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The new six-year agreement with Trammell Crow, announced last week, will allow us to build on that feedback and our experience, and will facilitate an even more productive relationship. Trammell Crow will continue to provide us with construction management services for the University's more than $700 million program. In addition, Trammell Crow will provide us with portfolio management services (i.e., property leasing, acquisitions and dispositions), and under a separate 10-year agreement with University City Associates, Trammell Crow will manage our off-campus facilities. Facilities operations will be managed directly by the University, and we are better informed and better prepared to accept those responsibilities. The decision to "extend and restructure" Penn's relationship with Trammell Crow is a natural evolution of our original core working agreement. It is not an indication that the original arrangement failed. Remember, ours was a unique model, the first between an educational institution and the private sector, and we were in uncharted waters. Much in the original agreement made very good sense, and we actively sought IRS approval to extend it for a nine-year term. In the final analysis, however, it simply wasn't feasible, in our opinion, to do so. The original agreement was grounded in three core principles; we continue to believe in them: · First and foremost, that an effective mix of private sector discipline and higher education knowledge could and should produce better and more efficient delivery of basic facilities services. Clearly, Trammell Crow brought to Penn a high level of professionalism, intensity, commitment and work ethic that is very attractive in the workplace. Trammell Crow also helped us increase financial discipline, and we use rigorous budgeting and financial analysis as a matter of course to manage our costs better. · Second, that the consolidation of three distinct organizational units -- Facilities Services, Residential Maintenance and University City Associates -- responsible for delivering those services would produce a more efficient organization, enabling us to make great strides toward providing the best service for the best possible price. Our organization is now consolidated, streamlined and re-engineered; the current model allows for both the Trammell Crow and in-house employees to work together toward a common goal, and we have accomplished an important reorganization of facilities services on campus. · Third, and perhaps most importantly, that restructuring service delivery would make it more responsive and focused on our customers. Are we where we want to be? Clearly, we have made considerable progress toward achieving our goal of better service at a lower cost. Can we improve? Yes! Will we improve? Absolutely. We believe that outsourcing allowed us to analyze and change almost every service delivery model. We attracted new talent to the organization, and we are very, very pleased with the quality of the people in our organization today, both those who will remain with Trammell Crow and those we will welcome back to the University. And we learned a great deal through the discipline of self-examination and solicitation of feedback from our customer base. There are those in higher education who have suggested that the Penn-Trammell Crow partnership is a model that demonstrates that educational institutions and the private sector can, in fact, work together. This relationship is for the benefit of both parties, providing essential services to support the educational teaching and research mission of America's colleges and universities. We're very pleased about that.

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