United States General Accounting Office

GAO Report to Congressional Requesters

March 1996 FDA LABORATORIES

Magnitude of Benefits

Associated With

Consolidation Is

Questionable

G O A

years

1921 - 1996

GAO/HEHS-96-30

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-270022 

March 19, 1996

The Honorable Paul Sarbanes

United States Senate

The Honorable John J. LaFalce

The Honorable Bill Paxon

The Honorable Jack Quinn

House of Representatives

To protect consumers from unsafe, ineffective, and mislabeled products,

the Food and Drug Administration’s (FDA) Office of Regulatory Affairs

(ORA) tests thousands of products annually in its laboratories for possible

violations of federal laws. The operating costs for ORA’s 18 field

laboratories in fiscal year 1995 were about $17 million.

Because ORA officials believe that many of the office’s laboratory facilities

are old, need costly repairs, and do not meet the needs for conducting

regulatory science in the future, ORA developed a 20-year plan to

consolidate its field laboratories. As illustrated in table 1, the plan calls for

closing several laboratories and building new ones, resulting in five

“mega-labs” and four special-purpose labs.

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Table 1: FDA’s Current and Proposed

Laboratory Structure Current laboratory structure Proposed laboratory structure

Multipurpose labs Multipurpose mega-labs

Atlanta, Ga. Atlanta, Ga. (expansion of current facility)

Baltimore, Md. Jefferson, Ark. (new facility)

Buffalo, N.Y. New York, N.Y. (new facility)

Chicago, Ill. Seattle, Wash.

Dallas, Tex. Special-purpose Labs

Denver, Colo. Cincinnati, Ohio

Detroit, Mich. Philadelphia, Pa.

Kansas City, Mo. San Juan, P.R.

Minneapolis, Minn. Winchester, Mass.

New York, N.Y.

New Orleans, La.

Los Angeles, Cal.

San Francisco, Cal.

Seattle, Wash.

Multi- and special-purpose labsa

Cincinnati, Ohio

Philadelphia, Pa.

San Juan, P.R.

Winchester, Mass.

aThese labs have a specialty focus such as forensic chemistry in addition to multipurpose

functions.

On the basis of your concerns, we reviewed ORA’s consolidation plan,

focusing on (1) projected cost savings, (2) projected operational

efficiencies, and (3) site selection criteria. To complete our work, we

reviewed agency procedures and data on the consolidation plan, analyzed

the assumptions in the plan, and discussed the plan with key officials at

FDA headquarters and selected field locations. See appendix I for more

details on our work scope and methodology.

Results in Brief While FDA’s decision to consolidate its 18 laboratories and create 5

multipurpose mega-labs and 4 special-purpose labs could yield

efficiencies, we found that the documentation and estimates of the

benefits resulting from consolidation are questionable.

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ORA projected that its 20-year consolidation plan would result in cost

savings of about $91 million over the life of the plan. More specifically,

ORA’s cost estimates projected that the consolidation plan would cost

$950 million over 20 years—about a 10-percent savings over the alternative

of replacing existing labs. However, ORA made certain assumptions that

may have inflated the replacement option cost. Moreover, current FDA

workload data, which are the only efficiency measures presented by ORA,

indicate that medium-sized labs (about 50 analysts per lab) are more

efficient and effective than existing larger labs (about 100 analysts per

lab).

In selecting sites for its mega-labs, ORA did little analysis of the relative

efficiency of alternative sites. For example, ORA placed less emphasis on

such factors as proximity to ports of entry and quantity of nearby food and

other relevant businesses for its site selections. Instead, ORA’s site

selection decisions were based mainly on where it thought it would

receive congressional funding approval.

Background ORA, under the direction of the Associate Commissioner for Regulatory

Affairs, is responsible for carrying out FDA’s mission to ensure that foods,

cosmetics, and medical products are safe, effective, and properly

promoted and labeled.1 ORA provides a central point to which headquarters

officials can turn for field support services. It also exercises direct line

authority over field operations, which are generally divided into four

branches: investigations, laboratory, compliance, and administrative

management. Product sampling and analyses are conducted primarily in

the field by ORA’s 21 district offices. Each office is headed by a district

director responsible for operations.

ORA’s laboratories play a major role in protecting consumers from unsafe,

ineffective, and mislabeled products. They provide a scientific base to

support ORA enforcement and regulatory activity. The laboratories test

thousands of product samples annually for possible violations of federal

laws.

Current Structure Includes

18 Laboratories

ORA operates 18 field laboratories nationwide, including 1 in Puerto Rico,

which FDA either owns or leases from the commercial sector or from the

General Services Administration (GSA). (See fig. 1.)

1

FDA derives its authority from the Federal Food, Drug, and Cosmetic Act of 1938, as amended (21

U.S.C. 301).

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Figure 1: Current FDA Field Laboratory Locations

Seattle

Los Angeles

Dallas

Buffalo

Winchester

New York

Philadelphia

Baltimore

New

Orleans

San Juan

Denver

Atlanta

Kansas

City

Minneapolis

San Chicago

Francisco

Detroit

Cincinnati

The laboratories, which are collocated with district offices, provide two

program functions: (1) surveillance and compliance and (2) research.

Surveillance and compliance functions are conducted by investigators and

laboratory analysts who inspect and investigate domestic establishments

and imports; sample, collect, and analyze products; monitor compliance

with existing regulations; initiate legal actions when health hazards are

detected; and respond to crises, such as consumer tampering.

Enforcement decisions are supported by research activities, such as

identifying potential health hazards and developing efficient and effective

laboratory testing methods.

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ORA spends about $17 million per year, excluding salaries, to operate its

laboratories. The field locations employ about 650 operating

personnel—which include chemists, microbiologists, entomologists,

research analysts, engineers, and physicists—and about 275 support

personnel.

ORA’s Restructuring

Plan—ORA 21

ORA refers to the plan for the proposed laboratory structure as ORA 21.

According to ORA management, the plan is designed to be a flexible

blueprint for the future, allowing for changes to be made as necessary,

with a 20-year implementation period extending to the year 2014.

The laboratory structure under the plan includes the following:

• five mega-labs located in New York City, New York; Atlanta, Georgia; Los

Angeles, California; Seattle, Washington; and Jefferson, Arkansas, which

will be expected to perform all laboratory functions; and

• four special-purpose laboratories located in Winchester, Massachusetts

(radionuclide analysis and engineering center); Cincinnati, Ohio (forensic

chemistry center); Philadelphia, Pennsylvania (drug analysis center); and

San Juan, Puerto Rico (drug analysis center).

Table 2 shows the expected laboratory closures and their scheduled

closing dates.

Table 2: Expected Laboratory Closures

and Dates Laboratories Closing date

Buffalo 1997

Chicago 1997

New Orleans 1998

Baltimore 1999

Dallas 2000

Detroit 2000

Minneapolis 2000

Denver 2010

Kansas City 2014

San Francisco 2014

History and Rationale for

Consolidation

ORA was led to consider laboratory alternatives when it decided that many

of its once state-of-the-art field laboratories built in the 1960s had become

Page 5 GAO/HEHS-96-30 Consolidation Benefits Questionable
B-270022 

obsolete. Over the years, FDA management has considered several options

for replacing these facilities, from one-for-one replacement to

consolidation.

In a 1986 consolidation plan, FDA proposed closing five laboratories to

reduce the total capacity of its field laboratory system by about one-third.2

In the early 1990s, ORA considered one-for-one replacement of these labs.

For example, in 1991 and 1992, ORA had planned to construct new labs in

New York and Baltimore, respectively. However, changes to the

government’s policy in 1992 precluded FDA from using GSA’s federal

building fund to acquire new construction projects. This caused ORA to

reconsider its overall restructuring strategy. Accordingly, when ORA senior

staff met in January 1993, they decided to examine how to most effectively

and efficiently meet ORA’s laboratory needs for the 21st century.

To accomplish this, ORA established the Working Analysts’ Advisory Group

(WAAG) in the summer of 1993 and the Laboratory Directors’ Steering

Committee in the fall of 1993. The members of these groups included

laboratory analysts and directors, a field science adviser, and a

representative of FDA’s Division of Field Science. Also, during a strategic

planning meeting in October 1993, the Associate Commissioner for

Regulatory Affairs requested that the Regional Food and Drug Director for

the Pacific Region develop an options paper to change ORA’s field

organizational alignment, including the laboratory structure, by the year

2004.

To evaluate the current field laboratory structure and to suggest

modifications to it, the two committees assessed many issues, including

positive and negative aspects of the current laboratories and other factors

relevant to the selection of laboratory locations.

The two groups presented their recommendations to ORA senior staff. WAAG

recommended that the 18 laboratories remain open and receive adequate

funding support, while the Laboratory Directors’ Steering Committee

recommended that the 18 laboratories be reduced to 13. The committee

noted, however, that it had recommended closing some laboratories

because the field structure was overwhelmed with work due to overall

staff attrition. According to one committee member, if FDA had adequately

2

GAO was asked to review FDA’s 1986 proposal. GAO issued its report, Food and Drug Administration:

Insufficient Planning for Field Laboratory Consolidation Decisions (GAO/HRD-88-21, Dec. 4, 1987), in

1987, concluding that FDA’s criteria were limited and did not adequately address whether FDA could

meet its current and future laboratory needs if the five laboratories were closed or whether

cost-effective alternatives to closure were available to reduce its capacity.

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B-270022 

staffed each laboratory, the committee would not have recommended

certain ones for closure.

In December 1993, the Director for the Pacific Region issued the options

paper, “Reorganizations of ORA for the 21st Century.” The paper presented

five options for restructuring the field laboratories. The options ranged

from maintaining the status quo to restructuring using various

consolidation options. The recommendations made by WAAG and the

Steering Committee were incorporated into the paper’s options and

presented to ORA senior management before an ORA senior staff meeting in

January 1994.

Participants in the ORA senior staff meeting discussed and reviewed each

option and reached a consensus to consolidate the laboratories by

creating five multipurpose mega-labs and four special-purpose labs. (See

fig. 2.)

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Figure 2: Proposed FDA Field Laboratory Locations

Seattle

Los Angeles

Winchester

New York

Philadelphia

San Juan

Atlanta Jefferson

Cincinnati

Mega-Labs

Special-Purpose Laboratories

Projected Cost

Savings May Be

Overstated

ORA’s analysis showed that its consolidation option saved money

compared with continuing with the present structure by replacing labs

when current leases expire. However, we found that ORA made

assumptions that may have inflated the projected costs of replacing

several laboratories.

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Consolidation Versus

One-for-One Replacement

ORA compared the costs of two options—consolidating laboratories as

proposed (ORA 21) and replacing all laboratories as their leases expire. The

replacement option assumes using leased property; the consolidation plan

envisions that three of the mega-lab facilities (in Los Angeles, Seattle, and

Jefferson, Arkansas) would be government owned. The costs estimated for

consolidating versus replacing all the laboratories were about $950 million

and $1.041 billion, respectively. Using these figures, ORA projected that the

savings from its consolidation plan would be about $91 millon over a

20-year period.

ORA’s assumption that it would have to lease space to replace existing

laboratories was based on the federal budgetary process. Under budget

score-keeping rules, outlays are generally scored on a cash basis when

they occur. Therefore, the full construction cost must be appropriated in 1

year, and FDA believed that it could not compete for such funds given HHS’

budget constraints. As we have pointed out previously, the federal

government has often entered into leases to satisfy long-term space needs

even though GSA analyses have showed leases to be more costly in the long

run than ownership.3

Space and Staffing

Requirements for

Replacing Labs May Be

Overstated

Under its most recently revised replacement analysis (July 1995), ORA

appears to have overstated the space requirement for some laboratories

and the staff requirements for two proposed laboratories. Such

overstatements would increase the cost estimate for replacing laboratories

and, thus, increase the comparative estimated savings from consolidation.

For the new facilities, ORA estimated laboratory space per analyst at 650

square feet and office space per nonanalyst at 230 square feet. (According

to a GSA official, GSA considers occupied office space of about 153 square

feet to be standard, but no standard exists for laboratory space.) ORA’s

consolidated space estimates, however, exceed all of ORA’s existing

laboratories’ space amounts. For example, ORA’s three newest

laboratories—in Kansas City, San Francisco, and Seattle—currently

operate with much less laboratory space per analyst. According to regional

officials and laboratory analysts, the San Francisco facility, with 369

square feet per analyst, is state-of-the-art, and the Kansas City and Seattle

laboratories, with 411 and 344 square feet per analyst, respectively, were

similarly characterized in a 1994 FDA Division of Field Science report.

3

(Budget Issues: Budget Scorekeeping for Acquisition of Federal Buildings (GAO/T-AIMD-94-189, Sept.

20, 1994).

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Also, the Atlanta laboratory, a multipurpose lab, currently has 33,654

square feet of laboratory, light industrial, and general storage space and 92

analysts on board with a capacity for 100. ORA had originally planned to

expand this laboratory by 20,000 additional square feet for 60 additional

analysts or about 333 square feet per analyst. However, after we

questioned this estimate, ORA revised it, increasing it to 39,000 square feet

(650 square feet per 60 additional analysts). Even using ORA’s revised

estimate of 39,000 square feet, the Atlanta laboratory would have only

about 450 square feet per analyst for its expected total capacity after

expansion.

If the cost estimates for to-be-leased space were based more on the

amount of space in ORA’s newer laboratories, the estimated costs of

replacing laboratories would be significantly less than ORA has projected.

Even if the estimates were based on the projected space for the Atlanta

mega-lab after expansion, they would be about $2.2 million less per year

than ORA has calculated. ORA feels justified in basing space requirements on

650 square feet per analyst and supplied us with a September 12, 1995,

outside consultant’s analysis performed after completion of our audit

work. Although the consultant supported ORA’s space requirement, this

amount of space is nevertheless significantly greater than that being

proposed for mega-labs in Atlanta and Seattle. Furthermore, ORA could not

explain how and why existing space requirements in its newest

laboratories (in San Francisco and Kansas) and in its proposed Atlanta and

Seattle mega-labs are inadequate.

ORA also overestimated the staffing requirements for new laboratories in

New York and Los Angeles under its replacement option. Instead of basing

its estimates on the current staff size of these two laboratories—115 and

48, respectively—FDA used the mega-lab staff size of 189 analysts for New

York and 75 analysts for Los Angeles. Thus, ORA came up with the same

costs for the New York and Los Angeles facilities under both its

replacement and consolidation options. Because the facilities’ costs under

the replacement option were not estimated on the basis of a smaller staff

size, the resulting cost estimate for replacing the laboratories is overstated

by about $2.5 million annually.

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Operational Efficiency

Gains From

Consolidation Are

Questionable

ORA believes that its consolidation plan would achieve certain benefits and

efficiencies. Although we recognize that almost any restructuring could

have some positive impact on operations, existing ORA evidence appears to

contradict its claims that mega-labs will improve operations, supervisory/

analyst ratios, and utilization of laboratory equipment. ORA’s claims that its

equipment and labs are obsolete are also questionable.

The operational efficiencies that ORA expects to gain through its

consolidation plan include

• achieving a critical mass (50 or more analysts) in each lab,

• decreasing the number of mid-level managers,

• redeploying some supervisory staff to operations,

• decreasing support work required of operational staff,

• increasing efficient use of equipment, and

• being able to do shift work.

Efficiency of

Medium-Sized Labs Versus

Large Labs

FDA believes that efficiency involves many factors in addition to timeliness,

such as overall costs per operations, staff, equipment, expertise available

and utilized, accomplishments/outcomes from each sample tested, and

customer service/responsiveness. However, FDA provided us evaluations of

its laboratories based only on the factor of timeliness.

Current FDA timeliness statistics do not show that large laboratories are

more efficient. In fact, FDA’s fiscal year 1994 Sample Timeframe Report

(which depicts each laboratory’s timeliness in conducting analyses)

showed that six out of seven medium-sized laboratories (33 to 50 analysts)

were more timely than the two largest labs (New York and Atlanta). ORA

officials in headquarters and in the field could not provide any explanation

to contradict the data showing that its medium-sized laboratories were

more timely or otherwise more efficient. In fact, WAAG and most ORA staff

in the field that we spoke with stated that on the basis of their work

experience an ideal laboratory size for efficiency is about 50 analysts. The

Lab Directors’ Steering Committee report also stated that a lab size of 50

to 75 analysts is ideal.

Supervisory/Analyst Ratio

in Larger Labs Not Better

Than in Most Other Labs

ORA’s claim that larger labs would improve the supervisory/analyst ratio is

also unsubstantiated. Data show that the supervisory/analyst ratio in ORA’s

two largest labs (in New York and Atlanta) with 115 and 92 analysts,

respectively, is not better than in most of the other labs. For example, for

Page 11 GAO/HEHS-96-30 Consolidation Benefits Questionable
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at least the last 2 years, the labs in Atlanta and New York have generally

had supervisory ratios of 1 to 7 and 1 to 8, respectively. Only the lab in

Chicago (with a ratio of 1 to 6) has had a worse supervisory ratio than the

labs in New York and Atlanta.

Claims of Obsolete

Equipment and Facilities

Questionable

In August 1994, the FDA Commissioner stated that many labs had obsolete

physical plants and analytical tools. Our work, however, raises questions

about FDA’s assessment. For example, the older labs (about 30 years old),

referred to as “Rayfield buildings,” are all similarly designed, brick

facilities that appear to be structurally sound. The Atlanta laboratory site,

in fact, includes a 1960 Rayfield building and an addition that was built in

1985. ORA wants to expand this site into a mega-lab.

WAAG also performed an evaluation of the existing labs. It concluded that

the Rayfield buildings (in Atlanta, Baltimore, Buffalo, Cincinnati, Dallas,

Detroit, and Minneapolis) generally are in good shape; however, some

need renovation and/or additional space. With the expenditure of some

funds for these purposes, these laboratories could be expected to continue

to serve for approximately another 10 years. Most of the older facilities

and some of the more modern facilities have three main problems:

(1) insufficient or inoperative heating, ventilation, and air conditioning

systems; (2) inoperable or insufficient exhaust hood capacity; and

(3) insufficient space for employees or instrumentation.

WAAG provided the following possible solutions for the three problems. It

suggested that (1) insufficient or inoperative heating, ventilation, and air

conditioning systems be corrected by installing booster fans and remotely

controlled baffles in existing air systems; (2) inoperable or insufficient

hood capacity may be solved by using smaller tabletop exhaust systems,

good housekeeping practices, and modified hoods to accept moveable lab

benches so that heavy or complicated equipment set-ups in the hoods may

be removed when not in use; and (3) additional space for analysts and

instrumentation may be found if labs implemented good housekeeping

practices. In commenting on a draft of this report, HHS argued against using

what it considers a stop-gap measure to continue occupation in current

facilities for a few more years.

Beyond the condition of the labs, the consensus of the analysts we spoke

with is that present equipment is generally state-of-the-art. Analysts at

several sites we visited told us that they do not know of more current

equipment that is needed in their laboratories. FDA, on the other hand,

Page 12 GAO/HEHS-96-30 Consolidation Benefits Questionable
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commented that a large percentage of field laboratory equipment is

scheduled for replacement on the basis of purchase dates in accordance

with the widely recognized Department of Veterans Affairs schedule of

scientific equipment life expectancy. However, FDA has not demonstrated

that its laboratories lack state-of-the-art equipment given its current

facility capability. Furthermore, ORA provided us no support for how

equipment needs would differ in the future.

One benefit of consolidation asserted by ORA was more intensive use of

laboratory equipment. However, ORA did not provide evidence to refute

assertions by analysts that cross-utilization of equipment is not always a

viable option because instruments must be specially calibrated for

particular samples.

Closures May Adversely

Affect FDA’s Analytical

Staff

In addition to possibly overestimating the cost savings and efficiencies to

be realized by consolidation, ORA may have underestimated this option’s

adverse impact on laboratory efficiency. For example, some analysts in the

field believe that consolidation would result in a significant loss of

experienced analysts.

Although ORA estimated that 75 percent of the analytical staff in labs

scheduled for closure would relocate to other FDA facilities, it did not

perform any analysis to support this estimate. We questioned this figure in

a 1987 report4

 when ORA previously used it in a proposed laboratory

consolidation effort. ORA said that it used the relocation rate of 75 percent

because it did not want to appear to understate the relocation costs. If a

large percentage of analysts would not relocate, ORA’s operations could be

adversely affected until new analysts are trained.

Site Selections Not

Based on Recognized

Criteria

To guide ORA in its site selection process, WAAG—at management’s

request—developed and prioritized a set of criteria for consideration,

recognizing that meeting each criterion might be impossible. In addition,

ORA management developed its own criteria. However, ORA appears to have

based site selection mainly on the availability of construction funds or

congressional indications that such funds would be available for specific

sites.

WAAG’s criteria included quality-of-life issues, such as transportation,

housing, population density, crime, and the merit of area schools; and

4

Food and Drug Administration (GAO/HRD-88-21, Dec. 4, 1987).

Page 13 GAO/HEHS-96-30 Consolidation Benefits Questionable
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construction feasibility issues, such as costs and available land for

building new or expanding existing facilities. WAAG’s criteria also included

projected workload distribution and the existing infrastructure to support

the laboratories, such as commercial labs, workforce demographics, local

universities, FDA investigation branches, and other government agencies.

ORA management considered these criteria but developed a somewhat

narrower set of criteria, which included geographic dispersion (two

laboratories on each coast and one centrally located), quantity of

commercial establishments in the area, major shipping ports of entry, and

availability of FDA-owned land.

We found, however, that the proposed mega-lab sites in New York, Los

Angeles, and Jefferson do not meet many of the criteria established by

WAAG and ORA. For example, the Jefferson site lacks such factors as

proximity to ports of entry and quantity of nearby food and other relevant

businesses. Instead, ORA appears to have placed more emphasis on the

availability of funding in selecting the site locations. For the Los Angeles

and Jefferson sites, the Congress has provided funds for architectural and

engineering design work, with the expectation that subsequent

construction funds would become available. Congressional action

authorized construction funds to build a laboratory at the New York site,

which committed FDA to this location. (See app. II.)

Conclusions ORA believes laboratory consolidation is necessary to meet its pressing

need to streamline and improve operations. Although consolidation may

achieve efficiencies, the evidence ORA provided to us appears to have

overstated the magnitude of the future benefits. For example, ORA may

have overestimated its costs for replacing several labs. Also, ORA

overestimated the staffing requirements for new laboratories in New York

and Los Angeles under its replacement option. Such inflated replacement

cost figures raise questions about ORA’s estimated cost savings from ORA

21. Further, ORA’s existing evidence appears to contradict its claims that

the mega-labs will improve operational efficiencies.

These and other issues raised in this report suggest that FDA should revisit

its plan to consolidate its regulatory laboratories.

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Recommendation We recommend that the Commissioner of FDA review the restructuring

plan to determine whether ORA adequately weighed the benefits of

consolidation relative to other alternatives.

Agency Comments HHS commented that it shared our interest in having accurate and

appropriate information upon which to base critical decisions about

current and future laboratory facility needs. However, HHS believes that

any further analysis would not satisfy the basic and compelling need to

reduce operations costs where possible. Thus, the Department disagreed

with our report. Specifically, it believes that (1) ORA’s cost estimates

(based on a space requirement of 650 square feet per analyst) are

appropriate, (2) consolidation will result in efficient ORA operations,

(3) the site selection for its mega-labs was based on reasonable criteria,

and (4) its current equipment and facilities are obsolete.

We found that ORA (1) has not demonstrated why existing space

requirements in its newest facilities (which are significantly less than 650

square feet per analyst) are inadequate; (2) does not have adequate

measurable data to support its claim that consolidation would achieve

certain benefits and efficiencies; (3) appears to have based site selection

mainly on the availability of construction funds or congressional

indications that such funds would be available; and (4) has not

demonstrated that its laboratories lack state-of-the-art equipment because

of its current facility capability or that its schedule to replace equipment

would differ if ORA consolidated its labs. We are not questioning whether

consolidation should occur but are reporting that documentation of the

bases for ORA’s decisions is lacking.

We have incorporated the agency’s specific comments in this report where

appropriate. A copy of the agency’s full response and our rebuttal appear

in appendix II.

We are sending copies of this report to interested congressional

committees, the Secretary of Health and Human Services, the

Commissioner of FDA, and other interested parties.

Page 15 GAO/HEHS-96-30 Consolidation Benefits Questionable
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This report was prepared by Barry Tice, Assistant Director; Robert

Wychulis; and Cameo Zola. Please call Mr. Tice at (202) 512-4552 if you or

your staff have any questions about this report.

Sarah F. Jaggar

Director

Health Financing and

 Public Health Issues

Page 16 GAO/HEHS-96-30 Consolidation Benefits Questionable
Page 17 GAO/HEHS-96-30 Consolidation Benefits Questionable
Contents

Letter 1

Appendix I 

Scope and

Methodology

20

Appendix II 

Comments From the

Department of Health

and Human Services

and Our Evaluation

21

GAO Comments 40

Appendix III 

Rationales for

Proposed New

Laboratories in New

York, California, and

Arkansas

45

Selection of the Queens, New York, Site Made by the Congress 45

Rationale for a New Mega-Lab in Jefferson, Arkansas,

Questionable

45

Rationale for the Los Angeles Site Questionable 47

Tables Table 1: FDA’s Current and Proposed Laboratory Structure 2

Table 2: Expected Laboratory Closures and Dates 5

Figures Figure 1: Current FDA Field Laboratory Locations 4

Figure 2: Proposed FDA Field Laboratory Locations 8

Abbreviations

FDA Food and Drug Administration

GSA General Services Administration

HHS Department of Health and Human Services

NCTR National Center for Toxicological Research

ORA Office of Regulatory Affairs

WAAG Working Analysts’ Advisory Group

Page 18 GAO/HEHS-96-30 Consolidation Benefits Questionable
Page 19 GAO/HEHS-96-30 Consolidation Benefits Questionable
Appendix I 

Scope and Methodology

We performed our work at FDA headquarters in Rockville, Maryland, and

visited FDA laboratories in Buffalo, Baltimore, and San Francisco. We also

reviewed videotapes of the Los Angeles, Seattle, Dallas, and New Orleans

laboratories. We reviewed agency procedures and data governing its plan

to restructure field laboratory facilities. During our review, ORA provided

us three different cost savings estimates. The initial cost estimate was

dated December 22, 1994, followed by revised estimates on May 26 and

July 5, 1995. The cost data were presented for two restructuring options:

(1) consolidating from 18 to 9 laboratories and (2) replacing every lab

when current leases expire.

We discussed ORA’s plan with key ORA officials in headquarters and at the

sites we visited. In addition, we discussed selected data with GSA

headquarters and field representatives. During our visits to the three field

laboratories, we held group meetings with analysts and inspection/

compliance personnel. Also, we met with import brokers in Baltimore and

Tampa.

We conducted our work between October 1994 and November 1995 in

accordance with generally accepted government auditing standards.

Page 20 GAO/HEHS-96-30 Consolidation Benefits Questionable
Appendix II 

Comments From the Department of Health

and Human Services and Our Evaluation

Note: GAO comments

supplementing those in

the report text appear at

the end of this appendix.

Page 21 GAO/HEHS-96-30 Consolidation Benefits Questionable
Appendix II 

Comments From the Department of Health

and Human Services and Our Evaluation

See comment 1.

See comment 1.

See comment 1.

Page 22 GAO/HEHS-96-30 Consolidation Benefits Questionable
Appendix II 

Comments From the Department of Health

and Human Services and Our Evaluation

See comment 2.

See comment 2.

See comment 2.

Page 23 GAO/HEHS-96-30 Consolidation Benefits Questionable
Appendix II 

Comments From the Department of Health

and Human Services and Our Evaluation

Now on p. 3.

See comment 3.

Now on pp. 3,8,9,10.

Now on p. 10.

See comment 4.

See comment 4.

Page 24 GAO/HEHS-96-30 Consolidation Benefits Questionable
Appendix II 

Comments From the Department of Health

and Human Services and Our Evaluation

See comment 4.

See comment 4.

Page 25 GAO/HEHS-96-30 Consolidation Benefits Questionable
Appendix II 

Comments From the Department of Health

and Human Services and Our Evaluation

See comment 4.

Now on p. 8.

See comment 5.

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See comment 6.

See comment 6.

See comment 7.

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and Human Services and Our Evaluation

See comment 7.

See comment 7.

See comment 7.

See comment 7.

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and Human Services and Our Evaluation

See comment 7.

Now on p. 3.

See comment 8.

See comment 8.

Page 29 GAO/HEHS-96-30 Consolidation Benefits Questionable
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and Human Services and Our Evaluation

See comment 9.

Now on p. 11.

See comment 10.

See comment 10.

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and Human Services and Our Evaluation

Now on p. 13.

See comment 8.

See comment 11.

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and Human Services and Our Evaluation

Now on p. 13 .

See comment 12.

Now on p. 11.

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and Human Services and Our Evaluation

Now on p. 3.

See comment 13.

See comment 13.

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and Human Services and Our Evaluation

See comment 13.

See comment 13.

See comment 13.

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and Human Services and Our Evaluation

See comment 14.

See comment 15.

See comment 15.

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and Human Services and Our Evaluation

See comment 15.

See comment 15.

See comment 15.

Now on p. 12.

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and Human Services and Our Evaluation

Now on p. 12 .

See comment 16.

See comment 17.

See comment 18.

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and Human Services and Our Evaluation

Now on p. 12 .

See comment 19.

See comment 20.

Page 38 GAO/HEHS-96-30 Consolidation Benefits Questionable
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and Human Services and Our Evaluation

See comment 20.

See comment 21.

See comment 22.

Page 39 GAO/HEHS-96-30 Consolidation Benefits Questionable
Appendix II 

Comments From the Department of Health

and Human Services and Our Evaluation

The following are GAO’s comments on the Department of Health and

Human Services’ letter dated November 7, 1995.

GAO Comments 1. Contrary to the agency’s comments, our report recognizes FDA’s past

efforts to consolidate its field laboratories. In addition, we also note that in

our 1987 report we criticized FDA’s 1986 consolidation plan because its

criteria were limited and did not adequately address whether FDA could

meet its current and future laboratory needs. More importantly, our

current report does not dispute FDA’s decision to consolidate, but

questions the magnitude of benefits FDA associates with its planned

consolidation.

2. We disagree with the agency that we placed undue reliance on the WAAG

or the Laboratory Directors’ Steering Committee reports. These were the

only groups chartered by ORA to evaluate the current field laboratory

structure and to suggest modifications. ORA’s management also provided

the groups’ reports to us in support of its plan.

On many occasions, we sought additional input from ORA regarding its

needs assessment for its field laboratories. We asked for any long-range or

strategic plan that described FDA’s workload expectations, including such

data as future staffing needs, trends in compliance/inspection activities,

shifts in port utilization, and possible changes in laboratory work resulting

from new mandates. ORA provided no such data to us. Instead, ORA officials

continuously told us that ORA’s future laboratory plans were based on the

current analyst workforce and an estimated 25-percent increase for

expansion.

3. Although the agency takes exception to our interpretation of its

laboratory space projections, we still believe that they may be overstated.

On June 5, 1995, ORA had reported to us that it had completed and

submitted to GSA a proposal to modify the Atlanta laboratory for an

additional 20,000 square feet. As we stated in this report, ORA provided

revised cost estimates in July 1995 for several of its laboratories, including

changing the requirements for expanding the Atlanta lab to 39,000 square

feet. Even with the larger space estimate for Atlanta, the overall space in

Atlanta at full capacity would only be about 450 square feet per analyst,

significantly less than 650 square feet as stated above.

4. We have acknowledged in our report ORA’s September 12, 1995,

consultant’s report. Our concern with the requirement of 650 square feet

Page 40 GAO/HEHS-96-30 Consolidation Benefits Questionable
Appendix II 

Comments From the Department of Health

and Human Services and Our Evaluation

per analyst is, however, that it significantly exceeds the amount of space

being proposed for mega-labs in Atlanta and Seattle and relatively new

laboratory space occupied in San Francisco (1994) and Kansas City (1991).

ORA has not provided us any explanation of why existing space in its

newest facilities (San Francisco and Kansas City) and its proposed

mega-labs in Atlanta and Seattle is inadequate.

According to data that ORA provided to us, the Kansas City, Seattle, and

San Francisco laboratories have an analyst capacity of 60, 65, and 70,

respectively. Using the laboratory square footage figures in the table in

HHS’ letter, the square footage per analyst is significantly less than that

stated by FDA when considering the capacity for which these laboratories

were built. For example, the San Francisco laboratory, FDA’s newest lab,

has only 369 square feet per analyst.

5. We have noted in our report that ORA’s latest attempt (July 1995) at

estimating lease costs for several of its laboratories was methodologically

better than its previous two efforts. However, two issues we

raised—(1) whether using a space requirement of 650 square feet per

analyst is excessive and (2) ORA’s overestimating the size of the New York

and Los Angeles laboratories under its replacement option—continue to

raise questions about ORA’s projected 20-year savings.

As we demonstrated in this report, if ORA used a square footage per analyst

requirement based on its proposed Atlanta laboratory (including using

ORA’s highest expansion figure), the cost for replacing six laboratories may

be overstated by about $2.2 million per year. In addition, by overestimating

the size of the Los Angeles and New York laboratories in its replacement

costs, ORA may have overestimated the cost of these facilities by about

$2.5 million annually.

6. We recognize FDA’s concern about successfully competing for funds

within the Department and have expanded FDA’s concerns and views about

this issue in the final report. We revised the report also to acknowledge

the constraints of the budgetary process.

7. After considering the agency’s comments, we deleted our discussion in

the final report on renovation and its implications for offsetting any

savings FDA sees from its laboratory consolidation plan.

8. We believe that losing as many as 40 percent of ORA’s analysts is a

significant factor that could adversely affect operations. This is especially

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Comments From the Department of Health

and Human Services and Our Evaluation

true if many analysts leave at the same time, which is usually the case

when sites close. ORA’s effectiveness could be weakened as a result until

new analysts are trained.

9. We agree that efficiencies can be measured by many factors in addition

to timeliness. However, as we point out in our report, FDA provided us

evaluations of its laboratories based only on the factor of timeliness.

10. We were asked to look at the analysis FDA had to support its mega-lab

site selections. FDA provided us with documentation for obtaining such

planned operational efficiencies. We expected that such documentation

would include analyses and projections of current and future

workload/resource needs. Throughout our review, ORA never provided us

any data suggesting that it lacked needed analysts of any type in any of its

laboratories. Nor did ORA provide any analysis showing problems with its

ability to analyze certain samples. In addition, during our review and

discussions with headquarters and field officials, ORA never provided any

explanation to contradict the data showing that medium-sized laboratories

were more timely or otherwise more efficient.

11. Although consolidation may make implementation of the team concept

more difficult, we recognize FDA’s commitment to making it work and have

deleted the reference to the team concept in the final report.

12. On page 8 of its comments, the Department states that about

40 percent of FDA’s analysts are eligible for retirement and probably many

of them will retire rather than move. As stated earlier, we believe that

many analysts leaving at the same time could adversely affect operations

at least in the short term.

13. Our report clearly points out that WAAG had developed comprehensive

criteria to guide ORA in selecting possible sites for laboratory location and

that ORA’s management developed a somewhat narrower set of criteria.

WAAG’s criteria for site selection included, in addition to quality-of-life

issues, all the issues included in ORA’s management’s criteria. HHS’

comments expand the set of criteria that ORA previously provided us. HHS

has maintained that ORA considered WAAG’s criteria along with the listed

criteria in its comments. However, no evidence exists on how ORA

considered any set of criteria. ORA appears to have based site selection

mainly on the availability of construction funds or congressional

indications that such funds would be available for specific sites.

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Comments From the Department of Health

and Human Services and Our Evaluation

14. We were only pointing out one element of WAAG’s comprehensive

criteria. We were not implying that FDA managers were not concerned with

staff recruiting and retention.

15. The documentation provided to us by FDA dealt with its schedule to

replace equipment. This action may occur whether ORA consolidates its

labs or not. As we discuss in this report, we recognize that certain

equipment will need to be replaced. However, FDA has not demonstrated

that its laboratories lack state-of-the-art equipment because of its current

laboratory facility capability. Furthermore, ORA provided us no evidence to

show how these equipment needs would differ in the future. In addition,

because overall staffing is not expected to decline as a result of ORA’s

consolidation plan and ORA has not demonstrated whether or how

economies of scale can be realized with equipment usage, we question

how consolidation would improve equipment resources.

16. While we recognize that some of ORA’s laboratories have certain

deficiencies, this does not mean that the laboratories are structurally

unsound. Thus, we do not believe this to be contradictory.

17. We changed this reference to the Atlanta facility to reflect the

clarification of dates noted.

18. We deleted this reference in the final report due to its anecdotal nature.

19. We have recognized the agency’s concerns in the final report.

20. Since we did not review the laboratory consolidation efforts of the

Environmental Protection Agency, we cannot comment on the relevance

of MITRE’s analyses to FDA’s consolidation plans. Furthermore, we are not

asserting that FDA should not consolidate its laboratories. Rather we

question whether FDA has adequately weighed the benefits of consolidation

relative to other alternatives. We have revised our recommendation in the

final report to better reflect this concern.

21. HHS has maintained that ORA considered WAAG’s criteria along with the

listed criteria provided in its comments. However, no evidence exists on

how ORA considered any set of criteria. ORA appears to have based site

selection mainly on the availability of construction funds or congressional

indications that such funds would be available for specific sites.

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Comments From the Department of Health

and Human Services and Our Evaluation

22. Our work does not suggest one laboratory field structure or alternative

to be better than that proposed by FDA. It does point out, however, that FDA

may have overstated the projected monetary and efficiency gains of its

proposed laboratory consolidations.

Page 44 GAO/HEHS-96-30 Consolidation Benefits Questionable
Appendix III 

Rationales for Proposed New Laboratories

in New York, California, and Arkansas

In the last few years, FDA has selected Queens, New York; Jefferson,

Arkansas; and Los Angeles, California as sites for new laboratories. This

appendix gives an overview of the rationales for those site selections.

Selection of the

Queens, New York,

Site Made by the

Congress

FDA’s current New York lab is located in a 75-year-old GSA-owned

warehouse building in Brooklyn. FDA moved its laboratory into the facility

in 1964 when space was renovated on the seventh floor to provide 37,000

square feet of laboratory space. Because of the structure and age of the

facility, GSA has decided not to support any major renovations to the

building to improve the quality of the laboratory.

To replace the aging New York facility, a site was selected in Queens, New

York, in 1991 before the ORA 21 plan. ORA officials told us that FDA had no

choice in selecting this site because the House Committee on Public

Works and Transportation and the Senate Committee on Environment and

Public Works passed resolutions that authorized leasing funds for the

Queens site facility at $7.875 million for a period of 20 years. ORA officials

told us that FDA was congressionally mandated to use this site; thus, no

other site was considered with the advent of ORA 21.

ORA did not pursue other alternatives to replace its Brooklyn facility and

may not be able to objectively justify the new location. One ORA

headquarters official told us that the Queens site is not the best choice for

a mega-lab on the East Coast. Similar views were expressed in a May 1994

report by the Committee on Appropriations’ surveys and investigations

staff, which stated, “Other plans in process may also be ill-advised such as

the acquisition of a new facility in Queens, New York, for regulatory

analysis....”

This planned facility is by far the most expensive of the five proposed

mega-labs with an estimated leasing cost for 1999 through 2014 of over

$200 million.

Rationale for a New

Mega-Lab in Jefferson,

Arkansas,

Questionable

Construction of a facility in Jefferson, Arkansas, is scheduled for

completion in 1999 at a cost of about $38 million. In fiscal year 1994,

$2.5 million was approved for an architectural and engineering design for

the Jefferson facility.

The number of analysts expected for the site is between 140 and 150.

According to ORA officials, the primary reason for selecting the Jefferson

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Appendix III 

Rationales for Proposed New Laboratories

in New York, California, and Arkansas

site is because FDA owns land at its National Center for Toxicological

Research (NCTR). FDA would then own the newly constructed facility

permanently.

It appears, however, that FDA was influenced by other factors. For

example, a December 1993 ORA options paper stated,

“Within the State of Arkansas there has been almost continuous, high-level

political activity to build up NCTR and it’s [sic] environs to stimulate the

State’s economy. A set of unique events has moved that effort to a higher

plane.

This presents FDA with what is probably a one time opportunity to make a

significant expansion in our use of the remnants of the initial structures.

Given this set of circumstances, the Commissioner asked Deputy

Commissioner for Operations and the Associate Commissioner for

Regulatory Affairs, if ORA wanted to (be a player) in the efforts to identify

new, and maybe better, things we could do there. They answered yes, as a

matter of principle, without having developed a clear picture as to what

that would be.”

The justification for the proposed mega-lab in Jefferson does not meet

even ORA’s limited criteria. Jefferson is clearly not a port of entry into the

country, nor is it an area that has a large number of commercial industries.

Also, the largest nearby city—Little Rock (about 50 miles away)—is not

among the top cities for air traffic, which makes the Jefferson site less

accessible for the shipment of samples.

Several WAAG members and other ORA staff told us that they strongly

opposed the selection of this site. WAAG’s analysis concluded, “An ORA

regulatory facility at NCTR would not adequately meet the criteria for an

effective field laboratory that services the public on a day-to-day basis.”

Several analysts told us that they have several concerns about the

Jefferson site, such as accessibility to a major airport, the availability of

good schools and universities, and recruitment and retention of qualified

analysts. Staff also questioned the logic of building a new laboratory in

Jefferson when an existing facility in Kansas City, Missouri, a bordering

state, was just built in 1992 and has a capacity for 60 analysts.

Page 46 GAO/HEHS-96-30 Consolidation Benefits Questionable
Appendix III 

Rationales for Proposed New Laboratories

in New York, California, and Arkansas

Rationale for the Los

Angeles Site

Questionable

The Los Angeles laboratory is crowded, with little room for

instrumentation or people. Also, the lab is located in a relatively unsafe

area with limited parking. FDA is currently investing about $1 million to

renovate the facility, including converting office space to additional

laboratory space.

ORA plans to construct its new mega-lab at the University of California in

the Irvine area, where it has purchased land. The construction costs are

estimated at about $40 million, and the facility is expected to

accommodate up to about 75 analysts with an expansion potential to 125

analysts. FDA was appropriated $10 million for purchasing the land and for

architectural and engineering design work.

Officials at another ORA lab in California—the San Francisco lab—told us

that while a lab may be justified in the Los Angeles area because of the

large number of imports and commercial industries, San Francisco should

have been considered as a mega-lab alternative. The lab, occupied in 1994,

accommodates 50 analysts and has a capacity for 70 analysts. The

state-of-the-art facility is located in Alameda, California, and is one of

several office complexes in a pleasant area with plenty of free parking.

According to ORA’s San Francisco staff person responsible for overseeing

the San Francisco site renovation, an identical adjacent unoccupied office

building could be converted to a laboratory for about $10 to $15 million.

This is considerably less then the estimated $40 million in construction

costs for a new Los Angeles facility.

ORA officials told us that San Francisco was not considered as a site for a

mega-lab and, as part of ORA 21, would be closed in 2014. The only

explanation provided was that funds were made available for Los Angeles

from the Congress for the land and architectural and engineering design

work.

(108222) Page 47 GAO/HEHS-96-30 Consolidation Benefits Questionable
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