RD358 - Department of General Services Combined Real Estate Report - November 15, 2013


Executive Summary:
Introduction

This report is provided in compliance with Section 4-8.01e of Chapter 806, 2013 Acts of the General Assembly, which provides:

"e. Utilization of State Owned and Leased Real Property:

1. By November 15 of each year, the Department of General Services (DGS) shall consolidate the reporting requirements of § 2.2-1131.1 and § 2.2-1153 of the Code of Virginia into a single report eliminating the individual reports required by § 2.2-1131.1 and § 2.2-1153 of the Code of Virginia. This report shall be submitted to the Governor and the General Assembly and include (i) information on the implementation and effectiveness of the program established pursuant to subsection A of § 2.2-1131.1, (ii) a listing of real property leases that are in effect for the current year, the agency executing the lease, the amount of space leased, the population of each leased facility, and the annual cost of the lease; and, (iii) a report on DGS’s findings and recommendations under the provisions of § 2.2-1153, and recommendations for any actions that may be required by the Governor and the General Assembly to identify and dispose of property not being efficiently and effectively utilized."

Summary of Savings and Income during the Period

Lease Savings: $1,273,114
Lease Administration Savings: $84,467
Surplus Real Estate Sales Revenue: $5,614,400
Surplus Real Estate Under Contract (receipt of revenue upon closing): $12,950,828
Surplus Contracts in Negotiation (receipt of revenue upon closing): $4,361,000
Total Savings/Income/Pending Income: $24,283,809

Lease savings throughout this report are divided between cost savings and cost avoidance. Cost savings is defined as reduced occupancy costs typically attributable to renegotiation of existing rents, reconfiguration of space to reduce rented areas, collocation efficiencies, and relocating from leased to owned properties when that is the most economical choice. These are savings which reduce the real cost of doing business for the agency.

Cost avoidance is typically attributable to improved economic terms through value added in negotiations. Examples of cost avoidance include the landlord’s agreement to pay a larger share of the cost of tenant improvements or the landlord’s agreement to pay for furnishing and equipment ordinarily paid by the tenant.

The combined report for 2013 follows.

1. Division of Real Estate Services – Program Status

Virginia Code § 2.2-1131.1 requires an annual report on progress of DGS’ efforts to establish performance standards for the acquisition, lease and disposition of real property and for the management and utilization of such property at the individual agency and statewide levels to maximize the use of the Commonwealth’s inventory of properties.

• Space Standards: The target average square feet per person in leased facilities remains at an average of 198 square feet. The number of square feet per person is a key measure under Virginia Performs. During FY12, the number of square feet per person averaged 178.8.

• Lease Administration: DRES is currently responsible for administering 538 leases with combined annual rental obligations of some $57.2 Million. In addition to ensuring that rental payments are made on time and in the correct amounts, this process allows DRES to identify and correct billing errors related to annual rent escalations and applicable operations and maintenance cost, saving agencies $84,467 during the past year.

• Integrated Real Estate Management System (IREMS): Last year we reported that our software vendor, BricsNet, had closed its business. Our contract allowed DGS to obtain the source code, and we originally planned to customize that system to better suit our needs. However, after considering the options with the advice of a neutral third party vendor, we have decided to pursue another software package. We have solicited for vendors and we are currently considering proposals.

• Real Estate Records: Since April of 2011, we have focused resources on collecting, reviewing and uploading data in order to meet the requirements of Virginia Code § 2.2-1136 as amended by the 2011 Session of the General Assembly. The amendment requires DGS to complete an inventory of all real property owned by state departments, agencies and institutions by January 1, 2012. That inventory was completed and we are now working to maintain current information on an on-going basis.

• DRES Strategic Planning: Using information on the current cost and utilization of office facilities, including current staffing levels, DRES has been able to develop long term plans that forecast leasing activities several years out and identify potential collocation and other opportunities that require longer range planning to realize. The strategic plan was updated in June of 2012.

• Space Utilization: We continue to advocate more prudent use of space. While DRES has been successful in reducing the square feet per person metric for the Commonwealth, additional strategies should be considered involving increased teleworking and more creative use of space through hoteling or other workforce or workplace strategies. Since these matters involve management styles and policies within the agencies, as well as HR policies, DRES is not in a position to do more toward this goal than to prepare to act if and when any agencies incorporate these strategies into their overall management strategies.