Reductions in Troop Strength and the BAH Program Offer Opportunities for Collaborative, Innovative Solutions
As originally published in Defense Communities Magazine, November/December 2015 www.phma.com
Finding balance between resident satisfaction, cost savings and efficiencies
Military Housing Privatization Initiative (MHPI) programs across the Department of Defense (DoD) are resilient, allowing for creativity and flexibility despite growing government budget constraints that have resulted in reductions to the Basic Allowance for Housing (BAH) and troop strength. These programs are designed to weather market changes due to a key element of the business model—public-private partners working together to align the goals of the DoD, the residents and the privatization partner. This collaboration is critical as reduced project income and challenging market conditions persist and privatized partners must look for ways to find cost savings and efficiencies while maintaining the integrity of the MHPI program and continuing the mission to improve quality of housing and life for Service members and their families. It's a balancing act in which the partner must find ways to reduce expenses while maintaining resident satisfaction and ensuring the long-term health of their projects throughout the life of the 50-year partnerships. Let's take a look at how Corvias Military Living operates to find creative and innovative solutions that will sustain and continue the mission at the installations where it operates housing. That means outside the box thinking and taking a look at the operational tempo from new angles.
Deep Impacts – Effects of Reduced Income
The effects of reductions in both military strength and the BAH have potential long-term effects on Service members and families, MHPI projects, and private partners. Service members and their families shoulder the greatest burden as families earning relatively modest salaries will be forced to stretch their finances even further. Seventy percent of military families live in local communities outside our military installations, where landlords are far less likely to make adjustments to their rent pricing structure to offset the reductions in the BAH as they will price to the rental market.
The reduction in the BAH will also have effects on the local communities and economies where military families reside. Reduced spending power for families and for future construction projects will impact local economies and further stress businesses and property owners who are already feeling the effects of troop reductions and other DoD budget impacts. MHPI projects and private partners are also not immune to the effects of the reductions, as they equate to less income available to reinvest for the future of housing projects. It has been stated time and time again, that the MHPI is one of the most successful public-private partnership models to date and continues to be the best framework to provide solutions for the military; however, housing programs are faced with the challenges of how to balance a reduced budget and declining occupancy, with customer service and reinvesting for the future.
Through the MHPI authorities, the DoD leveraged private sector expertise and funding, which was largely driven by the BAH. Project financial plans were built on the expectation of a predictable and market-driven revenue stream. The level of debt that programs assumed in order to fund the re-development and construction activities over the last decade is fixed, and so the repayment of the loan and the promise of sustainability over the 50-year term depends on revenue which is now being reduced. With less income to reinvest for the future, there is also less funding to complete necessary capital repairs. Fortunately, MHPI programs are resilient. Privatization programs are each designed for sustainability—to last 50 years and respond to and change with natural market conditions. While debt service payments are fixed, other uses for project funds can be adjusted. For example, resident services may be reduced in order to maintain adequate reinvestment levels for future capital and replacement needs. It is evident that the effects of the reduction in the BAH will have a lasting impact on local economies and quality of life standards in our defense communities; however, the MHPI model still offers the best framework to provide enhanced housing and quality of life solutions for military families because of its flexibility to shift with market conditions.
Changing the Way We Do Business
For the last 24 months, Corvias Military Living's leadership has been examining and rethinking the way the company operates in the face of challenging economic times. Corvias continues to seek out innovative solutions to find cost savings and efficiencies for the projects and partner, while keeping its core principle to "provide the best customer service" to residents at the forefront. "We are taking a look at every part of the business to find efficiencies and creative solutions to increase savings," said Chuck Parker, president, Corvias Military Living. "We also realize that we have to find ways to do it so that it is as seamless as possible to our residents."
From changing the way leasing procedures are carried out to finding efficiencies with vendors and contracts, Corvias has been able to find cost savings by implementing some of the following programs. One decision that Corvias and other partners have embraced is the move to expand eligibility for on-post housing to include retired military, DoD civilians and contractors, federal workers, Gold Star families and Reserve/National Guard service members. This decision has been made in partnership with Army leadership on a 'by location' basis to address stagnant or declining occupancy. Corvias has implemented this change at 9 out of 13 installations. Expanding to these potential tenant categories will help ensure sufficient funds continue to be available to reinvest for the life of the 50-year program.
Another area that must be considered when looking at cost savings is potential changes to resident services and programs. Today rent may include services such as lawn care, pest control, 24-hour maintenance and upkeep for amenities to include lifeguards. Recent examples of tailored service changes implemented this year include reduced landscaping days in the common areas of neighborhoods, reduced annual pest control services at specific locations and reduced pool hours during non-peak times at community center pools. It is extremely important to Corvias to maintain a quality living experience for Service members and their families while continuing to look for ways to find cost savings. "It was difficult [for us] to make this type of change, but we discovered that these small changes haven't been particularly impactful to resident satisfaction," said Brian Beauregard, senior vice president, Corvias Military Living. "We were surprised by that and are learning that one size doesn't necessarily fit all and small changes make a positive financial impact."
Another example of changes to service, from a portfolio-wide standpoint, includes changing from neighborhood-based maintenance scheduling to centralized services. "A centralized program doesn't ensure the same technician will visit to make a repair, and we were concerned about potentially losing some of the personal touch we've always prided ourselves on," said Beauregard. The centralized maintenance program has provided residents with quicker repair service in some cases and allows maintenance technicians to leverage areas of expertise and specific skillsets across all residential communities. The maintenance experts can complete more service requests in a more efficient manner, leading to happy residents and happy team members. As it turns out, the effort has created efficiencies and cost savings and residents are just as satisfied as they were prior to the change. In fact, Fort Rucker was one of the first installations to make this change and customer service scores have remained superior. The installation recently earned top honors and the Crystal Award for excellence in the Army Family Housing Survey. "We are so proud of that accomplishment," said Beauregard.
Further initiatives include consolidating management positions at the community level. During the beginning stages of the projects, or the Initial Development Period (IDP), many more team members were needed with active construction projects and activities to build and renovate homes. As the projects matured and construction activities wound down, some positions have been relocated within the company to new projects and other positions have been tailored to the level of need per community and installation. As it turns out, these tough choices have been well received and have resulted in greater levels of empowerment and autonomy for team members.
Not only that but, according to Chuck Parker, "We have found that our residents are served better when decisions are pushed down towards those team members that are closest to our customers." In seeking ways to address budget constraints Corvias actually learned that some cost cutting measures can actually improve the overall customer (and employee) experience. Other new and innovative ways Corvias is looking to cut costs include installing renewable energy sources, such as solar panels. In support of the Department of Defense (DoD) Privatized Housing Solar Challenge initiative, Aberdeen Proving Ground is the first Corvias installation to receive solar panels as part of a portfolio-wide initiative to install solar power at military installations across the U.S. at no cost to the military. This effort will provide the military housing projects rate stabilization resulting in utility savings and increased energy security while eliminating approximately 92,000 tons of carbon emissions each year. However, renewable energy is not the only game in town and we are also looking to renegotiate utility contracts and employ energy savings performance contracts (ESPCs) where we can.
Partners across the MHPI portfolio are considering current operations and ways to find savings and cost efficiencies. Corvias continues to monitor operating expenses and evaluate where reductions could be made without large impacts to our residents and has implemented several over the last year. "From evaluating outsourced operations to bringing some activities in house to centralizing maintenance operations -- everything is on the table for consideration," said Beauregard.
Customer Satisfaction at Corvias' Core
One of Corvias' governing core principles is to be the best provider of customer service. As part of the mission to improve quality of life for service members, it has been critical for its leadership to keep a close eye on how these changes impact customer service and resident satisfaction. "We continue to analyze how we're doing in meeting resident satisfaction through various surveys that are conducted through third-party companies and in our daily interaction with residents," Beauregard said. "We've discovered that it's not only the marketplace that has changed, but our customers have also changed over the course of the nearly 20-year period since Congress authorized MHPI. We're making every effort to keep up with the change."
To monitor its success, Corvias has instituted point of service surveys in addition to its annual Satisfaction survey. In the past seven years, Corvias has ranked first nationally in the SatisFacts Annual Resident Survey among companies with portfolios larger than 10,000 units. Last year also marks the eighth consecutive year the company has achieved the Superior Company Score award. In addition to these indicators, Corvias had five installations (Forts Rucker, Riley, Sill, Bragg and Aberdeen Proving Ground) place in the top 10 for resident satisfaction in the 2015 Army Family Housing Survey. Fort Rucker received the highest score of any installation overall.
Perhaps the most important thing Corvias is doing in order to ensure working together to align the goals of the military, the residents, and the privatization partner is simply listening. "In all interactions — customer satisfaction surveys, social media or partner meetings — we're listening to our customers and our partners to better understand how we can help meet their needs while changing the way we do business," said Beauregard. "We will continue to work with and support our partner and military members and families through these fiscally challenging times. We have made a 50-year commitment and we take that privilege seriously."
By Amanda Filipowski, Communications Director, Corvias Military Living and Angela Marcum, Regional Public Affairs Manager, Corvias Military Living. They can be reached at www.corviasmilitaryliving.com
Marketing & Media Strategist