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Key Performance Indicators for Federal Facilities Portfolios 1 Introduction BACKGROUND Successful public managers are concerned with delivery of services to the public, finances, efficient operations, employee satisfaction, and the needs and wants of the community and its stakeholders. Good public managers have long recognized the need to set goals and standards, identify and capitalize on opportunities, detect and resolve difficulties, understand and improve upon processes, and document the results of public investments in programs and capital improvements. Throughout the 1990s and continuing today, Congress has enacted legislation, the various presidential administrations have issued executive orders, and agencies have amended regulations, to institutionalize the establishment of goals and objectives and to develop performance measurement systems and processes in the federal government. The Government Performance and Results Act (GPRA) of 1993 (P.L. 103-62), for example, provides federal executives and program managers with an institutionalized commitment to (1) establish agency goals and objectives, including annual program goals and objectives; (2) specify how the agency is going to achieve those goals; and (3) demonstrate how agency and program performance in achieving those goals will be measured. The intent of GPRA and related legislation1 is to make federal departments and agencies more efficient (reduce delivery time), more cost effective, more responsive to the public, and more results driven (outcomes oriented). Owing to the magnitude of the investment, the management of federally owned and leased facilities is receiving increased scrutiny from the Office of Management and Budget, the Government Accountability Office, and from individual departments and agencies. On a government-wide basis federally owned facilities are valued in the hundreds of billions of dollars. Upwards of $21 billion per year is spent on new facilities and the renovation of existing facilities, and billions more are spent on their operation and maintenance (NRC, 2004). More than 30 federal departments and agencies with a wide range of missions and programs manage large inventories of facilities, also called portfolios. These portfolios range in size from a few hundred to more than a hundred thousand individual structures, buildings, and their supporting infrastructure. They are diverse in terms of facility types, mix of types, and geographic dispersal. An agency like the General Services Administration (GSA), 1 Related legislation includes the Chief Financial Officers Act of 1990, the Federal Acquisition Streamlining Act of 1994, Title V, the Government Management Reform Act of 1994, and the Federal Financial Improvement Act of 1996.
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Key Performance Indicators for Federal Facilities Portfolios whose role as a landlord to other agencies is unique, manages individual buildings (primarily offices and courthouses) located in hundreds of municipalities across the United States. The Bureau of Overseas Buildings Operations of the State Department, in contrast, manages compounds of embassy, housing, and office buildings located in 260 posts around the world. Others, for example, the National Institutes of Health, primarily operate one or two campus-like complexes, while the military services manage hundreds of city-like installations domestically and abroad. The individual departments and agencies are responsible for the planning, acquisition, management, operation, evaluation, and disposal of facilities. The diversity of their missions and of their facilities portfolios affect how those portfolios are managed and how investments are tracked, measured, and evaluated. Once facilities are designed and constructed, the owner agencies primarily rely on annual budget appropriations for operations, maintenance, and recapitalization funding to keep them in good shape and fully supporting the missions for which they were intended.2 In January 2003 the U.S. General Accounting Office (recently renamed the Government Accountability Office, GAO) issued a report on Federal Real Property, in its High Risk Series that states Unfortunately, much of this vast and valuable asset portfolio presents significant management challenges and reflects an infrastructure based on the business model and technological environment of the 1950s. Many assets are no longer effectively aligned with, or responsive to, agencies’ changing missions and are therefore no longer needed. Furthermore, many assets are in an alarming state of deterioration; agencies have estimated restoration and repair needs to be in the tens of billions of dollars. Compounding these problems are the lack of reliable governmentwide data for strategic asset management, a heavy reliance on costly leasing instead of ownership to meet new space needs, and the cost and challenge of protecting these assets against potential terrorism (GAO, 2003, p. 2). On February 4, 2004, the President signed an executive order regarding Federal Real Property Asset Management (subsequently numbered 13327), 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.” Among other actions, Executive Order 13327 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. The full text of Executive Order 13327 is contained in Appendix A. Concurrent with issuance of the executive order, a new program initiative for Federal Real Property Asset Management was added to the President’s Management Agenda (PMA). Issued in the summer of 2001 and subsequently updated, the PMA focuses on improving the measurement and performance of the federal government (available at http://www.whitehouse.gov/omb/budget/fy2002/mgmt.pdf). PERFORMANCE MEASUREMENT Much has been written about the establishment and use of performance measurement systems. Simply stated, the purpose of performance measurement is to help organizations understand how decision-making processes or practices led to success or failure and how that understanding can suggest improvements. Ultimately, an effective performance measurement system should support informed decision making about the allocation of resources within and by an organization. 2 Some agencies, like the Smithsonian, also raise private-sector funds for facilities such as museums. Much of GSA’s funding for operating existing buildings comes from the Federal Buildings Fund, a revolving fund.
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Key Performance Indicators for Federal Facilities Portfolios Key components of an effective performance measurement 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). Organizational Goals. Careful and consistent definition of organizational goals is a requirement for an effective performance measurement system. Organizational goals set standards for activity in areas that drive the attainment of strategic objectives. Organizational goals should be clearly defined, actionable, specific as to time for attainment, and reflective of the relative priority of the goals to the organization’s missions. Baselines. Baselines establish a condition or situation at a specific time. Key Performance Indicators. Key performance indicators are metrics designed to match up with organizational goals. Writing in 1998, Paul Arveson suggests key features for performance indicators: Leading Indicators: forecast future trends inside and outside the organization; Objective and Unbiased: fact based, not subject to manipulation and can be repeated; Normalized: can be benchmarked against other organizations; Statistically Reliable: small margin of error; Unobtrusive: not disruptive of work or trust; Inexpensive to Collect: small sample sizes adequate; Balanced: qualitative/quantitative, multiple perspectives; Appropriate: measures the right things; Quantifiable: for ease of aggregation, calculation, and comparison; Efficient: can draw multiple conclusions out of dataset; Comprehensive: show all significant features of an organization’s status; and Discriminating: small changes are meaningful. To Arveson’s list, the authors would add: Action Oriented: suggest next analysis or action step; motivate and direct action; Understandable to Decision Makers: understanding of performance indicators not dependent upon specialized facilities management knowledge; highly intuitive; and Verifiable: auditable. Accurate Data. Underlying an effective performance measurement system are accurate, verifiable, and repeatable data. Lack of quality data can be a principal obstacle to choosing effective indicators or to implementing an effective performance measurement system (NRC, 1995). In some cases data are available, but their underlying accuracy and integrity may be suspect. For effective facilities asset management this becomes more problematic when data are rolled up from the individual building level to the portfolio level. Ideally, key performance indicators are supported by an integrated information technology system that collects data at the point of transaction and allows for a seamless rollup to the portfolio level. Continuous Feedback. Performance measures are of limited value unless they are used in conjunction with formal and continuous feedback, or evaluation, processes. Evaluations have been defined as the systematic assess-
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Key Performance Indicators for Federal Facilities Portfolios ment of the operation and/or the outcomes of a program or policy, compared with explicit or implicit standards, as a means of contributing to the improvement of the program or policy (Weiss, 1998; NRC, 2004, p. 68). PROBLEM STATEMENT AND STUDY OBJECTIVES The senior facilities program manager for each Federal department and agency is responsible for the following key management activities relative to the department’s or agency’s portfolio of facilities: Physical control through establishment and maintenance of detailed inventories of assets: physical descriptions, quantities, locations, value, and use (know what you have); Maintenance and management of these facilities to support the achievement of the department’s or agency’s missions and the delivery of public goods and services (stewardship); Appropriate action to acquire, recycle, or remodel needed properties to provide suitable facilities to meet the existing and planned missions of the department or agency over an established planning horizon (support mission requirements); Prudent financial decisions relative to initial and ongoing control over the assets and maintenance of the value of properties in use or held as surplus (make good financial decisions); and Appropriate action to retire, recycle, reassign, or dispose of excess or obsolete properties as required to support mission requirements over various planning horizons (dispose of excess or obsolete facilities). Federal facilities investment decisions involve multiple stakeholders, decision makers, and operating groups, including senior executives, such as department and agency heads, senior facilities program managers, budget analysts, and field engineers. The senior facilities program manager in an agency must advise the agency’s senior executives on levels of investment required for facilities. He or she must also direct the development and operation of facilities portfolios and their related services within the budget allocated to them. At the senior executive level of agency management, facilities-related decisions revolve around the allocation of resources (staff, funding, time) for portfolios of facilities: acquisition, renovation, operation, repair, and disposition of facilities. To make informed decisions, senior 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? 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? The objective of this study is to identify real property portfolio-level performance indicators that can be used by Federal executives to answer such questions and to help fulfill the requirements of Executive Order 13327. These same indicators should help senior facilities program managers to fulfill their facilities asset management responsibilities with confidence. STUDY APPROACH In September 2002 the Federal Facilities Council (FFC) of the National Research Council (NRC)3 authorized a study to identify a set of key performance indicators that could be used by senior executives to determine a full 3 The FFC is a cooperative association of 28 federal departments and agencies operating under the aegis of the National Research Council. The NRC is the operating arm of the National Academy of Sciences and the National Academy of Engineering. The FFC’s mission is to identify and advance technologies, processes, and management practices that improve the performance of federal facilities over their entire life cycle, from planning to disposal.
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Key Performance Indicators for Federal Facilities Portfolios range of financial and nonfinancial results (outcomes) of investments in portfolios of facilities. Further, the performance indicators identified should lend themselves to identifying the relationship between a given level of investment today and expected outcomes or future effects on cost avoidance, reliability, operating costs, life-cycle costs, facilities condition, space utilization, customer satisfaction, agency effectiveness, and the like. As a first step, the FFC 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 FFC 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 (detailed biographies are in Appendix B). The Ad Hoc Committee identified points of contact in various agencies, several of whom were subsequently interviewed by the consultants. The consultants reviewed available descriptions of agencies’ current and planned facilities management information systems and management indicators, and sought to find areas of commonality across agencies. Additionally, the consultants conducted several informal working sessions of the Ad Hoc Committee and attended a special briefing about ongoing work by the U.S. Coast Guard. The working sessions considered and refined the following topics: common performance indicators, characteristics of performance indicators, and a framework for identifying key performance indicators to support decision making related to investments in federal facilities.
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