Page i

OUTSOURCING MANAGEMENT
FUNCTIONS FOR THE ACQUISITION
OF FEDERAL FACILITIES





Committee on Outsourcing Design and Construction-Related
Management Services for Federal Facilities


Board on Infrastructure and the Constructed Environment

Commission on Engineering and Technical Systems

National Research Council






NATIONAL ACADEMY PRESS
WASHINGTON, D.C.



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Page i OUTSOURCING MANAGEMENT FUNCTIONS FOR THE ACQUISITION OF FEDERAL FACILITIES Committee on Outsourcing Design and Construction-Related Management Services for Federal Facilities Board on Infrastructure and the Constructed Environment Commission on Engineering and Technical Systems National Research Council NATIONAL ACADEMY PRESS WASHINGTON, D.C.

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Page ii NATIONAL ACADEMY PRESS 2101 Constitution Avenue, N.W. Washington, D.C. 20418 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competencies and with regard for appropriate balance. This study was supported by Contract/Grant No. S-FBOAD-94-C-0023 between the National Academy of Sciences and the Federal Facilities Council via the U.S. Department of State. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. Library of Congress Cataloging-in-Publication Data International Standard Book Number 0-309-07267-0 Library of Congress Catalog Card Number 00-110532 Additional copies of this report are available for sale from National Academy Press , 2101 Constitution Avenue, N.W. , Lockbox 285, Washington, D.C. 20055 ; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); also available on line at: http://www.nap.edu Printed in the United States of America Copyright 2000 by the National Academy of Sciences . All rights reserved.

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Page iii THE NATIONAL ACADEMIES National Academy of Sciences National Academy of Engineering Institute of Medicine National Research Council The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. William A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. William A. Wulf are chairman and vice chairman, respectively, of the National Research Council.

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Page iv

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Page v COMMITTEE ON OUTSOURCING DESIGN AND CONSTRUCTION-RELATED MANAGEMENT SERVICES FOR FEDERAL FACILITIES HENRY L. MICHEL, chair, Parsons Brinckerhoff, New York, New York JOSEPH A. AHEARN, CH2M Hill, Greenwood Village, Colorado A. WAYNE COLLINS, Arizona Department of Transportation, Phoenix JOHN D. DONAHUE, Harvard University, Cambridge, Massachusetts LLOYD A. DUSCHA, consulting engineer, Reston, Virginia G. BRIAN ESTES, consulting engineer, Williamsburg, Virginia MARK C. FRIEDLANDER, Schiff, Harden, and Waite, Chicago, Illinois HENRY J. HATCH, American Society of Civil Engineers, Reston, Virginia STEPHEN C. MITCHELL, Lester B. Knight and Associates, Inc., Chicago, Illinois KARLA SCHIKORE, consultant, Petaluma, California E. SARAH SLAUGHTER, MOCA, Inc., Newton, Massachusetts LUIS M. TORMENTA, The LIRO Group, New York, New York RICHARD L. TUCKER, University of Texas at Austin NORBERT W. YOUNG, JR., McGraw-Hill Companies, New York, New York Staff RICHARD G. LITTLE, director, Board on Infrastructure and the Constructed Environment LYNDA L. STANLEY, study director JOHN A. WALEWSKI, project officer LORI J. VASQUEZ, administrative associate NICOLE E. LONGSHORE, project assistant

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Page vi BOARD ON INFRASTRUCTURE AND THE CONSTRUCTED ENVIRONMENT RICHARD WRIGHT, chair, National Institute of Standards and Technology (retired), Gaithersburg, Maryland GREGORY BAECHER, University of Maryland, College Park JONATHAN BARNETT, planning consultant, Washington, D.C. MAX BOND, Davis, Brody, Bond, LLP, New York, New York JACK BUFFINGTON, University of Arkansas, Fayetteville MARY COMERIO, University of California, Berkeley CLAIRE FELBINGER, American University, Washington, D.C. PAUL GILBERT, Parsons, Brinckerhoff, Quade, and Douglas, Seattle, Washington AMY GLASMEIER, Pennsylvania State University, University Park CHRISTOPHER M. GORDON, Massachusetts Port Authority, East Boston NEIL GRIGG, Colorado State University, Fort Collins JEREMY ISENBERG, Weidlinger Associates, New York, New York MARTHA ROZELLE, The Rozelle Group, Ltd., Phoenix, Arizona DAVID SKIVEN, General Motors Corporation, Detroit, Michigan E. SARAH SLAUGHTER, MOCA, Inc., Newton, Massachusetts ERIC TEICHOLZ, Graphic Systems, Inc., Cambridge, Massachusetts RAE ZIMMERMAN, New York University, New York Staff RICHARD LITTLE, director, Board on Infrastructure and the Constructed Environment LYNDA STANLEY, executive director, Federal Facilities Council JOHN WALEWSKI, project officer LORI VASQUEZ, administrative associate NICOLE LONGSHORE, project assistant

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Page vii Acknowledgments This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the NRC's Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We wish to thank the following individuals for their review of this report: John Cable, University of Maryland Frank Camm, RAND Corporation G. Edward Gibson, University of Texas-Austin Theodore Kennedy, BE&K, Inc. Donald Kettl, University of Wisconsin-Madison David Skiven, General Motors Corporation Ralph Spillinger, Facility Management Consultant Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations nor did they see the final draft of the report before its release. The review of this report was overseen by RADM Donald G. Iselin, U.S. Navy (retired), appointed by the Commission on Engineering and Technical Systems, who was responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution.

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Page viii

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Page ix Contents EXECUTIVE SUMMARY 1 1     INTRODUCTION 11     Outsourcing and Business-Process Reengineering, 11     Outsourcing and the Restructuring of Government Services, 13     Making the Federal Government More Businesslike, 14     Reengineering of Facilities Engineering Organizations, 16     Statement of Task, 18     Organization of This Report, 19     References, 20 2     OUTSOURCING OF MANAGEMENT FUNCTIONS 21     Brief History of Federal Facilities Acquisition, 21     Roles of Federal Agencies in Facilities Acquisition, 24     General Facility Acquisition Process, 24     Contract Methods, 29     Inherently Governmental Functions, 31     The A-76 Process, 34     Outsourcing of Management Functions for Federal Facility Acquisitions, 35     Summary, 43     Findings, 44     References, 44

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Page x 3     OWNERSHIP FUNCTIONS AND CORE COMPETENCIES 46     Ownership and Management Functions, 47     Characteristics of a Smart Owner, 50     Core Competencies for Facility Acquisitions, 53     Summary, 60     Findings and Recommendations, 61     References, 62 4     DECISION FRAMEWORK 64     Legality of Outsourcing, 65     Nature of Function, 65     Wisdom of Outsourcing, 67     Need for or Advantage of Outsourcing, 67     Outsourcing Decision, 68     Responsibilities-and-Deliverables Matrix, 71     Performance Measures for Evaluating Outsourcing Decisions, 73     Interagency Cooperation, 75     Summary, 76     Findings and Recommendations, 77     References, 78 APPENDIXES     A     Biographical Sketches of Committee Members, 81     B     List of Briefings, 88     C     Documents Related to Inherently Governmental Functions, 90     D     Questionnaire, 117 BIBLIOGRAPHY 128 ACRONYMS 135

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Page xi Tables and Figures FIGURES ES-1     Decision framework for outsourcing management functions, 5 ES-2     Example of responsibilities-and-deliverables matrix, 7 2-1     General facility acquisition process, 25 2-2     Cost-influence and cash-flow curves, 27 3-1     A four-square analysis tool to determine whether functions could be outsourced, 50 3-2     The four owner functions in successful facility acquisition, 50 4-1     Decision framework for outsourcing management functions, 66 4-2     Example of a responsibilities-and-deliverables matrix, 72 4-3     Simple measures of project performance, 74 4-4     Project performance measured against agency baselines, 75 TABLES 2-1     Important Dates in Federal Facilities Acquisition, 23 3-1     Skills Required by Successful Owner Project Personnel, 55

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Page xii