• Accessibility [Access Key '0' ]
• Home [Access Key '1' ]
• Site Map [Access Key '2' ]
• Search [Access Key '3' ]
• About MoRST [Access Key '4' ]
• Current Work [Access Key '5' ]
• Funding [Access Key '6' ]
• International [Access Key '7' ]
• Careers [Access Key '8' ]
• Contact Us [Access Key '9' ]
• New Zealand Government online [Access Key '/' ]
• Main Content [Access Key '[' ]

CRI Capability Fund evaluation: Context

Section 1 of the Evaluation of the Crown Research Institute (CRI) Capability Fund. Prepared for MoRST by Taylor Baines andAssociates, Christchurch. 56 pages, published in June 2008.   

3.1 Institutional context

The RS&T system

Government expects research, science and technology (RS&T) to assist in transforming the NewZealand economy.⁶ To achieve this goal, NewZealand’s RS&T system needs to be a catalyst in accelerating economic, environmental and social development. In doing so, it needs to build on NewZealand’s strengths and advantages to enhance the nation’s competitiveness.

The Ministry of Research, Science and Technology

MoRST is the main advisor to Government on RS&T policy development, and is responsible for allocating Vote RS&T. MoRST monitors progress towards higher-level government goals and strategies through an evaluation programme that looks at the short-, medium- and long-term outcomes of RS&T investments. This review is part of the planned evaluation programme for 2007/08.⁷

Crown Research Institutes

The nine CRIs have distinct identities. Each is a company (registered under the Companies Act 1993) and is owned by shareholding Ministers, namely the Minister for CRIs and the Minister of Finance, under the Crown Research Institutes Act 1992. CRIs are also Crown Entities under the Crown Entities Act 2004. Each CRI has an independent board appointed by shareholding Ministers. CCMAU is an agency of the NewZealand Government that monitors the Government’s investment in CRIs, and provides an annual Operating Framework for CRIs.⁸ ACRI is the national organisation for CRIs.⁹

In the 2005/06 year, we estimate that CRIs received about $300 million or 70% of Vote RS&T.

3.2 The role of CRIs

The role of CRIs as described in the 2007 Operating Framework is to:

• Undertake excellent research, science and technology (RS&T) that aligns with the Government’s current social, economic and environment priorities, in a manner that reflects best practice management and governance;
• Engage with relevant industrial, environmental and social stakeholders to address current RS&T needs and agree on longer-term research priorities, while regularly communicating to the public the set of stakeholders they are targeting;
• Serve as a key repository of NewZealand’s strategic scientific knowledge and RS&T skills of national importance;
• Collaborate with other science organisations, to provide for NewZealand’s current and future strategic science needs;
• Ensure the development of knowledge, and its transfer to and uptake by end-users within the resources available to the CRI, in a way that maximises the overall benefit to NewZealand;
• Promote awareness of the value of RS&T amongst all NewZealanders; and
• Continually develop the human capital of their organisation in ways that support and are aligned with the long-term interests of NewZealand’s science and innovation system.

The 2007 Operating Framework also complements this role specification with statements about what the CRI role does not include:

• Not necessarily being the sole provider of RS&T within NewZealand;
• Not acting as a principal education provider;
• Not maximising profit;
• Not focusing on financial return at the expense of delivering on its other objectives and statutory purpose;
• Not competing with or crowding out the private sector by holding a majority ownership interest in commercialisation ventures beyond the point where the CRI is the party that can add most value;
• Not acting with complete academic freedom, without regard to the needs of stakeholders;
• Not determining its own research priorities without regard to existing government research priorities and/or the needs of sector stakeholders; and
• Not deciding RS&T policy, although the CRIs are expected to have input to policy formation.

The owner’s expectations state that “A CRI’s research and development capabilities, which are ultimately geared to ensure benefit to NewZealand, should always be underpinned by a successful business so that those capabilities can continue to be delivered over the long term.”

3.3 The CRI Capability Fund

The changing funding environment for CRIs

Three major changes to the RS&T funding regime have occurred in recent years. Outcome Based Investments (OBIs) and Negotiated Contracts have been introduced by the Foundation, and the Non-Specific Output Funding (NSOF), administered by the Foundation, has been replaced by the Capability Fund, administered by CCMAU and MoRST.

The ratio of government to non-government funding differs significantly from CRI to CRI. Each CRI receives Capability Funding in proportion to its government funding. The CRIs do not publish revenue data by source, except for revenue received from the Capability Fund and from the Foundation. The proportion of Foundation funding also differs significantly from CRI to CRI. In the 2006/07 financial year the CRIs collectively received 8% of their total funding from the Capability Fund and 42% from the Foundation.

Furthermore, the introduction of OBIs and Negotiated Contracts have impacted very differently across the target group of organisations. Four of the nine CRIs participated in the OBI initiative and, at the time of this evaluation, six have gained long-term Negotiated Contracts. Three CRIs have experienced both new forms of Foundation contracting while two CRIs have experienced neither. Averaged across all nine CRIs for the current year, 79% of Foundation funding remains in the fully contestable pool. However, for two CRIs, 100% of their Foundation funding remains in the contestable pool, while for the other seven the contestable proportion lies in the range between 56% and 95%.

The advent of the Capability Fund on 1 July 2005 was an important change in the overall funding environment for CRIs. Significantly, even though the Capability Fund accounts for only 8% of CRIs’ total revenue (on average), the Capability Fund substantially increased the quantum of shareholder funds over which each CRI exercises a high degree of devolved decision making responsibility consistent with its organisational and governance model, as shown in Figure 1.

Figure 1: Annual allocations ($000s) of NSOF (1998/99-2004/05) or Capability Fund (2005/06 onwards)
(Source: MoRST data spreadsheet)


The Cabinet Paper establishing the Capability Fund stated explicitly that the Capability Fund will not replace exit funding. At para. 26 it stated that:

“It is important to note that purchase decisions made elsewhere in the system may result in CRIs sustaining large losses in income. It is not my intention that the CRI Capability Fund should fill those gaps, as this is not in line with the devolved nature or purpose of the fund. Where CRIs incur significant losses as a result of central purchase decisions, I expect purchasers such as the Foundation to make transition funding arrangements to assist the CRI in managing the change.”

No CRI personnel mentioned Foundation-related transition funding during interviews for this evaluation.

The study of Non-Specific Output Funding (NSOF) by McGregor (2004)¹⁰ provides useful background to the nature of the funding environment in which CRIs operated previously. In his study report McGregor noted that the NSOF class of funding was established in 1992, the first year of operation of CRIs, and was invested only in CRIs, on the basis of 10% of their previous year’s Public Good Science Fund (PGSF) funding including NSOF. The fact that NSOF applied only to CRIs specifically reflected an ownership interest by the Crown “designed to place CRIs in the same position in respect to access to multiple sources of funding as competitors”. Its purpose was to enable CRIs to produce Public Good Science and Technology (PGS&T) that was independent of government priorities, in order to maintain their viability and capacity. However, NSOF still represented the purchase of PGS&T outputs by the Foundation, and the work funded by NSOF had to be within specified output classes, although the outputs were to be of the CRIs’ own choosing and not subject to Government or Foundation priorities. NSOF was to be used for “exploring new ideas that are not sufficiently formed to enable a programme proposal to be made to the Foundation” and for “maintaining programmes which are important to the CRI but are not of sufficient priority to gain funding from the Foundation.”

McGregor’s report also pointed to signals of impending change in RS&T funding policy that were being discussed during the period 2003/04. Based on various documentary sources,¹¹ McGregor noted the Government’s intentions to focus (inter alia) on developing stronger long-term capabilities to drive innovation, to look for more stable ways to fund capability in the RS&T sector, and to increase institutional funding progressively, initially to CRIs.

Quoting from a ministerial media release:¹²

“This funding will increase the ability of CRIs to make independent decisions about maintaining capacity in research areas where the Foundation is unable to support funding bids. It will also allow more independent decisions about development of new areas of capability. ... The aim is to retain the benefits of contestability while increasing the ability of CRIs, in particular, to weather changes in the Foundation’s funding priorities and maintain or build strategically valuable research capabilities. Science and technology is a long-term business and our research organisations need to be able to position themselves to deliver tomorrow’s needs as well as today’s. ... The provision of more stable funding for research capability will help achieve these things and sustain the flow of new ideas, new knowledge and innovation.”

The evolution of NSOF into the CRI Capability Fund would signify a move towards a more targeted use of government funds - the enhancement of national science capabilities - in support of a specified, strategic objective, while retaining devolved decision making.

The intended purpose of the Capability Fund

A large proportion of NewZealand’s RS&T capability resides in CRIs. The key to the actual and potential social, economic and environmental impact of CRIs is their ability to foster highly specialised teams of experienced and talented scientists.

The CRI Capability Fundreinforces and supports the distinctive role of CRIs to maintain the scientific capabilities required for the provision of public good science in NewZealand. It strengthens CRIs’ ability to focus on organisational capability in order to retain and develop RS&T capability for the benefit of NewZealand. It also enhances and complements the science capability being developed in the NewZealand science system through a range of government RS&T-related contracts, government agency research and industry-funded research.

Interpretations of “capability”

The first six of the seven elements listed in the 2007 Operating Framework document (see Section 3.2 above) describing the role of CRIs imply a set of capabilities:

• to conduct excellent research;
• to engage with stakeholders;
• to serve as repositories of strategic scientific knowledge and RS&T skills;
• to collaborate with other science organisations;
• to ensure transfer of knowledge to end-users; and
• to promote awareness of the value of RS&T by others.

The seventh - to develop continually the human capital of their organisation - puts these first six capabilities clearly in an organisational context.

Both individual and organisational aspects of science capability are important. Individual scientists rarely, if ever, work on their own. Scientific research is frequently a collaborative activity, either within a science organisation or between several science organisations. Moreover, CRIs typically organise their scientists into science ”platforms” or ”portfolios”. Most are placing increasing emphasis on integrative science activities and cross-disciplinary collaboration. In such a collaborative working environment, the loss or gain of an individual scientist is reflected not only in the loss or gain of their individual capabilities; it affects the capabilities of the teams in which they participate. The mentoring of less experienced scientists by more senior and experienced scientists is another collaborative context in which individual science capability and organisational science capability are linked.

Clause 5.2.1 in the annual Capability Fund contract between the Minister and each CRI emphasises the dimension of “organisational performance” – “money provided from the CRI Capability Fund under this contract is for the CRI to maintain and build its key capabilities and improve its organisational performance.” (emphasis added)

The MoRST briefing papers for this evaluation (Sept 2007) stated that “The CRI Capability Fund reinforces and supports the distinctive role of CRIs to maintain the scientific capabilities required for the provision of public good science in NewZealand. It strengthens CRIs’ ability to focus on organisational capability in order to retain and develop RS&T capability for the benefit of NewZealand; and enhance and complement capability being developed in the system through a range of government RS&T- related contracts.” (emphasis added)

As part of this work, CRI personnel shared their views on what constitutes scientific capability in the context of implementing the Capability Fund. All nine interviews elicited expressions of a strong “people focus” - “existing people with new skills”; “our people being the best they can be”; “the needs of scientists in different circumstances”; “people need to be up-skilled, excited, retrained”. Eight¹³ of the interviews were explicit with terminology reflecting both individual and organisational aspects of capability - “new teams”; “PhD support”; “science platforms”; “balanced portfolios of sciences”; “science leadership”; “thinking beyond individual research interests”. Three described organisational capability development explicitly.

Recent capability issues faced by CRIs

As part of an initial discussion at the beginning of each CRI interview, Science Strategy Managers (SSMs) outlined what they considered to have been the most significant science capability issues faced by their CRI over the past 2 years.

Without exception, the CRIs reported having to address the consequences of unsuccessful Foundation bids as a significant capability issue for them - “reflecting a mismatch between the CRI’s notion of sector interests and the Foundation’s priorities, and the need to manage through such transitions”; “the need for fundamental research does not go away; Foundation priorities can be seen to get out of phase sometimes”; “retraining scientists when Foundation funding is discontinued”; “plugging the gaps”; “moving staff out of under funded areas”. Most CRIs referred to science teams subject to new Foundation bidding rounds as being “at risk”, and the exercise of responding to unsuccessful bids as “bridging”. However, none mentioned Foundation-related transition funding.

CRIs reported that varying levels of dependence on uncertain funding has ensured that other capability issues and challenges persist for the CRIs. These include: disadvantage in the competitive science labour market; erosion of time that scientists have for science; reduction in their confidence to take greater scientific risks; and increase in the need to develop new science teams and to seed new areas of skill. The result has been difficulties in maintaining the fundamental research base which underpins the provision of science-based services. They reported that funding uncertainty challenged their ability to develop science leadership, to develop and implement strategy to guide new capability investments, to develop attractive science careers and to address succession in the science workforce.

These represent recent capability issues. SSMs indicated that some have been addressed already, at least in part. Whether or not the Capability Fund enables the CRIs to address all these capability issues is a matter for future evaluation.

Footnotes

6 . An overview of the RS&T system http://www.morst.govt.nz/Documents/publications/policy/MoRST-Science-for-NZ.pdf

7 . Ministry of Research, Science and Technology, 2007. Statement of Intent 2007-2010. http://www.morst.govt.nz

8 http://www.ccmau.govt.nz/2007-Operating%20Framework.html. The document notes that each year, the CRI shareholding Ministers lay out their expectations on the CRIs for the coming year in the form of the Operating Framework. It is described as “the cornerstone document”. Most of the document is general to all CRIs. The 2007 document is the seventh. Since 2005, the document has incorporated an addendum specific to each CRI.

9 ACRI website

10 . McGregor, D. 2004. A Study of Non-Specific Output Funding. Unpublished paper. Prepared for the Foundation for Research, Science and Technology. September 2004. 36 p.

11 . See Endnote 10. pp. 8-9.

12 Minister of Research, Science and Technology. Media statement on 8 May 2004.

13 Since the question being asked was an open question, responses were not directed by the interviewer towards making the distinction between individual and organisational science capability.