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The U.S. Small Business Administration (SBA) identified a need to reduce costs due to its shrinking budget. One area that SBA identified as a large part of their budget was the annual rent payments of $34 million it made to GSA for over 100 facilities it operated nationally. SBA realized that the average facility had a utilization rate (an efficiency ratio of space to employee) of 450 square feet per employee. Compared to the industry average of 200 square feet per person, this number was unacceptable. SBA wanted to conduct a study of all their facilities to determine which facilities could become more efficient and a method to accomplish this major undertaking with a goal of reducing the rent to $17 million.
As a result, SBA wanted to conduct an analysis to validate these findings, determine which facilities could be more efficient, and develop a preliminary budget to make them more efficient. The only data SBA had was personnel records and GSA rent bills which were inaccurate.
They awarded a contract to Martek to satisfy the requirements of SBA’s efficiency and cost reduction initiative. By analyzing the various sources of data provided by SBA, Martek developed a list of all facilities and their respective utilization rates and created a methodology for the analysis. We then looked at several other aspects such as total potential savings, lease terms and size of the facility. We established ratings for each category and then began to categorize the facilities into tier groups. By doing this, Martek was able to analyze the data and created 4 tier groups that provided easy to execute options for the best and most immediate cost savings.
Through Martek’s analysis, development and implementation of the Rent Bill Reduction Program, the Small Business Administration achieved the results they expected. In the first couple years, SBA saved $18 Million on seven facilities (saving $6.5M on one facility alone.) Not only were rents lowered, offices were enhanced with fresh renovations, more conferencing facilities, new furniture and phone systems along with upgraded voice and data cabling. The Rent Bill Reduction Program is on-going and continues to save millions of dollars as each lease is modified, renewed or expanded.
Martek Global Services, Inc.
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