Strategies for Efficiency in Real Estate Management Report to the Governor March 2015 CustomerFocused DRAFT Table of Contents Executive Summary………………………………………………..….………………………………………….………….3 The Project…………………………………………………………………………………………...............................18 Opportunity Estimation………………..………………………………………………………….........................28 High-Level Strategies for Lowering Operating Costs…..…………………….…………………………….39 Facilities Management Outsourcing..…………..……………………………………………………..41 Energy Management…………..………………………………………………………………………………43 High-Level Strategies for Disposition and Consolidation………..……………………………………...46 Decommissioning…..……………………………………………………………………………………………48 Densification…..…………………………………………………………………………………………………..50 Increased Utilization……………………………………………………………………..…………………….52 Workplace Strategies…………………………………………………………………………………………..54 Recommendations for Improving SBC Decision-Making and Other Processes………………..56 Next Steps…………………………………………….……………….………………….……………………………………..70 2 Executive Summ ary CustomerFocused DRAFT 3 Executive Summary Overview • On November 13th, the Governor initiated a project to determine how to improve the efficiency of the management of the State of Tennessee’s (“the State’s”) real estate and realize the resulting cost savings. • The project began with an estimation of the potential savings opportunity and a determination of which high-level strategies the State should pursue in the achievement of that opportunity. Initial results and recommendations on how to proceed are presented in this report. • The project’s scope covers all State-owned real estate, including properties managed by the Facilities Revolving Fund (“FRF”), non-FRF, University of Tennessee System (“UT”) and Tennessee Board of Regents (“TBR”)— collectively referred to as the “State Procurement Agencies” (“SPAs”). 4 Executive Summary Participants and Approach Participants The project is sponsored by the Chief Operating Officer (“COO”) and led by the Director of Customer Focused Government (“CFG”). The project’s participants also include representatives from the State Building Commission (“SBC”), Office of the State Architect (“OSA”), UT, TBR, and Department of General Services (“DGS”). Approach • The project began on November 19th with a briefing to the project team leads. On December 12th, all participants met and were divided into three working groups—strategies for lowering operating costs, disposition and consolidation, and decision-making/process improvement—to discuss the project’s opportunities, which led to the recommendations as presented herein. • In January, the project’s objectives were further clarified and additional data to sharpen the projected savings opportunity were requested of DGS, UT and TBR. The report was then developed and provided in February to all participants. 5 Executive Summary The Estimated Opportunity The opportunity for improving the State’s management of real estate is initially estimated to be $183.9M. Strategies for Efficiency in Real Estate Management Opportunity (millions) Strategic implementation of facilities management outsourcing $94.5 Strategic implementation of an energy management initiative $53.9 Improvements to the design and construction processes of the SBC $17.4 Reduction of needed property through the strategic implementation of densification, increased utilization, and alternative workplace strategies $10.4 Elimination of vacant, functionally-obsolete, and expensive-to-maintain assets TOTAL ANNUAL OPERATING COST REDUCTIONS $7.7 $183.9 6 Executive Summary The Estimated Opportunity (cont.) State Procurement Agency Opportunity (millions) FRF $24.6 Non-FRF $42.4 TOTAL FOR GENERAL GOVERNMENT $67.0 UT (E&G) $26.2 UT (Auxiliary) $18.7 TOTAL FOR UT $44.9 TBR (E&G) $57.3 TBR (Auxiliary) $14.7 TOTAL FOR TBR $72.0 TOTAL FOR HIGHER EDUCATION TOTAL ANNUAL OPERATING COST REDUCTIONS $116.9 $183.9 7 Executive Summary The Estimated Opportunity (cont.) In estimating the opportunity, several important considerations for realizing the amount were determined: • The term “cost reduction” is intended to encompass both current and future costs. The latter is sometimes referred to as costs avoided. • The opportunity amount represents an expected annual reduction in operating costs after the strategies have been fully implemented. It is reasonable to conclude that some lesser amounts of cost reductions will be realized as the implementations progress. • There will be costs to achieve the opportunity. Most of these costs consist of deferred maintenance for the properties. Although some initial data about these costs were presented, their reasonableness could not be ascertained at this time. They will be further evaluated in the next phase of the project. • The UT and TBR opportunity amounts described as “auxiliary” are required to be returned to the funding sources for these properties. • The opportunity value of improving the SBC processes could only be partially quantified. Once thoroughly examined “end-to-end” for improvement recommendations and compared to private and public sector best practice, additional cost reductions will emerge through efficiency improvements to SBC statute, policies and procedures. 8 Executive Summary High-Level Strategies Lowering Operating Costs Facilities management outsourcing: Reduce costs while improving service quality through commercial management utilizing performance contracting. Opportunities • All SPAs are currently evaluating procurement of statewide service contracts. • Implementation is underway and expanding in FRF facilities. • Contracts can be written with incentives for new contract managers to reduce costs. Challenges • Outsourcing presents potential political issues, given past experiences. • Federal matching funds dedicated exclusively for facilities management can be lost. 9 Executive Summary High-Level Strategies (cont.) Lowering Operating Costs (cont.) Energy management: Decrease energy usage through active management, operational efficiencies, and conservation improvements. Opportunities • The greatest potential for cost savings exists in improving methods of energy management to include performance metrics and bill consolidation across all SPAs. • EmPower TN, the Governor’s initiative for investing in renewable energy sources , involves investment in measuring energy use, controlling use, and using new energy sources. Over the next 8 years, the initiative is projected to reduce cumulative energy costs of $265M. Challenges • Significant initial capital investment is required for energy production, energy reduction, and management. • The State’s energy spend data is incomplete for analyses of certain baselines and rate validation. 10 Executive Summary High-Level Strategies (cont.) Disposition/Consolidation Decommissioning: Eliminate vacant, functionally-obsolete and expensive-tomaintain assets. Opportunities • All SPAs are actively trying to decommission buildings and are continuing to identify additional facilities for replacement or demolition. • Decommissioning presents cost-savings opportunities by eliminating deferred maintenance and recurring high operating costs (UT and TBR buildings are approaching averages of 40-50 years in age). Challenges • Decommissioning historic buildings can result in public pushback. • Before widespread decommissioning is possible, other strategies (densification, workplace strategies, increased utilization, etc.) must first be implemented. 11 Executive Summary High-Level Strategies (cont.) Disposition/Consolidation (cont.) Densification: Reduce space requirements. Opportunities • Locating various general government services in regional “one-stop” centers presents an opportunity for large-scale densification. • The consolidation of back-office functions into one location, no new net real estate growth strategies, and responsibility-based budgeting for FRF and non-FRF could be considered. • Project T3 is resulting in large-scale densification of FRF properties. • Space utilization studies need to be conducted across the enterprise. Challenges • Many buildings are old and will require renovations, code adjustments, and funding before densification can be considered . 12 Executive Summary High-Level Strategies (cont.) Disposition/Consolidation (cont.) Increase utilization: Fully occupy existing capacity and eliminate unneeded leased or owned space. Opportunities • General government and higher education can share unoccupied/underutilized space. • Improved electronic scheduling, free address, and no net new real estate growth strategies can help managers increase utilization. Challenges • An accurate enterprise property inventory for the State is not currently available. • Eliminating leased space is not always consistent with desired program offerings in specific communities. 13 Executive Summary High-Level Strategies (cont.) Disposition/Consolidation (cont.) Workplace strategies: Reduce space requirements using solutions such as telework, hoteling, free address, touch downs, etc. Opportunities • Some field workers and adjunct professors may not require dedicated office space. Hoteling for some field workers and adjunct professors not engaged in student advising is already a prevalent practice. Challenges • Buy-in and cultural change management are crucial for successful implementation. • Failure to implement strategies properly after space reduction would increase overall State costs. • May be inconsistent with Drive to 55 initiatives and CCTA outcomes; data indicates student success is correlated with level of student engagement with faculty and staff members. 14 Executive Summary SBC Process Recommendations • Seek opportunities to align processes and contracts across the State, and strategic sourcing where appropriate. • Formalize front-end tools and processes, and adopt a robust approach to Master Planning. • Include demolition consent in initial SBC subcommittee agenda item. • Increase training and education regarding the SBC process. • Increase utilization of STREAM funding to start design process prior to construction approval (and funding) of General Government projects. • Develop a capital consent agenda so that standard projects may more readily allow a sponsor’s designee to attend hearings in place of the project sponsor. 15 Executive Summary SBC Process Recommendations (cont.) • Revise process so that leases are returned for processing, review, and signatures to the source of the request (STREAM, UT, or TBR). • Conduct a review of the entire disclosure process and consider a rolling process for non-appropriated projects (UT and TBR). • Grant STREAM legal counsel signing authority for contracts requiring SBC approval. • Improve SBC statute, policies, and procedures to be clearer, more consistent, and more efficient. • Explore adjusting the threshold values that determine what requires SBC approval. • Engage the Legislature in evaluating the appropriate level of budget detail required of F&A and the administration pertaining to capital maintenance projects. 16 Executive Summary Suggested Next Steps In this project, we’ve taken the first step to better understanding our opportunity to improve our real estate management. We’ve also identified most of the strategies necessary to accomplish this opportunity. The opportunity of $183.9M in annual operating savings to the State should be pursued. Moving forward, we suggest the following high-level approach: • Establish an Enterprise Project Management Office. • Establish Enterprise Strategy Teams to refine the strategies, determine the costs to achieve, and define the tactics required to realize the opportunity. • Develop implementation plans with clear cost benefit analyses and preference for immediate realization of savings. • Authorize SPAs to execute implementation plans. • Implement a Program Office for sustainability. 17 The Project CustomerFocused DRAFT 18 The Project Objective and Scope Objective To determine how to improve the efficiency of the State’s real estate management and realize the resulting cost savings. Scope All State-owned real estate, including FRF, non-FRF, UT and TBR properties and the processes performed by the SPAs and at the State as directed by the SBC. 19 The Project The Imperative for Change State budget pressures increasing Focus on managing shared services and administrative costs WHY NOW? State leadership aligned on need to obtain cost savings in real estate Real estate is our 5th-largest budget expenditure 20 The Project Participants Sponsors • Chief Operating Officer • Director of Customer Focused Government Stakeholders* • State Building Commission Representatives • The State Architect State Procurement Agencies • University of Tennessee • Tennessee Board of Regents • Department of General Services *Tennessee Higher Education Commission (THEC) will be joining in the future. 21 The Project Approach Opportunity Estimation Development of Strategies • Define the extent of the costsavings opportunity. • Vet initial strategies as to their applicability to SPAs, individual properties, and/or categories of properties. • Analyze property management data in the context of the initial highlevel strategies. • Apply cost savings targets to relevant square-footage data in order to derive a more refined opportunity than the initial $200M goal. Consider ideas for strategy realization. Evaluate process improvement based on participant experiences. • Consider how real estate processes can be modified to be more efficient. 22 The Project Primary Activities Project scope = All State real estate (FRF, Non-FRF, UT, TBR) 1) Estimate the opportunity. 2) Develop high-level strategies considering three objectives: Lower Annual Operating Costs Dispose/ Consolidate Real Estate Estimate the opportunity by using square footage and cost data from the SPAs. Conduct an ideation session to discuss high-level strategies. Improve Decision-Making & Other Processes Analyze current transactions through process flows led to recommendations. 23 The Project Initial High-Level Strategies Considered Lower Annual Operating Costs • Facilities management outsourcing • Energy management Dispose/Consolidate • Decommissioning • Densification • Increased utilization • Workplace strategies Improve DecisionMaking & Other Processes • Remove rework • Analyze workflow • Eliminate redundancies • Potential statute/rule changes 24 The Project Lowering Operating Costs Strategies • Facilities management outsourcing: Reduce costs through while improving service quality through commercial management utilizing performance contracting. • Energy management: Decrease energy usage through active management, operational efficiencies, and conservation improvements. 25 The Project Disposition/Consolidation Strategies • Decommissioning: Eliminate vacant, functionally-obsolete and expensive-tomaintain assets. • Densification: Reduce space requirements. • Increase utilization: Fully occupy existing capacity and eliminate unneeded leased or owned space. • Workplace strategies: Reduce space requirements using solutions like telework, hoteling, free address, touch downs, etc. 26 The Project Decision-Making & Process Improvements • Remove rework: Reduce repetitive submissions caused by lack of understanding of process requirements. • Analyze workflow: Order process steps for most efficient flow. • Eliminate redundancies: Examine role definitions to minimize overlap and provide clarity to value added at each step. • Potential statute/rule changes: Study impacts of status quo on process timelines and explore opportunities to alter. 27 Opportunity Estim ation CustomerFocused DRAFT 28 Opportunity Estimation Objective and Approach Objective Determine the State’s real estate square footage and operating costs to refine the attainable opportunity. Approach • Request square footage data from each of the SPAs relevant for the initial strategies. • Eliminate any properties that cannot contribute to the opportunity. • Conclude on relevant square footage considering operational experience. • Use cost benchmarks for each of the initial high-level strategies as follows: – – – – – Facilities Management Outsourcing – Based on FRF experience. Energy Management – Based on consulting advice and other States’ plans. SBC Improvements – Based on actual FRF experience with Job Order Contract processes. Reduction of Needed Property – Based on estimated consolidation opportunities. Property Elimination – Based on dispositions of buildings and leases. • Calculate cost reduction opportunity applying cost benchmarks to applicable square footage. 29 Opportunity Estimation The Estimated Opportunity The opportunity for improving the State’s management of real estate is initially estimated to be $183.9M. Strategies for Efficiency in Real Estate Management Opportunity (millions) Strategic implementation of facilities management outsourcing $94.5 Strategic implementation of an energy management initiative $53.9 Improvements to the design and construction processes of the SBC $17.4 Reduction of needed property through the strategic implementation of densification, increased utilization, and alternative workplace strategies $10.4 Elimination of vacant, functionally-obsolete, and expensive-to-maintain assets TOTAL ANNUAL OPERATING COST REDUCTIONS $7.7 $183.9 30 Opportunity Estimation The Estimated Opportunity State Procurement Agency Opportunity (millions) FRF $24.6 Non-FRF $42.4 TOTAL FOR GENERAL GOVERNMENT $67.0 UT (E&G) $26.2 UT (Auxiliary) $18.7 TOTAL FOR UT $44.9 TBR (E&G) $57.3 TBR (Auxiliary) $14.7 TOTAL FOR TBR $72.0 TOTAL FOR HIGHER EDUCATION TOTAL ANNUAL OPERATING COST REDUCTIONS $116.9 $183.9 31 Opportunity Estimation The Estimated Opportunity (cont.) In estimating the opportunity, several important considerations for realizing the amount were determined: • The term “cost reduction” is intended to encompass both current and future costs. The latter is sometimes referred to as costs avoided. • The opportunity amount represents an expected annual reduction in operating costs after the strategies have been fully implemented. It is reasonable to conclude that some lesser amounts of cost reductions will be realized as the implementations progress. • There will be costs to achieve the opportunity. Most of these costs consist of deferred maintenance for the properties. Although some initial data about these costs were presented, their reasonableness could not be ascertained at this time. They will be further evaluated in the next phase of the project. • The UT and TBR opportunity amounts described as “auxiliary” are required to be returned to the funding sources for these properties. • The opportunity value of improving the SBC processes could only be partially quantified. Once thoroughly examined “end-to-end” for improvement recommendations and compared to private and public sector best practice, additional cost reductions will emerge through efficiency improvements to SBC statute, policies and procedures. 32 Implementation of facilities management outsourcing The opportunity for cost reduction includes: Procurement and Sourcing: Reduce costs through bundling of outsourced service contracts. 5.4% reduction in Current Annual Costs equals the estimated Annual Cost Reduction; and is the basis for a 15-year Total Cost Reduction. Facility Management: Outsourcing of facility management to a single vendor 14% reduction of Current Annual Facility Management (FM) Costs equals the estimated Annual Cost Reduction; and is the basis for a 15-year Total Cost Reduction. Facility Management: Bundling of outsourced facility management to a single vendor $0.20 reduction per GSF equals the estimated Annual Cost Reduction; and is the basis for a 15-year Total Cost Reduction. FRF Current Gross Square Footage (GSF) 6,592,847 $ Current Annual Costs Annual Cost Reduction 32,470,000 $ 15-year Total Cost Reduction 7,617,749 $ 114,266,241 Non-FRF 21,540,963 91,679,499 22,094,015 331,410,231 UT - E&G 14,666,716 48,066,922 12,258,326 183,874,890 UT - Auxiliary 10,694,587 35,049,146 11,463,900 171,958,500 TBR - E&G 26,913,854 134,851,513 31,543,964 473,159,460 8,159,857 40,884,857 9,563,634 143,454,510 TBR - Auxiliary Totals 88,568,824 $ 383,001,937 $ 94,541,589 $ 1,418,123,832 Notes: 1. FRF (Current GSF) - The current GSF is reflects the average GSF of state-owned space JLL managed for the State during FY14. 2. FRF (Current Annual Costs) - The $32.47 million costs are based on FY13 State-owned budget costs which equals 88% of the total State-owned spend of $36.9 million. The 88% is the percentage of the FRF portfolio that is owned. 3. Non-FRF (Current GSF) - The current GSF represents the Non-FRF agencies in which DGS OFM was able to capture cost data, and is not a total representation of the NonFRF portfolio. Numbers are based on the 2014 Risk Management Report provided by Treasury and numbers from questionnaires provided by the Non-FRF agencies. 4. Non-FRF (Current Annual Costs) - Annual costs are based on Non-FRF agencies cost data in which DGS OFM was able to capture and validate through Edison. 5. UT/TBR: Auxiliary space is generally revenue producing space. (All numbers are estimates based on preliminary research and are subject to change based on a variety of factors.) 33 Implementation of an energy management initiative (EmPower TN) The opportunity for cost reduction is based on the analysis of the State’s energy management consultant, resulting in a 28% reduction in Actual Annual Utility Costs equals the estimated Annual Cost Reduction; and is the basis for a 15-year Total Cost Reduction. Current GSF FRF 6,592,847 Annual Cost Reduction (28% reduction, after Year 8) Actual Annual Utility Costs $ 19,352,636 $ 5,418,738 15-year Total Cost Reduction $ 81,281,071 Non-FRF 15,108,074 45,605,682 12,769,591 191,543,864 UT - E&G 14,666,716 36,373,455 10,184,567 152,768,511 7,186,249 17,821,900 4,990,132 74,851,980 26,913,854 56,284,431 15,759,641 236,394,610 8,159,857 17,064,554 4,778,075 71,671,127 UT - Auxiliary TBR - E&G TBR - Auxiliary Totals 78,627,597 $ 192,502,658 $ 53,900,744 $ 808,511,164 Notes: 1. General (All) - 15-year cost reduction is calculated by multiplying the Annual Cost Reduction by 15. The 15-year cost reduction would take effect beginning in Year 8. 2. FRF (Actual Annual Utility Costs) - The figure is supported by the state’s final FY14 accounting report and does not include waste removal costs since we reflect that in a non-utility cost category. 3. Non-FRF (Current GSF) - Current GSF is based on information provided by OFM, and does not include space that is not heated or cooled. 4. Non-FRF (Actual Annual Utility Costs) - Actual utility costs are based information provided by OFM. 5. General (UT/TBR) - Estimated savings percentage of 28% is based upon a starting cost/GSF that is double the starting cost/GSF for higher education. Since current higher education costs are less than half o the utility cost of General Government, the 28% reduction assumption for higher education is likely to be overstated. 6. UT - Auxiliary - Net of estimated parking structures that do have some utility costs albeit not heating and air conditioning. Costs for auxiliary was estimated by applying the E & G costs per square foot to total auxiliary square footage. Cost per square foot is calculated using net auxiliary after reducing for parking structures. (All numbers are estimates based on preliminary research and are subject to change based on a variety of factors.) 34 Improvements to the design and construction processes of the SBC The opportunity for cost reduction includes: 25% reduction in Total Design and Construction Costs on Construction Projects less than $100,000, 20% reduction on projects between $100,000 and $500,000, and 15% Reduction on Projects between $500,000 and $1M equals the estimated Annual Cost Reduction; and is the basis for a 15-year Total Cost Reduction. Percentage reductions based on FRF experience with Job Order Contracts. ALL PROJECTS COMBINED Total Design and Construction Costs FRF $ Total Number of Construction Projects Annual Cost Reduction 10,906,041 104 Non-FRF 14,797,644 46 2,552,197 38,282,954 UT- E&G 14,955,000 30 2,579,000 38,685,000 UT - Auxiliary 10,180,000 17 1,660,750 24,911,250 TBR - E&G 50,950,655 112 8,487,626 127,314,392 - - TBR - Auxiliary Totals $ 101,789,340 $ 15-year Total Cost Reduction 2,107,208 0 309 $ 17,386,781 $ $ 31,608,123 260,801,719 Note: FRF/Non-FRF - All design and construction costs are based on capital projects approved by SBC in FY13 and FY14. (All numbers are estimates based on preliminary research and are subject to change based on a variety of factors.) Construction Projects less than $100,000 Total Design and Construction Costs FRF Non-FRF UT TBR Totals $ 1,980,000 577,700 Annual Cost Reduction (25% reduction) Number of Construction Projects 15-year Total Cost Reduction 81 14 $ 495,000 144,425 $ 7,425,000 2,166,375 95 $ 639,425 $ 9,591,375 Note: UT/TBR account for projects under $100,000 as part of the operations and maintenance of physical plant 35 Improvements to the design and construction processes of the SBC (cont.) The opportunity for cost reduction includes: 25% reduction in Total Design and Construction Costs on Construction Projects less than $100,000, 20% reduction on projects between $100,000 and $500,000, and 15% Reduction on Projects between $500,000 and $1M equals the estimated Annual Cost Reduction; and is the basis for a 15-year Total Cost Reduction. Percentage reductions based on FRF experience with Job Order Contracts. Construction Projects between $100,000 and $500,000 Total Design and Construction Costs FRF Non-FRF UT - E&G UT – Auxiliary TBR - E&G TBR - Auxiliary $ 5,466,041 5,495,606 6,715,000 2,675,000 16,900,558 - Totals Number of Construction Projects Annual Cost Reduction (20% reduction) 15-year Total Cost Reduction 19 20 20 8 66 0 $ 1,093,208 1,099,121 1,343,000 535,000 3,380,112 - $ 16,398,123 16,486,818 20,145,000 8,025,000 50,701,674 - 133 $ 7,450,441 $ 111,756,615 Construction Projects between $500,000 and $1,000,000 Total Design and Construction Costs FRF Non-FRF UT - E&G UT – Auxiliary TBR - E&G TBR - Auxiliary Totals $ 3,460,000 8,724,338 8,240,000 7,505,000 34,050,097 - Number of Construction Projects Bet. $500K - $1M Annual Cost Reduction (15% reduction) 4 12 10 9 46 0 $ 81 $ 519,000 1,308,651 1,236,000 1,125,750 5,107,515 15-year Total Cost Reduction $ 7,785,000 19,629,761 18,540,000 16,886,250 76,612,718 - $ 139,453,729 - 9,296,915 36 Reduction of needed property through densification, increased utilization, and alternative workplace strategies Annual Cost Reduction is the average of the 15-year Total Cost Reduction from Reduced SF (% reduced), which includes 15 years of adjustments to operating expenses, lease payments, etc. Current SF Reduced SF FRF 6,592,847 749,584 11% FRF Leased 3,501,289 488,154 14% 23,202,740 250,000 UT 2,332,737 TBR Non-FRF Totals Current Annual Project Costs % reduced $ 15-year Total Cost Reduction Annual Cost Reduction 2,358,034 $ 35,370,516 39,185,873 4,702,305 70,534,571 1% 4,500,000 3,000,000 45,000,000 23,327 1% 12,480,143 124,801 1,872,021 3,854,702 38,547 1% 20,853,938 208,539 3,128,091 39,484,315 1,549,612 4% $ 7,300,000 $ 84,319,954 $ 10,393,680 $ 155,905,200 Notes: 1. Reduced SF – An estimate of the square footage that can be reduced utilizing asset management data. 2. % reduced - The % reduced amount is calculated by dividing the Reduced SF by the Current SF. 3. FRF and Non-FRF (Annual Cost Reduction) - These amounts are calculated by dividing the 15-year cost reduction by 15. 4. FRF (Current Annual Project Costs) - This amount represents the annual costs of leases the State believes it can consolidate into State-owned space. 5. FRF Leased (Current SF) - Current SF is based on January 2015 FRF Report. (All numbers are estimates based on preliminary research and are subject to change based on a variety of factors.) 37 Elimination of vacant, functionally-obsolete, and expensive-to-maintain assets The opportunity for cost reduction includes: Annual Cost Reduction is the average of the 15-year Total Cost Reduction from Reduced SF (% reduced), which includes 15 years of adjustments to operating expense, lease payments, etc. Current Square Footage (SF) FRF Reduced SF 6,592,847 387,429 6% Non-FRF 23,202,740 402,000 UT - E&G 8,913,417 UT - Auxiliary TBR - E&G TBR - Auxiliary Totals Current Annual Project Costs % reduced $ Annual Cost Reduction 15-year Total Cost Reduction 3,482,209 $ 2,388,582 $ 35,828,730 2% 3,600,000 2,010,000 30,150,000 178,268 2% 953,734 1,031,815 15,477,225 5,050,427 101,010 2% 540,403 584,645 8,769,675 10,657,202 213,144 2% 1,153,100 1,246,458 18,696,870 3,388,116 67,762 2% 362,527 392,207 5,883,105 57,804,749 1,349,614 2% $ 10,091,973 $ 7,653,707 $ 114,805,605 Notes: 1. % reduced - The % reduced amount is calculated by dividing the Reduced SF by the Current SF. 2. 15-year Total Cost Reduction - This amount is calculated by multiplying the annual cost reduction by 15. 3. FRF (Reduced SF) - Reduced square footage is based on the assumption that buildings identified for possible reduction are disposed. 4. Non-FRF, UT and TBR (Reduced SF) – An estimate of the square footage that can be reduced utilizing asset management data. 4. Non-FRF (Annual Cost Reduction) - This amount is calculated by multiplying the Non-FRF reduced SF by $5.00. The $5.00 is an assumption of OPEX costs the State would eliminate if the buildings are disposed. (All numbers are estimates based on preliminary research and are subject to change based on a variety of factors.) 38 High-Level Strategies for Lowering Operating Costs CustomerFocused DRAFT 39 Strategies for Lowering Operating Costs Objective and Approach Objective To determine high-level strategies to decrease costs associated with day-to-day operation of State real estate assets. Approach A strategy ideation session with SPAs and SBC representatives was held to determine the feasibility of strategies and potential challenges associated with implementation. Determining Impact & Ease of Implementation • Impact: On a scale from low to high, strategies with “high” potential impact had the greatest opportunity for future cost reduction. • Ease of Implementation: On a scale from easy to difficult, strategies with “easy” implementation can be quickly implemented and required little to no legislative change and/or anticipated significant initial capital investment. 40 Strategies for Lowering Operating Costs Facilities Management Outsourcing (Reduce costs while improving service quality through commercial management utilizing performance contracting) Impact Ease Medium Medium STATE PROCUREMENT AGENCY CONSIDERATIONS FRF Opportunities: • Outsourcing is currently being utilized in FRF facilities; FRF successes can be used as models for expanding the strategy to different types of facilities. • Contracts can be written to incentivize innovation and costsaving. Challenges: • Potential pushback from the public and media. Non-FRF Opportunities: • TDEC is currently exploring outsourcing strategies for state parks. • Contracts can be expanded to include departmental regional offices. Challenges: • Applicability limited with regard to TDOC and Military (Federal dollars/personnel manage maintenance/ operations). • Federal matching funds can be lost as a result of outsourcing and cutting State budgets allocated to maintenance and operations. • Some personnel may be completely federally funded, thus limiting what outsourcing is possible. 41 Strategies for Lowering Operating Costs Facilities Management Outsourcing (cont.) (Reduce costs while improving service quality through commercial management utilizing performance contracting) Impact Ease Medium Difficult STATE PROCUREMENT AGENCY CONSIDERATIONS UT and TBR Opportunities: • Many examples of successful outsourcing already in place: Elevator, maintenance, pest control, air filters, carpet, floor, window cleaning, waste collection, grounds/landscaping, construction, etc. Challenges: • Many of the outsourced operations have been re-evaluated and brought back in-house. • Outsourcing presents potential public relations issues and pushback from students, faculty and staff. • Savings from auxiliary facilities on UT and TBR campuses cannot subsidize general government. 42 Strategies for Lowering Operating Costs Energy Management (Decrease energy usage through active management, operational efficiencies, and conservation improvements.) Impact Ease High Difficult STATE PROCUREMENT AGENCY CONSIDERATIONS FRF and Non-FRF Opportunities: • Exploring opportunities for energy efficiency retrofits and operation/behavior efficiencies (including tenant training and education). • Investing in renewable energy projects can offset expected utility rate increases and “green” the State’s energy content. • Develop targeted goals for decreasing energy consumption. Challenges: • Identifying funding for: • Large capital investment and maintenance projects and • Smaller scale projects (lighting, HVAC). • Tracking savings from all other current capital and maintenance programs, including those by outside contracts, which include energy savings. • A statewide procurement of electricity will be difficult due to the potential role of federal government through TVA. • Determining the necessary return on investment to justify large capital investment projects is difficult. • Benchmarks (for example, preventative maintenance vs. reactive maintenance spend) don’t currently exist, making it difficult to evaluate our current consumption. • Investing in software for tracking utility bills, consumption, maintenance etc. is costly. 43 Strategies for Lowering Operating Costs Energy Management (cont.) (Decrease energy usage through active management, operational efficiencies, and conservation improvements.) Impact Ease Medium Difficult STATE PROCUREMENT AGENCY CONSIDERATIONS UT and TBR Opportunities: • Exploring opportunities for energy efficiency retrofits and operation/behavior efficiencies (including tenant training and education). • Investing in renewable energy projects can offset expected utility rate increases and “green” the State’s energy content. • Students can be powerful advocates for increasing facility efficiency. • Partnering with student groups might make initial investment more reasonable, especially with smaller scale projects. • Develop targeted goals for decreasing energy consumption. Challenges: • Identifying funding for: • Large capital investment and maintenance projects and • Smaller scale projects (lighting, HVAC). • A statewide procurement of electricity will be difficult due to the potential role of federal government through TVA. • Determining the necessary return on investment to justify large capital investment projects is difficult. • Benchmarks (for example, preventative maintenance vs. reactive maintenance spend) don’t currently exist, making it difficult to evaluate our current consumption. • Investing in software for tracking utility bills, consumption, maintenance etc. is costly. 44 Energy Management through EmPower TN This strategy has already begun as the EmPower TN initiative. Its objectives are: 1. Reduce energy costs and consumption across State-owned and managed buildings by: • Measuring and controlling energy use, • Investing in increasing energy efficiency and renewable energy generation, and • Creating an operational environment of excellence. 2. Promote energy cost savings across the State through conservation and efficiency in local government and the private sector. The goal of EmPower TN is to define a sustainable path to $54M annually in energy savings by 2023, while using on-site renewable generation to “hedge” against future energy rate increases; reducing cumulative energy costs of $265M over the next 8 years. 45 High-Level Strategies for Disposition and Consolidation of Real Estate CustomerFocused DRAFT (9?3 46 Strategies for Disposition/Consolidation Objective and Approach Objective To determine high-level strategies to dispose of and consolidate real estate assets. Approach A strategy ideation session with SPAs and SBC representatives was held to determine the feasibility of strategies and potential challenges associated with implementation. Determining Impact & Ease of Implementation • Impact: On a scale from low to high, strategies with “high” potential impact had the greatest opportunity for future cost reduction. • Ease of Implementation: On a scale from easy to difficult, the strategies with “easy” implementation can be quickly implemented and required little to no legislative change and/or anticipated significant initial capital investment. 47 Strategies for Disposition/Consolidation Decommissioning (Eliminate vacant, functionally obsolete and expensive-to-maintain assets) Impact Ease High Difficult STATE PROCUREMENT AGENCY CONSIDERATIONS FRF Opportunities: • Decommissioning of certain ‘bad’ owned buildings will reduce the State’s real estate footprint and associated costs. • Major cost savings / avoidance (deferred maintenance and recurring high operating costs) can be realized from decommissioning. • Densification, increased utilization, and workplace strategies can lead to decommissioning of more ‘bad’ assets. Challenges: • Opposition to decommissioning historic buildings. • Costs to abate hazardous materials and demolish. • Risk of not having enough available ‘good’ State-owned space to move agencies out of ‘bad’ buildings. • Significant costs associated with: • Capital outlay, renovation, and maintenance, • Renovating or saving historic buildings, and • Abating hazardous materials and demolishing. Non-FRF Opportunities: • See FRF Opportunities above. Challenges: • See FRF Challenges above. • Need to complete outstanding facility assessments to determine which ’bad’ buildings to decommission. • Cooperation of General Government agencies is required. 48 Strategies for Disposition/Consolidation Decommissioning (cont.) (Eliminate vacant, functionally obsolete and expensive-to-maintain assets) Impact Ease Low Difficult STATE PROCUREMENT AGENCY CONSIDERATIONS UT Opportunities: • Continuing to identify additional facilities for replacement or demolition. • Space densification (as part of master planning process) and increased utilization (as part of campus and institute planning) can increase the opportunity for decommissioning. • Major cost savings / avoidance (deferred maintenance and recurring high operating costs) can be realized from decommissioning. TBR Opportunities: • See UT Opportunities above. Challenges: • Short on program space in certain disciplines. • Specialized space needs in higher education can limit the ability to consolidate all types of space. • Opposition to decommissioning historic buildings. • Significant costs associated with: • Capital outlay, renovation, and maintenance, • Renovating or saving historic buildings, and • Abating hazardous materials and demolishing. Challenges: • See UT Challenges above. • Combining various program needs in specialized areas. 49 Strategies for Disposition/Consolidation Densification (Reduce space requirements) Impact Ease High Medium STATE PROCUREMENT AGENCY CONSIDERATIONS FRF Opportunities: • Presently conducting (T3 Phase 2 type) strategies on space not included in T3 project. 10-15% est. reduction possible (8-10% densification and 2-5% increase utilization combined). • Currently implementing new leases with an avg. 10-15% reduction of space per occupant. • Regionalization/co-location of general gov. services (state shared service centers, for example) presents an opportunity for large-scale densification. • No net new square footage strategies and responsibility-based departmental budgeting are tools to help densify. • Field workers do not need full-time offices. • Densification can create additional space for other functions, allow the State to move out of leased space and/or ‘bad’ owned space and into ‘good’ owned space, and/or not build additional space. Challenges: • Buy-in (on adoption of strategies and policies) from general government departments and supervisors is necessary. • Additional funding and leveraging new technologies is necessary for project implementation. • There is currently a need for more accurate drawings and occupancy information of all buildings and spaces (already have T3 - P1). Non-FRF Opportunities: • See FRF Opportunities above. Challenges: • See non-FRF Challenges above. • Completing outstanding facility assessments and space utilization studies. 50 Strategies for Disposition/Consolidation Densification (cont.) (Reduce space requirements) Impact Ease Medium Medium STATE PROCUREMENT AGENCY CONSIDERATIONS UT Opportunities: • Consideration of no net new square footage strategies can encourage densification. • Existing space can be reconfigured for more efficient use. • Academic space in non-specialized areas can be cross-utilized. • New science and lab buildings are designed to be flexible and multi-use. TBR Opportunities: • See UT Opportunities above. • Inventory can be evaluated for better utilization. • Existing spaces, particularly in older ‘good’ buildings, can be reconfigured to be more efficient. Challenges: • Buildings are increasing in age (UT average = 40+ years). • The lack of funding for deferred maintenance shortens the life of buildings. • Older buildings are less flexible due to code restrictions and design limitations. • Renovation costs due to age and code requirements are escalating. • Funding is necessary for project implementation. Challenges: • See UT Challenges above. • Buildings are increasing in age (TBR average = 50 years). • The fact that faculty office space is adjacent to related teaching space presents a challenge to densification. • Combining various program needs in specialized areas. 51 Strategies for Disposition/Consolidation Increased Utilization (Fully occupy existing capacity and eliminate unneeded leased or owned space.) Impact Ease Medium Medium STATE PROCUREMENT AGENCY CONSIDERATIONS FRF Opportunities: • Presently conducting (T3 Phase 2 type) strategies on spaces not included in T3 project. 10-15% est. reduction possible (8-10% densification and 2-5% increased utilization combined). • No net new square footage strategies, responsibility-based departmental budgeting, and increasing/improving use of electronic scheduling of work and conference space can encourage better utilization. • Sharing unoccupied and/or underutilized FRF space with other general government agencies and UT/TBR presents the opportunity for large-scale increased utilization. Challenges: • Incomplete building occupancy, existing conditions, and drawings/documents. • Difficulty of conducting space utilization studies. • Difficulty of positioning owned portfolio to move out of leased space/‘bad’ owned space. • Full capacity can reduce the flexibility for emergency needs and/or renovation-related move management. • Funding is necessary for project implementation. Non-FRF Challenges: • See FRF Opportunities above. Opportunities: • See FRF Challenges above. • Outstanding facility assessments need to be completed. • There may be limited application within the overall non-FRF square footage. 52 Strategies for Disposition/Consolidation Increased Utilization (cont.) (Fully occupy existing capacity and eliminate unneeded leased or owned space.) Impact Ease Low Difficult STATE PROCUREMENT AGENCY CONSIDERATIONS UT Opportunities: • Consideration of no net new square footage strategies and increasing/improving the use of electronic scheduling of classrooms, offices, labs, and other space can encourage better utilization. • Space can be cross-utilized across academic colleges and units. • Sharing unoccupied and/or underutilized FRF space with other general government agencies and UT/TBR presents the opportunity for large-scale increased utilization. • Space can be utilized outside of traditional classroom hours. Challenges: • Space utilization studies are difficult for many types of spaces (labs vs. classroom). • Enterprise property inventory knowledge needs to be improved and available for use across the State. • Funding is necessary for capital improvements and/or reconfiguring space. TBR Opportunities: • See UT Opportunities above. • Inventory can be evaluated for better utilization during the master planning process. Challenges: • See UT Challenges above. • Decentralization of management. • Class offerings may exceed the specific space required at any given time. 53 Strategies for Disposition/Consolidation Workplace Strategies (Reduce space requirements using solutions such as telework, hoteling, free address, touch downs, etc.) Impact Ease High Medium STATE PROCUREMENT AGENCY CONSIDERATIONS FRF Opportunities: • Moving to regional State shared-service centers can result in the massive reduction of space requirements. • Agencies that work closely together with the same or similar customer base can co-locate. • Increasing shared work and common spaces can lead to densification and allow for teleworking, hoteling, etc. • Utilizing workplace strategies can lead to increased employee satisfaction and reduced turnover in agencies. • Departments, Human Resources, Information Technology (“IT”), and DGS can work more collaboratively to encourage alternative workplace strategies and support the transition. Challenges: • Agency buy-in (adoption of strategies and policies) is necessary. • Cultural change management is required—employees must be valued on their work outcomes, not hours spent at the office; out-of-office workers must be kept engaged with their office teammates. • Public perception of State employees working outside State facilities could be a challenge. • Funding is necessary for project implementation. • Failure to implement strategies properly after space reduction would increase overall State costs. Non-FRF Opportunities: • See FRF Opportunities above. Challenges: • See FRF Challenges above. 54 Strategies for Disposition/Consolidation Workplace Strategies (cont.) (Reduce space requirements using solutions such as telework, hoteling, free address, touch downs, etc.) Impact Ease Low Difficult STATE PROCUREMENT AGENCY CONSIDERATIONS UT Opportunities: • Adjunct professors may not require permanent offices. • Administrative functions can be reviewed to determine greater workplace efficiencies and better space utilization. Challenges: • Student success is correlated with contact hours. • Many professors expect office space to conduct research and hold office hours. • The demand on teachers to assist and interact with students frequently is increasing. TBR Opportunities: • See UT Opportunities above. • Shared spaces for adjunct and temporarily-employed faculty are continuing to be developed. • Could benefit from recommendations/guidance on implementation of workplace strategies. Challenges: • See UT Challenges above. 55 Recommendations for Improving SBC Decision-Making and Other Processes CustomerFocused DRAFT 56 Decision-Making & Process Improvement Objective and Approach Objective To provide recommendations to streamline and improve decision-making and processes related to leasing, acquisitions/dispositions, new construction and major improvements by identifying opportunities to remove rework, analyze workflow, eliminate redundancies, and enact potential statute or rule changes. Approach An ideation session with SPAs and SBC representatives was held to review processes and evaluate suggestions that would lead to optimal decision outcomes and project timelines. Determining Impact & Ease of Implementation • Impact: On a scale from low to high, recommendations with “high” potential impact had the greatest opportunity for shortening process timelines and improving decision-making outcomes. • Ease of Implementation: On a scale from easy to difficult, the recommendations with “easy” implementation can be quickly implemented and required little to no legislative change and/or anticipated significant capital investment. 57 Decision-Making & Process Improvement Recommendations Impact Ease Medium Medium Current State: DGS, UT, and TBR have operated autonomously on many fronts for valid reasons, but all recognize that there may be some economies of scale that would not compromise their respective interests. Recommendation: Seek opportunities to align processes and contracts across the State, and strategic sourcing where appropriate. Opportunities: • Adopting best practices across the State for more effective, efficient governance. • Quarterly conference calls between SPAs and OSA will support continuous improvement. Challenges: • Concern that aligning activities would automatically turn into centralization. • Accountability – if one agency signs a contract and another abuses it, the original agency would not want to be held liable. • Strategic sourcing across SPAs would be challenging due to multiple factors impacting the true cost. 58 Decision-Making & Process Improvement Recommendations (cont.) Impact Ease High Difficult Current State: Master Planning occurs in varying degrees across the State, and buying or leasing property without consideration of alternatives is common. Recommendation: Formalize front-end tools and processes, and adopt a robust approach to Master Planning. Opportunities: • Presenting a “Total Cost of Ownership” to the SBC will provide some insight into not only how much it will take to build or acquire a property, but how much it will cost to operate it in the future. • A front-end decision point to determine which process is most appropriate to acquire a property can be formalized (Building, leasing, etc.) • Revisiting the mechanism used to create a priority list and creating a comprehensive living inventory of all statewide properties represent additional opportunities to formalize and improve front-end processes. Challenges: • Total Cost of Ownership is difficult to predict and may discourage the State from making necessary investments. • Front-end decision point may be perceived as an unnecessary step that employees try to work-around (can deter this by making it a simple, effective process). • Prioritizing mechanisms vary greatly across SPAs, and it may be difficult to set standards based on differing needs. 59 Decision-Making & Process Improvement Recommendations (cont.) Impact Ease Medium Easy Current State: Currently, when property is acquired with the intent to tear down, this fact must be disclosed to the SBC. When the SBC approves the purchase, they are aware that this will be a part of the cost and thus include it in the funding. This is currently done as two actions—one, a real estate transaction, and two, a capital transaction. These actions could be combined. Recommendation: Include demolition consent in initial SBC subcommittee agenda item. Opportunities: • Will reduce duplication and shorten process time. Challenges: • Will require an SBC policy change. 60 Decision-Making & Process Improvement Recommendations (cont.) Impact Ease Medium Medium Current State: Real estate-related processes are perceived to be lengthy or difficult due to rework. Much of the rework can be avoided with increased education and training on process options and business case development. Recommendation: Increase training and education regarding the SBC process. Opportunities: • Educating employees that trying to circumvent the process (because it takes too long) will only cause the process to take longer. • Expressing new changes and policies, and placing those policies in a single location for easy access. Challenges: • Determining who has ongoing responsibility to keep training materials current as processes continue to evolve. • The diversity of rules and functional requirements across General Government and Higher Education makes implementing a single process, on which all relevant staff members must be trained, difficult. • There is currently inadequate staff to accomplish this in a single location with consistency. 61 Decision-Making & Process Improvement Recommendations (cont.) Impact Ease Medium Easy Current State: For most projects, the design process does not begin until after its funding is available. DGS, UT, and TBR can access discretionary funds with reimbursement through approved project funds to begin the design process on projects prior to SBC approval. There may be an opportunity to execute this approach more frequently based on an evaluation of risk on a case-by-case basis. Recommendation: Increase utilization of STREAM funding to start design process prior to construction approval (and funding) for General Government projects. Opportunities: • Starting the design process early means that construction can start sooner (once approved), thereby shortening the overall building project timeline. • Architects contracted by the State will not be overburdened by multiple projects all being executed at once. Challenges: • Designs can become out of date if the funding is not approved in the expected timeframe. • STREAM operations will have to shift to accommodate/balance new workload. • There might be a perception that the administration or legislature must proceed with a project for which the design has already begun. • This recommendation’s impact and interaction with the current Budget and Appropriations process needs further evaluation. 62 Decision-Making & Process Improvement Recommendations (cont.) Impact Ease Low Easy Current State: SPA leaders and project sponsors (or their designees) must be present at the SBC hearing for their projects to be approved. Recommendation: Develop a capital consent agenda so that standard projects may more readily allow a sponsor’s designee to attend hearings in place of the project sponsor. Opportunities: • Allows for approval agenda items to be approved as a group, rather than representatives of individual agencies having to attend the public meeting. • Because less time will be spent discussing standard projects, SBC meetings will be more expedient. Challenges: • Decisions may still be held up if there are questions from the SBC that can’t be answered if the project sponsor is absent. 63 Decision-Making & Process Improvement Recommendations (cont.) Impact Ease High Easy Current State: Currently, all leases are returned to STREAM instead of the source of the request . Recommendation: Revise process so that leases are returned for processing, review, and signatures to the source of the request (STREAM, UT, or TBR). Opportunities: • SPAs have more knowledge about their specific needs and may be able to operate more efficiently on their own. • Fewer signatures will reduce time through an expedited signature process. Challenges: • Will need some mechanism to ensure that all proper documentation is still recorded and maintained as needed. • Will require statutory change to allow each procurement agency to sign for their own requests and allow for a different central signature (if needed). • May require a statutory change to allow higher education to maintain their own inventories. 64 Decision-Making & Process Improvement Recommendations (cont.) Impact Ease High Easy Current State: If non-appropriated projects do not disclose a project in the budget before the deadline, they must wait until the next budget cycle (following year) to have it approved. Recommendation: Conduct a review of the entire disclosure process and consider a rolling process for non-appropriated projects (UT and TBR). Opportunities: • Allows SPAs to complete non-appropriated projects in a more timely manner. • Will help prevent an increase in deferred maintenance. Challenges: • Requires legislative approval, SBC approval, and policy changes for SPAs. • Need to find an alternative way to disclose the expenditure. 65 Decision-Making & Process Improvement Recommendations (cont.) Impact Ease Low Easy Current State: The Office of the Attorney General is responsible for signing contracts for STREAM whereas UT and TBR legal counsel are empowered to sign for their own. Recommendation: Grant STREAM legal counsel signing authority for contracts requiring SBC approval. Opportunities: • Allows contracts to move more quickly through the process, shortening the overall timeframe by two weeks. • Provides a consistent process for STREAM, UT, and TBR. Challenges: • Requires either an SBC policy change or delegation of signature authority from the Attorney General’s office. 66 Decision-Making & Process Improvement Recommendations (cont.) Impact Ease High Easy Current State: The SBC statutes, policies, and procedures could be improved to clarify the necessary process by project and to increase timeliness of performing those processes. Recommendation: Improve SBC statutes, policies, and procedures to be clearer, more consistent, and more efficient. Opportunities: • Provides an opportunity for risk/benefit analysis for the approvals. • Ensures that projects needing approval receive proper SPA scrutiny and SBC/OSA high-level oversight. • Strengthens the understand of what requires SBC approval and what does not. Challenges: • Drafting a clear policy acceptable to all parties is needed (in progress). 67 Decision-Making & Process Improvement Recommendations (cont.) Impact Ease High Medium Current State: Project importance is determined solely by dollar value, meaning that some large dollar value but simple projects require SBC approval; conversely, smaller dollar value projects that may be highly complex are outside approval purview. Recommendation: Explore adjusting threshold values and clarify scope of what requires SPA, OSA or SBC approval. Opportunities: • Allows rolling assessments (in conjunction with the Master Planning recommendation) to be used on an ongoing basis to help maintenance stay current to avoid becoming deferred maintenance. • Grants additional flexibility for agencies in navigating project timelines. • SBC can adopt a risk management approach to their level of review and shorten overall process time. Challenges: • Will need to establish other processes for tracking activity on master inventory. • A higher level of service provided by procurement agencies might require more staffing. • Further research is needed to ensure that the solution increases efficiency while managing risk to the State. • Requires SBC policy change and potential statutory changes, depending on thresholds. 68 Decision-Making & Process Improvement Recommendations (cont.) Impact Ease High Medium Current State: The level of detail that has been provided by F&A Budget to the Legislature each budget cycle has increased over the years to the point that these heightened expectations constrain flexibility in the timing and administration of projects and funds by the SBC and F&A. Recommendation: Engage the Legislature in evaluating the appropriate level of budget detail required of F&A and the administration pertaining to capital maintenance projects. Reduction in required detail and passing the authority to assign appropriated funds to the SBC would provide added flexibility to the agencies while providing greater speed by eliminating the minimum 9-month gap in the budget review cycle. Opportunities: • Provides greater flexibility in applying and administering maintenance funding. Challenges: • Requires Legislative agreement. 69 Next Steps CustomerFocused DRAFT 70 Next Steps Summary We have the opportunity to manage the total cost of our real estate more efficiently. The opportunity of $183.9M in annual operating savings to the State should be pursued. • This opportunity represents significant recurring savings that will contribute to lowering the operating costs of: ─ General government, freeing cash for sustaining our services to the citizens, and ─ Higher education, relieving some of the need to raise tuition and facilities rates for the cost of operations. • This will contribute to better real estate asset management to reduce our real estate holdings, better utilize our properties, maintain these assets, and leverage private sector strategies. 71 Next Steps Moving Forward Achieving the opportunity is a major undertaking that will require significant amounts of time and resources from the State’s SPAs. The opportunity must be pursued carefully to ensure that the effectiveness of our services do not suffer as a result. Considerations for Moving Forward • Realizing the opportunity requires a thoughtful and objective consideration of the necessary strategies and their implementation in collaboration with the property stakeholders. • The strategies to consider must be evaluated in terms of how they contribute to the opportunity given the costs to achieve. • Leading public and private best practices must be seriously considered. • The supporting State statutes, policies and procedures for real estate management are integral to realizing the opportunity. 72 Next Steps We Are At The Beginning In this project, we’ve taken the first step to better understanding our opportunity to improve our real estate management. We’ve also identified many of the strategies necessary to accomplish this opportunity. Moving forward, we suggest the following high-level phased approach: • Establish an Enterprise Project Management Office (Phase 0). • Establish Enterprise Strategy Teams to refine the strategies, determine the costs to achieve, and define the tactics required to realize the opportunity (Phase 1). • Develop implementation plans with clear cost benefit analyses and a preference toward immediate realization of savings (Phase 2). • SPAs execute the implementation plans (Phase 3+). • Implement a Program Office for sustainability (Operational). 73 Next Steps Keys to Maximizing the Opportunity Critical Success Factors that Emerged from Initial Work • • • • • Maximize the cost savings opportunities for the enterprise. Invest time in obtaining buy-in from the SPAs with regard to the project’s objectives. Objective participation in consideration of potential strategies and process improvements. Include all current real estate management strategies, statutes, policies and procedures in the project’s scope. Create budget incentives to maximize savings results. Other Critical Success Factors to Consider in Change Management • • • • • • • • • Invest time in the buy-in. Be clear and consistent about the benefits to be achieved. Prepare to accept organizational “loss”. Manage the “in flight initiatives”. Participation requires a certain project pace. Provide the expertise and resources needed. Provide training in support of implementation. Over communicate. Pursue sustainability. 74 Next Steps Conclusion • This report, written in response to the Governor’s initiative of November 13, 2014, defines an opportunity and presents high-level strategies and process recommendations for improving the management of the State’s real estate and realizing the identified opportunity. • As described herein, the path ahead will be a significant undertaking that will require the engagement of the State’s resources for some period of time. With the initial work of the project’s participants, the investment in time required seems worthy given the potential sustained annual savings to be realized at project completion. 75 From: To: Eon Eumb Subject.- Re: Forb?ieapiti BudgetPrsei-u?on Today? Date: Thursday, M07, 2015 7:13:02 AM I'm here when you are Sent from my iPhone On May 7, 2015, at 6:45 AM, Ron Plumb wrote: 0k. Sent from my iPhone On May 7, 2015, at 6:17 AM, Bob Oglest wrote: Let's meet at 730 this morning then if I can meet Amy this afternoon and you and her Friday that would be good Sent from my iPhone On May 7, 2015, at 6:11 AM, Ron wrote: I am in the of?ce on Friday Sent from my iPhone On May 7, 2015, at 5:58 AM, Bob Oglesby wrote: It won't be enough time as I have to be at the Capitol by 8 Are you out the rest of the week? Sent from my iPhone On May 7, 2015, at 5:53 AM, Ron Plumb < 1Qn?umj?mgoy> wrote: 0k. Ican be in the of?ce by 730am if you would like to meet then Sent from my iPhone On May 7, 2015, at 5:50 AM, Bob Oglest wrote: I'm going to mikes dads funeral so I will be out then Sent from my iPhone On May 6, 2015, at 11:24 PM, Ron Plumb wrote: Meagan Is 930 Cir 10 available tomorrow? lam out of the of?ce smrting at 11 am. But Amy Thompson (an be available in the afternoon to discuss it with the commissioner. Ron Sent from my iPhone On May 6, 2015, at 9:36 PM, Bob Oglesby wrote: looks nice! help me understand thuth - the data shows we are overfunding FRF and non-FRF maintenance by 535M and STM respectively? 7 can we sit down as soon as possible to see where you got your basis tor these calculations for funding maintenance? does it include operations costs? recapital?zation costs? the title maintenance is not clear to me. i follow the deferred maintenance using the $36lsf but my previous calculations compute 339 after a credit from a JLL type FM program - where did you get the 536? please footnote of DM identi?ed at lets discuss that as well FYI - {or targeted recapitalization not maintenance funding iwuuld use 4% in stead of 3% since our assets are old is for new, and 5% for very bad conditions so 4% should be a conservative estimate at this time on average) when can we meet? im available I think alter lunch from 1-3 generally Please get with Meagan to set aside 1 hour tommorrow for us to go over this. thanks, Bob Ogiesby, AIA Commissioner Department of General Services WRS TenneSsee Tower, 22nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 (0) From: Ron Plumb Sent: Wednesday, May 06, 2015 4:37 PM To: Bob Oglesby Cc: John Hull; Thomas W. Chatter Subject: FW: For the Capital Budget Presentation Slide 'The Situation Today" Commissioner, The second table (Unhudgeted Capital Maintenance Obligations has been expanded to reflect a breakout of the four locations (FRF, UT and THE). Also the yellow highlight on the first table denotes a value that changed due to a cell formula being adjusted . Ron An Overview of Deferred Maintenance Needs - Statewide Total Estimated GSF (2014) Deterred Maintenance FRF 6,306,634 536 $227,038,824 22,420,470 $36 $807,136,920 UT 26,089,141 $36 $939,209,076 TBR 33,853,238 536 $1,218,716,568 Statewide 88,669,483 $3,192,101,388 Note: SDMIGSF 536,- based on actual deferred maintenance costs identi?ed In 2012/2013 real eSlaIe assessment of FRF. An Overview 01 Unbudgeted Capital Maintenance Obligations -Statewide Average Annual Average Annual Target Funding Actual Funding Actual FUnding Unbudgeted [oration GSF (2014) Amount FY 2013 FY 2014 FY 2015 FY 2016 Amount Obligations FRF 6,306,634 39,731,794 43,291,370 94,127,567 33,757,308 122,780,101 74,739,086 35,007,292 22,420,470 141, 243,961 210,787,540 125,214,331 136,200,594 120,810,184 148,253,162 7,004,201 UT 26,089,141 164,361,588 104,704,527 112,137,123 112,604,629 89,786,765 104,808,261 (59,553,327) TBR 33,853,238 213,275,399 130,359,264 176,337,620 204,902,587 103,874,376 153,868,462 (59,406,938) 5 Statewide 38,669,483 $58,617,743 $489,142,701 507,816,640 492,465,118 437,751,417 481,668,972 (76,943,771) Note: Annual target funding based on .03. #7361: Ron Plumb Sent: Wednesday, May 06, 2015 12:40 PM To: Bob Oglesby Cc: Thomas W. Chester; John Hun Subject: For the Capital Budget Pnesentation Slide - 'The Situation Today" Commissioner You requested a graphic or graphics illustrating unbudgeted obligations and deferred maintenance needs statewide. Below is the data developed. Graphs will also be constructed that support the data below. I wanted to run these two schedules by you to see ifthere were any issues that you saw. This afternoon, I'll also add the location detail (FRF, TBR, and UT) to the Unbudgeted Cap Maint Obligations schedule. Ron An Overview of Deferred Maintenance Needs - Statewide Total Estimated GSF (2014) Delened Maintenance FRF 6,306,634 536 $227,038,824 22,420,470 536 $807,136,920 UT 26,089,141 536 $939,209,076 TBR 33,353,238 536 $113,716,568 Statewide 88,669,483 $3,192,101,388 Note: SDMIGSF 536; based on actual deferred maintenance costs identified in 2012/2013 real estate assessment of FRF. Anc. of? ?Capltal - Average Annual Average Annual Target Funding Actual Funding Actual Funding Unhudgeted Location GSF (2014) Amount FY 2013 FY 2014 FY 2015 FY 7.016 Amount Obligations Statewide 88,669,483 558,617,743 489,142,701 507,816,640 492,465,118 452,502,926 435,481,846 (73,135,897) Note: Annual ba'Sedon .03. Kandis Crockarell From: Bob Oglesby Sent: Monday, May 11, 2015 4:47 PM To: Bob Oglesby Subject: Portfolio Strategies, Funding etc and coordination with AWS, FM CFG (through 665) hire a real estate advisory company, which will assist the State (enterprise wide) in determining which assets (buildings and land) it should keep, dispose, acquire, renovate, build, etc. They will not self perform any work so there is no conflict of interest. They will develop a living list of companies offering P3 services for the full array and size of P3 projects the enterprise may encounter, and assist the enterprise in the procurement and execution ofthose P3 projects. Each P3 project would be funded by the respective General S?PAsor?oth'erStateofTN' publiC'entities (citiesa nth" ?7 counties who have expressed interest in the State?s assistance). Data gathering of all land and facility assets will need to be verified. Facilities assessments will need to be current for/ provided by/ relied upon by the P3 bidders. They will need to coordinate with SEREM initiatives in particular: FM outsourcing ?this ideally needs to be rolled up into a P3 where the private sector is on the hook with performance guarantees for operations and maintenance (by building or campus or groups of buildings or campuses ie FRF or UT), to eliminate all deferred maintenance and keep it eliminated once each facility meets the State?s performance specifications Empower TN - (where should we be investing our energy monies?), AWS which departments and how much square footage is needed by each and where do they need to be located (which buildings) after AWS implementation, and sequencing scheduling ofthis work To recommend what if any new construction should be built and if so as part of a P3 approach or by?the state and operated maintained through outsourcing, etc. Bob Oglesby, AIA Commissioner Department of General Services WRS Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 (0) 615-741-2081 "Providing essential centralized services to support the daily operation of State government. Kandis Crockarell From: Bob Oglesby Sent: Tuesday, May 12, 2015 12:34 PM To: Bob Oglesby; Ron Plumb; Thomas W. Chester; Amy Thompson Cc: David Roberson; Phillip Murphy; John Hull Subject: RE: Documenting underfunding of TCO costs over 50 years and current estimated amount of deferred maintenance I was talking with Terry Cowles about this and he too is very interested to see how our P3 data gathering project and he like me is very curious to see what this deeper dive will say about our previous SEREM savings, so let?s be sure that is done as I requested. I said even if SEREM FM numbers are consistent with our P3 analysis which I doubt they will be, the SEREM numbers do not address other savings P3 can. Bob Oglesby, Commissioner Department of General Services WRS Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave., Nashville, TN 37243 (0) 615?741?2081 "Providing essential centralized services to support the daily operation of State government. From: Bob Oglesby Sent: Friday, May 08, 2015 3:21 PM To: Bob Oglesby; Ron Plumb; Thomas W. Chester; Amy Thompson Cc: David Roberson; Phillip Murphy; John Hull Subject: RE: Documenting underfunding of TCO costs over 50 years and current estimated amount of deferred maintenance forgot to attach file Bob Oglesby, AIA Commissioner Department of General Services WRS Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave., Nashville, TN 37243 (0) 615741-2081 "Providing essential centralized services to support the daily operation of State government. From: Bob Oglesby Sent: Friday, May 08, 2015 2:49 PM To: Ron Plumb; Thomas W. Chester; Amy Thompson Cc: David Roberson; Phillip Murphy; John Hull Subject: Documenting underfunding of TCO costs over 50 years and current estimated amount of deferred maintenance Ron the below is a summary of what I didn?t get to finish articulating this morning. I thought it would be helpful to me at least if I put it down on paper and for future reference when some of us meet Monday and Tuesday next week. Infn I mirren?rlv visuali7e that wnulrl like nresented is described herein: So for those underfunding Maintenance and Recapitalization they will have deferred maintenance. As we only have a decent handle on the amount of deferred maintenance for FRF before outsourcing FM, one could extend the logic that a ratio of spend on Maintenance and Recapitalization to deferred maintenance for FRF before FM outsourcing could be applied to non?FRF, UT and TBR. We only have one recent assessment of of (TBR university) which came in at $103/sf So you could also consider all universities of that age being in a similar state only if validated by their spend on Maintenance and Recapitalization (let me know if that logic follows). I am envisioning us calculating the gap between the target vs actual utilities, maintenance and recapitalization, and also the minimum and maximum estimated amount of deferred maintenance for FRF, non?FRF, UT, and TBR and showing them all separately like a challenge to figure out how to address their issues like we are for FRF. If we can assess by department and campus also and roll it up into the big 4 categories that would be very good For FRF, our outsourced FM contract can be assumed to reduce deferred maintenance by say 25%. For all others, we can assume there is no reduction until they do outsource FM. - We should also show the calculation of TCO breakdown for 50 years. I have updated the attached spreadsheet with that breakdown. Please also recalculate the target vs actual ?gap? of Maintenance and Recapitalization and estimated minimum and maximum amount of deferred maintenance for the big 4 also. I looked at the Recapitalization cost again. I like using 3% based on the logic if we built our portfolio today at $210/sf we should allocate 3% for new construction and costs are also calculated in today?s dollars (2015) so it all matches up. Just to know, I calculated a 'what if? scenario that assumed we built the portfolio 35 years ago and had not taken very good care of itjustifying a 4% recap rate based on a new construction cost/SF of $105. The 1% difference between 3 and 4% works backwards to the 35 years ago. So I think we are ok using the Another goal with the charts is to show how we can eliminate the gap between what we currently typically fund and what we should be funding today and to reduce the deferred maintenance as much as possible (to something we could pay off in 20 years lets discuss a strategy for this)? In thinking about this more, seems like it would be more appropriate if we illustrate the story of FRF and how we are planning on managing the TCO of that program; and then talk about the other 3 areas (non-FRF, UT and TBR) and let them figure that out. So let?s back up to total costs broken out per the below left column of categories. Starting with pre?outsourcing of FM costs then showing the impact of the SEREM program areas over 50 years of time, including FM outsourcing, Empower TN, disposal of assets, and and then P3. In each case, we need to state the total impact on SF and TCO per left column list of categories. Hopefully over time we will show we have a plan to close the gap. Until you start filling in the numbers, I don?t know exactly what that will look like. FRF Portfolio Analysis (compare to 6,592,847 SF per SEREM) Operating Costs Utility Costs Maintenance Costs Recapitalization Costs Subtotal Deferred Maintenance Total SEREM Pre FM, etc so as of what year was it? 2010? Post FM - show as of 2015/16 program and assume levels off after that for these purposes (compare with Phillip?s estimate of savings of $7,617,749 based on 6,592,847 SF and current annual costs of $32,470,000) Post Empower? reduction of $5,418,738 in annual savings starting in year 8 from starting point of $19,352,636 (verify with Bob Balzar on allocation of funds to FRF vs non-FRF each year, saved, etc.) l?ve revisited the charts you previously produced for TCO. If you can also isolate the from the 0 costs and the Recap costs that will be useful. What we want to figure out is after P3 reduces TCO including and Recap how much of a gap do we have between target and actual average total of 0&lVl and Recap? From there we can see how many square feet we need to reduce the portfolio so we can match the target and actual funding levels. Isolating actual vs target of 0 vs and Recap will illustrate how much yr agencies and higher ed are underfunding their real estate programs (assuming they have to pay for 0 costs as pass throughs) Bob Oglesby, AIA Commissioner Department of General Services WRS Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave., Nashville, TN 37243 ?Providing essential centralized services to support the daily operation of State government. Kandis Crockarell From: Bob Oglesby Sent: Wednesday, May 13, 2015 3:28 PM To: Bob Oglesby; Ron Plumb; Thomas W. Chester; Amy Thompson Cc: David Roberson; Phillip Murphy; John Hull Subject: RE: Documenting underfunding of TCO costs over 50 years and current estimated amount of deferred maintenance Ron I left you a copy of the SEREM savings projections for FM and Empower TN so you can show our calculations compared to what Phillip and I came up with previously for SEREM (forthat that is comparable). Thanks Bob Oglesby, AIA Commissioner Department of General Services WRS Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave., Nashville, TN 37243 (0) 615?741?2081 "Providing essential centralized services to support the daily operation of State government. From: Bob Oglesby Sent: Tuesday, May 12, 2015 12:34 PM To: Bob Oglesby; Ron Plumb; Thomas W. Chester; Amy Thompson Cc: David Roberson; Phillip Murphy; John Hull Subject: RE: Documenting underfunding of TCO costs over 50 years and current estimated amount of deferred maintenance I was talking with Terry Cowles about this and he too is very interested to see how our P3 data gathering project and he like me is very curious to see what this deeper dive will say about our previous SEREM savings, so let?s be sure that is done as I requested. I said even if SEREM FM numbers are consistent with our P3 analysis which I doubt they will be, the SEREM numbers do not address other savings P3 can. Bob Oglesby, AIA Commissioner Department of General Services WRS Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 (0) 615-741?2081 "Providing essential centralized services to support the daily operation of State government. 'From: Bob Oglesby Sent: Friday, May 08, 2015 3:21 PM To: Bob Oglesby; Ron Plumb; Thomas W. Chester; Amy Thompson Cc: David Roberson; Phillip Murphy; John Hull Subject: RE: Documenting underfunding of TCO costs over 50 years and current estimated amount of deferred maintenance I forgot to attach file nalnchu AIA Subject: Documenting underfunding of TCO costs over 50 years and current estimated amount of deferred maintenance Ron -the below is a summary of what I didn?t get to finish articulating this morning. I thought it would be helpful to me at least if I put it down on paper and for future reference when some of us meet Monday and Tuesday next week. Info I currently visualize that I would like presented is described herein: I understand some of it may be estimated (based on data available) lt needs to reinforce a TCO approach which includes - first cost, on-going costs, and Recapitalization costs Within the costs are things you have to pay if you need them like utilities, housekeeping, security, pest control etc. The balance should be maintenance related or capital improvements if not maintained and to renovate for change in use, etc. If we assume no changes in O/use costs (too hard to itemize just those costs) then the balance should compare to what an agency or higher ed institution is spending on their facilities purely for Maintenance and Recapitalization (refreshes, reroofs, etc.) That value can be compared to what the industry says they should be spending and we can calculate the ?gap?. One would think there could be an argument made that if a department spends the industry average on Maintenance and Recapitalization they would not have any deferred maintenance and that would be correct. So for those underfunding Maintenance and Recapitalization they will have deferred maintenance. As we only have a decent handle on the amount ofdeferred maintenance for FRF before outsourcing FM, one could extend the logic that a ratio of spend on Maintenance and Recapitalization to deferred maintenance for FRF before FM outsourcing could be applied to non-FRF, UT and TBR. We only have one recent assessment of of (TBR university) which came in at $103/sf So you could also consider all universities of that age being in a similar state only if validated by their spend on Maintenance and Recapitalization (let me know if that logic follows). I am envisioning us calculating the gap between the target vs actual utilities, maintenance and recapitalization, and also the minimum and maximum estimated amount of deferred maintenance for FRF, non-FRF, UT, and TBR and showing them all separately like a challenge to figure out how to address their issues like we are for FRF. If we can assess by department and campus also and roll it up into the big 4 categories that would be very good For FRF, our outsourced FM contract can be assumed to reduce deferred maintenance by say 25%. For all others, we can assume there is no reduction until they do outsource FM. We should also show the calculation of TCO breakdown for 50 years. I have updated the attached spreadsheet with that breakdown. Please also recalculate the target vs actual 'gap? of Maintenance and Recapitalization and estimated minimum and maximum amount of deferred maintenance for the big 4 also. I looked at the Recapitalization cost again. i like using 3% based on the logic if we built our portfolio today at $210/sf we should allocate 3% for new construction and costs are also calculated in today?s dollars (2015) so it all matches up. Just to know, I calculated a 'what if? scenario that assumed we built the portfolio 35 years ago and had not taken very good care of it justifying a 4% recap rate based on a new construction cost/SF of $105. The 1% difference between 3 and 4% works backwards to the 35 years ago. So I think we are ok using the Another goal with the charts is to show how we can eliminate the gap between what we currently typically fund and what we should be funding today and to reduce the deferred maintenance as much as possible (to something we could pay off in 20 years - lets discuss a strategy for this)? - In thinking about this more, seems like it would be more appropriate if we illustrate the story of FRF and how we are planning on managing the TCO of that program; and then talk about the other 3 areas (non-FRF, UT and TBR) and let them figure that out. L-..I. 1.- LL- I-LI. -1: SEREM Pre FM, etc so as of what year was it? 2010? Post FM - show as of 2015/16 program and assume levels off after that for these purposes (compare with Phillip?s estimate of savings of $7,617,749 based on 6,592,847 SF and current annual costs of $32,470,000) Post Empower- reduction of $5,418,738 in annual savings starting in year 8 from starting point of$19,352,636 (verify with Bob Balzar on allocation of funds to FRF vs non-FRF each year, saved, etc.) Post disposal calculate and break out Subtotal and DM reductions based on 387,429 SF (compare with Phillip?s estimate of savings of $2,388,582 per year on current costs of $3,482,209) Post AWS calculate and break out Subtotal and DM reductions based on 749,584 SF (compare with Phillip?s estimate of savings of $2,358,034 per year on current costs of $7,300,000) Post P3 calculate and break out Subtotal and DM reductions based on 15% of 6,592,847 SF now this is what we can expect to accomplish over the entire portfolio not in one year? so we should show it happening in inc?rmntis of??tmr?fir'st?proje?ct cost ?(vvh?isiratio?o?f Eo nstru?io? c??o?rojeft ?7 cost lets say 300,000 SF steps per year until it is fully achieved) Lets review the list of DM per FRF buildings to guestimate what DM projects we would prioritize to replace new construction To reduce the Maintenance/Recap gap we need to show reducing our portfolio size via use of P35 and disposal of assets/ better utilization through the various methods discussed in SEREM. I?ve revisited the charts you previously produced for TCO. If you can also isolate the from the 0 costs and the Recap costs that will be useful. What we want to figure out is after P3 reduces TCO including and Recap how much of a gap do we have between target and actual average total ofO&M and Recap? From there we can see how many square feet we need to reduce the portfolio so we can match the target and actual funding levels. Isolating actual vs target ofO vs and Recap will illustrate how much yr agencies and higher ed are underfunding their real estate programs (assuming they have to pay for 0 costs as pass throughs) Bob Oglesby, Commissioner Department of General Services WRS Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave., Nashville, TN 37243 (0) 615-741-2081 "Providing essential centralized services to support the daily operation of State government. Kandis Crockarell From: Bob Oglesby Sent: Thursday, May 14, 2015 10:56 AM To: Jay Harrison; Bob Balzar Cc: John Hull Subjectmention continuous commissioning, FM, work order systems etc? Sent from my iPhone Mayt4;201'5, at wrote':? - Are you thinking through specifying] (requiring in our projects) how these two can share data? Especially as we expand via empower Ops and trend data from BAS can inform BIM based design solutions energy modeling etc Sent from my iPhone Kandis Crockarell From: Bob Oglesby Sent: Monday, May 18, 2015 8:18 AM To: Ron Plumb Cc: Thomas W. Chester Subject: Updated Facilities costs Can I see an update by 11:00 or so today? i have a cabinet meeting and then a meeting with a candidate to run the FM outsourcing initiative like Bob Balzar is running EmPower TN and would like to have general numbers available for referencing of what FM vs performance contracting through P3 could do? Tl?ll take WWteV?r yio?uThave a?f'thTa?t? po'm'tT' Thanks, Bob Oglesby, AIA Commissioner Department of General Services WRS Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave., Nashville, TN 37243 (0) 615?741-2081 http://tngov/generalseLvZ ?Providing essential centralized services to support the daily operation of State government. Kandis Crockarell From: Bob Oglesby Sent: Tuesday, May 19, 2015 1:22 PM To: John Hull; Ann McGauran Cc: AnnaCatherine Davenport; Marsha Shelton Subject: new sharepoint items needed to be added Please add these to the list of STREAM items: 1. Shifting PB as current PM provider to utilize last planner in lieu of critical path scheduling. May require OSA approval and contract revisions? Or maybe we can just have it as an additional DGS specific "requirement if and getting?approvals. - 2. ResolvingICOBie data being collected by FM vendor (JLL) for use by designers and contractors on future projects. DGS Policy outlining need to have designers (also specify which sub-consultants) and contractors (also specify which sub-trades) on what size and types of projects to use BIM and/or at least provide data for FM vendor use. 3. Need to have funding requested for vendors provide BIM record models for buildings T3d 4. Need to have vendors provide BIM record models for all major existing FRF buildings staying in portfolio as they undergo major project renovations Bob Oglesby, AIA Commissioner Department of General Services WRS Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 (0) 615-741-2081 ?Providing essential centralized services to support the daily operation of State government. Kandis Crockarell From: Bob Oglesby Sent: Tuesday, May 19, 2015 2:28 PM To: Kelly K. Smith; Thaddeus E. Watkins Cc: Reen Baskin; John Hull; Thomas W. Chester; Bob Balzar Subject: legislation- draft thoughts CONFIDENTIAL Attachments: 051915 HASLAM MAKES APPOINTMENTS TO STATE BOARDS AND lam counting on you to maintain the running list of items. Items Identified to datewe need?to-discuss further to bring forward thisnext session; . a 7 1. Ability for Boards and Commissions, including public meetings to allow use of technology to achieve a quorum and any other relevant issues (due to our video conferencing program set to roll out Oct 1). I recall SBC has to have an exception approved each time and it is quite the effort so we want it to be without any extra effort. This should include an exhaustive review with each department?s boards and commissions and engaged discussion with the right representatives of each to be sure our language meets all needs. Shouldn?t it include Higher Ed, legislative and judicial branches in addition to all executive branches? Attached is a good start on the list may not be 2. Center-led and/or centralized real estate services lets discuss the easiest approach. John Hull agrees this needs an exhaustive analysis of the current obligations limitations associated with each individual general government department by category. I would assume it should not include Higher Ed, judicial or legislative branches. For instance, land acquisition, disposal, capital improvements, maintenance, leases, FM outsourcing, energy projects, AWS projects, P3, master planning, strategic planning, what else John? 3. P35 ability to partner with the private sector in a shared risk solution private sector would provide performance guarantees, use qualification based selections for professional services (comply with state governing laws, policies, etc.) scope may include all work associated with the project's real estate including but not limited to: development, financing, design and construction, operating, maintaining, capital improvements, etc. I expect we will soon have on board and accessible to assist us in the details of this request the SEREM related FM outsourcing (and future P3) initiative lead. 4. Anything AWS related? To not be a hassle to let people work in non-traditional work environments/ home etc. maybe how we bill agencies for space and services? Reen? Anything EmPower TN related? Anything FM outsourcing related? Anything CPO related? For enterprise c00peratives? Anything else STREAM related? Please develop a master calendar with key dates and standing meetings to move each item on the list forward. It may be wise to consider separate meetings for separate topics based on the participants and to be sure each item is well prepared for and developed. Bob Oglesby, AIA Commissioner Department of General Services WRS Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave., Nashville, TN 37243 (0) 615?741-2081 "Providing essential centralized services to support the daily operation of State government. Kandis Crockarell From: Peter L. Heimbach Sent: Wednesday, May 20, 2015 1:46 PM To: Bob Oglesby Subject: Follow Up Flag: Follow up Flag Status: Flagged Bob, 'Fim Wellshas asked us about the formatting for FM information regarding BlMand inputting information into Archibus. The request seems a little scattered but it appears to be coming from direction you have given. Can you share with me what you are looking for so that we can help Tim appropriately? If this is more than an email response I'd be glad to meet with you and help out in any way we can. Thanks, Peter Peter L. Heimbach, Jr, AIA, NCARB, LEED AP State Architect 312 Rosa Parks Ave, 18th Floor Nashville, Tennessee 37243 615.741.4201 "Good Business, Great Customer Service? Emmi mull mm: mm, salami sunreae ne Dawning mm I swam am my lamkm nana mammals".an Tuesday is fine, We need to clearly understand role fur both FRF and John M. Hull Deputy Commissioner Department of General Servloes State of Tennessee Real Estate Asset Mgml. WRS Tennessee aner, 24th Floor 312 Rosa L. Parks Ave, Nashville TN 37243 En) 615774171255 "Providing essential centmlized sen/[res tn support the dal/y operation of State gal/eminent" On May 20, 2015, at 9:23 PM, Bob Oglest wrote: 0k Tuesday it is John I mean role In regards lo primarily general government as a whole and non hlgher Ed additionally for PMO SenK my iPnone on May 20, 2015, at 9:17 PM, Mike Perry wrote: Works for me Sent from my iPhone Mike Perry On May 20, 2015, at9:13 PM, "Reen Baskin" wrnte: Tuesday alternoon start at 3:30 Reen Baskln Sent from my lPhane On May 20, 2015, at 9:06 PM, Mike Perry wrote: Monday is Memorial Day Sent from my iPhone Mike Perry On May 20, 2015, at 9:02 PM, "John Hull" wrme: Either is line with me. John M. Hull Deputy Cummissloner Depamnent of General Services State cf Tennessee Real State Asset Mgmt. was Tennessee aner, 24m Floor 312 Rosa L. Parks Ave, Nashville TN 37243 (0)515-74171265 essential services to support the daily uperatlon of state gavernment." On May 20, 2015, at 9:54 PM, Bah Oglest wrote: Shall we discuss in an extended 1 hr afternoon Elt black or a Monday ell sent my ipnune On May 20, 2015, at 5:49 PM, Bob Oglesby wroter I was primaan describing and mostly concerned about STREAMS own role within SEREM nut PMO its many times more complicated and larger than T3 Yes let's discuss YES we need In dlscuss Sent from my iPhone On May 20, 2015, at 6:57 PM, John Hull wrote: Obviuusly, we need to sit down and discuss the role and expecmtions of swam in relation to the achlerement of the SEREM initiative in me years to come. srkEAM will do its part in wanting with the PMO leads for the four new pieces at SEREM (Empawer, FM outsourcing, Aws, sac processes). If the PMO leads want to use PB to put together a schedule and plan for their individual pans at the initiative, I am sure we can assemble the resources necessary. I suggest a planning session with the PMO leads to determine how STREAM can support their efforts. John M. Hull, Esq. Deputy Commissioner, STREAM Sent from my iPad On May 20, 2015, at 5:43 PM, Bob Oglesby wrote: I'm revisiting the numbers again. FM outsourcing ALL of the TCO Target 1.37b using the 19.4% and $0.20 is (can round to 250). But the new TCO is still at $1.1b. SEREM savings as initially introduced/applied But the two ($250 and $160) cannot be added (5408) because we'd double dip savings. Not adding recap to the FM outsourcing would cost the state From: Bob Oglesby Sent: Thursday, June 11, 2015 9:51 AM To: Amy Thompson Cc: Ron Plumb; Thomas W. Chester; David Roberson Subject: Re: Fm outsourcing savings on target TCO of existing portfolio Correctjust added increment between Serem and new projection (+190m) Sent from my iPhone On Jun 11, 2015, at 10:49 AM, Amy Thompson wrote: I think I'm starting to get a little lost here. TCO daily operations, daily maintenance and periodic maintenance TCO target is $1.37b SEREM savings as previously applied 1 Outsourcing ALL of the TCO Target 1.37b would generate in savings. But this cannot be combined with SEREM savings in its entirety as that would be double dipping in savings. From: Bob Oglesby Sent: Thursday, June 11, 2015 9:40 AM To: Amy Thompson Cc: Ron Plumb; Thomas W. Chester; David Roberson Subject: Re: Fm outsourcing savings on target TCO of existing portfolio 0k agree and Serem savings are now approx285.5? Sent from my iPhone On Jun 11, 2015, at 10:30 AM, Amy Thompson wrote: Correct. FM outsourcing would take it to But other methods should potentially reduce it further. EmPower savings Disposition AWS which brings TCO to From: Bob Oglesby Sent: Thursday, June 11, 2015 9:23 AM Amy Thompson Cc: Ron Plumb; Thomas W. Chester; David Roberson Subject: Re: Fm outsourcing savings on target TCO of existing portfolio I think we adjust 1.374 by all Serem savings not just fm outsourcing right so new TCO is not 1.09? Sent from my iPhone On Jun 11, 2015, at 10:01 AM, Amy Thompson wrote: apologize, I applied wrong calculation. Your math was correct, Commissioner. TCO Target $1.374b FM outsourcing savings New TCO Target $1.09b (or 1.1) Amy From: Bob Oglesby Sent: Thursday, June 11, 2015 8:47 AM I To: Amy Thompson Cc: Ron Plumb; Thomas W. Chester; David Roberson Subject: Re: Fm outsourcing savings on target TCO of existing portfolio Excellent! Now we are in the black with 100m of improvements funding in fy14 left over right David And Serem savings will increase +2495 say 250 mil annually? Sent from my iPhone On Jun 11, 2015, at 9:25 AM, Amy Thompson wrote: Commissioner, TCO Target $1.374b FM outsourcing savings New TCO Target 31b Amy From: Bob Oglesby Sent: Wednesday, June 10, 2015 10:51 PM To: Ron Plumb; Amy Thompson Cc: Thomas W. Chester; David Roberson Subject: Fm outsourcing savings on target TCO of existing portfolio 0k If Serem formula says we should expect to reduce our costs by And Serem is based on a current costs of $383,001,937 But now we say out TCO target needs to be $1.374b - that would say our savings from outsourcing our target might be $285m yr Amy, can you confirm my math in the morning please? So does that mean if we change the definition of maintenance and outsource target TCO our recurring expenses would be what (less than 1.2b) is it more like 1.0 or 1.1b? Amy confirm and share we all of us in the am. David, Are you understanding following thiswould change slide 9 We will want to explain change in definition of maintenance and fm outsourcing scope will save us a lot more than stated in Serem. We will want to put that in slide and text. Sent from my iPhone Diana Cuellar From: Terry Cowies Sent: Wednesday, June 17. 2015 4 so PM To: Bob Oglesby, David Thurman; Thomas W. cnester Subject: RE on: we resolve FM outsourcing positions funding ior statewide usage (geri gov and nigtier ed) and tell Terry? i spoke to Tommy about tnis yesterday and we are good to go Contract being compleled tins week Tennessee Customer rewind State Government Guvavv'vv'cni E. Terry Cowles Director Tennessee Tower, 16'" Floor 312 R052 L. Parks Ave Nashville, TN 37243 p, 515-770-5975 -- term cowies at gov From: Bob Ogiesby Sent: Wednesday, June 17, 2015 2:58 PM To' David Thurman; Thomas W. Chester erry Cowies Subject: FW: did we resolve FM outsourcing positions funding for statewide usage (gen gov and higher ed) and tell Terry? Trving Bob Ogiesbv, MA Commissioner Department oi Generai Services WRS Tennessee Tower, 22nd Flour 312 Rosa L. Parks Ave, TN 37243 in) 515774172031 hug [1tn,gov[generaiserv[ "Providing essentiai centralized smite; to support the dai/y operation of State government From' Bob Ogleshy Se Wednesday, June 17, 2015 2:56 PM To: homas w. Chester; 'David Thurman' Cc: Terry Cowles Subject: old we resolve FM outsourcing positions funding for statewide usage (gen gov and higher ed) and tail Terry? Bob Oglesbv, AIA Commissioner Department of General services WRS Tennessee Tower, 22nd Floor 312 Rosa Parks Ave., Nashviile, TN 37243 (0) 615-741-2081 "Providing essential centralized services to support the daily operation of State government. Diana Cuellar From: Ann McGaulan Sent: Wednesday, June 24, 2015 10 03 AM To: John Hull: Thomas Chester' Mike Perry' Reen Baskin; Bob Oglesby Cc: Thaddeus Subject: JLL FM Client Survey Attachments: JLL Survey Questions 6 24 2015,docx: JLL FM Survey Pamelpants 201 idocx Follow Up Flag: Reply Due By: Friday, June 26,20151200 PM Flag status: Flagged All, One is a client survey score, the governance team has reviewed possible survey questions and considered the right people to include in the survey process, Attached are the team's recommendations. Please let me know by Friday July 15'" ifyuu have any questions or edits to the attached document. Thankvau! General Services ANN MCGAURAN Executive Director or Euslness Relationships State of Tennessee Real Estate Asset Management (STREAM) wus Tennessee Tower. 24th Floor 312 Rosa L. Parks Av TN 37143 p. 6152534765 em megaurangtneov Parking Office 615725377566 Kandis Crockarell Subject: FM Outsourcing Wait and see agencies 0 TDEC Maybe on the bubble agencies 0 Military 0 TDOC - TDOT (no) 0 TWRA (no) Schedule July 1, 2016 - Oct 1, 2016 (3 mos) Iii?; ?1 .General Services Bob Oglesby Commissioner Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 p. 615-741-2081 Bob.Oglesby@tn.gov tn.gov/generalservices/ 07/15/15 Diana Cuellar From: Diana Cuellar Sent: Monday, July 20, 2015 12:06 PM To: Bob Oglesby; Diana Cuellar Cc: Lauren Phipps Subject: FW: FM outsourcing - bringing Mike up to speed From: Bob Oglesby Sent: Tuesday, July 14, 2015 1:06 PM To: Mike Ledyard Cc: Terry Cowles; Diana Cuellar; John Hull; Mike Perry; Thomas W. Chester Subject: FM outsourcing bringing Mike up to speed I expect Terry has already reviewed the SEREM goals. My current priorities for assisting Mike in his developing an understanding about our goals include the following. Note I have suggested the individuals who I think might be important to have included in each conversation if possible, but others can also be included as you or Terry prefer. 1. Mike needs to understand current working timeline to centralize general government real estate and outsource general government FM (including recapitalization) assuming Higher Ed is not included. Meet with Tommy Chester, and Shannon Howell. Working a. Budget transfers associated with FM outsourcing (from one agency to DGS) needs to occur either July 1 (beginning ofthe FY) or October 1 (last chance for FY budget adjustments) b. Transition period after FM vendor(s) selected previous experience FRF FM outsourcing suggests vendor(s) need to be under contract by March 1 forJuly 1 orJune 1 for October 1 c. FM outsourcing Vendor solicitation and procurement d. Centralization of general government real estate 2. Oglesby and John Hull would appreciate Terry and Mike (on their own or teaming with Bob and John) introducing FM outsourcing to state agencies (without a mandate through an Executive Order) don?t know, but think other Commissioners don?t understand the timing and maybe not even the intent to outsource their department?s FM not to mention centralization of their real estate management that we think needs to occur before the outsourcing for it be more effective either. DGS believes they need to meet with each general government agency Commissioner and their leadership. 3. MIKE HAS A MEETING SET WITH TOMMY CHESTER ON TUESDAY 7/21 Mike needs to understand the SBC policies in regards to the definition of maintenance compared to GASB and Oglesby?s drive to redefine maintenance to include recapitalization and to get all maintenance work out jurisdiction oversight/ approvalsoutsourced meet with Tommy Chester 4. Mike needs to be presented the latest slide deck on long term real estate strategies including Total Cost of Ownership, and the alternative financing scenario (Vested Performance Contracting meet Oglesby, Amy Thompson, Ron Plumb and Tommy Chester MEETING SET FOR 10AM ON JULY 22 5. Mike needs to be presented the JLL FM contract, scope, KPIs, etc as well as history regarding otherJLL contracts, SBC interpretation of scope expansion, SBC lead sheet confirming FM contract scope will not be expanded meet with Mike Perry, Shannon Howell, Ann McGauran, John Hull 6. Mike needs to understand the limited data available regarding the facilities we hope to FM outsource meet with Tommy Chester, Ron Plumb, John Hull and Phillip Murphy DONE PER TOMMY CHESTER 7. Mike needs to understand opportunity to align and dates orfold FRF FM contract into new general government contract??JLL was to be a successful vendor? meetwith Mike Perry, Shannon Howell and Paul Krivacka 8. Mike needs to understand the TDOC outsourcing scope (daily maintenance only?) with CCA and other public entities meet TDOC representatives at the appropriate time and ask them for their contract and scope with CCA and other public entities 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Mike needs to understand the HR aspect of outsourcing FM across general government based on DGS prior experience outsourcing FRF FM meet with Reen Baskin, Tommy Chester and Vince Barnes Mike needs to be presented the current multi-agency VPC scenario being discussed at Cockrill Bend; the estimated timeframe of VPC consultant selection, procurement of VPC project developer, award, project development completion; as well as relationship of this project with other real estate portfolio reduction plans including renovation and/or sale of other downtown buildings meet with John Hull, Marcos Makohon, and Phillip Murphy Mike needs a copy of the current 'draft? VPC consultant contract DONE and to ask him to provide input on suggested revisions and/or additions regarding scope or deliverables; Mike also needs to be brought up to speed on TN pursuit of potentially ?piggy backing? onto Missouri?s P3 consultant agreement, the status of Missouri?s contract award, WE WILL LET HIM KNOW AS MO LETS US KNOW and provided the Missouri documents DONE Mike is to be invited as an optional attendee ofthe standing weekly FRF (expansion) Discussion group meeting at DGS Diana Cuellar to invite Mike DONE Mike is to be invited as an optional attendee ofthe standing weekly VPC meeting at DGS (topic right now is VPC consultant procurement) Diana Cuellar to invite Mike DONE Mike needs to understand previous similar FRF projects including build to suite/ lease /purchase of Davy Crockett, Andrew Johnson, TNCare and LWFD buildings; Diana Cuellar can provide a copy of previous SBC minute outlining Crockett Building approval meet with Tommy Chester to discuss further MIKE IS HAVING ONGOING DISCUSSIONS WITH TOMMY Mike needs to discuss TDEC proposal to outsource their hospitality facilities I am not sure who is the best person in TDEC for Mike to meet, but I am certain Terry knows DC Mike needs to understand Ryan Williams interest in passing P3 legislation as well as his previous attempts and obstacles in doing so meet Oglesby, Kelly Smith and Johnny Stites I also expect Mike will be engaging in FM outsourcing dialogs with SBC members, SBC staff and State Architect, as well as TBR and UT facilities representatives (identified by Terry) note VPC and pilot has not been introduced to anyone outside DGS except and Governor?s office team. Mike needs to understands plan and timeframe to centralize general government real estate why and what it hopes to achieve in doing so, and develop a strategy with Terry and team to do so Mike to discuss John Hull DONE PER TOMMY CHESTER THIS IS DONE AN ONGOING Mike needs to understand possible issues associated with individual agencies in regards to centralization and FM outsourcing, and the currently anticipated VPC multi-anticipated general government project meet with Oglesby, Tommy Chester, John Hull, and Terry Cowles DC Mike needs to understand current FM vendor governance structure and meetings as he considers governance of the expanded program and with possibly multiple vendors meet with Ann McGauran, Thad Watkins. Diana Cuellar to invite Mike to these governance meetings Think this is a good start to get you up to speed at your convenience. I?ll ask my assistant, Diana Cuellar to set up these meeting as you wish. Let me know if you have any questions Thanks, Bob General Services Bob Oglesby Commissioner Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 p. 615341-2081 Bob.Oglesby@tn.gov tn.gov/generalservices/ Diana Cuellar From: Amy Thompson Sent: Monday, July 27, 2015 11:51 AM To: Bob Oglesby Cc: Ron Plumb Subject: RE: SEREM FM values Good morning! is the initial TCO or figure. is the Post -SEREM TCO. However, we can't use either of these figures as the actual FM outsourcing amount because the TCO includes utilities. To outsource FM only, the amount available for this purpose would be Relating back to the SEREM report, FM Outsourcing FRF $32,470,000 $91,679,499 Sub?Total 124, 149,499 Recapitalization FRF Sub-Total 181m Total to be FM outsourced (124+181) Take into account the savings over 3 19.4% and would be (19.4% of 305 $59) (.20 28.2MSF General Services Amy Thompson Business Analyst Office of Financial Management Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 p. 615-741-8978 amy.thompson@tn.gov tn.gov/generalservices/ From: Bob Oglesby Sent: Friday, July 24, 2015 9:06 AM To: Amy Thompson Cc: Ron Plumb Subject: SEREM FM values Looking over last slides we generated, lam needing clarification What is the expected TCO to be FM outsourced for all of general gov 28.2M SF (TCO Funding) or (FM outsourcing cost)? And we hope to save over 3 years 19.4% and per SEREM so that equals what? (19.4% of 443.5M) or (19.4% 5.64M (.20 28.2MSF) Please clarify General Services Bob Oglesby Commissioner Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 p. 615-741-2081 Bob.Oglesby@tn.gov tn.gov/generalservices/ War/is Kandis' Crockarell To: David Roberson Subject: draft thoughts on RE discussion CFG Cabinet Takeaways after seeing Greg?s Branding presentation today Maybe use similar format? Objective Why Value Proposition Background Approach Thoughts: Centralization Maximizes clarity for the consumer Maximizes synergy between departments Maximizes leverage Maximizes efficiency for these reasons centralization of general government real estate maximizes effectiveness and helps position TN State Government as an enterprise Governor?s goal to be the best managed state in the nation To provide the best service at the lowest cost Track record on JLL outsourcing results from first 2 years FM, utilities, customer satisfaction Other thoughts: Provide clear consistent communication to our customers and the SBC Provide a a unified identity for general government real estate Who is responsible for general gov real estate management and capital projects Eliminate some of the approval touch points and related extra costs of a project Simplify processes Closes the gap between current slow processes and efficient and effective We need better data to make better decisions silo?d data and decision making not effective for the enterprise Timely decision?making and execution Lower operating costs Optimization of our existing portfolio Disposal of assets that are non-functional or with excessive deferred maintenance DM estimated at 4.2b statewide including 1.35 for general gov TCO funding general gov est at 443.5m/yr vs $257m/yr $186.5m recurring funding shortfall Examples: One department no longer needs a building and closes its doors versus utilizing the building for another purpose We have to stop thinking about this is a Dept of building, or floor we are one enterprise We have to be more integrated to reduce the total cost of ownership We need to prioritize the best use of every capital by a single resource ha rd to do with everyone submitting their capital requests ?General Services Bob Oglesby Commissioner Tennessee Tower, 22?d Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 p. 615?741-2081 Bob.0glesby@tn.gov tngov/generalservices/ 07/623/5 Kandis Crockarell To: David Roberson Subject: RE: draft thoughts on RE discussion CFG Cabinet The goal is to get every department seeing the value and benefits of centralization and no real pain on the downside. We cant take away some of the emotional issues associated with such a change, but we want them to see this as a win for the enterprise as more important than the individual goals of any department or people. We have to make decisions based on what is best for the state as a whole not individual departments, or people. We don?t want them to think or feel or reali7e they are losing control or that service will be worse because it is no longer theirs to oversee. But to the contrary, they should get better service and see process improvements as a result of this step toward simplifying the number of entities involved, handoffs, wait times etc. And that we aren?t planning on making operations related facilities decisions without collaborating with them. A win- win. They bring their expertise which can now be more focused on their mission and we bring ours and General Services Bob Oglesby Commissioner Tennessee Tower, 2.2nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 p. 615-741?2081 Bob.Oglesby@tn.gov tn.gov/generalservices/ From: David Roberson Sent: Monday, July 27, 2015 4:39 PM To: Bob Oglesby Subject: RE: draft thoughts on RE discussion CFG Cabinet I like this. Want me to build this out a little to share with Cheers, DR From: Bob Oglesby Sent: Monday, July 27, 2015 4:37 PM To: David Roberson Subject: draft thoughts on RE discussion CFG Cabinet Takeaways after seeing Greg?s Branding presentation today Maybe use similar format? Objective Why Value Proposition Background 'ana Cuellar From: Mike Ledyard Sent: Monday, August 03, 2015 1 23 PM To: Bob Oglesby, Terry Cowles CC: Diana Cuellar Subject: Thoughts (Questions lot FM Providers on Deferred Maintenance Bob Terry: Based on our conversations, here is the list ofquestions that I have come up with to stimulate thinking for your discussions with some FM providers: Do you have any experiences with helping companies and/or institutions work thru a significant backlog ofdeferred maintenance projects, especially those requiring large capital expenditures? What do you see as the major contribution that a Facilities Management company can bring to a deferred maintenance situation? 0 What do you see as the primary role of a Facilities Management company in a repair/replace project? 0 Is this service usually provided as an integral part of an FM contract, or handled under a separate contractual arrangement? Do you currently provide services and/or subcontract on major facility upgrades? What types of services do you provide internally and which do you subcontract? In a "normal" 3 to 5 to 7 year contract, what is your incentive to bring the right projects to the table, and to ensure proper execution of those projects? 0 Said another way, what is your "skinnin-the-game" and what is your upside for a successful implementation? 0 Does this change in the last few years of a contract? And if so, how does that change? What are your primary considerations and/or criteria in "replace vs. repair" decision or recommendation? I would suggest that you make your edits, and then send the list to the individuals as soon as you can to allow them time to get the right people and/or inputs \'or your conversations. Best Regards, Mike Ledyard Tennessee u" . StateGovemment - 7 Mike Ledyard Dlrector, Manangement outsaumng Tennessee Tower, 15'" Floor 312 Rosa L. Parks Ave TN 37243 p. 515-770-3977 -- Miketeoyarotemgov g) Kandis Crockarell To: David Roberson Subject: General Government FRF and non FRF David, Just a few more clarifications below that come to mind for you as you try to create the draft slide(s) showing of FM and Recapitalization options, TCO, funding, shortfall etc. We need to show estimated TCO (target values worst case) of FM program and recapitalization programs and show theoretical targeted savings for each FM and recapitalization (Serem for FM and recapitalization as calculated by David or revised) The below is just me trying to put my thoughts down on paper for you to consider (not really a decision tree at this point) and to see what you can do with it. Should the State (General Government) outsource Recapitalization with FM or not? Premise: 1. The private sector can perform the same or higher level of quality operations, daily maintenance, and recapitalization projects faster and less expensive than the State 2. The State ideally wants to have the private sector provide all of these services with as little involvement by the State as necessary (in its public sector role) Note: Current JLL scope FM ofoperations and daily maintenance only for FRF only FM outsourcing scope could stay with similar JLL scope or also include recapitalization Decisions 1. Can FM vendor be similarly responsible for recapitalization projects also? (phone calls with 3 vendors hopefully will clarify) 2. OR Does the State need to treat each recapitalization project as additional services to the FM vendor contract (wo recapitalization)? (Vendor would be recommending which projects are replacement vs repair, the state would approve Or the vendor to proceed with the project, and the vendor would perform the work, and the vendor would report back to the State including scope, costs for depreciation, debt service etc. 3. Does the State need or want to finance all of the recapitalization work or does the vendor fund some of the work and if the later, how much would the State be able to get approved by the legislature? (Is there a ?vested outsourcing? advantage to the State if the Vendor helps fund part of the work?) Including recapitalization should (for 80% of current volume) ideally - eliminate State design and construction procurement, contracts, management, payment of vendors etc. eliminate (or reduce) involvement_ 0 eliminate (or reduce) state (outsourced to PB) Project Management services plus 0 reduce some or most of recapitalization funding (currently 100% state funded) - eliminate inconsistent (or require additional ?gap?) state funding plus my: 0 if vendor provides funding - these replacement projects may require longer payback periods thus require a longer contract term than current contract (and that we may be able to get approved) I Caruir-nc Diana Cuellar From: David Roberson Sent: Tuesday, August 04, 2015 3:36 PM To: Amy Thompson; Bob Oglesby Cc: Ron Plumb Subject: RE: Fm numbers I don?t know the answer to this, Amy. I am copying to the Commissioner so he can advise us. Thank you, Dr From: Amy Thompson Sent: Tuesday, August 04, 2015 3:19 PM To: David Roberson Cc: Ron Plumb Subject: RE: Fm numbers Is the "categories of space" to mean FRF, UT, If so, then I have the FM savings (w/o recap) already calculated, and links back to the SEREM report, with one exception UT. FM Outsourcing of Contract Services - 19.4% 4 GSF Current Annual Costs Cost Avoidance FRF 6,724,729 $32,470,000 ($7,644,126) 21,540,963 $91,679,499 ($22,094,015) UT 25,361,303 $83,116,068 ($21,196,778) TBR 35,073,711 $175,736,370 ($41,107,59m $383,001,937 ($92,042,517) Applying the calculations used in the SEREM report, the cost avoidance is as above. However, UT did not apply a calculation to a portion of their square footage, but instead provided a hard number. See below. SEREM Report FM Outsourcing of Contract Services - 19.4% GSF Current Annual Costs Cost Avoidance FRF 6,724,729 $32,470,000 ($7,644,126) Non FRF 21,540,963 $91,679,499 ($22,094,015) UT 25,361,303 $83,116,068 ($23,722,226) TBR 35,073,711 $175,736,370 $383,001,937 ($94,541,589) The differences were discussed and it was determined that we should stick with the SEREM figures. The SEREM report had been shared with various folks and for consistency purposes, I used the SEREM figures in my chart. Additionally, we didn't want to change any ?gures provided to us by Higher ED. From: Ron Plumb Sent: Monday, August 03, 2015 10:30 PM To: Amy Thompson Subject: Fwd: Fm numbers Sent from my iPhone Begin forwarded message: From: Bob Oglesby Date: August 3, 2015 at 9:18:09 PM CDT To: David Roberson Cc: Ron Plumb Subject: Fm numbers David Please work Ron and Amy to add enterprise column to chart you and ?nalized this afternoon Additionally create a FM (wo recapitalization) savings line for all categories of space on chart and compare reconcile the later to what Philip included in Serem page Thanks Sent from my iPhone Diana Cuellar From: David Roberson Sent: Wednesday, August 05, 2015 2:37 PM To: Bob Oglesby Subject: FM Outsourcing PPT Attachments: FM Funding Options for FM Commissioner, Amy has sent the attached Excel sheet which captures all her figures for FM outsourcing. See also her notes below. I would propose to drop this information into the vacant page in the attached PPT (it might actually require more than one page). But before i did that I wanted to make sure you were comfortable with the numbers that Amy provided and that you don?t want anything recalculated or any alterations made. It['s much more ef?cient to edit the table before inserting into the PPT. Any comments or suggestions you have will be appreciated. Thanks, DR From: Amy Thompson Sent: Wednesday, August 05, 2015 2:00 PM To: David Roberson Cc: Ron Plumb Subject: FM impact David, Attached is the most recent set of figures I have calculated for FM Outsourcing. There are a few things I'd like to point out. The FM Costs include Daily Operations (pass through) and Daily Maintenance. Up to this point we've only been showing the funding gap in Daily Maintenance and in Recapitalization. As a result, when considering daily operations as part of FM, the gap grows a little more. The target FM funding is the Whitestone standard, excluding utilities - Let me know if there is any additional information needed or if you have any questions. General Services Amy Thompson Business Analyst Of?ce of Financial Management Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 p. 615-741-8978 amv.thompson@tn.gov tngov/generalsewices/ Kandis Crockarell 6 Suhlect: Facilities Management Outsourelng - Initial Steerlng Cornrniltee Meet/n9 Locatlon: TN Tower 1e/F eon/erenee Room A start: Tue 9/1/2015 5-30 AM End: Tue 9/1/2015 10:00 AM Show Time As: Tentative Recurrence: (none) Meeting Status: Not yet responded Organizer: Mike Ledyerd Required Attendees: Terry Cowles. Chris cimino; dale slms@lbr edu: Larry,Marlin@tn gov: Bob Oglesby (Bob Ogleshy@ln gov). lordan young@capllol.tn gov Gentlemen By now, you should have received your formal invitation for the FMO Steering Committee. We hope that you will become a part of this as we know that your contributions to this strategy will be important as we decide how to proceed. We will have several events behind us by the end of August, and feel it very appropriate that we get the Steering Committee together before Labor Day. As I began searching for times for the first meeting, I started with Chris Ciminn, as he has the longest drive. The only time he can attend is Tues Sept 1, and he needs to be on the road back to Knoxville by 10AM. We are hoping that you can make an opening on your schedule for on Tues 1 Sept. We will likely only go an hour, but would like to reserve 90 minutes just in case. We will send out an agenda the week before the meeting. Best Regards, Mike Ledyard state Government Mike Ledyard 1 Director. Manangement Outsourcing Tennessee Tower. 16'" Floor 312 Ross Parks Ave, Nashville, TN 37243 p. SIS-7708977 -- Diana Cuellar From: Amy Thompson Sent: Thursday, August 06, 2015 2:11 PM To: David Roberson; Bob Oglesby Cc: Diana Cuellar; Ron Plumb Subject: FM Outsourcing Attachments: FM Outsourcing apologize. neglected to verify one of the columns which affected the totals. Please use this version. David - I included TCO Current Funding and DM as well. General Services Amy Thompson Business Analyst Office of Financial Management Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 p. 615-741-8978 amy.thompson@tn.gg tn.gov/generalservices/ Diana Cuellar From: Amy Thompson Sent: Friday, August 07, 2015 7:27 AM To: Bob Oglesby Cc: Ron Plumb Subject: RE: Please provide me updated savings from fm outsourcing recapitalization Attachments: FM Outsourcing mpact.xlsx The FM Outsourcing (as shown by SEREM) FM Outsourcing of Contract Services - 19.4% I GSF Current Annual Costs Cost Avoidance FRF 6,724,729 $32,470,000 ($7,644,126) Non FRF 21,540,963 $91,679,499 ($22,094,015) UT 25,361,303 $83,116,068 ($23,722,226) TBR 35,073,711 $175,736,370 ($41,107,59m Enterprise $383,001,937 ($94,567,965) The Recap revisited at 14% is as follows: FM Outsourcing of Recap - 14% Target Target Funding Cost Avoidance FRF $6.30 $42,365,793 ($5,931,211) $6.30 $135,708,067 ($18,999,129) UT $6.30 $159,776,209 ($22,368,669) TBR $6.30 $220,964,379 ($30,935,013? Enterprise $558,814,448 ($78,234,023) I added some columns to the right showing the cost avoidance of the outsourcing for FM and Recap. I then showed the Net TCO Target AFTER applying the avoidance. Then there is a new "net" TCO. This may have been more than you wanted but I wanted to go ahead and include itjust in case. Amy From: Bob Oglesby Sent: Thursday, August 06, 2015 5:26 PM To: Amy Thompson Cc: Ron Plumb Subject: Please provide me updated savings from fm outsourcing recapitalization Sent from my iPhone $/v7/l5 Kand's Crockarell To: Greg 0 Adams; Jim Henry Subject: va Real estate documean Attachments: Funding Options for FM Outsourcing 7 Aug 15 Real Estate Centralizatlonu text -. 7 Aug 15.doo; Real Estate Cenlralizatron 7 Aug 15;:th Gentlemen, Here are updates for your use. These documents have yet to be shared with anyone I will be snanng Funding ootions document with Larrv Martin and Terry cawles as soon as i can Feel tree to do so yourself in the interim. thanks, General Services Bah Oglesby commissioner Tennessee Tower. 22"" Floor 312 Rosa L, Parks Ave, Nashville, TN 37243 p. 61547411081 Ecnglesby(R)m gay sle From: David Roberson sent: Friday, August 07, 2015 1:20 PM To: Eat) Oglesby Subject: Real estate documents AS we discussed. Cheers, DR General Serwces David H. Roberson DlrectorofCommurllcafians Tennessee Tower, 22m Floor 312 Rosa L. Parks Ave, TN 37243 p. 515725372527 davld rooersongotn gov REAL ESTATE CENTRALIZATION -- August 7, 2015 The Current Situation 0 Overview of TN real estate 0 FRF mainly office buildings; managed and maintained by D65 0 other general government space; managed and maintained by occupants 0 Higher education educational facilities managed and maintained by UT and TBR 0 However, the current siloed system for managing general government real estate is not effective in meeting the State?s collective needs 0 Total Cost of Ownership (TCO) I We have to be more integrated to have a greater impact in reducing TCO I TCO funding enterprise?wide estimate is $1.4ZB/year needed vs. S703M/yr actual $713.3 M/yr funding shortfall; general government estimate is 454.3M/yr needed vs. $257M/yr actual $197.4M/yr funding shortfall Deferred maintenance (DlVl) I We have not been fiscally responsible when growing our portfolio footprint at the expense of properly maintaining what we already have the result being excessive deferred maintenance I DM estimated at statewide including for general government 0 Competition among departments for scarce capital dollars I Reallocating dollars to maintenance will reduce the availability ofalready limited funds for new construction I We need to prioritize the best use of every capital dollar hard to do with everyone submitting their own (sometimes redundant) individual capital requests I Building smaller separate dedicated facilities is not as cost-effective as building larger multi-use facilities I Identifying other private funding sources to assist in funding new projects will reduce the State?s funding obligation Needed: A System-Wide Strategy for SolVing Our Real Estate Managerial and Fiscal Challenges I Fortunately, we have some encouraging experience that suggests what that strategy might include: The positive FRF experience I High levels of customer service and satisfaction, access to work order request system, DGS as a single point of contact, enterprise strategies and funding 0 The positive FM outsourcing experience I First two years' result total cost avoidance resulting from facilities management outsourcing is currently calculated at $7.4 million, while customer satisfaction was 83% for the first year and 96% for the second year. (insert graphics) 0 SEREM and its statewide strategies to date for reducing real estate costs I Eliminating vacant, functionally obsolete, and fiscally irresponsible assets I Alternative Workspace Solutions I EmPower TN I Expanding facilities management outsourcing I Real estate policy/process improvements Advantages of Centralization for the State 0 Provides a single strategic leader for general government real estate 0 Promotes more timely decision?making and execution Optimizes our existing portfolio 0 Example: If a department no longer needs a building, it can be made available to others with needs for greater space 0 Encourages us to act like every building and floor belongs to the State instead of to a certain department we are one enterprise: "Work is not where we are, it?s what we do.? 0 Provides clear consistent communication to our customers and the SBC Simplifies processes/approvals, reduces touch points, and eliminates extra labor costs - Speeds disposal or replacement of assets that are non?functional or with excessive deferred maintenance 0 Looking at real estate as a whole permits interdepartmental coordination and efficiencies of scale - Enterprise-focused capital project prioritization prevents potential redundancies in capital project requests Advantages of Centralization for the Departments - Departments and agencies to focus their attention on their core business and how they use their real estate 0 Integrated planning for design/construction and use of facilities enterprise?wide will give departments more efficient and effective facilities better aligned with their programs 0 Departments will get better service and staff will have higher customer satisfaction 0 Processes will be improved by simplifying the number of entities involved, thus reducing handoffs, wait times, etc. 0 One department overseeing State buildings? TCO cycle of maintenance and capital improvements is more efficient and effective 0 Biggest change: outsourced facilities management Questions and Answers 1. Will DGS be telling me to close facilities to save real estate costs? Your department and D65 will continue be partners. Your department will still be in charge of its programs and services. DGS will offer its real estate expertise to help the State make the best facilities decisions for the enterprise that support your vital programs. Overall we expect this to produce better results for your programs and for the management of our real estate. 2. Where will savings go? Will any savings be directed to our departments? Terry Cowles is the better person to address this, but as I currently understand it, all stated SEREM cost avoidance/savings are currently planned to be allocated to the originating departments. 3. What is the timeline for centralization? Planning will begin now, with implementation effective July 1, 2016. 4. What is our role in deciding what facilities will be included in As DGS does its analysis of each department, it will consult with your team about each of your non-FRF facilities to identify any properties and/or services for which it may not make financial or programmatic sense to be managed and maintained as part of FRF, but this will be the exception rather than the rule. These decisions are currently anticipated to be made by July 1, 2016. 5. in regard to DGS taking over management and maintenance of my department?s facilities: a. What should I do if I have some questions but no objections regarding our facilities being managed and maintained as part of b. What should I do if I have questions or exceptions to discuss? In either case, let Commissioner Oglesby know as soon as possible. DGS will begin its analysis with those departments that already have no doubt they should be in FRF. Let him know which category your department is in. 6. What is going to happen to my department?s personnel? To my budget? Personnel whose principal duties are related to facilities management will be transferred out of your department effective July 1, 2016, to align with facilities management outsourcing, also effective July 1. Your personnel will be provided opportunities for employment with the FM vendor(s). Funds for management and maintenance of your facilities will be transferred to DGS. ?General Services Facilities Management Outsourcing: Scope and Funding Options FM Outsourcing Program Funds - 1St Year - TCO Recurring Funds DM Total General Government -- Higher Education -- UT -- TBR Total Target $454,265,872 $111,447,835 $342,818,037 $962,086,882 $393,693,353 $568,393,530 $1,416,352,754 General Services Actual $256,888,755 $67,583,574 $189,305,181 $446,186,778 $163,261,423 $282,925,355 $703,075,533 Gap ($197,377,117) ($43,864,261) ($153,512,856) ($515,900,104) ($230,431,930) ($285,468,175) ($713,277,221) $1,328,487,524 $316,062,263 $1,012,425,261 $2,840,445,658 $1,191,981,241 $1,648,464,417 $4,168,933,182 Outsourcing Examples FRF FM contract FM+Recapita ization Davey Crockett Andrew Johnson Cockrill Bend pilot -General Services 3 Outsourcing Costs Outsourcing of Daily Operations and Recapitalization - Maintenance -- SEREM (14% of target (19.4% Outsourcing of Current Annual Costs Target Funding General Govt. $124,149,499 $178,074,060 $302,223,559 -- FRF $32,470,000 $42,365,793 $74,835,793 -- $91,679,499 $135,708,067 $227,387,566 Higher Education $258,852,438 $380,740,588 $639,593,026 -- UT $83,116,068 $159,776,209 $242,892,277 -- TBR $175,736,370 $220,964,379 $396,700,749 Total $383,001,937 $558,814,448 $941,816,385 General Services FM Outsourcing Cost Avoidance General Govt. -- FRF -- Higher Education UT TBR Total .General Services Outsourcing of Daily Operations and Maintenance -- SEREM (19.4% $29,738,141 $7,644,126 $22,094,015 $64,829,824 $23,722,226 $41,107,598 $94,567,965 Returned to agencies Outsourcing of Recapitalization 14% of target $24,930,340 $55,668,481 $5,931,211 $13,575,337 $18,999,129 $41,093,144 $53,303,682 $118,133,506 $22,368,669 $46,090,895 $30,935,013 $72,042,611 $78,234,022 $172,801,987 Reallocated for other use ?General Services Real Estate Centralization TN Real Estate: The Current Situation General Government Square Footage Facilities Revolving 6,724,729 SF Fund (FRF) General Government: 32% Higher Education: 68% Other General Govt 21,540,963 SF Space Higher Education I FRF . I UniverSIty of 25,361,303 SF Tennessee (UT) UT TBR Tennessee Board of 35,073,711 SF Regents (TBR) TOTAL 88,700,706 SF 2 General Services TN Real Estate: The Current Situation - The current system of siloed management is not effective in meeting the State?s collective needs Real Estate Category Managed By FRF Department of General Services Departments occupying or using the property Higher Education The UT and TBR systems, aswell as the individual campuses No enterprise-wide vision or strategy No enterprise-wide coordinated data collection/management Missed opportunities for better service at lower cost I ?General Services 3 Total Cost of Ownership (TCO) - We have to be more integrated to have a greater impact in reducing TCO TCO Annual Funding Estimates Needed Actual . Shortfall General $454.3 $257 $197.4 Government million/year million/year million/year Enterprise-Wide $1.42 $703 $713.3 billion/year million/year million/year . General Services 4 Deferred Maintenance (DM) - We have not been fiscally responsible in funding or spending We have been increasing our square footage at the expense of properly maintaining what we already have - The result: Underfunded recurring costs, and thus excessive deferred maintenance - DM estimates: billion statewide, including $133+ billion for general government - .General Services 5 Departments Compete for Limited Funds More money for maintenance fewer dollars for new construction and for programs and services - Enterprise-wide prioritization difficult with siloed capital budgets - Smaller separate dedicated facilities not as cost- effective as building larger multi-use facilities - Option: Identifying private funding sources to assist in funding new projects can reduce the State?s funding obligation General Services 6 Needed: System-Wide Strategies - Encouraging recent experience suggests a strategy for addressing real estate fiscal and managerial needs The FRF experience I - High levels of customer service and satisfaction - Access to online work order request system - DGS as single point of contact for management - Broader strategies and funding FM Outsourcing . - Cost avoidance of $7.4 million after first two years - High customer satisfaction (83% year 1; 96% year 2) SEREM - Five separate programs that employ a statewide strategy in lowering real estate costs by a projected $183.9 million - General Services Centralization: Advantages for the State - Better service at lower cost Single strategic leader for real estate More timely decision-making and execution ?Enterprise thinking? permits interdepartmental coordination and efficiencies of scale Clear, consistent communication to our customers and theSBC Simplified processes/approvals by Faster disposal or replacement of assets that are non- functional or have excessive deferred maintenance Enterprise-focused capital project prioritization .General Services Centralization: Advantages for Departments - Better service at lower cost Departments and agencies can focus on their core business Integrated planning gives better alignment between facilities and programs Better service, higher customer satisfaction Expedited building processes - Biggest difference: Outsourced facilities management - General Services 9 Diana Cuellar From: Mike Ledyard Sent: Monday, August 10, 2015 8:59 AM To: Bob Oglesby Cc: Ann McGauran; John Hull Subject: RE: FM Outsourcing Governance I will get with Ann, and go over the following guidance that we provide for Quarterly Business Reviews: Use data-driven analysis as the basis for contractor reviews and communications. The goal is to actively manage performance. Agenda should include the following: - Performance to Requirements Ability to meet requirements Analysis of requirements not met - Trend against requirements - Understanding of trend; Pareto chart, etc. of why not met - Root cause identification solution - Action plan steps taken to improve trend, eliminate cause for not meeting requirement - Business Analysis identification of business trends Understanding oftrends, Pareto chart Business case to improve service or decrease costs Action plan /time ine to improve trends - Look Forward New/changed requirements over the next quarter Future plans This has many similarities with the JLL Agenda from the latest - Review Year-to?Date Report Financial Results - Operations Energy Management - KPI Review 03 Success Stories - Dashboard Demonstration - Feedback from STREAM - STREAM Update I will meet with Ann to discuss similarities and perceived differences. Best Regards, Mike Ledyard Tennessee State Government - Mike Ledyard Director, Facilities Manangement Outsourcing Tennessee Tower, 15'" Fioor 312 Rosa L, Parks A Nashville, TN 37243 615-770-3977 Mike.teayarg@m go)! From: Bob Ogiesby Sent: Monday, August 10, 2015 8:32 AM To: Mike Ledyard Cc: Ann McGauran; John Hull subject: RE: FM Outsourcing Governance Sure, however i wouid prefer be more proactive. If not, maybe you couia offer topics for them re include this time and then afterwards provide Input/comments7 Lets see wnatAnn says she can or would iike etcomplish this next time. Thanks, General Services not: Oglesby i Commissioner Tennessee Tower, 22"'1 Fieor 312 Rosa L. Parks Ave, Nashvlile. TN 37243 p,615r74i-2081 Bob.Oglesh1@rn 39v From: Mike Ledyard Sent: Monday, August 10, 2015 8:30 AM To: Bob Cc: Ann McGauran; John Hull Subject: RE: FM Outsourcing Governance Commissioner, John has already invited me to the meeting on 27 Aug, With regard to agenda, etc., I thought it more appropriate that I be an observer in this meeting, and then offer my observations afterward. Is that UK with you? Best Regards, Mike Ledyard Tennessee State Government Mlke Ledyard Director. FaCilities Outsourring Tennessee Tower, 16'" Floor 312 Rasa Parks Ave Nashviil TN 372.43 p. 615-770-3977 Mike gqy From: Bob Oglesby Sent: Monday, August 10, 2015 8:23 AM To: Mike Ledyard Cc: Ann McGauran; John Hull Subject: FM Outsourcing Governance Mike, We have our next scheduled governance meeting with the vendor currently scheduled later this month. Seems like it would be worth our effort to discuss what your experience and recommendation is that the scope of this meetings should include (yes I have been reading in your book about this) and go ahead and start moving in that direction before we outsource additional facilities. Please schedule time to meet with Ann (and John) if we wants towards this end. General Services Bob Oglesby Commissioner Tennessee Tower, Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 p. 615-741-2081 Bob.0glesby@tn.gov tn.20ngeneralseNices/ 0/16 Kandis Crockarell To: Mike Ledyard Cc: Terry Cowles; John Hull; Thomas W. Chester Subject: Additional services to consider outsourcing as part of FM Mike, After our information gathering sessions with a few vendors, at least one suggested we consider including additional services they offer their clients, including but not limited to Postal, Printing, Copying, Food Service, Warehousing, etc. Of course, we have statutes that limit some of these areas like Food Service within General Government, and it may be better to contract direct for Food Service within Higher Education I don?t really We would need to do more research to determine if any of these make sense to include. But we certainly may have additional potential opportunities (I?m not sure how higher education handles these services centrally or decentrally at each campus) should we want to pursue them when requesting proposals so we could assess at that time any cost avoidance from outsourcing additional services versus our current delivery method(s). lam envisioning a menu for price comparison for your consideration and recommendation. Similarly, we currently don?t handle all of the legislature?s orjudicial?s postal services and/or security services. This could be a great time to do so if you want to take this from the other branches, and as we create new space within Cordell Hull. Please give this consideration and let us know how we can assist in gathering scope and baseline data for comparison across the enterprise should you want to shop any of these other services with the upcoming procurement. Thank you. I Iii! MM: eneral Services Bob Oglesby Commissioner Tennessee Tower, 22nd Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 p. 615-741-2081 Bob.Oglesby@tn.gov tn.gov/generalservices/ Diana Cuellar From: Andy Kidd 5e Tuesday: Augusl11,2015 5:34 PM Bob Oglesby 1 Mike Ledyard; Mike Perry Subject: Re. Additional services to cunslder outsourcing as pan of FM Attachments: imageoos png: irnageom png: imageoos Commissioner, That is correct i should have the notes Complled and sent to the team no later than end of business tomorrow. Thanks, Sent from my iPhone on Aug 11, 2015, at 5:21 PM, Bob Oglesby wrote: Thanks. Additionally, lam Sure Andy will provide documentation from the dlscusslons, uglesny 1 Commissioner Tennessee Tower, 22"" Floor 312 R053 L, Parks Ave. Nashville, TN 37m p. 6157411081 From Mike Ledyard Sen Tuesday, August 11, 2015 5:18 PM To: Bob Oglesby Cc: Terry Cowles; John Hull; Thomas W. Chester Subject: RE: Additional services to consider outsourcing as part of FM Commissioner, I will add this to the Core Team's list for evaluation as we consider scope and requirements. Best Regards, Mike Ledvard Mike Ledyard Direttar, Facilities Management Outsourcing TennessEE Tower, 15'" Flour 3lz Rosa L, Parks Ave Nashville, TN 37243 p. 6157703977 Mlke From: Bob Oglesby Sen - uesday, August 11, 2015 3:53 PM To: Mike Ledyard Cc: Terry Cowles; John Hull; Thomas W. Chester Subject: Additional services to consider outsourcing as part of FM Mike, After our information gathering sessions with a few vendors, several suggested we consider including additional services they offer their clients, including but not limited to Postal, Printing, Copying, Food Service, Warehousing, etc. Of course, we have statutes that limit some of these areas like Food Service within General Government, and it may be better to contract direct for Food Service within Higher Education I don?t really We would need to do more research to determine if any of these make sense to include. But we certainly may have additional potential opportunities (l?m not sure how higher education handles these services centrally or decentrally at each campus) should we want to pursue them when requesting proposals so we could assess at that time any cost avoidance from outsourcing additional services versus our current delivery method(s). I am envisioning a menu for price comparison for your consideration and recommendation. Similarly, we currently don?t handle all of the legislature?s orjudicial?s postal services and/or security services. This could be a great time to do so if you want to take this from the other branches, and as we create new space within Cordell Hull. Please give this consideration and let us know how we can assist in gathering scope and baseline data for comparison across the enterprise should you want to shop any of these other services with the upcoming procurement. Thank you. Bob Oglesby Commissioner Tennessee Tower, Floor 312 Rosa L. Parks Ave, Nashville, TN 37243 p. 615-741-2081 Bob.0glesby@tn.gov tn.gov/generalservices/ Diana Cuellar From: Sent: To: Cc: Subject: Reen Baskin Monday, August 17', 2015 9:22 PM David Roberson Michelle Martin; Terry Cowles; Mike Ledyard; Lola Potter; Katie Lillard; Bob Oglesby Re: FM outsourcing story -- success! Good job with your comments David. Reen Baskin Sent from my iPhone On Aug 17, 2015, at 4:56 PM, David Roberson wrote: Dear colleagues, Here?s Andy Sher?s story as published on the Chattanooga Free Press website. As you can see, he removed his erroneous claim that the initiative would involve tens of thousands ofjobs, and he makes no mention of how many jobs might be involved. news/ loca Cheers, DR From: Michelle Martin Sent: Monday, August 17, 2015 2:43 PM To: David Roberson Cc: Terry Cowles; Mike Ledyard; Lola Potter; Reen Baskin; Katie Lillard Subject: Re: FMO David - did I see you provide a job impact number of 1,500 to Andy Sher? was wondering where that came from and who approved releasing as that was not in our messaging. Thanks Sent from my iPhone On Aug 17, 2015, at 1:58 PM, David Roberson wrote: Thanks. Also, Commissioner 0 has agreed that we will reduce our recurring cost avoidance estimate to "more than $10 million? for the past two fiscal years. From: Michelle Martin Sent: Monday, August 17, 2015 1:38 PM To: Terry Cowles; Mike Ledyard; Lola Potter; David Roberson Cc: Reen Baskin; Katie Lillard Subject: RE: FMO Mike, Terry, Lola and David: Please find messaging on FMO RFI to assist David wiih questions veceived from (he Tennessean today. This is In a fact sheei farmat 1 am reachable by at 61573194682 lam leaving shorrly for a medical appointment that can her be rescheduled lei my daughker. Lola Potter is able to as well. ONLWF ASKED: This RFI is focused an exploring rhe business case a larger scale of facilities management servltes across me sKate'S real ponroilo and is nut focused on Jobs Dr pusmons. Mlchelle R. Martin i Senior Managerof Communications Tennessee Tower. le'h Floor 3i 2 Ross Parks Ave Nashville TN 37243 p.615-77073960 -- michelig maanm guv Fro Michelle Martin Sen Monday, August 17, 2015 12:51 PM To: David Roberson Cc: Lola Potter; Ree" Baskin; Thaddeus E1 Watkins; Mike Ledyard Subject: FMO Hi David, We are working on some poims re assist you with response to the Tennesseans questions and will provide Within the half hour. Hope this helps, Michelle R. Martin 1 seniorManager of Communications Tennessee Tower, 16'" Floor 312 Rosa L. Parks Ave. ashville, TN 37243 p. 6154703960 Wm Diana Cuellar From: David Roberson Sent Friday, Augusl 21, 2015 4:28 PM To' Greg Adams, Jim Henry Terry Cowies' Mike Ledyard, Bob Oglesby Subject: Our FM Outsourmng experience Attachments: Faclimes Management Outsourcing in TN -- 21 Aug 15 docx Commissionemgieshy asked that I forward the attached document. Please let me know ifvou have questions. We expect to expand this with additional data next week. Best wishes, DR eneral Services David H, Roberson i Diretmrafcommunitatinns Tennessee Tower. 22"d Haor 312 Rosa Pa(ks Ave, TN 37243 p. 615-253-2527 (-- david rubersothnguv [ngov/genemisen/Kes Facilities Management Outsourcing in Tennessee On July 1, 2013 the Department ofGeneral Services (DGS) outsourced the management of almost 10 million square feet of state?owned and leased property (the Facilities Revolving Fund portfolio) to JLL, an external vendor. A five-year contract specifying different responsibilities for owned and leased facilities was awarded on March 18, 2013, with a start date ofJuly 1, 2013. There is an option for two one-year extensions of the contract. The Challenges to the State of TN 0 Need to meet the governor?s challenge to improve efficiency and reduce real estate costs to "provide best service at lowest cost" 0 Poor condition of many state buildings and increasing cost of maintenance. 0 No modern work processes or technology available for facilities management (FM) 0 No professional development training for FM staff 0 No safety training programs for FM staff 0 Hundreds of code violations, many instances of hazardous working conditions, and some life safety issues in state buildings The Case for Outsourcing 4? Private providers have already developed FM technology, processes, and employee training the state needed a Private sector industry leaders (including Nissan, Motorola, Proctor Gamble) have moved to outsource real estate services so that the companies could focus on their core business and on customer service The FM Contract 0 Outcome?based contract does not specify tasks to be done by the vendor, but defines the vendor?s targeted outcomes and associated responsibility to manage and maintain facilities. Thus vendor decides how to manage and operate facilities, how to reduce operating costs, how to deliver great customer service. 0 Mutually developed Key Performance Indicators (KPIs) and goals determine the vendor?s success. Vendor provides a report detailing progress toward stated goals and overall performance trends. 0 KPIs include measurements for cost reduction, performance to budget, service delivery, energy use reduction, and customer satisfaction. - Fifty percent of vendor?s annual fee is at risk vendor earns full annual fee only by meeting or exceeding all for the year. Prior to entering a contract with the state, JLL estimated that, compared with Building Owners and Managers Association (BOMA) standards, available state data suggested Tennessee could realize cost reductions of $96 million over five years through FM outsourcing. JLL was subsequently awarded a $1 million maximum liability contract to evaluate state facilities and properties. Through a series of six amendments to this contract as more funding became available (adding T3 planning, master planning, and office modernization, and deleting the scope for facilities management) maximum liability was increased to $10,750,000. ln conducted a contracted evaluation of state facilities, analysis of more accurate data led the vendor to revise the cost reduction figure to $50 million over five years. Following this contract, JLL was awarded a separate competitively bid contract for facilities management (seven bidders responded). Now in the second year of that contract, JLL projects actUal five-year cost reduction will be in excess of $40 million net of its contracted fee million over five years). The $10 million difference is due to buildings being in worse condition than expected million), inability to manage some utility expenses paid directly by the state million) and the state?s inability thus far to use the "smart building? technology originally planned for use in state buildings million). Customer Service 0 The vendor utilizes a Computerized Maintenance Management System (CMMS) to document and manage the work it performs on the state?s facilities. 0 This system allows state employees to submit a service request on?line. Once the service request is received it is immediately dispatched to a JLL employee or third party vendor. State employees can also submit a service request by calling a service center open 24 hours a day. 0 Once the service has been completed, the employee filing the serviced request receives an email message from the service center noting that the service has been completed. The message also contains a link to a five-question customer satisfaction survey to solicit comment on the vendor?s performance. 0 During the first two years the vendor completed more than 60,000 service requests. Based on more than 4,000 completed customer surveys, customer satisfaction averaged 83% for the first year and 96% for the second year. Preventive Maintenance 0 Before outsourcing FM, the state did not have a formal, documented preventive maintenance program in place, and as a result the facilities suffered from severe deferred maintenance needs. 0 During the first six months the vendor developed a rigorous preventive maintenance program that is also housed in the CMMS system. The system automatically dispatches scheduled preventive maintenance routines to service technicians each month. 0 Once the work is completed, the technician documents the tasks performed and the date completed. During the first two years the vendor completed more than 14,000 preventive maintenance routines and spent $6.5 million (materials and externally contracted labor) addressing deferred maintenance needs, installing energy efficient lighting, and improving the operation of building mechanical systems. Other Results 0 Since much of the work maintaining facilities is performed by third-party vendors (janitorial, landscaping, security, etc.) JLL hired a Sourcing Manager and a Contracts Manager to contract for these services and to reduce costs to the state by consolidating vendors and negotiating lower prices. 0 in Nashville, the sourcing manager re?bid the janitorial contracts and reduced the number of vendors from five to one. This reduced the state?s annual janitorial expense by $750,000. 0 The vendor also worked with the security contractor to right?size the security staff, which reduced security costs by more than $1 million per year. . Strategic sourcing activities have produced almost $4 million in cost reductions during the first two years, and are projected to generate more than $10 million in cost reductions during the five?year contract term. 0 Although the vendor employs 50 fewer people than the state employed?on its facility management team, the overall skill set is much higher. State employees often lacked the skills necessary to self?perform maintenance work and costly third-party contractors were used to perform the maintenance on most building systems. 0 The vendor employs highly skilled technicians (and paid them market wages) who are capable of performing most of the work on building mechanical systems, so third-party mechanical contractors are needed much less often. In the first two years the vendor has documented the correction of 642 code violations. 0 The vendor has also implemented a required safety training program, and all technicians are required to complete 12 safety training courses each year (one per month). All courses are taken on-line, and each employee?s training records are stored on?line for review by managers. 0 The vendor also employs a full?time energy manager who developed an energy management program and works with the energy team as well as with facility managers and building technicians to identify ways to reduce energy consumption through steps proper programming of building systems so that lights and HVAC systems operate only during business hours. Cost Reduction/Avoidance Facilities Management Outsourcing Budget Cost Avoidance DGS baseline FY12 $36,914,545 Vendor?s cost reduction FY14 $35,150,800 4,965,222 FY15 $32,335,950 5 861,532 Two-year net reduction 5,826,754 Two? year recurring cost avoidance 10,791,976 (Note: Vendor?s FM target for FY16 is $31,087,768, not including labor.) Vendor?s Energy Management (Utilities) Budget Cost Avoidance DGS baseline FY12 $18,082,809 Vendor?s cost reduction impact FY14 $18,082,809 333,933 FY15 $18,082,809 Books not closed Two- year net reduction 5 333,933+ Two- year recurring cost avoidance 667,866+ (Note: Vendor's energy target for FY16 is $16,500,000.) Total two-year recurring cost avoidance is forecast to be in excess of $12.93 million once all utility bills for 2015 are totaled. (Note: There are no data to indicate FM budgets would have grown more than 1%/year from the FY12 baseline.) Employee Data State employees involved in FM in FRF facilities, 2013 129 Vendor employees involved in FM in FRF facilities, 2015 79 State employees offered interviews with vendor 129 State employees accepting interviews with vendor 101 State employees hired by vendor 31 0 Of state employees not offered jobs by the vendor, some retired, some transferred to other state jobs, some took private sector positions, and some were RlFed. severance benefits included a base payment of $3,200, college tuition assistance for two years, and a lump sum payment of compensatory time and annual leave. 0 The state made total direct payments of $739,123.88 to or on behalf of employees. 0 For all state employees leaving state service, the state offered assistance in resume writing and interview preparation. 0 All state employees hired by vendor received immediate raise of 10%, and their state longevity pay was added to their base rates. Years of service to the state also were transferred to the vendon - As of 2015, state employees hired by vendor are earning 13-52% more than they did as state employees (average of The vendor offers em ployer?paid benefits constituting an average of 37.2% of salary. The state offers employer-paid benefits constituting an average of 30% of salary. DGS Outreach Legislative Commissioner Oglesby has met with the SBC members (listed below) on a range of issues including FM outsourcing: Lt. Gov. Ramsey 0 Speaker Harwell - Treasurer Lillard Comptroller Wilson 0 Secretary Hargett Legislators who contacted 065 with questions: - Sen. Lee Harris (Democratic Leader) 0 Rep. Bill Dunn Constituents - AIA (TN Architects Association) We conducted a benchmarking study using Whitestone data; the costs and gross square feet (GSF) by purpose were supplied by the UT TBR Systems UTK UTC UTM UTHSC Benchmark $7.54 $8.08 $8.58 $7.70 $4.84 Current Spend $5.00 $6.20 $4.78 $8.37 $1.08 Benchmark/Spend 151% 130% 179% 92% 446% APSU ETSU MTSU TSU TTU UOM Benchmark $8.69 $6.54 $7.27 $8.08 $8.32 $7.59 Current Spend $4.67 $5.15 $4.59 $5.80 $5.58 $4.26 Benchmark/Spend 186% 127% 158% 139% 149% 178% COSCC DSCC JSCC MSCC NASCC NESCC PSCC RSCC STCC VSCC WSCC Benchmark $7.06 $8.51 $8.51 $6.25 $9.19 $6.41 $6.66 $7.34 $6.67 $5.46 $6.85 $6.90 $6.42 Current Spend $15.89 $4.41 $6.39 $6.69 $8.26 $9.43 $5.44 $14.43 $6.18 $6.27 $4.21 $8.86 $6.56 Benchmark/Spend 44% 193% 133% 93% 111% 68% 122% 51% 108% 87% 163% 78% 98% TCATS Benchmark $5.59 Current Spend $6.43 Benchmark/Spend 87% The Gap: Benchmarking studies represent what best practice commercial entities are spending, vs. what government entities can do with available funding The University of Tennessee Operations and Maintenance of Physical Plant Summary Data Knoxville Chattanooga Martin Health Science Ctr. Institute of Agriculture Total Current Fund Budget Provided by State Appropriations 19% 19% 19% 30% 44% Student Fees and Charges 35% 48% 43% 17% 7% Grants and Contracts 23% 22% 24% 44% 25% Other 5% 6% 6% 8% 24% Auxiliaries 18% 5% 8% 1% 0% FY 2014 Function Expenditures Salaries and Benefits(Adm., building support, grounds, security 45,458,414 10,531,873 7,959,451 19,061,154 105,176 _S_upplies and Operating Utilities 31,147,403 6,130,765 3,875,562 9,987,464 1,422,389 76,605,817 16,662,638 11,835,013 29,048,618 1,527,565 Area 3 Area 2 Area 5 Area 5 Area 5 .2 Gross Sguare Feet by; Purgose a as; slesr es; SIGSF esr s/esr slesr 10 Classroom] Office 9 1,938,720 10,408,829 369,031 2,138,546 389,453 2,200,416 435,842 2,462,515 - 17 1,746,001 23,213,345 231,149 3,177,513 95,403 1,316,471 1,148,781 15,852,086 43,392 593,768 16 979,083 10,299,793 204,496 2,212,361 - - 16 507,533 5,339,164 101,693 1,100,176 111,675 1,217,945 - - 18 2,074 11,109 23,940 132,893 - - 7 275,006 2,23 0,972 88,228 737,968 148,315 1,264,292 - 20 1,204,985 5,873,885 129,906 643,412 162,331 830,754 715,186 3,660,074 147,849 756,640 21 379,506 2,300,976 116,349 731,131 129,480 820,404 96,252 609,866 - 22 - 9,694 62,891 - - - 28 Other Academic Minor 9 - - - - 9 111,845 600,487 9,986 57,869 94,763 535,413 17,657 99,762 390,647 2,207,163 30 Physical PlantService 6 144,864 3,051,871 79,894 1,765,087 53,915 1,175,695 81,125 1,769,048 39,686 865,411 31 Farm Building 3 40,396 118,552 - 67,356 207,033 - 756,363 2,324,844 32 Storage 23 6,973 14,438 12,538 27,096 - 28,440 61,463 33 Farm Building- 2 (Complex) 3 35,088 102,974 - - a 35 Covered Area Walkway 40 Student Center 10 263,472 1,784,201 226,372 1,587,888 138,396 980,616 106,273 753,006 6&6 Total SF 7,635,546 $65,350,595 1,590,738 $14,352,737 1,403,625 $10,576,134 2,601,116 $25,206,359 1,406,377 56,814,238 111,497 1,371,459 - - - 16,200 199,267 - - - - 16,620 98,536 150,101 957,949 12,694 79,391 a - 172,683 1,113,804 - 102,729 692,955 - 4,171 8,636 - - - 3,171,842 32,085,840 391,636 3,966,588 834,602 8,938,953 20,886 223,698 - 10,000 149,385 - - - 1,356,568 11,005,087 231,358 1,939,337 108,952 928,747 - 2,824,226 4,060,700 322,773 482,165 13,905 20,817 847,550 1,268,859 2,287 3,424 Auxiliary Total SF 7,683,812 $50,052,715 1,096,368 $7,346,039 1,072,832 $10,660,863 868,436 $1,492,557 2,287 $3,424 Grand Total (check su m) 15,319,358 $115,443,310 2,687,106 $21,698,776 2,476,507 $21,236,997 3,469,552 $26,698,916 1,408,664 36,317,712 Whitestone Calculated $7.54 $8.08 $3.58 57,70 $4.84 Current Spend $5.00 $6.20 $4.78 $8.37 $1.08 151% 130% 179% 92% 445% Note 1 This data does not include leased space or non-formula space information is not available at this time. 55 Tennessee Board of Regents Universities Operations and Maintenance of Physical Plant Summary Data APSU ETSU MTSU Total Current Fund Budget Provided by State Appropriations 20% 18% 20% Student Fees and Charges 44% 44% 45% and Contracts 26% 27% 22% Other 3% 4% 4% Auxiliaries 7% 7% 8% FY 2014 8: Function Expenditures Salaries and BenefitslAdm., building support, grounds, security) 5 3,993,327 0,494,423 5 3,053,354 Utilities for owned space 3,742,648 7,007,155 6,553,664 Utilities for rented space 59,478 105,730 126,371 Supplies and Operating 2,582,462 4,920,026 12,086,450 10,377,915 5 21,527,334 26,819,839 3 Area 5 Area 3 Area 5 Gross Sguare Feet by Purpose 5 GSF SIGSF GSF GSF SIGSF 9 270,418 1,527,867 1,007,859 5,411,112 891,451 5,036,714 17 298,132 4,113,938 160,468 2,133,446 387,524 5,347,463 16 - 91,116 993,725 16 147,113 1,604,437 81,443 856,767 234,697 2,559,642 18 - - 75,008 418,415 7 190,365 1,522,741 3,240 25,254 323,710 2,759,423 20 120,967 619,067 116,510 567,946 192,519 985,246 21 30,514 510,732 193,233 1,171,391 252,534 1,500,091 30,185 170,546 148,811 798,954 388,824 2,196,863 Piant Servrce 6 32,395 706,420 74,061 1,560,254 122,005 2,660,495 Farm Building 3 20,666 63,521 112 329 20,830 64,025 Storage 23 18,604 40,206 12,476 25,832 Farm Building - 2 (Complex) 3 - - 24,943 76,668 C0vered Area Walkway Student Center 10 115,895 821,184 232,187 1,572,343 333,431 2,362,553 E846 Total 5F 1,325,354 $11,800,709 2,030,450 $14,125,158 3,338,592 $27,061,324 - 13,555 80,365 - 33,104 550,575 129,423 334,735 - . - 4,400 9,509 357,527 3,829,271 382,549 3,869,804 790,412 8,465,659 301,130 2,015,303 533,501 4,034,701 320,432 2,144,432 16,537 110,673 - 90,027 602,503 . - 600 1,399 - Food Service 5 - - - 115,249 982,425 448,174 3,635,788 317,108 2,703,145 25,085 37,555 544,244 782,519 977,486 1,463,385 Total SF 898,632 $7,535,802 2,152,151 $13,239,862 2,499,365 $15,388,682 Grand Total (check sum} 2,223,986 $19,336,511 4,182,601 $27,365,020 5,833,457 $42,450,006 Whitestone Calculated $8.69 $6.54 $7.27 Current Spend $4.67 $5.15 $4.59 186% 127% 158% Note This data does not include ieased space or non-formuia space (1) Information is not available at this time4,761,215 6,140,211 5,381,530 16,282,957 Area 733,524 153,549 49,323 202,343 104,945 31,291 103,327 136,315 66,106 232,223 1,883,551 40,170 499,927 243,042 139,489 922,628 2,806,179 SIGSF 4,144,424 2,327,195 537,979 1,724,345 537,072 515,071 514,375 2,972,545 203,191 1,545,435 515,222,535 270,955 5,354,437 1,525,551 203,325 $7,450,731 $22,683,416 $8.08 $5.80 139% 19% 46% 22% 5% 7% 3,942,940 4,658,136 3,434,201 5 17,035,277 Area 495,019 173,090 291,525 125,440 240 37,131 100,571 122,155 5,433 150,325 72,531 45,124 2,352 140,449 1,817,785 77,895 571,325 205,434 3,430 950 353,104 13,794 1,235,043 3,053,828 SIGSF 2,557,715 2,357,733 3,056,795 1,330,123 1,235 707,251 490,249 740,535 29,433 807,083 1,534,341 132,427 4,870 951,104 $14,821,057 502,405 5,779,441 1,303,500 22,150 3,039 2,945,552 19,533 $10,581,043 $25,402,100 $8.32 $5.58 14915,321,053 7,535,344 35,755 6,439,618 30,383,288 Area 1,715,335 474,430 215,123 375,905 247,215 277,231 327,515 10,590 573,503 179,311 9,573 254,332 4,775,920 55,591 151,399 1,405 947,733 303,039 129,330 1,200 27,532 154,125 573,333 2,360,893 7,137,813 Utilities 36,015,995 5 86,410,615 SIGSF 5,513,330 2,355,221 4,115,514 2,062,635 I 1,406,609 2,033,525 70,093 3,572,393 3,937,195 20,723 1,349,955 537,130,509 330,759 997,595 3,041 10,150,975 2,021,321 848,651 3,957 421,741 1,359,417 355,130 $17,012,655 $7.59 $4.26 178% Total Ail TBR 56,284,431 134,851,513 9,032,742 $54,143,264 Total Current Fund Budget Provided by State Appropriations Student Fees and Charges Grants and Contracts Other Auxiliaries FY 2014 0 Function Expenditures Salaries and Bene?ts(Ad building support, grounds, security i Utilities for owned space Utilities for rented space Supplies and Operating Grounds {acres} Gross Sguare Feet by Purpose 10 Classroom/Of?ce 11 Science 12 Engineering 13 Fine Arts 14 Instructionalshop 15 Physicai Education 16 Of?ce 17 Libmry 20 Chapel 28 OtherAcademic- Minor 29 OtherAcademic Facility 30 Physical Plant Service 31 Farm Building 32 Storage 33 Farm Building - 2 (Complex) 35 Covered Area Walkway 40 Student Center Total SF 41 Hospital orin?rmary 42 Incubation Center 43 Day Care Elem 8: Secondary Educ 45 Recreation Center 46 Rec Center Support Storage 50 Dormitory 51 Apartment Building 52 Single Family Dwelling or Duplex 53 Housing Support Storage 55 Food Service 58 Athletic Facilities 60 Other Aux. Enterprise Facility Auxiliary Total SF Grand Total [check sum) Whitestone Calculated Current Spend 2,285,284 5 6,568,394 a Whitestonetalegory minister-Iowans2,554,306 1,659,567 59,237 Area SIGSF 132,153 25,254 31,251 68,619 40,936 10,076 41,522 349,826 4,335 . 59,330 63,665 413,491 Note This data does not include leased space or non-formula space (1) Information is not avaiiabie at this time. 745,752 343,431 340,323 584,934 259,375 219,722 294,208 $2,794,300 36,953 33,322 $125,775 $2,920,075 $7.06 $15.549,692 586,549 923,746 3 2,059,987 Area 5 SIGSF 154,155 370,979 75,357 1,053,654 47,665 519,842 55,291 471,321 11,549 59,104 30,207 191,396 762 4,305 13,259 289,132 3,728 11,459 5,350 11,584 65,753 465,898 464,086 $3,948,673 3,092 26,357 3,092 $26,357 467,178 $3,975,030 $8.51 $4.41 193% coscc 25% 31% 43% 1% 1% 5 997,521 746,427 31,053 Area 5 $1655 154,155 870,979 76,357 1,053,654 47,555 519,842 55,291 471,321 11,549 59,104 30,207 191,395 762 4,305 13,259 239,132 3,723 11,459 5,350 11,534 65,753 465,393 464,086 $3,943,673 3,092 25,357 3,032 $26,357 467,178 $3,975,030 $3.51 $6.39 133% DSCC 21% 25% 50% 3% 0% 936,453 413,688 917,577 5 2,267,718 Area 187,089 34,901 33,799 1,243 4,200 2,550 6,464 14,000 334,261 4,200 696 4,396 339,157 297,509 530,952 7,051 23,730 55,325 13,970 99,193 $2,035,301 5,933 $34,041 52,119,342 $6.25 $6.69 93% Tennessee Board of Regents - Colleges Operations and Maintenance of Physical Plant JSCC 26% 34% 33?57 1% 1% 5 1,101,701 589,110 53,319 1,257,637 3,006,767 Area 5 SIGSF 150,162 343,413 61,072 842,736 44,195 376,734 13,935 95,903 26,673 169,004 38,500 839,548 24,413 172,980 363,950 53,346,323 363,950 $3,346,323 $9.19 $8.26 111% Summary Data MSCC 29% 40% 30% 1% 0% 876,785 771,024 58,319 2,05 6,144 3,762,272 Area 5 262,953 1,485,689 40,227 342,910 33,145 169,625 31,193 197,643 3,492 19,730 10,221 222,884 1,245 2,593 16,405 116,239 393,332 $2,557,412 398,882 $2,557,412 $6.41 $9.43 68% NASCC 22% 40% 37% 1% 1% 762,513 1,522,811 68,200 1,411,079 5 3,764,603 Area 5 SIGSF 519,678 804,700 73,784 71,217 429,679 13,916 67,814 355,367 16,755 691,947 $4,607,153 691,947 54,607,153 $6.66 $5.44 122% 2,936,190 NESCC 25% 36% 37% 100 0% 5 1,973,210 1,004,760 335,434 1,889,351 5 5,207,805 Area 114,533 24,938 35,845 33,756 61,619 53,745 12,436 3,442 14,900 360,219 786 736 361,005 PSCC 26% 40% 31% 2% 1% 1,271,355 1,715,357 2,088,966 5 5,075,678 Area 5 SIGSF 647,142 667,814 3,773,161 344,121 - 390,931 133,300 - 315,345 998 5,107 372,217 64,533 408,890 - 1,536 8,678 271,185 46,687 1,018,078 7,439 - 105,575 $2,642,254 781,568 $5,213,915 - 39,406 265,812 6,700 - $6,700 39,406 $265,812 52,648,954 820,974 $5,479,727 5734 $6.67 $14.43 $6.18 51% 103% RSCC 29% 32% 37% 2% 0% $1,360,553 1,508,933 84,616 1,908,493 4,862,595 Area 5 SIGSF 443,167 2,503,902 910 12,557 44,565 379,388 30,787 157,557 32,434 205,506 5,985 33,815 15,216 331,807 186,760 574,047 15,110 32,655 774,334 $4,231,735 862 7,348 862 $7,348 775,796 54,239,083 $5.46 $6.27 37% 57c: 26% 37% 30% 6% 1% 1,780,677 2,099,140 1,055,281 4,935,098 Area 5 SIGSF 675,954 3,819,152 66,174 913,138 76,266 831,769 111,166 568,909 142,964 905,840 17,234 97,372 31,150 679,271 32,002 69,161 1,152,910 $7,884,613 8,193 55,266 11,430 97,434 19,623 5152599 1,172,533 $8,037,312 $6.85 $4.21 163% VSCC 27% 43% 30% 0% 1% 1,865,765 1,025,219 1,512,210 4,403,194 Area 5 SIGSF 261,091 1,475,169 29,226 403,291 8,514 92,855 52,674 534,256 56,700 359,259 616 3,480 3,794 82,734 10,350 22,368 62,658 443,968 495,623 $3,417,331 1,570 13,383 1,570 $13,383 497,193 $3,430,764 $6.90 $8.86 78% WSCC 31% 34% 34% 1% 0% 3 2,661,530 1,627,019 51,367 1,934,678 6,274,594 Area 5 SIGSF 402,867 2,276,206 32,310 445,847 37,907 413,420 4,264 23,897 800 4,094 49,594 314,235 116,321 657,216 14,255 310,851 98,732 303,474 6,040 13,053 186,319 1,320,179 949,429 $6,032,471 6,960 59,330 6,960 $59,330 956,389 56,141,801 $6.42 $6.56 98% Utilities 16,076,204 - 5 39,099,579 Tennessee Board of Regents - TCATs Operations and Maintenance of Physical Plant Summary Data TCATS Total Current Fund Budget Provided by State Appropriations 37% Student Fees and Charges 23% Grants and Contracts 35% Other 1% Auxiliaries 3% FY 2014 8: Function Expenditures Salaries and Beaefits(Adm., building support, grounds, security) 2,553,876 Utilities for owned space 3,926,395 Utilities for rented space 265,837 Supplies and Operating 6,787,443 5 13,533,551 Grounds lacres) I1) Area a Gross Square Feet by Purpose Classroom/Office 9 1,131,829 Science 17 Engineering 16 Fine Arts 16 instructional Shop 18 863,301 Physical Education 7 Office 20 Library 21 Chapel 22 Other Academic - Minor 9 3,900 Other Academic Facility 9 Physical Plant Service 6 5,120 Farm Building 3 Storage 23 45,408 Farm Building 2 (Complex) 3 Covered Area Walkway 3 55,416 Student Center 10 200 Total SF 2,105,174 Hospital or Infirmary 14 Incubation Center 14 Day Care Elem 81 Secondary Educ 12 Recreation Center 11 Rec Center Support Storage 23 Dormitory 8 Apartment Building 4 Single Family Dwelling or Duplex 4 Housing Support Storage 24 Food Service 5 Athletic Facilities 7 Other Aux. Enterprise Facility 13 Auxiliary Totai SF Grand Totai (check sum) 2,105,174 Whitestone Calculated Current Spend Note This data does not include leased space or non-formuia space (1) Information is not availabie at this time. Utilities 4,192,232 9,341,319 slesr 6,558,985 4,792,246 22,601 113,115 98,910 171,234 1,403 $11,753,494 $0 $11,758,494 $5.59 $6.43 87% Whitestone Standards SIGSF 40.533 MOdel LE (.9 a: 52 2 Aircraft Hangar 3 3.09 2.93 3.00 3.07 0.71 0.75 0.26 2.88 0.14 0.25 0.44 Custodial 0.636 0.676 0.743 0.724 Apartment 4 6.70 6.37 6.56 6.69 2.32 1.45 0.26 7.65 0.14 0.11 0.90 Energy 0.758 0.754 0.782 0.764 Cafeteria 5 15.27 14.94 15.32 15.53 5.59 6.89 0.26 5.66 0.14 2.32 1.88 Grounds 0.965 0.885 0.924 0.893 Central Plant, Boiler 6 22.09 21.07 22.17 21.81 0.17 11.31 0.26 37.12 0.14 0.11 0.00 Maint&Repair 0.873 0.807 0.858 0.847 7 8.36 8.11 8.34 8.52 4.49 2.77 0.26 4.36 0.14 0.11 1.29 Pest Control 0.719 0.791 0.857 0.939 8 10.13 10.12 10.72 10.71 8.59 1.64 0.26 5.96 0.14 0.11 0.80 Refuse 0.890 0.921 0.944 0.933 Coilege Lecture rooms 9 5.80 5.37 5.26 5.65 1.91 1.47 0.26 2.96 0.14 0.11 1.78 Water/Sewer 1.114 0.883 0.683 0.941 College 51-. 10 7.01 6.77 6.99 7.09 2.72 2.77 0.26 5.09 0.14 0.11 0.86 11 6.73 6.45 6.59 6.75 2.40 2.77 0.26 4.27 0.14 0.11 1.04 .DayCare Center '12 6.38 5.93 5.83 6.25 2.51 1.27 0.26 3.44 0.14 0.11 1.95 1.49 1.44 1.49 1.50 0.14 0.75 0.26 1.05 0.14 0.02 0.09 12.40 12.30 12.92 12.88 7.25 5.49 0.26 6.29 0.14 0.15 0.85 11.53 11.23 11.75 11.62 2.38 7.31 0.26 10.31 0.14 0.11 0.38 10.82 10.52 10.95 10.91 2.58 6.71 0.26 8.42 0.14 0.11 0.63 13.75 13.30 13.95 13.80 2.58 7.31 0.26 16.30 0.14 0.11 0.38 Elwziinten'r?mceS'ho 5.55 5.36 5.53 5.58 1.51 2.77 0.26 4.06 0.14 0.11 0.56 12.73 12.74 13.44 13.36 8.67 5.49 0.26 4.89 0.14 0.15 0.77 4.99 4-87 5.07 5.12 2.53 1.64 0.26 3.18 0.14 0.11 0.52 6.28 6.06 6.22 6.34 2.34 2.77 0.26 3.69 0.14 0.11 0.86 6.49 6.33 6.56 6.66 3.80 1.74 0.26 3.85 0.14 0.11 0.86 Warehouse, selfstora 2.18 2.07 2.16 2.16 0.14 0.75 0.26 3.01 0.14 0.02 0.09 3.32 3.17 3.31 3.29 0.12 1.61 0.26 4.38 0.14 0.02 0.11 Share Carla From: Greg Adams Sent: Friday, August 23, 2015 1223 PM To: - Cc: Jim Henry Subject: Re: Outsourcing initiative Attachments: imagenozpng ice, Thank you for meeting with us this week. We thought the dialogue was quite constructive atid supponive orour FMO strategy to reduce real estate management costs throughout the State, want to provide you with a response to yourqitestions you have: I understand there is some Confusion about how the FMO projch is proceeding that has recently been exacerbated by a leaked working document of the euntructing aspects of the project. As you recognize, every project needs a plan and most complex projects like this one have many plan threads that include business justification, scope determination, milestone governance, change management and communications among others. The contracting process isjust one thread of many and many of them are still in formulation. The Vested Outsourcing method is being utili7ed to guide the procurement process and it does require a scope to be determined early on. We are preparing for that with a lot of knowledge/experience transfer right now to the core team but we are not at the scope determination which may set what is in or out. That step will not occur until we complete fully the bttsirtessjustifiealion and it has been presented and agreed to by you among the other leaders. Also, we are not even certain at this time that this method will prove acceptable to the Comptroller ofthe Treasury and/or the Legislature. Accordingly, we are eunsidering some hybrids orvi; ed Outsourcing that may work better rer the public sector. The businessjustilicatien is in process right now. For higher education the business justification is comprised of 4 major components: 0 Current spending on facilities management by campus 0 Benchmarking spending using certain external sources 0 Benchmarking spending to peer higher education organizations that have outsourced facilities management Realized resulls from our exisling facilities management arrangement. Finally, any decision to proceed or not far any oflhc facilities will be made by you when and only when you have all the information needed to make a good business decision. i hope that helps some with the apparent ilicollsislellcy/cclifusion with [his mailer, Thanks, Greg Adams Sent from my iPad On Aug PM -- wrote: Greg, Thank you for making the time for Chancellor Morgan and me yesterday to discuss the facilities management outsourcing initiative that is pan of SEREM. The discussion was beneficial and while it helped allay some at our concerns, representations are still somewhat inconsistent. The contusion seems to be in what the Governor and your team represent and what is being communicated with the working group related to the procurement methodology. Under conyenlionai procurement methods, buyers have the ability to make a decision after evaluation of technical and cost scoring. Vested Outsourcing on the other hand, is a structured process whereby potential yanoors are brought to the table early on in orderto create an outcomes-based solution. It is our understanding from the work groups that due to the need to define the business model, statements of intent, objectives, and outcomes, that stakeholders must be on board from the beginning and their ability to aptrout or withdraw at a later date would disrupt the entire model, This is particularly true when highereducatiun represents approximately two-thirds ofthe gross square ioptage, Accordingly, because a non-conventional procurement model 'is being used, we are seeking clarification that the University's ability to opt>>out if it is in our best interest is not constrained during the Thank you again lor your time and help in resolving this inconsistency Regards, Joe DiPietro THEUNIVERSITYOI TENNESSEE we Joseph A. DiPierro, President Memorandum To: From: Facilities Services Department 2233 Volunteer Boulevard Knoxville, TN 37996-3000 865-974-2178 fax 865-974-7786 fs.utk.edu Date: RE: o o UTK Deans Andrew P. Powers, Director of Design, UT Facilities Services September 14, 2015 Facilities Management Outsourcing According to a Request for Information (RFI) issued on August 10, the State of Tennessee is exploring outsourcing the facilities management of nearly all state-owned real estate assets - an extraordinarily large contract for the State of Tennessee (potentially $3-4.5 Billion over 10 years) which would affect far more state agencies and positions than most people realize. Unless somehow curtailed by the state legislature (which is currently out of session until January 12), or unless reduced per supposed options granted to UT President DiPietro and TBR Chancellor Morgan, the current scope of this initiative will be carried forward in early October. Contained within the RFI are the following services (note: underlined services constitute those currently offered or overseen by UT Facilities Services): o Call Center/Customer Service Center; o Building operations, including, but not limited to: o Management Services o Security o Cleaning o Repair/Maintenance o Administrative o Roads/Grounds o Utilities Services o Preventative maintenance; o Subcontractor management for services not self-performed; o Facilities related purchasing; o Safety and Emergency preparedness and disaster recovery plans/support; o Energy Management/Utilities Analysis; o Financial and Accounting related to building operations; o Accounts Payable and integration with the State's ERP system (PeopleSoft v8.9 or higher); o Cost Management and Budgeting (operating and capital); o Comprehensive Financial Reporting; and o o o o o o o o o o o Comprehensive Operational Reporting. Move management; Project management; Pre-planning; Occupancy Planning (e.g. strategy, space planning, etc.); Shipping and Receiving/Dock Management; Food Service Operations; Administrative Site Services (such as Conference Room Schedule and Set Up); Special Events Set Up and Coordination; Master Planning; and Facility Assessment. o Governor Haslam told News Channel 5 in Nashville that the sole impetus for outsourcing facilities management is to save money (though it is questionable whether the Governor can achieve enough savings without underserving the needs of the resident agencies). He has further told News Channel 8 in Knoxville that - again under the assumption that privatization will save money - lowering university tuition rates is one objective of privatization. Despite the fact that Haslam told Channel 8 that there is no timeline for the implementation of this outsourcing initiative, Channel 5's investigative reports have uncovered documents that, to the contrary, show the Administration has intended to convert this RFI to a Request for Qualifications (RFQ) as soon as October 19. Haslam has since denied that timetable to the Knoxville News Sentinel, and he has publicly promised state universities a choice on whether to be included in the scope; so we will see. This much remains: unless UT President DiPietro and TBR Chancellor Morgan are truly capable of opting out of this plan, UTFS and other public, collegiate facilities management groups statewide could still be privatized. DiPietro's first chance to opt out is October 6 (apparently there will be other opportunities, if he is thwarted the first time). o UT Facilities Services (UTFS) employs about 700 people, across three shifts, to execute the tasks above, and unless UT can opt out of the Governor's plan, the first phase of the proposed privatization would outsource nearly all of them. How many positions would be retained by the new contractor is anyone's guess. Those retained (and those who wanted to stay) would certainly face lower wages, fractional benefits, and possibly fewer hours. Apart from the savings attending a reduction in the State's pension rolls, the only way a private company could both save the State money AND carve out a profit would be to slash labor costs and/or reduce the level of service you receive. Savings associated with high-volume buying power are dubious at best. 2 o o o We know this because, believe it or not, UTFS is already quite efficient. o When it comes to services, UTFS already boasts a 94% satisfaction rate among the people they serve; the target satisfaction rate of the State's outsourcing initiative, by comparison, is 85%. After reorganizing itself several years ago, UTFS already employs most of the "best practices" that the outsourcing initiative seeks. In fact, portions of UTFS's operations that were outsourced until recently (like custodial) have been brought back in-house, to superior reviews. o With respect to lowest cost, UTFS again leads many peers, both public and private, across four different benchmarks. Using universally acceptable index metrics from an international real estate management company, the indexes for Knoxville would indicate an expected cost of $11.00 per gross square foot for a "medium" service level. UTFS currently provides a medium service level at $5.00 per gross square foot, which is 54% less cost than the index for a medium service level, and even 23% less cost than the index for a "low" service level. If the outsourcing initiative is intent on saving an additional 25% of current costs, as purported, a budget of $3.75 per gross square foot would clearly make a medium service level impossible - which would jeopardize the University of Tennessee-Knoxville's Top-25 goals. o What this demonstrates is that UTFS is an excellent steward of taxpayer funds, providing a service level well above what others would expect for the dollars spent, and doing so with a measure of quality that already exceeds what the State is targeting. In fact, the collegiate facilities management sector - via the third-party benchmarking firm Sightlines - looks to UTFS as an exemplar. So why would anyone see UTFS as incompetent? UTFS can always improve, but we feel we have operated admirably with the funding we have been given. Given that our employees have tallied anywhere from 0 to 47 years with UTFS, altogether UTFS's workforce has a combined 5,500 years of service to UTK. This is tremendous institutional knowledge that UT's faculty, staff, and students benefit from on a daily basis, and it enables a service level that would be devastated by layoffs and attrition when UTFS was outsourced. Moreover, it would be devastated all over again each time the facilities contract is rebid (perhaps every ten to fifteen years). Other consequences pertinent to you: o Loss of accountability and control. The University will exert much less control over an outsourced Facilities Services unit. Accountability will therefore decrease. If you have a grievance, for example, instead of the buck stopping with the Vice Chancellor for Finance and Administration, the buck will stop much further, in Nashville. o Divided loyalty. As a public entity, UTFS presently does not have to choose between catering to the interests of clients and those of shareholders when selecting how to respond to client needs; instead, UTFS only considers how to bring 3 o o about the highest quality solution the University can afford, as quickly as possible. This would surely change under privatization. No more gratuitous service. Since UTFS is currently non-profit, there are many things that UTFS is able to do for our clients at no additional charge, and under tight timeframes. Under an outsourced scenario, if desired actions are not itemized or covered under the State contract (which is bound to be imprecise given the variety of facilities within the scope), the performance of those actions will prompt additional fees. Under an outsourced scenario, we think you should expect to pay more out of your own departmental budgets for facilities services - for the same services you were previously receiving. As a Dean, if you value the services that UTFS provides in support of your educational mission, and if you value anything approaching the service level you currently receive - from your zone maintenance workers, custodians, electricians, plumbers, A/C technicians, carpenters, painters, movers, landscapers, locksmiths, engineers, architects, and landscape architects, to name a few - we believe you should be concerned by and opposed to this plan. Please encourage your subordinates to contact their legislators (find them at www.openstates.org ) and the Governor (615-741-2001); please urge those officials to conduct a public debate on this issue and to grant state universities the option to opt out of this initiative. Many state legislators we contacted had no idea this initiative was even on the table (much less progressing so determinedly behind closed doors in the executive branch). More importantly - please voice your opposition to this plan via a resolution in the next Deans' Council Meeting. To opt out of the Governor's plan by October 6, Chancellor Cheek and President DiPietro will need on-therecord backup that you could ably provide them. Thank you. 4