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Despite Protests, Trustees Approve Outsourcing Agreement

Citing the need to enhance services and lower costs, Penn's board of trustees has approved a plan to "outsource" the University's facilities-management operation to the Dallas-based Trammell Crow Co.
   The deal, in which Trammell Crow will pay Penn a total of $32 million for the right to manage its buildings, was expected to be finalized in early December and to take effect by March. It requires the firm to hire at least 70 percent of the 180 affected managers and support-staff.
   But some members of the University community criticized the administration for not publicizing its negotiations with Trammell Crow until after it signed a nonbinding letter of intent with the company in October -- thus giving them little time to analyze and comment on the deal before the trustees' vote on November 7. Others complained that the deal was announced after Facilities Management had been told that employees would be participants in helping restructure the present system to make it more efficient. And several of the employees filed a class-action suit in U.S. District Court to block the deal, charging that it violates an employee-benefits law that prohibits companies from outsourcing departments specifically to reduce benefits.
   At its November meeting, the University Council, an advisory body made up of representatives from all parts of the University, passed a nonbinding resolution calling for the trustees to reject the proposal. A campus-wide committee will examine how the administration consults employees and students on major decisions.
   Several administrators, however, defended the plan, emphasizing the need for better service and to free up more money to spend on Penn's academic mission. The University "excels at many things," said Barry J. Stupine, associate dean for administration at the Veterinary School. "Facilities-management is not one of them." He said delays and other problems with projects "tend to demoralize the faculty and staff, wasting their time and the University's resources." A number of grants his school has applied for have been rejected because of the high cost of in-house construction at Penn, he added.
   Gary Hack, dean of the Graduate School of Fine Arts, said, "Every dollar we can save which is unnecessary, either on the maintenance of things or on the building of structures, is another dollar that we get to spend on education."
   According to John Fry, Penn's executive vice president, the University's survival as a world-class institution is threatened by "a general concern over whether this sector of the economy is being well-managed." In a question-and-answer session with the Penn Professional Staff Assembly, Fry explained: "People simply believe that access [to higher education] is going to be threatened in the future unless we can get a handle on costs." In addition, he said, there has been much greater scrutiny of higher-education funding by the public and by federal and state agencies.
   The decision to outsource these services, which are currently provided by three different units on campus -- Facilities Management; Residential Services; and University City Associates, Penn's real-estate subsidiary -- should come as no surprise, said Dr. Judith Rodin, president of the University: "Before we ever spoke to Trammell Crow, the administration has had a mandate from all corners of the University to enhance administrative services across the board and to control their costs." Rodin cited a 1993 report by a faculty-administration committee that called for such improvements, as one example.
   The fair treatment of employees "has been a paramount concern" throughout the process, Rodin said, adding that the University will provide transitional services to help those who are not rehired by Trammell Crow find jobs elsewhere. Those who are hired will be eligible for performance bonuses and will have their salaries increased to compensate for any reduction in health coverage.
   Richard Cipollone, a Physical Plant employee who is one of four people suing the University and Trammell Crow over the legality of the deal, predicted that faculty and students would "suffer lower-level services" under outsourcing. "I don't think that Trammell Crow can do the job that needs to be done by making further cuts of 20-to-40 percent in its workforce," he added. "And if they can do it, then why can't John Fry figure out how, and tell us?"
   According to Fry, Penn has established strict performance standards that Trammell Crow will have to meet -- or face reductions in the approximately $5.25 million in annual fees it will receive.

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Copyright 1997 The Pennsylvania Gazette Last modified 12/11/97