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3

Ownership Functions and
Core Competencies



The reliance of federal agencies on nonfederal entities to provide management functions for facility acquisition has raised concerns about the level of control, responsibility, and accountability being transferred to outside entities. Outsourcing of management functions has also raised concerns about the long-term implications for federal agencies' capabilities to plan, guide, oversee, and evaluate facility acquisitions effectively.

Unless a federal agency's mission is to provide facilities, facility acquisition and management is not a core function (i.e., facilities are not the mission but support accomplishment of the mission). However, when acquiring facilities, a federal agency assumes an ownership responsibility as a steward of the public's investment. The expenditure of public funds and the actions undertaken to meet social objectives that may underlie a federal agency's mission require a degree of sensitivity to public issues and concerns that may not be necessary for private-sector organizations. Federal agencies are also responsible for upholding laws and policies that may not apply to the private sector.

One element of the study committee's statement of task was to identify the organizational core competencies federal agencies need for effective oversight of outsourced management functions while protecting the federal interest. This chapter begins with a brief review of the differences between ownership and management functions for facility acquisitions, including a discussion of the relationship between ownership and management functions and inherently governmental functions. The next section describes the characteristics of a smart owner of facilities. Ownership functions and core competencies for owners, users, and providers of facilities are then identified. The chapter concludes with recommendations for the development and retention of core competencies for federal facility acquisitions.



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Page 46 3 Ownership Functions and Core Competencies The reliance of federal agencies on nonfederal entities to provide management functions for facility acquisition has raised concerns about the level of control, responsibility, and accountability being transferred to outside entities. Outsourcing of management functions has also raised concerns about the long-term implications for federal agencies' capabilities to plan, guide, oversee, and evaluate facility acquisitions effectively. Unless a federal agency's mission is to provide facilities, facility acquisition and management is not a core function (i.e., facilities are not the mission but support accomplishment of the mission). However, when acquiring facilities, a federal agency assumes an ownership responsibility as a steward of the public's investment. The expenditure of public funds and the actions undertaken to meet social objectives that may underlie a federal agency's mission require a degree of sensitivity to public issues and concerns that may not be necessary for private-sector organizations. Federal agencies are also responsible for upholding laws and policies that may not apply to the private sector. One element of the study committee's statement of task was to identify the organizational core competencies federal agencies need for effective oversight of outsourced management functions while protecting the federal interest. This chapter begins with a brief review of the differences between ownership and management functions for facility acquisitions, including a discussion of the relationship between ownership and management functions and inherently governmental functions. The next section describes the characteristics of a smart owner of facilities. Ownership functions and core competencies for owners, users, and providers of facilities are then identified. The chapter concludes with recommendations for the development and retention of core competencies for federal facility acquisitions.

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Page 47 OWNERSHIP AND MANAGEMENT FUNCTIONS The nature of ownership and management functions in the facility acquisition process differ. Ownership functions are to establish objectives and to make decisions. Management functions, in contrast, include performing ministerial tasks to carry out or implement the owner's decisions and, by definition, to control the accomplishment of the task. Owner functions include determining the need for a facility, developing the project scope, balancing conflicting priorities, establishing parameters (e.g., cost and duration), and determining positions in disputes. Management functions include obtaining information from the owner, contractors, and others; analyzing the information, making recommendations, and determining options; and ensuring that communications are maintained among all parties. Owner and management functions are equally important for successful facility acquisitions. A well defined project led by an owner with a clear vision but with a poor management structure will probably fail. A poorly defined project with a good management structure will also fail but for different reasons. Federal legislation and policies related to determining which functions are inherently governmental are a critical determinant in deciding which functions can and cannot be outsourced. Section 7.5 of the FAR provides guidance to ensure that inherently governmental functions are not performed by contractors (see Appendix C for the complete text of FAR Section 7.5). In preparing this report, the committee reviewed this regulation and concluded that examples of inherently governmental functions that apply to facilities acquisition are listed in Sections 6, 7, 11, 12, and 16, which are reprinted below: (6) The determination of federal program priorities for budget requests. (7) The direction and control of federal employees. (11) The determination of what government property is to be disposed of and on what terms. (12) In Federal procurement activities with respect to prime contracts: (i) Determining what supplies or services are to be acquired by the Government (although an agency may give contractors authority to acquire supplies at prices within specified ranges and subject to other reasonable conditions deemed appropriate by the agency); (ii) Participating as a voting member on any source selection boards; (iii) Approving any contractual documents, to include documents defining requirements, incentive plans, and evaluation criteria; (iv) Awarding contracts; (v) Administering contracts (including ordering changes in contract performance or contract quantities, taking action based on evaluations of contractor performance, and accepting or rejecting contractor products or services); (vi) Terminating contracts;

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Page 48 (vii) Determining whether contract costs are reasonable, allocable, and allowable; and (viii) Participating as a voting member on performance evaluation boards. (16) The determination of budget policy, guidance and strategy. Inherently governmental functions include making a decision (or casting a vote) pertaining to policy, prime contracts, or the commitment of government funds. None of the functions listed is ministerial or informational, with the possible exception of “administering contracts.” Although the meaning of the term administer may be broad enough to include ministerial and information tasks, the examples of administration listed in Section 12(v) are limited to making decisions on issues likely to arise under the contracts. In essence, therefore, the distinction between inherently governmental functions and commercial activities is the same as the distinction between ownership and management functions. FAR Section 7.503(d) includes a list of activities that are not ordinarily considered inherently governmental but that may result in a contractor acquiring knowledge or wielding influence ordinarily considered more appropriate for an owner than a manager. Activities that relate to the acquisition of facilities include: (3) Services that involve or relate to analyses, feasibility studies, and strategy options to be used by agency personnel in developing policy. (5) Services that involve or relate to the evaluation of another contractor's performance. (6) Services in support of acquisition planning. (7) Contractors providing assistance in contract management (such as where the contractor might influence official evaluations of other contractors). (8) Contractors providing technical evaluation of contract proposals. (9) Contractors providing assistance in the development of statements of work. (11) Contractors working in any situation that permits or might permit them to gain access to confidential business information and/or any other sensitive information (other than situations covered by the National Industrial Security Program described in 4.402(b)). (14) Contractors participating as technical advisors to a source selection board or participating as voting or nonvoting members of a source evaluation board. (15) Contractors serving as arbitrators or providing alternative methods of dispute resolution. (16) Contractors constructing buildings or structures intended to be secure from electronic eavesdropping or other penetration by foreign governments.

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Page 49 (17) Contractors providing inspection services. (18) Contractors providing legal advice and interpretations of regulations and statutes to Government officials. Although the activities listed above are not inherently governmental functions, the FAR cautions agencies to consider whether a contractor's performance of them might unduly impinge on the ownership function of decision making and confidentiality. Section 12(e) explains that the agency's decision about outsourcing these activities depends on the degree to which ownership functions may be compromised: This assessment should place emphasis on the degree to which conditions and facts restrict the discretionary authority, decision-making responsibility, or accountability of Government officials using contractor services or work products. In the committee's opinion, FAR Section 7.5 can be used as a the basis for a two-step threshold test for determining whether a particular management function related to facilities acquisition should be performed by federal agency staff to protect the federal interest. The first step is to determine whether the function involves decision making on important issues (ownership) or involves ministerial or information-related services (management). If it is an ownership function, it should be performed by in-house staff and should not be outsourced. If it is a management function, the second step of the analysis is to consider whether the function might unduly compromise one or more of the agency's ownership functions, particularly those listed in Section 3(d). If it would, then the function should be considered a “quasi”-inherently governmental function and should not be outsourced. Figure 3-1 shows how functions can be grouped for decision-making purposes. Functions that fall into the category of “internal-dedicated” would be judged too critical to outsource. At the other extreme, functions identified as “external-shared” could be outsourced with relatively little concern. Functions that fall into the categories of “internal-shared” and “external-dedicated” require additional analysis to determine if outsourcing is appropriate. The Army's experience with the Logistics Civilian Augmentation Program, known as LOGCAP, is a case in point. A private contractor has provided almost all facility services, including project management, for six of the Army's recent deployments. This outsourcing of an external-dedicated function shows that even activities intimately connected with an agency's core mission can sometimes be outsourced successfully. If a function survives this threshold analysis and is deemed to be a management function that does not unduly compromise the agency's ownership functions, then the agency should determine whether or not to outsource the activity, based on a number of factors (these are addressed in Chapter 4). Agencies should be wary of compromising their ownership responsibilities and functions. The line

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Page 50 Internal resources External resources Dedicated Functions critical to the accomplishment of the core mission Functions that can be performed by others but are full time and dedicated to the accomplishment of the core mission Shared Functions that support the core mission of the agency and need to be performed with internal resources Functions that can be shared with other agencies or outside resources FIGURE 3-1 A four-square analysis tool to determine whether functions could be outsourced. between inherently governmental functions and commercial activities and between ownership and management functions can be very fine, and distinguishing between them can be difficult. Therefore, projects should be analyzed on a case-by-case basis. CHARACTERISTICS OF A SMART OWNER The term smart owner is used in the commercial design, engineering, and construction industry to designate a business entity that has the skill base—usually a staff with the professional qualifications and authority—necessary to plan, guide, and evaluate the facility acquisition process. A smart owner focuses on the relationship of a specific facility to the successful accomplishment of an organization's business or overall mission. A smart owner of facilities must be capable of performing four interdependent functions related to acquisition (Figure 3-2): establishing a clear project definition establishing progress metrics ~ enlarge ~ FIGURE 3-2 The four owner functions in successful facility acquisition.

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Page 51 monitoring overall project progress providing commitment and stability to the project definition and its achievement (i.e., leadership) Establishing Project Definition The first ownership function in the successful acquisition of a facility is the establishment of a clear project definition. Industry research has shown that preproject planning (requirements assessment, conceptual planning, and programming phases) has the greatest potential impact on project outcome. Thus, even if an organization outsources management functions for planning, design, and construction activities, competent representatives of the owner must still lead and implement preproject planning. Setting project-specific goals, objectives, and priorities requires knowledge of the organization's overall business or mission and the ability to translate facility requirements to meet business or mission objectives (FFC, 1998). Specific tasks may include: developing a strategic plan or written scope statement that defines mission needs, relates them to project requirements, and serves as the basis for future project decisions and control of changes in scope preparing an integrated project plan that addresses the overall strategy for acquiring the end product and/or services and identifies interfaces, including regulatory interface points and requirements preparing a detailed execution plan and schedule to establish the tactics, organizational relationships, roles, and responsibilities for accomplishing various aspects of the project (NRC, 1999) The smart-owner function becomes increasingly important when organizations, including federal agencies, use design-build and project management contract methods that limit owner involvement after the preproject planning phases. Establishing Progress Metrics The second smart-owner function, the establishment of progress metrics, requires that project objectives be translated into measurable criteria. The criteria should include not only absolute constraints (e.g., allocated funding, delivery schedule, performance specifications), but also the relative rate of progress that reveals the probability of completion within the constraints. For example, the metrics should include the rate of financial expenditures in different cost categories (e.g., labor, materials, and equipment) expected to be required to complete the project on schedule. Although the collection of data and the measurement of progress can be outsourced, the development of the metrics should be the

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Page 52 responsibility of the owner organization to ensure that they incorporate critical program directives and are commensurate with the organization's mission. Monitoring Project Progress A smart-owner organization uses detailed data collected and aggregated from the field to monitor progress. A key objective of monitoring is the active identification and mitigation of project (and program) risks (i.e., determining which risks are likely to affect the project and documenting the characteristics of each). Although the actual monitoring can be outsourced, the overall assessment of project performance should be conducted by the owner organization. Decisions related to risk identification and mitigation should also be the owner's responsibility. Providing Commitment, Stability, and Leadership The owner organization is responsible for the successful completion of a project and, therefore, has the authority to commit resources for that project and ensure stability throughout its duration. Project stability requires that progress related to specific metrics defined early in the life of the project be continuously monitored and maintained. Vacillations on performance objectives (e.g., allowing cost overruns to occur routinely) can be fatal to the successful acquisition of a facility. In performing these functions, the owner organization is responsible, by definition, for providing leadership, which involves the following responsibilities (PMI, 1996): establishing direction (developing both a vision of the future and strategies for changes to achieve that vision) aligning people (communicating the vision by words and deeds to all those whose cooperation may be needed to achieve the vision) motivating and inspiring (helping people energize themselves to overcome political, bureaucratic, and resource barriers to change) GAO has also recognized the importance of a committed senior leadership team in fulfilling an agency's mission and in establishing a vision for the future, core values, goals, and strategies. According to GAO, essential functions of senior leadership are “aligning organizational components so that the agency can best pursue this vision and building a commitment to the vision at all levels of the organization” (GAO, 1999a). Although activities related to the management of specific projects can be outsourced, the owner organization is ultimately accountable for the performance, cost, quality, and functionality of the acquired facility. Therefore, the owner

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Page 53 organization should provide leadership and retain in house the functions that are the most significant determinants of success. To do this, the owner organization must retain in-house staff with the management, financial, communication, and technical skills necessary for effective oversight of the acquisition process, from scope definition to start-up of the facility. CORE COMPETENCIES FOR FACILITY ACQUISITIONS In reviewing the characteristics of the best facility acquisition systems, The Business Roundtable found that owner organizations with better-than-average project acquisition systems all maintained some form of central facilities engineering organization, which was responsible for “providing excellence in project definition, maintaining disciplinary excellence in project management…[and] integrating contractors effectively into their project process.” Those same skills helped the organizations “select the right capital assets to make, acquire, or refurbish” (BRT, 1997). A recent NRC report found that the “best public agencies and private firms engaged in capital project development maintain central organizations with core competencies in project management, project planning, coordination, and human resources development.” Such organizations provide “structure, continuity, and leadership that foster cooperation both internally and externally” (NRC, 1999). And the Center for Construction Industry Studies has found that “using project teams and retaining in-house expertise in key functional areas of engineering improves the owner's ability to control project outcomes, evaluate contractor performance, and make informed decisions about contractor selection. Retaining this expertise in-house means that the owner is not dependent on just one person for the success of a project” (CCIS, 1999). Core competencies constitute an organization's essential area of expertise and skill base. In Competing for the Future (Hamel and Prahalad, 1994), a competence is defined as a: bundle of skills and technologies rather than a single discrete skill or technology....A core competence represents the sum of learning across individual skill sets and individual organizational units. Thus, a core competence is very unlikely to reside in its entirety in a single individual or small team. Unless a federal agency's mission is to provide facilities, facility acquisition and management are not core functions because facilities are not the agency's mission but support the accomplishment of the mission. However, as a steward of the public's investment in facilities, federal agencies have a responsibility to be smart owners. A federal agency's responsibility to be accountable for upholding public policy and its authority to commit public resources are indivisible. This combination of responsibilities requires that any federal agency acquiring facilities have the in-house capabilities to perform the owner's functions at the top administrative levels. The agency must have the capacity to translate its mission needs directly

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Page 54 into program definitions and project specifics and otherwise act in a publicly responsive and accountable manner. However, other organizational core competencies needed to direct and manage specific projects effectively vary, depending on whether the agency is acting as an owner, user, or provider of facilities. Core Competencies for Owners To function effectively as an owner when acquiring facilities, a federal agency should have the organizational core competencies to perform the following functions: evaluate and implement government-wide and agency-specific policies and standards and suggest ways to improve them develop, analyze, select, implement, and adjust the means or alternatives to achieve program or project objectives monitor, control, and adjust program or project implementation based on specific progress metrics (e.g., cost, schedule, complete-to-date, cost-to-complete) To manage planning, design, and construction services effectively or to oversee the management of those services by an outsourced entity, the agency should also have the capabilities to perform the following functions: detailed technical analyses of alternatives, including design, procurement, construction, and final performance requirements financial analyses of the relative costs, benefits, and cash flows of the alternatives from conceptualization through design, procurement, and construction to start-up project management analyses for the identification, collection, analysis, and summary of accurate and valid project data construction-management activities to implement and adjust policies, standards, and resource allocations to project conditions In short, federal agencies should retain the core competencies to establish project definitions, establish project metrics, monitor project progress, and ensure commitment, stability, and leadership. Owner agencies should have the leadership capability to develop and drive the process to increase the probability of success. Therefore, they should maintain in-house staffs capable of performing financial and technical analyses, as well as providing project and general management. In business terms, “critical owner skills include technical knowledge of the process, alignment with the business units' goals and objectives, facility definition, stewardship of the overall project process and objectives and project controls” (Sloan Program for the Construction Industry, 1998).

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Page 55 TABLE 3-1 Skills Required by Successful Owner Project Personnel Category of Skills Examples of Skills Business Writing and managing contracts Negotiation Managing budgets and schedules Communication Coordination/liaison Conflict management Cultivate broad network of relationships Influence Mentoring Motivating Change management Managerial Team building Delegating Politically aware/see big picture Problem Solving Continually analyze options/innovation Planning Consider both sides of issues, risk management Technical Understand entire construction process Multidisciplined (knowledge of several areas of engineering) Information technology skills Source: CCIS, 1999. The Center for Construction Industry Studies has identified a variety of specific skills related to the core competencies necessary for smart owners when outside entities are used extensively. These skills have been grouped into six categories (see Table 3-1). When some functions are outsourced, project-management skills become vitally important for owner organizations. Project management has been defined as “the application of knowledge, skills, tools, and techniques to project activities in order to meet or exceed stakeholder needs and expectations from a project…[it] invariably involves balancing competing demands among scope, time, cost and quality; stakeholders with differing needs and expectations; identified requirements (needs) and unidentified requirements (expectations)” (PMI, 1996). One essential condition for successful facility acquisition identified in a recent NRC report (1999) was: Project managers (in owners' as well as contractors' organizations) are experienced professionals dedicated to the success of the project. Each demonstrates leadership, is a project team builder as well as a project builder, possesses the requisite technical, managerial, and communications skills, and is brought into the project early. Core Competencies for Facility Users If an agency's role is that of facility user, rather than owner, the agency is responsible for acting as a “smart buyer” of services, including design, construction,

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Page 56 and management services. To be a smart buyer, an agency should retain in-house personnel who understand the agency's mission and requirements, as well as customer needs, and who can translate those needs and requirements into the agency's strategic direction (FFC, 1998). For a project to be successful, the project sponsors must “know what they need and can afford, where they want to locate the project and when it must be ready for use or otherwise completed.” Facility users should be committed to project scope, requirements, budget, and schedule and should have the capacity to weigh options and make timely, informed decisions to avoid project delays (NRC, 1999). Core Competencies for Providers of Facilities Agencies or entities whose mission includes providing facilities have a greater need to retain technical, general, and project management core competencies to ensure that they provide quality facilities that meet owner and user agencies' needs. General management “encompasses planning, organizing, staffing, executing and controlling operations of an on-going enterprise” (PMI, 1996). General management skills include leading (as defined above), communicating (verbally and in writing), negotiating, problem solving, influencing the organization, and the ability to get things done (PMI, 1996). NAVFAC provides facility engineering services to all of the Navy and Marine Corps, to other U.S. Department of Defense services and agencies, as directed, and to federal agencies and others on a case-by-case basis. NAVFAC has four engineering field divisions, each of which provides a full range of construction services, including project management, contracting functions, and construction management. For most construction projects, NAVFAC also manages the design phase; about 10 to 15 percent of the designs are accomplished with NAVFAC staff (FFC, 2000). In response to the committee's questionnaire, NAVFAC identified its core competencies as master planning, project planning, cost estimating, engineering, design, construction, acquisition, and project management. NAVFAC also considers an understanding of the Navy's mission, standards, and procedures a core competency. USACE defines its core competencies as “a set of interwoven skills tied to information systems and organizational values, a complex set of skills, capabilities and expertise that reside in employees working within and across skill sets” (FFC, 1998). Identified core competencies include the following capabilities: respond quickly through its worldwide organization quickly and effectively staff up to any size project with in-house and external resources provide a structured, rational approach to problem solving and a process for “best fit” solutions

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Page 57 facilitate or broker cooperative arrangements for public and private constituents offer full life-cycle project services implement public policy within the Army ethic USACE also identified specialized engineering services and project management as specific core competencies (FFC, 1998). The other major provider of federal facilities, GSA, defines its mission as “providing] expertly managed space, products, services and solutions at the best value and policy leadership to enable federal employees to accomplish their missions” (FFC, 1998). To fulfill its mission, GSA has reorganized itself as a portfolio-management organization with four primary goals: to promote responsible asset management; to compete effectively for the federal market; to excel at customer service; and to anticipate future workplace needs. To meet these goals, GSA project managers must have the management and technical skills to (FFC, 1998): align resources to the workload use technology effectively organize staffs and lead them towards a common goal of delivering a project on time and within budget manage plans, schedules, budgets, expenditures and change orders Development and Retention of Core Competencies Federal agencies should retain the organizational core competencies necessary to act as smart owners or smart buyers when acquiring facilities. Provider agencies require additional technical competencies in engineering, architecture, general management, and project management to perform effectively. Because agencies' roles in acquisition vary, the types of federal facilities acquired also vary widely. In addition, a wide range of new and evolving contract methods for project delivery have inherently different levels of risk and management requirements. For these reasons, no single approach or set of core competencies for the acquisition of federal facilities can be applied to all agencies or situations. Senior leaders and staff of each agency should identify the organizational core competencies necessary for effective facility acquisitions to support their current and future missions. Federal agencies face a number of challenges in developing and retaining core competencies for facility acquisitions. As part of its performance and accountability series, GAO issued a series of reports on the major management challenges and program risks facing federal agencies. Among its findings were: (1) the federal government's performance has been limited by a failure to manage projects on the basis of a clear understanding of the results that agencies are to

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Page 58 achieve and how performance will be gauged; (2) major challenges must be overcome, both at the agency level and for the U.S. government as a whole, in preparing reliable financial statements; and (3) human-capital planning must be an integral part of an organization's strategic and program planning (GAO, 1999b). The report goes on to note that, because of the rapid pace of social and technological change, shifts in agency missions and strategies to achieve their missions, combined with downsizing, agencies are “continually faced with the challenge of attracting, retaining, and motivating appropriately skilled staff.” As a consequence, “skills gaps in critical mission areas undermine agencies' effectiveness and efforts” (GAO, 1999b). DOE, for example, has reported that the “lack of skilled staff in program and contracting oversight positions is one of the most fundamental challenges for the department” (GAO, 1999b). The ability of the U.S. Department of Housing and Urban Development to perform essential functions, such as monitoring multibillion-dollar programs, has been limited by “not having enough staff with the necessary skills.” Of the 32,000 financial management personnel employed by the U.S. Department of Defense, less than half were given any financial or accounting-related training in 1995 or 1996, a time when the department was attempting to implement significant accounting reforms (GAO, 1999b). Problems in attracting, training, and retaining qualified staff for facility acquisition are not confined to the federal sector. A report by the Center for Construction Industry Studies based on 274 projects from 31 public and private-sector organizations showed that approximately 62 percent of planning, design, and procurement functions were outsourced. Based on detailed case studies of three of these organizations and interviews with members of 22 other organizations, the study found that it is “fairly well recognized in owner firms that the skill set required to manage and work on projects from the owner's side has changed dramatically…[and] the issue of skill development of owner personnel is perhaps the most important difficulty facing owner firms” (CCIS, 1999). The surveyed firms had “invested relatively little systematic effort into methods for ensuring that their personnel have the required skill sets” or formal training. Instead, they relied on on-the-job training for new employees and on the “few experienced personnel they have retained in-house” (CCIS, 1999). The report noted that, as the “current cadre of long-tenured individuals retires and need to be replaced, the effects of lack of training will become more critical” (CCIS, 1999). At most federal agencies, the major portion of operating costs is devoted to personnel costs and salaries. For this reason, employees have “often been seen as costs to be cut rather than assets to be appreciated” (GAO, 1999b). However, business management research has shown the need for continual “organizational learning” to improve the effectiveness and efficiency of organizational functions. “High performance organizations in both the public and private sectors recognize that an organization's people largely determine its capacity to perform” (GAO, 1999b):

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Page 59 …a high-performance organization demands a dynamic, results-oriented workforce with the talents, multidisciplinary knowledge, and up-to-date skills to enhance the agency's value to its clients and ensure it's equipped to achieve its mission. Because mission requirements, client demands, technologies, and other environmental influences change rapidly, a performance-based agency must continually monitor its talent needs…In addition, this talent must be continuously developed through education, training, and opportunities for continued growth. Federal agency staffs need a broad range of management, technical, communication, and leadership skills to act as effective stewards when acquiring facilities for the government. Agency leaders should evaluate current organizational skills, identify organizational skills likely to be lost through attrition, retirement, or continued reductions, forecast needs based on projected workloads, technologies, and contract types. A number of approaches can then be used to acquire, develop, and retain the necessary organizational core competencies and skills. Each agency will have to determine which approach or combination of approaches will be the most effective for its specific circumstances. One approach is to hire personnel from the public or private sector who have the training and experience necessary to perform these functions. A second approach is to provide the training and professional development for in-house staff to acquire necessary skills. Project management is increasingly being recognized as a professional discipline. The Project Management Institute, the Association for Project Management, the Australian Institute of Project Management, the Construction Management Association of America, and the International Project Management Association, among others, have developed certification programs for project managers. A recent NRC report found that to satisfy the basic core competencies required for a federal agency to be a smart owner, and for agencies that elect to retain their management activities, the staff involved with implementing capital programs should be trained and certified in project management. This professional training should be updated throughout their federal employment (NRC, 1999). Agencies can also design and conduct training programs based on industry best practices but tailored to the federal environment. NASA, for example, has developed a training program based on best practices identified by the Construction Industry Institute. Although NASA staff receive first priority for training, staff from other agencies also attend NASA's training course. Agencies should investigate the training and education available by other agencies and by outside organizations before developing their own training programs. For owner agencies or entities involved in providing facilities, one way to maintain and enhance technical proficiency is by retaining a portion of the planning, design, or construction management in house as part of a professional development program. Junior staffers need “hands-on” experience to develop and enhance their managerial and executive skills. Simply having in-house resources

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Page 60 dedicated to a function, however, does not guarantee that technical proficiency will be maintained or enhanced. Professional development programs should be appropriate to the staff level of experience. Mentoring programs can be an effective approach to on-the-job training, as well as to capturing institutional knowledge. GSA, for instance, has plans to create a learning center where less experienced project managers will have access to information and training. A mentoring program is also planned to encourage people who might be considering retirement to stay on and become mentors to less experienced personnel (FFC, 1998). Staff training should also focus on acquisition of competencies tailored to reflect an agency's context and requirements. This training should be comparable to the training available to employees of commercial architecture-engineering and construction-management firms. By maintaining professional skills at a level comparable to the skills typical of commercial design and construction firms, training and certification programs can provide a significant incentive for qualified personnel to enter and remain in government service. Professional development should also be nurtured through tangible and intangible rewards for effective program and project management, including emphasis on leadership and the opportunity to exercise it, management of a portfolio of projects, and the opportunity to advance an agency's strategic objectives through the implementation of specific projects. SUMMARY Ownership and management functions in the facility acquisition process differ. An owner's role is to establish objectives and make decisions. Management functions include the ministerial tasks necessary to carry out or implement the owner's decisions. In reviewing Section 7.5 of the FAR, the committee concluded that inherently governmental functions as they relate to facility acquisition involve making a decision (or casting a vote) pertaining to policy, prime contracts, or the commitment of funds and do not include ministerial functions. In essence, therefore, the distinction between inherently governmental functions and commercial activities is the same as the distinction between ownership functions and management functions. Using Section 7.5 of the FAR as a basis, the committee developed a two-step threshold test for determining whether a particular management function related to facility acquisitions should be performed by federal agency staff to protect the federal interest. The first step is to determine whether the function involves decision making on important issues (ownership) or ministerial or information-related services (management). If it is an ownership function, it should be performed by in-house staff and should not be outsourced. If it is a management function, the second step of the analysis is to consider whether the function might unduly compromise one or more of the agency's

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Page 61 ownership functions. If it would, then the function should be considered a “quasi”-inherently governmental function and should not be outsourced. If a management function survives this threshold analysis, then the agency should determine whether or not to outsource the function based on a number of factors outlined in Chapter 4. Core competencies constitute an organization's essential area of expertise and skill base. Unless a federal agency's mission is to provide facilities, facility acquisition and management are not core functions (i.e., providing facilities supports accomplishment of the mission but is not the primary goal). However, when acquiring facilities, federal agencies assume an ownership responsibility as a steward of the public's investment. The requirements that a federal agency be accountable for upholding public policy and have the authority to commit public resources are indivisible. This combination of responsibilities requires that any federal agency acquiring facilities have the in-house capabilities to translate its mission needs directly into program definitions and project specifics and otherwise act in a publicly responsive and accountable manner. Other organizational core competencies needed to direct and manage specific projects vary, depending on the agency's role as owner, user, or provider of facilities. A smart owner of facilities must be capable of performing four interdependent functions related to acquisition: define project scope, goals, and objectives clearly; establish performance criteria to evaluate success; monitor project progress; and provide commitment and stability, (i.e., leadership) for achieving the goals and objectives. FINDINGS AND RECOMMENDATIONS Finding. Each federal agency involved in acquiring facilities is accountable to the U.S. government and its citizens. Each agency is responsible for managing its facilities projects and programs effectively. Responsibility for stewardship cannot be outsourced. Finding. Key factors in determining successful outcomes of outsourcing decisions include clear definitions of the scope and objectives of the services required at the beginning of the acquisition process and equally clear definitions of the roles and responsibilities of the agency. Owners and users need to provide leadership; define scope, goals, and objectives; establish performance criteria for evaluating success; allocate resources; and provide commitment and stability for achieving the goals and objectives. Finding. Program scope, definition, and budget decisions are inherently the responsibilities of owners/users and should not be outsourced. However, assistance in discharging these responsibilities may have to be obtained by contracting for services from other federal agencies or the private sector.

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Page 62 Finding. The successful outsourcing of management functions by federal agencies requires competent in-house staff with a broad range of technical, financial, procurement, and management skills and a clear understanding of the agency's mission and strategic objectives. Finding. Because federal facilities vary widely, and because a wide range of new and evolving project delivery systems have inherently different levels of risk and management requirements, no single approach or set of organizational core competencies for the acquisition of federal facilities applies to all agencies or situations. Finding. The organizational core competencies necessary to oversee the outsourcing of management functions for projects and/or programs need to be actively nurtured over the long term by providing opportunities for staff to obtain direct experience and training in the area of competence. The necessary skills will, in part, be determined by the role(s) the agency fills as owner, user, and/or provider of facilities. Recommendation. Federal agencies should first determine their role(s) as owners, users, and/or providers of facilities and then determine the core competencies required to effectively fulfill these role(s) in overseeing the outsourcing of management functions for planning, design, and construction services. Recommendation. Owner/user agencies should retain a sufficient level of technical and managerial competency in house to act as informed owners and/or users when management functions for planning, design, and construction are outsourced. Recommendation. Provider agencies should retain a sufficient level of planning, design, and construction management activity in house to ensure that they can act as competent providers of planning, design, and construction management services. Recommendation. Agencies should provide training for leaders and staff responsible for technical, procurement, financial, business, and managerial functions so that they can oversee the outsourcing of management functions for planning, design, and construction services effectively. REFERENCES BRT (The Business Roundtable). 1997. The Business Stake in Effective Project Systems. Washington, D.C.: The Business Roundtable, Construction Cost Effectiveness Task Force.

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Page 63 CCIS (Center for Construction Industry Studies). 1999. Owner/Contractor Organizational Changes. Phase II Report. Austin, Texas: University of Texas Press. FFC (Federal Facilities Council). 1998. Government/Industry Forum on Capital Facilities and Core Competencies. Technical Report #136. Washington, D.C.: National Academy Press. FFC. 2000. Adding Value to the Facility Acquisition Process: Best Practices for Reviewing Facility Designs. Washington, D.C.: National Academy Press. GAO (General Accounting Office). 1999a. Human Capital: A Self-Assessment Checklist for Agency Leaders. GGD-99-179. Washington, D.C.: Government Printing Office. GAO. 1999b. Major Management Challenges and Program Risks: A Government-wide Perspective. Letter Report. OCG-99-1. Washington, D.C.: Government Printing Office. Hamel, G., and C.K. Prahalad. 1994. Competing for the Future. Boston, Mass.: Harvard Business School Press. NRC (National Research Council). 1999. Improving Project Management in the Department of Energy. Board on Infrastructure and the Constructed Environment, National Research Council. Washington, D.C.: National Academy Press. PMI (Project Management Institute). 1996. A Guide to the Project Management Body of Knowledge. Sylva, N.C.: PMI Communications. Sloan Program for the Construction Industry. 1998. Owner/Contractor Organizational Changes. Phase I Report. Austin, Texas: University of Texas Press.