When pure-play government service company Engility acquired the defense contractor TASC in 2015, it brought together two leading and complementary businesses to create a top-tier government services company.
As each entity was roughly a $1 billion-plus company, the acquisition was structured similar to a merger—and Charles Spencer, then working as senior manager of corporate real estate at TASC, was tasked with leading the combined portfolio of both legacy entities. Those portfolios consisted of approximately 115 domestic leases, occupying about 2.2 million square feet of rentable space, and an additional 22 leases around the globe.
“With respect to the scope that I’m held accountable for, I manage the entire lease portfolio, all facility operations and construction management for all our locations,” he says, adding that his 25-member staff ranges from office support to project managers. “Ultimately, the value of my team is being able to provide prompt and efficient day-to-day support for the end user. This is done while also being able to align with the business accounts to translate business needs into real estate solutions while reducing our overall real estate spend.”
Upon being promoted to Engility’s new director of corporate real estate and facilities in February 2015, Spencer made a to-do list of what needed to be done and has spent the better part of a year crossing off the items one by one.
“I inherited an opportunity-rich environment of excess space that was primed for significant disposition,” he says. “That presented fairly straightforward decisions for Engility leadership. However, there were several examples of where opportunities for consolidation weren’t obvious and the impacted account had an invested interest of ensuring the true utilization was obfuscated. In these scenarios, the guidance to my team was to focus on the tangible components of the decision, as we can always quantify the risk or savings in a real estate deal.
“I’m confident if my team presents a compelling business case, that ultimately the correct decision will be made by our leadership. I have been fortunate enough to serve under leadership that creates the environment that allowed me to deliver a reduction of $14 million in spending from the previous year.”
A well-rounded background in facility operations, project management, and real estate management—all in the defense contracting market—make him the ideal person for the job.
“Based on my experience and the particular skill set I’ve acquired, I am able to walk that thin line of aligning with the P&L side of the house to ensure the company establishes a real estate strategy that supports the leadership’s growth strategy,” Spencer says. “All the while doing it in a manner that is cost-efficient to ensure quality cost-control is achieved.”
GETTING TO WORK
One of his first undertakings dealt with his inheritance of an underutilized portfolio and leveraging this challenge to create opportunities not only for solutions that tackle occupancy, but others as well.
“I needed to rationalize all our leases and align them to specific contractual requirements of our programs that occupy the specific lease,” Spencer says. “You can achieve transparency on exposure as well as identify where there’s opportunity for consolidation. As lease end-dates and termination options present themselves, there’s now an opportunity to right size the footprint.”
The result of that vetting was a three-year consolidation plan to reduce indirect spending by $35 million, which Spencer says is key to creating efficiencies required in the highly competitive government services market. He also faced a portfolio that was severely outdated in configuration, efficiency, and an overall ability to accommodate a modern workforce—a challenge that plagues defense contractors as well.
“Typically, this market has been very traditional in regards to office layouts, so it’s been a struggle to move away from that,” he says. “As soon as I started leading the real estate function, my team was tasked by leadership to devise a new workplace strategy model for all new build-outs—not only delivering an office layout that was extremely efficient, but designed in a manner that could accommodate the workforce of today and the future.”
By adjusting the new workplace strategy with the lease consolidation strategy, Engility achieves a more modern and high-end workplace that’s better aligned with the company’s highly skilled professionals and the highly skilled professionals it hopes to attract going forward. It also accomplishes overall cost reduction by rightsizing the square footage. In addition to the upgrades on the aesthetics front, Spencer’s solution provides about 175 square feet of usable space per person, and an abundance of open and collaborative space throughout the office. This solution has been used in two projects so far—the 45,000-square-foot 80 M Street building in Washington, DC, and the first phase of Engility’s own 100,000-square-foot corporate headquarters in Virginia. Over the next two years, he says Engility plans to expand the concept in a dozen of its flagship locations throughout the United States.
Perhaps Spencer’s biggest challenge was integrating the two companies’ real estate and facility holdings with a limited amount of help.
“Due to the uncertainty of the pending acquisition from the legacy TASC side, I came into this with reduced staff,” he says, adding that Engility’s model was also entirely outsourced and key management and personnel also weren’t onsite. “We didn’t have a lot of overall resources, but it was a great opportunity for us to create, almost from a blank piece of paper, how this should be structured and then find and attract the right talent to make up this organization to support the new company.”
To do that, Spencer took what worked best from each model.
“Before the merger even took shape, both companies were actually considering ways to consolidate and improve their spaces,” he says. “I ended up adopting concepts from both legacy organizations. Most of my staff is outsourced, yet I hand-picked the talent and have them embedded onsite. I have also aligned key personnel with the business accounts to provide a more streamlined support model.”
As he readies himself the next set of challenges, Spencer says he’s excited to help the company continue its success.