June 15, 2001

Working Group Calls for Major NIH Initiative On Construction of Extramural Facilities

At the June 7 meeting of the Advisory Committee to the Director (ACD) of NIH, a special working group called upon that agency and the federal government to substantially increase direct funding and other financial support for construction and renovation of extramural research facilities. The recommendations of the Working Group on Construction of Research Facilities were presented to the ACD by working group Chairman William R. Brody, M.D., Ph.D., president of Johns Hopkins University. Among its many findings and proposals, the group makes several major recommendations.

First, Congress and NIH should increase funding to support federal grants for facilities construction and renovation. The group proposes an initial $250 million for NIH's annual extramural construction budget. Funding should subsequently increase to as high as $1 billion annually. However, the final FY 2001 appropriation for NIH's Research Facilities Improvement Program was $75 million, less than half the level authorized.

The federal government should also create a loan guarantee program to assist institutions in securing lower interest rates on debt financed construction. A loan guarantee would lower the costs of construction to universities, and consequently to the federal government, which reimburses a portion of interest payments on facilities construction through facilities and administrative (F&A, or "indirect") costs. The program would also help institutions constructing new facilities to protect their bond ratings, a matter of particular sensitivity to university trustees. Dr. Brody noted that creation of the loan guarantee would require new legislation by Congress.

Finally, the report recommends that OMB Circular A-21, governing reimbursement of F&A costs to academic institutions, be modified to allow a partial reimbursement of the capital costs from monies contributed directly by institutions to construction costs. Currently, an institution using its own funds for new construction or renovation is not permitted to recover its capital costs on research grants. Existing regulations thus favor debt financing over use of institutional funds.

Dr. Brody emphasized the needs of small, minority, and emerging institutions, particularly in their difficulty to support a 1:1 match for funding. The working group recommends that the match requirement be eliminated. Regional primate centers in particular need renovation, most having been constructed during the 1960s. These facilities, while nominally affiliated with some universities, are stand-alone entities and lack the networks for fundraising and capital that academic institutions have. Finally, larger institutions, while having certain advantages also have out- sized needs. Existing grants of $2 or $3 million are too small for these institutions. The subcommittee recommends a tiered structure for NIH facilities grants, with a larger awards (greater than $20 million) for such institutions.

The findings and recommendations of the working group were based in part on NSF's biennial survey of research facilities, indicating an excess of $5 billion in deferred maintenance and renovation of biomedical research facilities. The NIH working group also undertook an "informal survey" of facilities construction among a sample of NIH-funded institutions. The working group estimates that the NIH doubling effort will require an additional 12-13 million net assignable square feet (NASF), which, estimating at $500 per square foot, will cost $6 billion to $7 billion (not including renovation). Dr. Brody concluded that efforts to double the NIH budget clearly require NIH support new facilities construction and renovation.

The ACD received the report favorably. Dr. Kirschstein did not request a vote endorsing the report. She asked the committee members to review the findings and recommendations closely and in discussion with colleagues at their own institutions. The topic will be reviewed again at the next ACD meeting in December, or earlier by conference call if necessary.

Information: Stephen Heinig, AAMC Division of Biomedical and Health Sciences Research, 202-828-0488.