Real Property Portfolio Optimization

Transcription

1 Real Property Portfolio Optimization Improving and Modernizing Management of the Federal Real Property Portfolio to Optimize Space, Financial Resources and Energy Impact

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3 Contents 4 The Regulatory Environment for Real Property Management 6 Real Property Challenges and Solutions 8 Federal Real Property Optimization Maturity Model 10 Case Studies Backcover Contacts Real Property Portfolio Optimization Federal Management Solutions Offering 3

4 PwC has long assisted federal agencies in managing their real property portfolios to comply with reporting and management requirements for the real property assets, energy usage, workforce support and other relevant factors. We have helped agencies mature their processes in order to make informed decisions on use and allocation of real property. That information includes complete inventory of buildings, structures and land, with necessary detail on size, use, useful life, condition, and various aspects of construction and energy use. Facility managers, financial officers and agency heads need to understand key information about this significant set of assets in order to make most efficient use of the portfolio they have, use or inhabit. PwC is the partner to help federal agencies manage their real property portfolios. The Regulatory Environment for Real Property Management > The Federal government has identified the need for more effective real property management, as it recognizes the significant financial resources invested in these assets. President Barack Obama issued the Presidential Memorandum, Disposing of Unneeded Federal Real Estate - Increasing Sales Proceeds, Cutting Operating Costs, and Improving Energy Efficiency in June The Memorandum directs agencies to accelerate efforts to eliminate excess properties and identify other cost-savings opportunities through increased efficiency in utilization, space, consolidation, and cost avoidance measures such as telework. The Memorandum also requires agencies to identify real property cost reduction opportunities that yield at least $3 billion in federal cost savings by the end of FY These cost savings are expected to result from reduced operating, maintenance, and energy expenses from disposals or other consolidation efforts. Federal real property management appeared as an issue on the GAO High Risk List in Prior to this, the government had also made various attempts to improve federal asset management of its extensive holdings. The House Government Reform Committee passed H.R. 2548, the Federal Property Asset Management Reform Act of 2003, though it never became law as the Congressional Budget Office (CBO) expressed concerns over the Act s financial burden. In February 2004, President George W. Bush issued Executive Order (EO) 13327, Federal Real Property Asset Management, which borrowed several key provisions from H.R Real Property Portfolio Optimization Federal Management Solutions Offering

5 Figure 1: Real Property Regulatory Environment through 2010 and mandated that executive branch departments and agencies improve their real property asset management. EO instructed agencies to promote efficient and economical use of real property, increase agency accountability and management attention to real property reform, and establish clear real property goals and objectives. Major provisions of EO included the following: (1) creation of the Senior Real Property Officer position at major landholding agencies, (2) the development and implementation of agency asset management plans, and (3) the creation of the Federal Real Property Council (FRPC) which issues annual real property reporting guidelines. Agencies are to use their asset management plans and other data collected with respect to inventory and performance to determine the extent to which their real property holdings are lacking, sufficient, or in excess to carry out their respective missions. President Bush issued EO 13423, Strengthening Federal Environmental, Energy, and Transportation Management in January 2007, which directed federal agencies to conduct their environmental, transportation, and energy-related activities under the law in support of their respective missions in an environmentally, economically, and fiscally sound, integrated, continuously efficient, and sustainable manner. Recognizing the interdependency of effective real property asset management and the reduction of greenhouse gas emissions, President Obama issued EO 13514, Federal Leadership in Environmental, Energy, and Economic Performance in October EO expanded on energy reduction requirements in EO and included provisions for managing existing buildings to reduce energy, water, and materials consumption in an effort to improve sustainability. In fall 2010, the House of Representatives Republican staff of the Committee on Transportation and Infrastructure released a report on opportunities for cost savings associated with real property assets within many transportation focused agencies. This type of activity signals an interest in the incoming Congress on these issues as well. The actions of the last two administrations and Congress express the need for improvement in Federal real property asset management. This collection of regulations and guidance places significantly increased demands on federal agencies to dispose of excess real estate, make more efficient use of existing assets, eliminate ineffective lease arrangements, explore innovative approaches to space management, and reduce annual operating costs of existing assets with a focus on environmental responsibility and sustainability. Satisfying these demands poses a number of challenges, and PwC s experience in providing real property solutions can help federal agencies achieve success in meeting them. Real Property Portfolio Optimization Federal Management Solutions Offering 5

6 Past attempts at reducing the Federal Government s civilian real property assets produced small savings and had a minor impact on the condition and performance of mission-critical properties. These efforts were not sufficiently comprehensive in disposing of excess real estate and did not emphasize making more efficient use of existing assets. - President Obama, Memorandum -- Disposing of Unneeded Federal Real Estate, June 10, 2010 Figure 2: Federal Real Property Optimization Maturity Model 6 Real Property Portfolio Optimization Federal Management Solutions Offering

7 Real Property Challenges and Solutions > The requirements stemming from the Presidential Directives and OMB guidance present Federal agencies with resource and cost challenges, reporting challenges, and implementation challenges. Each agency has its own agency specific issues and challenges depending on the complexity of the real property portfolio, the maturity of its real property management practices and the overall control environment as it relates to real property management. Challenges may relate to the following: Identifying excess and creating opportunities for disposal Restructuring the budget or funding priorities to accomplish disposals Identifying, prioritizing and gaining funding for deferred maintenance and/or major construction to improve overall safety, efficiency and usability Greening specific to energy efficiency and other environmentally sound aspects of real property assets Right-sizing the portfolio to fit usage, taking into account personnel factors such as telework Having a comprehensive, data-rich inventory that allows managers to make decisions Having policies, processes and controls in place to effectively manage the risk involved with the valuation, maintenance and use of the portfolio The extent to which an agency is in a position to address these challenges will depend on its responses to these fundamental questions: Has the agency determined its real property asset needs, based on current and future mission and workforce? Does the agency have the proper processes, procedures, controls and systems in place for collecting sufficient, timely, complete, and accurate real property data in accordance with the requirements? Has the agency committed adequate resources to meet current goals, properly monitor performance, and drive continuous improvement for effective real property management? Has the agency calculated its carbon footprint as it relates to real property? Does the agency have the information necessary to make trade-off or planning decisions on cost saving measures? PwC has created a federal real property optimization maturity model, shown in Figure 2 (to the left). This model illustrates how agencies with a mature, or optimized approach are those where asset management business goals and objectives are established, tracked and reported regularly to senior leadership. These agencies make business decisions based on current asset data, and they can quickly take actions such as identifying like kind exchanges, implementing cost reduction measures in alignment with strategic plans, and making relocation decisions. These agencies have a 5-10 year space management plan, a deferred maintenance budget program and a riskbased real property management plan. Real Property Portfolio Optimization Federal Management Solutions Offering 7

8 Federal Real Property Optimization Maturity Model > PwC has several clients whom we have helped mature their processes towards optimization. For these clients, PwC brings to bear a total solution that facilitates mature real property portfolio management. The stages of the maturity model are shown below, with a sample of key activities that PwC helps agencies with each stage, depending on an agency s needs: Initiate Real Property Portfolio Management Define Asset Inventory and Subcomponents Assess Inventory Initiate Real Property Sustainability Initiatives Allocate indirect costs Assess Construction Allowance Inducement Assess Organizational Structure Define Requirements Assess Human Capital Implications Assess Technology Define Real Property Portfolio Management Create Real Property Inventory Data Model Remediate Financial Audit Issues (if applicable) Calculate Carbon Footprint Create / Refine Performance Metrics and FRPP Submission Define Technology Requirements 8 Real Property Portfolio Optimization Federal Management Solutions Offering

9 Measure Real Property Portfolio Management Calculate and Implement Capitalization Procedures Implement Space Management Implement Lease Management Develop Business Cases Implement Facility Management Incorporate into A-123 Process and Leverage Results Create Policies and Procedures for Managing Sustainability of Real Property and Incorporate Them into the Organization s Activities Implement Maintenance Management Define Asset Level Performance Implement / Modify Technology Integrate Real Property Portfolio Management Integrate Real Property Policy Review Implement Real Property Cost Savings Plan Integrate Energy-Efficiency / Carbon Emission Data into Management Decision-Making Assess and Manage Risk Integrate Performance Tracking Optimize Real Property Portfolio Management Use Standard Operation Procedures (SOPs) Implement Cost Reduction Strategies and Align Facility Management with Strategic Plans Act on Disposal, Relocation and Consolidation Plans Fully Leverage Technology for Reporting and Decision-Making Throughout this process, we bring the following experience: We help agencies create reporting and performance measurements to allow agencies to plan strategically, reduce costs, and prudently invest for efficient operations in a properly conditioned and efficiently utilized portfolio that supports the mission. Managing performance measurements allows agencies to drive positive results and sustain excellence. Our strategic planning and capital projects experience allow us to help agencies make informed decisions about their real property holdings and encourage alignment between real property and mission goals. We design sound, repeatable and risk-based processes for identifying and collecting required data such that the data are reliable and useful for reporting. We have globally-recognized expertise in calculating carbon footprint and analyzing real property energy usage metrics, and helping organizations act on that data to improve energy efficiency. We have data management solutions that allow our clients to consolidate data from multiple systems onto a shared platform for ease of reporting and decision making We have financial management experience to assist agencies in properly valuing, reporting, and planning related to real property, and to help align clients policies and procedures with sound financial management. Our facility management capabilities help facility managers identify and prioritize projects related to upkeep, maintenance, energy efficiency and facility use. Real Property Portfolio Optimization Federal Management Solutions Offering 9

10 Case Studies Following are just a few examples of how PwC collaborated with agencies in addressing real property management challenges. Department of Defense (DoD) Department of Transportation (DOT), Federal Aviation Administration (FAA) PwC supported the development of both strategic and operational documents that directed the transformation of the real property information management processes. The transformation consisted of developing data generation processes to cost effectively model selected assets, develop visual reporting dashboards to manage at the right costs, condition, and size and support disposal decision making. Key Accomplishments: Developed the Real Property Asset Management Plan, Three-Year Timeline, and System Framework documents Conducted analyses to identify common areas for measurable performance improvement and recommend assets for disposal Developed an automated real property performance dashboard Defined requirements and established a business case for the consolidation, integration, and replacement of DoT s real property systems As a result of this common effort, DoT was recognized by the Federal Real Property Council (FRPC) as one of the top five Federal agencies in disposal of real property assets. PwC provided Real Property and Property, Plant & Equipment management expertise to formulate DoD Real Property Policy and Procedures and integrate Real Property accountability and valuation procedures with the DoD Financial Management Regulations. Key Accomplishments: Provided financial management and real property subject matter experience to develop and recommend changes to DoD Financial Management Regulations and Federal Acquisition Regulations Supported DoD s pilot programs compliance assessment with Real Property Inventory Requirements and other initiatives Supported real property requirements and initiatives of the President s Management Agenda, Federal Real Property Council, and Office of Management and Budget Assessed Real Property accountability and valuation for the U.S. Army Corps of Engineers Financial Statement Audit Assisted DoD to determine baseline values for real property historical costs and provide for accountability and compliance. Identified weaknesses in human capital, knowledge management, and compliance with real property management policies and procedures PwC successfully supported DoD s Defense Business Transformation process to standardize and streamline business processes, and correct financial management weaknesses. 10 Real Property Portfolio Optimization Federal Management Solutions Offering

11 U.S. Department of the Interior (Interior), U.S. Fish & Wildlife Service (FWS) The PwC team assisted with conducting on-site inspections, collecting pertinent real property asset data and digital photographs, estimating repair and system replacement costs, field verifying or developing floor and roof plans, and uploading the data for selected properties into the NPS Facility Management Software System (FMSS). Key Accomplishments: Developed a comprehensive Five-Year Space Management Plan to help the Service efficiently and effectively manage asset life-cycles Developed the Real Property Financial Management Handbook to drive accurate financial management and reporting of real property assets Identified trends, underlying root causes attributable to significant asset valuation variances The Five-Year Space Management Plan was completed ahead of schedule and received formal recognition from the Department for the quality of the plan. The effort was recognized by stakeholders from multiple programs for the progress made in managing financial information for real property assets, and for the establishment of internal controls to encourage better valuation of assets. Department of the Interior, National Park Service (NPS) PwC helped with analyzing the existing improvement assessments and assisted in developing management tools and guidance for use in determining changes to assessment valuations in the field. Key Accomplishments: Performed comprehensive facility condition assessments on critical assets including calculation of replacement values Created cost estimates for reinvestment to improve assets to right condition Recommended a technology solution to programmatically manage and align real property asset inventory data throughout NPS As a result of these efforts, NPS received a complete data set of facility condition assessments, cost projections for improving asset conditions and accurate replacement values. Further, PwC assisted NPS in identifying areas of needed improvement in compliance with current regulations, potential alternatives, and understanding risks associated with proposed changes. General Services Administration (GSA), Public Buildings Service GSA is implementing innovative, green solutions in federal buildings through the American Recovery and Reinvestment Act funding, and by striving to become a zero environmental footprint (ZEF) organization. The Recovery Act granted GSA $4.5B to help convert federal buildings into high-performance green buildings (HPGB). The GSA Recovery program management office (PMO) faced challenges in defining a streamlined process to track HPGB project information for reports, assess project status towards sustainable design, and create a structure for managing strategic information to encourage collaborative progress towards GSA s sustainability goals. PwC developed an IT based solution to consolidate project data while facilitating a management process that engages multiple stakeholders to collaborate and provide input into the design and construction of all Recovery projects nationwide. The PwC team worked with experts in architecture, engineering, and construction management to define performance benchmarks for sustainable projects to adhere to GSA s guidelines and minimum performance criteria (MPC). Key Accomplishments: Created a tool that serves as one of GSA s primary tools to track and report on progress toward its Recovery Act goals by collecting performance metrics, project status data, and compliance with MPCs. Provided valuable information for reporting to external stakeholders such as GAO, OMB, Congressional Offices, and the White House and numerous internal stakeholders. The Recovery PMO is able to field a range of questions about the nature and progress of Recovery work, satisfying the higher threshold for transparency and accountability within GSA s Recovery Program. Allowed the Recovery PMO to project how the portfolio will benefit from implementing sustainable design (in energy efficiency, renewable energy production, waste diversion, and cost reductions). Established a multi-user process for the Recovery PMO to review individual projects design elements and encourage compliance with the MPCs. This process mitigates project risks and allows the PMO to influence and guide project decision-making towards sustainable design goals Real Property Portfolio Optimization Federal Management Solutions Offering 11

12 For more information about PwC s ongoing support of Federal agencies in increasing the cost-effectiveness and energy efficiency of their real property, in maturing real property portfolio management processes, and in seeking and finding the right information to effectively manage assets, please contact us: 2011 PwC. All rights reserved. PwC and PwC US refers to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.