APPENDIX 10
Memorandum submitted by the International
Centre for Life
1. INTRODUCTION
This evidence has been prepared by Alastair Balls,
the Chief Executive of the International Centre for Life and Linda
Conlon, the Director of LIFE Interactive World, the visitor attraction
element of the project. Both individuals have a decade and more
of experience in planning and developing major mixed use projects
from inception to completion.
2. PROJECT OUTLINE
2.1 Life science is at the centre of a revolution
that will touch all our lives. In 1953, in England, Watson and
Crick discovered the double helix structure of the DNA molecule,
which is essential to life. This molecule contains the instructions
for building all forms of life and programmes our biological potential.
It is only now, in the third Millennium, starting to yield its
secrets. Scientists are beginning to develop the ability to tap
into the code of life and bring its power to bear on our daily
lives. We look to its potential for curing diseases and eliminating
hunger. Advances will however only be won with major efforts,
by both the academic and commercial sectors. They also bring with
them major ethical and practical issues for each of us, which
have already created in some quarters, a climate of fear, distrust
and rejection.
2.2 These are challenges to which we aim
to make a major contribution. The purpose of the International
Centre for Life campus is to tap into this "code" in
every sense, develop its potential in all directions and make
it easily comprehensible to the wider public. Four years ago we
set out with the conviction that the DNA revolution needed to
reach a wider audience because it will affect us all. We aim to
let people share in the thrill of discovery and participate in
the debate concerning a science which could affect the nature
of life itself.
2.3 The project has a capital cost approaching
£70 million. It is supported by a £31.5 million grant
from the Millennium Commission and is one of 14 landmark projects
across the UK. The former Tyne and Wear Development Corporation
(TWDC) provided £11 million, and additional funding is coming
from the European Regional Development Fund (£10.5 million),
the Regional Development Agency for the Northeast (£2 million),
The Wellcome Trust (£3.3 million), the Government's Joint
Infrastructure Fund (£4.6 million) and £3.5 million
from a variety of other sources. A commercial loan facility of
£2 million is in place.
2.4 Noble Prize Winners, Dr Francis Crick
and Dr James Watson, who jointly discovered the structure of DNA
in 1953, are its Patrons. The project is lead by a Trust of eminent
regional leaders and businessmen and women and is chaired by journalist
and science writer, Dr Matt Ridley. It has the support of the
Universities of Newcastle, Durham and Northumbria, the Health
Trusts of Newcastle and Sunderland, the North East Regional Development
Agency and the City of Newcastle. It is a facility designed to
help the people of the region, their future prosperity and links
with the wider world.
2.5 The project is a world first. The synergy
between the elements creates a powerful mix. There is no other
centre, which brings together research, medical and commercial
application, ethics, education and entertainment on a single site
on the subject of DNA. We believe the integration of these elements
will lead to a flow of ideas, which will enhance individual objectives.
2.6 The £70m complex is housed on a
10-acre site in the centre of Newcastle upon Tyne. The project
is fully funded with the assistance of a £2m commercial loan.
2.7 It is intended to:
— Give everyone the chance to be literate
about DNA; and to promote a greater public debate about complex
issues affecting science and society.
— Provide a major new leisure attraction
and conferencing venue in the North East.
— Provide a leading edge centre for
medical research, medical application, technology transfer and
commercial application, in the fields of genetics, biochemistry
and biotechnology and to encourage interaction amongst the participants.
— Create a cluster of small-medium
sized enterprises at the leading edge of research and development
into life sciences and encourage their commercial application.
— Make a major contribution to raising
interest in young people's science education against a background
of low levels of attainment.
— Create up to 750 permanent jobs,
directly and indirectly, and an additional 120 during the construction
of the project.
— Regenerate a major area of dereliction
in the heart of the city.
3. WHAT IS
THE INTERNATIONAL
CENTRE FOR
LIFE?
3.1 The elements of LIFE are:
— LIFE Interactive World visitor experience,
set up to explore human biology, will intrigue and excite around
200,000 people a year. Visitors follow a storyline which takes
them back four billion years to the start of life, then having
revealed to them the secret of life, builds them back up to complete
human beings interacting with their world. They explore where
life came from, what it means for us and how we can celebrate
it today. It will bring DNA to the people.
— LIFElab Education Resource Centre
will inspire thousands of schoolchildren and the wider public
through a programme of exciting and innovative learning experiences.
— LIFE Conference Centre will provide
a first class location for meetings, conferences, events and receptions
allowing guests to take advantage of our unique facilities.
— The Institute of Human Genetics (part
of the University of Newcastle) where around 150 research and
clinical staff will carry out world class research in areas such
as developmental genetics, cancer prevention and conditions such
as muscular dystrophy from its new purpose built premises. The
Institute is already one of Europe's largest combined medical
and human genetics centres.
— Regional Genetics Clinic—a
unit run by the Newcastle Health Trust and Newcastle University
on behalf of the region providing clinical help to those with
concerns related to genetic diseases.
— The Bioscience Centre which nurtures
biotechnology and associated companies and acts as an interface
between industry and the life sciences.
— Reproductive Medicine, also a part
of NHT, opened by Lord Winston which provides assistance to couples
with fertility difficulties using techniques such as in-vitro
fertilisation. It has recently applied for a licence to undertake
pre-implantation genetic testing of embryos.
— The Policy, Ethics and Life Science
Research Institute (PEALS)—jointly managed by ICFL and the
Universities of Newcastle and Durham—which pursues academic
research and provides an open forum for all communities and individuals
who seek to express their views on the application of our new
understanding of DNA. The nature and speed of new discoveries
in biotechnology are raising deeply felt concerns about the possible
consequences for individuals and for society.
— Times Square—The development
also includes specialist shopping, a pub/restaurant and a public
space with art, seating and trees. It is a place to relax in,
enjoy a stroll or anticipate the excitement of a visit to LIFE
Interactive World.
3.2 Detailed financial projections have
been prepared identifying the ongoing commercial feasibility of
the project and its ability to generate a net revenue surplus
in future years. The Plan focuses on the period 2000-10.
3.3 An important factor in the success and
ongoing appeal of ICFL will be reinvestment in the form of upgrading
and enhancing the visitor experience. To achieve this net income
from the various property elements is dedicated to the development
of the educational elements. It is envisaged that this fund will
be drawn upon on an annual basis to create major new exhibit areas
once the commercial loan has been repaid.
3.4 The project is on time. The Bioscience
Centre opened in July 1998 and is already 50 per cent occupied.
Reproductive Medicine is already well established. The Policy,
Ethics and Life Sciences Research Institute is now operating.
LIFE Interactive World opens on 27 May 2000. The Institute of
Human Genetics will open late 2000. LIFE Conference and Banqueting—a
suite of eight rooms offering Conference or Reception space for
meetings of 20-450 together with high standard catering—comes
on stream in Autumn 2000 together with LIFElab.
4. PROJECT BUDGET
4.1 The original application was submitted
to the Commission in October 1995. A copy of the capital budget
included in the submission is at Appendix A. At that stage the
estimated total was £50 million approximately. No detailed
design had taken place—the budget was simply put together
from space use categories, areas and building rates.
4.2 Simultaneously, to obtain matching money,
we entered the project for a competition for EU funds, entitled
"Regional Challenge", organised by the DTI. From this
we were awarded £10.5 million but the money had to be spent
(ie on the basis of receipts for work done) by December 1998,
disbursed at the rate of 35 per cent of overall eligible expenditure.
Taking into account essential but non-eligible expenditure, this
meant that overall we had to spend £38 million in the 24
calendar months to December 1998. It meant we had to proceed with
great haste at all stages yet remain within budget. Given all
the steps involved, as the following paragraph will show, this
was a challenging and near impossible target.
4.3 In the months following the submission
of the application the Millennium Commission stated that if they
were to support it they would require a building design which
was of "millennial proportions and quality". To demonstrate
this they required that the Trust secure the approval of the Royal
Fine Art Commission for the design before the project could move
to the next stage. We therefore held a design competition amongst
well known "signature architects" and selected Terry
Farrell, to design the campus and Gardiner and Theobald to undertake
the costings. The design subsequently received RFAC approval.
4.4 This compounded the pressures placed
upon us by the EU. The design was highly innovative from a construction
point of view and hence difficult to cost accurately at an early
stage. The target date for spend however required us to let the
main construction contract before the detailed design information
was complete. The contractor began work with over half the contract
price in the form of provisional sums, ie we committed to the
work with less than half of it subject to reasonable cost certainty.
4.5 The result of the revised design process
was the Cost Plan submitted at the time of the grant award (May
1996)—Appendix B[3]
which amounts to £54 million approximately.
4.6 In May 2000 the Centre is 95 per cent
delivered, on timetable, major claims settled. It is largely as
originally conceived but with several additional elements. As
a building project, it consists of 30,000 sq metres of innovative
and technical buildings. The project is however complex and the
elements have not been static which, given the subject matter
of genetics is not surprising. The estimate of final outturn expenditure
(Appendix C[4])
is £60.6 million.
4.7 Three major factors lead to the increase
in costs of £6.60 million. They are:
— The Genetics Institute. In October
1997, during the running of the ICFL building contract, the Millennium
Commission announced that they were ceasing payment of grant until
the Trust had secured a signed lease for the Genetics Institute.
This placed the Trustees in a position where they were forced
to accept any terms the University of Newcastle offered them—no
other local University could offer the project a similar Institute—or
go into receivership. The University demanded a 25 per cent increase
in floor space from the informal agreement at the time of the
grant approval; and required the Trust to meet the fit-out cost.
This meant additional costs for the Trust of £4.5 million.
In addition the University abandoned its earlier understanding
to pay annual rent of £200,000 and effectively offered nil
rent. The Trust eventually accepted these terms because it believed
the Genetics Institute was essential for the credibility of the
overall scheme.
— The Conference and Banqueting Suite.
As it became apparent that the Trust had lost certain sources
of income, the Millennium Commission encouraged the Trust to look
more carefully at the potential for strengthening the Conference
and Banqueting opportunity. Accordingly in June 1999, we added
£1 million to the budget to fit out the available expansion
space and this is now underway.
— LIFElab—The Education Resource
Centre. A "learning lab" was contained in early plans
but as the project developed, and again with the encouragement
of the Commission, we decided to substantially enhance this element.
It has been the most successful target for raising funds for the
private sector. Consequently it is now a physically separate element
of the scheme costing £2.5 million and is nearing completion.
In June 1999 we also added £1 million to the budget to complete
the fit-out.
4.8 In late November 1997, aware that some
of these changes were likely to have an inevitable effect on our
budget we alerted the Millennium Commission to a potential project
final value of £59 million and the need for further grants
to cover the cost.
4.9 The Commission originally awarded the
project a grant of £27 million. This was increased to £29
million in September 1998; and again to £31.45 million in
1999. The Trust has also secured other elements for the project
which enhance it by some £10 million and are not included
in the formal budget figures—eg £5 million from the
Government/Wellcome Trust/Joint Infrastructure Fund. Given the
total project value of £70 million, a grant of £31.45
million is still below the 50 per cent mark.
4.10 Against the original budget of £54
million and the final total budget cost of £60.60 million,
the Trust was able to raise £52.0 million ie £8.6 million
short. This was partly because we did not secure a multiplex development
on adjacent land owned by the Trust (£2 million in projected
receipt); partly because we fell 30 per cent short in our targets
in private sector sponsorship; and partly because we faced additional
and unexpected costs of the kind outlined above.
4.11 The Millennium Commission came to our
aid on two occasions. On the first they increased our grant by
£2 million. On the second they increased it by a further
£2.5 million and used their influence to secure a grant of
£2 million for us from the NE Regional Development Agency.
The Trust for its own part has taken out a commercial loan of
£2 million. The project is now fully funded, although the
Trust would prefer that it began its operational life, debt free.
5. LONG-TERM
VIABILITY
5.1 The project consists of three profit
and loss centres: Property and Conferencing and Banqueting are
intended to make a profit, and Life Interactive World—the
visitor attraction—is forecast to break even on revenue.
The net margin is around £500k or approximately 13 per cent
in a stable year.
5.2 This is needed to pay off the long-term
loan—at the rate of approx £200k pa—and replenish
Life Interactive World in order to ensure that visitor numbers
are maintained at the projected levels.
5.3 Targets have been set at a prudent level
in the light of experience in other visitor attractions in the
North of England and Scotland. We are forecasting 225,000 visitors
in the first year and 200,000 per annum thereafter. Rental levels
are set at the Newcastle market levels.
5.4 Projections have been prepared looking
10 years ahead. It is the Trust's view that the project is soundly
based because of the cross subsidy available to the visitor attraction
from the portfolio of rental property. When the lease to the University
ends after 12 years it should be possible to charge a commercial
or near commercial rent for the space which should add a further
£500k to the annual income.
5.5 The Business Plan is still broadly similar
to the original provided with the Grant Application in scale content
and bottom line. The only exception is that rental income from
the Genetics Institute has now been replaced by income of a similar
order from Conferencing and Banqueting. It still indicates a robust
future for the scheme.
5.6 The Commission recently appointed independent
leisure and business consultants, L&R Leisure to review ICFL's
business and operations planning. Their conclusion was that "the
project represents an exciting new destination, with a blend of
business, bioscience research and development, ethical, leisure
and retail interests that embrace a large new public square and
have significant potential for long term sustainability".
They added that "the necessary strategic, operational and
financial planning has now reached a sufficiently realistic and
sophisticated level to encourage much optimism".
6. THE
ROLE OF
THE MILLENNIUM
COMMISSION
Effectiveness of Project Monitoring and Administration
6.1 As grant recipients, our relationships over
the six years during which we have been in direct contact with
the Commission have been largely good, though they have gone through
periods of severe strain and difficulty. Latterly, as cost and
funding pressures have built up, there have been inevitable disagreements
between us over operational matters.
6.2 Generally speaking information has been
sought in a professional manner and with attention to the key
issues primarily. Initially monitoring focused entirely on the
bricks and mortar. In the last 12-18 months alone attention has
been directed to the operational plans for the project. For the
first four years we were left to get on with the job, aware that
the Commission had a watchful eye on developments. In the final
year there has been a much increased level of intervention.
6.3 They have undoubtedly been generous
and helpful to us on two occasions when we have run into funding
difficulties. In particular they worked hard to broker further
financial help from third parties and achieved almost £2.5
million for us by that route. They have given us confidence to
go for ambitious targets when we were inclining to act too cautiously.
We are grateful for this. Also they were flexible in modifying
targets for the Bioscience Centre and similar matters.
6.4 As previously mentioned the Commission
also commissioned an independently conducted business and operational
review of the ICFL project, carried out at four monthly intervals
over the final year. This review process lead to a series of recommendations
which were considered very helpful and were subsequently implemented
to the overall benefit of the project.
June 2000
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