Real Property Portfolio Optimization - Improving and Modernizing Management of the Federal Real Property Portfolio to Optimize Space, Financial ...
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Real Property
Portfolio
Optimization
Improving and Modernizing Management
of the Federal Real Property Portfolio to
Optimize Space, Financial Resources and
Energy Impact
www.pwc.com/publicsector
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
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.
avoidance measures such as telework.
The Memorandum also requires agencies
to identify real property cost reduction
opportunities that yield at least $3 billion
The Regulatory Environment for in federal cost savings by the end of FY
2012. These cost savings are expected
Real Property Management to result from reduced operating,
maintenance, and energy expenses from
disposals or other consolidation efforts.
>
Federal real property management
The Federal government has appeared as an issue on the GAO High
identified the need for more effective Risk List in 2003. Prior to this, the
real property management, as it government had also made various
recognizes the significant financial attempts to improve federal asset
resources invested in these assets. management of its extensive holdings.
President Barack Obama issued the The House Government Reform
Presidential Memorandum, “Disposing Committee passed H.R. 2548, the
of Unneeded Federal Real Estate - Federal Property Asset Management
Increasing Sales Proceeds, Cutting Reform Act of 2003, though it never
Operating Costs, and Improving became law as the Congressional Budget
Energy Efficiency” in June 2010. Office (CBO) expressed concerns over
The Memorandum directs agencies the Act’s financial burden.
to accelerate efforts to eliminate In February 2004, President George
excess properties and identify other W. Bush issued Executive Order (EO)
cost-savings opportunities through 13327, “Federal Real Property Asset
increased efficiency in utilization, Management,” which borrowed
space, consolidation, and cost several key provisions from H.R. 2548
4 Real Property Portfolio Optimization Federal Management Solutions Offering
Figure 1: Real Property Regulatory Environment through 2010
and mandated that executive branch Energy, and Transportation assets within many transportation
departments and agencies improve their Management” in January 2007, which focused agencies. This type of activity
real property asset management. EO directed federal agencies to conduct signals an interest in the incoming
13327 instructed agencies to promote their environmental, transportation, and Congress on these issues as well.
efficient and economical use of real energy-related activities under the law The actions of the last two
property, increase agency accountability in support of their respective missions in administrations and Congress express
and management attention to real an environmentally, economically, and the need for improvement in Federal
property reform, and establish clear fiscally sound, integrated, continuously real property asset management. This
real property goals and objectives. efficient, and sustainable manner. collection of regulations and guidance
Major provisions of EO 13327 included Recognizing the interdependency of places significantly increased demands
the following: (1) creation of the effective real property asset management on federal agencies to dispose of
Senior Real Property Officer position and the reduction of greenhouse gas excess real estate, make more efficient
at major landholding agencies, (2) the emissions, President Obama issued use of existing assets, eliminate
development and implementation of EO 13514, “Federal Leadership in ineffective lease arrangements,
agency asset management plans, and (3) Environmental, Energy, and Economic explore innovative approaches to
the creation of the Federal Real Property Performance” in October 2009. EO space management, and reduce
Council (FRPC) which issues annual real 13514 expanded on energy reduction annual operating costs of existing
property reporting guidelines. Agencies requirements in EO 13423 and included assets with a focus on environmental
are to use their asset management plans provisions for managing existing responsibility and sustainability.
and other data collected with respect to buildings to reduce energy, water, and Satisfying these demands poses a
inventory and performance to determine materials consumption in an effort to number of challenges, and PwC’s
the extent to which their real property improve sustainability. experience in providing real property
holdings are lacking, sufficient, or in solutions can help federal agencies
In fall 2010, the House of Representatives
excess to carry out their respective achieve success in meeting them.
Republican staff of the Committee
missions.
on Transportation and Infrastructure
President Bush issued EO 13423, released a report on opportunities for
“Strengthening Federal Environmental, cost savings associated with real property
Real Property Portfolio Optimization Federal Management Solutions Offering 5“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• 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
Real Property Challenges systems in place for collecting sufficient,
timely, complete, and accurate real
and Solutions 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?
The requirements stemming from • Identifying, prioritizing and gaining
the Presidential Directives and funding for deferred maintenance • Does the agency have the information
OMB guidance present Federal and/or major construction to improve necessary to make trade-off or planning
agencies with resource and cost overall safety, efficiency and usability decisions on cost saving measures?
challenges, reporting challenges, • “Greening” specific to energy efficiency PwC has created a federal real property
and implementation challenges. and other environmentally sound optimization maturity model, shown
Each agency has its own agency aspects of real property assets in Figure 2 (to the left). This model
specific issues and challenges
• Right-sizing the portfolio to fit usage, illustrates how agencies with a mature,
depending on the complexity of the
taking into account personnel factors or “optimized” approach are those where
real property portfolio, the maturity
such as telework asset management business goals and
of its real property management
• Having a comprehensive, data-rich objectives are established, tracked and
practices and the overall control
inventory that allows managers to make reported regularly to senior leadership.
environment as it relates to real
decisions These agencies make business decisions
property management.
based on current asset data, and they can
• Having policies, processes and controls
Challenges may relate to the quickly take actions such as identifying
in place to effectively manage the
following: like kind exchanges, implementing cost
risk involved with the valuation,
reduction measures in alignment with
• Identifying excess and creating maintenance and use of the portfolio
strategic plans, and making relocation
opportunities for disposal
The extent to which an agency is in a decisions. These agencies have a 5-10
• Restructuring the budget or year space management plan, a deferred
position to address these challenges
funding priorities to accomplish maintenance budget program and a risk-
will depend on its responses to these
disposals based real property management plan.
fundamental questions:
Real Property Portfolio Optimization Federal Management Solutions Offering 7Federal Real Property Optimization
Maturity Model
Initiate
Real Property Portfolio Management
• Define Asset Inventory and
Subcomponents
> “PwC has several clients whom we have helped
mature their processes towards optimization.
• Assess Inventory
• Initiate Real Property Sustainability
Initiatives
For these clients, PwC brings to bear a total • Allocate indirect costs
• Assess Construction Allowance
solution that facilitates mature real property Inducement
portfolio management. The stages of the maturity • Assess Organizational Structure
• Define Requirements
model are shown below, with a sample of key
• Assess Human Capital Implications
activities that PwC helps agencies with each • Assess Technology
stage, depending on an agency’s needs:
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 OfferingMeasure Optimize • We design sound, repeatable and
Real Property Portfolio Management Real Property Portfolio Management risk-based processes for identifying
• Calculate and Implement Capitalization • Use Standard Operation Procedures and collecting required data such that
Procedures (SOPs) the data are reliable and useful for
reporting.
• Implement Space Management • Implement Cost Reduction Strategies
and Align Facility Management with • We have globally-recognized expertise
• Implement Lease Management
Strategic Plans in calculating carbon footprint and
• Develop Business Cases analyzing real property energy usage
• Act on Disposal, Relocation and
• Implement Facility Management metrics, and helping organizations
Consolidation Plans
act on that data to improve energy
• Incorporate into A-123 Process and
• Fully Leverage Technology for efficiency.
Leverage Results
Reporting and Decision-Making
• Create Policies and Procedures for • We have data management solutions
Managing Sustainability of Real that allow our clients to consolidate
Throughout this process, we bring the data from multiple systems onto a
Property and Incorporate Them into the
following experience: shared platform for ease of reporting
Organization’s Activities
• We help agencies create reporting and decision making
• Implement Maintenance Management
and performance measurements • We have financial management
• Define Asset Level Performance to allow agencies to plan strategically, experience to assist agencies in
• Implement / Modify Technology reduce costs, and prudently invest properly valuing, reporting, and
for efficient operations in a properly planning related to real property,
Integrate conditioned and efficiently utilized and to help align clients policies
Real Property Portfolio Management portfolio that supports the mission. and procedures with sound
Managing performance measurements financial management.
• Integrate Real Property Policy Review
allows agencies to drive positive results
• Implement Real Property Cost Savings • Our facility management capabilities
and sustain excellence.
Plan help facility managers identify and
• Our strategic planning and capital prioritize projects related to upkeep,
• Integrate Energy-Efficiency / Carbon projects experience allow us to help maintenance, energy efficiency and
Emission Data into Management agencies make informed decisions facility use.
Decision-Making about their real property holdings and
• Assess and Manage Risk encourage alignment between real
• Integrate Performance Tracking property and mission goals.
Real Property Portfolio Optimization Federal Management Solutions Offering 9Case Studies
Following are just a few examples of how PwC collaborated with
agencies in addressing real property management challenges.
Department of Defense (DoD)
PwC provided Real Property and Property, Plant &
Equipment management expertise to formulate DoD
Department of Transportation (DOT), Real Property Policy and Procedures and integrate Real
Federal Aviation Administration (FAA) Property accountability and valuation procedures with
the DoD Financial Management Regulations.
PwC supported the development of both strategic and Key Accomplishments:
operational documents that directed the transformation
• Provided financial management and real property
of the real property information management processes.
subject matter experience to develop and recommend
The transformation consisted of developing data
changes to DoD Financial Management Regulations and
generation processes to cost effectively model selected
Federal Acquisition Regulations
assets, develop visual reporting dashboards to manage at
the “right costs, condition, and size” and support disposal • Supported DoD’s pilot programs compliance assessment
decision making. with Real Property Inventory Requirements and other
initiatives
Key Accomplishments:
• Supported real property requirements and initiatives
• Developed the Real Property Asset Management of the President’s Management Agenda, Federal Real
Plan, Three-Year Timeline, and System Framework Property Council, and Office of Management and
documents Budget
• Conducted analyses to identify common areas for • Assessed Real Property accountability and valuation for
measurable performance improvement and recommend the U.S. Army Corps of Engineers Financial Statement
assets for disposal Audit
• Developed an automated real property performance • Assisted DoD to determine baseline values for real
dashboard property historical costs and provide for accountability
• Defined requirements and established a business case and compliance. Identified weaknesses in human
for the consolidation, integration, and replacement of capital, knowledge management, and compliance with
DoT’s real property systems real property management policies and procedures
As a result of this common effort, DoT was recognized PwC successfully supported DoD’s Defense Business
by the Federal Real Property Council (FRPC) as one Transformation process to standardize and
of the top five Federal agencies in disposal of real streamline business processes, and correct financial
property assets. management weaknesses.
10 Real Property Portfolio Optimization Federal Management Solutions OfferingU.S. Department of the Interior (Interior), General Services Administration (GSA),
U.S. Fish & Wildlife Service (FWS) Public Buildings Service
The PwC team assisted with conducting on-site GSA is implementing innovative, green solutions in
inspections, collecting pertinent real property asset federal buildings through the American Recovery and
data and digital photographs, estimating repair and Reinvestment Act funding, and by striving to become a
system replacement costs, field verifying or developing zero environmental footprint (ZEF) organization. The
floor and roof plans, and uploading the data for selected Recovery Act granted GSA $4.5B to help convert federal
properties into the NPS Facility Management Software buildings into high-performance green buildings (HPGB).
System (FMSS). The GSA Recovery program management office (PMO)
faced challenges in defining a streamlined process to
Key Accomplishments: track HPGB project information for reports, assess
• Developed a comprehensive Five-Year Space project status towards sustainable design, and create a
Management Plan to help the Service efficiently and structure for managing strategic information to encourage
effectively manage asset life-cycles collaborative progress towards GSA’s sustainability
• Developed the Real Property Financial Management goals. PwC developed an IT based solution to consolidate
Handbook to drive accurate financial management and project data while facilitating a management process that
reporting of real property assets engages multiple stakeholders to collaborate and provide
input into the design and construction of all Recovery
• Identified trends, underlying root causes attributable to
projects nationwide. The PwC team worked with
significant asset valuation variances
experts in architecture, engineering, and construction
The Five-Year Space Management Plan was completed management to define performance benchmarks for
ahead of schedule and received formal recognition from sustainable projects to adhere to GSA’s guidelines and
the Department for the quality of the plan. The effort was minimum performance criteria (MPC).
recognized by stakeholders from multiple programs for
Key Accomplishments:
the progress made in managing financial information for
real property assets, and for the establishment of internal • Created a tool that serves as one of GSA’s primary tools
controls to encourage better valuation of assets. to track and report on progress toward its Recovery Act
goals by collecting performance metrics, project status
data, and compliance with MPCs.
Department of the Interior,
• Provided valuable information for reporting to external
National Park Service (NPS) stakeholders such as GAO, OMB, Congressional
Offices, and the White House and numerous internal
PwC helped with analyzing the existing improvement stakeholders. The Recovery PMO is able to field a range
assessments and assisted in developing management of questions about the nature and progress of Recovery
tools and guidance for use in determining changes to work, satisfying the higher threshold for transparency
assessment valuations in the field. and accountability within GSA’s Recovery Program.
Key Accomplishments: • Allowed the Recovery PMO to project how the portfolio
• Performed comprehensive facility condition will benefit from implementing sustainable design (in
assessments on critical assets including calculation of energy efficiency, renewable energy production, waste
replacement values diversion, and cost reductions).
• Created cost estimates for reinvestment to improve • Established a multi-user process for the Recovery PMO
assets to ‘right condition’ to review individual projects’ design elements and
encourage compliance with the MPCs. This process
• Recommended a technology solution to mitigates project risks and allows the PMO to influence
programmatically manage and align real property asset and guide project decision-making towards sustainable
inventory data throughout NPS design goals
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.
Real Property Portfolio Optimization Federal Management Solutions Offering 11www.pwc.com/publicsector 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: Karen Wilson Director (703) 610 7546 karen.wilson@us.pwc.com Michael Donoghue Director (703) 918 -1238 michael.donoghue@us.pwc.com Christopher Stansbury Managing Director (703) 918-1045 christopher.stansbury@us.pwc.com © 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.
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