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Key Performance Indicators for Federal Facilities Portfolios Executive Summary BACKGROUND Much has been written about the establishment and use of performance measurement systems. Ultimately, an effective performance measurement system should support informed decision making about the allocation of resources within and by an organization. Key components of an effective system include Clearly defined, actionable, and measurable goals that cascade from organizational mission to management and program levels to individual performance; Cascading key performance indicators that can be used to measure how well mission, management, program, and individual goals are being met; Established baselines from which progress toward attainment of goals can be measured; Accurate, repeatable, and verifiable data; and Feedback systems to support continuous improvement of an organization’s processes, practices, and results (outcomes). Over the last 10-15 years, facilities management in both the private and public sectors has been evolving from a discipline historically focused on individual buildings to one focused on the total performance of an inventory of buildings (or portfolio) in support of an organization’s overall mission. This evolving discipline is often referred to as facilities asset management. In September 2002 the Federal Facilities Council of the National Research Council authorized a study to identify key performance indicators that could be used by senior-level federal managers to determine a full range of financial and nonfinancial results (outcomes) of investments in portfolios of facilities and to improve facilities asset management. To make informed decisions about facilities investments and management of large inventories of facilities, senior federal executives require information that will allow them to answer such questions as What facilities do we have? What condition are they in? What facilities are needed to support the organization’s missions?
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Key Performance Indicators for Federal Facilities Portfolios What problems and issues need to be addressed? How much are we investing? How much do we need to invest? What are the results or outcomes of those investments? What are the outcomes of decisions not to invest? Subsequent to the start of the study, the U.S. General Accounting Office (recently renamed the Government Accountability Office) designated the management of federal real property as a government-wide high risk area. And on February 4, 2004, President Bush signed Executive Order 13327, Federal Real Property Asset Management, which is intended “to promote the efficient and economical use of America’s real property assets and to assure management accountability for implementing Federal real property management reforms.” The Executive Order specifically calls for the establishment of appropriate performance measures to determine the effectiveness of Federal real property management. Such performance measures shall include, but are not limited to, evaluating the costs and benefits involved with acquiring, repairing, maintaining, operating, managing, and disposing of Federal real properties at particular agencies…. The performance measures shall be designed to enable the heads of executive branch agencies to track progress in the achievement of Government-wide property management objectives, as well as allow for comparing the performance of executive branch agencies against industry and other public sector agencies. Concurrent with the issuance of the Executive Order, a new program initiative for federal real property asset management was added to the President’s Management Agenda. STUDY APPROACH The Federal Facilities Council established the Ad Hoc Committee on Performance Indicators for Federal Real Property Asset Management to provide direction and oversight for the study and to collaborate with other federal personnel and staff. Beginning in May 2003, the Ad Hoc Committee refined the study scope of work and gathered data on facilities portfolio-level performance indicators in use or under development. The consulting team of John H. Cable and Jocelyn S. Davis of Nelson Hart LLC, a team experienced in the development of performance indicators, was hired to work with the Ad Hoc Committee and author this report. Ten meetings and work sessions were held over the course of the study. The senior representatives of the Federal Facilities Council as well as the members of the Ad Hoc Committee reviewed the final draft of the report. FINDINGS Finding 1: To improve decision-making about facilities investments and to improve management of federal facilities portfolios, it is important that agencies track (1) performance measures that characterize their facilities portfolios; (2) the level of alignment of their portfolios with their organizational missions; (3) investment levels; and (4) the results or outcomes of their investments. Federal departments and agencies are at different levels of sophistication and development with respect to performance measurement systems for facilities asset management. The variation in facilities asset management systems is not surprising given the wide variation in the roles, missions, and facilities portfolios of federal agencies. Most agencies maintain a centralized database with information about the number, type, location, age, size (typically in square feet or other appropriate units of measure), and value of their existing facilities, measures that characterize their facilities portfolios. However, the accuracy, integrity, and completeness of the information within existing databases vary. If departments and agencies are to develop effective performance measurement systems, accurate and complete data for these types of facilities portfolio characteristics are required. Efforts are already underway within the federal government to address this issue. Finding 2: A first step in developing high-level, portfolio-oriented performance indicators is to establish organizational goals in support of mission requirements and to establish a time period for attainment.
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Key Performance Indicators for Federal Facilities Portfolios Goals for facilities asset management should be tied to the attainment of organizational goals. Organizational goals should cascade to strategic goals, to functional unit goals, to team goals, and to individual performance goals. Several of the agencies participating in this study, including the Department of Energy’s National Nuclear Security Administration, the Department of Defense, and the Department of Veterans Affairs, have established goals for portfolio facilities management and a time frame for attaining them. Those agencies have also developed performance indicators to measure progress in meeting their goals. Finding 3: Investments made in portfolios of facilities are not often immediately visible or measurable but are manifest over a period of years. To understand the results or outcomes of facilities investments, a set of performance indicators should be tracked over a period of years and be compared to a baseline to determine whether the situation is improving or deteriorating. Because of the long-term nature of facilities and facilities investments, snapshot reporting (where performance is now) is insufficient to understand whether facilities investments and management changes are resulting in desired outcomes. Trend reporting, reflecting historical performance in relation to organizational goals, is essential. Finding 4: The operating environment within which a performance measurement system is used affects the types of indicators developed and their utility. Operating measures that are routine in the corporate facilities environment may not reflect the differing missions of public- and private-sector organizations and may require data not currently captured in federal accounting and management systems. Private-sector organizations, in general, have an overall organizational goal of producing a profit. They have flexibility to design their financial systems to gather the types of data needed to track and evaluate facilities investments, operations, and management. In the federal government the overall goal is to deliver goods and services to the public; making a profit is typically not an objective. All federal departments and agencies are subject to the same budget procedures, and their accounting systems are typically designed to track appropriations and expenditures for broad programmatic categories, not for specific assets like facilities. Other factors also come into play. For example, the lack of metering on many federal buildings inhibits tracking of utility costs, a component of operating costs. Thus, for a variety of reasons, care should be taken in developing key performance indicators for federal facilities by reference to the private sector. Finding 5: The General Services Administration, whose mission, funding sources, and facilities portfolio are unique among government agencies, has developed performance indicators that are similar to those used by private-sector organizations. The GSA functions, in part, as a landlord to other federal agencies. Its portfolio of facilities primarily includes office buildings and courthouses located on individual sites in hundreds of municipalities, which distinguishes it from other agencies. These factors need to be taken into account if measures used by the GSA are considered for use in other agencies. GSA’s measures include Cost per Square Foot (owned); Cost per Square Foot (leased), Employees Housed; Cost Per Person; Customer Satisfaction; Vacancy Rate; Non Revenue Producing Space; Net Income; and Funds from Operations. In the GSA, trends in space demand by tenant agencies, are measured historically in square feet, and anticipated requirements are estimated in the same manner. Finding 6. A variety of facilities portfolio-level performance indicators are being used by individual agencies to measure various aspects of facilities asset management. These performance indicators include a Facilities Condition Index; Asset Utilization Index (an indicator used to measure the portfolio against mission requirements); Current Replacement Value (an indicator of the total amount of money invested in the portfolio); Plant Replacement Value (the cost to replace facilities assets using
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Key Performance Indicators for Federal Facilities Portfolios today’s construction costs and building standards); and Sustainment Rate (a measure of the adequacy of funding for maintenance and repair); among others. Finding 7: The performance indicator used by the greatest numbers of agencies is the Facility Condition Index (FCI), also called Asset Condition Index. Various approaches are used to calculate the FCI and to report condition-related information. The FCI is a method for measuring the current condition of facilities to assess how much work, if any, is recommended to maintain or change the condition to acceptable levels to support missions. The calculation of FCI varies by agency. What constitutes an acceptable level of condition also varies by agency, by mission, by the importance of specific facilities (e.g., mission critical, mission supportive, mission neutral) and/or by types of facilities. Agencies also use a range of techniques to convey FCI-related information to executive management. Finding 8: A base set of key performance indicators for measuring the outcomes of facilities investment and management within Federal agencies could include total number and size of facilities; general types; median age; geographic dispersal; Current Replacement Value; Plant Replacement Value; FCI or Installations Readiness Report; Deferred Maintenance; Asset Utilization Index; Sustainment Rate or NRC Guideline; Facilities Revitalization Rate; and Recapitalization Rate. Used in combination and tracked against baselines over time, these indicators would help to measure: Improvement or deterioration in the overall condition of an organization’s facilities portfolio; Increases or decreases in the size of its portfolio; Increases or decreases in the median age of the portfolio and the implications for the continuity or disruption of government operations; Adequacy of funding for facilities maintenance and repair, renewal, and replacement and the implications for overall long-term operating costs; Adequacy of funding for facilities maintenance and repair and the implications for the useful life of facilities; Level of alignment between an organization’s missions and its facilities portfolio as evidenced by surplus, excess, or insufficient space; and The implications of surplus, excess, or insufficient space for future funding requirements. Finding 9: Additional performance indicators for portfolio-level management are needed to measure desired outcomes for cost effectiveness, customer satisfaction, and process efficiencies. Several promising measures are under development in Federal agencies. Additional indicators could be adapted from other performance measurement systems to round out a comprehensive set of qualitative and quantitative performance indicators for federal facilities portfolio management, over time and as resources allow. Efforts are underway within Federal agencies to develop a Mission Dependency Index, a Facilities Suitability Index, and a Building Condition Index. The Association of Higher Education Facilities Officers-APPA, the Project Management Institute, and other organizations have developed indices for Facilities Operating Current Replacement Value; Facilities Operating Gross Square Feet; Energy Usage; Energy Reinvestment; and Work Environment; among others. When choosing additional indicators for measuring Federal facilities portfolio investment outcomes, careful consideration and study should be given to the purpose to be served, how the data to support indicators will be gathered, the resources required (time, staff, funding) to gather data, whether existing accounting and management systems will require modification, and the costs and benefits of such modifications.
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