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October 14, 1997

Volume 44, Number 8

Outsourcing Facilities Management

Penn and the real estate property management firm of Trammell Crow Company have signed a "letter of intent" that by March would outsource the management and operation of three units of the University-Facilities Management, Residential Operations, and Penn's wholly owned real estate subsidiary, University City Associates. About 180 Penn managers and support staff (A-1s and A-3s) are affected, but the contracts of those in collective bargaining agreements are not.

President Judith Rodin announced the signing of the Letter of Intent in a news release issued Wednesday by Trammell Crow Company. The release was issued within hours of a meeting at the Faculty Club where Executive Vice President John Fry described the intent to the managers and staff. The president of Trammell Crow Corporate Services, Bill Concannon, also spoke to the group, indicating that all present staff will have an opportunity to be interviewed by the firm. Mr. Fry projected that "a significant majority" of the staff will be placed there, based on other such transitions conducted by Trammell Crow-whose normal mode of operation on taking on a contract is to employ client staff. The firm has a strong internal training program, and a retention rate of about 95%, Mr. Fry added. Predicting that some Penn staff may take retirement packages, he said that for all others not moving to Trammell Crow-whether because they choose not to be interviewed, choose not to accept an offer, or do not receive an offer-the University's Policy on Position Discontinuation and Staff Transition will apply. Arthur A. Gravina, Vice President for Facilities Management until the announcement, Wednesday, will serve on a transition team along with Omar Blaik, associate vice president for facilities management, and an newly named Interim Chief Facilities Officer, Lawrence R. Kilduff, Jr., of Columbia University, where he was vice president 1987-93, and acting EVP, 1993-94.

The outsourcing does not affect "residential service" areas, such as dining and program-related services which report to Business Services Vice President Steve Murray, Mr. Fry said. Nor are any union staff involved in the transfer: "Where collective bargaining agreements are in force, the University will honor its obligations under existing collective bargaining agreements and its obligations to labor organizations under the National Labor Relations Act," Wednesday's news release said.

Some 105 of the affected employees are in Facilities Management, which has the major all-University divisions such as Physical Plant (which handles building maintenance and groundskeeping), and Facilities Planning, where architectural and landscape design, and liaison to outside architects, are lodged. Another 37 are in Housing Services, which until recently came under the VPUL. And 38 are in University City Associates (UCA), the subsidiary that manages Penn commercial real estate on and off the campus.

UCA is already operated under contract with Trammell Crow Corporate Services, whose representative John Greenwood has managed the unit for more than a year, Mr. Fry said. "That is one of the reasons we looked at Trammell Crow for the larger role," he added. "I would not have recommended this transition if the firm had not impressed me with its efficiency and its employment policies. I believe they will value our people and give them new opportunities to grow professionally." Some terms of the transition would be, for employees who make the transition to Trammell Crow:

-- a salary at least the same as the present one;
-- eligibility for an incentive bonus-typically 5% to 10% of salary;
-- a benefits package that differs from Penn's but would include:
-- an increment to base salary equal to any out-of-paycheck loss related to medical/dental plans;
-- some extension of Penn tuition benefits at least through Spring 2001 ("at a minimum--and I stress that it is the minimum," said Mr. Fry);
-- continued access to recreation facilities, libraries, parking, Faculty Club membership, and other campus activities.

$32 Million to Penn: Under the proposed ten-year contract, Penn would pay Trammell Crow $5.25 million/year for its services-but, Mr. Fry added, the firm would pay Penn $32 million ($26 million up front and another $6 million at the end of the first five years) for "providing this opportunity to enter the higher education market in a leadership position." Trammell Crow Corporate Services, Inc., a division of the Dallas-based parent company, has operated some of the largest facilities in the country, Mr. Fry explained, but Penn represents its first entry into higher education-and it has created a new subsidiary, Trammell Crow Higher Education Services Inc. (TCHES), in order to make this entry. A condition of the arrangement is that TCHES will establish its Northeastern headquarters in University City, at a site to be determined. The headquarters unit is expected to create some 30 jobs.

In effect, Mr. Fry said, the Penn contingent who join Trammell Crow will form the core of a new TCC division that will provide facilities management and real estate services to many colleges and universities rather than just one. "Trammell Crow respects our facilities people, and if they can hire many of the Penn people, that is a body of expertise it would take a long time to build."

Penn's track record in Facilities Management is one of the best in the country, Mr. Fry said-looked upon as a benchmark by other institutions, which often send representatives often to see "how Penn does it." Reasons he gave for the decision to outsource, given that track record, were the complexity of operations here, with related operations in the three separate divisions; a perceived need for more coherency in the cost of, and cost-information on, services provided to the schools and centers; and a sense of " a need to look outside for new ideas and techniques." Penn is also entering a phase of physical planning and development that has more commercial ramifications than ever before, he added, citing the construction of Sansom Common, the projected renovations of residential facilities, and continued development in areas such as 40th Street.

Next Steps: A rough timetable for the outsourcing project calls for drafting the definitive agreement for Trustee approval at the upcoming stated meeting of the full board (November 6-7). Job interviews for the 175 employees are being scheduled for November 10 through November 25. Job offers are to be made by December 5, and those receiving offers will have until December 12 to return their decisions. The target for implementation is March 1.

Meanwhile, Trammell Crow representatives have been giving follow-up presentations to affected staff; a series of 20 focus groups is being scheduled to explore campus facilities management and related needs; and an e-mail hotline has been established at evp@pobox. "for members of the University to express their opinions and concerns, and to offer comments and suggestions."

(For complete texts of the TCC news release, and of the Letter of Intent it summarizes, please open Almanac Between Issues at


Residential Communities

"At Penn," said Provost Stanley Chodorow, "the Century will begin in September 1998." That is the launch date for a new program that incorporates all of Penn's undergraduate residences into a system of 12 College Houses, and eventually brings to all of them what has been a pilot project in academic support known as "The Wheel" (right).

Each house is to have common spaces, dining and study areas, and expanded staffing including a house dean. Launching of the house program is also the first phase in a longer-term plan to renovate the residences.





College Houses in the 21st Century

Provost Stanley Chodorow announced last week the details of the 21st Century College House program as a component of Penn's Agenda for Excellence "designed to strengthen the University's undergraduate residential system by providing an integration of students' residential, intellectual, cultural, social and recreational life at Penn." The program, produced by the Residential Communities Working Team led by Dr. David Brownlee, is outlined in the Team's final report in this issue.

It calls for the creation of 12 residential communities encompassing all of the present undergraduate residences. (Please see page five for the configuration.):

-- An expansion of the "Wheel" Project into all the residences. (The 21st Century Wheel Project, sponsored by the Residential Faculty Council with undergraduate schools and departments and the office of the VPUL, introduces into residence enhanced academic support programs in the areas of mathematics, writing, information technology, library, research, and languages.)

-- Enhanced staffing (each house to have a faculty master, faculty fellows, dean, and student peer support including graduate associates, and resident advisors).

-- Study centers, including computer and seminar rooms, office spaces, social and multipurpose facilities, in each house.

-- A dedicated dining facility for each house.

Freedom of choice is an important feature of the plan, Dr. Chodrow said: There is no mandatory residency requirement and no mandatory dining provisions are imposed. Undergraduates will continue to have a full range of housing options including Greek houses and off-campus housing. They will also be able to transfer among the college houses.

"It is expected, however, that the increased amenities and heightened sense of community of the college houses will attract growing numbers of students to multi-year residences on campus," Dr. Chodorow added. "Those who move into off-campus housing or fraternities will retain their college house affiliations and will be able to continue using college house services and programs."

Programming and themes will be defined and executed by the residents, offering undergraduates, graduates, and faculty the opportunity to work collaboratively on academic and non-academic projects of common interest, supported by a new infrastructure of facilities and services.

The project is considered the first phase in a longer-term capital plan to renovate and rehabilitate the residences, but the Provost and EVP John Fry project that little construction will be needed to launch the programand that most of the projected increase in annual operating costs will be paid for by efficiencies derived from the restructuring of Penn's residential service divisions.

First-year capital costs associated with the project are estimated at $700,000, to be funded through the established annual budget for the residences. Reallocation of existing resources is expected to reduce additional personnel and program expenses from over $1 million per year to $680,000. By extending the present $70 program fee across the residences, costs are further reduced to $525,000.

"Student, faculty and staff input will continue to be essential as the plan is put into place during the next year," Dr. Chodorow emphasized. "New and existing house councils, work groups and residential student and faculty leaders will shape the new system. In the immediate future, transition teams will be established for each College House to begin shaping the development of the houses, address house constitutional issues, space issues and marketing strategies, among others. Finally, the Wheel Project will be extended into each house, and dining and facilities recommendations will be implemented."

Please see the Final Report of the Working Team.