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State ending Jones Lang LaSalle’s exclusive contract

The state of Tennessee will not extend a controversial contract with a private real estate firm and instead will throw the deal to negotiate government office space open to bidders, reports WPLN.

The Department of General Services has posted a request for information asking commercial real estate brokers to offer their plans to manage the state’s office leases. The move comes after state officials decided not to extend their contract with Chicago-based Jones Lang LaSalle past February.

“Well, we’ve learned some things from the time when this contract was originally let,” said state spokesman David Roberson. “And so I think we’re better informed now than we were at that time.”

The state’s relationship with Jones Lang LaSalle began four years ago, when the firm wrote a study that suggested the state sell several of its buildings and instead lease office space from private landlords. Months later, the firm was given the exclusive right to represent state agencies when they negotiated with those landlords.

Critics said the arrangement smacked of backroom dealing. State officials have defended the deal.

…Jones Lang LaSalle is free to bid on the new contract. But it’s unlikely it would become the state’s sole agent. Tennessee officials are considering spreading the right to represent state government among several firms, each with expertise in a different region of the state.

The state may also bring more of its lease management in-house. Roberson says the Department of General Services has hired four people in the last year with experience negotiating office leases.
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UPDATE/Note: See also the Times-Free Press. Excerpt below.

JLL continues to hold a separate, competitively bid contract to run and maintain a number of state office buildings. That won’t be affected by the leasing change, Roberson said.

Haslam, meanwhile, is actively exploring outsourcing building management and maintenance for all state-owned structures, including higher education, prisons, hospitals and more. While administration documents point to a July 1 start date, state officials insist that no decision has been made.

Among the buildings JLL recommended closing were the Chattanooga State Office Building and James R. Mapp Building, both located on McCallie Avenue. They were too expensive to repair, maintain or both, the company said.

While JLL recommended leasing some buildings elsewhere in the state, in Chattanooga’s case, however, the company said it would be cheaper in the long-run to build a new building to replace the two it recommended closing.

The Haslam administration ignored that suggestion, with officials saying they didn’t want to be bothered with constructing a new building.

JLL earns commissions of up to 4 percent on each lease, which administration officials emphasize is paid by the building owner — not the state. However, officials concede building owners are free to up their price to compensate for the charge.

According to General Services, JLL has made $3.35 million in commissions on 19 buildings across Tennessee since May 2013 to mid-May 2015.

Administration spin on JLL ‘cost avoidance’ lacking key figures?

The state agency in charge of running and maintaining state-owned buildings says that a contract for outsourcing those functions resulted in a “cost avoidance of $12.9 million” over the contract’s first two years, reports Richard Locker.

But that estimate is not based on a direct comparison of what the state spent on the same services before the facilities-management contract with Jones Lang LaSalle went into effect in 2013. Instead, the $12.9 million figure is what the company did not spend during the first two years, out of a specially constructed “benchmark” budget of $36.9 million per year for the contract, state officials acknowledged Thursday.

The number will be presented to a state legislative committee Tuesday in an update on the contract by the state Department of General Services. The agency’s deputy commissioner, John Hull, previewed the presentation to reporters on Thursday.

But Hull was unable to provide a direct comparison to what the state was spending on the same building operations work now provided by Jones Lang LaSalle. Hull called such a comparison “irrelevant” because the state created a new “benchmark budget plan” for building operations on which the contractor’s performance is judged — the $36.9 million figure.

…And the PowerPoint presentation given to media Thursday provided no figures to determine whether taxpayers are saving money because it contained no pre-contract figures, despite repeated requests for such figures by reporters. And because the presentation is essentially a “messaged” construct designed to justify the contract, without details of the contract’s spending, the presentation cannot be used in conjunction with the state budget document for fiscal year 2012-13 to determine a precise comparison.

Estimated taxpayer savings from JLL contract dropping

Estimated taxpayer savings from private management of state buildings by Jones Lang LaSalle have declined from $18.8 million per year initially to around $5 million per year now, reports WTVF TV.

JLL officials convinced the administration to outsource office buildings in 2013 after the state paid the company a million dollars to study the condition of those buildings. A slide prepared by JLL showed the “expected results” would be savings of $18.8 million a year — $94 million over five years.

(Later JLL projected savings of $13 million per year, then $10 million per year and, still later, $8 million per year, the article reports.)

A JLL spokesperson first acknowledged in one email (this week) that the true savings were now $5 million a year, then he came back in a second email and said it’s more like $6.5 million.

The Tennessee State Employees Association has now called for an independent audit to determine which, if any, of those numbers are real..

…David Roberson, spokesperson for the Tennessee Department of General Services, said in an email: “It’s important to remember that, with all the figures you mention, we’re dealing with projections and estimates made at various times over a period of several years, and numbers are revised as more accurate data are available.”

Here is the statement from JLL:

“Through the second year of the outsourced facilities management program, total savings is $12.9 million. With continued modernization and maintenance of building systems, energy savings will increase year over year and become a primary driver of overall projected savings of $40 million over the five-year term of the program.”

Outsourcing plan hits a snag in Chattanooga

About 80 state employees are still working in the Chattanooga State Office Building more than a year after it was scheduled for closure under a Jones Lang LaSalle management plan, reports the Times Free Press. Some think that’s an indication that one of Gov. Bill Haslam’s earlier privatization efforts isn’t going well as the administration looks to a big expansion of outsourcing.

Employees started moving in April, 2014. Most of those remaining work for the Department of Correction.

It was almost exactly a year ago — Sept. 17, 2014 — that a state General Services official told the Times Free Press by email that the department “expected in about six weeks” to issue a request for proposals to find office space for the local Correction Department staff.

Ten days ago, on Sept. 4, a request for proposals finally was issued. The very same day, General Services issued a separate request soliciting local office-building owners to submit proposals to house employees with three other state agencies still in the Chattanooga State Office Building.

Those are the Tennessee Attorney General’s Chattanooga office, the state Alcoholic Beverage Commission and the Human Rights Commission.

Asked about the delays, General Services Commissioner Bob Oglesby last week acknowledged “we’re still trying to find an adequate location [for] those people. I believe [the issue] is the Department of Correction tenant, so to speak. And they’re not suitable for all locations.”

For the Correction Department, that’s due at least in part to one simple fact: Among department employees are parole officers whose job is dealing with released felons, including sex offenders.

…In its initial study of state buildings, Jones Lang estimated it would cost $8.75 million to address repair issues at the Chattanooga State Office Building, with the bulk of the cost going for heating and air conditioning system replacement. Jones Lang actually recommended the state construct a new building. But the Haslam administration opted instead to find private leased space.

Jones Lang, now in charge of finding landlords for many departments, gets a 4 percent commission on each lease.

Meanwhile, Haslam is looking at outsourcing of real estate, energy management and building operations for almost all state-owned buildings including state parks, prisons and Tennessee’s public colleges and universities. Campus workers and Democratic lawmakers are in an uproar over that.

House Minority Leader Craig Fitzhugh, D-Ripley, said Sunday the experience at the Chattanooga State Office Building with the Department of Correction doesn’t speak well of the administration’s attempt at further outsourcing.

Having “the old building operating at the same level, it’s not productive,” Fitzhugh said. “It’s obvious they’ve not thought this through. I think they have to realize that some things that government has to do are just different from the private sector and you can’t expect to let the private sector make money off it. And I think that’s been proved time and time again.”

John M. Hull, General Services’ deputy commissioner and head of the State of Tennessee Real Estate Asset Management, attributed delays to the department “trying to find the unique needs of every agency within the Chattanooga area. There were so many agencies within that building, we just did it in chunks essentially.”

A smell test for Haslam’s privatization plans

Gov. Bil Haslam’s plan for privatizing state parks and more state buildings is just the sort of deal that explains Donald Trump’s appeal to many Americans, opines columnist Frank Cagle.

Just how would a private company be able to operate state parks and other building maintenance cheaper than the state and still be able to make a profit? I think we all know the answer to that.

A company getting the contracts would likely hire immigrant workers to do the jobs, at slave wages and with no benefits. It is the only business plan that returns these bidders a profit and saves the state money. We are talking about people doing food service, janitors, landscapers and other maintenance jobs.

So the state parks and buildings would be maintained by Mexican or Somali immigrants while tax-paying Tennesseans will instead be on unemployment and TennCare? How does that save us money? When that state worker who has had the cushy job of cleaning the toilets is forced out, are they going to vote for Haslam fave Jeb Bush or Trump?

Don’t be surprised if we discover that the state privatization plan will be done by Jones Lang LaSalle… (which) has already has made millions on state contracts since Haslam took office.

…If the plan to outsource state labor comes to pass, it will not pass the smell test unless it is put through a strict bidding process and the contract requires every contractor employee be subjected to e-verify to determine legal status. The company should not allow its employees to be on TennCare, but make them full-time employees and provide them with health insurance as required by the Affordable Care Act.

Then let’s see how many companies want to operate at a profit while “saving” the state money.

New Haslam privatization plan targets higher ed

Gov. Bill Haslam’s administration is quietly moving to privatize the management and operations of all state college and university facilites and the other state government buildings not already outsourced to the multinational property management giant Jones Lang LaSalle, reports Richard Locker.

The administration came under criticism two years ago for turning a $1 million contract with JLL to assess the condition of several state buildings into a multimillion contract to outsource the operation of most state office buildings outside of the state’s prison system and higher education system to the same company.

The state Department of General Services posted on its website last Tuesday a request for interested companies to submit information on a state proposal for “facilities management outsourcing.” The deadline for responding is Aug. 21, a relatively short response window for a project whose scope is extraordinarily broad.

The posting says that the purpose of the RFI is to obtain information regarding the management of University of Tennessee and Tennessee Board of Regents properties and state government facilities that are outside the scope of the state’s current contract with JLL.

“The scope of properties included in Gov. Haslam’s project covers all state-owned real estate, including properties managed by the Facilities Revolving Fund, general Tennessee government properties not covered by the Facilities Revolving Fund, the University of Tennessee System and the Tennessee Board of Regents,” the RFI posting says.

…Department of General Services spokesman David Roberson said Monday the RFI is “just part of an information-gathering process. There’s been no firm decision made about the issue involved. DGS is simply examining options for reducing administrative costs of state government… If the information we gather from vendors suggests this would be a good opportunity to pursue, then we’ll issue an RFP (request for proposals, or bids) and evaluate the proposals we receive.”

News of the discussion was given to physical plant employees at UT Knoxville in an Employee Relations Council meeting last week, according to United Campus Workers, which represents campus facilities employees at some state colleges and universities.

The group said “the dizzying scope of the RFI threatens to affect public services and tens of thousands of jobs across every county in Tennessee.

Tom Anderson, a purchaser in facilities at UT Knoxville, said, in a statement released through United Campus Workers, that the request for information’s scope “scope includes every person, and every job, for every building everywhere. Haslam wants to outsource our safety, health, and education to some for-profit, out-of-state company. All of the maintenance, all of the purchasing, all of the utilities, all of the human resources, all of the security, all of the cleaning, all of the administrative work in our schools, our courtrooms, our service agencies. It will hurt everyone.”

Thomas Walker, press coordinator for UCW, said that UT employees were told last week that the timeline for the outsourcing project calls for a contract to be signed by next June with the winning vendor beginning management of the buildings by July 1.

Haslam administration kept secret a $100K payment for violating contract

State government has paid $100,000 to settle a claim by a moving company that Gov. Bill Haslam’s administration illegally broke a contract – then kept the payment secret, according to WTVF-TV.

In fact, our investigation discovered the Haslam administration never even told the lawmakers who watch over the state’s contracts.

“I didn’t even know there was a settlement,” said Rep. Mark Pody, R-Lebanon. “It was my understanding that everything was worked out.”

Pody, who sits on the legislature’s Fiscal Review Committee, was talking about the secret “compromise and settlement agreement” obtained by NewsChannel 5 Investigates — a settlement signed by the governor himself.

“When I heard there was a settlement, that was extremely concerning,” Pody said. “And then when I hear that it’s a confidential settlement where we can’t even publicly find out what the issues are or why we settled … that is extremely unsettling.”
While the settlement agreement prohibited both sides from discussing the deal, NewsChannel 5 was able to obtain details by filing a request under the Tennessee Public Records Act. (Read the settlement documents.)

Even more disturbing, Pody said, is our discovery from emails that the state’s settlement talks appear to have intensified after Sanders’ attorney asked to take the testimony of the state employee who had written “we’ve already broken several laws.”

“If laws were broken, we need to find out what happened and why and put processes in place in an open way where that does not or cannot happen,” the lawmaker added.

…State officials refused to discuss the settlement, again citing the agreement that they signed saying that they would not talk about what they did with your money.

…NewsChannel 5 Investigates also discovered that the Haslam administration also agreed to pay $900,000 last year to the owner of the L&C Tower in downtown Nashville.

That came after the state canceled a lease it had there. … Just like in the Sanders Moving case, that agreement was also labeled “confidential.”

At the center of the dispute is a claim filed over the Haslam administration’s massive effort to relocate thousands of state employees into new, redesigned offices.

Sanders Moving had the state’s moving contract, but the Haslam administration abruptly cancelled it, awarding much of the work to Flood Brothers out of Atlanta.

Emails show one state employee, Kurt Herron, objected, writing: “We’ve already broken several laws.”

“The original contract was broken, according to these emails, in order that Flood Brothers be brought on to the contract,” said Sanders’ lawyer, Harold Donnelly, in an interview last year. Haslam administration officials assured state lawmakers last year that those claims were bogus.

Change of plans: Renovate Cordell Hull building instead of demolishing it

By Erik Schelzig, Associated Press
NASHVILLE, Tenn. — Gov. Bill Haslam’s administration is backing off earlier plans to demolish the 60-year-old Cordell Hull office building located next to the state Capitol in Nashville and instead hopes to renovate it.

Bob Oglesby, the commissioner of general services, told the State Building Commission on Thursday that renovating the building would create space to house workers while other office buildings are overhauled in the future.

The original recommendation to demolish the building was made by consultant Jones Lang LaSalle, which said it would be cheaper to tear down than to fix up and maintain.

Oglesby said the long-term savings of using the building to house other state employees would offset some of the cost of estimated $70 million overhaul.

He also said the consultant’s study hadn’t been asked to take into account the key location of the building, which can be seen out the windows of the governor’s office in the Capitol.

“They treated that building the same as they would treat one in a suburb of another city,” he said. “They made no exception for the Cordell Hull being on Capitol Hill.”
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Republicans kill Democratic bill banning ‘organizational conflicts of interest’ in state contracts; OK an alternative

Senate Republicans have rejected a Democratic bill to ban state contractors from having an “organizational conflict of interest” – such as the comptroller deemed the case in a state building management contract – and instead adopted a measure governmental entities to develop a policy on the matter.

Senate Democratic Caucus Chairman Lowe Finney of Jackson sponsored the bill inspired by Jones Lang LaSalle’s contract for management of state buildings (SB1447). A comptroller’s review found an organizational conflict in that the contract called for JLL to recommend actions on state buildings, then profit when the state followed the recommendations – for example, closing a state building and renting alternative space with JLL getting a commission for negotiating the rental agreement.

Republican members of the Senate State and Local Government Committee, including Chairman Ken Yager, R-Harriman, contended Finney’s measure was unnecessary.

“There just some fundamental problems with the bill,” said Yager. “L et the agencies we have created make these policies… rather than one-size-fits-all approach.”
Yager’s alternative bill, SB767 as amended, instead calls on the state’s Central Procurement Office, the State Building Commission and the state Department of Transportation to “establish policies and procedures to define and identify organizational conflicts of interest.”

Finney said that does not go far enough and it would be much better to have a clear prohibition as part of state law to “put some teeth in it make it count.” He said that his bill includes a penalty provision, namely termination of the contract by the state comptroller.

Comptroller Justin Wilson, whose audit raised the issue, said he preferred Yager’s approach because state contracting is a “a very rapidly changing situation” and policies could deal with issues as they arrise.

Yager’s bill was approved 7-0. Only the two Democrats on the committee voted for Finney’s bill, while four Republicans voted no and two abstained. Five yes voted are needed in the committee for a bill to be approved.

Report says Haslam’s claim of $100m savings through JLL is inflated, includes some ‘pure fiction’

Gov. Bill Haslam’s repeated claim of $100 million in taxpayer savings through private management of state buildings through a contract with Jones Lang LaSalle appears inflated, according to a WTVF-TV report. The actual savings, the station suggests, is around $20 million – and maybe less than that.

It was a claim that the governor’s chief of staff, Mark Cate, repeatedly emphasized to the legislature’s Fiscal Review Committee back in July.

“So 10 years, $100 million,” Cates said. “That’s actually net savings after getting out of leases, consolidating space — all of that nets out to $100 million of net savings over that time period.”

But our investigation discovered that, a full three months before that testimony, the administration had an internal estimate showing that the actual “T3 Savings” were $43 million — a lot less than the administration’s $100 million claim.

“It gives the appearance that either he had faulty information, he was given faulty information, or he was dishonest,” said committee member Rep. Brenda Gilmore, D-Nashville.

We also showed Gilmore more recent internal estimates showing that Project T3 will save even less than expected and cost even more, resulting in net savings of just $20 million dollars.

That’s $80 million short of what the administration has claimed.

…The Haslam administration said that the decision to get rid of older state buildings like the Cordell Hull — a process called “decommissioning” — makes those savings more complicated to track.

“You can’t separate decommissioning from T3, as we would have increased the occupancy in those six buildings had they not been deemed functionally obsolete,” General Services spokesperson Kelly Smith said in an email.

But our analysis discovered that when all the spending associated with decommissioning is factored in, according to the administration’s own numbers, the total operational savings are just $4.5 million over 10 years. That’s $450,000 a year. (To get to $100 million, the administration counts $85.5 in deferred maintenance that might be needed on those buildings and $10 million from the sale of the buildings.)

In addition, after we asked the Haslam administration to show us where it gets the savings they are counting on, they gave us a list of what was supposed to be canceled leases.

It’s a list that, in some cases, was pure fiction.

Take, for example, a building in South Nashville. The administration’s list takes a lease canceled for the Department of Labor and counts it twice, showing almost $1 million extra in savings.

The list also includes a canceled Department of Health lease at a Knoxville building, saving $1.3 million.

In fact, that lease has not been canceled.

And it claims savings of half a million dollars by closing a Department of Safety office in Chattanooga.

It doesn’t count a new lease for a bigger building that will actually cost $1 million more.