Staff Paper Prepared for the President's Commission to Study Capital Budgeting

June 19, 1998

I. Description of Investment

The National Institute of Standards and Technology has pursued a series of facility improvements at its main campus in Gaithersburg, Md. to address a combination of aging facilities, deferred maintenance on existing equipment, and the desire to gain access to more advanced technology. Currently, NIST is completing an Advanced Chemical Sciences Lab (ACSL). This $75 million facility was begun in 1996, and when completed in 1999, it will include 81,870 square feet of lab and office space. NIST's FY99 budget proposes constructing an Advanced Measurement Laboratory (AML). This $218 million facility would be constructed in a single phase over 44 months, beginning in February 1999. NIST researchers would gain 210,0095 square feet of usable space with world-class controls for air quality (under 350 particles per liter), temperature (±0.25 Celsius), vibration (±3 micrometers per second), and humidity (±1%). These conditions would equal or exceed those of comparable foreign metrology labs, and are vital for NIST to keep pace with rapid developments in semiconductors, precision instruments, industrial robots, computers, chemicals, pharmaceuticals, building materials, and emerging technologies requiring molecular and atomic-level precision.

Like many equipment-intensive laboratories, these buildings show a wide gap between their total size (gross square feet), and the space available for research use (net square feet).
  Gross Sq. Ft. Net Sq. Ft.
Adv. Tech. Lab (initial) 826,735 289,357
AML (final) 511,070 210,295
ACSL (final) 200,090 81,870
II. Decisionmaking Process

A. Initial Proposal. NIST's Visiting Committee on Advanced Technology identified facility upgrades as a major priority as far back as 1990. A private consultant, SH&G, compared the conditions in NIST facilities to comparable facilities in industry, and found that 45% of its labs were failing to meet performance needs. Based on those findings, in 1992 NIST proposed a $540 million, 10-year plan for new construction, repairs, and upgrades, including a 826,735 gross square foot Advanced Technology Laboratory in Gaithersburg, with a smaller version in Boulder. The initial construction cost estimate for the ATL was $294 million. The construction plans were conceived as Federally-owned and operated facilities because both NIST campuses are on Federal land, the Gaithersburg site has abundant free space, and NIST's standards and measurement functions are seen as inherently governmental.

As a result of plan, appropriators provided NIST with $107 million in FY93, far more than requested in the President's Budget. Smaller amounts were provided in the following years, $60 million in FY94, and $65M in FY95. However, these funds were not tied to a specific project, NIST had to wait until sufficient funds were appropriated to award any contract. Given this constraint and concerns about the ATL's cost and complexity, in 1994 NIST rescoped the facility, reducing its size and cost by 38%. By mid-1995, NIST had received $232 million in its construction account, however the project encountered a series of problems. First, NIST decided to construct a new chemistry lab instead of renovating the existing building, a sudden change in strategy. In FY96, NIST announced an omnibus contract for managing all proposed facility upgrades and obligated these funds late in the year, an approach strongly criticized by the Inspector General and which also raised congressional concerns.

These events and increasing pressure on the Federal budget resulted in several congressionally-mandated recissions from NIST's construction budget. In FY95, $30 million was rescinded without explanation as part of a supplemental appropriations bill. The FY96 appropriations bill rescinded $75 million in carryover balances. Related report language expressed concern about NIST's level of obligations in late 1995, but allowed ACSL construction to continue. The FY97 appropriations committee reports pointed to the Inspector General's findings as grounds for rescission, and that year's omnibus bill rescinded $16 million. As a result, NIST was left with only enough funds to complete ACSL construction and AML design.

B. Master Facility Plan.
The Administration and Congress urged NIST to take another look at its facility needs in 1997, and prepare a more comprehensive and detailed Facility Master Plan. Headed by the director of the Boulder facility, NIST's internal facility planning group incorporated a variety of planning and engineering documents into this process, including reports from the Inspector General, a revised needs assessment, an independent economic cost analysis, an international benchmarking study, and the initial bids submitted for AML construction. Additional planning guidance was drawn from the OMB Capital Programming Guide, and the project's objectives were tied to the Department of Commerce Strategic Plan. NIST's laboratory council and upper management reviewed and commented on the planning process. NIST provided required periodic updates on this process to congressional oversight committees. The final draft of the NIST Facilities Master Plan for repairs, renovations, and new construction was submitted to OMB in September 1997 in conjunction with the Department of Commerce FY99 budget request.

C. Approval and Funding of Master Facility Plan.
The President's 1999 Budget included funding for NIST's highest priority project, the Advanced Measurement Laboratory, and a constant level of funding ($17 million) for repairs and maintenance. A separate NIST Facilities Improvement Plan reviewed these proposals and was submitted to Congress in February 1998. AML construction would be funded with FY98 carryover ($63 million), requested FY99 funds ($40 million), and $115 million in advance appropriations spread over FY2000-2002. This stream satisfies OMB's full funding requirements for capital acquisitions, and enables NIST to award the full contract in FY99. The FY99-02 funds were part of the Administration's proposed Research Fund for America (RFA), which allocated anticipated tobacco settlement funds to research and development programs.

D. Procurement Plans.
NIST used a simultaneous design/build strategy to construct the ACSL facility because the building's layout is similar to existing NIST lab buildings. The plans for the more complex AML facility are already complete. If construction funds become available, the project would be directed by an integrated project management team of NIST staff and contractors, including specialists in architecture, engineering, and construction management. This team would select construction contractors via a request for proposal approach, utilizing formal risk assessment procedures to compare offers for the firm, fixed-price contract. The awardee would build from prepared specifications and drawings, and would payment for work in place would be based on adherence to a contract schedule.

III. Specific Factors Related to Investment Decisions

A. Linkage to strategic goals. This investment was linked to the Department of Commerce strategic goals, which was a contributing factor to the Administration's support of the project.

B. Long-term planning. This investment was a component of a long term plan. This was an important factor in the project's approval.

C. Biases for or against program or project compared to other agency priorities. This investment had the disadvantage of having a relatively large cost in comparison to the total NIST budget, and having encountered difficulties on the previous construction plans.

D. Full funding. Full funding has been proposed for this project using advance appropriations. The relevant appropriations subcommittees appear uninterested in advance funding, and could either decline to fund the investment or use other funding mechanisms.

E. Spikes or lumpiness. The large amount of up-front budget authority needed for this building encouraged the Government to use advanced appropriations. Lease-purchase was not considered because the proposed facility is on Federal land and is highly specialized for agency needs.

F. Benefit/cost analysis. A business case analysis was developed for this project by Booz-Allen and Hamilton to assess and compare the cost of various NIST facility options. This study supported the cost-effectiveness of the AML proposal, and affirmed its status as the highest priority project, but the BAH study also raised issues about ongoing maintenance and program consolidation.

G. Leasing issues. The AML facility would be Federally-owned and operated. Due to crowding in Gaithersburg, NIST is leasing private office space (NIST North) until on-site space is freed up by the completion of new labs.

H. Dedicated revenues. NIST receives some fee revenues for its calibration and measurement services, which are used to purchase lab equipment through a working capital fund. Construction and maintenance of its lab buildings are funded through appropriations, and each project must be approved separately by the Congress. As a result, the absence of significant dedicated fees to finance this building had the effect of requiring trade-offs within discretionary spending.

President's Commission to Study Capital Budgeting