenditure funded from non-Budgetary sources, subject to the need for continual Commonwealth support for its main task described in Guideline 1.

119

10. The Organisation shall, as far as possible, cooperate with other organisations and authorities in the coordination of scientific research, with a view to:

a) the prevention of unnecessary overlapping; and

b) the most effective use of available facilities and staffs.

11. CSIRO will ensure that its financial, administrative and personnel management practices are consistent with relevant Government policies for the operations of statutory authorities and business enterprises.

120

CSIRO O R G A N ISA T IO N A L CHART

C O R P O R A T E S E R V IC E S D irector M r A W Blew! tt

T H E B O A R D Professor Adrienne Clarke AO

C H IE F E X E C U T IV E

M r M G Forshaw Prof Sir G ustav N ossal AC M r C R W ard-A m bler AM

M r D S Shears D r A K Greg son M r N C Stokes

Dr J W Stocker Prof J R de Laeter AO Dr S M Richards

Dr JW Stocker

C O R P O R A T E B U S IN E S S Director M r P J Brad field

IN S T IT U T E O F N A T U R A L R E S O U R C E S & E N V IR O N M E N T

Director Dr R M Green

IN S T IT U T E O F P L A N T P R O D U C T IO N U P R O C E S S IN G

D irector D r J C R addlffe

IN S T IT U T E O F IN S T IT U T E O F IN S T IT U T E O F I N S T I T U T E O F IN D U S T R IA L M IN E R A L S , A N IM A L I N F O R M A T I O N E N E R G Y U P R O D U C T IO N T E C H N O L O G IE S S C I E N C E U C O N S T R U C T IO N U P R O C E S S IN G E N G IN E E R IN G

Director Director Director Director Dr A D Donald Dr A F Reid Dr C M Adam Dr R H Prater

D I V I S I O N S

Entom ology

Forestry

Forest Products

H orticulture

P lant Industry

D IV IS IO N S D IV IS IO N S D IV IS IO N S D IV IS IO N S

Animal Health Information Technology Building C onstruction A pplied Physics and Engineering A nim al Production Mathematics and Bio m olecular Statistics Engineering Coal and Energy Food Science and

Technology Technology Radiophysics Chem icals and Polym ers Exploration and Mining Australia Telescope H um an N utrition M anufacturing National Facility Technology Mineral and Process Tropical Animal Tropical C rops and

Pastures

Engineering

M aterials Science and Production

Technology M ineral Products Wool Technology Soils Petroleum Resources

D IV IS IO N S

A tm ospheric Research

Fisheries

Oceanography

Water Resources

W ildllfeand Ecology

Centre for Environmental Mechanics

CSIRO Office of Space Sdence U. Applications (COSSA)

a p p e n d i x V

A PPENDIX VI

RESEARCH LEADESHIP

THE FUTURE ROLE AND STRUCTURE OF CSIRO IN AUSTRALIA

Submission to the Senate Standing Committe on Industry, Science Technology, Transport, Communications and Infrastructure

Malcolm Robertson June 1994

123

CSIRO NEEDS TO RE-ESTABLISH ITS LEADERSHIP POSITION IN THE AUSTRALIAN SCIENCE SYSTEM

Australia's highest level science policy body, the PMS&EC, needs more effective support for its leadership of national strategic research activities. Australian government-funded science lacks real leadership and effective priorities and resource allocation mechanisms. This is evidenced, for example, by recent events in relation to marine science, ANSTO, ASTEC etc

CSIRO could take a more active role in national science issues and the management of Australian government-funded science. The Organisation has the national status and credibility to sustain this role

CSIRO has developed effective priority-setting approaches and resource allocation mechanisms which could be extended to the national system

The diagram opposite develops a model for the structure of the Australian science system in which CSIRO assum es a prominent role in the co-ordination of strategic and applied research.

This role requires a change to the Science and Industry Research Act (1949) to allow the structure of CSIRO to change

STRUCTURE FOR AUSTRALIAN GOVERNMENT SCIENCE

SCIENCE ADVICE:

Prime Minister's Science arid Engineering Council

Priorities Resource Allocation Conditions

Other Ministers

National issues International comparisons Quantitative information (ASRC, SR & ED, etc)

Independent Advisory Mechanisms :

ASTEC CCST Chief Scientist

CSIRO'S TOP MANAGEMENT STRUCTURE NEEDS TO CHANGE TO ADDRESS THIS ISSUE

In some quarters, CSIRO is not perceived to be a suitable organisation to provide this leadership. In spite of ■demonstrated improvements over the past few years, the Organisation continues to be under pressure from critics who perceive it to be unresponsive to national needs, inflexible and poorly m anaged

CSIRO's Institute structure, and associated senior management arrangements, are also under criticism from within the Organisation after recent poor corporate performance in relation to resource allocations and property rationalisations

These perceptions threaten the survival of CSIRO

CSIRO's top management team has addressed these issues in the past and considered that a group m anagement structure provides possibilities for improving management

A group management approach is already emerging with Mr Blewitt's broad responsibilities for som e infrastructure matters, with the appointment of Mr Bradfield as corporate business director and with ad hoc group management responsibilities such as Dr Adam's recent role with the commercialisation task force

Further progess with group management requires that current Institute arrangements be dismantled to ensure group executives do not continue to shoulder conflicts of interest between group responsibilities and line m anagement responsibilities

A new 'corporate institute' approach to structuring CSIRO, as shown opposite, overcomes these conflicts, implements group management and offers opportunities for the Government to ensure national needs are addressed more effectively

CSIRO A PROPOSED MODEL FOR

'The World's Most Effective Multi-disciplinary Research Corporation'

Features:

Group Head Office CSIRO

Corporate Institutes __ (approx 15)

Proposed Corporate Institutes *:

Animal Production (4 divisions) Food & Nutrition (2 divisions) Plant Industries (3 divisions) Forest Industries (2 divisions)

Minerals & Energy Industries (5 divisions. AGSO) Water & Soils (3 divisions) Industrial Technologies (4 divisions) Entomology (1 division) Marine Sciences (3 divisions. AIMS) Wildlife & Ecology (1 division) Information Science & Engineenng (3 divisions) National Facilities (Vessel, Telescope. Reactor) Building, Construction & Engineenng (1 division) Bongs together ail federal government strategic reseaich agencies (CSIRO. AGSO. AIMS. ANSTO)

Group Chief Executive Organisation leadership, Australia's Chief Scientist

Group Executives (five) Business Development Research Capacity Corporate Services

National & International Marketing Priorities for Government funding

Group Support Planning, Human Resources, Legal, Finance & Property, Marketing, Information management

Each Corporate Institute is:

Semi-autonomous with its own Chief Executive and Board Focussed on customers in industries or national interest areas Structured around a natural cohesion of research

activity, disciplines and/or core technologies Deals directly with other CIs in order to achieve objectives and establish joint programs Undertakes strategic and applied research with

medium to long term objectives Operates within broad policies and frameworks established corporately but with the Chief Executive accountable corporately for performance

Draft June *99·*

CORPORATE INSTITUTES OFFER CUSTOMER FOCUS, FLEXIBILITY AND DEVOLVED RESPONSIBILITY

Corporate Institutes are formed around a natural cohesion of research activity, disciplines and/or core technologies

They operate as semi-autonomous business units or agencies within the the broad umbrella structure provided by CSIRO and the policies developed by the Organisation's group executives

Corporate Institutes can be formed from natural synergies between existing CSIRO divisions, but also incorporating other government-funded strategic research agencies such as AIMS, ANSTO, AGSO

A senior m anagement team, responsible to a Board representing the customer base of the Corporate Institute, is accountable for the scientific strength and for marshalling together multidisciplinary research team s into programs which address custom er needs

Corporate CSIRO provides an umbrella for intellectual property protection, the development of broad HR policies such as enterprise bargaining, award development, career management etc, and other infrastructure such as communications networks and administrative systems

The diagram opposite schematically illustrates the structure of a typical Corporate Institute

LEVEL 3:

CUSTOMER-FOCUSED

Problem-oriented Research (Project-based)

Planning & Business Services (Office-based)

INFRASTRUCTURE SERVICES Lead by Senior Service Managers June 7994

APPENDIX VII

TERMS OF REFERENCE FOR BOARD EVALUATION OF CSIKO’S MANAGEMENT AND STRUCTURES

The Board has decided that CSIRO needs to

* strengthen further its developing culture of delivering service and new knowledge to its customers (the Board notes that this may require separate processes to meet the diverse and changing needs of large and small companies and different industry and government sectors; the Board seeks to both increase significantly the number of stakeholders with which CSIRO interacts effectively and to enhance the overall accessibility and uptake of CSIRO technology for furthering the national interest),

* develop more flexibility to redirect resources quickly and effectively to tackle new problems and opportunities; and

* improve further the mechanisms to marshal the best talent from across the Organisation into focussed multi-disciplinary teams to respond to national needs.

These steps will complement CSIRO’s legislated role in the maintenance and growth o f a strong base of enabling research strengths for Australia and Australia’s capacity to understand and access international scientific and technological developments

IN THIS CONTEXT, IT IS NOW TIMELY TO EVALUATE AND MAKE RECOMMENDATIONS ON:

(i) an effective and ongoing mechanism to identify and take into account government’s developing requirements in the process of agreeing CSIRO’s goals (including public interest goals),

(ii) processes to identify the changing expectations of our customers and to improve CSIRO’s delivery against these expectations,

(iii) appropriate measures of CSIRO’s progress towards fulfilling these goals and expectations,

(iv) the removal of impediments to achieving all of these objectives in a cost effective manner;

(v) processes and a timetable for achieving acceptance of and implementation of any modifications needed to existing policies, practices and structures

131

* .

APPENDIX VIII

Overview of Priorities and Process

At its June 1993 meeting the CSIRO Board decided on research priorities recommend­ ations made by the Executive Committee for the budget triennium commencing on 1 July

1994. The Board's decisions on priority research areas are based on a process of rigorous assessment extending over a period of one year and involving Institutes, Divisions

and advisory committees. Decisions on priority research programs will be made by the Board in December 1993 following

development of proposals by cross-institute and cross-Division teams.

The Priorities

After weighing up the results of the Executive Committee's deliberations, the Board agreed that minerals, environmental and rural research continue to provide a high return to Australia. However, they also considered that CSIRO research for manufacturing and information

and communications industries provide a high return but are not receiving a level of resources commensurate with their importance to Australia. This led to the decision that

increased resources will be re-directed to three of CSIRO's major research purposes: Minerals Resources, Manufacturing Industries, and Information and Communications Industries.

The Board also decided that appropriation funding would be maintained at the 1992-93 level for the environmental research purposes : Environmental Aspects of Economic Develop­

ment, and Environmental Knowledge.

The Process

The Executive Committee Research Priorities Workshop in March 1993 completed a process of appraisal involving Divisions, Institutes, key external shareholders, the Executive Committee and the Board supported by the Corporate Planning Office.

The overall process was a major improvement on the first triennial review of research priorities held in 1990. This was partly due to experiences gained from priorities exercises

undertaken by Divisions since 1990.

First Triennial Review

The purpose of CSIRO's triennial review of its research priorities is to redistribute limited resources among competing research opportunities such that maximum benefits are

achieved for Australia.

The first review conducted in 1990, to cover the budget triennium 1991-92 to 1993-94, had the following salient features:

• The classification of research purposes by socio-economic objective (SEO), as derived from the Australian Standard Research Classification of the Australian Bureau of Statistics. At that time the classification comprised:

- four divisions : Economic Development and National Welfare to which CSIRO directs most of its effort. Advancement of Knowledge essentially that associated with the Australia Telescope, and National Security to which CSIRO makes a small

contribution to research for Defence. - 20 SEO sub-divisions, of which 17 are relevant to CSIRO as shown in Box 1. - 72 SEO groups and 372 SEO classes

relevant to CSIRO.

Box 1: CSIRO's Research Purposes

1 . Plant Prod'n & Primary Products

2. Animal Prod'n & Primary Products 3. Rural-based Manufacturing 4. Mineral Resources 5. Energy Resources 6. Energy Supply 7. Manufacturing

8. Information & Communications 9. Environ! Aspects of Econ. Develop! 10. Environment 11. Transport 12. Construction 13. Commercial Services 14. Health 15. Defence

16. Community Services 17. Advancement of Knowledge

133

Box 5: Return to Australia from R&D, 1990 and 1993

N o t* :

(1) N um bers aloog U M show sco res a s sig n ed by CS1RO

Executive Comm ittee to * c h of th e SEO subdivisions.

(H) Data, tn d k a to fs and trsod end other a n a ly s * Im proved

greedy from 1 tt0 to I tM . This pkie the f e d that two of th e

nine E xecutive Committ ee mem bers were different In 1SS3

n ee d s So be taken Into account In com paring 1W0 and 1M 3

0.0 10.0 20 0 30.0 40.0 50 0 60.0 70.0 80.0

Feasibility

Key to CSIRO's SEO subdivisions:

1 Plant Production and Primary Products 2 Animal Production and Primary Products 3 Rural-Based Manufacturing 4 Mineral Resources

5 Energy Resources 6 Energy Supply 7 Manufacturing 8 Information and Communications

9 Environmental Aspects of Economic Development 10 Environmental Knowledge 11 Transport 12 Construction 13 Commercial Services 14 Health 15 Defence 16 Community Services

134

1.56%

0.85%

0.60%

0. 22%

0. 20%

0.04%

APPENDIX IX

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

PARLIAMENTARY ΡΑΡΕΠ No. 319 of 1594 ORDERED TO BE PRINTED

ISSN 0727-418