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Key Performance Indicators for Federal Facilities Portfolios 2 Facilities Asset Management and Performance Goals In part because of the President’s Management Agenda, which is intended to move the federal government toward integrating business management principles, the area of federal facilities management is in flux. Decades of tradition are being challenged as Federal departments and agencies look for ways to tie all asset allocations directly to mission requirements. 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 a portfolio of buildings in support of an organization’s overall mission. This evolving discipline is often referred to as facilities asset management, which helps to ensure that an organization’s portfolio is aligned with its mission and public demand for services. Required elements include accurate data about the facilities portfolio; models for predicting the future requirements for and condition of these facilities and the performance attainable from them; engineering and economic decision support tools for trade-off analyses among competing investment alternatives; performance measures to evaluate the impacts of different types of actions (e.g., maintenance versus rehabilitation) and the timing of investments on the overall goals for facilities provision; and short- and long-term feedback procedures (NRC, 2004, p. 43). Facilities asset management supports the day-to-day and long-term operations of an organization in meeting its mission. Poor facilities management results in inadequate facilities to support functional requirements; excess facilities that divert available funds from direct mission support; cost-inefficient facilities that waste available resources; aging facilities that become increasingly costly to maintain and less supportive of mission; and unavailable or inadequate facilities to meet anticipated needs. Effective facilities asset management, on the other hand, consistently supports an organization’s missions; anticipates the organization’s facilities requirements;
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Key Performance Indicators for Federal Facilities Portfolios TABLE 2.1 Example of Cascading Goals Goals Example Statement Organizational Operate cost effectively. Strategic Operating costs shall be within 5 percent of comparable industry, nongovernmental, or governmental peer group results not later than the end of fiscal year 2006. Overall Facilities Portfolio Cost of facilities shall be within 5 percent of comparable industry, nongovernmental, or governmental peer group results not later than the end of fiscal year 2006. Facilities—Acquisition Cost of facilities acquired through lease, purchase, or construction shall be within 5 percent of comparable industry, nongovernmental, or governmental peer group results not later than the end of fiscal year 2006. Facilities—Utilities Cost of utilities for base housing shall be within 5 percent per square foot of comparable industry, nongovernmental, or governmental peer group results not later than the end of fiscal year 2006. continuously assesses and adjusts the portfolio holdings to match facilities requirements in the near term and in the future; operates facilities cost effectively; predicts with reasonable accuracy the future consequences of current management decisions; and reports this highly specialized function in a concise and easily understandable manner to all nonfacilities managers involved in decision making. PERFORMANCE GOALS A first step in developing high-level, portfolio-oriented performance indicators is to assess which organizational goals are to be attained and to establish a time frame for attainment. In other words, 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 finally to individual performance goals.1 As goals cascade through the organization they become increasingly more specific, but are entirely consistent in their support of the organizational goals. For facilities asset management in a federal organization the cascade of performance goals might work like the example shown in Table 2.1. Careful and consistent definition of organizational goals is a requirement for an effective performance measurement system. To be effective goals must be actionable and must have a specific time frame for attainment. Examples of goal statements are illustrated in Table 2.2. In the review of Federal agency materials related to performance measurement systems, the consultants identified several examples of actionable goal setting for facilities asset management programs. The Department of Energy’s (DOE) National Nuclear Security Administration (NNSA), for instance, has set performance goals for its facilities management program as follows: By the end of fiscal year 2005 NNSA will stabilize its deferred maintenance. By the end of fiscal year 2009 NNSA will: aggressively reduce deferred maintenance to within industry standards; return facility conditions for mission essential facilities and infrastructure to an assessment level of good to excellent (deferred maintenance/replacement plant value less than 5 percent); and 1 This concept is integral to The Balanced Scorecard (Kaplan & Norton, 1996), which is a structured performance measurement process that recommends establishing both financial and nonfinancial performance measures for organizations overall and for specific departments or functional groups within the organization. The Balanced Scorecard includes performance measures in four perspectives: financial, customer, internal business process, and learning and growth.
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Key Performance Indicators for Federal Facilities Portfolios TABLE 2.2 Examples of Goal Statements Goal Statement Comment Deferred maintenance for X agency shall be reduced. This goal statement lacks an action orientation and a specific time frame for attainment. Deferred maintenance for X agency shall be not more than 5 percent of current replacement value not later than the end of fiscal year 2006. This goal statement is both actionable and specific as to time frame for attainment. Deferred maintenance for X agency shall be not more than 3 percent of current replacement value for aircraft maintenance facilities and not more than 7 percent of current replacement value for base housing facilities by the end of fiscal year 2006. This goal statement is actionable, specific as to time frame for attainment, and sets performance goals for the same indicator based on the priority of specifically defined facilities. have institutionalized responsible and accountable facility management processes, including budgetary ones, so that the condition of NNSA facilities and infrastructure is maintained equal to or better than industry standards. Similarly, the Department of Defense (DoD) has established a goal of achieving full sustainment and full recapitalization levels by fiscal year 2008 and having all facilities at C-2 readiness level, on average, by the end of fiscal year 2010. The Department of Veterans Affairs (VA) has identified departmental portfolio goals and measures as part of its Capital Asset Management System (see Table 2.3). Not all departments and agencies reported setting actionable goals for facilities asset management. Some departments and agencies are hampered by a lack of organizational goals in establishing the derivative facilities asset management goals. This can be remedied on two fronts: (1) establishing organizational goals at the department or agency level and (2) establishing preliminary or working facilities asset management goals by reference to industry or other standards. Once actionable goals are established, they should be periodically revised to respond to changing priorities and conditions as well as actual changes in the strategy of the organization. Ideally, such a review will occur in conjunction with a periodic review and revision of the organization’s strategic plan. The authors believe that performance goals for facilities asset management should be periodically reviewed and revised as appropriate to reflect changing circumstances and organizational priorities. DEVELOPING PERFORMANCE INDICATORS FOR FACILITIES PORTFOLIOS It seems intuitively clear that run-down, poorly performing facilities will detract from mission effectiveness and will be increasingly expensive to operate and maintain. However, the analytics are simply not yet available to assess with reasonable accuracy how run-down is “too run-down,” optimum reinvestment rates, and optimum timing for such investments. Developing portfolio-level performance indicators for facilities is challenging in other ways. Such indicators should be meaningful and not lose impact in the aggregation process. They should concisely report performance against established goals and provide a clear focus for further analysis and action. They should also provide the basis for long-term assessment of the efficacy of current decisions. Aggregate indicators should be available to enable executives to make informed decisions about how to most efficiently support the requirements for providing space at a field command or operational level. The operating environment within which performance measures are applied determines the types of measures developed and their utility. Private-sector organizations, in general, have an organizational goal of making a profit.
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Key Performance Indicators for Federal Facilities Portfolios TABLE 2.3 VA Portfolio Goals & Measures—Business View They have the flexibility to design their financial systems to gather the types of data needed to track and evaluate facilities investments, operations, and management. Such data include operating and utility costs. Best-practice private-sector organizations have long used such measures as internal rate of return, growth or decline in earnings per share, percentage of market share, and the like to measure performance in relation to mission and the desired results. They also use such operational measures as the level of customer satisfaction and the introduction of innovative products, techniques, or technologies (NRC, 2004). All these measures derive from an operating environment in which achieving a profit is paramount.
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Key Performance Indicators for Federal Facilities Portfolios In the Federal government the overall goal is to deliver goods and services to the public; making a profit typically is not an objective. All Federal departments and agencies are subject to the same budget procedures. Accounting systems are typically designed to track appropriations and expenditures for broad programmatic categories, but not for specific facilities assets. The GAO has reported that Various material weaknesses related to financial systems, fundamental recordkeeping and financial reporting, and incomplete documentation continued to: (1) hamper the government’s ability to accurately report a significant portion of its assets, liabilities, and costs; (2) affect the government’s ability to accurately measure the full costs and financial performance of certain programs and effectively manage related operations; and (3) significantly impair the government’s ability to adequately safeguard certain significant assets and properly record various transactions (GAO, 2003, p. 27). The GAO also reports that the government’s worldwide inventory of property, the only central source of descriptive data on the makeup of the real property inventory, does “not contain certain key data—such as data related to space utilization, facility condition, historical condition, historical significance, security, and age—that would be useful for budgeting and strategic management purposes” (GAO, 2003, p. 26). Other factors also come into play. For example, the lack of metering on many federal buildings inhibits tracking of utility costs. For all of these reasons, care must be taken in developing key performance indicators for federal facilities by reference to the private sector. Clearly some federal facilities and their functions are inherently governmental and will not find a comparable private-sector function. Of all the federal agencies managing facilities portfolios, the GSA’s mission most closely reflects that of a private-sector organization. As a landlord for other agencies, GSA uses performance indicators that are comparable to those used by private-sector organizations. Aggregate measures include Cost per Square Foot (owned), Cost per Square Foot (leased), and Employees Housed (occupying employees adjusted to estimate full-time equivalents). The GSA’s Cost per Person Model estimates the average cost per person in each of the following areas: real estate (space usage), telecommunications, information technology, and alternative work environment. An additional feature is a “what if” tool that calculates potential cost savings resulting from an alternative work environment, such as hoteling or desk sharing. Trends in space demand by tenant agencies, are measured historically in square feet, and anticipated requirements are estimated in the same manner. The GSA also measures Customer Satisfaction (based on customer surveys), Vacancy Rate, and Non Revenue Producing Space. GSA’s measures include a Net Income calculation that focuses on its ability to produce revenue from its tenants to cover its costs of leasing or operating owned buildings. To the GSA, Funds from Operations is also a significant measure of management effectiveness. Within the federal government the GSA’s mission, funding sources, operating environment, and portfolio of facilities are unique. Further, its portfolio consists of a limited number of building types, which tend to be located on individual sites in hundreds of communities. These factors should be carefully considered if GSA’s performance measures are suggested for use in other agencies. The 30 other federal departments and agencies have a wide range of differing missions, differing funding sources, and more diverse portfolios of facilities, which differentiate them from the GSA and from most private-sector organizations. Considerable effort is being expended by individual agencies to develop key performance indicators that quantify the relationship between agency mission effectiveness and investments in facilities portfolios. These portfolio-level indicators are the focus of Chapter 3. FINDINGS (A) 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. (B) 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 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 not typically 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. (C) 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 federal 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.
Representative terms from entire chapter: