Government/Industry Forum on Capital Facilities and Core Competencies: Summary Report (1998)

The Honorable Robert Pirie, Jr.

Assistant Secretary of the Navy for

Installations and Environment

There is a dramatic downsizing underway in the Department of the Navy. The top-line budget has been reduced 42 percent from the years of the Reagan Administration. The fact that the infrastructure budget has been reduced only 27 percent in this period makes the point that when an organization downsizes, the overhead is much more difficult to shed than the direct-labor segment. The challenge has been to accommodate downsizing without crippling the institution.

How does an organization like the Navy downsize without destroying its ability to carry out those tasks it is obligated to do to support the operating forces? It will require what can be called a revolution in business affairs, and will involve new concepts, technologies, organizational structures, doctrines, and programs.

Regionalization is one path the Navy is pursuing to save money. Military base-support functions will be regionalized rather than having each part of a base that responds to a different operating leader have its own accounting system, printing office, and contracts with maintenance crews for painting and the like. Not only will these services be aggregated within bases, but military bases themselves will be consolidated in major fleet concentration areas like Norfolk, Virginia; Jacksonville, Florida; and San Diego, California. This kind of regionalization is expected to save a considerable amount of money. A major fleet concentration area like Norfolk might have as many as 30 to 35 motor

repair shops or 20 calibration laboratories for ship and aircraft maintenance functions, for example. Consolidation of such functions will conserve considerable resources.

The Navy is also consolidating the number of major organizations from 18 different entities down to 8, which is expected to achieve standardization as well as consolidation.

In the future, the Navy will rely more on the private sector for commercial and off-the-shelf items, as well as services. By outsourcing some services, the Navy intends to reduce overhead costs through competition. In the next few years, studies will be conducted on more than 80,000 jobs in the Navy and Marine Corps to determine whether they can be done less expensively by the private sector. This process requires the government to change its internal organization to the most efficient configuration for that competition. About half the time, the studies show the private sector can provide these services more cost-effectively. The average savings have been considerable, at about 30 percent.

In principle, there are not many jobs that are so inherently governmental that they cannot be outsourced-including technical and scientific work, and even work that is highly military-specific and is classified.

The Navy's 215,000 civilians and 380,000 military staff make up an important national asset-technical expertise. Care must be taken in downsizing, consolidating, outsourcing, privatizing, and in otherwise making efficient use of all these people.

The dramatic growth of environmental law and regulation in the past two decades has profoundly influenced the structure and outlook of civil engineering organizations. The base closures of the past decade have also had a profound effect. Pressure on scientific and technical activities is likely to fall more heavily on activities such as civil engineering that do not appear to have a uniquely military focus.

The Navy buys many goods and services from the market in support of its infrastructure. It is occasionally required to build a bridge across an ice-clogged river in a faraway place on short notice and under fire or to comment on a plan to replace an existing air base with one on a floating iron platform 1 kilometer long by 200 meters wide in a part of the world renowned for its typhoons. Virtually any modification of an existing plant or movement of military units from one place to another requires the National Environmental Policy Act to be implemented and faithfully obeyed.

If the Navy precipitously divests itself of engineering capabilities in the facilities engineering area, there might not be an appropriate person ready with an appropriate answer to questions about problems that arise. The Navy must preserve its core competencies in important engineering disciplines and thus must remain uniquely and inherently a governmental function.

Lt. General Joe N. Ballard

Chief of Engineers

The U.S. Army Corps of Engineers is experiencing many of the same challenges facing other governmental agencies and companies in the private sector. Federal resources are diminishing at the same time as demands for services are increasing. Although the Corps has not downsized or outsourced its facilities engineering capability, it is refocusing its work in its core competencies.

The Corps builds facilities for two different clients. In its civil works program, it builds facilities that it will often operate and maintain, such as locks, dams, bridges, levies, and other infrastructure critical to the country. In addition, it provides the same design and construction service to the Army, Air Force, other Department of Defense customers, and federal, state, and international agencies. Because of its size and mix of skills, it often receives assignments that other engineering organizations cannot handle.

Although the Corps has not downsized, it has been affected by downsizing of other organizations. It has a declining construction budget for both military programs and civil works. Its civil work is shifting from new construction towards operations and maintenance. At the same time, the Corps is tightening percentage constraints on managerial funds. Congress has made it clear that the overhead for the Corps cannot be increased. Rather, it has to reduce costs while delivering the same products and services as in the past.

Two years ago, it was decided that a meaningful vision and a strategic plan had to be developed. The Corps is taking a two-prong approach, first by addressing short-term goals and objectives and then by addressing long-term goals and objectives.

A year ago, the Corps created a transition team consisting of about 30 senior leaders from within the Corps, customer organizations, the stakeholders, and the retiree community. Together, they developed a vision for the Corps, and wrote a set of strategic plans for achieving that vision. A series of campaign plans were also implemented as the team worked down through the organization to provide a set of operating plan initiatives for the districts to address a number of short-term goals.

Since late 1997, the Corps has focused on a single vision as

The Corps' vision has three corporate goals: to seek growth opportunities; to revolutionize effectiveness; and to invest in its people. To meet these corporate goals, the Corps established seven substrategies: serve the Army; align for success; satisfy the customer; build teams; reshape cultures; build strategic commitment; and build in-house capabilities. Thus, the focus is on complementing the Army's vision: meeting today's needs, and preparing for tomorrow's challenges.

The Corps defines its core competencies as "a set of interwoven skills tied to information systems and organizational values, a complex set of skills, capabilities and expertise that reside in employees working collaboratively within and across skill sets." To identify these core competencies, several questions had to be answered as part of a litmus test.

• Why do our customers and partners seek us out?
• What skills, functions, or qualities are unique to the Corps?
• Does the competency provide sustainable advantage over other alternative providers?
• Why is the Corps unique from other organizations providing the same kinds of services?
• Is that competency hard to replicate, imitate, or transfer?
• Is it a source of value to the customers and stakeholders?
• Does it cross multiple markets or product lines?
• Is it complex or diffused across a group of employees or does it reside in a small number of employees?

Through this process, the Corps identified a series of core competencies. The first is the ability to respond quickly through its worldwide organization—there are no other governmental engineering organizations with its nationwide and worldwide scope.

The second core competency is that the Corps can quickly and efficiently staff up to any size project with in-house and external resources. It can create a mixed team from the public and private sectors. Third, the Corps provides a structured, rational approach to problem solving and a process for "best fit" decisions, not just build-to-order. The Corps handles major projects in

a rational approach from cradle to grave; it can take a customer's specifications, help him or her determine his or her needs and budget, and then build the project.

In its fourth core competency, the Corps facilitates or brokers cooperative arrangements for its public and private constituencies that might have competing interests. Fifth, it offers full life-cycle project services. After it designs and builds a project for a customer, the Corps can operate it, maintain it, close it if necessary, and even clean up the remaining environmental problems. The final competency is the Corps' ability to implement public policy within the Army ethic. It diligently pursues the public good as it is directed, and safeguards the public interest in its areas of expertise.

The question is ''How can the Corps enhance its capabilities for the future?'' The answer is to continue ongoing engineering work; provide specialized engineering services, when and where appropriate; concentrate certain types of work in particular offices; alter division staff size and functions; and strengthen program management. The Corps has focused centers of expertise in certain locations. It has consolidated many of its capabilities within certain laboratories and field-operating agencies. It is moving toward becoming a full project management organization. Although the Corps expects to change, to develop new skills and capabilities, its core competencies will not change. The Corps cannot lose sight of its purpose, which is to deliver quality products to its customers, on time, and within budget.

Mr. Robert A. Peck

Commissioner of the Public Buildings Service

and

Mr. Myron H. Goldstein

Director, Project Management Center of Expertise

The Public Buildings Service (PBS) of the General Services Administration (GSA) is the federal government's real estate asset manager and is responsible for building, leasing, and operating federal workspace. With an annual budget of approximately $5.5 billion, PBS manages a facilities inventory of over 280 million square feet, accommodating over 1 million workers in more than 8,000 buildings.

The mission of GSA is to provide expertly managed space, products, services, and solutions at the best value and policy leadership to enable federal employees to accomplish their missions. PBS has four primary goals: to promote responsible asset management, compete effectively for the federal market, excel at customer service, and anticipate future workforce needs.

In the past several years, PBS has undergone fundamental change and has reorganized itself as a portfolio management organization. It has begun to look at capital projects as an asset base, not as a disaggregated series of discrete projects, but as an inventory as a whole. Each asset has its value and that value needs to be maintained. When new facilities are built—or it is decided that existing facilities will be renovated-it must be done in such a way that it adds value to the asset base.

The second goal is to compete effectively for the federal market. This goal resulted from the sense that the government itself should be run as a business, and that it can provide more value if it is organized efficiently. Thus, PBS two years ago told its federal clients that they no longer had to use its services if PBS did not have government-owned space available and it needed to lease in the private-sector market. That was one of the fundamental changes made in PBS, not simply in its advertising, but within its internal culture. It emphasized to PBS staff that they must win business from federal customers that previously was guaranteed.

The amount of space handled by PBS has remained relatively static for the last couple of years. Clearly, a part of the government is downsizing and that is reflected in part by PBS's space inventory and in the types of projects that it now undertakes. However, a large part of the government is expanding. The country is engaged in a court construction program unparalleled in any civilian

construction that this country has seen since the public works program of the Depression. Law enforcement agencies, including the Justice Department, Drug Enforcement Agency, Bureau of Alcohol, Tobacco, and Firearms, Federal Bureau of Investigation, and the Immigration and Naturalization Service are all expanding, which is creating a huge demand on GSA's inventory of space. Revenues to the Federal Building Fund are remaining about the same or increasing somewhat because they are tied to the size of the inventory.

Some things have changed, however. PBS employment is down 27 percent since the beginning of the Clinton Administration, from 10,000 to 7,300 employees. (Twenty years ago the staffing level was between 18,000 and 20,000). In FY 1999, about $2.6 billion, a little more than half of PBS's entire budget, will be contracted out.

When considering further downsizing and outsourcing, PBS conducted a series of analyses on each of its discrete functions to see if they measured up to those in the private sector. It found that in most cases they did. With respect to PBS's project management team, the Federal Organization Review Methodology (FORM) analysis indicated that PBS was as efficient in terms of overhead as private-sector project managers. The FORM analysis identified two areas in which PBS did not match up to the private sector: in the use of technology and in aligning its resources to the workload.

The Office of Portfolio Management has become a key function for the organization, and is one of the core competencies it intends to develop further. Specifically, greater business acumen is needed among in-house project managers. Although every project manager might not need the business acumen to figure out an internal rate of return on a project, he or she will need to be watchful of a project's bottom line.

Operating more like a business organization, PBS now provides all its staff, from the top down to the property-management level and individual facilities, with an anticipated budget and with a tracking system to tell them each quarter how they are doing within the system. This will eventually flow through to other items such as bonuses and promotions.

PBS is organized into 11 regions and has decided that it does not make sense for every region to perform all tasks. The organization can no longer afford this redundancy due to downsizing. In addition, some staff have more experience than others and some simply do the job better than others. As PBS identifies the teams that are working the best, those teams will be assigned to do work on a national, rather than a regional, basis.

Last September, PBS announced its establishment of 12 centers of expertise, which are not only doing hands-on work around the country, but are making sure that its core competencies are maintained as the work is performed. PBS's new construction projects, planned for delivery between 1998 and 2002,

are distributed around the country, another element impelling it toward organizing centers of expertise. But in some parts of the country there will be idle technical resources, another factor moving PBS toward these centers. The next step will be for the centers to assess and organize resources to make things happen. In this new experiment, PBS is creating a virtual organization, in which not every national function needs to be headquartered in Washington, D.C. About half will be in the Washington, D.C. region, and half around the country. Functions have been placed where technical competence was determined to reside.

One of the 12 centers is the Project Management Center of Expertise. The mission of this center is to assign GSA's best project managers to the new, most highly visible, most highly complex, high-dollar projects that GSA is building. Identifying the "best in class" project managers has not been easy. In part this is attributable to PBS's desire to find the best project managers, who might not be the best architects or engineers. Management is looking for people with business aptitude and with business degrees and "people skills," people who know how to organize staffs and drive them towards a common goal of delivering a project on time and within budget.

The Project Management Center of Expertise is also in the process of identifying those projects that require a heightened level of management. The center is going to select managers who best work with the type of projects being built. They will work in a virtual state from their existing locations through the use of computers, faxes, cell phones-all the different kinds of technology available today. They will be able to manage projects anywhere in the country while in another location. This will help align resources with the workload at times when more projects are being built in one region than in others.

GSA is also implementing a management information system "toolbox." This computer technology will allow everyone associated with a project, from regional project managers to national program directors, to have access to one data source regarding a project. Management plans, schedules, budgets, expenditures, and change orders will be tracked. This project managers' toolbox should allow GSA to meet its customers' and in-house needs more efficiently and accurately.

PBS is also attempting to create several new databases that can be used nationwide. One will be for architect-engineer (A-E) selection processes. Managers in every region complete evaluations of A-E firms that have contracts with GSA. These evaluations will be entered into a database so project managers anywhere in the country can tie into it and see how an A-E firm under consideration for a contract in one region actually performed on a contract in a different region. A-E firms working with PBS must understand that consistent,

quality performance by their various national branches will be important in the selection criteria for new projects.

The Project Management Center of Expertise is in the process of strengthening the PBS team concept. Project managers will be brought into projects at the concept stage. A team of experts from around the country, either project managers or directors of the other centers of expertise, together with representatives of those agencies for whom the project is being done, will be assembled.

Another team of project managers will be developed to deal with problems. A project manager will be able to call the Project Management Center of Expertise for help and will receive support from other people who have experience with the particular problem and who will help this person succeed.

Knowledge bases will be developed for procurement methods that will take advantage of new ways to make contractor selections based on best value for the government, not based on low bid only. A "lessons learned" database for project managers will be created. Also in the first year, current practices and processes will be reviewed to identify "best practices" that can help project managers succeed and those practices from within and from outside government that can be of benefit.

In the future, PBS plans to create a learning center where less-experienced project managers will have access to information and training. The organization will try to educate its managers through project management institute certification, an assurance that they have reached a certain level of education and know how to be business—and people—managers. A mentoring program is also planned, in which people who might be considering retirement might instead choose to stay on and become a mentor to the less-experienced employees.

All the above represent a change in old paradigms, the creation of new ones, and a change in culture that is intended to be enduring. The response thus far has been positive.