Maintaining Quality in an Era of Reduced Resources

Robert A. Peck

General Services Administration

The reality of reduced resources confronts all of us who serve in the federal government. At the General Services Administration (GSA), one way this trend can be defined is in terms of our shrinking workforce. In the past two and one-half years, the GSA's Public Buildings Service (PBS) has lost between 20 and 24 percent of its workforce. At the end of the 1970s, PBS had around 18,000 people; today we number only about 8,000.

Much of this loss has been due to contracting out. Of our budget of $5.5 billion for fiscal year 1996, about 90 percent is for services that are contracted out. PBS has done about all the downsizing of federal employees that it can. As I have discussed with members of Congress, we cannot spend more than 90 percent of our budget for outside services without turning over critical management functions to the private sector. We are already a well-developed, public-private partnership as envisioned by the National Performance Review.

Greater Efficiency

Last year, under the guidance of the Arthur Andersen Company, we conducted a series of studies called the Federal Operations Review Model, or FORM. Our intention was to identify the best organizational models for the work we do, using relevant examples and methods from the private sector. Teams were formed to study each major part of PBS and compare our service delivery costs with those of the private sector. GSA was found



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--> Maintaining Quality in an Era of Reduced Resources Robert A. Peck General Services Administration The reality of reduced resources confronts all of us who serve in the federal government. At the General Services Administration (GSA), one way this trend can be defined is in terms of our shrinking workforce. In the past two and one-half years, the GSA's Public Buildings Service (PBS) has lost between 20 and 24 percent of its workforce. At the end of the 1970s, PBS had around 18,000 people; today we number only about 8,000. Much of this loss has been due to contracting out. Of our budget of $5.5 billion for fiscal year 1996, about 90 percent is for services that are contracted out. PBS has done about all the downsizing of federal employees that it can. As I have discussed with members of Congress, we cannot spend more than 90 percent of our budget for outside services without turning over critical management functions to the private sector. We are already a well-developed, public-private partnership as envisioned by the National Performance Review. Greater Efficiency Last year, under the guidance of the Arthur Andersen Company, we conducted a series of studies called the Federal Operations Review Model, or FORM. Our intention was to identify the best organizational models for the work we do, using relevant examples and methods from the private sector. Teams were formed to study each major part of PBS and compare our service delivery costs with those of the private sector. GSA was found

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--> to be generally competitive with the private sector. Many of our building management costs turned out to be lower than the costs for comparable private buildings, as reported by the Building Owners and Managers Association. We are also near private sector benchmarks both in general and specialized facilities construction. In workmanship, courtroom size, and especially security, the federal government generally builds better courthouses than state governments. In defending our budget recently, I realized there is one thing the private sector does that we fail to do. Unlike the private sector, we do not review our project and building operating costs relative to program costs. As a rule of thumb, 25 percent of gross operating costs is about what an average company is prepared to pay annually for real estate. The public sector generally does not think about real estate in this way. I believe that our $5.5 billion budget in the Public Buildings Service ought to be compared to some output measure, rather than being considered simply a cost. Using this approach, we first consider that we accommodate roughly 1 million federal employees. According to the Office of Personnel Management, on average, about $55,000 is spent for salaries and benefits for a federal employee annually. If so, we have about $55 billion in personnel costs (as a sort of output measure) compared to $5.5 billion of real estate costs. That is not a bad ratio. However, such ratios are elusive in government. In manufacturing, facilities costs would be reflected as a percentage of cost-per-unit. But much of government is a service industry. Some government agencies disperse money (e.g., Social Security), and some collect it (e.g., Internal Revenue Service). However the calculation is done, we should begin to analyze our real estate as a production factor in the broader scheme of providing public service. At a time when government budgets are increasingly viewed from a private sector perspective, such an analysis would depict government programs as more than mere cost centers. Managing Quality How are we managing quality, given our limited resources? Throughout government we are confronting changed ways of working. I recently attended a conference, sponsored in part by a high-tech firm (in cellular and military communications). This firm expects their people to

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--> do completely different functions every 18 months, on average. Of course, this is driven by their product cycle. But their engineers shift the product teams and often the work environment every 18 months. This high-tech company has devised many adaptive arrangements, similar to those shown in a recent popular article on the office of the future. Workstations in these cases may be very small, but the coffee break areas look like work areas, with chairs, computer consoles, and whiteboards. People can meet and exchange information well in these spaces. When we talk of quality in the workplace, we need to start pushing these kinds of ideas. I am convinced that taking a fresh look at the nature of our workplaces could lead to an increase in productivity. GSA has had projects before on the workplace of the future. We have begun something internally that we call the ''skunk works,'' after the Lockheed plant that produced some of the better secret airplanes for America. We wanted to keep this activity somewhat under wraps until we thought we knew what we were doing. One group is looking more closely at how we can achieve better productivity in the federal workplace. I do believe we lag behind the private sector in developing work environments that foster productivity. If we are to fund the construction of such work environments, we will need tools to measure the resulting gain in productivity and thereby justify the expenditure. It is a daunting prospect. Some business professors have warned me that we would not be the first to try to measure white collar productivity gains, but I am hoping we will be the first to do it successfully. We are all familiar with the studies which conclude that over the course of a building's life, say, 20 years, only 5 percent of the facility's costs are in initial construction. Another 5 percent are in operating expenses, the last 90 percent in personnel costs. I keep pointing this out to people who are not in real estate, and I keep getting glazed looks. Some of the spending on design and construction or maintenance and operations might well affect the return on the 90 percent spent on personnel. Downsizing We are as interested as anyone in the governmentwide outcome of downsizing. But I find throughout government that agency heads can seldom divine the impact of downsizing on their space needs. Many

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--> agencies only recently received their fiscal year 1996 budgets. Until then, they could not have projected their space needs for this year, let alone for the two-to-three year timeframe needed for federal office building leases. Generally speaking, however, we know that GSA's huge inventory of government-owned space will be affected by downsizing. About half of our employees are in leased space, about half in government-owned space. We expect that the proportion in owned space will increase, because, obviously, we can let some leases expire as personnel decline. On the other hand, it sometimes costs money to save money over the long run. We have begun to educate our stakeholders regarding the front-end cost to reconfigure government-owned space to accommodate staff from vacated leased space. So far, we have been unsuccessful in these discussions. Those who control the purse strings expect to reap the benefits of downsized government in real estate costs, but they have not provided us with the money needed for the transition. We will need the help of federal agencies to make that transition. We will all need to manage this well if we wish to avoid embarrassing newspaper exposes, such as those about a vacant government building with five years left on its lease. Reengineering We are undertaking several reengineering initiatives in GSA. Federal executives tell me our processes take too long, and if we really want to serve our customers, we will provide quality space. I believe we have accomplished the second part of this; gone are the days when we leased third-tier buildings. However, we still need to work more expeditiously. The Arthur Andersen study also recommended that we improve our information systems. Our basic computer system is a mainframe with batched processing, the same system I was introduced to in 1979. I believe it was obsolete then. We are developing better systems, something we owe to the agencies and to ourselves. Our reengineering efforts began with our leasing process. The procurement system requires, correctly, I think, that GSA use fair and open competition for most major expenditures of federal money. A largely tacit policy says that we should break our purchases down into small units to allow the maximum participation by various firms around the country. Such a system well reflects the intention of our Founding Fathers in

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--> Philadelphia in 1787. It springs from the core of our representative form of government. Still, that system will allow improvement, mainly where we have regulations that are not legally required. In July 1996, GSA will hold a nationwide meeting of our 700 leasing people, from the top managers in Washington to the support people in the regions. We will reinvent the leasing process so that it works faster for our clients and for private sector building owners. Our process will look much more like that of the private sector. We believe it will tremendously reduce the amount of time it takes to acquire space and sign a lease. Some of regions around the country have done a terrific job reinventing the process themselves. We are going to adopt their insights and build upon them. Surely this new process will save money. I was once a private sector lawyer representing landlords who leased to the government. We included in our bids to government an expense factor, for the additional time and inconvenience of negotiating with them. GSA has also been operating several pilot projects to have commercial brokers provide leasing services in several regions. However, while the Office of Management and Budget may be saying, "Privatize," the Federal Acquisition Streamlining Act makes doing so quite difficult. This act suggests that we cannot contract out to the private sector for these services before surveying all other federal agencies to see if a leasing specialist is momentarily available. At GSA we have made the very consequential commitment to give up our mandatory status as provider of leasing services to the federal government, once our leasing program is overhauled, and to compete with other agencies and the private sector. We do hope that we will not be competing with one hand tied behind our back. For example, we should be able to contract with two or three vendors to provide all our maintenance and custodial services, as the private sector would, at a deep discount, given our 73 million square feet of space in the Washington metropolitan area. Or we might model ourselves after the Swedes, who take a very capitalistic approach to facility management. They are permitted to lease space to the private as well as the public sector. If our government did this, GSA would need the authority to borrow money to modernize our space so it could compete in the marketplace. I hope we will get the tools we need to meet the challenges ahead. By the same token, those promoting privatization should consider exactly what it is they mean, including

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--> changing the rules the agencies must follow. A capital budget, while hardly a new idea, may seem appealing, but the notion now faces bipartisan and OMB opposition. While such a budget may appear to be an attractive funding vehicle, it has the disadvantage of distancing expenditures from budgetary review. Conclusion In sum, GSA needs to broaden its project-by-project focus to encompass a broader, management perspective. We need to develop investment measures that demonstrate the value we add. The Federal Facilities Council may help us develop the means to justify our programs, whether by gauging the investment value of our inventory, or the value of our real estate in promoting staff productivity. If we can do this, we can win the argument for resources. If we do not devise such measures, we may well fail to obtain even the minimal resources needed to maintain our inventories, to operate our buildings efficiently, and to build those facilities needed for the government to perform its mission.