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NIH Record

Getting Down to Business
NIH Administrative Operations Under Review

By Carla Garnett

On the Front Page...
In an age when government agencies face increased budget scrutiny every year, and taxpayer purse strings are drawn tighter with each round, it was only a matter of time before NIH would have to reassess its fitness for battle. And although the agency has in many ways already reinvented the way it does business and clearly has been among the blessed at budget season, test time has come: NIH is in the middle of a thorough review of its administrative structure and costs and the results will be used by Congress to help decide the agency's appropriation.


Correspondence from Congress

Congressional concerns go back to fiscal year 1996, and the current effort began with a Nov. 21 letter to NIH director Dr. Harold Varmus from Rep. John Porter (R-Ill.), one of NIH's staunchest supporters on the House appropriations committee. The letter pointed out that administrative costs for federal agencies were examined extensively during the last congressional session and that wherever possible funds for overhead were minimized. The statement reflected NIH's 1997 fiscal picture: Although NIH's total budget increased 6.9 percent over last year's, administrative costs were held at fiscal year 1996's level, after being reduced by 7.5 percent the previous year. Level funding would likely continue in the next series of negotiations, the letter said. Gearing up for the coming budget discussions, Porter asked Varmus first to launch a comprehensive review of NIH administrative operations, then to develop a long-range spending plan for what is called research management and support (RM&S).

The gist of Porter's communication was this: Don't expect Congress to increase funding for so-called administrative costs in the near future; in fact, plan as though such dollars would be diminished over time. As always, the letter suggested, Porter was committed to fighting for NIH funding, but the stakes were higher now and the agency had to flash not only its talent for research, but also its head for business.

"It's important to keep in mind," explains Tony Itteilag, NIH deputy director for management, "that the study is not focused on reducing administrative costs -- we've already done that -- but rather an effort to find out whether we need to, and, if so, how we can efficiently enhance the services that we provide in support of science -- both intramural and extramural -- through our stewardship and management of administrative resources."

Everything 'On the Table'

To coordinate the assessment, Varmus engaged the consulting services of a familiar NIH face -- Jack Mahoney, former NIH deputy director for management who left NIH a few years ago to become deputy administrator at the Health Resources and Services Administration and recently retired from federal service. A 15-member inter-ICD advisory team of the agency's senior managers was also assembled, with Varmus issuing a charge at the first meeting: Aside from ICD scientific components, "everything is on the aggressive."

"We need to focus on the foremost needs of NIH as a research institution, and this is our principal duty and task," Itteilag says. "We should view this study as an opportunity to make, where warranted, what Dr. Varmus has described as 'healthy changes' to the way we conduct our administrative business."

Mahoney agrees that the review gives NIH administration the chance to explore new possibilities. "Everyone is starting with no preconceptions," he pointed out. "I would like the study to be viewed as an opportunity, either to advertise to the larger world those areas in which NIH excels, or as an opportunity to learn new techniques to provide state-of-the-art administrative services. I would hope that this not be viewed as an exercise to 'cut administrative costs' but as an effort to help achieve what I believe to be everyone's goal of providing the best level of support to achieve NIH's mission within the resources that are available."

Seeking 'Best Practices'

One goal of the study is to "identify best practices, including those that may be currently in use" and "to point to areas for increasing effectiveness and optimizing" the use of agency resources in future years, according to a February advisory panel document. Study results will form the foundation for the long-range RM&S plan Congress requested.

"There is a relationship between the level of resources needed to conduct first-rate science and the level of resources needed for administration," says Itteilag. "It is not always a linear relationship, but it exists nonetheless, and those of us in the business of providing administrative support would like to be sure that this relationship is recognized, while at the same time being certain that our work is done as efficiently and effectively as possible."

One of the team's first challenges was to get everyone speaking the same language. Definitions of such key terms as "overhead," "administrative costs," and "research support" vary widely across NIH's ICDs. Uniformly categorizing and quantifying budget amounts and FTEs devoted to those areas -- by the deadline Congress set -- will be a tremendous, but crucial undertaking in itself.

After determining a course of action, NIH awarded a competitive contract to a top management consultant firm, Arthur Andersen & Co., to conduct the independent review, which involves designing the study, collecting and analyzing the data, documenting the results, and making recommendations. (The contract costs associated with the review are in the range of $1 million.)

The scope of the project is broad: Arthur Andersen has been asked to examine 18 functional areas in a 7-month time frame, in the hope that NIH may deliver preliminary results to Congress late this summer, and final recommendations by mid-October. A variety of tools will be used including data collection and analysis, individual interviews, focus groups, questionnaires and surveys, although every effort will be made to minimize time required of NIH staff. Interviews within the Office of the Director have already begun as have regular meetings with the advisory council.

"This is a chance to further strengthen our support in the Congress," Itteilag concludes. "We want to be able to portray that excellence in administration goes hand-in-hand with excellence in science, and this effort should present an opportunity to do that and result in a positive outcome when appropriations are enacted."

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