The Office of Research Facilities (ORF) must follow all federal regulations and Department of Health and Human Services (DHHS) policies related to the appropriate use of funds for facility projects. The primary policies and guidelines for use of funds for planning, design, construction, temporary construction, renovation, repair, maintenance, leasing and similar activities are contained in the DHHS Facilities Program Manual Section 2-1: FUNDING SOURCES FOR FACILITIES PROJECTS.
ORF continues discussion with the Department on the implementation of the new manual and on developing guidance for its use by our project officers and IC customers.
March 30. 2016
IC RENOVATIONS AND ALTERATIONS PROGRAM—
GUIDANCE ON USE OF THE $ 3.5M PER PROJECT SPECIAL AUTHORITY PROVIDED UNDER SECTION 216 OF THE FY 2012 OMNIBUS APPROPRIATION HR 2055
On February 14, 2007, as part of the NIH FY2007 Appropriation Act, Congress authorized NIH to spend operating funds appropriated to ICs, up to $2,500,000 per project, to cover costs associated with altering, repairing, or improving NIH facilities. Subsequently, the FY 2008 Budget, which included NIH’s appropriation, was signed into law by President Bush. Similar budget language was included in the President’s proposed FY 2009 Budget, with the continuing proviso that the total IC operating funds expenditures for renovations, alterations, and repairs are limited to no more than $35,000,000 for the year. Wording of this original Special Authority with intent is provided below 
A major change in the budget thresholds took place with the FY 2012 Omnibus Appropriation Act HR 2055, section 216, which increased the funding ceiling by providing that not to exceed $45,000,000 of funds appropriated by this Act to the institutes and centers of the National Institutes of Health may be used for alteration, repair, or improvement of facilities, as necessary for the proper and efficient conduct of the activities authorized herein, at not to exceed $3,500,000 per project.
The following provides general guidance on IC’s use of the $3.5M per project spending authority included in Section 216 of HR 2055. Funds appropriated to NCI to be used for repair and improvements at NCI-Frederick are not subject to Section 216.
Improvements (Renovations/Alterations) - Any betterment or change to an existing property to allow its continued or more efficient use within its designated purpose (Renovation), or for use for a different purpose or function (Alteration). Building improvements also include improvements to or upgrading of primary mechanical, electrical, or other building systems, and site improvements not associated with construction projects. Improvements typically increase the useful life of a facility and are capitalized against the existing property in accordance with the accounting principles of the Federal Accounting Standards Advisory Board.
Minor renovations – Renovations that are directly related to the installation of special-purpose equipment, as well as related design and inspection services. These renovations may include extending utility services, providing suitable safety and environmental conditions for proper operations, and making structural changes such as cutting walls and floors, and new partitions, provided such improvements are proximately incident to the installation, operation and use of special purpose equipment and necessary to conduct the functions of the program(s).
Project – This includes the design and construction work associated with renovating, repairing, or altering NIH owned facilities and space.
Project Cost – The expenditure associated with the completion of design and construction activities related to NIH projects, including contingency, for projects subject to the $3.5M and $45M ceilings. These ceilings do not include costs for fee for service, furniture or furnishings, casework, or IC scientific instrumentation, all of which can be IC funded and are included in “Total Project Cost” when preparing a Facility Project Approval Agreement (FPAA). Costs for pre-design planning studies can also be IC funded and are not included in the ceiling that count toward the $ 3.5M ceiling per project cap or the annual $45M cap.
Repair – The restoration of a failed or failing primary building system or real property facility component to a condition that restores its effective use for its designated purpose. A repair does not increase the underlying value of an existing facility and is typically not capitalized. An example of a primary building system would be the structural foundation and frame, domestic waste disposal system, or building HVAC; a real property component would be a piece of the primary building system such as a roofing system, central chiller/boiler, generator, or elevators. A failed or failing primary building system or real property component may be the result of action of the elements, fire, explosion, storm and/or other disasters, and by use near to or beyond its expected useful life or technical obsolescence.
Examples of project-related costs that count against the ceilings in the new authority:
- Renovations to all office, laboratory, clinical, animal, research, or support space that involve new drywall or masonry partitions, installed doors, ceilings, lighting, and permanent flooring or the reconfiguration of such;
- Alterations that change the use or function of existing program space (i.e., office-to-lab, lab-to-office, lab-to-animal room, etc.);
- Infrastructure repair work that is directly impacted by IC renovations or alterations; and
- Architect and Engineer design and inspection costs
Examples of project related cost that don’t count against the $3.5M ceiling of the Special Authority
- Pre-project planning & pre-design studies ( studies and Program of Requirements)
- Fee For Service
- Furniture or furnishings
- Carpet & window coverings
- Casework & counter tops
- Special Purpose Equipment such as IC scientific instrumentation such as CT Scanners and work directly incident to such
Project Funding (IC Projects Subject to the New Authority)
IC renovation and alteration projects (those subject to the new authority), with design / construction/ inspection costs up to $3.5M, can be paid for using IC funds and do count against the $45M overall NIH ceiling. Repair and Improvement (R&I) funds are no longer needed for these projects, unless the project exceeds the $3.5M per project ceiling—At that point the entire project design and construction cost must switch to R&I as funds cannot be mixed. Note: Appropriation law does not permit NIH to augment the $3.5M IC funding ceilings by mixing IC funds with R&I. funds.
All IC renovation, repair, and alteration projects in government owned facilities must be submitted to ORF through the established Work Request process. Because NIH is constrained by the $45M cap on IC work, ICs cannot undertake projects on their own without receiving prior approval from the Director, Office of Research Facilities. Work Requests for IC renovation, repair, and alteration projects, subject to the new Special Authority (as defined in this document) must cite the specific IC Common Accounting Number (CAN) established exclusively for such work. This will provide NIH with a mechanism to track and report on compliance with the $45M cap. Other costs not subject to the new authority may continue to cite a CAN identified by the IC and/or an R&I CAN, if applicable.
Because of HHS’ concern about the use of IC funds for renovations, alterations & repairs, and its inconsistency with HHS policy, such renovations, alterations & repairs projects must have an approved Facility Project Approval Agreement (FPAA) if the Total Project cost exceeds a Threshold of $2M for Alterations $ Renovations or $5M for Repairs before it can proceed to design or construction. ORF is responsible for preparing the FPAA, working with the customer, and securing its approval from HHS.
- An approved project must be executed within its assigned amount. The amount cannot be exceeded, nor can the allotment be used for a different project, without prior approval.
- ORF will be responsible for tracking costs and conducting a periodic review of projects on the approved list to ensure that they remain within the established ceilings.
ICs are urged to contact ORF Division of Design and Construction Management if they have any questions about this guidance.
Questions on appropriate use of funds can be directed to the ORF Chief Engineer, Tony Clifford or Senior Architect, Dan Cushing, 301-594-0999.
 Included within the NIH / Department of Health and Human Services FY 2008 Justification for Estimates for Appropriations Committee, FY2008 President’s Budget. Sec. 221
Not to exceed $35,000,000 of funds appropriated by this Act to the Institutes and Centers of the National Institutes of Health may be used for alterations, repair, or improvements of facilities, as necessary for the proper and efficient conduct of the activities authorized herein, at not to exceed $2,500,000 per project.
Explanation of legislative proposal:
To conduct research in buildings of the type and age of those on the NIH campus, it is sometimes necessary to demolish and reconstruct solid walls and partitions of permanent materials. The needs for such construction usually cannot be anticipated in budgets prepared a year or more in advance. This provision clarifies that funds appropriated to the Institutes and Centers may be used for alterations, repairs, or improvements, provided that (1) the funds are not already included in the buildings and facilities appropriation; (2) the improvements and repairs funded are principally for the benefit of the program from which the funds are drawn; and (3) such activities are conducted under and subject to the administrative policies and procedures of the NIH Office of the Director and the Department. The proposal includes a limitation ($2,500,000) on the size of projects to be funded directly by the Institutes and Centers and a cap of $35,000,000 for total NIH projects of this type.