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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies 1 Context The role of facilities and infrastructure in supporting the day-to-day operations of business and government and improving our quality of life is made apparent by a number of momentous events: the attacks on the World Trade Center and the Pentagon in September 2001; the anthrax crisis of November 2001; the blackout in the Northeast in August 2003; and the aftermath of Hurricane Katrina in 2005. When facilities failed and infrastructure collapsed, the impact on human health, welfare, and safety and on the provision of essential operations and services was evident. Facilities have a large impact on energy usage and the environment as well, accounting for 40 percent of all U.S. energy use and 40 percent of all emissions to the atmosphere, including the greenhouse gases linked to global climate change. As the 21st century progresses, buildings and infrastructure that are efficient, reliable, cost effective, and sustainable will become even more important. The U.S. federal government is the world’s largest single owner of facilities, with a worldwide portfolio of more than 500,000 buildings, structures, and associated infrastructure (NRC, 2004). Comprising billions of square feet of space, these facilities were acquired over more than 200 years to support federal missions and programs ranging from national defense and foreign policy to scientific and medical research, space exploration, cultural arts and history, and recreation. These public assets are valued in the hundreds of billions of dollars. Upwards of $40 billion is spent each year to acquire new facilities and renovate, operate, and maintain existing ones (NRC, 2004). Nonetheless, many facilities are deteriorating owing to aging and to inadequate maintenance and repair. This is significant because their poor condition hinders performance and the achievement of federal missions. Further, as federal policies, programs, missions, and processes evolve in response to the end of the
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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies Cold War, the 9/11 attacks, and other events, it is clear that facilities portfolios are no longer well aligned with current missions. Federal organizations (departments and agencies) have too many facilities, facilities in the wrong locations, and insufficient resources to operate and maintain them. The Base Realignment and Closure (BRAC) process of the Department of Defense is the most visible and dramatic action taken to align facilities portfolios with missions. However, other federal organizations, including the Department of Veterans Affairs and the Department of State, are undertaking significant, if less visible, actions to realign their portfolios to suit current missions and geopolitical conditions. Throughout the federal government, the ways in which federal organizations acquire, manage, invest in, and evaluate facilities are being transformed. This transformation requires a concurrent transformation in the core competencies—the essential areas of expertise and the skills base required of the workforce responsible for facilities management. THE EVOLUTION OF FACILITIES MANAGEMENT The profession of facilities management is changing rapidly and will continue to evolve through 2020 and beyond. Much of this change has occurred in parallel with the information technology revolution and with the increased expectations of facility owners and users for building performance and cost effectiveness. Until the 1990s, most of the large public and private organizations that owned facilities managed them through an in-house building or engineering division, often led by a professional engineer. This in-house division typically focused on the tactical issues that arose in the day-to-day operation of individual buildings. An essential area of expertise was building systems operations—mechanical, electrical, plumbing, heating, ventilation, air conditioning, and safety—which required a workforce with technical skills. As new functions were assigned to the in-house facilities division—strategic planning, construction coordination, utility management, space planning, and project management, among others—the essential areas of expertise and the skills base required to discharge these responsibilities broadened to include financial management and business-related skills (Figure 1.1). In the 1990s, private sector corporations began to “reengineer” their business processes and organizational structures to increase their profitability by becoming more competitive and significantly improving critical areas of performance such as quality, cost, delivery time, and customer service. Three underlying premises of reengineering were that the essential areas of expertise or core competencies of an organization should be limited to a few activities that are central to its current focus and future success; that because managerial time and resources are limited they should be focused on the organization’s core competencies; and that services or functions required by the organization that are not core competencies can be outsourced to organizations that specialize in those services. Ideally, by outsourc-
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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies FIGURE 1.1 Evolution of facilities management functions. SOURCE: Adapted from APPA (2002). ing noncore functions an organization receives the best value or best performance of the resources expended (NRC, 2000). One result of process reengineering has been closer attention to the function of the facilities and to their costs. As shown in Table 1.1, facilities typically account for almost 25 percent of a corporation’s assets and are the second or third highest operating cost after people (salaries and benefits) or after people and information technologies (NRC, 2004). Recognition of the costs of facilities and their role in business operations and impacts on workforce health and safety has moved organizations to take a more strategic approach to facilities management, viewing them as assets that enable the production and delivery of goods and services. A portfolio of facilities requires continuous investment, evaluation, and strategic management if the facilities are to operate reliably, effectively, and efficiently. Because in-house facilities management divisions have outsourced many noncore facilities-related activities—including design, construction, routine operations and maintenance, and custodial services—in-house staff are now responsible for strategic planning, procurement, management, and other higher-level activities.
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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies TABLE 1.1 Distribution of Total Assets for a Typical Private Sector Organization Asset Share (%) People (salaries and benefits) 40 Facilities 23 Products/services 17 Finances 15 Miscellaneous 5 SOURCE: Brandt (1994). Most activities contemplated in the course of an organization’s strategic planning entail a facilities requirement: Space is required to house people and equipment and to ensure that operations are ongoing and efficient. The location of that space can help or hinder operations and the achievement of the organization’s missions. The space may be owned or leased, depending on its function, the availability of funding, and other factors. According to the NRC (2004, p. 47), best practice organizations use their mission as guidance for instituting management approaches that integrate all of their resources—personnel (human capital), physical capital (facilities, inventories, vehicles, and equipment), financial capital, technologies, and information—in pursuit of a common goal. Strategic management has been facilitated by advances in information technologies, which enable the collection and analysis of systemwide data for entire portfolios of facilities and their integration with human resources and financial data. Such integrated information gives senior executives and managers a better basis for understanding the impact of facilities-related decisions on their organization’s budget, its workforce, and its missions and, in turn, allows them to make strategic decisions about when to acquire, invest in, or dispose of individual buildings. Due to the increasingly competitive business environment, which requires optimization of facilities’ functions and reliability and minimization of costs, organizations—as owners and users of facilities—have greater expectations for the performance of facilities. They are also more informed about the relationship of facilities to environmental, health, and safety issues; security threats; emergency preparedness; and continuity of operations in the post-9/11, post-Katrina era. As a result of these changes, the role of in-house facilities divisions has evolved from tactical operations of individual buildings to facilities asset management—management of an entire portfolio of facilities. FACILITIES ASSET MANAGEMENT Facilities asset management has been defined as a systematic process for maintaining, upgrading, and operating physical assets cost effectively. It combines
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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies engineering principles with sound business practices and economic theory and provides tools to facilitate a more organized, logical approach to decision making (NRC, 2004). The goal of facilities asset management is to give an organization the work environments it needs to achieve its missions by optimizing available resources. This can best be done by integrating people, places, processes, and technologies to optimize the value of facilities throughout their life cycles—that is, from planning, design, and construction through operations and maintenance, renewal, and ultimately disposal (Figure 1.2). Facilities asset management considers the entire life cycle of a facility, because 85 to 90 percent of a building’s lifetime costs occur after it has been constructed (NRC, 1998). Effective life-cycle asset management takes a holistic approach that considers the interrelationships between operations and maintenance costs on the one hand and facility capital investments on the other, to help minimize total life-cycle costs and maximize asset availability and use. A life-cycle approach allows facilities asset managers to plan strategically and to link day-to-day operations to facility investments and organizational missions. In the federal government, policies and directives have been issued for applying life-cycle costing to federal facilities investments. However, because the annual budget process considers capital and operating expenditures separately, it FIGURE 1.2 Facilities asset management life-cycle model. SOURCE: Adapted from APPA (2002).
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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies discourages a total life-cycle perspective at the highest levels of decision making (NRC, 2004). Although federal organizations are not concerned with making a profit, they also began reengineering their processes in the 1990s to improve customer service, cost effectiveness, and the outcomes of federal programs. Like private sector organizations, they began focusing on mission-essential, or core, activities and increased the outsourcing of noncore activities. GOVERNMENT-WIDE INITIATIVES FOR MANAGEMENT REFORM With the passage of the Government Performance and Results Act of 1993 (P.L. 103-62), Congress and two presidential administrations embarked on what has been a 15-year effort to improve the results of federal investments and programs by transforming how federal organizations (departments and agencies) produce and deliver public goods and services. Legislation and initiatives reforming policies and practices have been enacted for procurement processes,1 accounting processes,2 human resources,3 and federal facilities and infrastructure.4 Despite these reforms, the U.S. Government Accountability Office (GAO) has designated both human capital management and federal real property management as government-wide high-risk areas. The GAO defines high-risk areas as the most important challenges facing the federal government and identifies them every 2 years at the beginning of each new Congress (GAO, 2001, 2003). When it designated human capital “high risk,” the GAO stated that “an organization’s people—its human capital—are its most critical assets in managing for results” and identified four government-wide challenges: Strategic human capital planning and strategic alignment; Leadership continuity and succession planning; Acquiring and developing personnel whose number, skills, and deployment meet agency needs; and Creating results-oriented organizational cultures (GAO, 2001, p. 71). 1 The Federal Acquisition and Streamlining Act of 1994 (P.L. 103-355); the Clinger-Cohen Act of 1996 (P.L. 104-208). 2 The Government Management Reform Act of 1994 (P.L. 103-356); the Federal Financial Management Improvement Act of 1996 (P.L. 104-208). 3 The Federal Workforce Restructuring Act of 1994 (P.L. 103-226); the Federal Activities Inventory Reform Act of 1998 (P.L. 105-270). 4 Executive Order No. 12893, Principles for Federal Infrastructure Investments (January 26, 1994); Office of Management and Budget (OMB), Bulletin No. 94–16, Guidance on Executive Order No. 12893; OMB, Circular A–11: Part 3: “Planning, budgeting, and acquisition of capital assets”; OMB, Capital Programming Guide, a Supplement to Part 3; and Executive Order 13123, Greening the Government Through Energy Efficiency.
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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies The President’s Management Agenda (PMA) of 2001 contained a number of government-wide initiatives, one of which was “Strategic Management of Human Capital.” The PMA noted that the significant downsizing of the federal workforce since 1993 had been accomplished through across-the-board staff reductions and hiring freezes rather than through targeted reductions aligned with agency missions. One result is a workforce whose skills are currently out of balance with the needs of the public it serves. The PMA further stated as follows: Workforce deficiencies will be exacerbated by the upcoming retirement wave of the baby boom generation, and without proper planning, the skill mix of the federal workforce will not reflect tomorrow’s changing missions (PMA, 2001, p. 12). To address this issue, the PMA called for human capital strategies to be linked to an organization’s missions, vision, core values, goals, and objectives. Federal organizations must determine their core competencies and then decide whether to build internal capacity or contract for services from the private sector. Additional legislation pertaining to human resources management in the federal government was subsequently enacted. The Chief Human Capital Officers Act of 2002 (P.L. 107-296, Title XII, Section 302) creates the position of chief human capital officer (CHCO) in the main executive departments and agencies and establishes an interagency group, the Chief Human Capital Officers Council. In Section 1305 the act also requires the Office of Personnel Management (OPM) to design a set of systems, including metrics, for assessing human capital management by agencies. The CHCO positions were created to (1) ensure that considerations of human capital and workforce management influence agency strategic planning at the highest levels; (2) create clear accountability with agencies for the responsibilities of workforce planning, leadership development, and strategic recruiting; and (3) work on metrics to gauge the progress of agencies on workforce management issues (Simpson, 2004). Section 1412 of the Services Acquisition Reform Act of 2003 (P.L. 108-136) is intended to ensure that the federal acquisition workforce (1) adapts to fundamental changes in the nature of federal government acquisition of property and services associated with the changing roles of the federal government and (2) acquires new skills and a new perspective to enable it to contribute effectively in the changing environment of the 21st century. In 2003, the GAO designated federal real property a high-risk area because there were significant problems with excess and underutilized property, facilities were deteriorating, data on property were unreliable, space was too expensive, and physical security was poor (GAO, 2003). In February 2004, the President issued Executive Order 13327, Federal Real Property Asset Management, which requires that each executive department and agency designate among its senior management officials a senior real property officer (SRPO) who has the education, train-
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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies ing, and experience required to administer the necessary functions of the position for that organization. The SRPO is charged with developing and implementing an agency asset management plan that identifies and categorizes the facilities in its portfolio; sets goals and prioritizes actions for improving the operational and financial management of the portfolio; makes life-cycle cost estimations associated with those prioritized actions; and measures progress in meeting the goals. The Executive Order also establishes the Federal Real Property Council (FRPC), an interagency working group chaired by a senior executive of the OMB. The FRPC is charged with developing guiding principles for asset management, including performance measures, an inventory database, and a process for asset management planning. In 2007, the GAO updated the status of efforts to improve both real property and human capital management. It reported that progress has been made [on real property], but the problems that led to the designation of federal real property as a high-risk area still exist…. In addition, deep-rooted obstacles, including competing stakeholder interests and legal and budgetary limitations could significantly hamper a government-wide transformation. (GAO, 2007, p. 41) Progress in addressing federal human capital challenges has been made since 2001, but significant opportunities remain to improve strategic human capital management to respond to current and emerging 21st century challenges…. The federal government now faces one of the most significant transformations of the civil service in half a century, as momentum grows toward making government-wide changes to agency pay, classification, and performance management systems. (GAO, 2007, p. 39) DEFINING THE PROBLEM Modern buildings and infrastructure are complex technological systems whose effective management draws on a broad range of disciplines. Facilities asset managers in both the public and private sectors are routinely called on to synthesize information from disciplines as diverse as civil and environmental engineering, materials science, government operations, economics and finance, political science, public administration, public art, design for accessibility, and conflict resolution. At one time federal facilities management divisions primarily employed staff with technical expertise—planners, architects, engineers, project managers, real estate specialists, and other professionals—to manage their facilities portfolio and to oversee the services performed by private contractors. Now, in the face of federal workforce restructuring efforts and the ongoing retirement of experienced personnel, many facilities asset management divisions find themselves without staff having the expertise to implement a facilities asset management approach.
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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies STATEMENT OF TASK In response to a request from the Federal Facilities Council,5 the National Research Council (NRC) appointed a committee of experts to undertake a study that would help to ensure effective federal facilities asset management (inclusive of property development and financial and operational functions) in the next 15 years. To this end, the committee was asked to identify and assess the following: Forces that will drive change in how federal buildings are planned, designed, built, operated, and managed; The potential impact of new and emerging technologies on processes related to facilities management; Organizational capabilities that federal departments and agencies will require to effectively oversee a facilities asset management program; Individual skills required for effective facilities asset management; Development strategies, processes, and training to ensure that required core competencies will be in place and sustained over time; Performance indicators for measuring progress in developing a workforce with the required core competencies. THE COMMITTEE’S APPROACH To accomplish its tasks, the committee met six times between June 2005 and July 2006. Committee members talked with representatives of federal agencies, including DoD, the Department of Energy (DOE), the General Services Administration (GSA), the U.S. Coast Guard (USCG), the National Aeronautics and Space Administration (NASA), the Smithsonian Institution, the U.S. Navy, and the U.S. Army Corps of Engineers (USACE). The committee also heard from a representative of the duPont Company. To help in identifying organizational and individual core competencies, the committee used several previous NRC studies as a jumping-off point. It then reviewed books on facilities management, journal articles, and the programs of various professional societies and individuals. The committee’s recommendations are based on a synthesis of all of these sources of information as well as on the members’ own expertise and experience. 5 The Federal Facilities Council (FFC) is a cooperative association of more than 20 federal agencies responsible for portfolios with many facilities. 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. The FFC operates under the aegis of the NRC, the operating arm of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine.
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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies PREVIOUS STUDIES OF THE NATIONAL RESEARCH COUNCIL Three previous NRC studies examined different dimensions of the federal facilities management challenge. Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation’s Public Assets (1998) developed a framework to facilitate strategic planning for the maintenance and repair of facilities. Its objectives were to optimize available resources to maintain the functionality and quality of federal facilities and to protect the public’s investment (see Appendix C for that report’s Executive Summary). Outsourcing Management Functions for the Acquisition of Federal Facilities (2000) provided guidance for federal agencies as they began to make decisions about outsourcing management functions such as planning, design, and construction. It also identified the core competencies federal organizations need for effective oversight of outsourced management functions while protecting the public interest (see Appendix D, which is the Executive Summary for that report). The last of the three reports, Investments in Federal Facilities: Asset Management Strategies for the 21st Century (2004), identified best practices of the private sector as it invests in facilities and suggested how such practices might be adapted for use in federal organizations. It proposed principles and policies for facilities investment and asset management (Appendix E contains its Executive Summary). The recommendations of these three studies were intended to result in Improved alignment between federal facilities portfolios and organizational missions; Responsible stewardship of federal facilities and federal funds; Savings in the life-cycle costs of facilities; Better use of available resources—people, facilities, and funding; and A collaborative environment for decision making related to federal facilities. Several findings emerged from these studies: Facilities asset management in the public sector has very different objectives than such management in the private sector, even though many of the challenges are similar; Federal organizations should approach facilities asset management with the mindset of an owner; Strategic planning and decision making are needed to align the facilities portfolio with an organization’s missions; A life-cycle approach is very important; and Performance measurement is a necessary ingredient of continuous improvement.
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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies The findings of these earlier studies provided a platform for the committee as it began to address the tasks set before it and also suggested an approach for it to take. ORGANIZATION OF THE REPORT This report is organized into five chapters that outline the committee’s approach, consensus thinking, findings, and recommendations in response to the statement of task. Chapter 1, Context, provides background information about the role of facilities and infrastructure, the evolution of facilities management, and federal initiatives and issues related to the management of facilities and human resources. Chapter 1 concludes with a summary of findings from three previous NRC reports related to federal facilities management. Chapter 2, Forces Affecting the Federal Government: Implications for Facilities Asset Management in 2020, categorizes and describes the diverse internal and external forces affecting the federal government and their implications for facilities and the workforce that manages them. Chapter 3, Core Competencies for Federal Facilities Asset Management, defines the core competencies required for effective federal facilities asset management and describes a process that federal organizations should use to identify skills gaps. Chapter 4, A Comprehensive Strategy for Workforce Development, addresses methods for developing and sustaining core competencies through a multifaceted approach to professional recruitment, education, training, and a culture of learning. Performance indicators for measuring progress in workforce development are also discussed. Chapter 5, Core Competencies for Federal Facilities Asset Management: Findings and Recommendations, summarizes the committee’s findings and conclusions and provides recommendations to help ensure effective federal facilities asset management through 2020 and beyond. Appendix A contains the biographies of the committee members. Appendix B lists the briefings to the committee and interviews that took place during the study. Appendixes C, D, and E contain the executive summaries of three previous NRC reports on federal facilities management. REFERENCES APPA (Association of Higher Education Facilities Officers). 2002. Development of the Facility Management Profession. Alexandria, Va.: APPA. GAO (General Accounting Office). 2001. High Risk Series: Human Capital. Washington, D.C.: GAO. GAO (Government Accountability Office). 2003. High Risk Series: Federal Real Property. Washington, D.C.: GAO.
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Core Competencies for Federal Facilities Asset Management Through 2020: Transformational Strategies GAO. 2007. High Risk Series: An Update. Washington, D.C.: GAO. NRC (National Research Council). 1998. Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation’s Public Assets. Washington, D.C.: National Academy Press. NRC. 2000. Outsourcing Management Functions for the Acquisition of Federal Facilities. Washington, D.C.: National Academy Press. NRC. 2004. Investments in Federal Facilities: Asset Management Strategies for the 21st Century. Washington, D.C.: The National Academies Press. PMA (President’s Management Agenda). 2001. Accessed at <www.whitehouse.gov/omb/budget/fy2002/mgmt.pdf>. Simpson, K. 2004. Testimony of Kevin Simpson, Partnership for Public Service, Before the Subcommittee on Civil Service and Agency Organization, Committee on Government Reform, House of Representatives on First Year on the Job: Chief Human Capital Officers. Available online at <http://federalworkforce.oversight.house.gov/documents>.