Investments in Federal Facilities Asset Management Strategies for the 21st Century (2004) / Chapter Skim
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Pages 13-29
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From page 13... ...
to finance the construction and operation of roads, transit systems, airports, housing, hospitals, schools, and utilities.1In 2001 such grants 1 In addition to federal loans and grants, state and local governments raise funds through income, personal, and real property taxes and borrow money through bond sales repaid by these taxes.
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From page 14... ...
To provide a context for Chapters 2 through 6, Chapter 1 describes the ongoing magnitude of the federal government's investment in facilities; reviews some fundamental characteristics of private-sector organizations and the federal government that affect facilities investment and management; and discusses drivers of change and conceptual shifts in facilities investment and management. THE ONGOING INVESTMENT IN FEDERAL FACILITIES As of September 2000, the federal government owned and leased approximately 3.3 billion square feet of space worldwide (GAO, 2003f)
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90% DOT39.1 Air Force603.2 FIGURE 1.1 Federal agencies' facilities holdings in millions of square feet.
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The majority use specialized space -- courthouses, embassies, museums, hospitals, prisons -- in combination with office, warehousing, and research/laboratory space. The military services have the most diverse portfolios: Military installations contain all the types of facilities and infrastructure typically found in a small city, including airports, in addition to specialized facilities that support the defense mission.
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Funding Facilities Investments In 2001, U.S. businesses invested approximately $362 billion in new and existing structures and $748 billion in new equipment (U.S.
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of the potential investment by projecting the revenues the investment is likely to generate, discounting the future cash flow by the time value of money, accounting for risk, and subtracting the initial costs. Under such a process, it makes economic sense to proceed with a more detailed evaluation of a facilities investment only if the NPV is positive.
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They use a mix of ownership, leasing, lease-purchase, and other financial arrangements to acquire facilities depending on how the space will be used to support their operational requirements. Some private-sector organizations also build flexibility directly into their facilities: buildings with components and furniture that can be relatively easily reconfigured to accommodate new uses or new technologies, thereby allowing changes to be made in the physical environment relatively rapidly and at a relatively low cost.
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SOME CHARACTERISTICS OF THE FEDERAL GOVERNMENT THAT AFFECT FACILITIES INVESTMENT AND MANAGEMENT In addition to the President, Congress, and the judicial branch, the federal government's executive and legislative branches today comprise 15 departments, 40 independent agencies, 22 corporations and commissions, and approximately 1.7 million civilian employees (U.S. Government, 2003)
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The President and Congress are responsible for providing leadership and vision, setting policies, enacting legislation, establishing regulations, and authorizing and appropriating public funds. Civil service employees and political appointees within the various federal departments and agencies are responsible for administering programs, establishing and executing processes, analyzing their results, recommending initiatives, enforcing regulations, and expending public funds efficiently, effectively, and legally.
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Funding Facilities Investments The U.S. government primarily collects taxes and sells debt instruments, such as Treasury bonds and notes, to raise funds to support its activities.8 All expenditures, both operating and capital, are accounted for in the annual Budget of the United States Government.9 Since 1945, a number of actions and studies have been initiated to determine if the federal government should institute procedures to allow for separate consideration of operating and capital expenditures.10 To date, such procedures have not been implemented, and the government continues to make decisions about and budget for operating and capital expenditures together, unlike private-sector organizations.
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Decision makers in Congress and federal departments and agencies are asked to balance the competing demands of very different programs: Funding for facilities investments must be weighed against funding for medical research, weapons systems, homeland security, education, or numerous other public programs.11 In many cases, therefore, federal policy and budget decisions are fundamentally matters of achieving political consensus. Where a difficult decision is at stake, the government often operates on the principle that, absent a clear consensus, it is better not to act but rather to continue to seek a consensus.
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However it is possible and can be done when the need is clear.12 For these reasons and others, the missions of the federal government, its departments, and agencies often remain relatively unchanged at strategic levels for long periods of time, although many management practices change over time and the missions of individual agencies do evolve.13 Flexibility The scale of government operations is invariably large and typically precludes flexibility and scalability. The government is frequently a monopoly provider of goods and services, either because the function is inherently governmental or because of legislation.
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Federal departments and agencies must seek to attract workers with the required management and technical skills by using relatively standardized compensation packages with clearly established salary ranges and salary caps. Their ability to adjust their workforces to meet changing requirements is similarly limited in that it is a timeconsuming process to reassign or lay off workers whose skills are no longer essential to the achievement of the mission.
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Thus, a central issue in addressing facilities investments is the relative longevity of facilities and the likelihood that whatever is built and however it is maintained will eventually become obsolete to the original objectives in the short,
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. For facilities to perform adequately and reach their design service life, annual investments in preventive maintenance and minor repairs are required.
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CONCEPTUAL SHIFTS IN FACILITIES INVESTMENT DECISION MAKING In the drive to achieve their missions, increase profitability, and become more competitive, private-sector organizations have sought to significantly improve critical areas of performance by being results-driven. They focus on improving operations linked to financial, functional, and corporate objectives such as increased yields, reduced delivery times, increased inventory turns, improved customer satisfaction, [and]
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From page 29... ...
Doing so is likely to require a concerted effort to identify, verify, and refine data in order to develop information that is helpful in differentiating the consequences of alternative actions. All of the above factors -- the desire for flexibility, responsiveness to change, changing expectations, integrated management, information technologies -- are driving significant change in the field of facilities management.
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