7

The Future of Capital Planning for the NIH Bethesda Campus

INTEGRATING STRATEGIC RESEARCH PROGRAM AND STRATEGIC CAPITAL FACILITIES PLANS

Background

In the preceding chapters of this report, the committee has described how and why the National Institutes of Health (NIH) Intramural Research Program (IRP) may be vulnerable and its mission at risk unless there is a timely reassessment and readjustment of the agency’s capital planning processes and associated funding. At the same time, the committee acknowledges and commends the work of the Office of Research Facilities Division of Technical Resources (DTR) team on the Bethesda Campus. Its capital infrastructure collaborative planning processes can serve as an excellent starting point, in part, to support the integration of the IRP scientific program objectives balanced by similarly required robust planning—planning by the DTR leadership, which has proven to be innovative, rigorous, and financially sustainable.¹

Specific findings in the Clinical Center Working Group Report to the Advisory Committee to the Director (NIH ACD, 2016) regarding the condition of NIH facilities highlight the critical importance of the built environment to the ability of NIH to achieve its mission. Inefficient facilities management and deteriorating building and site infrastructure systems have been demonstrated to undermine mission performance and workforce productivity within both private and public sector research enterprises.

By providing an objective and accurate assessment of an institution’s built environment, as well as its developmental potential, rigorous facilities capital planning can serve as a critical component of effective biomedical research and healthcare strategic planning (Manevich, 1985). Wasteful expenditures are avoidable through application of the most fundamental and key steps of strategic capital facilities planning, ensuring that a comprehensive evaluation of critical program and capital facilities is completed and impacts

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¹ See National Institutes of Health, “HHS Assistant Secretary Bardis Visits, Tours,” NIH Record, Vol. LXIX, No. 17, August 25, 2017, https://nihrecord.nih.gov/newsletters/2017/08_25_2017/seen.

to the strategic program plan are identified. Last, while the needs for major capital facilities investments are often clear to facilities engineers and program leaders, institutional leaders must continually reprioritize formal allocation of capital investments in the institutional capital plan to enhance emergent as well as the highest ongoing existing program priorities (Glagola, 2002).

Existing Practices of Federal Agency Research Enterprises

To fulfill the committee’s charge to “review comparable available facility condition methodologies and metrics of other federal agencies at an overall portfolio level,” four federal agencies with scientific missions presented their capital asset management practices to the committee. These were (1) the Naval Research Laboratory (NRL); (2) the National Institute of Standards and Technology (NIST); (3) the National Aeronautics and Space Administration (NASA); and (4) the Agricultural Research Service. Similar to NIH’s IRP, each of these entities has in-house research professionals, specialized research equipment and test facilities, and research-focused capital assets. In addition, the committee reviewed a recent report by the Institute for Defense Analysis on the capital planning, prioritization, and management at 10 research laboratories that conduct U.S. national security research (see the section “Institute for Defense Analyses Benchmarking Analysis of Federal Security Laboratories” in Chapter 7). The committee also briefly reviewed a recent report from the Government Accountability Office on best practices for federal real property asset management (GAO, 2018), which reviewed practices at six federal agencies (see the section “GAO Report on Best Practices for Federal Real Property Asset Management” in Chapter 7).

Naval Research Laboratory

NRL was established in 1923, to “Conduct a broadly based multidisciplinary program of scientific research and advanced technology development directed toward maritime applications of new and improved materials, techniques, equipment, systems and ocean, atmospheric, and space sciences and related technologies.”² NRL is administratively housed under the Navy’s Chief of Naval Research, and conducts approximately $1.3 billion of research annually. The majority (60 percent) of the research funds come from the Department of the Navy. Approximately one-third of NRL’s funding comes from research contracts with other Department of Defense (DoD) offices, and a small amount (about 7 percent) comes from other U.S. government or industry contracts.

The main NRL research facility is located in Washington, D.C. (NRL-DC), and consists of 22 buildings on 880 acres. NRL also operates facilities for flight support (Patuxent River, Maryland), corrosion (Key West, Florida), oceanography and marine geosciences (Stennis Space Center, Mississippi), and marine meteorology (Monterey, California). Major shared facilities across NRL include (1) global satellite operations; (2) scientific research library; (3) Institute for Nanoscience (Class 100 clean room, 5,000 square feet); (4) Laboratory for Autonomous Systems Research; and (5) VXS-1 (scientific research squadron). The NRL-DC buildings date from the 1930s to 1950s.

NRL employs approximately 2,400 personnel (see Table 7.1).

The NRL capital asset management program is supported through a 2 percent fee on all research contracts. New capital expenditures for equipment or specialized facilities is covered either through direct expense to the research contract, covered under the NRL-wide general and administrative (G&A) account, or through a specific military construction (MILCON) appropriation (although MILCON funds are rare; NRL just received one approval after not having received one for 12 years).

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² B. Danly, “Naval Research Laboratory Overview,” presentation to the committee, August 8, 2018.

TABLE 7.1 Naval Research Laboratory Personnel

NOTE: FY, fiscal year; S&E, science and engineering.

SOURCE: B. Danly, “Naval Research Laboratory Overview,” presentation to the committee, August 8, 2018.

The NRL Corporate Facilities Investment Plan explicitly analyzes the link between mission, research, and facilities, and is aligned with the Naval Warfare Center, and in collaboration with the DoD Defense Advanced Research Projects Agency. Recent NRL capital asset initiatives include an “Innovation Space” for new collaborative research efforts, as well as extensive sharing of specialized equipment and laboratory space. The Naval Research Advisory Committee panel,³ which is composed of external experts, reviews NRL progress, challenges, and opportunities, and reports to the NRL Director of Research. The Head of Business Operations, who has responsibility over all finances as well as facilities, reports to the Director of Research.

National Institute of Standards and Technology

NIST was established in 1901 as the Bureau of Standards. Its mission is “To promote U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve our quality of life.”⁴ NIST is the only broad-based research laboratory in the Department of Commerce, and in FY 2018 conducted approximately $685 million in Scientific and Technical Research and Services (STRS), and an additional $152 million in Industrial Technology Services (ITS).⁵ Each lab within NIST can charge a fee for the use of its specialized equipment and facilities by other government agencies and industry; those revenues stay within that lab’s finances.

The NIST main campus is in Gaithersburg, Maryland, and consists of 579 acres with 61 buildings (3.6 million gross square feet [GSF]). NIST operates three additional sites: (1) Boulder, Colorado, with 206 acres and 30 buildings (896,000 GSF); (2) Fort Collins, Colorado, with 390 acres and 5 buildings (19,000 GSF); and (3) Kauai, Hawaii, on the Barking Sands Pacific Missile Range Facility, which covers 31 acres and has one building (6,000 GSF). The majority of the NIST-Gaithersburg facilities date from the 1960s, with several major additions during the early 2000s. The majority of the Boulder facilities date from the 1950s.

NIST employs approximately 3,300 personnel (full-time, part-time, and student employees) and approximately 5,550 full-time and part-time associates (NIST, 2017a). The majority of those employees (2,742) are employed at the Gaithersburg campus. NIST reported approximately 440 employees working at its facilities in Boulder, Colorado.

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³ See the U.S. Navy Naval Research Advisory Committee website at https://www.nrac.navy.mil/.

⁴ National Institute of Standards and Technology, “NIST Mission, Vision, Core Competencies, and Core Values,” updated January 26, 2017, https://www.nist.gov/about-nist/our-organization/mission-vision-values.

⁵ National Institute of Standards and Technology, “Budget Tables,” updated December 21, 2018, https://www.nist.gov/fy-2019-presidential-budget-request-summary/budget-tables.

TABLE 7.2 NIST Fiscal Year 2018 Budget for Capital Asset Management

^a Actual CRF/SCMMR FY 2018 budget is $319 million.

NOTE: CRF, Construction of Research Facilities; FY, fiscal year; IS, Institutional Support; SCMMR, Safety, Capacity, Maintenance, and Major Repairs.

SOURCE: R.C. “Skip” Vaughn; NIST, “Capital Planning at the National Institute of Standards and Technology,” presentation to the committee, August 9, 2018.

At NIST, all nonstaffing costs against STRS (i.e., lab programs) and Industrial Technology Services (ITS—extramural programs) are taxed at a rate of 29 percent. Nonstaffing costs associated with the budget line items, Construction of Research Facilities/Safety and Capacity, Maintenance, and Major Repairs (CRF/SCMMR), are charged at a rate of 1.5 percent. All such funds are used for what might be deemed support costs: human resources, budget, information technology (to a degree), acquisitions, safety, general administration, utilities, and facilities (i.e., operations, services, and grounds maintenance).

The FY 2018 Budget for NIST capital asset management was $378 million (see Table 7.2).

NIST is currently assessing the Facility Master Plan across the Gaithersburg and Boulder campuses with an eye toward reducing extensive lab customization, shifting toward IT-based research, and encouraging significant collaboration across NIST labs. The prioritization within the Master Plan is based on a Condition Index (CI), and a 5-year projection of capital needs that will identify and renew or develop additional critical major infrastructure systems and capital assets. Major new appropriations currently provide an opportunity to renew and expand capital assets on NIST campuses. Management priorities include expansion planning to implement an increase in capital expenditure from $40-50 million per year to $250 million per year. The periodic reviews of the strategic value of NIST research activities by external expert panels do not usually concern capital assets. There does not appear to be shared laboratory space or extensive sharing of specialized equipment or testing facilities. The chief facilities management officer reports to the associate director of management resources, who reports to the NIST Director and Under Secretary of Commerce for Standards and Technology.

National Aeronautics and Space Administration

NASA was established in 1958 to develop peaceful applications of space science. NASA’s total budget for FY 2017 was $19.6 billion, which included $361 million for construction and environment (Davis, 2017). NASA also receives lease payments, which equaled $2.3 billion in FY 2017 (13 percent of NASA’s spending authority), primarily through commercial leasing of facilities (NASA OIG, 2018). For example, Google paid NASA an initial base rent of $3.7 million per year to lease 42 acres of unimproved land in

NASA Research Park,⁶ and leased NASA’s Moffet Airfield for 60 years, for a total of $1.6 billion in rent over the life of the agreement (Kastrenakes, 2014).

NASA has nine research centers: (1) Ames Research Center; (2) Armstrong Flight Research Center; (3) John H. Glenn Research Center at Lewis Field; (4) Goddard Space Flight Center; (5) Lyndon B. Johnson Space Center; (6) John F. Kennedy Space Center; (7) Langley Research Center; (8) George C. Marshall Space Flight Center; and (9) John C. Stennis Space Center. The Jet Propulsion Laboratory is a federally funded research and development center managed by the NASA Management Office. NASA also has seven installations with component facilities. NASA manages over 3,000 buildings and facilities (47 million square feet), including 695 labs.

NASA currently employs 17,002 personnel, including 455 students, and 86 term or other nonpermanent personnel.⁷ It employs 11,058 science and engineering professionals, including 182 students, and 23 term or other nonpermanent personnel.

The NASA capital asset management program has its own line-item appropriation.

NASA is currently developing a Master Plan across all locations and directorates to assess the current NASA mission need for facilities, particularly compared with the current plethora of existing (and outmoded) facilities. Recent NASA capital asset priorities include significant increases in new collaborative research efforts, as well as extensive sharing of specialized equipment and laboratory space.

Other key priorities include reducing unscheduled maintenance (currently at 30 percent of annual expenditures) by 1 percent per year, using a new reliability-based maintenance management system, and reducing operating expenses using strategic portfolio management. Each NASA lab has external expert review panels that assess both the research and the facilities of that lab, and across NASA. The Office of Strategic Infrastructure reports to the Associate Administrator of Mission Support, who reports to the NASA Administrator.

Agricultural Research Service

The ARS of the U.S. Department of Agriculture was founded in 1953 with a mission to

ARS operates over 95 research facilities in five regions across the United States: (1) Pacific West; (2) Plains; (3) Midwest; (4) Northeast; and (5) Southeast. The ARS conducted approximately $1.5 billion in research in FY 2017, a large majority (92 percent) of which was funded by the Department of Agriculture,

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⁶ John Shonder, Oak Ridge National Research Laboratory, NASA Facilities Engineering and Real Property Conference, 2011, https://fred.hq.nasa.gov/Capitalassets/Docs/ConferenceNashville2011/Tuesday/ShonderAltFinEULPPA.pdf.

⁷ NASA, “Workforce Information Cubes for NASA,” https://wicn.nssc.nasa.gov/wicn_cubes.html.

⁸ See the U.S. Department of Agriculture’s (USDA’s) Agricultural Research Service website at https://www.ars.usda.gov/about-ars/.

3 percent by other federal departments, and approximately 3 percent by nonfederal funders, including in collaboration with land grant universities.⁹

ARS-owned capital assets include approximately 388,000 acres of land and 3,095 buildings (approximately 15 million GSF). Approximately 40 percent of the buildings (including laboratories) are over 50 years old. ARS also leases over 400,000 GSF, and occupies over 600,000 GSF under memorandums of understanding with states and other federal agencies.¹⁰

In FY 2017, ARS employed 5,522 personnel, including both field and Washington, D.C., personnel.¹¹

Within the ARS, projects pay 4 percent of their research funds for facility repairs and maintenance.¹²

The capital asset management for ARS consists of an agency-wide Capital Asset Management Committee, which includes research administrators, the budget director, and facility directors and research directors for each region. In addition, each region has a capital asset management committee, as does each location. An external expert review panel meets three times each year to review research progress and facilities based on the following criteria: (1) relevancy; (2) impact; (3) capacity (such as human resources and infrastructure); (4) innovation; (5) quality; and (6) technology transfer.

The annual assessment of ARS capital management projects requires formal alignment with the research assessment and utilizes a current building condition index to compile an annual, mid-range, and long-range capital projects prioritization report reviewed and approved by the ARS senior administrative leadership team. The ARS uses the U.S. Army Corps of Engineers and one of the common institutional commercial software building conditions program to track and assess capital assets.

Ongoing ARS capital asset priorities are reported to be effective due to the nature of the ARS extensive collaborative research efforts with land grant universities and agricultural industry researchers, often sharing laboratory space and specialized plant biosciences equipment and facilities. The associate administrator for research and operations reports directly to the ARS budget director.

Summary of Comparable Portfolio Capital Asset Management at Federal Research Agencies

All four federal agencies that presented their capital asset management practices to the committee have instituted external expert panels to assess research missions, and three of the four agencies use external panels to assess the alignment of the agency’s mission with capital facility assets management and planning (see Table 7.3). Three of the four agencies have also established programs to enhance shared facilities, including specialty equipment and research space, and have designated funding to encourage collaboration across organizational units. Two of the agencies focus collaboration support toward organization-wide themes, and one focuses on regionally based intergroup themes. All four federal agencies have explicit mechanisms to support capital facility assets by all of its organizational units, ranging from a proportion of all research funds to a space usage charge (e.g., “rent”). In addition, three of the agencies charge external organizations (public or private organizations) fees for usage of specialty facilities or space. The reporting structures for facilities management and planning differ across the four agencies, with two agencies reporting that facilities management reports within the research mission structure, and two agencies reporting within the organization’s finance administrative hierarchy.

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⁹ A further 2 percent arises from miscellaneous contributions; see USDA, “2018 President’s Budget. Agricultural Research Service,” https://www.obpa.usda.gov/18arsexnotes2018.pdf.

¹⁰ S. Liu, USDA Agricultural Research Service, “ARS Capital Planning at the USDA Agricultural Research Service,” presentation to the committee, August 9, 2018.

¹¹ See USDA, “2018 President’s Budget. Agricultural Research Service,” https://www.obpa.usda.gov/18arsexnotes2018.pdf, p. 18-7.

¹² S. Liu, USDA-ARS, communication to M. Offutt, National Academies of Sciences, Engineering, and Medicine, December 21, 2018.

TABLE 7.3 Comparable Portfolio Capital Asset Management at Four Federal Research Agencies

NOTE: ARS, Agricultural Research Service; DOC, Department of Commerce; DoD, Department of Defense; FM, Facilities Management; NIST, National Institute of Standards and Technology; NASA, National Aeronautics and Space Administration; NRL, Naval Research Laboratory; USDA, U.S. Department of Agriculture.

Institute for Defense Analyses Benchmarking Analysis of Federal Security Laboratories

In 2013, the Institute for Defense Analyses (IDA) reviewed the capital facilities planning, prioritization, and management practices at 10 research laboratories that conduct national security research. The IDA report examined the planning processes, prioritization criteria, stakeholder involvement and communication, and data and metrics used to guide investment in capital facility assets (Howieson et al., 2013). The focus of the analysis is the facilities and infrastructure required to meet the national and homeland security missions of DoD, Department of Energy (DOE), and Department of Homeland Security (DHS). The 10 laboratories included in this assessment are listed in Table 7.4.

TABLE 7.4 Federal Laboratories in Institute for Defense Analyses Study

NOTE: DoD, Department of Defense; DOE, Department of Energy; DHS, Department of Homeland Security; FFRDC, federally funded research and development center; GOGO, government operated, government owned; UARC, university-affiliated research center.

SOURCE: Howieson et al. (2013), p. 3.

The analysis found significant challenges at these federal research laboratories in securing the needed investment in critical facilities, equipment, and infrastructure (F&I). The report concluded that a major challenge for capital investment is the lack of organization and agency leadership and commitment for championing capital requirements during annual budget development and final recommendations, in part, to limited integration between institutional capital plans and institutional strategic research goals, objectives, and vision.

During the planning process, these laboratories often lacked “an integrated agency plan to address long-term F&I needs across the agency and the national security enterprise” (Howieson et al., 2013, p. iv). In addition, the agency and department often develop prioritization criteria and metrics that do not include F&I impacts on mission capabilities, and the F&I investment prioritization criteria are often not linked to the agency-level priorities. The study found that, in part, the planning and prioritization challenges were often due to the lack of communication among stakeholders for the federal security laboratories, and particularly the missing link of the dependence of mission capabilities on F&I capital assets. This challenge of establishing the mission-F&I dependence is complicated by the need for detailed data, metrics, and analysis, which is often expensive and time-consuming to collect and consistently update.

Each of the laboratories cited in the IDA report has implemented strategies to address these challenges. For the purposes of this report on the NIH Bethesda Campus, certain strategies are heighted below.

IDA Observations on Peer-Reviewed Space, Equipment, and Infrastructure Performance and Highest Value Capital Investments to Meet Scientific Goals and Objectives

The IDA report (Howieson et al., 2013) cites multiple examples where these research enterprises have established panels of external and internal subject matter experts to identify and measure key performance indicators that will successfully integrate F&I investments and agency mission capabilities. These panels have facilitated more open and effective communications among multiple stakeholder groups and

particularly scientists, financial leaders, and facilities architects and engineers. The panels appear to have been successful in the development and assessment of key capital investment prioritization metrics, which were expected to create more efficient capital investment results for the research mission. Key observations from the report include the following:

• “In November 2011, the LANL [Los Alamos National Laboratory] Director announced the creation of the Laboratory Integrated Stewardship Council, which comprises the Associate Director of Capital Projects and other program leadership. The council will approve projects over $100,000 in an effort to better manage budget constraints that will impact future activities at the laboratory” (Howieson et al., 2013, p. 22).
• “The DHS uses the cyclic Planning, Programming, Budgeting, and Execution (PPBE) process to identify mission gaps and guide investment decisions in the annual budget and Resource Allocation Plan. The planning component of the PPBE outlines the DHS’s long-term strategic direction assuming no budgetary constraints, while the programming, budgeting, and execution components focus on budgetary resource allocations to fund, deploy, and support programs over the next 5 years. As part of the PPBE process, the DHS (2008) established a streamlined acquisition lifecycle framework in 2008 composed of four phases:
  • Need: The directorates and offices review a preliminary Mission Needs Statement to identify whether items in the statement are unique needs or are being addressed by other DHS activities. If the needs are approved as unique, the directorate submits a Mission Needs Statement to the DHS and the Joint Requirements Council.
  • Analyze/Select: The DHS identifies alternatives to fulfill the mission need defined in the Mission Needs Statement and selects an option based on cost, schedule, and risk.
  • Obtain: The DHS further refines logistics and funding through testing and evaluation to ensure the capability can operate as expected when deployed.
  • Produce/Deploy/Support: The DHS reviews plans for production readiness, staffing, and funding and approves deployment.” (Howieson et al., 2013, p. 22-23)
• The DHS also uses various supporting boards and working groups to aid F&I investment decisions. The Acquisition Review Board reviews and approves Level 1 and 2 projects at each phase of the acquisition life-cycle framework. Moreover, the Program Review Board reviews and makes recommendations on projects to the DHS Secretary; the Joint Requirements Council assesses the project’s alignment with strategic requirements; and the Capital asset Review Board is responsible for managing the DHS capital portfolio. Groups external to the agency may also be consulted for input into F&I plans. For example, Office of National Laboratories (ONL) staff coordinated with federal intelligence agencies and other potential customers when planning the National Biodefense Analysis and Countermeasures Center (NBACC).” (Howieson et al., 2013, p. 23)
• “The DoD’s Defense Medical Facilities MILCON Capital Investment Decision Model and the National Nuclear Security Administration’s (NNSA) Construction Working Group are two examples where this occurs. These decision-making models are effective ways to communicate and link F&I needs to current and future missions across the agency. Both the Capital Investment Decision Model and Construction Working Group facilitate agreement on the top F&I needs across the DoD and the NNSA enterprises, respectively.” (Howieson et al, 2013, p. 31)
• The NNSA Construction Working Group also serves as a way for laboratories and leadership to better understand the cross-competencies and unique capabilities across the NNSA laboratories. NNSA staff is developing a similar model to coordinate deactivation and decommissioning activities. The NNSA conducted two teleconferences and invited all stakeholders to participate in 4- to 8-hour sessions in which all proposed projects were reviewed and feedback on each one was provided. This process resulted in fewer complaints the following year about involvement and the prioritization of projects.” (Howieson et al, 2013, p. 31)

IDA Observations on Identification of Alternative Research Enterprise Revenue to Support Increased Capital Resources to Meet Facilities and Investment (F&I) Requirements

The report cites several examples of research laboratories that generate F&I operations and capital investment funding through a centrally managed “rent” or “tax” applied to the research enterprise expenditures. In general, the university-affiliated research center laboratories generate central fund sources through a percentage fee applied to all research enterprise expenditures.

IDA Observations on Enhanced Outcomes and Leverage of Existing Capital Assets in Research Collaboration and Engagement Among Multiple Research Enterprises

Several laboratories reviewed in the report explicitly collaborate with other agencies and organizations to increase capital asset utilization and advance agency mission objectives. Specific examples include the following:

• DHS funded the National Infrastructure Simulation and Analysis Center at Sandia, which is staffed by personnel from DHS, Sandia, and LANL.
• The DoD laboratories regularly conduct research across the military departments.
• The DOE laboratories conduct research and share equipment with other DOE programs.
• Several laboratories shared facilities with nonfederal research partners, such as through Cooperative Research and Development Agreements.
• “In July 2010, the secretaries from the DoD, DOE, and DHS and the Director of National Intelligence developed the ‘Governance Charter for an Interagency Council on the Strategic Capability of DOE National Laboratories as National Security Capital Assets.’ The interagency council serves to review the science and technology capabilities across the DOE laboratories for supporting government-wide national security missions. The interagency council also presents a formal mechanism for agencies to support research needs across the federal agencies.” (Howieson et al., pp. 46-47)
• “In November 2011, the Navy headquarters office established the Naval Laboratory and Centers Coordinating Group (NLCCG), a coordinating body created to promote communication among leadership in the Navy’s laboratories and research centers. The NLCCG covers various management and operations dimensions, including facilities, workforce, and technical research capabilities. The Navy headquarters staff expressed their hopes that the NLCCG would also serve as a mechanism to advocate and better communicate a consistent message of F&I needs to the Navy and other DoD agency staff as well as other R&D capital asset stakeholders.” (Howieson et al., p. 47)

IDA Observations on Developing Improved Capital Facilities Investment Planning Processes to Meet Research Mission Objectives

The report cited several examples at different laboratories of processes to establish the link between F&I investments and meeting mission objectives.

• “DOE-SC’s Mission Readiness Peer Review sends F&I personnel from DOE-SC laboratories to assess the F&I process of other DOE-SC laboratories. Instead of attempting to compare laboratories’ data, the Mission Readiness Peer Review assesses the mission readiness process itself and whether it is aligned with the laboratory’s mission objectives. Laboratories involved in

• the peer review team are asked to evaluate whether the process is comparable to one that would be produced by their own laboratory.” (Howieson et al., 2013, p. 63)
• “NBACC and JHU-APL select comparison laboratories based on their research area to improve the accuracy of the benchmark.” (Howieson et al., 2013, p. 64)

GAO Report on Best Practices for Federal Real Property Asset Management

The Government Accountability Office (GAO, 2018) was asked to review the best practices of federal real property asset management, particularly the applicability of International Organization for Standardization (ISO) 55000 standard on asset management. GAO reviewed six federal agencies as case studies: (1) General Services Administration; (2) NASA; (3) National Park Service; (4) U.S. Army Corps of Engineers; (5) U.S. Coast Guard; and (6) U.S. Forest Service.

The GAO report identified “six key characteristics of an effective asset management framework: (1) establishing formal policies and plans, (2) maximizing an asset portfolio’s value, (3) maintaining leadership support, (4) using quality data, (5) promoting a collaborative organizational culture, and (6) evaluating and improving asset management practices” (p. 10). The GAO report also found that:

• “Five of the agencies linked their asset management goals and objectives to their agency mission and strategic objectives in their asset management plans.” (GAO, 2018, p. 16)
• “Each of the six agencies we reviewed has documentation describing a process for prioritizing asset investments … based on specific criteria, such as the risks an asset poses to agency operations, asset condition, project cost, and project impact.” (GAO, 2018, p. 16)

The GAO report recommends that the Office of Management and Budget (OMB) should update its guidance to federal agencies to improve federal real property asset management “to develop a comprehensive approach to asset management that incorporates strategic planning, capital planning, and operations, and maintaining leadership support, promoting a collaborative organizational culture, and evaluating and improving asset management practices.” (GAO, 2018, p. i).

CAPITAL ASSET PORTFOLIO PERFORMANCE-BASED CAPITAL PLANNING DECISION MAKING

As noted in the previous section, NIH is one of multiple scientific government research agencies engaged in strategically aligning facilities and their real estate portfolio to achieve future organizational goals, while contending with decreasing budgets and rising facility operating costs, in combination with responding to technological and socioeconomic drivers and federally mandated compliance requirements. (Further discussion may be found in Appendix I.)

As the role of facilities and infrastructure in support of government and private sector day-to-day operations is made more apparent, their efficiency, reliability, cost effectiveness, and sustainability will become even more important. Facilities typically account for almost 25 percent of the value of an organization’s total capital assets and are either the second or third highest operating cost after people (salaries and benefits) or after people and information technologies. Nevertheless, many facilities are deteriorating due to aging and inadequate maintenance and repair. This is particularly noteworthy because their poor performance due to their deteriorated operating condition hinders federal agency personnel from performing and achieving their mission. An acknowledgement of facility costs, how facility performance influences business operations, and the impact of the built environment on workforce health and safety have prompted organizations to take a more strategic approach to facilities management, viewing them as capital assets that enable the production and delivery of goods and services (NRC, 2008).

There is growing recognition within the national and global research enterprise of the critical need for capital investment strategies that move beyond focusing on simply meeting research program capital needs through investments in capital asset creations without proactive acknowledgement and identification of the long-term total cost of ownership, operations, and maintenance, as well as rehabilitation, replacement, and retirement. Facilities capital asset management has been defined by the National Research Council (NRC, 2004) “as a systematic process for maintaining, upgrading, and operating physical capital assets cost effectively.” Effective facilities capital asset management combines engineering principles with sound business practices and economic theory and provides tools to facilitate a more organized and logical approach to decision making. Federal agencies began capital asset management implementation actions in response to Executive Order 13327, issued February 4, 2004, which required all federal entities to take a more corporate approach to managing real property capital assets by developing capital asset management plans, establishing appropriate performance measures, and gaining an understanding of life cycle costs of the inventory (IWR, 2013). Publicly available information on federal agencies shows that some of them have successfully adopted capital asset management and activity management programs. This has allowed them to reduce their real property portfolio costs and dramatically improved their facility and infrastructure effectiveness and efficiency. For example, the 2004 GAO Water Infrastructure report (GAO, 2004) described how utilities that have started using comprehensive capital asset management reporting are able to make more informed decisions about how best to manage the capital assets. In particular, utilities are using the information they collect to allocate their maintenance resources more effectively and make better decisions about whether to rehabilitate or replace aging capital assets. The effective management of capital assets over the life of their operation and use requires a total cost of ownership financial approach that considers the interrelationships between operations and maintenance costs on one hand and facility capital investments on the other, to help minimize total life cycle costs and maximize capital asset availability and utilization (NRC, 2008).

For further discussion, see Appendix I, “Capital Asset Portfolio Performance-Based Capital Planning Decision Making.”

In conclusion, the committee believes that integrating current best practices of capital facility capital asset management into NIH’s short-, mid-, and long-term financial planning processes would provide an accountable framework that would much more effectively enhance the necessary alignment of the built environment portfolio performance with NIH’s diverse research program objectives.

FINDINGS AND RECOMMENDATIONS

Findings

These strategies and functions are developed and executed by an associate director (or equivalent), reporting to the agency director.

Finding: Due to the accelerating competition for capital resources in both the private and public sectors of the national and global research enterprise, the role of capital facilities financial planning is recognized as a critical component requiring subject matter expertise within central administrative leadership to support institutional financial sustainability. In addition, more comprehensive capital facilities plan and capital projects reviews are required to achieve a more highly integrated capital and scientific program decision making model that is more quantitative, objective, and subject to rigorous peer review external to NIH or HHS.

Finding: The U.S. GAO emphasizes the need for federal agencies “to develop a comprehensive approach to asset management that incorporates strategic planning, capital planning, and operations, and maintaining leadership support, promoting a collaborative organizational culture, and evaluating and improving asset management practices.” (GAO, 2018, p. i)

Recommended Strategies to Accommodate Short-, Mid-, and Long-Range Capital Planning Process Improvements at NIH