Creating a multi-use building for a research center: a management and operations case study and critique.

Introduction

The University of California, San Diego (UCSD) enjoyed heady times in 2001. In May the National Cancer Institute (NCI) awarded the Moores Cancer Center its sixth Cancer Center Support Grant (CCSG) for five years of continued support at a substantial increase in funding. In July, for the first time in its 23-year history, the center was granted status as an NCI-designated comprehensive cancer center. The construction of a major building assigned to the cancer center was in the final stages of planning and approval. This study summarizes a series of decisions and events that had an impact on that building over the next four years.

The 2000 CCSG application included the University's commitment to construct a large, multi-use building consolidating the cancer center's research, patient care and outreach activities. The center at that time was dispersed over 20 locations on the UCSD campus and in neighboring leased facilities. Its ambulatory patient care was conducted at two sites 20 miles apart. The building promise was long in coming and its delay threatened the survival of the center. Plans called for a building of 270,000 sq. ft., with the first floor housing a state-of-the-art ambulatory oncology center and the upper floors containing wet and dry labs. A large conference center and administration suite were also part of the plan. The design featured a striking exterior of glass and limestone, with stainless steel tiles chemically treated to reflect sunlight in different hues throughout the day. It would be one of the largest buildings on the UCSD campus, exceeding the size of the university hospital and buildings in Health Sciences. The plans had been granted concept approval in 1999, and the estimated cost was $100 million.

Financing the Building

The building commitment was made with the understanding that the entire cost of the research space would be underwritten with private funding (the clinical space was to be financed with $20 million from Medical Center reserves). While this was a development goal of unprecedented scale at UCSD, the Cancer Center Board and leadership accepted the challenge and proceeded to raise $50 million, including a naming gift from benefactors Rebecca and John Moores. But by fall 2001, potential sources had become scarce, and $30 million stood between further delay and groundbreaking. Debt financing was, reluctantly, the only option. The timetable was critical, as the building was considered essential to future NCI CCSG support.

To finance new construction, the University of California may advance funds to a campus to be repaid through indirect cost reimbursement on competing federal grants. This form of construction support, known as Garamendi financing (named for former State Sen. John Garamendi, who introduced the legislation to create the debt instruments), has its benefits and drawbacks (University of California, San Diego, 2002). While it allows urgent construction to proceed, repayment is subtracted from the indirect cost reimbursement available to the entire UCSD campus, including Health Sciences. Thus, the budgets of all divisions and departments are calculated on the balance of funds after debt reduction payments. In employing debt financing, the cancer center was charged with computing myriad models to determine if the building could sustain an estimated annual repayment cost of approximately $3 million.

Form and Function of the Building

The building was conceived with the primary goal of shortening the time and distance between discovery and clinical application of advances in cancer prevention and treatment. Much thought went into creative venues for small- and large-group meetings to facilitate collaboration and research sharing. A 110-seat auditorium with pre-function space, a cafe, 15 conference rooms, 12 terraces and multiple outdoor seating areas for the comfort of patients and staff were among the design features. Because of its spacious design, usable space shrunk from 270,000 gross sq ft to approximately 150,000 assignable sq ft. The first floor, containing about 34,000 sq ft, would be dedicated to patient care. Cancer prevention and control would be conducted in about 23,000 total sq ft of dry labs and examination rooms distributed on floors two and three. Clinical trials offices would be allocated about 5,000 sq ft, and administration, approximately 8,000. A 13,000 sq ft vivarium occupied most of the basement. A five-story, 62,779 sq ft laboratory wing contained approximately 15,000 sq ft on each of its 4 upper floors; the clinic would occupy the first floor. Public use areas of approximately 7,000 sq ft completed the assignable space.

Modeling the Debt Service

Foremost in building financial models was determining where and how much debt was needed and what savings in construction could be achieved. One option was to build shell space in designated lab areas, perhaps as large as whole floors. Another option was to shell the conference center pending a naming gift. Yet another option was to limit additional parking spaces. The engineers and architects cautioned that renovating shell space at a later date was far more costly than building it out in the initial construction. This advice would be weighed carefully against the workable debt ceiling. Ultimately, it was decided to complete the building during construction because of the incremental costs of deferred renovation.

Financial modeling began in earnest in October 2001, and continued through April 2002, in anticipation of a request for debt approval at the UC Regents meeting that May. A senior member of the business office used Microsoft Excel to build spreadsheet programs employing complex macros and links to facilitate modeling. The macros included formulas for percent of overhead toward debt multiplied by the term of the mortgage times the principal, the annual prorated increase in grant dollars, and the calculation for escalating start-up costs. The models included multiple metrics, such as amount and length of the financing, percentage of revenues to be allocated to debt service, time to and amount of optimal sponsored funding, and other avenues of revenue, including the lease of one to two lab floors to non-cancer center tenants. The limits of financing applied alternative scenarios of 10 to 30 years and amounts from $33 million to $47 million. The higher debt ceiling was to cover the funding gap of sequential payment and testamentary contributions as well as the build-out of the entire building. The percentage of revenue applied to debt ranged from 80% to 90%, in accord with Garamendi-type financing. Ramp-up grant revenue projections generally followed a schedule of 25% annual increments leading to capacity funding in four years. Included in the grant revenue projections was the backfilling of occupied space vacated by investigators transferring to the new building.

The final model would forecast a debt of $44.3 million to be repaid over 10 years from the projected building completion in 2005, with a four-year ramp-up of recruitments, starting with 25% to 100% of projected revenue from applicable grants beginning July 2002. Indirect cost revenue to debt service would be at the 80% level. Rent revenue from two lab floors was proposed, but this decision was later modified to limit cancer center space to three, not two lab floors, and thus leasing to only one, for a period not to exceed five years. Thus, while the potential occupancy by cancer investigators was temporarily limited, the requirement to meet debt service obligations was reduced. With start-up package obligations for 17 new lab recruitments estimated at $12 million, or $3 million per year for the first four years, it was projected that expenses would exceed revenues until year five of occupancy. The proposal was approved by the UC Regents at their May 15, 2002 meeting. The building project was officially launched.

Planning for Cultural and Organizational Change

Along with new opportunities, the building presented the cancer center with many challenges. Significant among these were consolidating the separate cultures of the medical center and the medical school under one roof; territorial disputes arising from adjoining, partitionless labs of up to 12 investigators on a research floor; the new proximity and threat to productivity of contiguous administration and faculty offices, and the ongoing financial needs of a considerably larger and more costly enterprise.

In July 2002 the cancer center director unexpectedly announced his plans to retire, effective December 31, 2002. Ground-breaking took place on November 8, 2002, with anticipated construction completion in 25 months. An interim cancer center director would monitor the building construction until November 2003, when the current director, Dennis A. Carson, MD, assumed the post. Shortly thereafter a staff management group was formed to plot the logistics of the transition. This committee, the Managers' Workgroup, had many functions, including: 1) Human Resources; 2) Facilities Coordination and Management; 3) Operating Policies; and 4) Financial Planning and Management.

The human resources (HR) representative would seek to unite the previously separate cultures and numerous sub-cultures, and build common HR practices among the occupants of the building. The HR representative set out to establish and implement measurable performance standards, tie performance standards to business objectives and operational efficiencies, identify reward and recognition mechanisms for various levels of performance, and tie these rewards and recognition systems to business results (US Office of Personnel Management, 2001). Techniques to facilitate the cultural assimilation process included cultural and needs assessments, cross-sectional work groups, employee orientation resources, focus groups, town hall-type forums, and the development of communication models to build and sustain participation and excitement.

The facilities representative focused on the timeframe and implementation sequence, space assignment issues, move logistics, and coordination of move-in services.

The operating policies representative worked to develop a cancer center building manual that would establish a set of shared operating principles for all areas of the facility and address central building services, including security, waste disposal, and parking.

Finally, the financial planning and management representative sought to identify the costs to meet, the financial targets for debt reduction, and financial strategies and projections for ensuring adequate revenues through a combination of grant award and patient revenue, philanthropy, and auxiliary services. Models for debt reduction, developed using Microsoft Excel spreadsheets, were based on varying dollars per square foot, different levels of occupancy until full building occupancy was achieved, and other variances, such as the fluctuating grant revenue of occupants once space was granted.

A cross-section of the cancer center population, including occupants from different locations, sub-cultures, and programs, was invited to participate in functional work groups. All participants were notified that active involvement would be required to achieve established objectives. The functional work groups met weekly; the Managers' Workgroup met monthly initially and bi-monthly thereafter. Sharing among the groups was essential to the planning process, as many areas that appeared separate were actually connected, either operationally or logistically. To keep leadership and other functional work groups apprised of initiatives and objectives, timelines, and progress, reports were developed for each area of the Managers' Workgroup. Cancer center administrative consultants from institutions throughout the nation who had engaged in similar large-scale construction programs and transitions to multi-use buildings were invited to share their experiences with the Managers' Workgroup. Consultant review of progress reports, building specifications, and agenda topics provided valuable information that would aid in the planning process.

Communication as the Key to Change

Communication was instrumental to the success of this endeavor, particularly in creating and sustaining excitement for and "ownership" of an entity both unknown to and larger than most cancer center employees were accustomed to. Consequently, one of the first actions was to add a transitions page to the cancer center's website at http://cancer. ucsd.edu. This page was designed by various Managers' Workgroup participants, built by the IT Director, and managed by the Member Relations Analyst. It was populated with photos of the evolving construction site, including a continuous real-time videocast, information on the project and proposed guidelines for operations, and a forum for suggestions and questions. To keep the UCSD community advised of progress and policies for occupancy, the site also included a new Space Management Policy and Application Form, floor plans of the facility to aid navigation and help occupants familiarize themselves with their new home, and a variety of occupant-related general information resources. Communication among a physically dispersed faculty, formerly transmitted via paper, e-mail and phone, now traveled the information highway of the cancer center's Intranet, ONcLINE. Proven effective approaches to improve communication, as established by Goodman, Cabral, Nemcek, and Powers (1996), included: (1) minimizing the impact of geographic separation on administrative services; (2) connecting personnel electronically; (3) developing compatible computer systems; (4) sharing common information, and (5) planning collectively.

To enhance cross-communication and help ensure the success of clinical operations, the Managers' Workgroup, which included a representative from both the medical school Dean's office and the Medical Center, actively participated in the transition planning meetings with a parallel medical center group comprised of specialists in various service and activity areas.

Flexibility and focus were invaluable to the success of this venture. Due to transitioning workforce members, fluctuating demands and unanticipated challenges, priorities evolved and efforts were refocused on addressing emerging issues and resolving unexpected problems. While planning oversight was under the auspices of the Associate Director for Administration in collaboration with the Director, the day-to-day planning and actualization of the transition were carried out by cancer center staff members through a combination of overtime, work reassignment and adjusted priorities. As no external consultants or additional personnel were hired to oversee the project and its many details, this responsibility was assumed by the HR Manager and the facilities representative, who became integral to the process.

As the construction project evolved and the transition planning and timeline progressed, issues required continuous attention: construction change orders; space usage, assignment, and occupants; security system and food service vendors; furniture selections and configurations for public, shared and office spaces; interior and exterior signage; parking for patients, visitors, staff, and faculty; operational details including telecommunications, copier and mail services, shipping and receiving; facilities maintenance; housekeeping;, safety and fire code compliance; meeting room and public venues management, and publicity and events. Consequently, it was sometimes necessary to postpone planned initiatives to address issues requiring immediate attention.

Because space assignment was a Cancer Center senior leadership function, a Space Advisory Committee (SAC) was appointed by the Director in December 2003, with representation from members of the Manager's Workgroup (including the chair).

The Managers' Workgroup performed exceptionally. Despite changing priorities and challenges, workgroup participants not only made significant progress and contributions to their early objectives and initiatives, but also resolved a plethora of issues that would otherwise have been addressed by external consultants. This group also effectively navigated the university systems, working closely with such key offices as the Health Sciences Dean's Office, Facilities Design and Construction, and Real Estate Development. While benefiting from "in house" knowledge and expertise, the project management approach involved higher risk, as responsibility rested with a few key employees. For example, had the HR Manager or the facilities representative been unable to continue in their roles, the transition would have been compromised. Any institution preparing for such a large-scale project should assess the availability, benefits and drawbacks of internal and external resources.

More difficult than other objectives was the task of merging the medical school and medical center cultures. Turf disputes, policies and priorities regularly interfered with movement toward a unified cancer center organization. Programmed organizational and individual change management was considered key to the overall effort to transform the cancer center from a widely dispersed setting to a physical site with integrated, coordinated systems for translational research and optimal patient care. The Deputy Director for Clinical Oncology/Medical Director successfully forged new working relationships.

By mid-2004, the work of the Managers' Workgroup was turning increasingly to plans for occupancy. With new leadership, the vision for the building was changing. A former focus on the biological aspects of cancer was modified to allow for a greater emphasis on the chemistry and pharmacology surrounding experimental therapeutics. UCSD and San Diego are well-recognized sites of groundbreaking biotechnology, and the building is a natural setting to bring these strengths to bear on curing cancer. At a cost of $483,000, a number of lab bays were retrofitted to triple the number of chemical hoods. Priority recruitments targeted accomplished and promising lab scientists in drug discovery and design, while also seeking clinicians committed to advancing cancer treatment via investigator-initiated trials emanating from a cancer center lab and ending in the clinic.

Space Metrics and Management

By mid-2004 construction was proceeding as planned and tours of the building were regularly scheduled with prospective occupants. The SAC had approved a research space application form and accompanying metrics by which to evaluate requests for space. Requests were submitted electronically and adjudicated at committee meetings. Because of the number of investigators seeking to move, and the limited amount of space committed to recruitment, not all requests could be filled. In approving requests for research space, the SAC employed the following criteria: the ratio of grant funding to square footage would follow the school policy; each bay of space would be accompanied by one office; no one would have two offices, and single-office occupancy required full-time service in the cancer center; core facilities would be allocated space equal to that used for their current operations. Consideration was also given to the cancer relevance of the applicant's research, the applicant's scientific productivity, and the potential for interdisciplinary collaboration within the cancer center. Clinic space was not originally allocated by the SAC; this activity is evolving. The clinic includes 24 exam rooms, an infusion center of 30 chairs and 10 beds, a hematology lab, research and patient pharmacy, patient and family resource room, two radiation chambers and CT simulator, mammography center, and MRI imaging.

After initial space assignments were completed and the cancer center assumed occupancy of the building on March 14, 2005 (approximately three months behind schedule), it was time to execute the move logistics sequence. The furniture was received and installed in phases based on the timelines established to move in the various occupant groups. Simultaneously, the security system was being installed, the telecommunications group was activating and expanding services, housekeeping was preparing the building, and electrical and plumbing contractors were adding and modifying outlets and fixtures to accommodate special research equipment needs. Many factors determined the order of occupant moves: location and lease status of occupants prior to move-in; location within the new building to avoid congestion with service elevators; ongoing work in certain areas of the building caused by construction change orders; the urgency of some groups to relocate; in-progress research experiments and grant application deadlines to minimize disruption; availability of specialists to move highly sensitive equipment requiring recertification and calibration, and readiness of on-site services and resources. Confirmation of each scheduled move was sent to groups providing services to the building, such as mail and copier services and telecommunications. In addition, a relocation handbook was issued to occupant groups approximately two weeks prior to their scheduled moves. The handbook, which streamlined communication of critical information, addressed move responsibilities and expectations, moving supplies, environmental health and lab safety, lab equipment, common areas and shared equipment, the building address, mail and ship-to codes, security, phone and data line information, and directions on how to move computers. In addition, representatives from the contracted move company met with each group approximately one to two weeks prior to the scheduled relocations. A process to address after-occupancy change orders was developed and implemented.

The building was dedicated on April 8, 2005. Despite the intense planning and anticipation that the Administration would be first to relocate and facilitate subsequent moves, a newly recruited investigator and his research team were the first occupants. The Administration assumed occupancy in mid-April. The clinic opened on July 9. Research moves were sequenced over four months, from May through August, and all were relatively problem free. Aside from research space reserved for designated recruits, the building was at research and patient care capacity less than a year after completion. The fifth lab floor, originally assigned elsewhere, has been returned to the cancer center. Over 800 employees are now working in the building.

During and after the phased-in moves, planning continued to address a barrage of operational issues. An ad-hoc committee of occupants from all areas was devised to discuss building-related issues and identify solutions to shared problems. Additionally, a Service Excellence Committee, formed approximately one year prior to the move, continues to meet to focus on performance and service excellence and cultural assimilation.

A Patient Advisory Council (PAC) has been created to advise the cancer center leadership on patient and family perspectives, with the goal of becoming a top tier cancer center. The PAC is comprised of patients both on and off active treatment, family caregivers, and UCSD faculty and staff. To date, the PAC's contributions to the cancer center feature recommendations on how to improve and humanize the cancer experience and ways to maximize excellence, including a Medal of Excellence award to recognize employees who help patients in a special way.

The SAC continues to meet regularly to fulfill its review and space management responsibilities.

Lessons Learned

The decision to build out the entire building reduced add-on and retrofitting costs. Sustained, intensive planning, punctuated by flexibility and strong decision-making, were paramount. With an eye toward rapid completion and close monitoring, the building was brought in very close to target: a $105 million cost and a 28-month construction time. The move was relatively smooth, due primarily to the significant efforts devoted to planning. The building was intended to reduce the dispersion of research and clinical activity. While large in scale, however, its space assignable to growth was reduced because over 50% was committed to current operations, not new activities. The building is now fully occupied or obligated. The research occupants are already experiencing limitations on growth. Continuing communication was particularly valuable, and the web provided easy access without imposing on staff time. Time to consolidate information and develop transition resources was well invested. Re-engineering cultures and performance requires a longer horizon. In less than a year of operation, the building is clearly fulfilling a dream and fostering interactions unimaginable a very short time ago.

Author's Note

The authors wish to acknowledge the assistance of the following Moores Cancer Center Administration unit members, without whom the transition project would not have been as successful as it was: Richard Deteresa, Director, Information Services; Wei Deng, Sr. Analyst, Business Office; Deborah Davis, Member Relations Administrator; Sonia Ashley, Manager, Sponsored Projects; Pamela Ventura, Administrative Assistant.

References

Goodman, I. S., Cabral, K., Nemcek, G, & Powers, T. (1996). Enhancing communication in a multi-campus research center. Journal of the Society of Research Administrators, XVIII, 3,4, 17-26.

United States Office of Personnel Management. (2001). Handbook for measuring employee performance: Aligning employee performance plans with organizational goals. (PMD-13). Washington, DC: US Office of Personnel Management.

University of California, San Diego. (2002). Allocation and expenditure of indirect cost recovery funds at UCSD. Retrieved March 1, 2006 from University of California, San Diego, Academic Subcommittee on the Campus Budget Web site: http://www-senate.ucsd.edu/FrontPageDocs/ICR_Report.doc

Ira S. Goodman, MPA, MS, Associate Director for Administration

Moores Cancer Center

University of California, San Diego

3855 Health Sciences Drive, 0658

La Jolla, C.A. 92093-0658

858-822-1221

igoodman@ucsd.edu

JoAnne M. Weissberger, PHR, Director of Operational and Human Resources

Moores Cancer Center

University of California, San Diego

3855 Health Sciences Drive, 0658

La Jolla, C.A. 92093-0658

858-822-3556

jweissberger@ucsd.edu