If you look back at the history of the authorizing legislation, the issue was: Would this be tax money or would it be fee money? And we in the Administration clearly have taken the position right now that there are other priorities and that it should be fee money.

Our customers have not complained about the level of fees thus far. They have not complained about the Surcharge Fund. We have not seen any reduction in the patent applications as a result of these fees. And so it seems appropriate to continue. And this will give the Committee $116 million more dollars to deal with.

Mr. ROGERS. So what will happen in '99 if the Congress fails to enact these fees?

Mr. LEHMAN. What will happen is that we will lose $182 million. And we will be able to get along for 1999 because our budget contemplates our spending less. But if the fees are not reset or if we establish a precedent that the fees will not continue at their current level, we will use up our extra resources. We will then have an under-funded Patent Office. And we estimate that that would have the effect of increasing pendency time.

Remember, I mentioned in my statement it was very critical that we keep pendency time low. And we have seen that creeping up. One reason it has crept up is because of our efforts to save on FTES and so on and so forth over the last several years. Those were reasonable trade-offs to make. We now need to correct those problems. Pendency is now at over 22 months. We will see a pendency, I believe it is by 2003, of 41.8 months. Now, you can imagine if you are an innovator in Silicon Gulch by Dulles or Silicon Valley or wherever it may be in the country, if we are going to tell you that it is going to take you a year and a half more to get a patent, that is going to have a very, very negative effect on your capacity to go to the capital marketplaces. So I think that prudence absolutely demands our fiduciary responsibility to these very critical people who are producing the revenue that is creating a better budget situation, and demands that we reset fees to their current level. And I am not aware of anyone of our customer base who is not saying that we should continue the surcharge. There are people who do not like the money going back into the Federal Treasury.

Mr. ROGERS. There may not be customers complaining, but there is a group of people called the authorizing committee of the Congress that is complaining. And they think that we are stealing patent money to pay for other spending.

Mr. LEHMAN. Well, I think their concern is, Mr. Chairman, that they would like to see that $116 million go back to me, the Patent Office, so that I can spend it on the Patent Office.

I am in exactly the same situation you are and the Administration is in. We are trying to be as prudent as we possibly can, but we have larger issues. And the Administration has determined that for this year, we can get along with what we have. And we have a good program. We are going to improve service, and we can afford to spend this $116 million elsewhere.

Mr. ROGERS. Well, we are still talking about the long-term problem.

Mr. LEHMAN. Yes, it is a long-term problem.

Mr. ROGERS. Fiscal '99 is a short-term view when you look at

Mr. LEHMAN. And, Mr. Chairman, I know the Appropriations Committee can only increase the surcharge a year at a time. We need a permanent solution, and that will have to come out of the authorizing committee. And we will work with them.

PATENT AND TRADEMARK OFFICE RELOCATION

Mr. ROGERS. Now let us talk about your move. A lot of questions being raised about it, everything from whether you need all of that space, or that it is too costly. How do you respond to that?

Mr. LEHMAN. Well, Mr. Chairman, you know, one of the frustrating things that we all have to deal with in Government, you certainly have to deal with it, is a lot of people get misinformation. Mr. ROGERS. We never encounter that.

Mr. LEHMAN. So let me try to set the record straight. First of all, this is widely characterized as being that the Patent Office is purchasing a new headquarters or something like that. It is important to understand that in 1969, the Patent Office moved out of the Commerce Department, which is a Government building. And we started moving into high-rise buildings that were constructed by a developer there in Crystal City. And we rent space.

Crystal City is filling up. The leases for that space are expiring. In fact, we are now on GSA-negotiated sole-source extensions. So I think you would have probably been most unhappy with us if several years ago we did not begin planning for this, for an orderly solution to the problem of expiring leases, not to mention the fact that our office has grown, which is a good thing for the economy, but that has also resulted in us willy-nilly getting a building here, a floor here, a floor there. It is not the most efficient use of our fee payers' money.

So we put out a solicitation for offers (SFO) to solve this problem for the next 20 years and, in effect, advertised for developers to come along and say, "We will rent space to you for 20 years.” That SFO requires, as a condition, as a predicate, that the space be cheaper than the rent we are paying now.

In addition, you know, I know some people have said we are building elaborate headquarters. I would like to just bring it to your attention, Mr. Chairman, that at the present time, a patent examiner has 150 square feet for his office. Under the proposed design, it will be 120 square feet. It will be less. Now, our patent examiners professional organization does not like that very much, but that is hardly a waste of money. We will actually have less space per examiner. Furthermore, supervisors will have offices exactly the same size as the examiners.

The space will be cheaper, but it will be better in the sense that we will have buildings that will be smart-wired. That is a condition of this procurement for new leases. And we are heavily automated. It does not help our efficient use of fee money to have to go and back-wire 30-year-old buildings to deal with our new computers and so on and so forth.

We will have a thoroughly modern infrastructure so that we can be more productive and ultimately save fee payers their fees and maybe produce situations more like we have this year, where we have some money for the Committee to work with, where we make a profit for the U.S. Government.

Mr. ROGERS. Well, you are talking about two million square feet. Currently you have about 1.7 million.

Mr. LEHMAN. That is correct.

Mr. ROGERS. With an annual price tag of about $40 million a year; correct?

Mr. LEHMAN. That is correct, yes.

Mr. ROGERS. A lot of people wonder whether you need all of that space given the fact that much of your space is used for in the old days paper storage. And now you are on computers, which does not require anywhere near that kind of space. And there is some suggestion that there is some gold-plating going on. I will ask what you think about those charges.

Mr. LEHMAN. Well, I think you can just look at the figures, Mr. Chairman, and you will see pretty quickly that there is no goldplating. First of all, as I said, business is booming. Patent applications went up by 15 percent.

Now, we have really kept down hires. I mean, for the first Clinton Administration, we had an FTE limitation. We worked our people to the bone. We did not hire new patent examiners. We had to hire some. The Commerce Department recognized that we needed some more FTEs than other people, but we have been ringing more efficiency out of the system. So we have not had a lot of hires, but we have had some. And so our workforce has increased. We are expecting our workforce to go up, I think by 2001, by about 35 percent. We are going to have over 7,000 employees. Today we have only about 5,000.

Well, it does not take a Ph.D. in mathematics to realize that that is going to require some more space, even though, as I said, each employee will have a smaller amount of space. In fact, we will have 37 percent more staff people, but we will only have 20 percent more space. So the budget contemplates that and that is with the impact of automation.

You know, this has all been worked out, and it is hard to go over all of the details here in this setting, but I would be happy to send our space people up here to go over every last fact and figure with Ms. Miller if you would like.

Mr. ROGERS. Well, is there any independent analysis being done? Mr. LEHMAN. Yes, there is, Mr. Chairman. We have had four outside studies already. And the Secretary went over to the Senate Appropriations Committee last week. I know there was a letter that came up from the National Taxpayers' Union. It was, frankly, misinformed.

But when that happens, I can imagine neither you nor Senator Gregg nor anybody else would not be doing your duty if you were not going to respond to that and try to ask the questions that you are asking me, that you asked the Secretary. So he plans on having yet another study done, in addition to the four we already have had, that hopefully will be completed within a very near-term period of time because it will only cost us more money if we slow down this process. And I am quite confident that that will confirm what the other four outside studies have done, outside studies, that this is an extremely prudent way to proceed.

Mr. ROGERS. When can we expect the results of that study?

Mr. LEHMAN. Well, I was told by our Assistant Secretary for Administration that he hoped to get this done by the end of April. Mr. ROGERS. Give us a copy of that.

Mr. LEHMAN. Yes. And I certainly hope he can, Mr. Chairman, because it would be quite tragic if we had to slow down this process. You know, this has been a totally above-board RFP. You know, going back, it has been supervised from the beginning by the Public Works Committee. We have reported to this Committee. GSA has put out an SFO. Anyone in the country who wanted to develop this project could apply.

It has been absolutely by the numbers. And it would be quite tragic if because of confusion and misinformation or perhaps people that have a vested interest in not seeing this project go forward it were to be delayed. And it would only cost the fee payers more money and result in a less efficient system.

Mr. ROGERS. Well, at one point you were considering buying, rather than leasing, at I am told a cost of over a billion dollars. And there was some discussion that you would ask this Committee to pay for all of that up front, effectively an advance appropriations. I trust you have discarded that idea.

Mr. LEHMAN. Mr. Chairman, I do not think that was during my tenure in office. I think that the cost of constructing these buildings will be $700 million. That is what we estimate. Now, that is a private party who is going to spend that amount of money in order to build space that we will rent.

Mr. ROGERS. Who is the private party?

Mr. LEHMAN. Well, we do not know yet. We have put out an RFP. And there are four developers that have tentatively-more than tentatively-that have submitted proposals. And we are in the process of evaluating those proposals to see which is going to be the best deal.

Mr. ROGERS. Well, I just want to clarify it. You have no plans to buy a building, and you will not come to this Committee asking us to pay for it?

Mr. LEHMAN. No. We have no plans to buy a building. And we are not going to ask the taxpayers to pay for anything, and, secondly, we are not going to ask this Committee to pay for anything.

It is a question of Government accounting. I do not think anybody, the Administration or here on the Hill wants to put out $700 million in any year for our buildings.

We have a very reasonable plan. That plan, this SFO, the leased space, will meet all of our needs. There is no need to do anything differently than what we are doing right now.

Mr. ROGERS. Mr. Mollohan?

EPSCOT PROGRAM

Mr. MOLLOHAN. Mr. Bachula, the Senate I understand is currently considering authorizing legislation which would provide that EPSČOT grants be made through EPSCoR state committees. Are you aware of that? Will you comment on that proposal?

Mr. BACHULA. Yes, sir. The EPSCOT Program that you areMr. MOLLOHAN. EPSCOT?

Mr. BACHULA. EPSCOT.

Mr. MOLLOHAN. EPSCOT. Okay.

Mr. BACHULA. The EPSCOT Program that you are funding is meant to be a companion program to EPSCOR. EPSCOR is a program started by the National Science Foundation. It is a number of agencies. It goes to 18 states and Puerto Rico, and it is designed to build the research capacity—

Mr. MOLLOHAN. I know what EPSCOR is.

Mr. BACHULA. Yes.

Mr. MOLLOHAN. What I am asking you is there a Senate proposal

Mr. BACHULA. Yes.

Mr. MOLLOHAN [continuing]. For EPSCOT to be run through EPSCOR state committees? What is your opinion on that?

Mr. BACHULA. Through the committees. We would prefer not to have to run it through those committees. We looked for language that would require us to work with those committees along with economic development agencies, local agencies, state governments, and so on.

We had two regional meetings last year attended by literally someone from every one of those states. We had representatives of governments, Secretary of Commerce, local businessmen, and university presidents. All of them said that EPSCoT could be a great organizing function in their states to bring together universities, economic development activities, state economic development entities. But that if you put the money in the hands of any one of those in a controlling fashion, any one of those without some self-organizing, it would be a mistake.

So we are proposing to let each state

Mr. MOLLOHAN. Who said that it would be a mistake?

Mr. BACHULA. The economic development folks, the folks that represented some of the state government activities, some of the

Mr. MOLLOHAN. That was the consensus of the feedback you received?

Mr. BACHULA. Very much. It was very much the consensus. There were representatives in both of those meetings from some of the folks from the EPSCoR Foundation who have been active here in town and who would prefer the other route.

Mr. MOLLOHAN. What other route?

Mr. BACHULA. Putting it through the EPSCoR committees.

Mr. MOLLOHAN. Okay. So what you heard back in the states is that they would prefer that the money not be put through the EPSCOR committees?

Mr. BACHULA. They would prefer that states be allowed to selforganize, that if there is a place that a recommendation or a proposal has to be signed off on, that it be self-organization. And it might be different in all 18 states.

In a state like Montana, for example, the EPSCOR committee is very active. It works with the universities. But in Louisiana, West Virginia, or somewhere else, it may not be.

The plan was believed to have the states have flexibility and not just dictate from Washington how this needs to be done. Mr. MOLLOHAN. In this legislation?