Are the National Technical Information Service’s Prices Too High?

J. Timothy Sprehe*

Some have claimed that prices charged by the National Technical Information Service (NTIS) for its information products and services are inappropriately high. The National Technical Information Service commissioned a study, carried out by the author, to determine whether these claims were substantiated. The study focused on 15 selected information products and services, and asked whether prices for these products were too high relative to NTIS’ costs, relative to prices for comparable commercial products, and

relative to prices for comparable products from the Government Printing Office (GPO). NTIS breaks even in the aggregate, showing neither profit nor loss at the end of the

year, although individual products may be priced higher or lower than cost. NTIS prices appeared to be competitive with comparable private sector prices, and 17 executives from information industry firms believed NTIS prices were about right or not too high. For comparable products from GPO, NTIS prices tend to be lower because of

administrative decisions to underprice GPO. The study examined, in greater depth, issues surrounding two new information products, Big Emerging Markets and World News Connection. NTIS prices are not too high relative to costs, to comparable

commercial products and GPO products.

In congressional testimony, published articles, and speeches, a number of people have

made public claims that prices charged by the National Technical Information Service (NTIS) for its information products and services are inappropriately high, given the

requirements of the Paperwork Reduction Act of 1995 and OMB Circular No. A-130, Management of Federal Information Resources. The persistence of these public claims damages the ability of NTIS to perform its mission. NTIS decided, therefore, to

commission a study by a party external to NTIS to determine whether these claims are substantiated, and if so, what changes should be recommended in NTIS’s policies and procedures to correct the situation.

* Direct all correspondence to: J. Timothy Sprehe, Sprehe information Management Associates, Inc., 1301 Penn-

svlvania Ave.. N. W.. Suite 507. Washinaton, DC 200041701 <itsnrehe@intr.net>.

Government Information Quarterly, Volume 13, Number 4, pages 373-391. Copyright 0 1996 by JAI Press Inc. All rights of reproduction in any form reserved. ISSN: 0740-624X

37-l (,OVtKNMtNl~ INFORMATION (~IJAKTEKI Y Vol. I S/No. 4ilWf1

The study, which my firm was hired to carry out, focused on how NTIS prices its

products and services; whether the level of pricing for the products and services is

inappropriate, given the legal and regulatory context in which NTIS exists; and if prices are

inappropriately high, what remedies NTIS should consider to make its prices more

appropriate. While the author extensively interviewed NTIS officials, he worked

independently and his perceptions and judgments are his own, not those of NTIS officials.

BACKGROUND

Although NTIS has roots in the 1940s, it was in September 1950 that Congress set up “a clearinghouse for the collection and dissemination of scientific, technical, and engineering

information” ( IS USC I 152). From the outset, Congress intended that the service should

be self-supporting.

It is the policy of this Act, to the fullest extent i’casiblc and consistent with the objcctivcs

of this Act, that each of the services and functions provided herein shall be self-sustaining

or self-liquidating and that the general public shall not bear the cost of publications and

other services which are for the special use and benefit of private groups and individuals

(IS USC 11.53)

The clearinghouse became known as the National Technical Information Service in 1970. The National Technical Information Act of 1988 (P.L. 100-5 19) further defined the

powers and functions of NTIS. established an Advisory Board, and required various

reports to Congress. One requirement of the 1988 Act was as follows:

Sec. 212 (t)(2) Within 90 days after- the date of the enactment of this Act, the Secretary ot

Commerce shall submit to the Congress a report on the current fee structure of the Service.

including an explanation of the basis for the fees, taking into consideration all applicable

costs, and the adequacy of the fees, along with reasons for the declining sales at the Scrvicc

of scientific, technical. and engineering publications. Such reports shall explain any actions

planned or taken to increase such salts at rcasonablc fees.

NTIS submitted its report in satisfaction of this requirement in January 1989.’ NTIS

reported that sales of its technical reports had declined by SO percent over the previous

decade. In NTIS’ view, “a major factor contributing to this decline is an information

explosion and the emergence of a major new industry, one dedicated to acquiring,

producing, marketing and disseminating information.” Moreover, technology had

improved so that a significant migration had occurred away from paper-based information

products and toward the electronic realm of online databases. NTIS’s online revenues had grown but sales of its paper products had declined.

The sale of technical reports was particularly affected by these developments because the reports are paper-based. NTIS believed technical report sales were falling because online searchers could more precisely identify their infimiation needs. because end users had become more dependent on intermediaries. and because competition from the information

industry increased. In addition, NTIS had increased its prices for technical reports to adjust for falling sales:

‘I’hc dcclinc in unit sales for these product? has forced NTIS to raise prices in order to cover

the costs of its operation. Over the past decade, the price of the average paper technical

Are the NJ/S’s Prices Too Hgh 175

report sold by NTIS has increased by approximately 180%. This is about in line with the

rest of the information industry where the price of the average scientific/technical

journal has increased by approximately 200% over the last ten years.

NTIS planned to increase sales with a new acquisition strategy that involved enhancing

collection quality, increasing outreach to users and expanding coverage of foreign

scientific and technical literature. NTIS would also improve current products, develop new

products, pursue better customers relations, and aggressively push joint ventures. It is worth noting that NTIS’s decision to raise prices in the face of declining sales

represents a commitment to a course of action that could only result in a vicious downward

spiral, since raising prices would further contribute to sales decline.

NTIS’s Cost Accounting System

NTIS adheres to product line cost accounting. All NTIS products are grouped into

product lines. Each product is identified by a product code as it is input into the NTIS

financial system. Within the NTIS Cost Accounting System, all costs, labor, and revenues

are related to the NTIS Product Code Structure. The product code numbers about 100

codes and defines the universe of NTIS product lines. The financial system produces

revenue and unit sales by product line. Wherever possible, labor costs associated with a particular product are assigned directly

to that product, as are nonlabor costs. From this, NTIS generates the three elements of

product cost: “direct product costs” and “allocated processing costs,” and “General

Overhead.” Direct Product Costs would be matters such as the cost of printing a given title. Allocated

Processing Costs are broken down into orders, copies distributed, and revenue operations.

General Overhead consists of space rental, utilities, departmental operational expenses,

facilities management, depreciation, and NTIS management. Presumably, there are many ways one can allocate costs. NTIS’s allocation to the

threefold breakdown elaborated above seems reasonable. NTIS’s finances are audited

annually by external auditors and the results of the audit are published in the Annual Report

and Financial Overview.* Were there irregularities in cost allocation from the standpoint

of accepted business practices, the auditors would say so. The auditors have found nothing

irregular in NTIS’s cost allocation procedures.

PRODUCTS SELECTED FOR STUDY

In consultation with NTIS, I chose a list of NTIS products to study in detail. The list does

not represent any kind of statistically representative sampling of NTIS products, but it does

include all the different kinds of formats and delivery modes NTIS uses, and several

products were chosen for their intrinsic interest. The list also does not include any of NTIS’s top 10 best-sellers. Table 1 shows the products and various characteristics.

NTIS Bibliographic Database. No discussion of NTIS products would be complete without the NTIS Bibliographic Database which is at the heart of NTIS’s work. It contains

summaries of virtually all scientific, technical, engineering, and business information

products acquired by NTIS from 1964 to the present day. At present about 2 million items

Tab

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etc.

et

c.

378 GOVERNMENT INFORMATION QUARTEKLY Vol. 1 (.‘No. 3ilWO

are carried in the database, including some sources outside NTIS holdings. The database is

leased to commercial, academic, and corporate entities. About 10 commercial firms act as

retail resellers of the database. In 1995, NTIS leased 25 copies of the bibliographic

database in electronic format. Government Reports Announcements md Index (GRAM). GRACGI consists of

summaries of U.S. government research reports and surveys; regulations; handbooks;

directories; and recently developed computer software and data files. GRA&I is virtually

the print equivalent of the NTIS Bibliographic Database. The number of sales for GRA&l

stood at 239 in 1995, but the number is dropping from year to year as customer preferences

switch to the electronic version. As a viable product, GRA&I’s days are numbered. NTIS

believes it cannot lower the product’s price because of the substantial printing costs

involved. The direct costs for the product almost equal the sales price. which is less than

half the total costs for the product. Davis-Bucon Subscription Service. Under the Davis-Bacon Act, all U.S. government

construction contracts and most contracts for federally assisted construction, above a

certain threshold, must use Department of Labor wage rate determinations. Hence, the

Davis-Bacon wage rates represent information that those involved in Federal construction

must acquire. NTIS offers Davis-Bacon wage data on CD-ROM for $2,000 in a form that

permits searching a history for 1994 and 1995. In addition, NTIS sells the Davis-Bacon

database through FedWorld for a subscription price of $600 per year. Foreign Language Courses. Various Federal agencies offer language training, notably

the State Department’s Foreign Service Institute, Department of Defense’s Defense

Language Institute, and the Central Intelligence Agency (CIA), in order to teach language

skills to Federal employees. More than 60 courses in over 30 languages are available to the

public through the National Audiovisual Center.’ The courses consist of textual materials

plus audio cassettes, and the volume of materials varies with the course. Courses are

labeled basic instruction, Familiarization and Short-Term Training (FAST), Headstart, and

Survival. NTIS’s experience has been that the language courses comprise about 17% of

sales from the NTIS Catalog of Products and Services.

IRS Electronic Filers Muil List Senvice. The Internal Revenue Service (IRS) provides

mailing lists consisting of the names and addresses of people and firms who are

transmitters of electronic tax filings or software developers for such filing; they are, in

effect, those who have registered with IRS as qualified to perform electronic filing. IRS

creates the database monthly from its Electronic Filing Applicants database, containing

about 53,000 names. NTIS sells the mailing lists, either as an entire file or as subsets, either on paper labels or diskette. Users can purchase the full file on diskette or breakdowns by

states or breakdowns by four IRS service centers. NTIS sells the lists for $35.00 per

thousand labels. User interest in the product is most active from October through March. In

1995, NTIS sold 16,600 label sets from the service. Occupational Outlook Handbook, 1 W4-1995. The Department of Labor prepares the

Occupational Outlook Handbook featuring information about the current job market. The

work describes what the actual work is like; what education and training are required; and

what job advancement opportunities the occupation holds; potential earnings a person can

expect, and future outlook. It also details related occupations. More than 250 occupations.

Are the NT/S’s Prices Too High 379

representing almost 9 out of 10 U.S. employment opportunities, are found in the book. NTIS sold 250 copies of the handbook in 1995.

U.S. Foreign Agriculture Service Publications. The Foreign Agriculture Service of the

Department of Agriculture prepares expert analyses of the agricultural export market by

individual commodities. The publications provide timely and accurate information on

changing consumer preferences, foreign buyers’ needs and the supply-demand situation in

other countries. The publications appear as printed newsletters, and NTIS had 2,587

subscribers to the publications in 1995. World Factbook. The CIA publishes the World Factbook which contains up-to-date

information about countries and geographic areas of the world. For each country, entries

treat the geography, people, government, economy, communications, and defense forces.

Color fold-out maps provide detail for countries and regions. The Factbook is a popular

publication and NTIS sold 1,300 copies in 1995. GPO and commercial resellers also sold

this title. Statistical Abstract of the United States. The Statistical Abstract of the United States has

been published since 1878 and is the standard summary of statistics on the social, political,

and economic organization of the United States. It serves as a convenient volume for

statistical reference and as a guide to other statistical publications and sources in 3 1 major

subject areas. The Statistica Abstract is another popular publication and NTIS sold 1,300

copies of it during 1995. The title, which is also available on CD-ROM, is also sold by

GPO and commercial resellers. Toxic Substances Control Act: Chemical Substances Inventory. The Chemical

Substances Inventory lists the latest information on 62,000 chemicals manufactured in or

imported into the United States as defined under the Toxic Substances Control Act

(TOSCA). Firms that manufacture or use these substances are required to file reports with

the Environmental Protection Agency (EPA) every four years. Chemical Abstracts

produces a magnetic tape for EPA, which EPA then brings to NTIS. NTIS converts the tape

to diskettes, which are then sold. The inventory is also available on CD-ROM produced

and distributed by Solutions, Inc. The inventory sold only about 20 magnetic tape copies in

1995. The diskette sells much better at 60 copies per year, and the CD-ROM is also a

steady seller at 63. The product experiences a rush every four years because of the

quadrennial reporting requirement. The Blood Alcohol Content Estimator. The National Highway Traffic Safety

Administration has prepared a software program on blood alcohol content for use on microcomputers. The program calls for the user to enter into the computer a person’s

weight, gender, number of drinks consumed, and time-period of consumption. Using these

data, the program provides a quick do-it-yourself estimate of blood alcohol concentration.

The product sold 114 copies in 1995. FDA Food Code 1993. The latest guidance from the Food and Drug Administration on

preventing food-borne disease in restaurants, grocery stores, and vending machines is found in the FDA Food Code. The code includes FDA’s latest recommendations for updating state and local laws and regulations. The code is a best seller, accounting for 8,500 print sales and 900 diskette sales in 1995.

National Health Interview Survey. The National Center for Health Statistics carries out

annually the National Health Interview Survey. It contains responses to questions on acute

380 GOVERNMENT INFORMATION QUARTERLY Vol. 13/No. 4/1996

and chronic conditions; loss of work-days and school days; types of medical contacts

made; health promotion and disease prevention; assistive devices; hearing trouble;

podiatry; and AIDS. The 1993 sample consisted of almost 45,000 households containing

nearly 110,000 persons. In 1995, the product sold 113 diskette copies and 10 magnetic tape

copies. Technical Reports. Technical reports is a term that encompasses the great majority of the

2 million items that NTIS holds in its inventory and archives. These are scientific,

technical, and engineering papers produced by Federal agencies in the course of their work

from 1964 to the present. For the most part, the public seldom requests copies of individual

technical reports. NTIS retains the reports in accessible archives as part of its basic

mission. The grand total for 1995 sales of technical reports was 212,000 titles. Big Emerging Markets (BEM). The Big Emerging Markets: 1996 Outlook and

Sourcebook originated editorially from the International Trade Administration, U.S.

Department of Commerce but was published as a joint venture between Beman Press and

NTIS. BEM focuses on 10 markets around the world on the premise that opportunities for

American businesses are particularly impressive in these markets. Sales of BEMs were 253

in 1995. ITA, NTIS and Bernan hope sales will grow higher in 1996 as more people

become aware of the product. World News Connection (WNC). The CIA operates a program known as the Foreign

Broadcast Information System (FBIS), under which the CIA monitors and captures

broadcast and published news sources in foreign countries. The sources are “unclassified

military, political, environmental, and sociological news, commentary, and other

information including scientific and technical data and reports.” Under the new WNC

service, NTIS is now making the FBIS database available online over FedWorld. NTIS

introduced WNC in November 1995, had 20 subscribers in December, and that number had

grown to 125 by mid-March 1996.

COMPARISONS

By law, NTIS is supposed to be self-sustaining on the basis of its fees, and this means,

among other things, that NTIS is required to break even on revenues versus expenses. For

FY 1994, NTIS had revenues of $32,200,840 and showed a positive balance of excess

revenues over expenses of $44,652, or a profit of one-tenth of a percent. For FY 1995,

NTIS had revenues of $38,461,745 and expenses of $38,290,375, for a balance of

$17 1,370 or four-tenths of a percent. In other years, NTIS has shown a small negative balance, so that over time the numbers even out.

In Table 1, costs are broken down by Direct Costs, Allocated Processing Costs, and

General Overhead. For the NTIS Bibliographic Database, the total annual costs were $2.9

million in 1995. The price shown in the table for the bibliographic database is the price for

FY 1996. NTIS states that revenues for the bibliographic database were approximately $1

million less than costs, and that the difference was made up by revenues from other

products. NTIS also prices GRA&I at almost 50% below cost ($ I 178 in cost versus a sales price

of $565). Sales on this title are dwindling every year, with corresponding increases in the

Are the NJ/S’s Prices Too High 381

use of electronic products. NTIS foresees eliminating GRA&I in the future, and offering

only the electronic version, because the paper product now loses money so steadily. For Technical Reports, NTIS uses a price schedule pegged to the number of pages in the

order, as shown in footnote 2 to Table 1. The Allocated Processing Costs for seven of the

products listed in the table are identical at $32.30. The products are Occupational Outlook

Handbook, World Factbook, TOSCA Chemical Substances Inventory CD-ROM, the Blood

Alcohol Content Estimator, the National Health Survey CD-ROM, Technical Reports, and

Big Emerging Markets. The reason that the figures are identical is because Allocated

Processing Costs were figured by product class and then allocated equally to all members

of the class.

Most of the products listed in the table show negative numbers for price minus cost.

Apparent money makers are the Davis-Bacon subscription service; Toxic Substances

Control Act Chemical Substances Inventory; and the National Health Interview Survey

magnetic tape sales. NTIS appears to lose money on the IRS Electronic Filers Mail List

Service; Occupational Outlook Handbook; the World Factbook; the Statistical Abstract of

the United States, the Blood Alcohol Content Estimator; the FDA Food Code; and Big

Emerging Markets.

NTIS apparently loses money on these various products, in part, because of pricing

policy decisions. For example, NTIS chooses to price the World Factbook and the

Statistical Abstract below cost in order to boost sales volume for popular items (and to be

competitive with the Government Printing Office (GPO)).

What Table 1 shows is that NTIS loses money for some products and makes money for

others. Additionally, the NTIS financial report shows that, in the end, revenues and

expenses come out about equal. From these data one would have to conclude that in the

aggregate, NTIS prices are not too high relative to costs. The question might then become

whether NTIS prices are too high for individual products or groups of products. NTIS’s

answer to the question is likely to be that, for every product whose price someone says is

too high, they can point to a product whose price is arguably too low. At the very least,

NTIS is not gouging its users with prices that bear no relation to its costs since NTIS breaks

even each year and makes no profit worth speaking of. What Table 1 does not show is the effect of volume sales on cost versus price. For

example, Allocated Processing Costs include Sales Desk Operations and Accounting

Operations. These costs are independent of sales volume in the sense that the costs will

not necessarily increase as sales volume goes up. In a given year, only so many people

work at the Sales Desk and the number of people-and hence the personnel costs-will

not change as sales volume increases (unless the rise in sales is unusually dramatic, such

as doubling or tripling, which might trigger hiring more personnel). As sales volume

goes up and the number of Sales Desk personnel remains the same, the Allocated

Processing Costs per copy sold goes down and NTIS makes proportionately more

money. Another question is whether NTIS’ costs are too high. After all, one could argue, NTIS

prices are too high because its costs are too high. This study did not and could not address

this latter question, other than to note that NTIS is audited annually by external auditors. Whether an agency’s costs are too high is the kind of management question that is properly

addressed by the Commerce Department’s Inspector General.

182 (;OVEKNMtN-I INFOKMATUN QLJAKTtKLY Vol. I3/No. 4/1YY(,

Pricing Comparisons: Commercial Products

The NTIS bibliographic database is now sold for $10,000 per year plus 40% of resale

revenue. The closest comparison to the bibliographic database product is offered by

Engineering Information, Inc. (Ei), which acts as both wholesaler and retailer of “the

world’s most comprehensive engineering database.” Ei’s Compendex Plus is said to

provide “worldwide coverage of significant applied engineering and technology

literature.” Engineering Information sells its products and services in many formats. The most

expensive is Ei Compendex Plus on magnetic tape. The full database, covering all back

years to 1990, now costs over $50,000, not including search software and with a

prohibition against resale. The figure of $50,000 includes the one-time cost of purchasing

cumulative backfiles; annual updates are about $14,000. Engineering Information has much cheaper services, including a World Wide Web site

known as the Engineering Information Village. as well as CD-ROM versions. A

university can purchase the NTIS bibliographic database and make the database available

for free (i.e.. no resales) over a university-wide LAN for $10,000. To make Ei’s

Compendex Plus and the Ei website available to up to 2.000 users would cost the

university $13,500 per year. The Ei prices scale up with number of users; fewer than 500

users costs $6,750 per year, while up to 12,000 users costs $44,000 per year. On balance,

therefore, it appears that NTIS’s prices for its bibliographic database are somewhat

cheaper than Ei’s prices. NTIS sells the IRS Electronic Filers Mail List for $35.00 per thousand. NTIS believes its

prices for mailing lists to be substantially lower than commercial prices. Commercial

mailing lists typically sell for upwards of $50.00 per thousand.

Views of Private Sector Providers

In preparing the report, the author interviewed 17 persons from fimts in the information

industry. Those chosen for interviewing were selected on the basis of the fact that their

firms dealt in the same general publishing market as NTIS and/or the fact that they

personally were known to be conversant with both Federal and commercial publishing.

The unstructured interviews centered on the following questions:

l In your judgment, are NTIS prices too high, too low, or about right for each item in

the set of typical products’? l How would you price each of these products if you were selling them? l What other views would you like to express about NTIS‘?

In general, private sector interviewees either stated that NTIS’s prices were about right

or “not too high,” or said they did not have enough information to judge. Some were

exceptions to this generalization, believing that NTIS’s prices were too high either because

the prices are greater than the costs of reproduction and distribution (i.e., a philosophical

disagreement regarding NTIS’s self-supporting status) or because they thought NTIS’

costs were too high. Where an interviewee’s firm sold a product similar to an NTIS

Are the NJ/S’s Prices Jo00 High 383

product, the interviewee went into detail about that particular product, the upshot generally being that NTIS’s prices were competitive.

Interviewees tended to spend more time in discussing larger aspects of NTIS. Several focused on the question of whether NTIS subsidizes some money-losing products with

money-making products. They had the impression, for example, that NTIS charges high

prices for the NTIS bibliographic database and subsidizes money-losing products with the excess of revenues over costs on the database. (In fact, the opposite is true. The NTIS

bibliographic database is a money-loser-it lost about $1 million in 1995-that is

subsidized by other information products and services.) The answer, in general, is that NTIS does subsidize money-losers with money-makers,

and breaks even over all products. NTIS believes it could not behave otherwise and still

be self-supporting. As a practical matter, it would be impossible to break even on each and every information product. NTIS believes its responsibility is to break even in the

aggregate, not on the individual product level. Some products make money and some

lose money, but at the end of the year NTIS is as close to a no-loss-no-profit status as all

of its efforts can make it.

Comparisons with GPO Prices

For some of the products on the list in Table 1, the author sought out comparable GPO

prices. The results are shown below:

Product Occupational Outlook Handbook World Factbook Statistical Abstract

GPO Price $23.00 29.00 37.00

NTIS Price $22.00 29.00 29.00

Also, all three of these products are also sold by a private publisher, BemanRJnipub, of Lanham, Maryland, and Beman’s prices are identical to GPO’s Hence, in this limited comparison, NTIS’s prices are below the GPO and commercial prices in two cases, and

identical in a third. NTIS sells the Davis-Bacon subscription service online through FedWorld for $600 per

year. GPO sells the Davis-Bacon subscription service in paper for approximately $2,000

per year. Although online and paper are different media, the NTIS price appears to be

significantly cheaper.

“Pricing Government Information”

In 1994, James Love, Director of the Taxpayer Assets Project, published a paper entitled “Pricing Government Information.“4 After elaborating a number of economic concepts, Love examined pricing of government information products at the GPO and NTIS; he considered pricing under the Freedom of Information Act and discussed copyright of government information. Love presented a table in which he compared prices for 19 selected GPO and NTIS databases. For these products, Love found that the NTIS prices were higher in every case than the GPO prices. The author checked Love’s prices for the NTIS products and found them generally accurate.

384 GOVERNMENT INFORMATION QUARTERLY Vol. 1 ~/NO. 4/l 996

Love’s findings are an artifact of his selection process. Although he claims the products

were selected in a “nondiscriminatory manner, ” in fact, he chose 19 products where the NTIS price was higher than the GPO price. He could just as easily have chosen 19 products where the GPO price was higher than the NTIS price. Indeed, for products that are popular with users such as the Statistical Abstract of the United States, NTIS prices tend to be

consistently lower than GPO’s The reason for this is that NTIS generally follows a policy of underpricing GPO for high volume titles that both agencies sell.

TWO SPECIAL CASES

Case I. Big Emerging Markets

In September 1995, Bernan Press and NTIS, in a joint venture, published The Big

Emerging Markets: 1996 Outlook and Sourcebook (BEM), a report that originated editorially from the International Trade Administration, U.S. Department of Commerce. Big Emerging Markets was published at no cost to ITA; indeed, ITA received 1,000 free copies of the report. Beman paid for printing BEM, which was marketed jointly by Beman and NTIS. Beman also offered to provide the Federal Depository Library program with 1,400 copies of a microfiche version of BEM.

The Interagency Strife

A key question germane to the BEM joint venture was whether or not ITA and NTIS were obliged to print and sell the report through the GPO under Federal printing laws in Title 44 United States Code. In August 1995, Robert Galpin, Director of the Office of Administrative Operations in the Department of Commerce, requested an opinion from the Commerce Department General Counsel’s office as to whether NTIS is exempt from

section 207 of the 1993 Legislative Branch Appropriations Act, P.L. 102-392. Section 207 enforces Title 44 by prohibiting Federal agencies from using appropriated funds for the production or duplication of government publications unless procured through GPO.

Responding to Galpin on August 28, 1995, Barbara S. Fredericks from the General Counsel’s office stated that an agency must procure its printing services through GPO unless there is an applicable exception. According to Fredericks:

There are only three instances where Federal agencies are not required to procure printing services through GPO: (1) where the entire cost of printing is not borne by the Government or where printing is not exclusively for the government, (2) where the agency possesses specific statutory authority otherwise, and (3) where the Joint Committee on Printing approves an exception..

Because NTIS is statutorily directed to collect user fees to recover at least the cost of the materials, the entire cost of printing by NTIS is not borne by the government. As a consequence, this office has consistently opined that NTIS is not required to go through

GPO to procure printing services.’

Subsequent to receiving this opinion, NTIS issued a Request for Information in the Commerce Business Daily asking for expressions of interest from commercial firms that wished to perform printing services for NTIS for documents printed with funds that NTIS recovers from fees.

Are the NJ/S’s Prices Too High 385

On October 31, 1995, Public Printer Michael F. DiMario wrote to the Secretary of Commerce to express concern on several grounds regarding the publishing arrangements

for BEM. First, neither ITA, NTIS, nor Beman had arranged to supply the GPO depository library program with copies, and DiMario requested 1,218 copies of the book for

distribution to the depositories. Second, GPO believed the arrangement was in violation of

Section 207 of the 1995 Legislative Branch Appropriations Act requiring Executive Branch agencies to obtain printing services from GPO. Third, the Superintendent of

Documents was deprived of the opportunity to include the book in the document sales

program. Finally, the arrangement was said to be contrary to OMB Circular A-130’s prohibition on establishing exclusive or restricted distribution arrangements that interfere

with the timely and equitable availability of government information products. DiMario

asked that the BEM project be suspended. On December 6, 1995, William W. Ginsberg, the Commerce Secretary’s Chief of Staff,

responded on behalf of the Secretary. Ginsberg said the Commerce Department was

satisfied that “because of its clear statutory mandate, NTIS is not required to procure printing services through the GPO.” Contrary to DiMario’s assertions, Commerce believed

that its dissemination strategy guaranteed maximum availability of BEM both to the

depository libraries and the public. Because the printing of BEM did not use appropriated funds (Beman paid for the printing), the 1995 Legislative Branch Appropriations Act did

not require NTIS to use GPO’s printing services. Commerce declined GPO’s request that

the BEM joint venture be suspended. NTIS and Beman had offered GPO 1,400 copies of the microfiche version of BEM for

the depository libraries. DiMario’s letter said this was insufficient because “the physical

characteristics (3-color process) and high public interest content of this publication render

it inappropriate for conversion to microfiche.” Not only did GPO want printed copies of BEM for the depository libraries, but GPO also wanted the opportunity to offer BEM through the Superintendent of Documents’ sales program.

The Commerce response was that GPO could have printed copies of BEM, purchased under the same terms that GPO sells print publications to NTIS. This was a clever

hoisting of GPO on its own petard. In August 1994, GPO had informed NTIS that, since

NTIS was a reseller of government publications from the GPO viewpoint, NTIS could

enjoy the “rider” price only for the first 250 copies of a title that it purchased. When

NTIS purchases more than 250 copies, NTIS would have to pay the price paid by commercial resellers, namely, sales price less 25%. NTIS, in other words, would not

receive the financially-favorable treatment accorded other Federal agencies but rather would be treated like a commercial reseller. In its December letter, Commerce returned

the favor, proffering the identical terms back to GPO for printed copies of BEM, terms

GPO was unlikely to accept. This brought matters to an impasse, with NTIS offering free microfiche or purchase of printed copies and GPO insisting on free printed copies.

The Poliqv Issues

The foregoing details make picaresque anecdotes about interagency bureaucratic strife, but they also contain interesting policy questions. First, in my experience, this is one of the rare instances when an agency general counsel was willing to render a legal opinion that appeared to contradict the traditional understanding of Federal printing laws fostered by

386 CCIVEKNMENT INFOKMATION QUARTERLY Vol. 1 </No. 4119%

GPO and the Joint Committee on Printing (JCP). Arguably, the legal basis for Fredericks’

opinion was in existence 5, 10, or even 20 years ago. What was new, therefore, about Fredericks’ opinion is the change in political climate and the new willingness of an executive

agency’s legal counsel to render an opinion likely to upset another agency (GPO) and a

congressional committee (JCP). Many have argued that the Federal printing laws are an

unconstitutional trespass upon the separation of powers insofar as they convey upon a legislative agency, GPO, monopoly rights over an executive management function, namely,

printing.’ While Fredericks’ opinion does not cite aconstitutional argument, it is nonetheless

a kind of landmark in the longstanding conflict between GPO and its client agencies. Second, a more fundamental question arises in the BEM case. Granted, for the sake of

argument, that NTIS has no legal requirement to use GPO for printing in this case, what about ITA’? Does not ITA have to abide by the Federal printing laws? Can ITA, in effect,

use NTIS as a way of circumventing the printing laws? Or, is NTIS in the nature of a

legitimate loophole for avoiding some of the restrictions of those laws? William Ginsberg’s letter appears to address these questions somewhat obliquely by

saying:

ITA has chosen to use NTIS and its joint venture authority to assure the broadest possible distribution of its information into the private sector. The joint venture proactively extends

the reach of the information to audiences well beyond the traditional channels of

distribution.’

Ginsberg also points out that NTIS is not using appropriated funds and, therefore, is not

in violation of Section 207 of the 1995 Legislative Appropriations Act-an echo of the Fredericks’ opinion.

Although this may be putting words in the Commerce Department’s mouth, Ginsberg

appears to argue that, Section 207 aside, ITA’s primary legal obligation in the BEM case is to satisfy its responsibility for delivering BEM to ITA’s public in the most effective

manner. In Commerce’s view, NTIS was the most effective way for ITA to proceed,

particularly since the partnership with a private sector publisher ensures the marketing of

BEM to audiences “beyond the traditional.” If one extrapolates this argument, it seems to

say that an agency’s responsibility to reach its public may outweigh its responsibility to abide by the Federal printing laws, and if it does so, the agency is justified in exploring

arrangements not contemplated in those laws. Doubtless the Commerce Department never intended Ginsberg’s letter to bear such

heavy policy freight. Hence, one should not push the foregoing arguments very far. At best,

it is perhaps an ancillary argument, yet perhaps also the harbinger of executive agency thinking. Indeed, the argument harkens back to the many voices who have urged that GPO represents a bottleneck, rather than a facilitator, to disseminating government information. For the present case, it is enough to say that Commerce was satisfied that ITA’s use of

NTIS was within the boundaries of legality.

The Precedent for the Future

The BEM title page bears the Commerce Department seal and states: “U.S. International

Trade Administration, Ronald H. Brown, Secretary [of Commerce].” It also states that the volume is “published by Beman Press in conjunction with the National Technical

Are the NTIS’s Prices Too High 387

Information Service.” Big Emerging Markets thus represents an instance in which NTIS entered a joint venture with a private sector partner to produce and disseminate what might have become, in the traditional course of events, a routine government information

product. It now seems possible that NTIS could market to other agencies the idea of following the

example of BEM. The National Technical Information Service and the agencies could enter into agreements with private firms to split the costs and profits deriving from the enterprise. Whatever else happens, BEM already symbolizes a precedent in that it marks the occasion when the Commerce Department’s General Counsel opined that, under

certain circumstances, NTIS is free of the responsibility to use GPO for printing services. To the extent that this is a legitimate legal loophole, other agencies may find BEM an

attractive exemplar. A key question, which cannot be answered at the moment, is whether BEM and ventures

like it will result in adequate profits for the private partners. Indications are that, in the case of BEM, the private partner did not make a profit, but the reason for this seems to be ITA’s unrealistic expectations for BEM. That is, ITA was convinced that BEM would sell over 5,000 copies and insisted on a corresponding print run. Actual sales have been about half of ITA’s expectations. If nothing else, BEM was certainly a learning experience for both NTIS and the private partner. In the future, perhaps both NTIS and its private partners will

negotiate more firmly with originating agencies. If the joint ventures prove unprofitable for the private sector, the willingness of Federal

agencies to enter the ventures will be moot. Hence, it remains to be seen whether private firms will want to do business with NTIS over the longer term. This depends, in turn, on whether the joint ventures realize profits and whether NTIS and the originating agencies are satisfactory business partners.

Case II. World News Connection

In November 1995, NTIS announced World News Connection (WNC), billed as “a new online service that gives you the power to quickly and easily locate time sensitive news from thousands of non-U.S. media sources.” Although the WNC brochure nowhere says so, the service is basically an online version of FBIS which NTIS has been publishing in print for 24 years as FBZS Daily Reports. Foreign Broadcast Information System (FBIS) is a program of the CIA. The CIA monitors foreign radio and television broadcasts, news

agency transmissions, newspapers, books and periodicals under its general mandate to collect, produce, and disseminate foreign intelligence. The agency translates into English those materials that come from non-English-language sources.

FBIS represents what the intelligence community labels as “open source intelligence,” meaning information that can be freely gathered or purchased by anyone with the means to do so. The intelligence community estimates that perhaps as much as 40% of its information is open source in nature.

Traditionally, the intelligence agencies have shared information only within agency walls or among the intelligence community, but not beyond Federal agency boundaries. This is now changing and the CIA’s memorandum of understanding with NTIS to make WNC available outside the Federal government is a case in point. Other elements of the intelligence community are actively considering making their open source intelligence

388 CXJVEKNMENT INFORMATION QUARTERLY Vol. 1 ~/NO. 411996

available to the general public.’ The impetus for this movement is found partially in the

efforts to reinvent government and partially in the desire to justify intelligence activities in the climate of diminishing resources in the post-Cold War era.

In this new atmosphere of openness, the intelligence community is concerned about

problems of copyright. So long as the agencies summarize their sources and share within the Federal government, no copyright problems appear to arise. To the extent, however,

that the agencies redisseminate whole works to the general public from their open source

holdings, they will encounter problems of copyright, especially as regards the Beme

Convention. In March 1989, the United States joined the Beme Union by signing a treaty called the

Beme Convention for the Protection of Literary and Artistic Works.’ At the same time, the

United States modified its copyright law to satisfy obligations under the treaty. The effect of the Beme Convention is that all 79 signatory nations agreed that copyright in authors’ works will be automatically protected both within their boundaries and internationally. The

United States and other members agreed to treat nationals of other countries like their own

nationals for purposes of copyright. One additional effect is the abolition of a mandatory notice of copyright for published works. Failure to place a copyright notice on copies of

published works no longer results in loss of copyright. For U.S. Federal agencies dealing in international STI, the impact of joining the Beme

Union is that the agencies must presume all open source information from other countries

is copyrighted. So long as such information was intended only for agency internal use, this presented no problem. As intelligence agencies have begun discussing dissemination of

open source intelligence to the general public, the agencies are threatening to run afoul of

the Beme Convention. NTIS is accepting responsibility for administering copyright in selling the FBIS holdings

through WNC. NTIS has established a set-aside escrow fund into which a portion of the sales price for each item sold is deposited and NTIS will pay royalties to copyright holders from this fund. NTIS canvasses copyright holders to ask whether they agree with the NTIS

arrangement, which is to pay each holder royalties from the escrow account based on the number of “hits” received in the online WNC service. Thus far, about two-thirds of the

copyright holders have agreed to this arrangement, although not all have been heard from

yet. Since WNC was launched in November, NTIS says about 20 subscriptions have been

purchased. Expectations are that the service will grow slowly but steadily. NTIS is preparing a version of WNC that will be For Official Use Only and available only to

Federal agencies. Currently WNC goes back to July 1994. NTIS is studying how far back to go in online presentation before the user hits a backfile function. Also under study are the options of publishing a CD-ROM version and subdividing the service by subject

matter.

The Precedent for the Future

WNC is an online service that depends for its existence on the continued willingness and ability of a Federal agency to maintain a program generating the service’s content. Relatively few Federal agencies create and maintain continuous information services like WNC that are also salable. Indeed, within the past 2 years, the Justice Department

Are the NJ/S’s Prices Too High 389

announced that it would no longer maintain its Juris system for computer-assisted legal

research, opting instead to purchase services from private vendors. In other words, one

example parallel to WNC has recently disappeared. In my judgment, therefore, WNC

offers limited opportunity as a precedent for the future. There are now, and will continue to

be, very few cases in which the Federal government maintains internally a dynamic

information database that is of sufficient interest to the general public.

CONCLUSION: ARE NTIS’S PRICES TOO HIGH?

Within the limited scope of this study, I concluded that NTIS’ prices for its information

products are not too high. When compared with its costs, NTIS prices are not too high,

almost by definition. When compared with commercial products, NTIS prices are not too

high. When compared with prices GPO charges, NTIS prices are not too high.

Beating GPO’s prices is not a particularly difficult thing to do. Many in the Federal

publishing community have long contended that GPO’s prices are too high. Private firms

such as Beman Press are able to republish Federal documents, sell them at GPO’s prices,

and apparently make a nice profit. NTIS prices seem high to some observers because of the comparison with prices charged

by other Federal agencies that are not self-supporting from fees and whose prices reflect

little more than the cost of reproduction and distribution. I doubt that the other agencies

even accurately represent their dissemination costs, since it is common practice not to

include sunk costs and many overhead factors when computing their prices. I see no alternative to accepting NTIS as currently constituted, namely, as a Federal

agency that by law is self-supporting from fees charged for its products. Given that fact, I

see no alternative for NTIS but to apply the Paperwork Reduction Acts’ (PRA’s) cost-of-

dissemination pricing rule in the aggregate, meaning that some individual products will be

money-makers and some money-losers but that at the end of the year profit and loss will

balance out to zero. Does NTIS subsidize some money-losing products with revenues from money-making

products? The answer is yes. However, contrary to what some think, the NTIS

Bibliographic Database is not one of those money-makers that is sustaining the money-

losers. Rather, the opposite is true. The bibliographic database currently costs about one

million dollars more per year than it generates in revenues.

Does NTIS make a profit off of sale of its products? The answer, both de jure and de facto, is no. NTIS breaks even; sales revenues roughly equal costs.

The deeper question here is whether NTIS’s costs are too high, because NTIS prices

appear to be completely cost driven. Some interviewees who had dealt with NTIS for years

thought the costs were entirely too high; others said they had no basis for judging. One

suggested that, rather than cost-driven pricing, NTIS practiced price-driven costing,

meaning that NTIS kept its costs as high as the market will bear; so long as the market sustains the costs, NTIS has little motivation to reduce its costs. Should NTIS be

legislatively transformed into a government corporation, this interviewee thought NTIS

would have an extremely hard time surviving because of its high costs. It is important to remember that many costs-personnel, for example-in Federal agencies are more beyond

the control of management than they would be in private firms.

390 (X )VEKNMtNT INFOKMATION QLJAKTEKLY Vol. I i/No. 4/10%

NTIS is an agency that must market in two directions. Most obviously, it markets information products and services to the public. Less obviously, NTIS must also market

itself to Federal agencies in order to convince the agencies that their interests will be well

served if they disseminate agency information products through NTIS. Without a vigorous

supply of attractive new products and services proffered through NTIS by the agencies,

NTIS would wither and atrophy. NTIS’s ability to offer new products and enter into new

joint ventures or cooperative agreements with the private sector depends very much on

NTIS’ reputation with the agencies and companies. The study uncovered some problems facing NTIS in the area of work culture. Many, if

not most, of those contacted for this study had extensive firsthand experience with NTIS.

They believed that, despite a bright new management face on NTIS, the agency underneath was still the same old inefficient government bureaucracy. They lamented the absence of a

customer-driven mentality, saying that NTIS’ response to customers inquiries and

complaints was as slow as always, that staff were bound to outmoded procedures and mired in paperwork. Assuming current trends bear fruit, a key challenge facing NTIS for the

future will be a cultural transformation from a Federal agency to a private corporation. If NTIS is to continue to pursue joint venture agreements with private firms, it must find

ways to make the joint venture processes more user friendly to the firms. Some of the

interviewees for this study stated flatly that they would never again consider entering into a joint venture with NTIS, no matter how profitable, so unpleasant was their past

experience. Finally, the existence of this study is, in its own way, a testament to the openness of

NTIS to change and improvement. NTIS did define the study’s scope, but also did not

object when my inquiries went beyond that scope. All infomlation 1 requested was forthcoming. At every turn I was invited to call things the way I saw them. While NTIS

staff freely expressed their opinions, no one attempted to coerce or shape the author’s conclusions. Perhaps, as some believe, NTIS has a distance to travel before it is ready to

stand on its own as a government corporation. but NTIS’s willingness to open itself to

this study’s scrutiny is evidence that the journey is already well underway.

NOTES AND REFERENCES

Are the NTIS’s Prices Too High 391

7. Letter from William W. Ginsberg, Chief of State to Secretary Brown, Department of Commerce, to

Michael F. DiMario, Public Printer, Government Printing Office (December 6, 1995).

8. These issues are under active consideration by the Interagency Gray Literature Working Group. Gray

literature, as used by the intelligence community, means information that is not readily available

through routine publishing sources, such as conference and workshop proceedings.

9. See Copyright Office, “The United States Joins the Berne Union,” Circular 93a (Washington. DC:

Library of Congress, February 1989). Copyright Office, “Highlights of U.S. Adherence to the Beme

Convention,” Circular 93 (Washington. DC: Library of Congress, August 1989).