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Forces Affecting the Federal Government: Implications for Facilities Asset Management in 2020

As the 21st century unfolds, geopolitical and socioeconomic trends are placing substantial pressure on the U.S. federal government. The federal presence will probably intensify both here and in some other parts of the world in response to political and economic change but diminish elsewhere. By 2020 the world’s population will have increased by nearly 2 billion, and the demands on Earth’s finite resources will call for heightened environmental sensitivity. Current geopolitical conditions indicate that the nation’s focus on homeland security and global terrorism will continue. Rapid advances in technology, real and perceived threats to national security, changes in government paradigms, the growing national fiscal imbalance, and changes in the workforce all have tangible implications for federal facilities asset management and for the core competencies needed by the divisions set up to perform this management.

GEOPOLITICAL AND SOCIOECONOMIC TRENDS

In response to changing international political alliances and threats and domestic fiscal constraints, the portfolio of facilities that support the defense and foreign policy missions will continue to be restructured. Plans are under way to move 70,000 military troops and their dependents from Europe to the United States as part of a new defense strategy in which U.S. forces are based stateside and rapidly deployed overseas for training or military operations. This will require the closing of military bases in Europe and the upgrading of bases, including new construction, in the United States. Separately, the new round of domestic military base closures authorized in 2005 is expected to result in the closing of 22 major



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2 Forces Affecting the Federal Government: Implications for Facilities Asset Management in 2020 As the 21st century unfolds, geopolitical and socioeconomic trends are placing substantial pressure on the U.S. federal government. The federal pres- ence will probably intensify both here and in some other parts of the world in response to political and economic change but diminish elsewhere. By 2020 the world’s population will have increased by nearly 2 billion, and the demands on Earth’s finite resources will call for heightened environmental sensitivity. Current geopolitical conditions indicate that the nation’s focus on homeland security and global terrorism will continue. Rapid advances in technology, real and perceived threats to national security, changes in government paradigms, the growing national fiscal imbalance, and changes in the workforce all have tangible implica- tions for federal facilities asset management and for the core competencies needed by the divisions set up to perform this management. gEOPOLITICAL AND SOCIOECONOMIC TRENDS In response to changing international political alliances and threats and domestic fiscal constraints, the portfolio of facilities that support the defense and foreign policy missions will continue to be restructured. Plans are under way to move 70,000 military troops and their dependents from Europe to the United States as part of a new defense strategy in which U.S. forces are based stateside and rapidly deployed overseas for training or military operations. This will require the closing of military bases in Europe and the upgrading of bases, including new construction, in the United States. Separately, the new round of domestic military base closures authorized in 2005 is expected to result in the closing of 22 major 

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 CORE COMPETENCIES FOR FEDERAL FACILITIES ASSET MANAGEMENT bases and other changes.1 Physical security concerns are prompting the transfer of thousands of federal employees in the Washington, D.C., metropolitan area from leased facilities in commercial centers to federally owned land on which several million square feet of new space will be constructed. The bombing of two U.S. embassies in East Africa in 1998 was the catalyst for a $16 billion, 12-year effort to provide greater security for embassy personnel. This effort will be implemented by upgrading existing buildings and constructing approximately 160 new embassies and consulates.2 On the domestic front, socioeconomic trends are affecting how government organizations provide services. For example, the Department of Veterans Affairs (VA) is realigning its health-care system to provide for more outpatient services and fewer long-term hospital stays. The number of hospital beds and amount of hospital space owned by the VA is being reduced, while the number of patients served through outpatient services and centers is being increased. To respond to global and socioeconomic trends, federal facilities asset man- agement divisions must continually evaluate whether the types, numbers, and locations of their facilities are aligned with their missions, and they must clearly have the capacity to carry out such evaluations. Strategic planning, decision making, and operations, in turn, require the capacity to identify which facilities enable or hinder the achievement of an organization’s missions to formulate and evaluate alternatives for acquiring, renovating, or disposing of facilities and quantify the impacts of the various alternatives; to determine which strategies and mechanisms will be most effective in particular situations; and to effectively communicate that information to others throughout the organization, from senior executives to field office managers. Facilities asset management divisions will require staff with skills related to logistics/supply chain management, physical security, risk identification and management, and selection of the most appropriate project delivery strategies (e.g., design-build, design-bid-build). CHANgINg gOVERNMENT PARADIgMS Contracting with private sector firms to provide goods and services that were traditionally provided by federal organizations continues to be a significant trend worldwide. A survey of a dozen national governments in the late 1990s indicated that a large majority of the respondents expected that the most successful govern- ment structure in 2010 would be one in which the national government focuses 1Four previous rounds of base closures (1988, 1991, 1993, 1995) resulted in 97 major closures, 55 major realignments, and 235 minor actions (GAO, 2005). 2There are more than 60,000 U.S. government employees from 35 agencies plus additional thou- sands of support staff at 260 diplomatic posts worldwide; most of these facilities do not meet new security standards.

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 FORCES AFFECTING THE FEDERAL GOVERNMENT on managing projects and suppliers, allowing the private sector to deliver most of the traditional public services (Economist Intelligence Unit, 1999). Although the U.S. government has long contracted with the private sector to deliver public goods and services, the Federal Activities Inventory Reform (FAIR) Act of 1998 gave renewed emphasis to contracting out, also called outsourcing. The act broadly defines inherently governmental activities as those that are so intimately related to the public interest as to mandate performance by govern- ment employees. Inherently governmental activities include the interpretation and execution of the laws of the United States and often involve a decision pertaining to policy, prime contracts, or the commitment of government funds. The FAIR Act also states that functions that are not inherently governmental include those involving the following: • Gathering of information for or providing advice, opinions, recommenda- tions, or ideas to federal government officials or • Any function that is primarily ministerial or internal in nature. Examples cited include building security, facilities operations and maintenance, and routine electrical and mechanical services. To comply with the FAIR Act, federal organizations must annually develop lists of activities performed by government staff that in the judgment of the head of the organization are not inherently governmental functions. Such functions are classified as “commercial services.” To carry out commercial services, federal organizations must use a competitive process that allows private sector firms to submit a proposal for performing the activity. Competitive sourcing, one of the five major initiatives in the President’s Management Agenda (PMA), is intended to develop procedures that will expand and improve the competition between public and private organizations as envisioned in the FAIR Act. In the foreseeable future federal agencies will continue to outsource a sig- nificant portion of services related to facilities—design, construction, operations, maintenance, and some management functions. A key question facing facilities asset management divisions is whether additional facilities-related services, including management functions, should be outsourced as well. Services that are not critical to organizational missions are likely to be considered for outsourcing whenever the risk of service failure and competency loss is less than the value added by an outside firm. The implication of this way of operating is significant. It demands that federal asset management divisions routinely determine which services they “own” and which they “oversee.” To make this determination they must have enterprise knowledge, a profound understanding of which facilities- related services truly enable the organization’s missions, and which services merely support them. To act on this knowledge, facilities asset managers must have skills in strategic planning, investment decision making, contract oversight, communication, negotiation, and risk assessment and management. They must

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 CORE COMPETENCIES FOR FEDERAL FACILITIES ASSET MANAGEMENT also be able to perform detailed technical analyses of the alternatives; financial analyses of the relative costs, benefits, and cash flows of those alternatives; project management analyses; and construction management activities to implement and adjust policies, standards, and resource allocations (NRC, 2000). As facilities asset management divisions contract out services, federal employees will need to have technical competencies related to architecture, engineering, and project management so that they can be smart buyers of services and oversee contracts. Federal facilities asset managers will still be called on to make decisions about design change orders, contract negotiations, claims and disputes, or other things that can affect safety, risk, life-cycle costs, schedule, and the community where the facilities are located. Such decisions must be based on a foundation of technical knowledge and expertise. BUDgETARY PRESSURES Within the federal government, decisions on investment in and management of facilities involve multiple stakeholders (Congress, the executive branch, the public), multiple decision makers (the President, Congress, the OMB, senior exec- utives of departments and agencies), and the more than 30 facilities asset man- agement divisions whose primary responsibility is to manage their organization’s facilities portfolio. The President and Congress are responsible for providing leadership and vision, setting policies, enacting legislation, establishing regula- tions, and authorizing and appropriating public funds. Civil servants and political appointees in the various federal organizations are responsible for administering programs, establishing and executing processes, analyzing results, recommend- ing initiatives, enforcing regulations, and expending public funds efficiently, effectively, and legally. In this decision-making structure, the various government entities have diverse but overlapping objectives (NRC, 2004). In the federal budget process, funding requests typically exceed available funds. Only a relatively small proportion of the federal annual operating budget is discretionary, because the bulk of it is constrained by entitlement programs such as Social Security, Medicare, and Medicaid and by the need to maintain ongoing programs and services seen as critical or valuable. In any environment where expectations exceed resources, trade-offs must be made. Decision makers in Congress and federal departments and agencies are asked to balance the compet- ing demands of very different programs: Funding for facilities must be weighed against funding for medical research, weapons systems, homeland security, educa- tion, and numerous other public programs. Insufficient funding to adequately maintain the existing federal facilities portfolio is a decades-old issue. Funds appropriated by Congress to federal organizations for new construction, modernization, operations, maintenance, and management are classified as discretionary in the budget process. Projections for the federal budget through 2040 indicate that an ever-increasing proportion of

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 FORCES AFFECTING THE FEDERAL GOVERNMENT federal expenditures will be needed for entitlement programs, leaving an even smaller proportion for discretionary expenditures (Figure 2.1). This situation will place even greater demands on facilities asset managers. As federal facilities continue to age and deteriorate, the funding required for operations and maintenance will escalate exponentially. As budgetary pressures rise and as facilities portfolios become better aligned with missions, the dollars allocated to facilities will be increasingly scrutinized for their return on invest- ment, making life-cycle planning more prevalent and visible. As discretionary funds decrease, federal asset managers are likely to seek alternatives to budget appropriations to acquire and operate facilities. They will also be called on to dispose of excess facilities by title transfers or other means. Alternative means of acquisition such as public-private partnerships, sale-and- leaseback arrangements, real property exchanges, the sharing of facilities with other federal agencies, and title transfers will call for staff who can innovate across traditional functional lines and processes and work effectively with staff from the private sector and state and local governments. Staff will need to know about real estate finance and economics, have a profound understanding of federal regulations and procedures, and be able to recognize opportunities to accomplish organizational missions. They will need listening and negotiating skills and skills that allow them to turn an opportunity into a reality. FIGURE 2.1 Spending as a share of gross domestic product. SOURCE: GAO (2006).

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0 CORE COMPETENCIES FOR FEDERAL FACILITIES ASSET MANAGEMENT ADVANCES IN TECHNOLOgIES Rapid changes in information technology (IT) have had remarkable impacts on the ways we live, work, and interact. Just as the interstate highway system provided Americans with unprecedented physical connectivity, the Internet and wireless technologies are providing virtual connectivity. Technologies already make it possible to carry out paperless transactions—for example, to obtain music without visiting a record store or to plan and execute work without the benefit of office space. The automation of routine tasks has the potential to free up workers’ time to concentrate on “knowledge” work. Today, IT is an integral part of the work environment, such that an organization’s information infrastructure is as important as its physical infrastructure. Many employees of service-based private enterprises already work from home or from mobile offices, reducing the need for corporate workspace. Given current trends, it is likely that a greater portion of the federal workforce and its contractors will be working off-site, elevating the importance of digital infra- structure and knowledge management and lessening the amount of physical space required by agencies. The type of physical space required may also change, such that more meeting spaces and fewer individual workspaces will be needed. IT is also changing the physical infrastructure and the methods for its development and management. Sensor technologies embedded in building com- ponents allow managers to gather more real-time operational data, while three- and four-dimensional models permit visualization and simulation of design and construction prior to project execution. There is every reason to believe that smart buildings will be more common by 2020, with some legacy structures hav- ing been retrofitted with infrastructures that support smart work environments. Multidimensional digital models used for building or renovating facilities will become the backbone of the facility management information system where as- built and operational data are housed. Sensors and controls will be embedded in new buildings, providing users with operational data and managerial features. Such a geospatial facility platform will allow unprecedented operational control and information access. Moreover, IT and its supporting tools will enable virtual simulations that are only being imagined today. All of these trends are enabling a new realm of strategic and tactical decisions to be made about facilities-related impacts on the organization, the workforce, and the environment. In some cases, new technologies may be used to automate routine tasks, giving staff the time to work on more complex or strategic tasks. Facilities asset management divisions must employ staff who are knowledge- able about IT and its role in strategic decision making, design, management, and operations. They will need people who can anticipate how IT will help or hinder interaction, collaboration, and understanding among people and work units and how it will change traditional processes and the relationships among people and the organizations involved in those processes. They will need, as well, people with

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 FORCES AFFECTING THE FEDERAL GOVERNMENT the leadership skills necessary to bring about changes in management, business processes, and organizational culture. Because of downsizing and the inability to hire younger, tech-savvy workers to replace retiring federal staff, federal facilities asset management divisions generally do not have people who are able to take advantage of the opportunities presented by advances in IT or who understand their implications for workforce processes and relationships. SUSTAINABLE DEVELOPMENT As world population increases and the economies of China, India, and other countries continue to grow, the demand for natural resources—energy, water, building materials—may outstrip supply. Some side effects of increased develop- ment, such as air and water pollution and greenhouse gas emissions, have raised concerns about global climate change and the future quality of life on Earth. These concerns have spawned a movement toward more sustainable development. The Bruntland Commission of the United Nations defined sustainable devel- opment as development that meets the needs of the present without compromising the ability of future generations to meet their own needs (UN, 1987). In 1996, the President’s Council on Sustainable Development (PCSD) wrote that sustainable development means maintaining economic growth while producing the absolute minimum of pollution, repairing the environmental damages of the past, using far fewer nonrenewable resources, producing much less waste, and giving the whole population the opportunity to live in a pleasant and healthy environment (PCSD, 1996). The total U.S. building stock—residential, commercial, institutional, public and private, including federal facilities—accounts for more than 40 percent of U.S. energy use as well as for significant percentages of raw materials, water, and land use. Concurrently, buildings produce 40 percent of atmospheric emis- sions, including greenhouse gases, and significant amounts of solid waste and wastewater (Table 2.1) As the world’s largest single owner of facilities, the federal government has a significant role to play in reducing building-related environmental impacts. Several Executive Orders3 and the Energy Policy Act of 2005 set goals for reduc- ing energy use and greenhouse gas emissions for federal facilities. The Energy Policy Act specifically requires a 20 percent reduction in federal building energy use by 2015 and requires the federal government as a whole to increase its use 3They include Executive Order 13123, Greening the Government Through Efficient Energy Man- agement; Executive Order 13101, Greening the Government Through Waste Prevention, Recycling, and Federal Acquisition; Executive Order 13148, Greening the Government Through Leadership in Environmental Management; and Executive Order 14123, Strengthening Federal Environmental, Energy, and Transportation Management.

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 CORE COMPETENCIES FOR FEDERAL FACILITIES ASSET MANAGEMENT TABLE 2.1 Environmental Burdens of Total U.S. Building Stock Including Federal Facilities Share of Share of Resource Use Total (%) Pollution Emissions Total (%) Raw materials 30 Atmospheric emissions 40 Energy use 42 Water effluents 20 Water use 25 Solid waste 25 Land (SMSAsa) 12 Other releases 13 a SMSA, standard metropolitan statistical area. SOURCE: Levin (1997). of energy from renewable resources (e.g., hydroelectric, geothermal, wind, solar, and biomass) to 7.5 percent or more by 2013. Executive Order 14123, “Strength- ening Federal Environmental, Energy, and Transportation Management,” issued in January 2007, requires federal organizations to improve energy efficiency, reduce greenhouse gas emissions, and reduce water consumption intensity. It also requires organizations to ensure that new construction and major renovation of federal buildings comply with the Guiding Principles for Federal Leadership in High Performance and Sustainable Buildings and that 15 percent of the exist- ing building inventory at the end of fiscal year 2015 incorporate the sustainable practices in the Guiding Principles. Managing federal facilities portfolios more sustainably requires staff who understand how buildings affect and interact with the environment and how the choice of materials and design will affect both a building’s life-cycle costs and the organization’s long-term fiscal outlook. Sustainable management also requires individuals who can analyze data; assess the implications for energy use and water use, indoor environmental quality, and systems longevity; propose a course of action; and communicate their recommendations to decision makers and building tenants. AgINg FEDERAL WORKFORCE As the baby boom generation approaches retirement, the federal workforce faces the possibility of workforce shortages in the near future and the loss of institutional memory and experience. Studies by the Partnership for Public Service (PPS), a nonprofit agency dedicated to making the federal government a competi- tive employment option, predict that retirements and resignations will result in large-scale federal turnover by 2010. Four of every ten individuals in the Senior Executive Service, which includes most career management and policy positions in the executive branch, are projected to retire by 2010 (PPS, 2006).

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 FORCES AFFECTING THE FEDERAL GOVERNMENT One potentially enduring outcome of these retirements is the loss of insti- tutional knowledge—particularly knowledge related to the design, construction, and operation of specialized facilities such as complex military and civil works projects. As experienced personnel leave the federal government, their on-the-job knowledge of standards and criteria, unique user needs, and construction efficien- cies could be lost unless efforts are made to capture it in such forms as databases, standards, decision-support tools, training manuals, or advisory councils. At best, loss of this knowledge base might result in a few project-specific inefficiencies; at worst, it could adversely affect military preparedness and national security. ATTRACTINg A NEW gENERATION OF WORKERS TO THE FEDERAL gOVERNMENT As the bulk of today’s workforce retires, the federal government will be challenged to attract a new generation of workers into its service: a tech-savvy generation born into the Information Age. This generation of workers will be accustomed to connectivity, mobility, and information availability. The federal government has not been an employer of choice for this genera- tion (PPS, 2006). Currently, only 3 percent of the federal workforce (military personnel excluded) is younger than 25 (PPS, 2006). A survey found that although nearly half of the college students interviewed were interested in federal service, most were unaware of federal career opportunities. Many said that “too much bureaucracy” and “low salaries” were the biggest reasons not to work for the government. The federal hiring process, which is confusing and cumbersome, is also a barrier to recruitment. In a report to the President and the Congress, the U.S. Merit Systems Protection Board (MSPB, 2004, p. 17) said The Federal hiring process is often a long process. The U.S. Government Accountability Office (GAO) estimates that it takes an average of 102 days to complete all of the steps in the competitive hiring procedure (from making the request to fill the position to making the appointment). . . .The longer the process takes, the more applicant attrition is likely to increase as potential candidates accept positions with other employers. . . . The Federal hiring process is also complicated. Many applicants claim they do not understand how to apply, and this deters them from doing so. Attracting, training, and retaining qualified staff is also an issue in the private sector because facilities asset management is evolving. A report by the Center for Construction Industry Studies (CCIS), which looked into both public and private sector firms, found as follows (CCIS, 1999, p. 30): It is fairly widely recognized in owner firms that the skill set required to man- age and work on projects from the owner’s side has changed dramatically (e.g., more “soft” skills are important; deep technical knowledge is less important).

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 CORE COMPETENCIES FOR FEDERAL FACILITIES ASSET MANAGEMENT . . . The issue of skill development of owner personnel is perhaps the most important difficulty facing owner firms. The vastly increased reliance on con- tractors has required new methods of structuring and managing projects. These new methods cannot be implemented without adequate skill and preparation of owner personnel. An industry-wide deficit of skilled professionals means that federal organi- zations cannot rely on outsourcing alone as either a short- or long-term strategy for facilities asset management. To fill skill gaps and to develop and sustain core competencies and capabilities over time, federal organizations will need to imple- ment a range of strategies, as discussed in Chapter 4. The workplace itself is often an overlooked factor in workforce recruitment and retention, and the workforce of tomorrow will have particular expectations for the workplace environment. These expectations will likely include immediate and reliable access to information from anywhere and at any time; meeting space for communal gatherings, information exchange, and telecommuting; and tools for digital hardware, media, and communication. Thus, the configuration of the workplaces throughout the federal government will need to evolve. To support the retention and recruitment of workers, facilities managers will need to find ways to economically modify existing assets and design new space. An “information and control infrastructure” will become one of the central components of the facilities portfolio, and its reliability will be essential. Facilities asset managers will need to coordinate across traditional functional lines to bring together information technology groups and other tenants as facilities are modernized, expanded, and operated. A NEW PARADIgM IS ESSENTIAL By 2020, the divisions that manage federal facilities will require professionals with a multifaceted, wide-ranging set of knowledge, abilities, and skills if they are to effectively support the missions of their organizations. Their staff must collectively be able to • Identify which facilities enable or hinder the achievement of the organi- zation’s missions. • Formulate and evaluate alternatives for acquiring, renovating, or disposing of facilities. • Use information technology effectively for decision support. • Identify and quantify the potential consequences of decisions. • Develop and execute strategic plans to align current facilities portfolios and available resources to missions. • Act as smart buyers of services and oversee contracts.

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 FORCES AFFECTING THE FEDERAL GOVERNMENT • Work with staff from other agencies, state and local governments, and the private sector. • Assess and manage risk. • Determine which strategies and mechanisms will be most effective in particular situations. • Communicate information effectively to others inside and outside their organization. • Innovate across traditional functional lines and processes. To fulfill these responsibilities, the staff of facilities management divisions will need a range of technical, behavioral, and business skills and enterprise knowledge to effect changes in management, business processes, and the orga- nizational culture. Although federal organizations face many challenges in developing such a workforce, they also have a significant opportunity: As the current workforce retires and as technologies become increasingly important in decision support and daily operations, their asset management divisions can redefine their core competencies and then hire, train, and equip a workforce that has the knowledge, skills, and abilities required to move forward. To meet current and future challenges, federal facilities asset management divisions must continue to evolve and do so quickly. The director of such a divi- sion and the senior real property officer should be involved in the organization’s strategic planning and executive-level decision making, which requires a macro- scopic, strategic view of the assets being managed. Moreover, the staff of these divisions must have the appropriate education and skills and be organized into a structure that enables achievement of organizational missions by linking day-to- day operations and facility investments. Thus a new paradigm is essential. Indeed, one of the more complex and excit- ing challenges confronting federal asset management divisions is the formulation of strategies to support the migration of their organizations from the workplace of today to the workplace of tomorrow. The pending retirements of significant numbers of federal employees, coupled with new technologies and an increased appreciation for the role of facilities in achieving missions, present an opportunity to transform facilities asset management divisions and grow a new generation of facilities managers. The core competencies—essential areas of expertise and the skills base—required by facilities asset management divisions are the subject of Chapter 3. REFERENCES CCIS (Center for Construction Industry Studies). 1999. Owner/Contractor Organizational Changes, Phase II Report. Austin: University of Texas Press.

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 CORE COMPETENCIES FOR FEDERAL FACILITIES ASSET MANAGEMENT Economist Intelligence Unit and Andersen Consulting. 1999. Vision 2010: Forging Tomorrow’s Public-Private Partnerships. New York. GAO (Government Accountability Office). 2005. Military Base Closures: Observations on Prior and Current BRAC Rounds. Washington, D.C.: GAO. GAO. 2006. The Nation’s Long-Term Fiscal Outlook. Washington, D.C.: GAO. Levin, H. 1997. Systematic Evaluation and Assessment of Building Environmental Performance. Second International Conference on Buildings and the Environment, CIB TG8, Environmental Assessment of Buildings, June 9-12, Paris. Rotterdam, The Netherlands: International Council for Research and Innovation in Building and Construction. MSPB (U.S. Merit Systems Protection Board). 2004. Managing Federal Recruitment: Issues, Insights, and Illustrations. Washington, D.C.: MSPB. PCSD (President’s Council on Sustainable Development). 1996. Sustainable America: A New Consensus for Prosperity, Opportunity and a Healthy Environment for the Future. Available at . Accessed November 21, 2006. PPS (Partnership for Public Service). 2006. Back to School: Rethinking Federal Recruiting on College Campuses. Washington, D.C.: Partnership for Public Service. UN (United Nations), World Commission on Environment and Development. 1987. Our Common Future. New York: Oxford University Press.