FDA Laboratories: Magnitude of Benefits Associated With Consolidation Is Questionable
Published: 1996-03-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Pursuant to a congressional request, GAO reviewed the Food and Drug Administration's (FDA) plan to consolidate its Office of Regulatory Affairs' (ORA) 18 field laboratories for product testing, focusing on: (1) the validity of projected cost savings and operational efficiencies; and (2) site selection criteria.
section_title: What GAO Found
paragraphs: GAO found that: (1) the 20-year consolidation plan, known as ORA 21, proposes to create five mega-laboratories and four special-purpose laboratories; (2) ORA based its plan on the belief that its current facilities are old, need costly repairs, and do not meet the needs for conducting regulatory science in the future; (3) ORA may have overstated the consolidation plan's projected cost savings because ORA made several assumptions about replacement costs, construction costs, and space and staffing requirements; (4) the plan's claims for achieving greater operational efficiencies are also questionable, and ORA did not substantiate claims regarding obsolete equipment, supervisor/analyst ratios, laboratory efficiency, and staff relocation; and (5) ORA conducted limited analysis of the relative efficiency of proposed laboratory sites and based its site selections on areas where it believed that it would receive congressional funding approval.

section_title: Letter
paragraphs: 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.
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.
subsections: section_title: Background
paragraphs: 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. 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.
subsections: section_title: Current Structure Includes 18 Laboratories
paragraphs: 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.)
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.
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.
section_title: ORA’s Restructuring Plan—ORA 21
paragraphs: 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.
section_title: History and Rationale for Consolidation
paragraphs: 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 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.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 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.)
section_title: Projected Cost Savings May Be Overstated
paragraphs: 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.
subsections: section_title: Consolidation Versus One-for-One Replacement
paragraphs: 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.
section_title: Space and Staffing Requirements for Replacing Labs May Be Overstated
paragraphs: 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.
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.
section_title: Operational Efficiency Gains From Consolidation Are Questionable
paragraphs: 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.
subsections: section_title: Efficiency of Medium-Sized Labs Versus Large Labs
paragraphs: 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.
section_title: Supervisory/Analyst Ratio in Larger Labs Not Better Than in Most Other Labs
paragraphs: 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 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.
section_title: Claims of Obsolete Equipment and Facilities Questionable
paragraphs: 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, 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.
section_title: Closures May Adversely Affect FDA’s Analytical Staff
paragraphs: 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 report 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.
section_title: Site Selections Not Based on Recognized Criteria
paragraphs: 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 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.)
section_title: Conclusions
paragraphs: 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.
section_title: Recommendation
paragraphs: 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.
section_title: Agency Comments
paragraphs: 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.
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.
section_title: Scope and Methodology
paragraphs: 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.
section_title: Comments From the Department of Health and Human Services and Our Evaluation
paragraphs: The following are GAO’s comments on the Department of Health and Human Services’ letter dated November 7, 1995.
subsections: section_title: GAO Comments
paragraphs: 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 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 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. 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. 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.
section_title: Rationales for Proposed New Laboratories in New York, California, and Arkansas
paragraphs: 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.
subsections: section_title: Selection of the Queens, New York, Site Made by the Congress
paragraphs: 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.
section_title: Rationale for a New Mega-Lab in Jefferson, Arkansas, Questionable
paragraphs: 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 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  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.
section_title: Rationale for the Los Angeles Site Questionable
paragraphs: 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.
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