4
Additional Performance Indicators for Federal Facilities Portfolios

The base set of performance measures suggested in Chapter 3 can help to improve facilities asset management activities in the federal government. However, an expanded set of indicators to be developed in the long term is desirable. The purpose of developing additional indicators is to allow agencies to measure aspects of facilities investment, management, and outcomes that are not fully captured by the proposed base set.

The authors believe that additional key performance indicators should incorporate major management objectives of the federal government to become more efficient, more cost effective, more responsive to customers, and more results driven.

Additional key performance indicators should also

  • Be easy to understand by nontechnical staff and decision makers;

  • Directly and substantially support critical decision making;

  • Use available or easily gathered data and understandable calculations; and

  • Be supportive of, not in conflict with, the suggested set of key performance indicators described in Chapter 3.

In the course of this study, performance measurement systems in use by private industry and academia were reviewed. Some promising performance indicators being developed within federal agencies were also identified. The authors believe these systems and indicators deserve consideration in any future effort to round out a comprehensive system of qualitative and quantitative performance measures for federal facilities asset management.

PERFORMANCE MEASUREMENT MODELS

Several models for developing performance measurement systems have been developed and are in use. These include the Malcolm Baldrige National Quality Program, the Balanced Scorecard, and the Strategic Assessment Model (SAM) developed by the Association of Higher Education Facilities Officers-APPA.

The Balanced Scorecard provides a well-researched and heavily utilized approach to the development of balanced performance indicators that seek to measure both quantitative and qualitative outcomes. A key aspect of the Balanced Scorecard is its focus on four separate but related perspectives of organizational performance and management: finances, internal processes, customer satisfaction, and workforce support (called innovation and



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Key Performance Indicators for Federal Facilities Portfolios 4 Additional Performance Indicators for Federal Facilities Portfolios The base set of performance measures suggested in Chapter 3 can help to improve facilities asset management activities in the federal government. However, an expanded set of indicators to be developed in the long term is desirable. The purpose of developing additional indicators is to allow agencies to measure aspects of facilities investment, management, and outcomes that are not fully captured by the proposed base set. The authors believe that additional key performance indicators should incorporate major management objectives of the federal government to become more efficient, more cost effective, more responsive to customers, and more results driven. Additional key performance indicators should also Be easy to understand by nontechnical staff and decision makers; Directly and substantially support critical decision making; Use available or easily gathered data and understandable calculations; and Be supportive of, not in conflict with, the suggested set of key performance indicators described in Chapter 3. In the course of this study, performance measurement systems in use by private industry and academia were reviewed. Some promising performance indicators being developed within federal agencies were also identified. The authors believe these systems and indicators deserve consideration in any future effort to round out a comprehensive system of qualitative and quantitative performance measures for federal facilities asset management. PERFORMANCE MEASUREMENT MODELS Several models for developing performance measurement systems have been developed and are in use. These include the Malcolm Baldrige National Quality Program, the Balanced Scorecard, and the Strategic Assessment Model (SAM) developed by the Association of Higher Education Facilities Officers-APPA. The Balanced Scorecard provides a well-researched and heavily utilized approach to the development of balanced performance indicators that seek to measure both quantitative and qualitative outcomes. A key aspect of the Balanced Scorecard is its focus on four separate but related perspectives of organizational performance and management: finances, internal processes, customer satisfaction, and workforce support (called innovation and

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Key Performance Indicators for Federal Facilities Portfolios learning). The Balanced Scorecard by design provides for cascading goals, objectives, and performance measures from the organizational mission to management and program levels to individual performance. Like the Baldrige program, the Balanced Scorecard can be applied to any aspect of organizational performance. APPA’s SAM is specific to facilities management. The SAM incorporates features from both the Malcolm Baldrige National Quality Program and the Balanced Scorecard and provides a consistent vocabulary for continuous improvement. It uses a five-level rating system with criteria applicable to each level of performance. Although SAM has not yet been implemented broadly in the higher education arena, it is useful because it addresses facilities management in a complex (university) facilities environment and more closely matches the funding environment of the federal government than that of private-sector organizations. One caveat in applying the SAM directly to a federal agency relates to the geographical distribution of university facilities: Most universities are responsible for managing facilities that are concentrated in one or two campus complexes. This is very different from the geographic distribution of the facilities portfolios of most Federal agencies. As noted in Chapter 2, the geographic distribution of facilities has implications for how they are managed. However, some of the facilities indicators developed for the SAM could be adopted or adapted for federal agency use without adopting the entire model. The four perspectives of the Balanced Scorecard as applied in SAM are described below. (For further reading on SAM see APPA, 2001.) The financial perspective reflects the organization’s performance in ensuring its financial integrity and demonstrates stewardship responsibility for capital and financial resources associated with the operation and preservation of facilities. Financial performance indicators are tracked to ensure that services are delivered efficiently and cost effectively. The financial perspective is linked to other perspectives through the relationships between costs and the results in achieving other objectives. An example would be to understand how improving internal processes or customer satisfaction correlates with increasing or decreasing costs. Another might be to determine how financial benefits are derived from improvements in employee safety, absenteeism, and turnover (italics added). Primary services include those for operations and maintenance, energy and utilities, and planning, design, and construction (combines Baldrige categories 4.1, 4.2, and 7.2). The internal process perspective addresses the key aspects of improving the organization’s processes for delivering primary services, including services for operations and maintenance, energy and utilities, and planning, design, and construction. Examples of processes supporting these might include handling of work orders, procurement, billing, and relationships with suppliers. Evidence should show that processes for delivering services are efficient, systematic, and focused on customer needs (combines Baldrige categories 6.1, 6.2, 6.3 and 7.4). The innovation and learning perspective addresses key practices directed toward creating a high-performance workplace and a learning organization. In a learning organization people at all levels are continually increasing their knowledge and their capacity to produce the best practices and best possible results. This perspective considers how the organizational culture, work environment, employee support climate, and systems enable and encourage employees to contribute effectively. Work environment and systems include work and job design, compensation, employee performance management, and recognition programs. Training is analyzed to determine how well it meets ongoing needs of employees and how well it develops their leadership and knowledge-sharing skills to improve efficiency and accommodate change. There is an emphasis on measuring results relating to employee well-being, satisfaction, development, motivation, and effectiveness and work system performance (combines Baldrige categories 5.1, 5.2, 5.3, and 7.3). Customer perspective addresses how the organization determines requirements, expectations, and preferences of customers to ensure relevance of current services and to develop new opportunities; how the organization builds relationships with customers; and how the organization measures results of customer satisfaction and performance of services…. Primary services would include those for operations and maintenance, energy and utilities, and planning, design, and construction (combines Baldrige categories 3.1, 3.2, and 7.1). It is interesting to note that the themes running through the four perspectives of the Balanced Scorecard as adapted to the SAM are similar to those of the GPRA and Executive Order 13327: improved efficiency, cost effectiveness, customer satisfaction, and results-driven performance.

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Key Performance Indicators for Federal Facilities Portfolios ADDITIONAL PERFORMANCE INDICATORS FOR CONSIDERATION Financial Measures Operating cost is a key performance indicator used by private-sector organizations that is desirable for use in federal facilities asset management. Some of the considerations in developing an operating cost measure include determining what categories of costs are to be included, the resources (staff, time, funding) required to gather the data, how accounting and management systems would need to be modified to consistently gather the required data, and the costs and benefits of doing so. Two indicators for operating costs have been developed for the SAM. The first, Facilities Operating Current Replacement Value Index, represents the level of funding provided for the stewardship responsibility of an organization’s facilities. The indicator is expressed as a ratio of annual facility maintenance operating expenditures to CRV. The second indicator, Facilities Operating Gross Square Feet Index, is expressed as a ratio of annual facilities maintenance operating expenditures to the total gross square feet of the facilities portfolio. Further study is required to determine how best to calculate an indicator of operating costs that would be applicable to most agencies and cost effective to generate. The authors also suggest development of a Facilities Operating Gross Agency Expenses Index. This indicator would track annual facility maintenance and operating expenditures as a function of an organization’s total expenditures for the programs and people housed in the subject facilities. A key component of facilities operating costs is utility cost. By fiscal year 2010, under Executive Order 13123, Greening the Government Through Efficient Energy Management (June 3, 1999), Federal agencies are to (1) significantly reduce energy consumption from 1990 baseline levels and (2) increase their use of renewable energies. However, for reasons already mentioned utility costs and energy consumption typically are not tracked. The SAM offers two measures of energy costs and usage that may have value for Federal agencies. The Energy Usage Index is calculated as the total number of British thermal units (BTUs) consumed annually divided by gross square feet of total facilities portfolio. The BTU is an energy consumption metric that is commonly considered a worldwide standard measure; all fuels and electricity can be converted to their respective BTU content for the purpose of totaling all energy consumption. Facilities are a major consumer of energy for heating, cooling, lighting, and routine equipment operation. An energy usage index plotted over time can help to measure the energy efficiency of the portfolio and determine whether energy consumption is increasing or decreasing. SAM’s Energy Reinvestment Index tracks annual expenditures on energy efficiency measures as a function of the annual agency energy expenditure. It can help to measure the outcomes of investments in energy conservation efforts. Process Improvement Measures (Internal Perspective) To fully measure the outcomes of facilities asset management activities, indicators related to the planning, design, construction, operation, renewal, and disposal of facilities are needed. A promising process indicator for prioritizing projects and funding to support an organization’s overall mission is the Mission Dependency Index (MDI). MDI uses the operational risk management techniques of probability and severity and applies them to facilities in terms of interruptability, relocateability, and replaceability. It also takes mission intradependencies (those that reside within a command) and mission interdependencies (those that reside between commands) into account. It does this through structured interviews with command representatives of individual units that cover a finite geographical area. The reported MDI is calculated using a standardized formula. MDIs are applied at the building level, and the resulting index is a driver for prioritizing projects. Now being tested at the site level, the MDI is being designed for application at the facilities portfolio level. The MDI scores range from 0 to 100, with associated colors for visual interpretation of reports: blue (0-40), green (40-55), yellow (55-70), orange (70-85), and red (85-100, most critical). The MDI was initially developed by the Naval Facility Engineering Service Center (NFESC), and is being collaboratively refined by the Coast Guard and the Navy. GSA and NASA are also considering its use.

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Key Performance Indicators for Federal Facilities Portfolios Workforce Support Measures (Innovation and Learning Perspective) Understanding of the relationships between worker health, productivity, and the quality of the workplace is expanding through research. Finding ways to measure the effects of facilities investments on worker health and productivity is becoming increasingly important. Efforts are underway to develop such measures, as described below. The Work Environment Index, as contemplated in the SAM, is based upon a survey instrument originally developed by IBM Consulting Group and the University of California. It assesses organizational climate within a specific work unit and to some extent includes departmental-level information relating to facilities.1 This survey instrument covers the following areas: demographic data about respondent; communications; compensation; customer service; decision making; diversity; leadership; morale; performance management; teamwork; training and development; vision, values and business principles; and mission. Results from these surveys are tallied in the aggregate and then a high and low distribution score is developed for specific areas. The U.S. Coast Guard is testing a Suitability Index that measures gaps between appropriateness of a facility to the mission requirements. The Suitability Index draws on an ASTM International2 standard for many types of buildings that employs over 100 scales and 340 features for possible valuation. It reports a side-by-side comparison between an occupant’s functionality requirements (the demand side) and the facilities’ serviceability requirements (the supply side) and identifies the gap between demand and supply. When developed, the Suitability Index could potentially be applied at the portfolio level to help indicate how well the portfolio is aligned with mission and how well facilities support worker productivity. The Coast Guard is also considering the development of a Life Safety or Building Code Index. The purpose of such an index would be to determine how well federal facilities comply with existing life safety measures (such as fire protection) and other building codes. Such an index would help to assess the quality of the work environment and the potential for circumstances that could be harmful to building occupants. The index would be aggregated by rolling up building-level data into the total portfolio. Table 4.1 provides a summary of additional indicators that could be of value in measuring the outcomes of investments in federal facilities portfolios. FINDINGS (A) 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 system 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. In 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 (staff, time, funding) to gather the data, whether existing accounting and management systems will require modification, and the costs and benefits of such modifications. 1   A number of Federal agencies have developed customer satisfaction surveys for post-occupancy evaluation and other processes. It is possible that such surveys could be used in place of the survey referenced in the SAM. 2   ASTM International was originally known as the American Society for Testing and Materials.

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Key Performance Indicators for Federal Facilities Portfolios TABLE 4.1 Additional Indicators That Could Be Developed for Use Within Federal Agencies Over the Long Term Category of Information Key Performance Indicator (KPI) Calculation Purpose of KPI Financial Facilities Operating CRV Index Annual Facility Maintenance Operating Expenditures ($)/CRV Measures annual operating and maintenance expenditures as a function of CRV. Financial Facilities Operating GSF Index Annual Facility Maintenance Operating Expenditures ($)/ Total Gross Square Feet (GSF) Measures annual facility maintenance expenditures per gross square foot of total portfolio. Financial Facilities Operating GAE Index Annual Facility Maintenance Operating Expenditures ($)/ Gross Agency Expenditures (GAE) Measures annual facilities operating expenditures as a ratio of total organizational expenditures for the programs/missions housed in the facilities. Financial Energy Usage British Thermal Units (BTUs)/Gross Square Feet Measures total use of energy (electricity and fuels) as a ratio of total square feet of the facilities portfolio. Financial Energy Reinvestment Index Annual Expenditure on Energy Efficiency Measures H 100/ Annual Institution Energy Expenditure Measures realized benefit of energy project expenditures on overall energy costs. Process Mission Dependency Index See text for process description Assesses individual facility’s relative importance to an organization’s missions. The resulting index is a driver for prioritizing projects and could be used for allocation of funding across a facilities portfolio. Workforce Support Work Environment Index Survey-based measure Measures employees’ satisfaction with facilities across various areas, a critical foundation for employee performance. Workforce Support Suitability Index Currently under development by U.S. Coast Guard Will measure gaps between appropriateness of facilities and mission requirements.