Trammell Crow's role drastically reduced

Penn outsourced management of its facilities to the Dallas-based firm just two years ago. Nearly two years after Penn entered into a groundbreaking but controversial outsourcing agreement, officials announced yesterday that the University will resume management its on-campus facilities -- abruptly restructuring a deal that had been touted as the first of its kind. As part of a new, six-year contract with Trammell Crow Co., both sides agreed to take away some of the responsibilities that the Dallas-based management firm assumed in a highly contentious 1997 move that drew fire from University faculty and staff. Under the terms of the restructured agreement, Trammell Crow will continue to manage Penn's for-profit real estate arm and focus on the management of large-scale construction projects -- which it had been doing before the 1998 deal. But while the deal includes a contract for Trammell Crow to manage University City Associates for the next 10 years, the firm will no longer be in charge of day-to-day operations, such as housekeeping and maintenance, for on-campus facilities. Penn will resume control over the management of its on-campus facilities and will rehire the 75 current Trammell Crow managers, offering them comparable positions, salaries and benefit packages. In financial terms, the restructured deal will reduce the cost of services that Trammell provides from about $18 million to $11 million, Vice President for Facilities Services and Contract Management Omar Blaik said. And the $26 million lump-sum payment that Penn was promised by Trammell Crow for taking part in its first attempt to outsource a higher-education institution will also be cut in half to about $13 million, according to Executive Vice President John Fry. Fry, who spearheaded the outsourcing deal more than two years ago, insisted that this latest development is not a total repudiation of the initial agreement. "It's a mid-course adjustment on ways we can improve things," said Fry, who earned the enmity of many in the Penn community for going forward with the plan without consulting those who were to be affected. Still, University President Judith Rodin acknowledged that poor performance on the part of Trammell Crow had caused the change. "We need to take responsibilities for maintenance," Rodin said. "Despite the fact that it is not our core strength, it is indeed our core responsibility. And when we don't see it going as well as we would like, of course the only default is to take it back ourselves." Trammell Crow Higher Education Services Executive Vice President Bob Chagres said the new agreement would only help Penn and Trammell Crow work together better. "Generally speaking, long-term contractual relationships go through modifications based on the practical realities of the day to day," he said. For the past two years, Trammell Crow has been providing the University with services under year-long agreements as they worked to get approval from the Internal Revenue Services for a 10-year contract. But with this year's contract set to expire in July, University officials decided to sit down at the bargaining table with Trammell Crow in confidential negotiations to hammer out a new contract that they hope will rectify the problems in housekeeping, maintenance response time and overall efficiency. According to Fry, University management of on-campus facilities will focus on making its employees more responsive to daily concerns. "Our work-orders will take place in 24 hours instead of 72 hours," Fry said. "The impact I am looking for is service." Although Fry said Penn will continue using Trammell Crow's decentralized, organizational structure, the new University management will concentrate on deploying staff more efficiently. "It's one thing to design an organization, and it is another thing to implement it," Fry said. "Direct management of University employees is the best way to go. Trammell Crow was seen as a layer between the University and University-managed, union employees." When the Trammell Crow outsourcing was first announced in the fall of 1997, members of the University community responded in outrage. A special session of University Council was called to discuss the situation, and the body passed a resolution asking the Board of Trustees to reject the deal. And nearly 200 staff members rallied on College Green in an unsuccessful 11th-hour attempt to persuade the Trustees to rethink the proposal. For the past 21 months, many Trammell Crow employees have voiced displeasure with the management, calling it inefficient and dysfunctional, and few students or faculty have seen any improvement in facilities services. Upon hearing yesterday's announcement, many said they believed outsourcing all of Penn's facilities to Trammell Crow was doomed from the start. "Contracting out institutional work is a delicate operation and three years ago, [Penn] was very anxious to start work and didn't have the experience," said City and Regional Planning Professor Anthony Tomazinis, who chaired the Council's facilities committee when Fry first proposed the deal. "I know they didn't do the homework they ought to have done and I am not surprised." Added a former Penn Physical Plant manager, "[Trammell Crow] was a real estate company and they never had experience with facilities. It is evident because they failed."

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