5

Practices of Portfolio Management and Capital Project Planning

INTRODUCTION

This chapter describes how the National Institute of Standards and Technology (NIST) leadership went beyond traditional master planning to create its innovative 2022 Infrastructure Plan, which is the basis for the Office of Facilities and Property Management’s (OFPM’s) Draft Recovery Sub-Plan for Recapitalization (Construction and Major Renovations [CMR]-funded). The chapter begins by laying out the 2018 Gaithersburg and Boulder Master Plans and the related 2020 Integrated Master Plan Implementation Report. This includes a discussion of Enterprise Risk Management considerations, statutory requirements for energy use and historic preservation, project phasing, and budget scenarios.

After that, the chapter reviews major changes that resulted from the Department of Commerce (DOC) direction in 2020 for NIST leadership to expedite recovery from its unsatisfactory facilities situation with CMR-funded projects. In response, NIST leadership initiated a Research Building Modernization program and created an innovative 2022 Infrastructure Plan, which OFPM now uses as the basis for its Draft Recovery Sub-Plan for Recapitalization (CMR-funded). Finally, the chapter evaluates OFPM’s estimated costs for projects proposed by the 2022 Infrastructure Plan, alternative strategies for funding those projects and best management practices for future consideration.

PORTFOLIO MANAGEMENT PROCESSES FOR CAPITAL PROJECTS

This section provides an overview of the capital facility planning tools that are used by NIST and OFPM. It should be noted that the preparation and use of these plans are consistent with the DOC Real Property Management Manual (DOC 2017). This manual is not a step-by-step guide but a reference document containing policies, processes, and procedures; it discusses applicable laws, regulations, authorities, reporting requirements (internal and external), accountability practices, performance measures, building asset plans, prioritized year project plans, capital projects, space utilization standards, etc.

DOC practices are aligned with best practices and institutional planning tools used for acquiring new and replacement facilities (capital projects) throughout the federal government. Members of this committee spoke to other organizations, including federal agencies. The organizations included the Department of the Interior, the National Institutes of Health, and the Army Corps of Engineers’ U.S. Army Engineer Research and Development Center, as well as the Johns Hopkins University Applied Physics Laboratory; although the funding mechanism

varied between organizations. In general, NIST planning processes are similar and are aligned with the executive branch requirements for project planning and prioritization in most cases.

Strategic Plans

The Government Performance and Results Act requires federal agencies to make strategic, long-range plans and measure their performance to improve the delivery of programs and services to the American people. Under the Government Performance and Results Act, all agencies are required to submit strategic plans to the Office of Management and Budget (OMB) and Congress that outline their program activities, program goals and objectives, and through their annual plans, agencies lay out how they will be achieved. Federal agencies, including DOC, have worked with external stakeholders and their own workforces to create 4-year strategic plans, as well as 2-year agency priority goals. Strategic plans lay out the strategic priorities for an organization and set the direction for resource allocation over the next half decade.

In March 2022, DOC released its strategic plan titled “Innovation, Equity, and Resilience Strengthening American Competitiveness in the 21st century” (DOC 2022). The plan is in direct alignment with the President’s fiscal year (FY) 2023 budget request, which reflects DOC’s role to drive U.S. competitiveness at home and abroad, and the administration’s focus on economic growth and job creation. The Secretary of Commerce assigned NIST the lead for several initiatives in the strategic plan, including for Strategic Objective 1.2 to “Accelerate the development, commercialization, and deployment of critical and emerging technologies” (DOC 2022, p. 12). One of the department’s key performance indicators for this objective is the “Number of businesses using NIST research facilities.” The committee expects that this initiative will reinforce the link between the physical condition and functionality of NIST’s facilities and the quality and reputation of its research.

From the DOC-level strategic plan, reporting organizations develop their own plans, using DOC’s goals. At the department, agency, and division level there are strategic goals that are focused on improving the reliability of buildings and infrastructure in support of the research mission.

NIST Master Plans

A master plan is a foundational document and capital planning programming guide for portfolio management. It is designed to help organizations create a vision for their future. DOC requires that its agencies have a master plan for their sites, reflecting both the anticipated special needs of the user groups and the impact of its activities on the surrounding community. This is in alignment with other federal agencies, and best practices for campus planning. The master plans are used to identify needed facilities and utilities, advance the agency’s mission-related goals, and develop more efficient and flexible campuses. Master plans typically do not include costs or schedules; these are developed in implementation plans as part of the annual budget formulation process. NIST’s master plan implementation plan is typically referred to by OFPM as the “Integrated Master Plans Implementation Report.”

In 2017 and early 2018, NIST completed two campus master plans that would be used for long-range planning, expansion, and modernization over a 20-year horizon. Both the Gaithersburg and Boulder master plans were commissioned in response to institutional policy and the evolving mission of the laboratories and the greater demand for highly controllable research environments. NIST’s master planning is the responsibility of OFPM. This practice also included an assessment of historic and cultural campus assets along with a National Environmental Policy Act (NEPA) scoping process that included a public presentation.

As a best management practice, a master plan is reviewed every 5 years (NIST’s next formal review is in 2023 to 2024) to determine its relevance to the current mission and to remove any projects or programs that are no longer relevant to NIST’s mission. OFPM has stated that NIST will evaluate the impact of how the COVID pandemic’s shift to telework has affected work practices and office space requirements; DOC encourages the consideration of telework on space planning, and telework impacts were identified in the DOC Real Property Management Manual as practice that operating units (OUs) should consider as a best management practice (DOC 2017). NIST will also evaluate any changes in its programs and how that has changed facilities requirements for example, the recently passed CHIPS and Science Act of 2022 has placed new demands on NIST and may impact the staffing trends.

The DOC Real Property Manual requires a space utilization analysis for offices and certain other facilities which includes laboratory buildings. The manual also requires OUs to conduct a POR review of how work is accomplished, space assignment polices, impacts of telework and other work elements when significant changes are occurring in the program or there is a change in the occupancy of the current space (an example given was a need for a new lease) (DOC 2017). DOC has set a goal of a standard utilization rate for office space set at 170 usable square feet per person.¹

Finding 5-1: The master plans provide architectural drawings, analysis, and assessments, but provide little information relevant to the program requirements of NIST laboratories at the two sites. Specifically, there is no evidence that NIST has documented and established technical criteria and space standards for laboratories nor that those standards have been used in the development of the master plans.

Gaithersburg Master Plan

The 2018 Gaithersburg Master Plan² was developed as a follow-on to a 2014 study that found that only 37 percent of existing research facilities were fully compliant with current practices and needs (NIST 2014). The Master Plan noted at the time that “There are 62 buildings and structures, totaling over 3.6 million gross square feet of space and housing approximately 4,000 personnel (both employees and associates). Approximately half of the permanent buildings are now more than 50 years old” (NIST 2018, p. 7).

The master plan consultants surveyed NIST program directors for projects for the next 5 to 10 and 20 years in anticipated program changes. The Master Plan projected growth in staff and research requirements and developed a program for how much additional space would be required to meet future mission needs. The program plans for a 25 percent increase in staffing and an associated 38 percent increase in gross square footage on the campus, as captured in Figure 5-1.

The master plan then developed various alternatives for methods to best meet future requirement on the campus. The various alternatives were vetted for compliance and the best alternative was selected. This became the new Master Plan’s capital planning program. The capital projects were broken down into three phases, as well as a series of independent projects to be completed in parallel to the phases, as funding permitted. The 20-year plan is outlined in Figure 5-2.

The Master Plan identified high priority projects based on the organizational mission (present and future), and the ability of the facilities to support the NIST mission in their current state. As noted in Chapter 3, the current state of NIST research facilities is in many cases working against the researcher and impeding NIST’s mission.

Phase 1 titled “Immediate Priorities” includes:

• A renovation and addition to Building 245, the Radiation Physics Building.
• Constructing a new facility, Research Building I (RB I), to serve as swing space for general purpose laboratory (GPL) building occupants, and the subsequent modernization of the seven GPLs that constitute over 45 percent of the current campus research space.
• A flexible high-bay laboratory addition to Building 206 that will also serve as swing space during renovation of the GPL buildings.
• Security upgrade at the Visitor Center, Main Entrance, and Vehicle Screening gates.
• A new electrical switching station to replace aging switchgear, primary feeders, and failing duct banks, some of which are collapsing.

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¹ The 170 useable square feet standard utilization rate includes primary office space, reception area, circulation space, associated storage space, and auxiliary space (e.g., conference rooms, server closets, processing areas, file rooms, break rooms). Department of Commerce Administrative Order, Space Allowance and Management Program, DAO 217-21. Effective date March 1, 2021.

² See National Institute of Standards and Technology, 2018, Gaithersburg Campus Master Plan, https://www.nist.gov/system/files/documents/2018/06/15/nist_gaithersburg_master_plan_may_7_2018.pdf.

Conclusion 5-1: The projects in Phase 1 will address the critical situation that the committee noted during its tours of the campus regarding the physical condition, functionality, and suitability of NIST’s mission critical laboratories. It will renovate the outdated facility of Building 245, construct wing space and subsequently renovate the GPLs, and replace the aging electrical systems, which are working against the researchers.

Phase 2 addresses Building 101—the main administrative building—and the center for conferences and other public events. The projects include a phased renovation to replace major infrastructure that has exceeded its useful life and upgrading the building envelope for energy conservation and the renovation of the public spaces used for conferences.

Conclusion 5-2: The proposed renovation of Building 101 will address the leaking hot-water heating system that has created flooding problems for the past several years; this proposed program of renovation is well-overdue.

Phase 3 includes:

• The expansion of the central utility plant’s chilled water system to accommodate the requirements of the new construction.
• A parking structure to replace the parking lot spaces that will be lost when used for new building sites.
• The construction of new facilities (Research Buildings II, III, and IV) at the campus core that will be linked to other research buildings and offices.

Conclusion 5-3: The Phase 3 projects represent a group of projects associated with new construction, which ensure that adequate infrastructure remains available to the campus with the addition of new structures.

The independent projects listed in the Master Plan are for special purpose laboratories and site and landscape improvements. The committee visited as many special purpose buildings as possible during its tour of the Gaithersburg campus. As documented in Chapter 2, the most recently built special purpose laboratories have proven to be excellent research platforms for NIST’s mission. Similarly, Chapter 3 and the Appendixes C and D that document the tours, show that when specialty laboratories no longer remain suitable for their purpose, the mission is adversely affected.

Conclusion 5-4: An investment into specialty laboratories, such as those listed in the master plan, is a necessary investment that will enable NIST to meet its mission.

Boulder Master Plan

The 2017 Boulder Master Plan noted “Both the campus and research programs have changed since a 1992 Site Development Plan, and today modernized laboratory space and flexible, integrative, and collaborative space are needed to promote advancing research” (NIST 2017, p. 1).

The Boulder Master Plan included the projections and planning for National Oceanic and Atmospheric Administration (NOAA) and National Telecommunications and Information Administration (NTIA) staff that are collocated on the campus. The committee focused on the NIST elements of the plan in accordance with the statement of task, however for projections in staffing and thereby space, NTIA and NOAA must be discussed because NIST provides office and laboratory space to NTIA staff within Building 1.

The NIST and NTIA program directors surveyed for the master plan projected growth in staff of 112 persons at NIST, a 15 percent increase, and an NTIA increase of an additional 40 staff. The master plan concluded that to support future NOAA and NTIA staff, the existing 882,174 gross square feet (GSF) of space would need to be increased by demolishing 128,226 GSF of temporary buildings and constructing 242,096 GSF of new space for a net growth of 113,828 GSF, or a 13 percent expansion (see Figure 5-3).

The 2017 Boulder Master Plan provides a construction plan that is summarized below in Figure 5-4.

The Boulder Master Plan includes the following elements:

• Research Buildings Phasing:
  • Building 1 renovations with additions
  • Repurposing through renovation of Building 3 with an addition
  • Replacement of older laboratory Buildings 2, 2A, and 24 with a new research building
  • Changes in vehicle circulation and the addition of a parking garage to create a building site for the new research buildings
  • Demolition of Buildings 2 and 2A
• Campus Center Phase: Reuse Building 24 to centralize employee amenities like a health center, fitness center, and cafeteria for the campus in one location
• Visitor Center, Parking, and Screening Phase: Since the Boulder campus does not have a security fence, the security screening and visitor access issues were analyzed, and solutions associated with changes in parking and personnel screening were developed
• Management Resource Center: Construction of a single building to replace 10 temporary structures currently used by the NIST management resources staff
• Childcare Center Replacement: Demolition of the existing structure and replacement with a new center

The committee’s visit to the Boulder campus focused on the research facilities and the poor physical condition and functionality of temporary buildings as documented in Appendix C. The committee found the physical condition and functionality of the 1950s-1970s era laboratory Buildings 2 and 24, along with the unrenovated portions of Building 1, to be detrimental to the NIST mission as documented in Chapter 2 of this report. It should be noted that during the tour, OFPM was evaluating whether Building 24 should be demolished and replaced in lieu of renovation due to its extremely deteriorated condition since the backlog of deferred maintenance exceeds the Current Replacement Value (CRV) of the building.

Conclusion 5-5: In a review of the Boulder Campus Master Plan, along with the site visit, the planned projects are an appropriate remedy to the current situation and future projects and, in the case of the laboratory projects, urgently needed to support NIST’s mission.

Finding 5-2: While the plans were published less than 5 years ago, the headcount numbers used for the development of the plans are 8 years old. The plans stated an expected of increase of 1,200 by 2035 at the two sites combined. The impact of campus expansion was established based on a general percentage space increase versus specific space requirements.

Conclusion 5-6: NIST would benefit from validation of the projected staffing changes. It has been 8 years since NIST projected a growth of 1,000 and 200 at the Gaithersburg and Boulder campuses respectively, by 2035. The recent CHIPS and Science Act of 2022 may significantly affect these numbers.

NIST Master Plans Sufficiency in Meeting DOC Guidelines

The DOC Real Property Manual sets forth the elements of a strategic portfolio management approach. Master plans are one part of the strategic portfolio management process. The committee evaluated what elements of the approach were undertaken in the master planning process. A comparison of elements relevant to long-range master planning is provided in Table 5-1.

The committee identified best management practices that are appropriate for NIST master planning, including:

• Documenting the technical criteria needed in new construction and renovation for offices and especially for laboratories and establishing laboratory design standards. These could be developed from lessons learned from current facilities, a review of other research and development laboratory projects in industry, and input from research staff.
• Establishing and documenting space standards that could be used when setting future-looking metrics. These could include research staff per net square foot of laboratories and necessary technical support spaces, including new neighborhood laboratory concepts, to optimize laboratory efficiencies and staff collaboration. These standards would augment the DOC space-use standard of 170 usable square feet for office space.
• Reviewing industrial best practices in the use of office space, in usable square feet per person, and trends in space use, such as the impact of virtual and hybrid workers. This would be supplemented with space-use metrics for meeting room and collaboration.

Further best practices for the design of laboratories are included in Appendix B and may be useful to OFPM.

STRATEGIC PORTFOLIO MANAGEMENT PROCESSES BEYOND MASTER PLANNING

In addition to the master plan study, other factors are taken into consideration in the strategic portfolio management approach. At the project level, DOC recommends a disciplined examination of alternatives not just involving first costs, but also predictable, recurrent, and periodic costs as well as terminal (residual) values, all cast in present day worth by discounting future expenditures or income in accordance with present value theory. As the master plans are site-wide conceptual plans, there are no project-level, life-cycle cost analyses, though NIST does some energy planning as part of their capital planning strategy as discussed later in this chapter (Chapter 6

TABLE 5-1 Comparison of DOC Real Property Manual Strategic Management Portfolio Approach and the NIST Master Plan

^a DOC 2017.

evaluates OFPM’s life-cycle cost). Similarly, a cost-benefit analysis of projects with attribution, where possible, of monetized benefits not included in the conceptual master plans is needed.

The DOC Real Property Manual requires NIST to comply with enterprise risk management, the National Historic Preservation Act, and the Energy Independence and Security Act (EISA), all which have a significant impact on determining priority, cost, and schedule of critical projects.

Enterprise Risk Management

Enterprise risk management (ERM) is a forward-looking management approach that allows agencies to assess threats and opportunities that could affect the achievement of its goals. The ERM assessment is currently presented to NIST leadership on a regular basis and enterprise decisions are made based on the report results. The NIST ERM office has identified the poor conditions of facilities as the highest risk for the organization. In addition to the risks to research that those facilities in poor condition pose, the situation also poses a risk to recruiting and retaining top talent. The physical condition, appeal, and function of campus buildings and interior spaces are a significant factor in NIST’s ability to recruit and retain staff with in-demand expertise in critical areas. The enterprise risk of the agency is evaluated every year and would properly be part of the agency’s evaluation of priority projects. Every year new risks emerge for facility managers (e.g., inflation, labor and material shortage, and even pandemics), and evaluation of the risks and impact to facilities is critical. ERM can be utilized in conjunction with the updates to the master plan (every 5 years) and the master plan implementation.

Finding 5-3: The NIST Enterprise Risk Management Program is the process by which NIST complies with the DOC strategic portfolio management requirement for “Risk Assessment, Management, and Mitigation: Process of identifying and assessing future events that may negatively impact the course of action, and establishing plans to mitigate and minimize this impact.” NIST has determined that the poor conditions of facilities are the highest risk for the organization.

Planning Based on the Energy Independence and Security Act

Since 2007, NIST and all other federal agencies have been required to comply with the EISA, which identifies goals for the reduction of energy use, water conservation, the reduction of greenhouse gasses, and the use of sustainable environmental practices. Federal agencies have the authority, through the Department of Energy (DOE), to utilize energy savings performance contracts, and to finance EISA-compliant projects without the use of appropriated funds. Federal agencies use this authority in the prioritization of projects with a lower up-front cost without using appropriated funds.

At the Gaithersburg campus, NIST used this authority to fund projects such as the construction of a combined heat and power (CHP) plant, a 4,100 square foot building addition onto the campus’s central utility plant with a natural gas fired turbine. The CHP recovers high temperature turbine exhaust heat that met almost 75 percent of the campus’s steam load and reduced 40 percent of the campus’s electric load. Using this method of project financing and delivery avoided having the CHP compete with other critical projects because it did not have to compete for appropriations.

Finding 5-4: NIST and OFPM evaluated alternative project acquisition strategies and selected an ESPC approach to a CMR-funded project based on cost-benefit and life-cycle cost analysis. NIST has demonstrated two key portfolio management practices in this acquisition strategy.

Planning Based on the National Historic Preservation Act

The National Register of Historic Places recognizes districts, buildings, structures, objects, and landscapes for their significance in American history, archeology, architecture, engineering, or culture, and identifies them as

worthy of preservation. Federal law requires that all work affecting National Register of Historic Places eligible properties meet Section 106 of the Secretary of the Interior’s Standards for the Treatment of Historic Structures.

NIST projects that touch on historic preservation requirements have an influence on project prioritizations and funding requests, depending on the type of modifications to the historically designated buildings. Projects with historic preservation attributes may require a specialized design and construction approach, thereby increasing the necessary funding. In 2016, the entire NIST Gaithersburg campus was named a historic district. The designation recognizes NIST’s important contributions to science and technology and the campus as a significant example of post–World War II, mid-century research campus design. The Gaithersburg campus is one of the largest intact groupings of modernist buildings in Maryland. In the summer of 2018, the OFPM Architectural Design Review Board (ADRB) was created to provide a process for project review and was also in direct response to recommendations contained in the NIST Gaithersburg Campus’s and the Boulder Laboratories’ Master Plans that were developed by OFPM’s Capital Asset Management and Facilities Planning Group. The purpose of the ADRB design review process is to preserve and enhance the beauty, order, and historic integrity of NIST’s Gaithersburg and Boulder campuses. The ADRB also ensures compliance with the National Historic Preservation Act. The ADRB, therefore, is made up of OFPM architects and engineers and is chaired by the NIST federal preservation officer. The ADRB meets quarterly to:

1. Promote high quality architectural and landscape architectural design
2. Assure that designs are consistent with goals and principles of the campus master plans
3. Encourage project designs that are compatible with the historic content of the campuses

Executing a project within accordance with the overlay of the National Historic Preservation Act can be challenging and affect the outcomes of the project. The development of alternatives, costs, and an understanding of risk is key to a successful outcome.

NIST has successfully renovated Boulder’s Building 3, transforming an underutilized industrial space into a new research laboratory; the project was done in consultation with Maryland’s state historic preservation officer (SHPO). Similarly, Boulder is currently renovating four of the six wings in Building 1 to meet new laboratory standards; unfortunately, the Colorado SHPO has limited the extent of the renovation to the other portions of the same building as they are more visible to the public.

Finding 5-5: NIST has a process to engage with SHPOs to develop projects for modernization of facilities with historical significance and has achieved successful outcomes.

Conclusion 5-7: Historical preservation issues need to be clearly identified as to limitations and needs for investment. The best opportunity to undertake this analysis is in the development of alternatives for the individual projects and the cost-benefit analysis of the effectiveness of the facilities.

DOC PROCESS SUBSEQUENT TO PUBLISHING MASTER PLAN

The creation of a master plan is just a first step in the process. The DOC Real Property manual describes how an OU is to work with the department in the budget integration and planning processes to ensure that the projects get into the department’s budget. According to the manual, the completion of a master plan is the third step in this process diagram shown below (see Figure 5-5).

At this point, NIST would begin the detailed cost analysis (life-cycle costing and cost-benefit analysis) of alternatives for individual projects and potentially engage with the DOC Office of Real Property Programs (ORPP), whose role it is to “Assist OUs in developing asset and portfolio management plans, and in conducting life-cycle cost/benefit analyses of strategic and tactical alternatives” (DOC 2017, p. 31).

To date, NIST has had limited success in the implementation of its master plan as discussed in the following section.

IMPLEMENTATION OF THE MASTER PLANS

Chapter 4 discussed in detail the history of funding for NIST facilities. It documented that over the last 20 years there has not been a consistent level of CMR funding to construct new facilities or recapitalize existing facilities. In fact, since the completion of the 2017 Boulder Master Plan and the 2018 Gaithersburg Master Plan there have only been two master plan CMR-funded projects started, and two other projects mentioned in the master plans were under way during the master plan.

• Boulder Building 1 renovation, Wings 3 and 6, funded FY 2011-2016 for a total CMR budget of $57.4 million. The project was completed in FY 2016 before the 2017 Master Plan was published.
• Boulder’s Building 3 renovation, funded in FY 2015-2018 and under way during the master plan. It was completed in FY 2019 at a cost of $16.8 million CMR and $3.0 million for Scientific and Technical Research Services.
• Gaithersburg’s B245 H-Wing addition, initiated with FY 2016 of $60 million, was completed in 2019 at a total budget of $82.4 million. This was the first stage of a multiphase modernization effort expected to cost a total of $327 million.
• Boulder’s Building 1 renovation, Wings 4 and 5, received CMR funding and began in FY 2020. The project is still in progress; CMR funds provided to date are $104.9 million.

2020 Integrated Master Plans Implementation Report Requirement

In its fiscal year 2019 annual appropriations bill (P.L. 116-6) Congress required NIST to develop an integrated implementation report for the combined Boulder (2017) and Gaithersburg (2018) Master Plans, the Master Plan Implementation Report. The report:

• Considers strategic portfolio management
• Prioritizes capital improvement
• Analyzes various capital budget scenarios (including those presented above)

Over the course of FY 2020 NIST’s leadership first developed the top five ranked projects on both of the Boulder and Gaithersburg campuses and then combined them to develop the top ranked list of projects for the implementation report. After the consolidation and ranking of the top 10 project priorities for both campuses, NIST leadership added another GPL as priority number 11. The top 11 combined campus projects include:

1. Gaithersburg GPL Building 222 renovation and addition
2. Boulder Building 3 addition
3. Gaithersburg Building 101 lower levels renovation and addition
4. Gaithersburg GPL Building 221 renovation and addition
5. Boulder New Laboratory Building as replacement of Buildings 2, 2A, and 24’s research capacity, along with construction of a parking garage to create the building site, and the subsequent demolition of buildings 2and 2A
6. Gaithersburg Gate F shipping, receiving, and inspection site (new construction)
7. Gaithersburg GPL Building 220 renovation
8. Boulder childcare center (new construction and demolition of old center)
9. Gaithersburg GPL Building 223 renovation
10. Boulder Building 24 renovation for reuse as campus center
11. Gaithersburg GPL Building 225 renovation

The total cost for all the projects was estimated to be $1.74 billion in FY 2020 dollars. To date, no funds have been appropriated for the top 11 projects identified.

IMPLEMENTATION PLAN SCENARIOS BASED ON HISTORICALLY CONSTRAINED BUDGET LEVELS

In April 2022, NIST OFPM presented the committee with two possible CMR scenarios from the 2020 Integrated Master Plans Implementation Report based on the then current budget outlooks with CMR at either $80 million/year or $60 million/year.

Budget Scenario: $80 Million CMR Annually

With $80 million in annual CMR funding, the top 11 projects could be completed in 26 years at a total cost of $2.03 billion.³ The details of this scenario are shown in Figure 5-6. The plan shows that if a constant stream of $80 million in CMR funds was appropriated annually, OFPM would hold the no-year funds until accumulating adequate funding to begin a project. According to OFPM’s projects it would take 26 years to complete the top 11 projects.

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³ OFPM noted that assumes an inflation rate of 0 percent through 2025 and 3 percent thereafter and using D-B delivery method. Inflation, fuel cost, and labor and material shortages have caused recent major spikes in pricing in the construction industry and there are supply chain disruptions of unknown duration, casting these forecasts into doubt.

Budget Scenario: $60 Million CMR Annually

With $60 million in annual CMR funding and using the same inflation assumptions as above, the first 11 projects could be completed in 34 years. This approach takes 8 years longer than the $80 million per year scenario and ultimately costs over $500 million more due to inflationary cost increases over the longer working period.⁴Figure 5-7 shows the details of this scenario.

Conclusion 5-8: The committee reviewed these two scenarios for adequacy in addressing the documented impacts on NIST mission and found both plans are inadequate because the excessively long schedule fails to solve NIST’s immediate mission gaps in a reasonable time frame.

IMPLEMENTATION PLAN TO COMPLETE MASTER PLANS EXPEDITIOUSLY

During the period of this committee’s study and at the direction of DOC to expedite facilities revitalization, OFPM developed a 2022 Draft NIST Infrastructure Plan that included a Sub-Plan for Recapitalization based an annual CMR budget of $300-$400 million.⁵ This revised approach called for the 2022 Draft Infrastructure Plan to be complete in three phases for Gaithersburg and two phases for Boulder.

Revised Phasing of the Sub-Plan for Recapitalization (CMR-funded) to Build Out the Master Plan

The possibility to expedite NIST’s recovery from its unsatisfactory facilities situation necessitated a change in the phases outlined in the Gaithersburg Master Plan. Table 5-2 below shows the current plan.

There is a strong start in the revised Gaithersburg plan with an emphasis in renovating research space. Infrastructure and utility projects start early in the program and are phased over several years. A major change is that the new construction work for Research Buildings II, III, and IV are moved up so that space is created to vacate the GPLs for subsequent renovation. Several special purpose laboratories are constructed in this middle period. The remainder of the laboratories are renovated toward the end of the phasing.

In Boulder, a similar emphasis is placed on immediate improvement of laboratory physical condition and functionality and campus infrastructure. The later portion of the phasing finishes up the laboratory construction and renovation and addresses new construction of office spaces, childcare center, and the campus center, shown in Table 5-3.

To achieve this level of project execution, OFPM intends to use a design-build approach that would focus NIST on the development of the program requirement for the buildings and not require the internal development of detailed construction design documents.

Finding 5-6: If NIST begins to receive CMR-funding in FY 2023 at the level outlined in the revised plan, given the 2 to 5 years from procurement to commissioning per the Figures 6-6 and 6-7, the “expeditious” funding of the 2022 Draft Infrastructure Plan would result in completion of the 12-plus year plan on time.

Conclusion 5-9: The proposed program as set forth in the Draft Sub-Plan for Recapitalization (CMR-funded) for implementation of the master plan immediately begins to address restoring research capabilities, enhancing perimeter security, correcting deficiencies in the Gaithersburg central utility plant, and tackling the deteriorated condition of Building 101’s building systems. These projects therefore align with the recommendation in Chapter 3.

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⁴ OFPM noted an assumed inflation rate of 0 percent through 2025 and 3 percent thereafter and using the design-build delivery method. Inflation, fuel cost, and labor and material shortages have caused recent major spikes in pricing in the construction industry, and there are supply chain disruptions of unknown duration casting these forecasts into doubt.

⁵ Email from Robert Vaughn, NIST CFMO, to Jim Myska, study director, August 5, 2022.

TABLE 5-2 Gaithersburg Draft Sub-Plan for Recapitalization (CMR-funded)^a

^a Impact of CMR-Funding at $300-$400 million/year on Gaithersburg Draft Recapitalization Sub-Plan (CMR-funded) completion (cost estimates are in 2022 dollars).

^b CUP, central utility plant.

SOURCE: Created by the committee based on timeline information provided by NIST in the CMR Sub-Plan.

TABLE 5-3 Boulder Draft Sub-Plan for Recapitalization (CMR-funded)^a

^a Impact of CMR funding at $300-$400 million/year on Boulder Draft Sub-Plan for Recapitalization (CMR-funded) completion (cost estimates are in 2022 dollars).

SOURCE: Created by the committee based on timeline information provided by NIST in the Draft Sub-Plan for Recapitalization (CMR-funded).

OFPM estimates that the CMR-funded projects in the Draft Sub-Plan for Recapitalization (CMR-funded) will eliminate $559 million (78 percent) of the project backlog reported in the facility condition assessment. As noted in Chapter 3, the problems that NIST laboratories face are not just limited by poor physical condition, but also by poor performance (functionality) due to the demanding requirements of the new types of research now being done. These new and recapitalized laboratories will provide 21st century facilities for 21st century work.

Conclusion 5-10: An expedited implementation of the NIST Draft Sub-Plan for Recapitalization (CMR-funded) is required for NIST to perform its mission. Recapitalization projects through major renovation or replacement facilities will eliminate 78 percent of the current repair needs documented in the Facility Assessment, making this most effective means to address facility condition, functionality, and performance issues in one effort.

EVALUATION OF PROJECT COSTS

One of the statement of task’s four focus areas is “evaluating at a high level the completeness, accuracy, and relevance of cost estimates (already developed by or for NIST) for proposed individual capital and repair projects.” The committee undertook this tasking by looking at individual and groups of capital projects from the Draft Sub-Plan for Recapitalization (CMR-funded), and benchmarking the projects against industry standards, similar projects currently in planning by other organizations, and the existing NIST facilities portfolio.

Project scope is the most elusive driver of cost projections. The Master Plan provides a very limited scope for the projects, essentially the size of the building, the number of stories, and its purpose. As demonstrated by the following table, the cost estimates of the Draft Sub-Plan for Recapitalization (CMR-funded) are at the strategic planning and concept screening level. Estimates at this stage range from −50 percent to +100 percent of the expected cost at time of award; in other words, the actual cost of the project could be half or twice the estimate in the master plan.

As the project alternatives are developed and alternatives are evaluated for feasibility, the revised project estimate may range from the expected value by −30 percent to +50 percent. This level of estimating would be expected as NIST performs “options and business case analysis” of the DOC Planning Process as shown in Figure 5-8.

In the development of NIST’s budget requests, NIST should have fully defined the program requirements for the projects and the estimate would be expected to be within the −20 percent to +30 percent range for the expected value.

Based on this industry practice, the committee would expect to find that estimates in the Draft Sub-Plan for Recapitalization (CMR-funded) vary across this level of definition as the projects that NIST is developing for near-term funding have been further refined, while those further out in the timeline have not had their scopes defined. This is confirmed in NIST’s chief facilities management officer (CFMO) statement that “For the initial master plan estimates the estimating firm used average laboratory pricing per GSF vs. attempting to provide pricing based on specific types of research.”⁶

The CFMO also expressed concerns as to the pandemic impact on recent project costs. Industry past practices have been to average 4 percent per year in forecasts, however, with the pandemic construction costs escalated by 20-25 percent, well out of the norm, impacted by both labor and materials. In addition to higher costs, another COVID-19 impact was the timely delivery of equipment (large and small), which magnified to months for items like cabinets and furniture and years for large heating, ventilation, and air conditioning equipment and electrical equipment. These costs have been accelerated by the unavailability of skilled trades. The CFMO communicated to the committee his thorough understanding of these factors and that he calculated his concerns into his revision of estimates.

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⁶ Email sent from Robert Vaughn, NIST CFMO, and director, OFPM, NIST, to Jim Myska, study director, August 5, 2022.

Evaluation of New Construction Costs for Laboratories

To evaluate the quality of the cost estimating, the committee looked at a subset of the new construction for laboratory projects in the master plan and found the costs ranged from $1,167/GSF to $10,000/GSF as shown in Table 5-4. The committee inquired of OFPM as to the high range NIST was using for laboratory constructs as (1) the committee’s experience for design and construction costs (in 2022 dollars) would average around $600/GSF with the typical research facility containing 80 percent laboratory and 20 percent office not accounting for demolition, historical considerations, or other costs outside the perimeter of the building; and (2) OFPM report to the Federal Real Property Profile estimates NIST’s existing laboratory buildings replacement cost to be $613/GSF according to its FY 2022 worksheet (CRV = $2,271,280,328 and 3,703,700 GSF).⁷

The CFMO stated that “$2,000/GSF is actually a good number for planning purposes at this time for total project cost (not just design/construction cost). Because of the major swings in MEP requirements for different types of research we will have a broad range of dollars per GSF costs per building type. For the initial master plan estimates the estimating firm used average laboratory pricing per GSF vs attempting to provide pricing based on specific types of research.” And added further clarification on the Standard Reference Material Building being

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⁷ Calculations based on OFPM’s Condition Assessment Report 4th Qtr. FY21, sent by email from Robert Vaughn, NIST CFMO, and director of OFPM, to James Myska, study director, on June 20, 2022.

TABLE 5-4 Gaithersburg Draft Sub-Plan for Recapitalization (CMR-funded) New Construction Costs^a

^a Costs per GSF for new laboratory construction (cost estimates are in 2022 dollars).

SOURCE: Created by committee based on timeline information provided by NIST in the Draft Sub-Plan for Recapitalization (CMR-funded) and the Gaithersburg Master Plan.

more expensive to construct as “this will be a combination of laboratory spaces, freezer farms [and] warehouse space for SRMs. The total project cost estimate for this new construction building is $1,707/GSF.”⁸

With the additional information provided, the committee looked for the main differences between OFPM’s cost estimates and industry benchmarks. Industry typically benchmarks building costs just inside a 6-foot perimeter, but OFPM’s estimates include additional project related costs, including design cost, which can be 6 to 15 percent of the value of the facility. Additionally, while industry generally focuses on just the laboratories with commensurate offices, other organizations, such as NIST, include all the elements needed to achieve a building with the necessary support that its facilities require to operate successfully (central utilities, waste disposal, cooling towers, parking, and storage). When the committee examined OFPM’s forecasts for new, unfurnished buildings inside the 6-foot perimeter, the estimates appeared to be well in line with dollars per GSF benchmarks. OFPM includes laboratory furnishings, non-research laboratory equipment, office furniture, move-in costs, installation of instruments and equipment, security and fire services, and a larger information technology (IT) capability. These additional inclusions are appropriate to provide for a complete project and the rather high initial planning numbers are reasonable given the recognized level of uncertainty in planning at this stage of the projects.

Finding 5-7: NIST’s cost estimates for new construction of laboratories are high compared to industry standards but that is attributable to the inclusion of items in the project costs that are not purely construction costs but full project management costs, as well as highly specialized features required to support unique scientific programs.

Evaluation of Renovation Costs for Laboratory Facilities

To evaluate the quality of the cost estimating, the committee looked at the Gaithersburg laboratory renovations, which did not include additions to the existing structures. Table 5-5 shows the relationship between the project cost and information that NIST reports in the Federal Real Property Profile.

Allowing that the project costs are in FY 2022 dollars, and the backlog and CRV of the facilities were reported in FY 2021, the following relationships are evident:

• The renovation project estimate as a percentage of the CRV of the facility ranges from a low of 71 percent to a high of 337 percent.
• The project estimates for the renovation work ranges from $333/GSF to $1,883/GSF.
• The project costs are range from more than twice to 16 times the documented backlog of projects required to restore the facility to the originally intended and designed capacity, efficiency, and capability.

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⁸ Email sent from Robert Vaughn, NIST CFMO, and director of OFPM, OFPM, NIST, to James Myska, study director on August 5, 2022.

TABLE 5-5 Project Cost Relationships^a

^a Project cost per GSF and costs as a percentage of the CRV of the facility being renovated (Project Cost Estimates are in 2022 Dollars, Backlog, and CRVs as reported in FY 2021).

^b Backlog is the reported the non-recurring costs that reflect the amount necessary to ensure that a constructed asset is restored to a condition substantially equivalent to the originally intended and designed capacity, efficiency, or capability. 2021 Guidance for Real Property Inventory Reporting, Federal Real Property Council, Version 1, May 20, 2021.

^c CRV is defined in Appendix E.

SOURCE: Created by committee based on timeline information provided by NIST in the Draft Sub-Plan for Recapitalization (CMR-funded) and the Gaithersburg Master Plan, May 2018.

The committee used its experience to reflect on the relationships in the table and made the following evaluations:

• Project cost/CRV: The committee’s experience is that a typical renovation of a laboratory for the original designed purpose would be around 60 percent of the value of the facility. If NIST is renovating the facilities for a purpose substantially different than the original purpose, the costs can be significantly higher. As noted in Chapter 3, the laboratories do not currently provide the level of environmental controls, mechanical, and electrical systems that 21st century laboratories require. NIST is seeking to upgrade the functionality of the laboratories.
• Project cost/GSF: Renovations are normally undertaken in lieu of new construction as there is an anticipated cost savings in the reuse of the structure of the building itself, with costs being limited to the functional interior elements. As the GPL renovation cost per square foot approaches the costs that OFPM is using for new construction, the documented issues with the GPLs that was addressed at length in Chapter 3 and included structural inadequacies of building, this could explain the high costs to renovate these facilities.
• Backlog relationship to total project cost: If the reason for the project cost/GSF approaching the cost to build new was the underlying deficiencies in the existing structure, it would be expected that the current backlog would reflect that difference. However, the backlog of deficiencies represents the smaller fraction of the cost of these projects.

Given that the project backlog is a relatively small portion of the overall project cost, and that most of the renovation projects are costing close to OFPM’s dollars per GSF for new laboratory construction, the costs seem to be high for a renovation project. However, the committee allows as that these projects are in the out-years and are still in the conceptual planning phase, therefore as noted before, cost estimates are not expected to have a high level of certainty and could be a much as 100 percent over the final construction cost given the level of planning.

Finding 5-8: The committee finds that the out-year renovation technical facility project cost estimates to be satisfactory to begin the process of development of alternatives and life-cycle costing and seek a more refined cost estimate.

To understand how OFPM improves accuracy in project estimates, the committee inquired about a nearer term project, the renovation and additions to Building 222, which is currently estimated at $315 million. The CFMO responded that “Renovation of Building 222: This building is to be renovated for maximum research space with admin space almost totally addressed in an addition so that the existing building is almost entirely research space. This building will be approximately 60 percent biosafety level 2 laboratories for the biology research area, approximately 20 percent advanced communications which is primarily dry laboratories with high IT needs and approximately 20 percent quantum biology which is an evolving field of technology that combines the BSL (biosafety level) level 2 laboratory needs with advanced data (and) precision metrology equipment. This building has high MEP and IT requirements. The total project cost for this building renovation (the addition is separately priced) is $2,340/GSF.”⁹

Evaluation of Costs for Non-Laboratory Facilities

The committee looked at the current project cost to replace the Boulder Child Care Center as an example of a simple, non-laboratory facility for which there were two good benchmarking projects at the time of the report.

The Boulder Child Care facility is proposed as a design and build project for a 13,000 GSF replacement facility for the existing 104-child facility. The project is to include construction on a new site, with associated site improvements, a play area, and includes commissioning and purchase and installation of furniture, fixtures, and equipment (FF&E). The project includes the demolition of the existing 7,776 GSF building and its supporting infrastructure and the restoration of the area to a vegetated landscape.

In Summit County, Colorado, in the mountains west of Boulder, the community of Silverthorne’s effort to design and construction a 9000/GSF childcare facility for 65 to 70 students has received media coverage due to the cost overruns associated with the pandemic. Initially budgeted for $4 million in 2020, the project has been delayed and is now estimated at $8.56 million for design and construction. This project is greenfield construction, meaning that there is no existing building on the intended construction site (Noe 2022).

The FY 2022 DoD budget request included a replacement child development center at Sheppard Air Force Base, Texas. The facility proposed is a 200-space center to replace a 140-child capacity center, with a project cost at $20 million (Shane and Jowers 2021). This project is similar in scope to the Boulder facility.

The two projects have reasonable equivalencies to the Boulder project. A linear scaling of the Silverthorne facility to the Boulder would give a cost estimate for Boulder of between $12.4 million¹⁰ and $13.9 million¹¹ not including demolition and FF&E. A linear scaling of the Texas facility proportional to children would be $10.4 million¹² including demolition and FF&E. These numbers are 30-50 percent lower than OFPM’s current project estimate. Given that conceptual estimates at the planning stage can be 20-50 percent less than the actual values, OFPM’s estimates fall within the acceptable range.

Finding 5-9: The Boulder Child Care Center, as an example of a non-laboratory project, has a project estimate that falls into alignment within an acceptable level of accuracy for a concept estimate.

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⁹ Email sent from Robert Vaughn, NIST CFMO, and director of OFPM, OFPM, NIST, to James Myska, study director, on August 5, 2022.

¹⁰ 13000GSF/9000GSF × $8.56 million.

¹¹ 104child/64child × $8.56 million.

¹² 104child/200child × $20 million.

Evaluation of OFPM’s Overall Project Cost Estimating

The committee did not complete a comprehensive review all OFPM project cost estimates; rather it accomplished the “high level” review of the previously discussed project to evaluate OFPM’s approach to cost estimating. The committee believes this review provides adequate information to opine on the validity of OFPM’s processes.

Completeness: Regarding the completeness of OFPM’s project estimates, OFPM project costs are comprehensive. The CFMO informed the committee that OFPM’s “total project cost covers design, construction, commissioning, moves, FF&E, AE [architect and engineer] & CM [contract management] support services, allowances for IT and security specialty requirements, and the IS [Institutional Support] tax rate of 4.5 percent. The special allowances (6 percent of construction estimate) and IS tax rate drive up the overall cost.”¹³ This level of completeness exceeds the “labor and materials” construction estimate and should deliver a facility suitable to the NIST mission.

What appears to be lacking in the NIST project cost estimates in the mechanism to ensure that there is adequate follow-on funding for operations and maintenance, an issue raised in Chapter 4 which will be further discussed in Chapter 6.

Accuracy: Regarding accuracy, OFPM’s project cost estimates appear to fall into alignment with the expected level of accuracy for the various of stages of planning through design and procurement. Project scope and program requirements are essential to refining estimates. OFPM’s estimates appear to be at to the high upper end of estimating which is a common practice in government to ensure that adequate funds are appropriated to complete a project. Recent experience with pandemic project pricing is one reason OFPM has escalated its cost estimates.

Relevance: The projects in the Draft Sub-Plan for Recapitalization (CMR-funded) are essential to the current and future success of NIST’s mission, as they recapitalize 1950s and 1960s facilities through renovation or replacement and construct new facilities for new mission requirements. The CRV of the two campuses reported in FY 2021 totals $2.85 billion. The total Draft Sub-Plan for Recapitalization (CMR-funded) for Boulder and Gaithersburg as provided to the committee totals $5.125 billion. The relationship between what has been previously built and what is being requested to renovate, replace, and build new is striking. Measured in dollars, this is a very large recapitalization investment that is being requested for future investment in NIST. However, the review of the Master Plan and existing facilities itself shows that the projects themselves are essential to NIST success.

Conclusion 5-11: The committee does not believe that the initially large conceptual project estimates should dissuade DOC or the administration from pursuit of the implementation of the Draft Sub-Plan for Recapitalization (CMR-funded). OFPM has demonstrated that it refines its cost estimates as program requirements become better defined. Using the process for the evaluation of best alternatives, the most cost-effective solution will be determined. The best-value award system will ensure the appropriate cost for the project at the time of award.

Recommendation 5-1: OFPM has a sound Draft Recovery Sub-Plan for Recapitalization (CMR-funded) and should seek funding of $300-$400 million annually for at least 12 years to enable NIST to restore lost mission capabilities and provide facilities for new NIST programs.

CAPITAL ACQUISITION STRATEGIES

The committee is most hopeful that NIST will be supported by DOC and OMB in the effort to recapitalize existing facilities and construction for new capabilities. Certainly, the physical condition, functionality, and suitability of the current facilities warrant a large capital investment, however the DOC Real Property Manual advises OUs to consider alternative mechanisms if the budget exercise becomes futile.

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¹³ Email sent from Robert Vaughn, NIST CFMO, and director of OFPM, OFPM, NIST, to Jim Myska, study director, on August 5, 2022.

With NIST’s poor track record in achieving a sustained level of annual CMR-funding in the first 5 years following the publishing of the Master Plans, it would benefit NIST to consider working with DOC on alternative strategies that may mitigate a fraction of the shortfall. These strategies might include:

• ESPCs
• General Services Administration (GSA) construction or operation with NIST lease back
• NIST Facilities Modernization Fund

Energy Saving Performance Contracts to Expedite Utility Infrastructure Improvements

Federal agencies have the authority, through DOE, to use ESPCs, a way to finance EISA-compliant projects within the existing annual recurring funding level. The Federal Energy Management Program is authorized by statute to establish appropriate procedures and methods for use by federal agencies with regard to the ESPC program.¹⁴ ESPCs allow federal agencies to procure energy savings and facility improvements with no up-front capital costs or special appropriations from Congress; the cost of the capital improvements is paid from annual appropriations that are freed up by the future energy savings. The underground utilities, central utility plant renovation and expansion, and the electrical substation projects are good candidates for this authority. This would provide NIST with an opportunity to replace this utility infrastructure, which is beyond its useful life and not EISA compliant, with new utilities using ESPCs, partnerships between an agency and an energy service company. This strategy would fund the utility infrastructure project through the anticipated future energy cost savings, taking this project out of competition for the limited CMR funding stream. This presents an opportunity to meet EISA requirements and replace or repair the entire Gaithersburg campus underground utility infrastructure, which needs to be replaced due to its decrepit condition, operational inefficiencies, and the mission impacts detailed in Chapter 3.

The current master plan implementation plan does not fully address the critical need of utility infrastructure. All the Gaithersburg campus utility systems are more than 60 years old and are beyond their useful life and in a failing physical condition and functionality. This includes steam, chilled water, and potable water. The mission is impacted by utility disruptions, quality, and reliability.

NIST also has an option to use a Utility Energy Service Contract (UESC). A UESC is a limited-source contracting service offered between a federal agency and its local electric, natural gas, or water utility for improvements in energy-efficiency, water-efficiency, and demand-reduction. Such a contract might be a strategy to address water distribution, storm water collection, and other site infrastructure problems on the NIST campuses. Box 5-1 gives an example of the use of an ESPC and a microgrid at the Food and Drug Administration White Oak Campus, MD.

Conclusion 5-12: An evaluation of ESPC and UESC in the future as part of the portfolio management strategy requirement for OUs to look at cost analysis and risk management is worthwhile. With uncertainty in funding as a known risk, these alternative mechanism for implementing the utility system projects may be a solution in lieu of greater CMR funding for utility system projects.

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¹⁴ See 42 U.S.C. § 8287(b)(1)(A); and 10 C.F.R. § 436.30(a), https://www4.eere.energy.gov/femp/requirements/laws_and_requirements/energy_savings_performance_contract_authority.

General Services Administration Construction and Operation, NIST Lease Back

DOC has the authority to lease property from GSA. In at least one instance, GSA has built a facility for a DOC OU on NIST property, and that OU has then leased the space from GSA. The specific example is on the Boulder Campus where GSA built the David Skaggs Research Center (DSRC), a 405,000 square foot building. The DSRC’s tenants include NOAA’s Earth System Research Laboratory, the National Geophysical Data Center, the Space Environment Center, and the National Weather Service Forecast Office. NOAA has leased the DRSC from GSA since its completion in 1991.

The Boulder Master Plan has three projects to replace existing non-laboratory buildings with new construction: the childcare center, the campus center, and the Management Resources Building. These projects are currently scheduled at the end of the implementation plan so as not to compete with critical research buildings for limited CMR funding.

Construction by GSA would remove the large capital project from DOC and NIST budget requests and enable NIST to focus limited CMR funding on the mission critical research facilities. A request for additional funding for the annual lease cost would be required and might be better received in the budget process. A life-cycle cost analysis would be part of the engagement with DOC on the evaluation of the CMR-construction versus GSA-construction alternatives.

Conclusion 5-13: An evaluation of a GSA construction and lease back as part of the portfolio management strategy requirement which is part of a cost analysis and risk management for non-laboratory buildings is worthwhile as well. With uncertainty in CMR funding as a known risk, this could be a partial solution in lieu of greater CMR funding.

Current Authorizations for Funding

As noted in Chapter 2, the bipartisan U.S. CHIPS and Science Act of 2022, signed into law on August 9, 2022, provides significant opportunity and challenges for NIST. The act provides billions to NIST over the next 5 years as well as authorizes multiyear appropriations for NIST under Title II—National Institute of Standards and Technology for The Future. This title authorizes (but does not itself provide) an increase in the CMR appropriation to $200 million for each year through 2027. Of this funding, $80 million is authorized for Safety, Capacity, Maintenance, and Major Repairs (SCMMR) in 2023. From 2024 to 2027, $200 million continues to be authorized for subsequent appropriations, of which $80 million is for SCMMR and $20 million is for IT infrastructure. This

authorization represents a recent legislative “high water mark” for NIST facilities, but still falls short of the funding required to bring NIST facilities to the performance needed in a rational time frame.

The enacted CHIPS and science bill did not include an earlier House version’s authorization of a “NIST Facilities Modernization Fund’” for “the modernization, renovation, and construction of research facilities needed to conduct leading edge scientific and technical research.” Some of the challenges currently faced by OPFM and other federal research agencies could be mitigated by such a fund for capital projects.

For example, it can take several years to build up sufficient appropriations to fund a major project but carrying unobligated balances in the meantime can make it appear like the facilities program has surplus funds. A facilities modernization fund could protect and enhance these capital funds, such as by having the authority to earn interest on balances and reprogram any project savings or recaptured funds. The facilities modernization fund would also authorize the use of “alternative financing” in capital procurements, such as the CHIPS and Science Act of 2022 did for DOE’s Science Laboratories Infrastructure Program. Such financing can include lease-purchase agreements in which the agency pays annual rent to a third party and takes ownership of the asset at the end of the lease. Though not often more economic for taxpayers in the long run, such agreements are one means of adapting to the current incremental funding environment, which is exacerbated by agencies living in uncertainty for months under continuing resolutions before getting their final appropriations.

Conclusion 5-14: A building modernization fund could be structured to allow NIST to accumulate and re-direct funds from unpredictable annual funding streams and any under-budget project surpluses, allowing more predictable deployment of funds that better matches the NIST Draft Sub-Plan for Recapitalization (CMR-funded).

Lastly, it should be noted that these alternative acquisition strategies of ESPCs or GSA construction and leaseback will reduce the demand for overall CMR-funding by a small part, and that amount may vary year to year based on projects and funding. The major benefit would be to expedite the projects in their delivery. This needs to be considered in balance with the complications of having several acquisition strategies under way simultaneously. NIST has experience with ESPCs, but it does not have experience with GSA construction and lease back.

BEST MANAGEMENT PRACTICES FOR CONSIDERATION

In the committee’s discussions with OFPM and other agencies, suggestions and best management practices were brought up that NIST might consider to strengthen or to implement funding.

Total Ownership Costs and Life-Cycle Costing of Alternatives

Chapter 4 showed OFPM’s focus on the two-prong approach to the sustained annual funding levels for SCMMR and CMR. Chapter 4’s analysis of the root cause of the poor physical condition and functionality of NIST’s facilities is in part due to a continual erosion of SCMMR funding as more activities previously funded through IS taxes were inserted into the SCMMR budget. The committee has asked but not seen where there is a consistent budget process within NIST to ensure that all future recurring costs including operations and maintenance are part of the budget for new facilities. DOC requires the analysis of life-cycle cost as part of portfolio management. Chapter 6 discusses best management practices for total ownership costs in detail.

Renovation Versus Replacement

OFPM stated that its new prioritization for the implementation of the Draft Sub-Plan for Recapitalization (CMR-funded) focuses in on new construction because it can be much more cost effective than renovation. This assessment echoes the findings from the 2017 study that stated the architectural and structural limitations of the existing buildings would “preclude transforming existing facilities into true state-of-the-art laboratories, even after modernization” (NIST 2014, p. B-4). This difficulty in upgrading the GPLs to a laboratory with greater

environmental controls required for precision measurement is why the new research buildings are a more desirable first investment.

Examining Table 5-6 and Figure 5-2, it appears that the cost to renovate a facility exceeds the CRV of the facility and approaches the same cost as to build a new building. NIST will need to evaluate whether it would be most cost effective to build a new facility rather than renovate an aging facility.

Conclusion 5-15: NIST would benefit from continuing to evaluate which laboratories can be renovated in a cost-effective way as in light of to the possible cost savings of replacing facilities. If the GPLs cannot be effectively renovated then alternatives, including demolition, will need to be considered.

Project Staffing to Meet Obligation of Funding Demands

During OFPM’s presentation to the committee in February 2022,¹⁵ the team indicated a concern with the slow pace of project contract awards, taking up to 2 years to accomplish. This challenge was also highlighted in the most recent DOC Strategic Plan issued in March 2022. OPFM leadership has done a very good job looking at ways to facilitate contract awards including a use of indefinite delivery/indefinite quantity contracts, and partnering with other agencies (e.g., the U.S. Air Force in Boulder) to leverage contract authority.

If NIST is successful in obtaining a significant CMR funding for its Draft Sub-Plan for Recapitalization (CMR-funded), the surge in projects will put a burden on an already taxed acquisition and project management process. To facilitate this surge of projects, OFPM and NIST will need to increase staff in acquisitions, project management, inspection, safety, and other associated activities. In addition to hiring, it would prove beneficial for NIST to consider expanding the use of indefinite delivery/indefinite quantity contracts to create a “pool” of qualified contractors. The increased use of task order contracts for professional services will allow NIST to easily procure the needed design-build services to support a surge of projects needed to meet the NIST mission. The level of staffing would be in line with the needs of the program, allowing it to ebb and flow as needed.

TABLE 5-6 Comparison of Renovation Project Cost to Value of the Facility and Project Backlog

^a Backlog is the reported the non-recurring costs that reflect the amount necessary to ensure that a constructed asset is restored to a condition substantially equivalent to the originally intended and designed capacity, efficiency, or capability. (2021 GUIDANCE FOR REAL PROPERTY INVENTORY REPORTING, Federal Real Property Council, Version 1, May 20, 2021).

SOURCE: Committee-generated table from NIST provided data on FCI and the CMR Project Plan from the two-prong approach.

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¹⁵ “Technical Assessment of the Capital Facility Needs of the National Institute of Standards and Technology,” presentation by Robert Vaughn, NIST CFMO, and director of OFPM, to the committee on February 15 and 16, 2022.

Conclusion 5-16: The Draft Sub-Plan for Recapitalization (CMR-funded) projects and funding provided by the CHIPS Act may result in a surge in construction for NIST. In the proposed implementation plan, there are several projects listed that request large sums of funds within one fiscal year that would be executed simultaneously with other ongoing projects. An increased procurement and project management team will be required to facilitate the execution of this stream of projects.

Performance Management and Performance Measurement

As NIST begins to expedite master plan implementation, it is important to develop a performance management and measurement system to track objectives and status of completion. A data-driven portfolio management program will identify challenges to the program early, so they can be resolved promptly. A performance management system is a requirement of the Chapter 4 of the DOC Real Property Management Manual. DOC requires OUs to provide the performance measures used by DOC to track and manage its portfolio including those in the Federal Real Property Plan. The use of performance measures facilitates timely and accurate data responses to various inquiries, such as those from Congress and OMB. DOC uses the measures internally to comply with financial statement reporting requirements and for preparing the annual budget. This data is best utilized in conjunction with the Draft Sub-Plan for Recapitalization (CMR-funded).

A best practice is the tracking of the obligation and disbursement of appropriated funds for construction. This is an early indicator whether a project will be completed on time or delayed.

CONCLUSION

The committee’s review of available information makes it clear that there is a compelling need for the investment in NIST’s research facilities. Fiscal authorities ranging from traditional funding to energy service company ESPC contracts as well as GSA offer NIST avenues to address, and potentially accelerate, the delivery of critical research capabilities at both campuses. As NIST completes the implementation of the Draft Sub-Plan for Recapitalization (CMR-funded), it will be equally important that it match it with appropriate operations and maintenance funding and a long-term strategy to effectively own and operate the nation’s investment in critical research.

REFERENCES