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FHWA Office of Real Estate Services Research Results:
2006 Strategic Vision for the Public Sector Real Estate Profession

August, 2006

Executive Summary

The Federal Highway Administration (FHWA) Office of Real Estate Services, in its role as the lead agency for the Federal Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (Uniform Act), initiated a research project to identify the future needs of public sector real estate (PSR).  The purpose of this effort was to facilitate strategic and future oriented thinking by the public sector real estate community in terms of:

• Looking 30 years into the future and predicting the needs, role and environment of public sector real estate.

• Determining actions required today and in the near term to ensure that public sector real estate professionals are prepared for and positioned to take on the work that they will be required to do over the next 30 years.

FHWA research, in preparation for this study, suggested that combining forecasts from different methods and from independent experts improves accuracy. To this end, FHWA asked each of its three research contractors to conduct independent research projects, following a general scope, but utilizing its own independent research approaches.  The work of the three research teams will be synthesized and integrated; and the best ideas will be carried forward. This report summarizes the work of one of the teams. 

Research Approach and Methodology

This team's research approach and methodology entailed:

• Identifying external and internal forces that affect Federal, State, and Local agencies responsible for planning, developing, maintaining, and operating infrastructure for the public benefit.

• Assessing the impact of these external and internal forces on the operations of the agencies.
  Identifying the resultant impact on the public sector real estate functions within these agencies and the private sector partners performing real estate activities for the agencies.

• Identifying the roles the public sector real estate community will need to perform to meet the needs and requirements of the various Federal, State, and Local agencies.

• Developing a mission statement and a set of strategic objectives in support of the anticipated role of the public sector real estate community.

• Defining an action plan consisting of a number of short-term and longer-term initiatives to prepare the public sector real estate community to achieve its proposed mission.

As its primary research vehicle, the study team conducted a series of brainstorming sessions with a team of ten (10) stakeholders who have substantial public sector real estate experience with FHWA, the Department of Housing and Urban Development, National Park Service, two state departments of transportation, the U.S. Army Corp of Engineers, and a large Local Public Agency.  A detailed literature search jump-started and supplemented the brainstorming process.

Visioning how anticipated trends over the next 30 years will affect public sector real estate

The research team identified a number of external and internal forces that could be expected to impact public sector real estate over the next thirty years.  The team categorized the internal and external forces for planning purposes into several major trend areas as follows:

• World
• Community
• Technology
• Infrastructure Development and Management ¹
• Policy and Politics
• Project Development Process
• Human Capital

The team analyzed the impacts of each of these trends on public sector real estate in terms of 10 year and 30 year planning horizons.

Provided below is a summary of the findings from each of these trend areas and their anticipated impact on public sector real estate.

• World - The predominant trend in this category is the migration to a tri-polar world economy in which the United States is no longer the predominant force but one of three large players along with India and China, which will become the world's largest economy.  The growth of China and India, along with other developing countries, will force the United States to compete for scarce resources globally.  This will drive up the cost of projects and put more pressure on the public sector real estate function to help to find creative solutions to manage project costs, especially given that real estate and utilities cost continue to increase as a percentage of the overall project budget.

• Community - A number of research studies suggest that there will likely be more growth in urban and suburban areas, but with an increased emphasis on environmental sensitivity expected by citizens in developing projects to support this growth.  This will require the public sector real estate function to engage early in the project development process and leverage its real estate acquisition and cost estimating experience to develop cost effective solutions that either minimize or mitigate real estate and utility impacts.

• Technology - Continued advances in information technology will allow public sector real estate to leverage technology to automate and streamline its processes, as well as to capture and share the intellectual capital of its existing work force.  At the same time, advances in construction technologies may lead to new types of projects such as underground cities, in which the public sector real estate function will need to address new challenges.

• Infrastructure Development and Management - Trends in this area include aging of the existing infrastructure as the interstate highway system approaches its 80th birthday by the end of this planning horizon, massive development effort for the North American Free Trade Agreement (NAFTA) corridors, and increased multi-modal solutions that integrate transportation with parks, housing, and other elements.  Another trend will be the use of concession agreements to build new infrastructure and operate existing infrastructure.   The impact of these trends on public sector real estate will include the need to work effectively in large multi-modal and global teams and the need for more property management, business, and financial skills to support implementation of concession agreements.

• Policy and Politics - One trend in this area is a focus on managing government agencies as much like a business as possible.  This will drive public sector real estate to develop performance measures and to focus on accountability to its customers.   Another trend in this area is increased reluctance to use eminent domain for redevelopment projects, at least in the short term, because of fall-out from an adverse public reaction to the Supreme Court's decision in the Kelo case ² that allowed the use of eminent domain to transfer land from one private owner to another to further economic development.   In response, public sector real estate will need to develop education programs, which highlight for decision makers, the role and benefits of the Uniform Act, how the Uniform Act is different from the types of acquisitions envisioned in the Kelo case and the overall value proposition of public sector real estate.

• Project Development Process -   Major trends in this category include increased use of innovative financing, greater use of design/build and non-traditional delivery approaches, and more Local Public Agency involvement in programming and managing projects.   A primary impact on public sector real estate is the need to work with new customers such as consortium managers and Local Public Agencies, who may be less familiar with the role and function of public sector real estate and will need to be educated about the valuable role the real estate function can play.

• Human Capital - In the short term, the aging of the existing public sector work force presents a major challenge.   This will require developing tools, templates, and job aids to leverage the intellectual capital of experienced workers while they are still in the workforce and the immediate establishment of aggressive recruiting programs to market public sector real estate as a profession of choice for potential candidates. Public sector real estate itself also faces challenges in maintaining recognition among its peers as a profession and being fairly regarded as an equal player at the table with other disciplines.   Establishment of a strong Uniform Act certification program and on-going education programs about the role of real estate for policy makers and leaders in other disciplines can help to better position public sector real estate with its peers, as well as provide a mechanism to train new people quickly and effectively.

Developing a Mission Statement and Strategic Plan to Meet These Challenges

In response to the various trends, challenges, and opportunities being envisioned over the next 30 years, it is anticipated that the public sector real estate function will shift from a support organization that is focused primarily on the core real estate transactions associated with a project, to one that is an integral partner throughout the project lifecycle from inception to completion and beyond to operation.  
Public sector real estate's customers will change from primarily Federal, State, and Local entities to a broader mix of customers including large, multi-national consortiums, non-profit groups, and a wide range of Local entities.   These new customers will have less experience with public sector real estate, especially initially, putting a premium on the role of the federal real estate community to educate these customers on the importance of the real estate function.  Consequently, it will be paramount for public sector real estate to take a more proactive stance in defining its role, explaining and sustaining its value to the project development process, and stepping into a leadership rather than a supporting role.
In support of this transition, the research team has proposed the following mission statement for the public sector real estate community:

"Public sector real estate will become a value-added partner that actively engages with customers through a world-class work force and effectively leverages technology to operate efficiently and provide effective customer service."

To implement this mission, the study team has proposed a number of objectives.   These include:

• Develop and implement a service delivery model that provides the benefit of single point of accountability, while leveraging deep expertise in specialized situations. 
• Develop model performance measures to provide a framework for greater accountability for the profession. This should include development of national acquisition and relocation statistics to help analyze what is working, as well as areas for continuous improvement.
• Enhance real estate and utility cost estimating methodologies and supporting tools by implementing state of practices and deploy use of these methodologies throughout all partner agencies.
• Implement an education program to help sell the role of public sector real estate as a valued business partner to decision-makers, as well as additional detailed training seminars for project managers, designers, and other stakeholders on real estate and utility considerations.
• Leverage technology to improve communication, collaboration, and information sharing among public sector real estate professionals, as well as developing practice aids, templates, and guides to further the sharing of knowledge across the profession.
• Develop and maintain a highly trained, multi-disciplinary work force that is sensitive to and representative of the communities they serve by:
  
  • Expanding marketing programs to attract new people to the profession.
  • Developing a model multi-disciplinary training program to train new public sector real estate staff, and expand and extend the skills of existing staff.
• Design, implement, and ultimately institutionalize a new public sector Uniform Act certification program, or strengthening existing certification programs available through International Right-of-Way Association (IRWA) and other organizations.
• Establish public sector real estate as an equal player at the table with other professions and as a value added partner for collaboration on multi-national teams for both domestic and international projects.
• Achieve greater flexibility within the Uniform Act legislation to allow more adjustments to be done through regulation and policy, allowing for a rapid response to changing conditions.
• Establish a comprehensive research program to develop cost effective solutions for current, evolving, and yet to be anticipated issues.

1 The term "Infrastructure" refers to not just highways, but housing, parks, forest services, and all other public benefit improvements in the purview of real estate services.

2 Kelo v. City of New London, 125 S. Ct. 2655 (2005)

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