Incubator decision uses sloppy economics -- Gazette.Net


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In its Feb. 19 editorial [“Incubator politics”], The Gazette indicates its support of County Executive Isiah Leggett’s position to close the county’s flagship biotechnology incubator, the William Hanna Innovation Center. The editorial cites Leggett’s argument that costs will be lower if the laudable new NCCoE (National Cybersecurity Center of Excellence) is located in the incubator.

Leggett’s economic analysis is inaccurate. Doug Duncan got it right.

The county claims that the difference in expense is $3 million as compared to $750,000. This is comparing apples to oranges.

In one case, the county pays rent to house the NCCoE and in the other case, it’s constructing a building. The economic analysis then ignores all building costs.

Reportedly, the state and county are putting in a total of about $11 million, substantially from new appropriations from both the state and county within the current budget cycle. These are for construction costs for the NCCoE.

A sound financial analysis has to include destruction costs of the existing incubator. When the county bulldozes these specialized biotech (including 24 wet labs) taxpayer-funded assets, they must be written off. This economic loss is properly added to construction costs. The incubator’s audited financial statements indicate its value on the government’s books is $6.1 million.

The incubator’s current operation is funded by the private sector, mainly biotechnology companies. The NCCoE’s $750,000 operation expenditures represent new annual spending.

The editorial denigrates Duncan for failing to identify an alternative to paying rent (presumably $2 million plus). However, the county has identified alternatives itself, which it dismissed. In a presentation to the Montgomery County Delegation on Feb. 14, Leggett’s representative, Steve Silverman, indicated that NIST had originally proposed to house the NCCoE on its large campus in Gaithersburg, which would obviate the need to use the WHIC, but the county “talked them out of it.”

Further, the county admitted that no RFP for a competitive bidding process to house the NCCoE in commercial space was ever generated, a normal good governance process.

The editorial also frames the county’s loss as moving businesses out of a Gaithersburg (actually Rockville) incubator. The WHIC increases the odds of building a successful business by promoting interactions among the entrepreneurs in a shared biotech facility. WHIC’s track record of developing successful companies and life-enhancing medical products is a testament to this community-building strategy.

Jerry Stringham and Aprile L. Pilon



The authors are CEOs of biotechnology companies located within the WHIC incubator.