Texas Facilities Commission Maintenance Program Review. A Report of the State Council on Competitive Government

Texas Facilities Commission Maintenance Program Review A Report of the State Council on Competitive Government August 2008

Council on Competitive Government Texas Facilities Commission Maintenance Program Review Members: Hon. Rick Perry, Governor Hon. David Dewhurst, Lieutenant Governor Hon. Susan Combs, Comptroller Hon. Jerry Patterson, Land Commissioner Hon. Tom Craddick, Speaker of the House Ronald Congleton, Texas Workforce Commissioner Edward Johnson, Texas Facilities Commission Dustin Lanier Director In 1993, the Texas Legislature created the Council on Competitive Government (CCG) in response to a growing interest in making government more efficient, cost-effective, and competitive. The Council represents key members of state leadership, with the statutory empowerment to drive fundamental change. The Council on Competitive Government exists to advance government transformation efforts in the state of Texas. Government transformation efforts are projects that reexamine the method of delivering services in ways that improve efficiency, effectiveness and results that are relevant to citizens. c

Council on Competitive Government Texas Facilities Commission Maintenance Program Review Table of Contents Executive Summary... 1 Project Background...1 Environment Overview...1 Facilities Maintenance Effectiveness...1 Contracting Opportunities...1 Additional Observation...2 Background... 3 Project Background...3 Definition...3 State Environment...3 Figure 1: Top Ten Agencies by Building Portfolio...3 Figure 2: University Owned Building Portfolio...4 TFC Facility Maintenance Programs...4 Figure 3: TFC Program Overview... 5 Building Maintenance and Operations Program...6 General Carpentry Repair... 6 Painting... 6 Heating, Ventilation and Air Conditioning (HVAC)... 6 Electrical... 6 Plumbing... 6 Elevator Maintenance... 6 Controls... 6 Operations... 7 Preventive Maintenance... 7 Energy Management/Utilities... 7 Building Management Program... 7 Custodial Services Program... 7 Grounds Maintenance Program... 7 Deferred Maintenance Program... 8 Minor Construction... 8 Related Programs...8 Recycling and Waste Management Program... 8 Security Guard Services Program... 8 Methodology... 9 Program Observations... 10 Service Approach...10 Figure 4: Estimated TFC Maintenance Budget and Expenditures for FY 2008/2009...10 Efficiency...10 Figure 5:TFC Efficiency Measures Comparison...11 Effectiveness in Service Delivery...11 i

Texas Facilities Commission Maintenance Program Review Council on Competitive Government Deferred Maintenance...11 Funding Approach...12 Contracting Opportunities...13 Opportunity 1: Energy Savings Performance Contracts...14 Key Findings... 14 Scope... 14 Potential State Benefits... 15 Opportunity 2: Recycling Program...16 Key Findings... 16 Scope... 16 Potential State Benefits... 16 Opportunity 3: Security Services...17 Key Findings... 17 Scope... 17 Potential State Benefits... 17 Appendix A: Maintenance Process Diagrams... 19 Building Maintenance Process...20 Minor Construction Process...21 ii

Council on Competitive Government Texas Facilities Commission Maintenance Program Review Executive Summary Project Background Rider 17 of the Comptroller of Public Accounts Biennial Budget (House Bill 1, Article I, 80 th Legislature) directed the Council on Competitive Government (CCG) to conduct competitive reviews of all Texas Facilities Commission (TFC) facility maintenance programs and report its findings to the Legislative Budget Board and the Governor by no later than Sept. 1, 2008. The rider further establishes that recommendations may be implemented under the statutory authority of the Council at the discretion of its members. Environment Overview According to the General Land Office, the State of Texas currently owns and manages over 11,000 buildings statewide ranging, from standard office buildings to maintenance barns to prisons. Additionally, the state s university systems manage approximately 6,300 owned buildings throughout the state. Of the State inventory of buildings, TFC manages and maintains approximately 6 million square feet of space in 62 state-owned buildings in Travis County area. In addition, the Commission manages 6 state-owned buildings outside of Travis County in San Antonio, Houston, Waco, Fort Worth, El Paso and Corpus Christi totaling one million square feet of space. The average age of the buildings in TFC s current portfolio is 33 years. The maintenance responsibilities of the TFC are outlined in Texas Government Code Chapter 2165, with rules and requirements further delineated in Title 1, Chapter 116 of the Texas Administrative Code. Through its Facilities Management Division, TFC has established six key programs: Building Management; Building Maintenance and Operations; Custodial Services; Grounds Maintenance; Deferred Maintenance; and Minor Construction. In addition to these areas, CCG reviewed two additional programs related to the process of maintaining operational state buildings: Waste Management and Recycling, and Security Guard Services. Facilities Maintenance Effectiveness TFC currently employs a combination of public sector employees and private sector contracts for the majority of services provided. Contracts for the service areas are rebid at a minimum of every two years and more frequently where required. Comparison of the TFC organization to other states finds the TFC is following an approach that is consistent with one employed by peer states. Also, TFC s cost efficiency measures are largely consistent with city-specific and nationwide benchmarks provided by the Building Owners and Managers Association International (BOMA). The state recently made new strides in addressing deferred maintenance with an $80 million package authorized by the Legislature. However, the state continues to face a significant backlog in deferred maintenance projects, currently estimated at more than $300 million. This represents a policy issue in terms of the proper maintenance of state buildings, safety, and the ability to retain focus on preventive maintenance efforts. Contracting Opportunities Staff reviewed TFC programs for opportunities that could result in contracts that would be appropriate as CCG contracts. Factors considered in that analysis include the following: 1

Texas Facilities Commission Maintenance Program Review Council on Competitive Government Could the program area be reengineered to yield savings or capacity? Does the issue have multiple stakeholders with similar responsibilities within the state? Could a contract bring efficiencies and serve needs across multiple levels of government? In the CCG review of the TFC there were three opportunities the Council could choose to investigate that may meet the above stated criteria: Establish a master contract for energy performance retrofits, which allows facilities to be upgraded to modern utility equipment with a guarantee the cost will be paid for over time through utility savings. This could be a tool to address portions of the state deferred maintenance and deploy more energy efficient technology in state buildings. This contract could be a new service for buildings within the TFC portfolio, as well as the thousands of buildings managed directly by state agencies, institutions of higher education and local cities and counties. Establish a master contract for combining waste management and recycling that could be leveraged by state agencies and local cities and counties. This could increase the state recycling capacity, streamline independent efforts and improve state costs for these services. This initiative would evaluate the existing state waste management contract, the state in-house recycling program, the CCG document destruction program and recycling efforts operated today by individual agencies. Establish a master contract program for security services for state-owned facilities that covers access control systems and security guard services. This program would provide enhanced security of state facilities and resources and consistency of access controls for state-owned facilities. This initiative would evaluate contracts held by TFC, Texas Department of Public Safety (DPS) and other individual agencies. The Council has not yet acted upon any of the opportunities presented in the report by staff and as such has not identified any of the opportunities as state services for review as of this date. CCG will establish the priority and direction for these opportunities in future meetings and determine if they are to be designated state services. Additional Observation Interviews with tenant agency representatives indicate opportunities to bring more clarity to the nature of the TFC role as service provider and the agency role as tenants. Today the funding approach for occupied buildings varies from situation to situation, and the entities using services are often not the entities paying for the services. This contributes to instances of dissatisfaction and a lack of market forces needed to more deeply evaluate individual TFC maintenance programs. This is not a contracting issue, rather a policy issue. If the legislature wants to consider options to create a closer service provider-tenant relationship, the following could be policy options: 2 Establish a consistent appropriations approach to the funding of facilities maintenance that establishes a stronger, more appropriate billing link between TFC as property manager and agencies as tenants, similar to the approach taken by Virginia. Extend existing efficiency performance measures currently tracked for the whole of the portfolio of TFC managed facilities down to an individual building basis. Establish a formal process for agencies to provide feedback to TFC related to the accuracy of efficiency measures and customer experiences. Establish a policy related to additional billing detail and the expanded use of deliverable-based billing. Include tenant agencies in the development and evaluation of facility maintenance services RFPs and contracts.

Council on Competitive Government Texas Facilities Commission Maintenance Program Review Background Project Background Rider 17 of the Comptroller of Public Accounts Biennial Budget (House Bill 1, Article I, 80th Legislature) directed the Council on Competitive Government (CCG) to conduct competitive reviews of all Texas Facilities Commission (TFC) facility maintenance programs and report its findings to the Legislative Budget Board and the Governor by no later than Sept. 1, 2008. The rider further establishes that recommendations may be implemented under the statutory authority of the Council at the discretion of its members. CCG staff met with key stakeholders of the TFC services in an attempt to gain an understanding of the service space, the challenges facing the service space as it exists today and the functional process of provisioning the services. Definition For the purpose of clarity, TFC facility maintenance programs in this document are defined as all maintenance programs of the Facilities Management Division of the TFC, including but not limited to, building maintenance, building management, custodial services, grounds maintenance, preventive maintenance, deferred maintenance, minor construction, elevator maintenance and energy management and utilities. State Environment According to the GLO, the State of Texas currently owns and manages over 11,000 buildings statewide ranging from standard office buildings to maintenance barns to prisons. Figure 1 below provides the 10 largest agencies and the number of buildings each has in its portfolio. Note that the following table does not account for parking facilities, which TFC does regard as part of its facilities portfolio. Figure 1: Top Ten Agencies by Building Portfolio Agency Total Buildings Texas Department of Criminal Justice 3,067 Texas Parks and Wildlife Department 1,552 Texas Department of Transportation 1,177 Health and Human Services Commission 934 Texas Youth Commission 288 Adjutant General s Office 231 Texas Department of Public Safety 191 Texas Facilities Commission 63 Texas Workforce Commission 28 Texas Historical Commission 16 Source: General Land Office. In addition to the state inventory, the state s university systems manage an additional 6,300 owned buildings. Figure 2 below provides an overview of the state s university-owned bulding portfolio. 3

Texas Facilities Commission Maintenance Program Review Council on Competitive Government Figure 2: University Owned Building Portfolio Institutions Number of Buildings Texas State Tech College Waco 715 Texas Ag Experiment Station 668 Texas A&M University 500 University of Texas at Austin 492 Sam Houston State University 218 Texas Tech University 214 University of North Texas 177 Texas State University San Marcos 174 Texas Forest Service 134 U.T.M.D. Anderson Cancer Center 132 Texas A&M University Kingsville 127 Stephen F. Austin State University 119 University of Houston 106 Lamar University 105 University of Texas at Arlington 105 U.T. Medical Branch Galveston 105 Laredo Community College 102 Texas A&M Univ Commerce 101 Prairie View A&M University 100 Tarleton State University 93 University of Texas at San Antonio 89 Texas Engineer Extension Service 86 Sul Ross State University 84 Institutions Number of Buildings University of Texas at El Paso 84 Texas Cooperative Extension 83 West Texas A&M University 82 University of Texas at Dallas 82 U.T.S.W. Medical Ctr Dallas 74 Texas State Tech College Harlingen 72 University of Texas Pan American 71 Texas Woman s University 65 Angelo State University 62 Texas Southmost College 55 Midwestern State University 54 Texas A&M Univ Coll of Vet Med 52 Jarvis Christian College 51 Texas Engineer Experiment Station 50 El Paso Community College Dist 49 Texas A&M Univ Corpus Christi 42 U.T. Health Science Ctr San Antonio 40 University of Texas Permian Basin 40 Texas Southern University 38 University of Texas at Tyler 32 U.T. Health Ctr at Tyler 31 Lamar State College Port Arthur 26 U.N.T. Health Science Center 25 Institutions Number of Buildings Texas Tech Univ. Health Science Ctr 25 Texas State Tech College West Texas 24 U.T. Health Science Center Houston 23 Tamu System Health Science Ctr 20 Texas A&M International Univ 20 Texas A&M University at Galveston 19 The University of Texas System 16 Texas Transportation Institute 15 Lamar Institute of Technology 14 University of Houston Clear Lake 12 Lamar State College Orange 12 Texas State Tech College Marshall 10 Texas A&M University System 9 University of Houston Downtown 7 University of Houston System 5 Texas Tech University System 5 Texas Vet Med Diagnostic Lab 4 University of Houston Victoria 4 Tx State Tech College Central Office 3 Texas A&M University Texarkana 3 University of Texas at Brownsville 3 University of North Texas System 1 Source: Texas Higher Education Coordinating Board Of the State inventory of buildings, TFC manages and maintains approximately 6 million square feet of space in 62 state-owned buildings in Travis County. In addition, the Commission manages 6 state-owned buildings outside of Travis County in San Antonio, Houston, Waco, Fort Worth, El Paso and Corpus Christi, totaling approximately 1 million square feet of space. The average age of the buildings in TFC s current portfolio is 33 years. TFC Facility Maintenance Programs The maintenance responsibilities of the TFC are outlined in Texas Government Code Chapter 2165 with rules and requirements further delineated in Title 1, Chapter 116 of the Texas Administrative Code. To enable the TFC to provide the full range of services required to maintain and operate the buildings under its management as outlined in these statutes, the Facilities Management Division has established six key programs. Each program and the services provided are outlined below. For a detailed overview of all programs and related costs, reference Figure 3: Program Overview. TFC Overview Travis County 62 facilities 6m square feet Outside Travis County 6 facilities 1m square feet 4

Council on Competitive Government Texas Facilities Commission Maintenance Program Review Figure 3: TFC Program Overview 1 In House FTEs Estimated Annual In House Spend Contracted Vendors Estimated Annual Contract Spend Estimated Total Spend Programs Key Services Facilities Management Division Management and Support of Programs 13 $ 743,000 NA NA $ 743,000 Building Maintenance Manage Maintenance Program and Operations Provide 24/7 tenant service 3 $ 248,000 NA NA $ 248,000 Carpentry - General Carpentry Hardware 4 $ 178,000 2 $ 100,000 $ 278,000 Floor Coverings - Painting Scheduled Painting Unscheduled Painting 3 $ 126,000 See General Carpentry $ 126,000 HVAC systems - HVAC Chillers 10 $ 596,000 4 $ 270,000 $ 866,000 Boilers Electrical Maintenance - Electrical Power Failures Light Fixtures 6 $ 322,000 4 $ 220,000 $ 542,000 Modifications/Additions - Plumbing Plumbing Maintenance Service Requests 4 $ 178,000 2 $ 43,000 $ 221,000 Service Requests - Elevator Maintenance Routine Maintenance 1 $ 53,000 2 $ 315,000 $ 368,000 Inspections Install of Fire, Security and Building - Controls Automation Systems 9 $ 527,000 9 $ 408,000 $ 935,000 Monitor Fire and Security Systems 24/7 monitoring of Building Automation - Operations Systems Respond to building alarms and emergency 22 $ 1,150,000 NA NA $ 1,150,000 situations Periodic Inspection of Equipment - Preventative Maintenance of Inspected Equipment Maintenance Scheduled Maintenance 13 $ 620,000 NA NA $ 620,000 - Energy Management/ Identify Energy Savings Opportunities Utilities Work with SECO 1 $ 101,000 NA NA $ 101,000 Manage Buildings Building Management Liaison with Tenant Agency Representatives 29 $ 1,580,000 NA NA $ 1,580,000 Publish Tenant Manual Trash & Recycling Pickup Cleaning of Restrooms and Public Areas Custodial Services Sweeping, Mopping and Vacuuming Dusting 30 $ 950,000 11 $ 4,000,000 $ 4,950,000 Window Washing Pest Control Services Grounds Maintenance Grounds Maintenance Grounds Repair Review of Landscape Plans 9 $ 326,000 2 $ 200,000 $ 526,000 Cleaning and Maintenance of Parking Areas Intiate, Manage and Complete Delayed Deferred Maintenance Maintenance Projects Works closely with TFC s Facilties Design 1 $ 89,000 NA $ 40,650,000 $ 32,089,000 and Construction Division Minor Construction Minor Renovations Utilizes Building Maintenance & 22 $ 1,119,000 Rehabilitation of Space Operations contracted vendors $ 1,119,000 TOTALS 180 $ 8,906,000 36 $ 37,556,000 $ 46,462,000 1 TFC recently reorganized its operations and related programs to place added emphasis on the Energy Management/Utilities program. This table represents the status of the programs of the TFC prior to this reorganization. 5

Texas Facilities Commission Maintenance Program Review Council on Competitive Government Building Maintenance and Operations Program The Building Maintenance and Operations Program works closely with the Building Management Program to meet facility maintenance needs and tenant service requests 24 hours a day, seven days a week. Within this program the following sections are responsible for specific types of requests or specialized systems. General Carpentry Repair The General Carpentry Repair section is responsible for all carpentry, hardware and flooring maintenance or service requests. The section currently employs four full time equivalents (FTEs) and contracts for work in this area with two vendors. Painting The Painting section is responsible for all scheduled and as-needed painting of TFC managed buildings. The section currently employs three FTEs and utilizes the same contracted vendors that the General Carpentry Repair section does to complete their work. Heating, Ventilation and Air Conditioning (HVAC) The HVAC section is responsible for the maintenance of all HVAC equipment and related systems. This includes major systems such as chillers and boilers. The section currently employs ten FTEs and contracts for work in this area with four vendors. Electrical The Electrical section is responsible for handling all electrical related maintenance or service requests. This includes work to address power failures, lighting fixtures and modification and additions to existing electrical systems. The section currently employs six FTEs and contracts for work in this area with four vendors. Plumbing The Plumbing section is responsible for handling of all plumbing related maintenance and service. The section currently employs three FTEs and contracts for work in this area with two vendors. Elevator Maintenance The Elevator Maintenance section contracts with private elevator companies to ensure the elevators and associated equipment meet all code requirements and ensure they are working properly. The contracted vendors also perform periodic inspections and services on each elevator and associated machinery in accordance with the elevator manufacturer s recommendations. The section currently employs one FTE that acts as a Contract Specialist who oversees the two vendor contracts for work in this area. Controls The Controls section is responsible for the installation of building automation systems and the installation and monitoring of security and fire related controls and systems. The section currently employs nine FTEs and contracts for work in this area with nine vendors. 6

Council on Competitive Government Texas Facilities Commission Maintenance Program Review Operations The Operations section provides 24/7 monitoring of TFC managed buildings equipped with building automation systems. Using these systems they are able to make minor adjustments to building temperature and operate chillers, boilers and associated pumping equipment for all plants. Staff in this section are often the first to respond to alarms and other emergency situations. The section currently employs 22 FTEs. Preventive Maintenance The Preventive Maintenance section provides for periodic inspection of equipment to uncover conditions that could lead to equipment breakdown or harmful depreciation, and correction of the condition in an effort to prevent such loss. Preventive maintenance includes such things as changing filters, inspecting systems, lubrication, replacement of parts, minor adjustment and repair of equipment and systems which are performed on a scheduled basis in line with recognized industry standards. The section currently employs 13 FTEs. Energy Management/Utilities The Energy Management/Utilities section works with SECO to identify opportunities to use innovative energy solutions that optimize energy consumption at TFC managed buildings. TFC has recently reorganized this program to place additional emphasis on the work, developing an Office of Energy Management headed by a newly hired Director reporting directly to the Executive Director of TFC. The division now includes a section focused on engineering and research and development, as well as a section that handles all related maintenance and plant operations. These sections work together to find better, more efficient and fiscally responsible ways of managing TFC resources. Building Management Program The Building Management Program comprises Building Managers and Building Technicians responsible for the maintenance and operation of TFC managed facilities. Building Managers are assigned responsibility for one or more of the TFC managed facilities and act as the initial resource for tenant agency representatives for all questions or issues related to facilities maintenance and operation, and work as a liaison between the tenant agency representatives and the TFC program staff or contracted service providers. The Building Management staff is also responsible for publishing the Facilities Management Division Tenant Manual, a guide for tenant agencies that provides the rules and guidelines for the day-to-day operations and activities of TFC managed facilities. The section currently employs 29 FTEs. Custodial Services Program The Custodial Services Program staff, along with contract custodial staff, is responsible for performing custodial and pest control services within office areas and shared space in all TFC managed facilities. The primary goal of the program is to provide clean, safe and sanitary conditions throughout all TFC managed properties and address tenant service requests. The program currently employs 30 FTEs and contracts for work in this area with 11 vendors. The contracted vendors provide the majority of the work performed in this program, providing support for approximately 96 percent of the TFC managed square feet. Grounds Maintenance Program The Grounds Maintenance Program staff, along with contract landscapers, is responsible for the maintenance and repair of the grounds, parking facilities and surface lots in the TFC inventory. The program is responsible for more than four million square feet of landscape area and five million square feet of parking lots and garages. The program also reviews landscape plans for new and remodeled buildings and provides support for 7

Texas Facilities Commission Maintenance Program Review Council on Competitive Government special events and government functions. The program currently employs nine FTEs who perform workday maintenance and contracts with vendors to provide grounds maintenance for evening and weekend events. Deferred Maintenance Program The Deferred Maintenance Program works closely with TFC s Facilities Design and Construction division to initiate, manage and complete projects that were delayed beyond their originally scheduled period. There is currently a backlog of projects estimated to cost in excess of $300 million over the next ten years. The majority of these projects are to replace mechanical, electrical and plumbing systems, including HVAC controls and heating and cooling plants, and another 10 percent of the projects are considered to be life safety projects. The section currently employs one FTE that acts as a Project Manager and coordinates between Facilities Management and Facilities Design and Construction and also coordinates with the Energy Engineer as needed. Minor Construction The Minor Construction Program performs minor renovations and rehabilitation for agency tenants. The program is a cost recovery program, and at times may contract with outside vendors currently under contract with the Building Maintenance and Operations Program to assist with renovation projects. The section currently employs 23 FTEs. Related Programs In addition to the established programs of the Facilities Management Division, there are two programs administered by the TFC that are related to the maintenance and operation of managed facilities: Recycling and Waste Management Program The Recycling and Waste Management Program is responsible for collecting recyclable materials and managing the waste generated by state operations in Travis County. The recyclable materials, primarily paper but also including plastic, aluminum cans, scrap metal and electronic waste, are reclaimed, reused or recycled by qualified vendors, reducing the amount of materials sent to the landfill. The program is a cost recovery program generating more than $300,000 in revenue from recycled materials. Security Guard Services Program The Security Guard Services Program addresses TFC s responsibility for the administration and coordination of security for TFC managed facilities as outlined in Texas Administrative Code 116.13. Security Guard services for state-owned facilities are handled in one of four ways: 8 1. Texas Department of Public Safety provides DPS officers for a majority of buildings in the Capitol Complex (officially defined as the area bound by 10th Street on the south, Martin Luther King, Jr. Boulevard on the north, Trinity Street on the east and Lavaca Street on the west). 2. DPS contracts for security services in two state buildings in the Capitol Complex with contracts totaling an estimated $50,000 annually. 3. TFC administers contracts with three private security entities providing security to TFC managed buildings outside the Capitol Complex with contracts totaling an estimated $1.3 million annually. 4. Agencies provide for their own security guard services, utilizing either contracted vendors or in house staff, for all buildings not in the TFC managed inventory.

Council on Competitive Government Texas Facilities Commission Maintenance Program Review Methodology To perform the competitive review of the facilities maintenance programs of the TFC, CCG first met with TFC management and staff in a series of meetings and interviews. These meetings reviewed the full scope of services provided, costs of the programs (both in-house and contracted), division performance measures, and issues faced by the agency in their individual programs. Additionally, CCG reviewed the programs at TFC that were outside the purview of the Facilities Management Division to identify other programs that should be considered for inclusion in the competitive review. CCG also performed an evaluation of the efficiency performance measures tracked and reported by the TFC. The goal of the review was to determine if TFC is providing their programs and services in a cost efficient manner comparable to other government entities. To perform its assessment, CCG compared the TFC measures with those in the 2006 Building Owners and Managers Association International Experience Exchange Report figures for U.S. Government Sector facilities and the 2007 BOMA report figures for Suburban Buildings in Austin, Texas. The BOMA report is compiled through a survey of its membership, and is a recognized industry standard benchmark evidenced in the use of the report by the Office of Real Property Management of the General Services Agency to benchmark their efficiency measures. In an effort to understand the effectiveness of the TFC programs, CCG staff met with representatives from various state agencies to discuss the existing programs and services, determine if tenant needs are being met and solicit ideas on potential improvements. CCG met with representatives from agencies that managed their own facilities and those located in TFC managed buildings to identify commonalities and differences in approaches to maintenance processes and services. CCG also compared TFC s program approach with that of other states, focused on scope of services offered and method of service delivery. To acquire this information, web sites for each state were reviewed and email surveys were sent to the primary facilities maintenance contacts for each state. As part of a final analysis, CCG reviewed the programs and the services provided by the TFC for potential opportunities that directly addressed one or more of the guiding principles of the CCG. Our review of the programs and services found likely opportunities for CCG to perform additional research in some key service areas that may benefit from a new approach to the delivery of the service or from a more coordinated or competitive approach. 9

Texas Facilities Commission Maintenance Program Review Council on Competitive Government Program Observations Service Approach TFC currently employs an approach to service that incorporates a combination of public sector employees and private sector contracts for the majority of services provided. Figure 4 provides an overview of the estimated TFC budget for FY 2008/2009 for General Maintenance, Custodial and Deferred Maintenance, and identifies the level of spend in each program for services provided with in-house personnel and contracted vendors. Contracts for the service areas are rebid at a minimum of every two years and more frequently where required. Figure 4: Estimated TFC Maintenance Budget and Expenditures for FY 2008/2009 Program Estimated TFC Budget Estimated In House Expenditures Estimated Contract Expenditures General Maintenance $28,200,000 $25,088,000 $3,112,000 Custodial $10,500,000 $ 2,500,000 $8,000,000 Deferred Maintenance $81,478,000 $178,000 $81,300,000 TOTAL $120,178,000 $27,766,000 $92,412,000 Efficiency Comparison of the TFC organization finds that the TFC is following an approach generally consistent with one employed in peer states and their cost efficiency measures are consistent with city-specific and nationwide benchmarks provided by BOMA. Figure 5 provides a comparison of the TFC efficiency performance target measures tracked and reported against two different BOMA benchmarks. The first BOMA benchmarks represent a 2006 survey of 472 U.S. Government Sector buildings and the second BOMA benchmarks represent a 2007 survey of 10 suburban buildings in the city of Austin. Benchmark figures indicate that opportunities may exist in the area of TFC provided custodial services and in the continued pursuit toward advances in building automation and energy efficiency in an effort to further decrease utility costs. TFC has a newly funded program to complete building automation with energy efficient controls that should positively impact utility costs. 10

Council on Competitive Government Texas Facilities Commission Maintenance Program Review Figure 5: TFC Efficiency Measures Comparison Measure TFC Target BOMA US Government Average (2006) Variance BOMA Austin Suburban Average (2007) Variance Average Cost Per Square Foot of TFC Provided Custodial Services $ 1.80 $ 1.36 24% $ 1.12 38% Average Cost Per Square Foot of Vendor Provided Custodial Services $ 0.84 $ 1.22-45% $ 1.12-33% Average Cost Per Square Foot of Grounds Care Provided $ 0.22 $ 0.23-5% $ 0.24-9% Average Cost Per Square Foot of All Building Maintenance $ 1.10 $ 1.77-61% $ 1.42-29% Cost Per Square Foot for Outsourced Property Management $ 4.92 $ 5.46-11% $ 5.79-18% Cost Per Square Foot for State Managed Properties $ 5.32 $ 5.46-3% $ 5.79-9% Cost Per Square Foot for Utilities $ 2.92 $ 2.47 15% $ 3.25-11% Effectiveness in Service Delivery In interviews many agencies noted the desire to see additional responsiveness, timeliness and transparency from the TFC service and billing process. There were also observations about the fact that there have been improvements in the relationship with the deployment of more active TFC building managers. In an effort to drive continuous improvement in the quality of work and in the perception of quality from tenants, TFC could assemble a group of representative stakeholders to determine a set of performance measures related to work quality and responsiveness and revamp existing customer satisfaction tracking to meet the new criteria. Additionally, TFC could increase their program transparency by extending existing efficiency performance measures currently tracked for the whole of the portfolio of TFC managed facilities down to an individual building basis, and establish a formal process for agencies to provide feedback to TFC related to the accuracy of efficiency measures and customer experiences. Lastly, TFC could develop a formal process for the inclusion of tenant agencies in the development and evaluation of facility maintenance services RFPs and contracts. Deferred Maintenance While the state has made recent strides in addressing the deferred maintenance backlog with an $80 million package, there remains a significant backlog in deferred maintenance projects. Deferred maintenance ranges from life and safety repairs, general repair, and preventive maintenance behind its recommended schedule. Based on a recent report commissioned by the TFC to identify the state s deferred maintenance needs, the backlog of projects is estimated at more than $300 million. Time spend addressing this backlog is time not spent on other pressing responsibilities of the Commission. One of the opportunities described in this report could be a component to clear the deferred maintenance backlog. More information on that opportunity is outlined in Opportunity 1 in the Contracting Opportunities section of this report. 11

Texas Facilities Commission Maintenance Program Review Council on Competitive Government Funding Approach TFC provides its best service to the state when there is a clear relationship between service provider and service consumer. The Legislature can further this relationship by setting a consistent policy for the funding of facilities maintenance that establishes a stronger, more appropriate linkage between TFC as property manager and service provider and agencies as tenants of TFC managed facilities and service consumers. Today TFC receives direct appropriations for building maintenance and operations needs and in most cases pays on the behalf of the client, such as in the case of the Capitol Complex buildings under TFC management. In these cases there is little incentive on the part of the agency to minimize maintenance requests or to attempt to lessen utility usage to decrease overall costs to the state. With other agencies, TFC works with the agency to identify an annual estimated cost for building maintenance and operations, and then processes quarterly bills to the agency based on the agreed upon amount. Interviews with agency tenant representatives indicate cases where there is not a solid understanding of what they are being billed for and how, if at all, the agency can affect those bills. Actual expenditures for maintenance are tracked by TFC and any excess payments to TFC from the agency, or excess expenditures by TFC on behalf of the agency, are settled with the agency at the end of the fiscal year. In projects done by TFC that are non-maintenance related buildouts, TFC does provide project cost breakouts. Even in these cases though, there are instances where the practice of payments based on phases or deliverables, common in the private sector, are not consistently followed. If the Legislature had interest in a funding model that establishes a clear service provider - tenant relationship, a good model to consider for Texas could be Virginia. Virginia stipulates that the Department of General Services (DGS) will establish rental charges assessed to occupants of seat-of-government buildings controlled, maintained and operated by DGS (Item 80, A2, Virginia Appropriations Act). A representative said it was, in his opinion, the most impactful thing the State of Virginia had done to address the issues around facility management and maintenance. Through this approach, Virginia has established an appropriate manager/tenant relationship and addressed issues surrounding space utilized by federally funded programs. To establish bills for state agencies, the Virginia DGS performs the following steps: 1. Computes a cost per square foot for facilities in its inventory, based on estimates of biennial operating costs for each building. This computation is performed for each type of facility in their inventory (e.g. office space, warehouse, library, and consolidated lab). 2. Updates its Space Assignment Log, a record of each agencies space assignments. This log is developed and maintained through the use of Space Assignment Agreements, which are basically lease agreements between the DGS and the agencies that are executed anytime space assignments change, whether increasing or decreasing. 3. Computes the total agency cost based on space assignment and per square foot cost and develops a list of funds to be appropriated to agencies that is provided to the Department of Planning and Budget for inclusion in each agencies biennial budget. The budgeted amount is considered a maximum not to exceed figure. 12

Council on Competitive Government Texas Facilities Commission Maintenance Program Review 4. Bills the agencies for the amount appropriated. If unforeseen maintenance needs arise, the DGS has either Maintenance Reserve or Deferred Maintenance funds it can use as needed. In addition to Virginia, similar approaches are in place in California, Georgia, Colorado and Iowa. Contracting Opportunities TFC programs were reviewed for opportunities that could result in contracts that would be appropriate and consistent with the CCG contract portfolio. Factors considered in that analysis include the following: Could the program area be reengineered to yield savings or capacity? Does the issue have multiple stakeholders with similar responsibilities within the state? Could a contract bring those efficiencies, and serve needs across levels of government? In the CCG review of the TFC there were three opportunities, detailed on upcoming pages, that the Council could choose to investigate that may meet those criteria. In the CCG process, the first formal step of review is to identify a state service and develop a case for a contracting opportunity. Opportunities in this report have not been formally adopted as identified state services, although the Council will consider whether they should be formally identified in future meetings. 13

Texas Facilities Commission Maintenance Program Review Council on Competitive Government Opportunity 1: Energy Savings Performance Contracts CCG could establish a master contract for energy performance retrofits that could be leveraged by TFC, agencies with direct building ownership and local cities and counties. Key Findings Scope Based on a recent review by a third party of TFC managed facilities the deferred maintenance project backlog is estimated at more than $300 million. Mechanical, Electric and Plumbing, including HVAC and cooling and heating plant projects represent 60 percent of the backlog. House Bill 1, Article IX, Section 14.03(k)(2-3), 80th Legislature, requires the use of energy savings performance contracts for capital expenditures items that can be acquired through this mechanism. Energy savings performance contracts allow an entity to bundle utility saving improvements for a building or a set of buildings, and finance the efforts through reduced utility expenditures. State agencies and institutions of higher education have typically financed the cost of the project through programs such as the Texas Public Finance Authority and the LoanSTAR program, while municipalities typically leverage Municipal Lease Purchase programs. Statute currently stipulates the contractor will guarantee an amount of savings that will be achieved as a result of implementing the measures in the contract, and will send money back to the state if the savings are not met. All savings guarantees must be reviewed and certified by an independent third party engineer for reasonableness and accuracy. Performance contracts can come at a cost compared to in-house design, bid, build, but provide expertise, alternative funding options and guaranteed utility savings that bring strong benefits. In-house design, bid, build also inherently comes with traditional FTE costs. The Health and Human Services Commission has been an early adopter of this approach in addressing energy consumption in the former MHMR schools and state hospitals. HHSC staff declare that they have seen 10 percent to 30 percent utility cost savings from the new technology, and the effort has won multiple awards for a dramatic reduction in energy consumption. One of the barriers to using these contracts is they are complex and need solid protections. By establishing a state contract that improves consistency of terms, transparency of costs, and reduces redundant steps, CCG could help make this service available to a much wider set of users. Any contract CCG might contemplate in this space would likely be structured to establish one or more vendors to review appropriate opportunities, rather than blanket committments to retrofit the state portfolio. Even with a state contract, these transactions will remain complex. But a state contract that establishes a consistent business arrangement allows for focus on the key set of questions: What is the utility consumption of this facility, what could it be, what are the costs of the transition, and can the costs be covered through savings? For buildings in the TFC portfolio, the backlog of deferred maintenance projects currently stands at more than $300 million, with a substantial percentage of these projects falling into a category that could be 14

Council on Competitive Government Texas Facilities Commission Maintenance Program Review addressed through energy savings performance contracts. The use of energy performance contracts as a complementary funding approach could be a tool in addressing deferred maintenance, as well as investing in modern energy efficient technology. Outside of the TFC portfolio, there are well over 10,000 buildings in the public arena that could benefit from a state contract that establishes a common business arrangement and makes available the appropriate consulting and financing options. Potential State Benefits CCG Guiding Principle Savings Capacity Speed & Efficiency Transparency Opportunity Lower utility costs for state buildings by replacing aging systems Provide ability to fully automate and monitor systems. Provide a negotiated tool that brings expertise and an alternate funding mechanism to accelerate energy savings projects within the state building portfolio. Clear the backlog of deferred maintenance in a shorter period of time Expedite the contracting process allowing projects to be started and completed in a shorter timeframe A state contract that establishes consistent terms and conditions enables costs to be easily assessed and compared 15

Texas Facilities Commission Maintenance Program Review Council on Competitive Government Opportunity 2: Recycling Program CCG could establish a master contract for waste management and recycling that could be leveraged by all state agencies and local cities and counties. Key Findings Scope The TFC recycling program is not fully deployed at all TFC managed facilities. Agencies that maintain their own facilities manage independent recycling programs. The Texas Commission for the Blind regulates cafeterias in state buildings, and the recycling in those facilities is not formally aligned with TFC recycling. CCG oversees a contract that has a recycling component. Additionally, the CCG franchised print program can incorporate recycling requirements that would align with a reengineered state program. Texas Government Code Chapter 2175.902 requires TFC to establish and manage a paper recycling program for TFC managed facilities. The current program functions as a cost recovery program, with custodial staff collecting recyclables and TFC staff picking the recyclables up from managed facilities and delivering them to the recycling vendor. Private sector property managers have indicated that recycling contracts are often incorporated with waste management contracts, with the value of the recycling program reducing the cost of the waste management contract. The vendor then has an inherent motivation to market the program to reduce the waste stream to landfills. Recyclables such as plastic, aluminum, and scrap metal are only contracted as needed. Additionally, state agencies not in buildings managed by the TFC are not required to recycle and must coordinate any recycling program on their own and at their own expense. CCG today provides oversight for a document destruction contract. This contract has also recently added the ability for agencies to recycle e-waste, such as computers, monitors and hard drives if needed. CCG also franchises state print shops and has the ability to establish additional recycling provisions for the state s large scale print operations. A comprehensive program could result in more availability of recycling options, better return for the state, and benefit the environment through increased availability of recycling options. Potential State Benefits CCG Guiding Principle Savings Capacity Opportunity Increase recycled materials collected and return to state for those recyclables Combining of waste management and recycling provides competitive opportunity Expand availability of recycling options within state facilities. 16

Council on Competitive Government Texas Facilities Commission Maintenance Program Review Opportunity 3: Security Services CCG could establish a master contract for security services for state-owned facilities that covers access control systems and security guard services. Additionally, policies and procedures related to access controls at state-owned buildings could be improved to provide for enhanced security and overall consistency. Key Findings Scope There are numerous approaches to provide security guards for state facilities. These approaches include the use of DPS officers or security guards, vendors contracted by both TFC and DPS and the use of in-house employees. There is no consistency in the application of electronic access control systems for state facilities. Some buildings have systems, some do not and others have multiple systems to provide for internal and external access controls. There are no statewide established policies and procedures for access security for state facilities, leading to inconsistent approaches to facility access control that vary from no security to extremely stringent security. Texas Government Code, Chapter 411.062 states DPS has primary responsibility for security services on the Capitol Complex area officially defined as the area bound by 10th Street on the south, Martin Luther King, Jr. Boulevard on the north, Trinity Street on the east and Lavaca Street on the west. DPS provides direct support for most buildings, with the exception of two buildings and the Attorney General s office, all of which employ independent contract staff. Texas Administrative Code Chapter 116.13 states TFC is responsible for the administration and coordination of security for managed facilities. This responsibility includes the provision of security guard services provided either by DPS or private entities, and the installation and maintenance of access control systems in managed facilities. Any building occupied by a state agency that is either not managed by TFC or is outside the Capitol Complex area is left to coordinate and administer their own security and procure, if needed, their own access control systems and security guards. For example, the Texas Workforce Commission building was acquired with federal funds, and security services there have been independently procured. Due to the varying approaches to procure and provide security services, there is no statewide standard for technical systems and human resources in securing state buildings, leading to inconsistent security processes from building to building. As a result, the potential exists for additional savings and capacity to be achieved through a combined approach. This opportunity could be addressed through contracting, or alternatively, could be addressed through the current sunset review of the Department of Public Safety. Potential State Benefits CCG Guiding Principle Savings Capacity Opportunity Combining multiple contracts may yield larger volume and improved pricing Combining programs through a master contract allows for consistent, tiered measures and better quality performance tracking. 17