Bacon's Rebellion

James A. Bacon


 
 

Sorry about that.

The Rest of the Story

 

Contrary to the possible impression created by my last column, the Warner administration is re-evaluating the way it manages the state's real estate assets.  


 

Every once in a while, a columnist needs to eat humble pie.

 

Two weeks ago I argued that Virginians shouldn’t even be thinking about raising taxes until they had fully implemented the recommendations of the Wilder Commission on government effectiveness and efficiency. (See “Anybody Want a Used Prison,” August 25, 2003 .) In particular, I contended, the state should take a private-sector approach to managing its scattered real estate holdings.

 

By failing to note how the Warner administration was following up on the recommendations of its own commission, I may have created the impression that nothing was happening. If I’d made one more phone call -- to Sandy Bowen, Virginia’s secretary of administration -- I would have learned that a lot is going on behind the scenes. Indeed, the Department of General Services is only days away from formally engaging an outside contractor to implement the Wilder Commission’s recommendations on real estate operations.

 

Bowen’s secretariat, traditionally a quiet backwater of the executive branch, has become a crucible of change in the Warner administration. As is evident from a perusal of the Wilder Commission’s final report, the greatest opportunities to make state government operate more efficiently require changes in the administrative processes of government: procurement, information technology, real estate operations and the management of inventories and receivables.

 

It can be dull, eye-glazing stuff, but reforms could add up to hundreds of millions of dollars a year. Bacon’s Rebellion has chronicled the state’s IT reforms (see Joyce Wise Dodd ’s “Bringing VITA to Life,” August 25, 2003 ) but many changes fall within Bowen’s bailiwick. Bowen, former chief lobbyist for the Virginia Chamber of Commerce, has been content to operate largely out of the public eye. But she’s in charge of implementing far-reaching reforms.

 

“As we looked at how state government does its business, it was obvious that we could do it better,” says Bowen. The root problem is that state government does not function at an enterprise level. It’s organized around dozens of agencies, each of which manages its own administrative processes. Many of those tasks could be more efficiently handled centrally. “We cannot afford the inefficiencies and the money it costs to operate in multiple little buckets.”

 

The administration has been “mining best business practices in the private sector and bringing them to state government,” Bowen says. But you don’t reinvent government with a snap of the fingers, she warns. Government and business don’t work by the same rules. Furthermore, recent budget cuts have limited resources to handle complex new projects. Rather than tackle all the Wilder Commission recommendations at once, Bowen’s team took on major projects in sequence. The top priority was reforming procurement, where the Wilder Commission estimated the most money could be saved – 10 percent of state procurements, or up to $500 million annually.

 

Bowen made her deputy, James T. Roberts, the point man on procurement reform. Early on, Roberts focused on eVA, an electronic procurement initiative started during the Gilmore administration, that was still in “start-up hell” when Warner took office. Then he set about leveraging the state’s buying power. Through the Virginia Partners in Procurement program, the state now is bundling the purchasing data of its various agencies and using its aggregated buying power to negotiate more aggressively with vendors. Roberts expects to generate savings of $25 million to $30 million a year.

 

In late spring, coinciding with his appointment as director of the Department of General Services, Roberts turned his attention to real estate. Agency heads typically determine their needs for office space in isolation from one other. Furthermore, because they make major real estate decisions only episodically, they rarely have the background to negotiate the best deals.

 

Richard Sliwoski, director of engineering and buildings, has been visiting other states to study best practices. Meanwhile, this summer, Roberts and his team interviewed six major firms and framed a scope of work. “We’re on the cusp” of getting an outside contractor on board to help manage the state’s real estate portfolio, Roberts said early last week.

 

When that finally happens, though, don’t expect a lot of fanfare. Says Roberts: “We haven’t spent much time on the marketing and P.R. side of this."

 

So, at long last, the Commonwealth will have a system in place for better managing its leases, disposing of surplus property, co-locating state offices, and making complex lease-buy decisions.

 

But as I pointed out in my column, there's more to managing a real estate portfolio than finance. The state is a major producer and consumer of energy for purposes of heating, air conditioning, ventilating and lighting its facilities. Like any company, the state needs to control its energy costs.

 

I still question how well the state can fulfill this mission: The management structure is hopelessly fractured. Real estate operations fall under Bowen's secretariat. Energy conservation programs are subsumed under the Department of Mines, Minerals and Energy reporting to Secretary of Commerce and Trade Michael Schewel. And steam-generating power plants report variously to the prison system and individual colleges and universities.

 

Do not construe this as a negative commentary on the Warner administration or state employees, both of whom are doing some creative work. The issue is how to align the people who manage the state's real estate portfolio with those who manage its energy spending. The business and investment decisions of the two are entwined; the people in charge need to be talking to one another.

 

Finally, on the issue of taxes, I'm not backing off -- even if the Warner administration isn't letting the Wilder Commission recommendations sit on the shelf. As Steve Haner points out in his column this week (See "Our Cup Runneth Over," September 8, 2003), it looks like state finances are improving. As savings kick in from the administration's re-engineering efforts, Virginia could find itself debating in a year or two what to do with the state surplus.

 

The Warner administration deserves kudos for contributing to that surplus by squeezing tens, maybe hundreds, of millions of dollars a year of "waste and inefficiency" -- which pundits said didn't exist -- from state government. Let's apply those savings, not new taxes, to education and other priorities.

 

-- September 8, 2003

 

 

Bring Home the Bacon

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You can berate Bacon at jabacon@

baconsrebellion.com

 

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