Outside firm to manage Penn's facilities

Haverford High School '95 Havertown, Pa. The October 8 outsourcing agreement affected about 160 employees in the Physical Plant and Residential Maintenance departments, along with those in non-managerial positions at University City Associates, Penn's for-profit real estate arm. Approximately 122 employees were offered jobs by the company. The University entered into the agreement in an effort to streamline its operations while boosting efficiency. The deal took effect on April Fool's Day, but it was no joke to employees who had to get accustomed to new supervisors, new titles and remodeled office space. "It was just strange," Assistant Controller Flo Griffin said at the time. "I walked out on Tuesday as a Penn employee and I walked in on Wednesday under Trammell Crow." The deal was temporarily called into question last year when the Internal Revenue Service announced new "management contract" restrictions regulating joint ventures between non-profit and for-profit corporations. Under the original non-binding letter of intent, the University agreed to pay Trammell Crow $5.25 million per year for managing building operations, maintenance, utilities, planning, design and groundskeeping across campus for a 10-year term. The company, in turn, would give Penn $26 million up front and another $6 million later for helping it start its higher education venture, Trammell Crow Higher Education Services. But IRS regulations threatened the tax-exempt status of the University buildings to be managed by the company, spurring administrators to sign a revised agreement in February. Since the deal is unprecedented in higher education, administrators chose to play it safe and secure the IRS' stamp of approval before locking itself into a decade-long agreement. The newly-restructured contract includes a one-year preliminary term with a stipulation for a second, nine-year term. Once the IRS gives Penn the go- ahead on the nine year extension, the University will be entitled to its $26 million payment. "The whole thing is technical," Vice President for Facilities Services and Contract Management Omar Blaik said, adding that the regulations merely involved an adjustment to the "packaging" of the deal. Blaik said he expects a favorable ruling within the next several months. Penn and Trammell Crow have already received one positive sign. In February, U.S. District Judge Ronald Buckwalter dismissed a suit filed against the University by three employees and one of their wives, alleging that Penn and Trammell Crow officials violated the federal Employee Retirement Income Security Act, which regulates employee benefits. The plaintiffs accused both parties of conspiring to avoid providing University employees with benefits such as vacation days and tuition reimbursement, and of intending to implement reductions in employees' pensions and health coverage. The judge, however, ruled that no such violation had occurred since Trammell Crow had not yet taken over. The plaintiffs, Richard Cipollone of Swarthmore, Lisa Karnincic of Philadelphia and Donald Calcagni and his wife Linda of Levittown, have yet to announce whether they intend to refile the suit. The initial suit erupted out of mounting concern over the tight-lipped negotiations characterizing the Trammell Crow deal and a perceived lack of consultation between officials and the University community before the deal was made public. The deal shocked many long-time employees, who only learned that they would have to reapply for their positions the morning of the announcement. University Council, comprised of administrators, faculty, staff and students, called a special session one month later and passed a resolution by a three-to-one margin asking the Board of Trustees to reject the deal. Council serves as an advisory body to the president and provost, and meets monthly to discuss campus issues in a public forum. The Trustees, however did not heed Council's advice, and voted unanimously to approve the deal.

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