Successful facility executives make their marks in part by ignoring facilities — at least when it comes to setting priorities. That’s not to say facility performance isn’t important. On the contrary, it’s immensely important. But when it comes down to identifying which aspects of facility performance count most, top facility executives look first to the needs of the organization. Those needs set the agenda.
That approach explains why different facility executives can have such different to-do lists. Here’s a look at the items that top the 2002 agenda for facility executives in five leading organizations. Taken together, these five snapshots provide a picture of the complex range of challenges facility executives will face in the coming year and of the strategies they’re using to meet those challenges.
Innovation Is Fidelity’s Priority
During a recession, finding ways to wring every penny out of real estate expenses can become such an overriding priority that, in some organizations, cost cutting becomes an end in itself. Not so at Fidelity Investments Corporate Real Estate. “We’re trying to offer our customers a competitive advantage,” says Stephen Bell, president of the Fidelity real estate unit. “Cost cutting is one way to do that. But we’re still focused on providing innovative workplaces. We’ve not cut back on that. In fact, we’ve expanded our efforts to provide creative occupancy solutions.”
Behind that approach is simple economics. Because real estate represents about 4 percent of total Fidelity operating costs, even a substantial reduction in those expenses pales in comparison to the payback for improving performance for the rest of the company. “That’s the significant opportunity,” says Bell. “We’re interested in reducing real estate costs, but not if it means hurting the performance of the rest of the company.”
In the search for creative ways to house Fidelity’s business units, one path leads through a research lab dedicated to exploring innovations in the design of physical space. It isn’t surprising to hear the word “creative” applied to things like new ideas in furniture or office layout. But at Fidelity, creativity extends to areas employees never see — under the floor, for example, or in a mechanical room.
When it comes to infrastructure, the Fidelity real estate group is on the lookout for approaches that will deliver a competitive advantage. The headquarters of Fidelity’s German arm will have chilled ceilings, radiant heating and innovative lighting. In the United States, everything Fidelity has built over the past two and a half years has been set up for wireless communications. “We know wireless isn’t ready for prime time,” says Bell. “But when it’s ready, we’ll be ready.”
Fidelity expects innovation to pay off. For example, the company designed a 600,000-square-foot facility in Texas with underfloor air distribution. It’s following up with a study to see whether it’s had any impact on churn; to gauge the impact on indoor air, Fidelity is tracking absenteeism.
Fidelity occupies about 8.3 million square feet of space in the United States, a number that is growing 12 to 14 percent a year. To manage that space, Fidelity relies on a corporate real estate staff of about 165 that focuses on activities where a high level of expertise can have the most impact on performance. There’s a client services team of top project managers. There’s the in-house workplace research lab run by a former marketing manager. There’s a group of data center engineers so good that they’re used as benchmarks by outsourcing providers. There’s a consulting engineer whose job is to keep on top of energy technologies. “Our focus has been outsourcing tactical functions that we can buy,” Bell says.
In a recent organizational change, security now reports to corporate real estate. That plan was in the works prior to Sept. 11; the terrorist attacks accelerated the shift. The real estate group now sits on several company-wide committees looking into areas like bioterrorism. Even when corporate real estate isn’t ultimately responsible for developing policies and procedures, it sometimes leads the effort.
“We need to make sure we deal effectively with the threats,” Bell says. That means starting with risk assessments and then evaluating physical changes to improve security.
“It wasn’t in our business plan, but it’s become a huge issue for us,” Bell says.
— Edward Sullivan, editor
At Miami, Efficiency is Driving Change
Victor Atherton can boil his professional philosophy down to one word: efficiency. As associate vice president of facility administration at the University of Miami in Coral Gables, Fla., Atherton’s mission is to operate the university at the least cost per square foot possible. And those aren’t just words.
The university has saved $2.7 million through productivity and energy efficiency gains in 2000, and Atherton aims to do as well or better this year. His incentive is based on his unusual arrangement with the university: What the department saves, the department keeps. And a further productivity gain is one of the first things on his mind these days.
A zone maintenance system and a computerized maintenance management system have enabled the school to reduce its maintenance staff in full time equivalent employees by 40 percent — all by attrition.
“But we still spend 18 percent of our time on travel, 2 percent on paperwork, 6 percent on getting parts and 3 percent on troubleshooting,” Atherton says. “This represents 15 people.”
His mission this year is to cut those 15 unproductive people by half, and his tool is not going to be an axe but a computer.
It’s a Web-based, wireless, Palm-Pilot-like device that will allow the facility staff to access and collect data in real time not only from building systems and the university’s own computers but also from OEMs and anywhere else for that matter.
“We might be able to achieve even greater efficiency and reduce staff by another 8 people,” Atherton says. That represents a quarter of a million dollars, though it will take awhile to achieve that through attrition.
“This system won’t be bleeding edge, but it’s out there,” he says. “We like to be progressive at this university. We’re not going to sit and wait for things to happen.”
Another area where the university isn’t waiting around is deregulation.
Success in its goal to buy and sell electricity depends on the university’s ability to monitor and control its electric load. The core of the system that is going to help do this is operating in one building where the load has fallen by 14 percent. Other buildings are now being added to the system.
This system, with further development, will combine weather and energy cost forecasts and other variables. It will allow equipment power needs to be varied right down to fan motors. Atherton also wants the system to recognize when a classroom is unoccupied so it can shut HVAC systems down and then determine what the minimum time is to get the classroom back up again.
Technology is not the only thing preoccupying Atherton, however. After the events of Sept. 11, security has been put on the front burner.
Immediately following the attacks, the facility department did a security assessment. Things that didn’t seem a problem before Sept. 11 now did.
Besides buildings that were vulnerable to bombs because of open and unoccupied first levels, the team also found that some air handling units could be accessed. The department is working on securing access to these areas and putting in a system that allows the department to shut down individual air handling units at the push of a button.
“The assessment was an eye opener,” Atherton says. “You don’t think of people trying to blow up your buildings, but now we do.”
— David Kozlowski, senior editor
Security Tops the Public Buildings Service Agenda
The terrorist attacks of Sept. 11 reinforced the importance of ensuring that the government’s buildings and their occupants remain safe, says F. Joseph Moravec, commissioner of the Public Buildings Service (PBS). “Our federal clients, like commercial tenants nationally, are very concerned about safety.”
PBS is the real estate arm of the U.S. General Services Administration (GSA). “We’re the chief landlord of the civilian federal government,” says Moravec. “We develop, manage, lease, sell and buy property, and provide security.” PBS manages some 340 million square feet of space across the country. Its portfolio of 8,000 buildings ranges from laboratories to border stations to office buildings. Approximately 100 federal agencies make up its client base.
Of course, securing the government’s buildings had been a priority long before last fall. Since the bombing of the 1995 Alfred P. Murrah Federal Building in Oklahoma City, the federal government had been incorporating stricter security guidelines in its building designs and operations, says Moravec. For instance, windows in new facilities use a multi-layer system of glass that helps control breakage.
Even so, the focus on secure building designs and operations has become more intense since September. More visitors and tenants in federal buildings now pass through X-ray screens and magnetometers, which help detect concealed weapons. In order to beef up its ranks of security guards, PBS is asking for $200 million in supplemental funding.
Employing state-of-the-art security features and guidelines is necessary, of course. However, the biggest lesson learned in Oklahoma City is that intelligence and preparation are the best defense, says Moravec. “Once terrorists arrive at a building, there is only so much you can do,” Moravec points out. In order to be as prepared as they can, PBS’ special agents have stepped up their involvement with the FBI’s Joint Terrorism Task Forces and the CIA’s Interagency Committee on Terrorism.
In addition to ensuring that the government’s buildings are secure, Moravec and his colleagues are working to improve their operational efficiency. For instance, Moravec is making a concerted effort to leverage PBS’ size and national presence as the agency works with tenants and vendors. “We realize that we're missing some opportunities for synergy.”
Asset management is another issue at the top of Moravec’s to-do list for 2002. He points out that the capital appropriations process through which PBS obtains funds, which involves presenting a case to Congress, isn’t always conducive to obtaining the funds required to maintain and update its facilities. As a result, a number of the government’s buildings have not been maintained as well as they could have been, and are not energy efficient, says Moravec.
To change that, GSA is supporting a property reform act that would allow PBS to use some of the asset management tools now available in the private sector. For instance, PBS would be able to have a private firm develop a parcel of land, which PBS would then lease back from the firm.
— Karen Kroll, contributing editor
Kaiser Permanente Plans $4 Billion in Construction
Impending state requirements have given healthcare giant Kaiser Permanente a giant challenge: replacing nearly half of its California hospitals and upgrading others to meet the state’s new seismic requirements. “The cost will be in the neighborhood of $4 billion,” says Thomas Heller, vice president of national facilities services for Kaiser Permanente. “We’re in active design and construction of five hospitals right now.”
Although Kaiser Permanente is a national healthcare organization, with nearly 50 million square feet of space and roughly 100,000 employees and physicians across the country, Kaiser has more members, employees and physicians in California than in the rest of the nation combined. About 38 million square feet of its space is in that state, including 5 million square feet of hospital space that will have to be upgraded or replaced.
Despite the magnitude of the task, Kaiser isn’t cutting any corners — just the opposite. State law sets two levels of seismic requirements. By 2008, hospitals must be capable of protecting patients and staff from an earthquake, though the building
isn’t required to be useable after the quake. By 2030, hospitals must be remain functional following an earthquake.
Kaiser is designing replacement hospitals to meet the 2030 requirements. “Since healthcare is our core business, for us to be nonfunctional doesn’t make any sense,” says Heller.
Economics support Kaiser’s approach. Meeting the 2008 standards would be costly, disruptive to patient care and virtually impossible for some hospitals; what’s more, these hospitals would still have to be upgraded or replaced by 2030. “Hitting the 2030 standards is more expensive initially,” says Heller, “but it’s a wise investment in the long run.”
Meeting the seismic requirements by 2008 for the 13 hospitals Kaiser plans to replace would be next to impossible, Heller says. Kaiser is supporting a proposal to extend the time for meeting the first set of standards, when a hospital commits to meeting the 2030 standards by 2013. If 2008 sounds like a long way off, bear in mind that, with all the approvals and reviews required, it takes nearly seven years to get a new hospital built in California, Heller says.
As a healthcare organization with facilities in the Washington, D.C., area, Kaiser has been on the front lines of the effort to respond to terrorism. A top level effort is now underway at Kaiser to evaluate the risks of and responses to terrorism.
“Our first priority is how we care for people,” Heller says. “Right along with that, we have to consider our emergency preparedness plans, including direct threats to hospital facilities.”
To be able to care for patients following a terrorist strike, hospitals may well require some modifications. “When you’re dealing with bioterrorism, you may have to consider the isolation of patients with infectious diseases or deal with a volume of patients you hadn’t considered when the building was designed,” Heller says.
One thing that won’t be on the agenda for Heller is winning top management support. He already has that, thanks in part to the facility organization’s solid track record of balancing cost and service. “Facilities are a critical part of our healthcare program, and we’re always vigilant,” says Heller. “We always ask whether we’re providing the right level of service at the right price.”
— Edward Sullivan, editor
At CarrAmerica, The Economy is the Challenge
“It’s the economy.”
That phrase, which first became popular during the 1992 presidential election, resonates again in today’s world. “The economy certainly is a bigger challenge than it’s been in 10 years,” says Philip Hawkins, chief operating officer with CarrAmerica Realty Corporation. CarrAmerica, a Washington, D.C.-based real estate owner, developer and operator, manages 38 million square feet of office space in about 12 markets across the United States.
The management team at CarrAmerica has been preparing for the current economic downturn for the past several years, says Hawkins. By late 1999, CarrAmerica’s research showed that the demand for office space was outstripping job growth, at least in selected markets.
That information prompted the firm’s management team to focus more intently on build-to-suit projects. Over the past 18 months, about 85 percent of CarrAmerica’s development projects have been build-to-suit or substantially pre-leased. That compares to 30 percent three years ago, says Hawkins. In addition, most of the new speculative projects were started about a year ago; CarrAmerica currently is not embarking on any new speculative building.
At the same time, CarrAmerica’s professionals have been working to come up with innovative ways to help its tenants manage their space issues. “We’ll be as flexible as possible to meet our mutual needs,” says Hawkins. For instance, one tenant in Silicon Valley needed to sublease 200,000 square feet of its space. A credit-worthy tenant was interested in the facility, but wanted to lease it directly and needed a longer term than the original agreement would allow. CarrAmerica worked with the original tenant to modify its lease, and was able to provide the new tenant with a direct lease for the time period needed.
CarrAmerica also is striving to find ways to keep its operating costs low, and thus hold the line on the charges its tenants pay, says Hawkins. One example is CarrAmerica’s InfoCenter, a Web-based workflow product. Through InfoCenter, CarrAmerica’s operations employees and tenants can communicate back and forth inexpensively. A tenant calls or e-mails its request to CarrAmerica’s facilities team, and then can monitor the progress of the work online. “It’s a way to track the work more efficiently,” says Hawkins.
Finally, making sure that its employees, tenants and buildings are secure remains a significant concern for 2002. “We’ve learned that event risk is really significant, whether it’s Sept. 11 or the day the plane went down,” says Hawkins, referring to the November 2001 crash of American Airlines Flight 587.
The goal should be to prepare for risk in general, as trying to plan for a specific event almost is impossible, asserts Hawkins. To that end, the facilities management professionals at CarrAmerica have been reviewing their security plans in detail. For instance, the company’s management team has been working with its on-site facilities professionals to make sure that they know which authorities to call, and in what order, for different emergencies. One example: if an anthrax scare occurs, one of the building manager’s first calls would be to the Centers for Disease Controls (CDC). That probably wouldn’t be the case if a fire breaks out, notes Hawkins.
— Karen Kroll, contributing editor