TOUGH CALLS

Building Operating Management, Nov 2004 by Zimmerman, Greg

A bare-bones budget and a huge portfolio complicate facility decisions at SBC. Vickie Berry and her team have found ways to ease the pain

Vickie Berry is being asked to perform a rather delicate balancing act: maintain the organization's facilities at level that supports the business's mission while constantly searching for ways to drive costs out of the business.

For Berry, vice president of corporate real estate, properly management, at SBC Communications, several factors have made reconciling the two particularly tricky. The factor that most complicates her responsibilities - which include facilities management, security and energy management, environmental management, and occupational health and safety - is the sheer size of SBCs national real estate portfolio: 22,000 facilities encompassing 141 million square feel and housing 165,000 employees. SBC owns about 80 percent of that space.

The girth of the corporate real estate portfolio has meant that driving costs out of the business to meet leaner budgets has required more than just examining facility strategies, such as installing motion sensors to reduce energy use or limiting the frequency of interior painting projects. Though these are important elements of the overall strategy, as is consolidating or eliminating underused properties, the most important component has been identifying and standardizing operational best practices, especially as the portfolio has grown.

Three acquisitions - Pacific Telesis in 1997, Southern New England Telephone in 1998 and Amerilech in 1999 - made SBC the second-largest local phone company in the United States. During these acquisitions, Berry played a critical role in aligning the acquired companies with the operating procedures of SBC. It was a task that meant examining the operations of each acquired company, comparing them with those that existed at SBC and identifying the most efficient system that could be implemented companywide.

Complicating matters was that after each acquisition, senior management gave each SBC business unit, including corporate real estate, a non-negotiable financial target as a way to drive cost out of the business. The downturn of the economy in the early 2000s made further cost reductions imperative.

The size of the portfolio, the acquisitions and the budget cuts have required Berry to identify the best property management practices, then adapt and standardize them so that facilities across the country are operated and maintained similarly. And all this had to be done while keeping a careful eye on eliminating expenses and maintaining employee safety and network reliability.

"It was incumbent on us to take a look at operations and determine where the best practices were and what were the smartest ways to be operating," she says.

For Berry, locating best practices is crucial because even with a total corporate real estate budget of close to a billion dollars, real opportunities for cost-cutting aren't as apparent as they might seem.

"A billion dollars is certainly a large amount of money," says Berry. "But when you start peeling away the pieces, you will see that there's really only a small percentage where there is an opportunity to eliminate costs."

What has made Berry successful is understanding that the challenges of locating, adapting and standardizing best practices, while cutting costs, are inextricably linked. Doing the first helps take care of the second. Standardized procedures bring standardized data, which facilitates a way to look across the entire portfolio and make cost-conscious decisions. Operating procedures are streamlined - from the frequency of preventive maintenance to how utility bills are paid. This means greater productivity from Berry and everyone else, all the way to the maintenance technicians performing work at SBC facilities across the country.

"If you don't standardize, even if you're doing well, you may not know you're doing well," says Tobey Nealy, SBC's director of property management for the Texas region.

PRIORITY NOW

Berry places SBCs facilities in three categories. Network and equipment-related facilities house telephone switches and serve as the home base for network field technicians. These facilities make up about 71 percent of SBCs real estate portfolio. Data centers comprise about 3 percent and the remaining 26 percent is administrative and office space.

As SBC's corporate real estate budget has shrunk, Berry and her five regional directors have been forced into some tough facility decisions. If a chiller replacement is needed at both a network lacility in St. Louis and a data center in Dallas, and there's only enough money for one or the other, how is a decision made on what to do? Berry realized the necessity of constructing a plan whereby a consistent ranking system could be applied to different types of projects for different types of facilities in different regions of the country.

The solution was a software package called RECAPP (real estate capital asset priority plan - an SBC rename of the original acronym: renewal capital asset planning process), which was tailored to SBC's needs. Berry recognized the system as a best practice in the Midwest region, where the former Ameritech used it to prioritize capital expenditures. Berry expanded it to include deferred maintenance projects that have the potential of turning into significant repairs.