Prepare for a shock. A federal government agency has been recognized for cutting building operating costs.

The U.S. General Services Administration (GSA) won its second award in two years from the International Development Research Council. The Global Innovator’s Award recognizes practices that apply new ideas to corporate real estate and workplace management.

GSA’s real estate program cut building operating costs to 15 percent below comparable expenses in the private sector, netting $400 million in new revenue and savings since 1998. The agency’s "Linking Budget to Performance" initiative could serve as a model to many private-sector firms.

“The gains we have made under 'Linking Budget to Performance' enable us to direct existing resources to constructing, repairing, renovating and modernizing America’s public buildings, reducing the need for additional appropriated dollars from Congress,” said Robert Peck, GSA’s public buildings service commissioner.

Another GSA program, the “Integrated Workplace” initiative, was also one of 10 IDRC award finalists. The program seeks to improve worker productivity while shaping the office of the future. GSA was the only organization with two contenders in the final round.

“Having a government agency as one of the winners of this award is truly a breakthrough and very unexpected,” said Tom Godart, chairman of the IDRC Global Innovator's Award Program and vice president of the Equis Corp. of Chicago. “GSA’s approach is a unique concept for a government organization. It shows that all organizations need to think outside the box and look at new ways of motivating employees.”

Linking Budget to Performance uses key business measures to gauge employee performance. It has changed GSA’s culture profoundly, Peck said. The program challenges employees to think creatively and try innovative ideas. The most productive regions have received increased budgets, and individuals have won cash awards.

GSA runs the largest commercial real estate organization in the United States, providing approximately 339 million square feet of workspace for more than 1 million federal workers in some 8,400 owned and leased buildings across the country.

In other news, RioCan Real Estate Investment Trust is undergoing a significant transformation, internalizing all property management functions for its shopping center portfolio. The company hopes to fully implement the initiative by July.

A self-styled leader among real estate investment trusts, RioCan in 1996 was the first REIT to undertake all leasing activities in-house. Since that time, the company has continued to internalize other functions that most closely affect the bottom line, including construction management, lease renewals and lease administration.

Under this new initiative, RioCan will handle its own day-to-day management of its portfolio, including the physical maintenance of its properties, the collection of all rents and all accounting related functions. These duties are currently performed by a number of arm’s-length, third-party property managers.

“We have now reached a scale of operations where it makes financial sense to take these functions in-house,” said Edward Sonshine, president and CEO of RioCan. “Once up and running, our new internal property management division will provide RioCan unitholders with significant cost savings that we estimate will be approximately $4 million on an annualized basis without any material growth in our portfolio.

“These savings will be achieved with relatively minimal capital investment. This decision is a part of RioCan's strategy of continuing to maximize the income from our existing shopping centre portfolio of over 20 million square feet.”

Published: December 13, 2000

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