<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:62621.wais]
FEDERAL REAL PROPERTY MANAGEMENT: OBSTACLES AND INNOVATIVE APPROACHES
TO EFFECTIVE PROPERTY MANAGEMENT
=======================================================================
JOINT HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY
of the
COMMITTEE ON GOVERNMENT REFORM
and the
SUBCOMMITTEE ON SUBCOMMITTEE ON ECONOMIC
DEVELOPMENT, PUBLIC BUILDINGS, HAZARDOUS
MATERIALS AND PIPELINE TRANSPORTATION
of the
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
APRIL 29, 1999
__________
Committee on Government Reform
Serial No. 106-86
Committee on Transportation and Infrastructure
Serial No. 106-61
__________
Printed for the use of the Committee on Government Reform and the
Committee on Transportation and Infrastructure
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
U.S. GOVERNMENT PRINTING OFFICE
62-621 CC WASHINGTON : 2000
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
JOHN T. DOOLITTLE, California (Independent)
HELEN CHENOWETH, Idaho
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
David A. Kass, Deputy Counsel and Parliamentarian
Carla J. Martin, Chief Clerk
Phil Schiliro, Minority Staff Director
------
Subcommittee on Government Management, Information, and Technology
STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois JIM TURNER, Texas
THOMAS M. DAVIS, Virginia PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon MAJOR R. OWENS, New York
DOUG OSE, California PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin CAROLYN B. MALONEY, New York
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
J. Russell George, Staff Director and Chief Counsel
Randy Kaplan, Professional Staff Member
Mason Alinger, Clerk
John Bouker, Minority Counsel
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BUD SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska JAMES L. OBERSTAR, Minnesota
THOMAS E. PETRI, Wisconsin NICK J. RAHALL II, West Virginia
SHERWOOD L. BOEHLERT, New York ROBERT A. BORSKI, Pennsylvania
HERBERT H. BATEMAN, Virginia WILLIAM O. LIPINSKI, Illinois
HOWARD COBLE, North Carolina ROBERT E. WISE, Jr., West Virginia
JOHN J. DUNCAN, Jr., Tennessee JAMES A. TRAFICANT, Jr., Ohio
THOMAS W. EWING, Illinois PETER A. DeFAZIO, Oregon
WAYNE T. GILCHREST, Maryland BOB CLEMENT, Tennessee
STEPHEN HORN, California JERRY F. COSTELLO, Illinois
BOB FRANKS, New Jersey ELEANOR HOLMES NORTON, District of
JOHN L. MICA, Florida Columbia
JACK QUINN, New York JERROLD NADLER, New York
TILLIE K. FOWLER, Florida PAT DANNER, Missouri
VERNON J. EHLERS, Michigan ROBERT MENENDEZ, New Jersey
SPENCER BACHUS, Alabama CORRINE BROWN, Florida
STEVEN C. LaTOURETTE, Ohio JAMES A. BARCIA, Michigan
SUE W. KELLY, New York BOB FILNER, California
RAY LaHOOD, Illinois EDDIE BERNICE JOHNSON, Texas
RICHARD H. BAKER, Louisiana FRANK MASCARA, Pennsylvania
CHARLES F. BASS, New Hampshire GENE TAYLOR, Mississippi
ROBERT W. NEY, Ohio JUANITA MILLENDER-McDONALD,
JACK METCALF, Washington California
EDWARD A. PEASE, Indiana ELIJAH E. CUMMINGS, Maryland
ASA HUTCHINSON, Arkansas EARL BLUMENAUER, Oregon
MERRILL COOK, Utah MAX SANDLIN, Texas
JOHN COOKSEY, Lousiana ELLEN O. TAUSCHER, California
JOHN R. THUNE, South Dakota BILL PASCRELL, Jr., New Jersey
FRANK A. LoBIONDO, New Jersey LEONARD L. BOSWELL, Iowa
JERRY MORAN, Kansas JAMES P. McGOVERN, Massachusetts
JOHN T. DOOLITTLE, California TIM HOLDEN, Pennsylvania
LEE TERRY, Nebraska NICK LAMPSON, Texas
DON SHERWOOD, Pennsylvania JOHN ELIAS BALDACCI, Maine
GARY G. MILLER, California MARION BERRY, Arkansas
JOHN E. SWEENEY, New York RONNIE SHOWS, Mississippi
JIM DeMINT, South Carolina BRIAN BAIRD, Washington
DOUG BEREUTER, Nebraska SHELLEY BERKLEY, Nevada
STEVEN T. KUYKENDALL, California
MICHAEL K. SIMPSON, Idaho
JOHNNY ISAKSON, Georgia
DAVID VITTER, Louisiana
------
Subcommittee on Economic Development, Public Buildings, Hazardous
Materials and Pipeline Transportation
BOB FRANKS, New Jersey, Chairman
JOHN COOKSEY, Louisiana, Vice ROBERT E. WISE, Jr., West Virginia
Chairman ELEANOR HOLMES NORTON, District of
TOM EWING, Illinois Columbia
STEVEN C. LaTOURETTE, Ohio RONNIE SHOWS, Mississippi
BUD SHUSTER, Pennsylvania JAMES L. OBERSTAR, Minnesota
(Ex Officio) (Ex Officio)
C O N T E N T S
----------
Page
Hearing held on April 29, 1999................................... 1
Statement of:
Gregory, William, member, Committee to Assess Techniques for
Developing Maintenance and Repair Budgets for Federal
Facilities National Research Council; and J. Christopher
Mihm, Associate Director, Federal Management and Workforce
Issues, General Accounting Office.......................... 19
Wagner, G. Martin, Associate Administrator, Office of
Governmentwide Policy, General Services Administration,
accompanied by Robert Peck, Commissioner, Public Buildings
Service; and David Bibb, Deputy Associate Administrator,
Office of Governmentwide Policy............................ 110
Yim, Randall, Acting Deputy Under Secretary of Defense for
Installations, Department of Defense; Denis Galvin, Deputy
Director, National Park Service, Department of the
Interior; Thomas Garthwaite, Deputy Under Secretary for
Health, Department of Veterans Affairs, accompanied by
Charles Yarbrough, Chief Facilities Management Officer, and
D. Mark Catlett, Deputy Under Secretary for Budget; and
Rudolph Umscheid, vice president, facilities, U.S. Postal
Service.................................................... 52
Letters, statements, et cetera, submitted for the record by:
Franks, Hon. Bob, a Representative in Congress from the State
of New Jersey, prepared statement of....................... 7
Galvin, Denis, Deputy Director, National Park Service,
Department of the Interior, prepared statement of.......... 79
Garthwaite, Thomas, Deputy Under Secretary for Health,
Department of Veterans Affairs, prepared statement of...... 67
Gregory, William, member, Committee to Assess Techniques for
Developing Maintenance and Repair Budgets for Federal
Facilities National Research Council, prepared statement of 23
Horn, Hon. Stephen, a Representative in Congress from the
State of California, prepared statement of................. 4
Mihm, J. Christopher, Associate Director, Federal Management
and Workforce Issues, General Accounting Office, prepared
statement of............................................... 35
Turner, Hon. Jim, a Representative in Congress from the State
of Texas, prepared statement of............................ 12
Umscheid, Rudolph, vice president, facilities, U.S. Postal
Service, prepared statement of............................. 94
Wagner, G. Martin, Associate Administrator, Office of
Governmentwide Policy, General Services Administration,
prepared statement of...................................... 113
Wise, Hon. Robert E., a Representative in Congress from the
State of West Virginia, prepared statement of.............. 15
Yim, Randall, Acting Deputy Under Secretary of Defense for
Installations, Department of Defense:
Information concerning land transactions................. 107
Prepared statement of.................................... 55
FEDERAL REAL PROPERTY MANAGEMENT: OBSTACLES AND INNOVATIVE APPROACHES
TO EFFECTIVE PROPERTY MANAGEMENT
----------
THURSDAY, APRIL 29, 1999
House of Representatives, Subcommittee on
Government Management, Information, and
Technology, Committee on Government Reform,
joint with the Subcommittee on Economic
Development, Public Buildings, Hazardous
Materials and Pipeline Transportation,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittees met, pursuant to notice, at 10 a.m., in
room 2167, Rayburn House Office Building, Hon. Stephen Horn
(chairman of the subcommittee on Government Management,
Information, and Technology) presiding.
Present for the Subcommittee on Government Management,
Information, and Technology: Representatives Horn, Biggert, and
Ose.
Present for the Subcommittee on Economic Development,
Public Buildings, Hazardous Materials and Pipeline
Transportation: Representatives Franks, Norton, and Shows.
Staff present for the Subcommittee on Government
Management, Information, and Technology: J. Russell George,
staff director and chief counsel; Bonnie Heald, director of
communications, professional staff member; Randy Kaplan,
professional staff member; Mason Alinger, clerk; Jon Bouker and
Faith Weiss, minority counsels; and Earley Green, minority
staff assistant.
Staff present for the Subcommittee on Economic Development,
Public Buildings, Hazardous Materials and Pipeline
Transportation: Rick Barnett, professional staff member; and
Susan Brita, minority professional staff member.
Mr. Horn. A quorum being present, the joint hearing of the
House Subcommittee on Government Management, Information, and
Technology and the Subcommittee on Economic Development, Public
Buildings, Hazardous Materials and Pipeline Transportation will
come to order.
The Federal Government is one of the world's largest owners
of real estate. Its vast portfolio consists of more than
500,000 buildings located on more than 560 million acres of
land. These holdings are under the custody and control of more
than 30 Federal departments and agencies. They represent a
taxpayer investment of more than $300 billion.
We are here today to examine the ways to improve the
management of these assets. Overall, the Federal Government has
not been a good steward. There is mounting evidence that the
physical condition of Federal buildings has been allowed to
deteriorate. Roughly half of these buildings are more than 50
years old.
Last year, a National Research Council Committee
independently studied the status of many of these Federal
facilities. The committee found that maintenance and repair
programs have persistently been underfunded. As a result, many
buildings have deteriorated to a point that they now require
major repairs to bring them up to an acceptable health and
safety standard.
Federal facilities program managers are being encouraged to
be more businesslike and innovative. However, the committee
found that current management and financial processes create
disincentives and, in some cases, barriers to cost effective
property management and maintenance.
For example, Ellis Island in New York Harbor--and this
committee has walked that ground--is a highly visible example
of this neglect. For nearly 100 years, the buildings and
structures on Ellis Island housed and received 12 million
immigrants, including my own father in 1903. Among its 36
historic buildings, 32 have been so neglected that two-thirds
of this national treasure could soon be lost to catastrophic
structural failure.
And if we could turn these pages, we will find out what
great mystery is next.
At the same time, millions of dollars are being spent on
buildings that no longer serve their intended purpose.
Downsizing of the Federal work force and changing agency
missions have resulted in an excess of Federal buildings and
work space that are costly and an inefficient use of the
taxpayers' money.
However, in many cases, the laws and regulations governing
the disposition of these excess facilities create disincentives
that, in fact, make the process expensive, time consuming and
difficult.
On March 10 of this year, for example, the General
Accounting Office testified before the House Subcommittee on
Health that the Department of Veterans Affairs could spend
billions of dollars over the next 5 years operating hundreds of
unneeded buildings. The General Accounting Office concluded
that the Department of Veterans Affairs could greatly enhance
veterans' health care simply by reducing the resources it
spends on underused buildings.
We cannot continue to ignore the consequences of not
maintaining our public buildings. The investment made in these
assets warrants sustained, appropriately timed, and targeted
maintenance. The Federal Government needs to develop a strategy
for facility management, maintenance, and accountability for
stewardship that will optimize limited resources while
protecting the value and functionality of the Nation's public
buildings and facilities.
Today, we are going to look at how the Federal Government
manages its vast portfolio of real property. There are
currently a variety of laws governing the acquisition,
maintenance, and disposal of these assets. We will examine
whether these laws help agencies effectively and efficiently
manage this property and whether the agencies have some
suggestions of what else needs to be amended in the laws to
make their life a little easier and more effective.
We have before us many knowledgeable witnesses to discuss
the problems, policies, and procedures surrounding the
management disposal of Federal real estate. Among our panelists
are representatives from five of the largest land-holding
agencies. This important issue affects hundreds of communities
across our Nation. We welcome them. And we look forward to
their testimony.
I now yield to Chairman Franks, whose committee is meeting
with us in this joint session for his opening statement.
[The prepared statement of Hon. Stephen Horn follows:]
[GRAPHIC] [TIFF OMITTED] T2621.001
[GRAPHIC] [TIFF OMITTED] T2621.002
Mr. Horn. Mr. Franks.
Mr. Franks. Thank you, Chairman Horn. It is a delightful
opportunity to share jurisdiction of this hearing with you. I
would like to not only recognize but thank you and commend you
for your extraordinary leadership you have displayed in so many
areas of government management and particularly in the area of
Y2K compliance, forcing the government to look at itself in the
mirror and make certain that we were leading the way in terms
of being prepared for the turn of the new millenium. I want to
thank you on behalf of all Americans.
I will keep my opening statement brief. Before I begin,
though, I would like to ask unanimous consent that my colleague
from the Transportation Committee, Mr. Blumenauer, be able to
submit a statement for the record.
Mr. Horn. Without objection, so ordered.
Mr. Franks. I would like to welcome the Members and our
witnesses to this hearing today. I would also like to thank
Chairman Horn for working closely with the subcommittee which I
chair in planning and developing this hearing on alternatives
for funding Federal capital investment projects with public
pride and partnerships.
We welcome new ideas to better manage our Federal assets.
Managing our Federal assets is something that needs to be done
with the assistance and cooperation of the private sector. I am
sure some of our witnesses here today will agree with that.
One facility management component that is often overlooked
is the role the facility places in promoting an agency's
mission. As the mission changes, so does the agency's
facility's needs. These needs have to be accounted for in the
context of the Federal budgetary constraints. This is in the
form of repair and alteration projects, new Federal
construction projects, or in the case of downsizing, disposing
of underutilized facilities.
I am well aware in the case of the General Services
Administration that short-term expensive operating leases are
increasingly used instead of long-term capital improvement
projects to meet space needs. Short-term leases reduce the
overall government budget at the present time only because
these expenditures are counted as annual costs.
The overall impact of this decision places an ever-
increasing burden on GSA's buildings' budget. This year, GSA
will devote 50 percent of its budget for lease payments. Each
year, GSA has less to spend on the important areas of repairs,
innovations, and new construction.
The current budget process also emphasizes design and
construction cost of a new facility. When these costs account
for 5 to 10 percent of the total life cost of the building,
operations and maintenance account for 60 to 85 percent of the
total cost of ownership. Public-private partnerships could be
in the government's best economic interest in meeting the long-
term needs of a facility.
With that, Mr. Chairman, I would like to join you in
welcoming our witnesses and look forward to the creative ideas
that they will share with us today.
Mr. Horn. I thank the gentleman.
[The prepared statement of Hon. Bob Franks follows:]
[GRAPHIC] [TIFF OMITTED] T2621.003
[GRAPHIC] [TIFF OMITTED] T2621.004
[GRAPHIC] [TIFF OMITTED] T2621.005
Mr. Horn. The ranking member on the Subcommittee on
Government Management, Information, and Technology is Mr.
Turner. The gentleman from Texas and your opening statement
would be welcome.
Mr. Turner. Thank you, Mr. Chairman. We are here today to
exercise the responsibility of the Congress to oversee the
management of Federal property. As we know, the Federal
Government's real estate portfolio is vast and diverse, and one
size clearly does not fit all.
As we move into the next millenium, and the government
hopefully continues to operate more like a business, Federal
property management must also become more flexible and more
innovative.
Today, we will hear about recent efforts to engage in
alternative and innovative management practices at the Federal
level. We will also hear about unique Federal partnerships with
other public, nonprofit, and for profit entities.
For the past 50 years, Federal property has been purchased,
managed, and disposed of under the authority of the Federal
Property and Administrative Services Act of 1949. The
principles established by this law have worked extremely well
over the years, assuring the American people the value of
Federal property will be maximized.
While discussing this issue today, I think it's appropriate
to recognize the invaluable contribution and achievements of a
former Government Reform Committee staff member, Mr. Miles
Romney, who devoted his career to public service and devoted
his attention to Federal property management issues. He
recently succumbed to cancer.
Mr. Romney left an indelible mark on Federal property
management and the Government Reform Committee, serving on this
committee staff continuously from 1956 to 1997. As we look to
new approaches, we would do well to remember Mr. Romeny, who
was guided by the belief that Federal property was a sacred
trust held by the government for the American people.
It is my belief that it is the government's responsibility
to use Federal property wisely and efficiently; and when it is
no longer needed, the government must assure that its disposal
occurs without prejudice or favor.
While the policies and principles of the 1949 Property Act
have served us well, it may be time to consider modifying
particular aspects of the law to encourage more innovative and
modern approaches to management and disposal.
For example, certain types of public-private partnerships
have proven to be very successful, and we will hear about the
characteristics of their success today. In addition, Congress
could consider increasing incentives for agencies to dispose of
property that they no longer need by allowing them to retain a
portion of the revenue generated by the sale. These are just a
few ideas that we should explore vigorously.
I look forward to the testimony from all of the witnesses
today
and thank Chairman Horn and Chairman Franks for holding this
hearing today.
Thank you, Mr. Chairman.
Mr. Horn. I thank the gentleman.
[The prepared statement of Hon. Jim Turner follows:]
[GRAPHIC] [TIFF OMITTED] T2621.006
[GRAPHIC] [TIFF OMITTED] T2621.007
Mr. Horn. And now the ranking member for Mr. Franks'
subcommittee, the Subcommittee on Economic Development, Public
Buildings, Hazardous Materials and Pipeline Transportation of
the full Committee on Transportation and Infrastructure, Ms.
Norton, the Delegate from the District of Columbia.
Ms. Norton. Thank you, Mr. Chairman.
I ask unanimous consent to incorporate the statement of the
ranking member, Mr. Wise, who is unable to be here this morning
before I make my own statement.
Mr. Horn. Without objection.
[The prepared statement of Hon. Robert E. Wise follows:]
[GRAPHIC] [TIFF OMITTED] T2621.008
[GRAPHIC] [TIFF OMITTED] T2621.009
Ms. Norton. I appreciate your leadership, Mr. Chairman, and
that of my own chairman, Mr. Franks, in organizing this
important hearing about a subject badly in need of oversight,
the oversight of real property management of the Federal
Government.
I have two concerns that I would like to discuss in opening
this hearing. The first is my long-time interest in the effect
of the scoring rules, which have essentially destroyed any
National Building Program of the United States of America.
Originally proposed as a way to control the budget, these
rules have had an unintended effect that we have not been able
to overcome. They have wreaked havoc on GSA's ability to house
the Federal work force. And they cost us billions of dollars in
rent because we are unable to build on Federal land often in
order to house Federal facilities.
This matter is of such urgency that I went and testified
last year before the President's Commission on Capital
Budgeting. I myself favor a capital budget for the Federal
Government and believe it is only out of a long tradition that
we don't have a capital budget.
States, localities, and cities have learned how to work
capital budgets so that they don't get out of hand and so that
they do control expenditures and so that you do spend capital
funds for capital budgeting and operational funds for
operational matters. It is time that the Federal Government
learns that, and we will not be able to effectively manage our
real property for the Federal Government unless we come into
the 20th century when it comes to capital budgeting.
I have a special interest as well, Mr. Chairman, in the
discussion that we will take here today about public-private
partnerships. Among the ways in which this will be discussed
undoubtedly will be the report of the GAO entitled, ``Public-
Private Partnerships Key Elements of Federal Building and
Facility Partnerships.''
I note that the report focuses on a number of elements that
all of these effective partnerships had. One of those elements
was specific legislation. And among the six projects that is
studied as an effective public-private partnership is the
Presidio.
I note, for the record, that in the Nation's Capital, there
is an enormous tract of land owned by the Federal Government,
57 acres 55 acres at the Southeast Federal Center. If this land
were in the hands of private developers, its worth would be off
the charts. The Federal Government has let this land, within 5
minutes of the Capitol, lie fallow.
The Defense Department understood what to do when Crystal
City, a naval operation closed in Arlington. They moved to
renovate the Navy Yard in the District of Columbia, which is
right next to the Southeast Federal Center. And, of course, it
is now well along the way of being rehabilitated.
They are anxious that the Federal Government take this
strip of land and do something with it. If you don't do
something with it, we are going to sell it to somebody who will
because it is one of the most expensive pieces of land on the
East Coast, given its location and its proximity.
The major difficulty has been that Federal agencies want to
be on Constitution Avenue or K Street. And somehow or the
other, OMB and GAO, despite the billions it costs us now to
rent for space for Federal agencies that don't have the
wherewithal to, in fact, get agencies to come to this location
so close to the Capitol.
One way to utilize this land might be to form some form of
Federal public-private partnership like the ones that the GAO
has studied. I welcome the opportunity to hear more about how
this has been done in other jurisdictions.
And I particularly commend your leadership and that of Mr.
Franks for the hearing that you called today.
Thank you, Mr. Chairman.
Mr. Horn. Thank you.
The gentlewoman from the District of Columbia makes a
number of very important points, especially with regard to the
capital budget. Mr. Clinger, when he a chaired the Committee on
then Government Operations, now Government Reform, he was very
interested that we have held hearings on it. We haven't
forgotten it. This is a case of getting some people to wind
down and others to wind up. I think some of the testimony this
morning will be immensely helpful.
Let me just give you the procedural way this hearing will
be conducted. Since we are an investigating Committee of
Government Reform, all witnesses will be sworn in. And the
first two panels I will preside over. The third panel, the
tough one, Mr. Franks will preside over. That's the General
Services Administration, our good friends. They have testified
before us many times, and Mr. Franks knows more about them than
I do. So he will preside over the third panel.
Also, we would like you to summarize your statements as
best you can. We have your statements. We have read your
statements. If you could do it in 5 or 8 minutes, that would be
fine, but that would leave us more time for a dialog with you.
And that is what we like is to, having read your statement,
having heard your summary, we can get down to some questions.
Your full statement is automatically put in the minute we call
on you. So we don't need a lot of ``without objection, we will
do this and that.'' It is in the record.
We will ask the first panel that is here, we have Mr.
William Gregory, member, Committee to Assess Techniques for
Developing Maintenance and Repair Budgets for Federal
Facilities of the National Research Council. It sort of sounds
like a doctoral dissertation. Usually, there is something and a
colon that goes on for three sentences in science. But we are
deeply grateful for the work the Research Council has done.
And a long time friend of both our subcommittees, Mr.
Christopher Mihm, the Associate Director of Federal Management
and Workforce Issues, General Government Division, General
Accounting Office, part of the legislative branch, does a
splendid job. We always use the GAO to be the principal
nonpartisan above-the-battle type of witness to pull all the
pieces together. We might well ask the GAO and others to sit
with the third panel. We always ask them if they have any
comments after their formal statements after they have listened
to the testimony.
I think let's just start with panel one. And you have some
assistants with you. Let's swear them all in at once so that we
don't if there are others that are going to speak behind you, I
am used to the Pentagon and bringing a squad or company or
maybe a battalion of aides, and I just like to have a mass
baptism of swearing in, and then we get down to business.
So if you will stand and raise your right hands.
[Witnesses sworn.]
Mr. Horn. I note seven members standing, and the clerk will
note that for the record.
We will now begin with Mr. Gregory, the member of the
National Research Council committee that has taken a real look
at these questions on maintenance and repairing of bridges for
Federal facilities. So please proceed, Mr. Gregory.
STATEMENTS OF WILLIAM GREGORY, MEMBER, COMMITTEE TO ASSESS
TECHNIQUES FOR DEVELOPING MAINTENANCE AND REPAIR BUDGETS FOR
FEDERAL FACILITIES NATIONAL RESEARCH COUNCIL; AND J.
CHRISTOPHER MIHM, ASSOCIATE DIRECTOR, FEDERAL MANAGEMENT AND
WORKFORCE ISSUES, GENERAL ACCOUNTING OFFICE
Mr. Gregory. Good morning, Chairman Horn and Chairman
Franks and members of the Subcommittee on Government
Management, Information, and Technology and the Subcommittee on
Economic Development, Public Building, Hazardous Materials and
Pipeline Transportation.
My name is William L. Gregory. I am manager of
environmental and facilities management at Kennametal, a global
provider of industrial tooling systems with annual revenues of
nearly $2 billion per year and 13,000 employees.
At Kennametal, I am responsible for environmental health
and safety, real estate, corporate building operations,
strategic facility planning, and construction management for
all major facility projects on a global basis. I am also past
international president of the International Facility
Management Association in which capacity I oversaw IFMA's
operations consisting of 13,000 members and 130 chapters as
well as international development and formation of public
alliances.
I am testifying here today in my capacity as a member of
the National Research Council appointed committee that produced
the report ``Stewardship of Federal Facilities: A Proactive
Strategy for Managing the Nation's Public Assets.'' The
National Research Council is the operating agency of the
National Academy of Sciences and the National Academy of
Engineering.
Jack E. Buffington, the chairman of the NRC committee sends
his regrets that he is not able to be here today. Ms. Lynda
Stanley of the National Research Council who provided staff
support to our committee is here.
The ``Stewardship of Federal Facilities'' report addresses
a wide range of management and budgeting issues related to the
maintenance and repair of the 500,000 buildings and facilities
owned by the Federal Government worldwide. They represent an
investment of more than $300 billion taxpayer dollars. Upwards
of $20 billion per year is spent to acquire new facilities or
substantially renovate existing ones. Yet, it is difficult, if
not impossible, to determine how much money the Federal
Government spends for the maintenance and repair of these
facilities once they are acquired.
Over the course of the study, our committee came to two
overriding conclusions. No. 1, the Federal Government should
plan strategically for the maintenance and repair of its
facilities in order to optimize available resources, to
maintain the functionality and quality of Federal facilities,
and to protect the public's investment.
No. 2, greater accountability for the stewardship or
responsible care of facilities is needed at all levels of the
Federal Government. Accountability includes responsibility for
the condition of facilities and for the allocation, tracking,
and effective use of maintenance and repair funds.
The committee's specific findings relating to Federal
facilities-maintenance budget and management issues are
extensive. I will highlight the 7 key findings related to the
current state of Federal facilities and their management to
provide the context for the committee's recommendations.
No. 1, evidence is mounting that the physical condition,
functionality, and quality of Federal facilities continues to
deteriorate. Many Federal buildings require substantial repairs
to bring them up to acceptable standards of health, safety, and
quality.
No. 2, inadequate funding for facilities maintenance and
repair programs is a persistent, long-standing and well-
documented problem.
No. 3, some agencies own and are responsible for more
facilities than they need to support their missions or that
they can maintain with current or projected budgets.
No. 4, the relationship of facilities to agency missions is
not recognized adequately in Federal strategic planning and
budgeting processes.
No. 5, there are few rewards or incentives for Federal
facilities program managers to act in a cost-effective fiscally
responsible manner to be innovative or to take risks that might
result in better management practice. In fact, current
management, budgeting, and financial processes have
disincentives and institutional barriers to cost-effective
facilities management and maintenance practices.
No. 6, agencies have not been able to make effective use of
the data they gather through condition assessments for timely
budget development or for ongoing management of facilities.
And last, No. 7, the type of information that
decisionmakers find compelling to support maintenance and
repair budget requests is not available.
Public officials and decisionmakers want to know how much
money will be saved in the future by spending money today on
maintenance and repair. That information is not available
because only a limited amount of research has been done to
identify effective facility management strategies for achieving
cost savings, identifying cost avoidances, and providing safe,
healthy productive work environments.
To address these findings systematically, our committee
developed a strategic framework of methods, practices, and
strategies that can lead to a better maintained and better
managed inventory of Federal facilities.
To plan strategically for maintenance and repair and to
create greater accountability for the stewardship of Federal
facilities, the committee made the following 11
recommendations.
No. 1, facility investment and management should be
directly linked to agency mission. A facility element should be
incorporated into each agency's strategic plan to link
facilities to agency mission and establish a basis and
rationale for maintenance and repair budget requests.
No. 2, long-term requirements for maintenance and repair
expenditures should be reduced by reducing the size of the
Federal facilities portfolio. New construction should be
limited. Existing buildings should be adapted to new uses. And
the ownership of unneeded buildings should be transferred to
other public and private organizations. Facilities that are
functionally obsolete, are not needed to support an agency's
mission, are not historically significant, and are not suitable
for transfer or adaptive reuse should be demolished when it is
cost effective to do so.
No. 3, the condition assessment programs should be
restructured to focus first on facilities that are critical to
an agency's mission on life, health, and safety issues, and on
building systems that are most critical to a facility's
performance. This restructuring is needed to optimize available
resources, provide timely and accurate data for formulating
maintenance and repair budgets, and provide critical
information for the ongoing management of facilities.
No. 4, the government and private industry should work
together to further develop and integrate technologies for
performing automated facility condition assessments and
eliminate barriers to their deployment.
No. 5, the government should support research to develop
quantitative data that can be used for planning and
implementing cost effective maintenance and repair programs and
strategies. Research data are also needed to better understand
the programmatic impacts of maintenance on mission delivery and
on building users' health, safety, and productivity.
No. 6, the government should encourage accountability for
the stewardship of Federal facilities at all levels. Within
Federal agencies, facilities program managers should justify,
identify the resources necessary to maintain facilities
effectively and should be held accountable for the use of these
resources.
No. 7, at the executive level, an advisory group of senior
level Federal managers and other public sector managers,
nonprofit and private sector representatives, should be
established to develop policies and strategies to foster
accountability for the stewardship of facilities and to
allocate resources strategically for their maintenance and
repair.
The committee believes such a group is needed to give
greater visibility to the issue of Federal facilities
maintenance, management, and plan more strategically. A senior
level advisory group could focus on a wide range of facility
management related topics, some of which are suggested on pages
73 and 74 of this report.
No. 8, the government should adopt more standardized cost
accounting techniques and processes to allow for more accurate
tracking of maintenance and repair funding requests,
allocations, and expenditures, and reflect the total cost of
facilities ownership. The committee developed an illustrative
budget template that differs from current practices because of
it accounts for the full range of facility management costs in
one place.
No. 9, governmentwide performance measures should be
established to evaluate the effectiveness of facilities
maintenance and repair programs and expenditures.
No. 10, facility program managers should be empowered to
operate in a more businesslike manner. By removing
institutional barriers and providing incentives for the cost-
effective use of maintenance and repair funds. The carryover of
unobligated funds and the establishment of revolving funds for
nonrecurring maintenance needs should be allowed if they are
justified.
And No. 11, and last, the government should provide
appropriate and continuous training for a staff performing
condition assessments and/or developing and reviewing
maintenance and repair budgets to foster an informed
decisionmaking process.
In summary, the Federal Government has a significant
opportunity to strategically redirect Federal facilities
management and maintenance practices for the 21st century. This
will require long-term vision, commitment, leadership, and
stewardship by decisionmakers and agency managers. The results
will be a significant improvement in the quality and
performance of Federal facilities, lower overall maintenance
costs, and protection of the public's investment.
Thank you for the opportunity to review the findings and
recommendations of the ``Stewardship of Federal Facilities''
report. I will try and answer any questions you may have.
Mr. Horn. Thank you very much.
[Note.--The GAO publication, ``Public-Private Partnerships,
Terms Related to Building and Facilities Partnerships,'' may be
found in subcommittee files.]
[The prepared statement of Mr. Gregory follows:]
[GRAPHIC] [TIFF OMITTED] T2621.010
[GRAPHIC] [TIFF OMITTED] T2621.011
[GRAPHIC] [TIFF OMITTED] T2621.012
[GRAPHIC] [TIFF OMITTED] T2621.013
[GRAPHIC] [TIFF OMITTED] T2621.014
[GRAPHIC] [TIFF OMITTED] T2621.015
[GRAPHIC] [TIFF OMITTED] T2621.016
[GRAPHIC] [TIFF OMITTED] T2621.017
[GRAPHIC] [TIFF OMITTED] T2621.018
Mr. Horn. We now move to Mr. Mihm. And after he finishes,
we will have questions of panel one.
Mr. Mihm, as I noted earlier, is the Associate Director of
Federal Management Workforce Issues, General Government
Division of the General Accounting Office.
Mr. Mihm.
Mr. Mihm. Thank you, Mr. Horn, Mr. Franks, and members of
the subcommittees. It is a pleasure and an honor to be here
today to discuss the findings of our recent report on public-
private partnerships. We did this report at the request of
Chairman Horn.
I am fortunate today to be joined by Don Bumgardner, who is
the project manager for our work on partnerships, and in
addition, our colleague, Peter Del Toro, was also instrumental
to our work on this partnership report.
I am also pleased to provide the subcommittee with a
Glossary of Terms, Practices and Techniques related to
Buildings and Facility Partnerships that was released earlier
this week. We did this, of course, at the request of you Mr.
Horn and Mr. Franks as well.
In the interest of brevity and getting to the discussion as
you requested, I will just hit a couple of high points this
morning. First, I would like to note some of the long-standing
management weaknesses that are leading agencies to think more
strategically when managing buildings and facilities.
Second, I will discuss one response to those challenges,
the public-private partnerships and highlight the common
elements of the six Federal partnerships we examined for our
report.
In terms of my first point, the need to think strategically
about the Federal Government's assets, as you noted in your
opening statement, Mr. Horn, the Federal Government is one of
the world's largest property owners. Our work and that of
others, certainly of our colleagues here today, over the last
several years has identified several important weaknesses in
Federal agencies management and maintenance of facilities and
real property.
At the most fundamental level, as Mr. Horn and Mr. Franks
have noted in their opening statements, is a need to think
strategically about the use of Federal assets, Mr. Gregory
covered many of these issues very well, so I won't reiterate
them here.
But just to underscore the point, over half of the
government's office buildings are roughly 50 years old and were
designed and located to meet the needs of an earlier era.
Clearly we need to think more strategically as we approach the
21st century on how we are going to use public assets. To make
better use of their buildings and facilities, Federal agencies
are responding by increasingly striving to manage them in a
more businesslike manner.
I want to now discuss with you my second point by
describing our recent work on partnerships between the Federal
Government and the private, not for profits and other public
entities through contracts or agreements. These arrangements
are vehicles that agencies have used to better manage their
assets.
Partnerships typically involve a government agency
contracting with the partner to renovate, construct, operate,
maintain, and/or manage a facility that provides a public
service. As you know from our report, we reviewed six
partnerships and found five common elements that appeared to
play key rolls in the effective implementation of those
partnerships. These elements are shown on the figure on page 4
of my written statement and are discussed in detail in our
report. I will touch on each of these.
First, a catalyst for change was needed. Fiscal and
community pressures were among the factors that lead agencies
to seek better ways of managing their properties, including
considering the use of partnerships.
For example, these pressures were the catalyst at the two
Park Service projects that we reviewed, including the Presidio,
in which the Park Service entered into partnerships to help
finance needed preservation efforts.
Second, Congress had to provide statutory authority for the
partnership to move forward, including allowing the agency to
keep the revenues it received. The legislation was either
project specific, as was the case for the Park Service
projects, or broader in scope, as was the 1991 law that
authorized the Department of Veterans Affairs to lease its
properties and retain the resulting revenues.
According to building and facility managers and all of the
agencies we reviewed, a primary reason for an agency to enter
into the partnerships is the authority to keep for its own use
the revenue that it would receive from the partnership. In
short, Federal managers told us they needed to have incentives
before they were willing to undertake the risks.
A third common element is that agencies established
organizational units and acquired the necessary expertise to
work effectively with the private sector. For example, the
Department of Veterans Affairs established an Office of Asset
and Enterprise Development to promote the partnership concept
within VA, to design and implement public-private partnership
projects, and to be a single point of contact with VA's private
sector partners. The office was staffed with professions
experienced in portfolio management, architecture, civil
engineering, and contracting.
The fourth common element is that agencies used business
plans or similar documents to make informed decisions and to
protect the government's interests. According to Postal Service
officials, the development and execution of business plan,
which included information about the division of risks and
responsibilities between the Postal Service and its private
sector partner, was critical to the success of implementing its
large-scale development projects.
For each of the projects we reviewed, business plans were
drafted jointly between the public and private sector entities
to help ensure the close involvement of both parties in the
design and implementation of the project. I would just add that
this close involvement in designing these business plans
underscores the importance of the point that I was making
earlier of making sure that agencies have the human capital and
the knowledge base so that they can deal effectively with the
private sector.
Finally, a fifth common element was that support for
project stakeholders was an important element in developing the
partnerships. In all of the projects we reviewed, agencies had
to obtain the support of the local community and other
stakeholders to create the partnership.
For example, in both of the Park Service projects we
reviewed, community leaders who were worried about preserving
historic structures without overcommercializing them, became
important and active stakeholders for those projects.
In conclusion, Congress and the Federal agencies need to
continue to work together to find approaches that will
encourage prudent management of Federal buildings and
facilities. When accompanied by sound financial management and
appropriate congressional oversight, public-private
partnerships are one approach to facilitate effective building
and facility management.
The set of common elements that we identified appear to be
key to the implementation of the six partnerships we examined.
Of particular importance to us is the critical roll that
Congress played in providing the authority for--and continuing
its oversight of--these projects.
This concludes my statement, and I would be happy to answer
any questions that the subcommittee may have.
Mr. Horn. I thank the gentleman.
[The prepared statement of Mr. Mihm follows:]
[GRAPHIC] [TIFF OMITTED] T2621.019
[GRAPHIC] [TIFF OMITTED] T2621.020
[GRAPHIC] [TIFF OMITTED] T2621.021
[GRAPHIC] [TIFF OMITTED] T2621.022
[GRAPHIC] [TIFF OMITTED] T2621.023
[GRAPHIC] [TIFF OMITTED] T2621.024
[GRAPHIC] [TIFF OMITTED] T2621.025
[GRAPHIC] [TIFF OMITTED] T2621.026
Mr. Horn. Now we will have 5 minutes per person alternating
between parties, and we will stick to that very strictly. If
you can get the question in before the red light goes on, the
answer can take longer. But we will make a second round if we
need to. So don't feel you are being rushed, but this gives
everybody a chance to participate.
We will start with Mr. Franks' 5 minutes for questioning
the witnesses.
Mr. Franks. Thank you, Mr. Chairman.
Mr. Gregory, how would you impress upon building managers
the importance of not deferring scheduled maintenance.
Mr. Gregory. Not deferring scheduled maintenance? The
deferring of scheduled maintenance catches up with you. It ends
up being a very large issue that soon becomes insurmountable.
That is what we heard many times from the people that were
testifying before our committee. They had a large backlog that
seemed to be insurmountable. To encourage someone not to do
that suggests it becomes too expensive to attack all at once.
It grows to something that eventually starts eating away at the
facility. There are no positive benefits to allow that to
happen.
Mr. Franks. I think you're absolutely right. But I guess
I'm looking for what kind of motivation can you inject into
building managers to convince them of the needs that you just
very confidently spoke to.
Mr. Gregory. The issues that we talked about in our
committee were some of the disincentives. These are the things
that are common at the Federal facilities management level. As
they look at some of their issues, they have little incentive
to improve because of the way the budget dollars are
determined.
Mr. Franks. I don't mean to interrupt again, but how can we
provide them the incentive that you say is----
Mr. Gregory. To give them incentives in the budget, give
them more freedom in the budget to allow their budget dollars
to be used more effectively. For an example, savings end up
being a negative. Savings are subdivisions from the budget in
the next year. They need more ability to handle those kinds of
issues.
Mr. Franks. What kind of information do decisionmakers find
compelling as it relates to increased building maintenance and
repair budgets?
Mr. Gregory. The facility is a if you look at facilities as
a holistic approach, facilities in fact the real definition of
facility management is integration of people, process, and
place. The process is the business that happens there.
When you look at it from a holistic point, there are huge
savings to a quality facility management program impacting the
people. The people in that work environment are subjected by
the work environment that they are in, either positively or
negatively. The real savings in all of this are productivity
savings by the work force and the health benefits that accrue
by working in a healthy environment. These are very significant
issues that can make the facility work better.
Those, to me, are the more compelling reasons that a senior
level agency manager should be focused on facility and facility
issues. It is not necessarily what is happening in the basement
of the building, it is what more is happening in the overall
facility that impacts productivity. The people cost on a life-
cycle basis is almost 80 percent of the cost of running a
building.
Mr. Franks. Thank you, Mr. Chairman.
Mr. Horn. I thank the chairman. I now call on Mr. Turner,
the gentleman from Texas, and the ranking member on the
Subcommittee on Government Management, Information, and
Technology for 5 minutes of questioning.
Mr. Turner. Thank you, Mr. Chairman.
I would like to ask each of you to comment on and share
with us some examples where Federal agencies have utilized
public-private partnerships successfully to give us some feel
for, you know, where we are, seeing some progress, and perhaps
even highlight the agencies that have done the best job in
utilizing some of the tools that the Congress has given them,
and then beyond that offer your suggestions for what new
legislation we might need to give flexibility to agencies to be
able to move forward with some of these new innovative
approaches.
Mr. Gregory. I would like to defer to Mr. Mihm. Our report
dealt with the public-private partnerships as a tool, and we
didn't get into the specifics. But I think you can address
that.
Mr. Mihm. Yes, sir. I guess a good starting point would be
to look at the success stories experienced by the six
partnerships that we profiled. We profiled two from the
National Park Service, two from Department of Veterans Affairs,
and two from the Postal Service, including one from Veterans
Affairs outside Houston, which I understand is near and dear to
your heart, sir.
The focus was not to audit the results of these cases but
to try and learn from their successes. We spoke with numerous
agency officials and private-sector partners, to seek whether
or not there were any negative feedback from the public on
these projects. We found that, universally, there were positive
responses.
And in some cases, this has been fairly well documented. In
the cases, for example, of the Park Service partnerships, those
out at the Presidio and Fort Mason, one of the major advantages
that they got out of that was that the restoration and
preservation of some historically very important property. The
valuable property near Golden Gate Bridge could easily imagine
could have gone a different route if it had been just
exclusively developed for commercial purposes. So, the
prevention of historic property was certainly one major
advantage to these partnership arrangements.
In terms of the Postal Service, they currently recover
about $16.5 million a year from the two partnerships we
received. This revenue is returned to their general operating
fund.
In terms of the VA partnerships, the money is earmarked to
serve veterans. So it goes into mission-related efforts that
assist the veterans.
In all of the partnerships that we looked at, there seem to
be these common elements that were keys to their success of
these partnerships as well as some advantages from both the
Federal and the partnership standpoint and the public and the
private partners standpoint that these partnerships gave.
Now in terms of the second half of your question, dealing
with some of the statutory authorities on this, there are a
number of things that clearly can be done; first, we have found
in each of the partnerships there is a need to give incentives
to the agencies to participate in the partnership.
The single most overriding incentive that we heard from all
the asset managers that we talked to was to allow them to keep
the proceeds from the partnership or at least a portion of
those proceeds. In specific cases that can be earmarked for
certain projects within the agency. But if they have to return
all revenues earned to the Treasury, there is very little
incentive for them to enter into these ventures.
I think, taking a look more broadly at the enabling
legislation for the Veterans Affairs, which was the Enhanced
Use Leases is what the partnership approach at Veterans Affairs
is called, and which Congress laid out expectations for
consultation with stakeholders and expectations for
congressional review of the projects before they received final
approval. I think that law and the incentives together provide
good framework for where to go in terms of statutory changes.
Mr. Turner. Give me a good example of let's take maybe the
example of the VA. Tell us about the legal relationship between
the government and the private partner and how that is
established.
Mr. Mihm. My colleague Don Bumgardner did most of the work
at the VA, and I am going to ask him to speak to that.
Mr. Bumgardner. In terms of the VA specifically, the key
part of allowing them to enter into partnership arrangements
was the 1991 enhanced-use leasing law. Without that type of
enabling law, there is no incentive for any asset manager in
any Federal agency to take on the risk of a public-private
partnership.
The legal relationship is outlined pretty much in our
report and, as Chris stated, the partnership has to have the
approval of the Secretary, the Congress. A large part of the
legal relationship revolves around the detailed business plans
that layout both the public and private sector's
responsibilities, and assure that the public's interests are
protected. But, really, the overarching thing here is the law
itself.
Mr. Turner. Thank you, Mr. Chairman.
Mr. Gregory. I would like to add a couple of comments.
Mr. Horn. Please. Go ahead.
Mr. Gregory. One of the things we talked about in our
committee was the problem of confusing expense budgets with
capital budgets. We talked about a separation of the two items
that more clearly defines and helps to identify the cost of
running a facility by removing the capital portion.
The other concern that we talked about is that partnerships
are very good. We hear a lot today about business like. That is
very good. The proceeds that go back into the agency budget, is
a concern that maybe they support the program and still don't
get to the facilities' people that need those dollars. That is
a cautionary note.
Mr. Horn. Let me pursue what Mr. Frank started here, and
what some of you have responded to. I would sort of just like
in one place Mr. Mihm, if you could sum up how the executive
branch of the Federal Government funds the long-term
maintenance for particular buildings that it operates. And is
this mostly administered by the General Services
Administration? What does OMB do when they're looking at
budgets of a particular agency? Do they just leave it for a
reprogramming purpose, or how does this thing work across the
board in general?
Mr. Mihm. The short answer, sir, is poorly.
Mr. Horn. What's the process right now?
Mr. Mihm. The process is it comes in as part of the
standard budget process through that agencies would submit
through OMB. And then subsequent appropriations up here on the
Hill. There is not a separate or necessarily focused attention
to capital issues. In fact, the budget process has been seen
pretty widely as creating a bias against these long-term
spending issues. So, they have a tendency to fall out or not
get the full weight because long-term benefits are not
considered with short-term costs.
Mr. Horn. Is there a percentage that they use as a rule of
thumb as to the amount of money that is available for deferred
maintenance and all of that?
Mr. Mihm. If there is, I am not aware of it. I have heard
numbers of 2 to 4 percent.
Mr. Gregory. The earlier report that was done, the cost of
ownership----
Mr. Horn. Do you want to put the microphone up to you.
Mr. Gregory. The earlier report that was done prior to our
report dealt with the cost of ownership and strongly
recommended a 2 to 4 percent of replacement cost for buildings.
All of the testimony or presentations that we heard in our
committee, everyone was under 2 percent. No one was in the 2 to
4 percent range. They were not able to get there.
Mr. Horn. What would the private sector or the nonprofit
sector, if its universities with vast buildings and so forth,
put aside for maintenance?
Mr. Gregory. That is a difficult question to answer,
because of the the different ways that people look at
facilities. The earlier report looked at the government
facilities in terms of replacement cost in arriving at what is
a nominal number. When trying to compare that with business or
private industry, numbers were sometimes in excess of 4
percent. But, clearly, they were upwards of the 4 percent
range.
Mr. Horn. Is there any role the executive branch has
pursued to identify certain structures by some coding that
where more maintenance would be required in terms of a long-
term basis, because we know a lot of schlock buildings have
been built in this city, among others, because for the last 30
years, you could go down and get an agency to say, yeah, we
will move into your building. And they then go to the bank and
get a mortgage and up goes this thing, which probably is
depreciated over 20 years or so, and they might well stay there
for 80 years.
Now what do we know about how you evaluate that if you are
trying to put a budget together and you have got maybe 150
buildings or facilities of one sort or the other? I mean, is
there any part of OMB's, and this I am asking both of you here,
is does OMB have any formulas in this area? Are there any
common sense rule of thumb.
Mr. Gregory. We were very impressed at the committee level
with the capital planning guide as part of the OMB. It talked
about a very good process. It was a draft at the time. I don't
know that it's even been finalized.
Mr. Mihm. It is out.
Mr. Gregory. It talked very specifically about planning,
budgeting procurement, management, use, and ultimately
disposal. It's the total life cycle consideration. As you
connect mission and facilities, decisions start to be made
easily as you better understand the agency's mission.
Facilities programs that wrap around the business part enable a
proper facility for the business and the mission.
Mr. Horn. Mr. Mihm, I have got 23 seconds to go here. Is
there an identification on that OMB document you are saying now
that is policy?
Mr. Mihm. There is a capital programming guide that is out
from OMB. It was based on some of the work that we did looking
at capital planning and best practices.
Mr. Horn. How thick is the guide?
Mr. Mihm. Not an inch.
Mr. Horn. About 100 pages, 200?
Mr. Mihm. Yes, 100 pages.
Mr. Horn. Without objection, we will put as much of it as
we can in the record.
Mr. Mihm. We will get you that as well as our best practice
guide.
Mr. Horn. Please. That would be very helpful. Well, my time
is up. Let me now go to Mrs. Norton for 5 minutes of
questioning.
Ms. Norton. Thank you, Mr. Chairman.
I have a question about how to encourage essentially more
public-private partnerships, how we get there from here. First
let me ask you whether or not how important you think the
statutory basis you describe as one of the key elements in all
of these projects has been for the development of these
projects?
Mr. Mihm. It was Ms. Norton, it was absolutely critical.
None of the projects could proceed without a statutory basis.
Now, some of this was project specific. In other cases, for
example, the VA, and even more broadly with the Postal Service
and the creation of the Postal Service, it was more general
enabling legislation that allowed them to do it. But in all
cases, they had to have a statutory basis in order to move
forward with the partnership.
In terms more broadly, though, the question that you are
asking about, the incentives, there are actually two areas that
I think that we can really put some effort into and incentivize
agencies to start thinking strategically.
First is continuing congressional oversight. In very
pointed questions from the Congress to the agency that has
jurisdiction over the property or buildings that you're
interested in is, how are you thinking about this
strategically? How does this fit or not fit in with what you
are trying to achieve. Could it fit in with what you're trying
to achieve?
I think the case study of the Park Service and the growing
attention that the Park Service is giving to the issue of
deferred maintenance, certainly indicate that they care very
deeply about it. But I think Congress, and the persistent
questioning that Park Service officials they have gotten from
Congress in recent years, and I know we have done quite a bit
of work on that, has helped to bring that even closer to the
front of their minds.
I think the second thing that needs to be done is to create
incentive. This is something that Congress has already done by
passing the Government Performance and Results Act requires
agencies to, in their annual performance plans, think about all
the various resources which includes their physical assets and
how the assets are being used to achieve their goals.
So it requires some very reasonable questioning on the part
of Congress. When we're assessing those plans on the behalf of
Congress, we will ask how agencies are using their assets and
help determine if they are using them strategically.
So those two areas, questions from Congress, and certainly
our continuing work I think will help to elevate this in a
general sense on the agenda for agencies.
Ms. Norton. I note that there are some agencies that have
authority to enter into partnerships to do innovative leasing
arrangements. The DOD has it, VA has it, Park Service has it.
Now I can only what I can charitably call on anomaly, however,
in the Federal structure because there is one agency that has
real estate responsibility, that is GSA, doesn't have it.
So here you have Defense, VA, Park Service, you have other
missions who can enter into partnerships and proceed some of
the way, even before one even gets to the statutory point, and
may not need the statutory point in some instances, and the
GSA, which has control of the most Federal land, most Federal
buildings, is left there without any authority to do any of
this. I think that's part of responsibility for the horrible
waste we see down in Southeast Federal Centers.
They actually had a plan, had a very good plan, that there
would have been a mall there that would have encouraged Federal
employees to come there, and that hadn't done it, and that
hasn't brought agencies there. I wonder if you think the GSA
ought to have some of the authority that DOD, VA and Park
Service already have?
Mr. Mihm. We haven't looked at that directly, so I am going
to have to give you an, admittedly, a bit of a roundabout
answer on this, and that is that I note there's a lot of effort
that's going on in GSA now. And I think the statement for the
record from OMB alluded to some of the legislative package
that's being put together that would amend statutory
requirements for this disposal of property and liberalize the
authority to engage into partnerships.
I think one of the problems encountered government-wide,
and certainly this is shared at GSA, is the culture which in
the past has not viewed Federal property as an asset. They have
viewed them basically as sunken costs. For example, we may view
an office building simply as the building we work in but not
something that can be used to further the mission of the
organization.
And so this is why, when I mentioned one of the common
elements, is that, each of the partnerships we looked at, the
Federal agency found it necessary to establish a new
organizational unit and bring in new expertise that was used to
and comfortable in thinking strategically about how do we use
this, how do we use assets. And that's something that capacity
is needed at GSA and elsewhere on that.
Ms. Norton. Imagine GSA not even having the authority to
help agencies use assets, which is part of their bottom-line
responsibility in very many ways. So you'd think the GSA should
have some authority of the kind DOD and VA and Park Service
have now.
Mr. Mihm. Well, we haven't looked at it directly, but it's
something that I know that they are working on. If Congress
views it as making sense for others, it's certainly worthy to
explore for GSA, the government's largest landlord.
Ms. Norton. Thank you. Thank you, Mr. Chairman.
Mr. Horn. I thank you.
Let me just round out some of this testimony on the budget
process and the training process for property managers, if any,
and I'd be curious what both of your studies tell us in terms
of the degree to which we have a program somewhere in the
executive branch that we can upgrade the understanding and
provide the skills, if property managers don't have those
skills.
What did you find as you looked at this question? I mean,
are there certain essential skills that are needed in a
property manager to do the kind of things you are recommending
be done and you have already seen done in some areas?
So, Mr. Mihm who'd like to jump at this?
Mr. Gregory. What we experienced at the committee level is
the facilities people know the job. They know what they need to
do. They are good, well-intentioned people. They find their
hands tied when they come up with suggestions for savings or
implement programs that reduce their costs. It's not friendly
to the budgeting process. That's the one issue.
Mr. Horn. Well, is that a matter of they're afraid to make
the money or they feel they have to turn it back or what is it?
Mr. Gregory. My understanding, sir, is they are driven by
the budget process, that they have to turn it back, spend it or
lose it, and that maybe gets into an issue of not spending it
as well as you would like to. If you could pool money, if you
had a revolving account where funds could be pooled and used
for some of these nonroutine maintenance things that happen,
that would really allow them to manage their facilities better.
The overall thought was that the facilities maintenance
backlog and facilities issues in general could be much better
handled if there was relief in the budget area of how budgets
and dollars are allocated.
Mr. Horn. What you are talking about? Can they carry it
forward into a new fiscal year?
Mr. Gregory. Right. That's one of the issues that we talked
about.
Mr. Horn. And you would favor that, obviously, because it
gives flexibility?
Mr. Gregory. Some type of flexibility, but there is a
caveat to that, in not being able to carry funds forward or use
funds differently. But, more importantly, we identified the
ability to have a cost system that better identifies the true
cost of facility management, and that's one of the things
that's very obscure in a number of presentations that we heard.
Mr. Horn. Mr. Mihm.
Mr. Mihm. We found in a couple of various Mr. Chairman,
first, is that there was a need for real leadership. I know
it's easy to say that, but in the projects that we reviewed,
often they didn't get going or weren't even conceived until a
new woman or man came in and said, look, you know, we are going
to do things differently here. The old ways of doing business
just aren't going to work anymore.
The Postal Service, for example, had the authority to enter
into partnerships for a number of years until they got some new
leadership, not at the very top but in terms of managing their
assets. This manager began to think differently about how we
can do that. So leadership is key.
Second, there is clearly the need for skills and basic
business management, as opposed to traditional property
management. This includes skills like how to negotiate with the
private sector, draw up a business plan, and monitor the
execution of the business plan.
I mentioned in my opening statement about the importance of
how in the partnerships that we reviewed it wasn't the normal
contracting procedures where the government figures out
everything that it wants, sends out a request for proposals,
and then accepts the lowest bid. This was something where the
public and private sectors engage in a partnership. In this
partnership there's an awful lot of give and take that goes on.
These business plans are jointly developed, and that's a
different set of skills than you routinely find in Federal
asset management offices.
Mr. Horn. Well, on this point and the management of assets,
to what could be done on, one, the strategic plan that we now
require and, two, just in the general framework of the
Government Performance and Results Act, and what is your
understanding if, let's say the next round we got this pretty
pitiful last round from most agencies, hardly any that were
worth reading should that be worked in as part of it? Does it
need a change in the law to assure that it's worked in or is it
simply a matter of getting OMB to provide guidelines or
Congress in some way to provide guidelines? What's your
reaction on that?
Mr. Mihm. I think this is an area where we have the
statutory basis. The law is pretty clear about what Congress
was expecting in terms of the level of detail in the annual
performance plans versus the strategic plans. And OMB has
recently, with the capital programming guide and the revisions
to A-11, which is the circular that governs the preparation of
the President's budget, given agencies adequate guidance.
Nevertheless, when we reviewed both the fiscal year 1999
plans and the 2000 plans, the ones that came up here to
Congress in February, one of the consistent failures that we
saw in the plans was a lack of attention to how resources in
general, whether it be information technology, budgeting, or
assets, will be used to achieve the goals of the organization.
This is just a consistent theme that we have seen.
Even when we knew it was separate budget documents, that an
organization was going to be undertaking a large capital
project, you wouldn't see it reflected in the annual
performance plan.
At GAO one way that we're trying to contribute, is by
consistently sending these messages back to the agencies, in
both our audit reports and in the guidance that we issue. I
know in the evaluations that congressional staff was looking at
of the annual performance plans this year, that was one of the
factors that they were looking at as well.
I think it's just a matter more and more of agencies kind
of getting the message and that the fiscal pressures, the
pressures that are coming from Congress, the pressures that are
coming from OMB, I think we will see more progress over time on
this.
Mr. Horn. Mr. Turner, do you have some more questions you'd
like to ask? How about Ms. Norton? Chairman Franks, any more?
Well, anything else you'd like to add?
We're going to round out panel one, and if there is
something we have missed that you'd like to make an extra
comment on, feel free.
Mr. Gregory. Just in conclusion, that the title of our
report, the ``Stewardship of Federal Facilities,'' applies to
all levels. There has to be a better understanding of what
facilities means to the mission of the agency. We believe that
if our report is embraced with the key items and serving as a
guidance document will be a great first step.
Mr. Horn. Now, have you and the OMB sat down to discuss
that report?
Ms. Stanley. No, we haven't. I mean, OMB briefed the
committee during their deliberations, but there hasn't been
followup action.
Mr. Horn. Is there going to be followup with them?
Ms. Stanley. There's nothing planned. We'd be very glad to
do that.
Mr. Horn. Well, I was going to say, we ought to get a
letter one way or the other out of us and suggesting they sit
down and get the ideas in their bloodstream, as well as your
bloodstream and ours and GAO's. So, well, we will work that out
with staff and your own staff.
Well, we thank you both for very worthwhile studies and for
giving us that in-depth and overall view that is always needed
if something good is going to happen. So, thank you very much
for the work, and thank you very much for coming, presenting
this to us. We appreciate it.
The next panel is panel two, Mr. Randall Yim, the Deputy
Under Secretary of Defense for Installations of the Department
of Defense; Mr. Thomas Garthwaite, Deputy Under Secretary for
Health of the Department of Veterans Affairs, and Mr.
Garthwaite will be accompanied by Charles Yarbrough, the Chief
Facilities Management Officer, Mr. D. Mark Catlett, the Deputy
Under Secretary for Budget; and the next witness will be Mr.
Denis Galvin, Deputy Director of National Parks Service; and
Mr. Rudolph Umscheid, vice president, facilities, U.S. Postal
Service.
OK. Gentlemen, I think you were in the room, and your
testimony will automatically go in once we call on you, and we
need to swear you in. So if you'd stand, raise your right
hands, and those behind you that are perhaps going to testify,
please get all of them up. We have seven possible witnesses.
[Witnesses affirmed.]
Mr. Horn. OK. The clerk will note that all seven witnesses
took the oath and affirmed it.
We will now start with Mr. Randall Yim, Deputy Under
Secretary of Defense for Installations.
You got the, I think, the approach earlier. Your statements
were all fine. We have all read them; staff read them. We would
now like a summary, if possible, in 5 minutes. If you need to
go to 6 or 8, I'm not going to be offended, especially if you
spent a lot of work on it. But, basically, I go by the rule
that if they can't explain something in two pages, they don't
understand it. So I think you can do that.
But go ahead, Mr. Yim.
STATEMENTS OF RANDALL YIM, ACTING DEPUTY UNDER SECRETARY OF
DEFENSE FOR INSTALLATIONS, DEPARTMENT OF DEFENSE; DENIS GALVIN,
DEPUTY DIRECTOR, NATIONAL PARK SERVICE, DEPARTMENT OF THE
INTERIOR; THOMAS GARTHWAITE, DEPUTY UNDER SECRETARY FOR HEALTH,
DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY CHARLES
YARBROUGH, CHIEF FACILITIES MANAGEMENT OFFICER, AND D. MARK
CATLETT, DEPUTY UNDER SECRETARY FOR BUDGET; AND RUDOLPH
UMSCHEID, VICE PRESIDENT, FACILITIES, U.S. POSTAL SERVICE
Mr. Yim. Thank you, Chairman Horn and Chairman Franks and
distinguished members of these two subcommittees. I am very
pleased to be here today to discuss the Department of Defense
initiatives for reshaping our installation infrastructure to
support our changing military needs.
Secretary Cohen recently testified before the House Armed
Services Committee about the important role that our
installations play in our defense missions. Installations are
platforms from which diverse strategies and missions are
executed. They contain facilities and equipment for training
and mobilizing our forces and their communities where our
people live and work. Our installation programs must enhance
our readiness, our mission accomplishment and maintain a high
quality of life.
As most of you know, our military mission needs have
changed. We must be vigilant to assure that our installation
structure similarly changes to match these new mission
requirements. To this end, we are embarking on a series of
interrelated initiatives to reshape our installation
infrastructure. These include privatization of housing and
utilities, enhanced outleasing of underutilized real property
and facilities, competitive sourcing of noninherently
governmental functions, certain aspects of base operations, for
example, demolition of excess facilities, and construction
supporting improved standards and conditions for critical
facilities such as our barracks and dormitories. And let me
emphasize this, and, most importantly, authorization for two
additional rounds for base closure and realignment.
We need legislative authority for additional rounds of BRAC
now. Additional BRAC has proven to be the only fair, open and
realistic way that the Department of Defense can align its base
structure to support the military's changing mission
requirements and support operations.
We are actively seeking from Congress two additional BRAC
rounds in 2001 and 2005 to reduce what we estimate to be a 23
percent excess in our infrastructure requirements. We estimate,
and the GAO agrees, that we may save approximately $3.6 billion
per year through additional BRAC, and we sorely need to use
these funds on our enduring facilities to support high-priority
programs such as readiness and modernization, quality of life,
and all of the above.
BRAC, however, is only one initiative in a multipart
strategy to reshape the DOD base structure. I spoke earlier
about some. Let me highlight a few of these.
First, on quality of life and housing in particular. When
we embark on our various initiatives to reshape our
installation's infrastructure, we are not only interested in
saving costs but we are dedicated to maintaining mission
readiness and protection of the people that have served our
country. So quality of life and housing is a very important
program.
Last year, we established clear goals for improving the
quality of our housing. We directed the services to program
resources to eliminate the worst of the barrack conditions our
single service members endure, that's permanent party, gang
latrine barracks, no later than fiscal year 2008 and directed
the services to continue to implement the one plus one building
construction standard.
Based on established goals the service have also developed
plans to eliminate our inventory of inadequate family housing
by 2010.
Our housing privatization initiatives have progressed over
the last years. We've devolved more execution authority to the
services, while maintaining oversight within the Department. I
am committed to making this program work and to move the
projects to completion. They provide very sorely needed housing
for our service members and our families.
Next, is leasing of our facilities. The Department is
considering how to better use our fallow assets, both land and
buildings. Our challenge is to determine if we can realize the
unused economic value of a property at a given installation to
fund facility maintenance and revitalization. We are
recommending changes to our current leasing authority, Section
2667, Title 10, of the United States Code, that we believe
could result in better economic use of our assets, additional
revenues, as well as cost avoidance scenarios such as military
construction.
This initiative could result in upwards of $100-$150
million of annual revenue by the end of fiscal year 2005, but
this is very important. We are going to pursue this, but let me
again emphasize that $150 million compared to $3.6 billion of
savings from BRAC is no substitute for BRAC.
Before closing, let me address briefly two other areas.
The first is real property maintenance. For fiscal year
2000, we are requesting $5.2 billion for real property
maintenance, which is a 7 percent increase over last year's
program. Keeping our facilities in operational and safe
condition is an absolute high priority for the Department. As
you know, lack of proper maintenance, as other witnesses have
testified previously, and timely repairs leads to facilities'
failure that will jeopardize our missions and our readiness.
And we have also emphasized disposing or demolishing facilities
that we no longer can afford to maintain, that are excess to
our needs. And, again, closing bases will free up additional
real property and maintenance funds.
Second, let me voice my support for OMB's comments that our
proposed legislative changes on leasing, coupled with those
proposed by GSA and VA, will enhance the Federal assets across
the Federal Government. This is clearly a move in the right
direction.
As your subcommittees consider these changes, let me add,
however, one note of caution. The Department of Defense
currently has authority to implement enhanced outleasing that
is in part broader than that being considered by GSA and OMB,
and I would not want DOD to take a step backward as the rest of
the Federal Government moves forward in this important area.
Chairman Horn, Chairman Franks, thank you and committee
members, thank you for this opportunity to present the
Department's programs, and I'll be pleased to answer any
questions.
Mr. Horn. Thank you.
[The prepared statement of Mr. Yim follows:]
[GRAPHIC] [TIFF OMITTED] T2621.027
[GRAPHIC] [TIFF OMITTED] T2621.028
[GRAPHIC] [TIFF OMITTED] T2621.029
[GRAPHIC] [TIFF OMITTED] T2621.030
[GRAPHIC] [TIFF OMITTED] T2621.031
[GRAPHIC] [TIFF OMITTED] T2621.032
[GRAPHIC] [TIFF OMITTED] T2621.033
[GRAPHIC] [TIFF OMITTED] T2621.034
[GRAPHIC] [TIFF OMITTED] T2621.035
[GRAPHIC] [TIFF OMITTED] T2621.036
Mr. Horn. The next witness is Dr. Thomas Garthwaite, the
Deputy Under Secretary for Health, Department of Veterans
Affairs.
Dr. Garthwaite. Mr. Chairman and members of the
subcommittees, the Department of Veterans Affairs is the second
largest of the 14 cabinet departments and operates nationwide
programs of health care, assistance services and cemeteries for
veterans.
The Department's capital portfolio currently consists of
over 22,000 acres of land, 5,300 buildings, to the total of 140
million square feet of owned and leased space. This inventory
is spread over nearly 1,200 locations in all 50 States, the
District of Columbia, Puerto Rico, Guam, and Samoa. A large
percentage of the Department's capital assets are devoted to
providing health care to the Nation's veterans. In this
portfolio we have 1,700 historic buildings which require
special consideration and treatment.
A significant discordance between our actual capital assets
and our capital asset needs has developed in large part due to
the ongoing massive transformation of VA health care that began
in 1995. As part of this transformation, we have closed more
than 52 percent of our hospital beds. We've integrated the
management and services of 48 facilities into 23 systems of
care and have opened or are in the process of opening 272 new
community-based outpatient clinics, some built, many leased.
At least three factors contribute to the discordance
between our current asset array and our needs. First, the rapid
changes in the delivery of health care which require radically
different physical structures and significantly less space. The
rate of change in medical practice is far faster than the
capital asset cycle.
Second, the location of facilities is often outside the
veteran population centers which leads to inconvenience for
access for many veterans.
And third, the age of many of our facilities requires
constant investment to maintain function and is associated with
intrinsic barriers to efficiency.
To align our physical infrastructure to more effectively
support our current needs, we are in the process of
implementing a new strategic planning process beginning at the
local level. Each of our 22 geographic service areas will
establish a government community committee, including
membership representing veterans, the State, our academic and
business affiliates and our local leaders. The committee will
develop plans aimed at realigning any imbalance between VA
capital assets and veteran needs.
The process will emphasize the use of data as the basis of
recommendations and will encourage the suggestion of
alternative ways to deliver service, enhance access and improve
the quality of care.
Following such strategic review, any proposal for capital
investments are documented in a capital asset plan for which we
currently follow the principles of the OMB Capital Programming
Guide. Proposed investments are reviewed by the VA Capital
Investment Board in Washington to assess their linkage to
strategic planning budget and performance goals. The board then
provides an analysis to the Secretary about each proposal's
viability for inclusion in our VA capital plan and our request
of the VA budget to OMB.
While the Department uses all of the traditional legal
authorities available to Federal agencies for managing and
disposing of its assets, two unique efforts may be of interest
to the committees. The first has already been described in some
detail by the first panel, and that is our enhanced use leasing
program. It is unique among Federal agencies and has recently
been recognized by the GAO as an example of a key element in an
efficient and effective property management program.
The Department has used this authority to consolidate
operations and dispose of unneeded facilities, to co-locate
Veterans Administration office space with VA medical center
space, to obtain child care services for employees, to expand
parking facilities for veterans and for employees, and to
redirect operational funds from managing golf courses into
direct medical care. In doing so, these leases have achieved
significant cost savings, have enhanced employee recruitment,
have added substantial private investment to the Department's
capital assets, have provided new long-term sources of revenue
and have created jobs and tax revenues for local economies. My
full statement provides examples of our use of this authority.
Finally, the Department is also proposing a pilot program
to encourage and streamline the conversion of the value in the
properties we no longer need into service for veterans. This
proposal would allow the VA to dispose of unneeded properties,
including land structures or equipment associated with those
properties by sale, transfer or exchange, and to reinvest the
bulk of the proceeds to support its health care program. The
pilot would be restricted to 30 dispositions over its 5-year
life.
Mr. Chairman, the turmoil on health care you read about
daily is all about a quest to define and provide value.
Similarly, our capital asset program seeks value for veterans
and for taxpayers. We believe we are making progress, but would
welcome creative new options and incentives. We'd be pleased to
answer any questions you and the committee may have.
Mr. Horn. Thank you very much for being so punctual. You
have 2 seconds left.
[The prepared statement of Dr. Garthwaite follows:]
[GRAPHIC] [TIFF OMITTED] T2621.037
[GRAPHIC] [TIFF OMITTED] T2621.038
[GRAPHIC] [TIFF OMITTED] T2621.039
[GRAPHIC] [TIFF OMITTED] T2621.040
[GRAPHIC] [TIFF OMITTED] T2621.041
[GRAPHIC] [TIFF OMITTED] T2621.042
[GRAPHIC] [TIFF OMITTED] T2621.043
[GRAPHIC] [TIFF OMITTED] T2621.044
[GRAPHIC] [TIFF OMITTED] T2621.045
[GRAPHIC] [TIFF OMITTED] T2621.046
Mr. Horn. Mr. Denis Galvin, the Deputy Director of National
Park Service, Department of the Interior.
Mr. Galvin. Thank you, Mr. Chairman. Since its
establishment in 1916, the National Park System has grown to 80
million acres of land and 378 national parks. There are 16,000
structures in those parks. Some have none, and some have
thousands. We have building capacity frequently that exceeds
the requirement for park operations. These are frequently
historic buildings. We have an obligation to try and preserve
them.
We have a certain amount of authority to enter into
agreements with private or other government entities to help
pay for rehabilitation, maintenance and operation of structures
through leasing, cooperative agreements and partnerships. The
GAO report previously cited mentions our experience in San
Francisco at Fort Mason and the Presidio.
There, a good real estate market has allowed us to enter
into some successful partnerships with nonprofits and for-
profits to both rehabilitate and operate rather extensive
structures that result in a savings to the government. Fort
Mason was part of the Presidio turned over to the Park Service
immediately upon the creation of Golden Gate. That was in the
early 1970's. In an effort to reduce the rather significant
operating costs associated with the major pier structures on
San Francisco Harbor, the then superintendent made approaches
to nonprofit groups to provide cultural educational and
recreational activities to the park. Ultimately, that became
the Fort Mason Foundation which represents a number of
nonprofit groups that lease space at the site.
Since 1972, the National Park Service has spent about $3.5
million dollars on the rehabilitation while the Fort Mason
Foundation has spent $13 million. Operating expenses for the
Park Service are about $250,000 a year; for the foundation,
about $2.3 million. A more recent example cited in the GAO
report was the leasing of the old Letterman Hospital, again at
the Presidio within Golden Gate National Recreation Area. That
complex was transferred to us in 1994.
Legislation enacted in 1993 by the Congress, specifically
aimed at the Presidio, allowed us to lease the Letterman
Complex. Through a competitive procedure, we selected the
Thoreau Center Partners, a for-profit real estate partnership,
to lease and rehabilitate the building. That has been
successful. The partnership generates $170,000 thousand
annually in rents and fees, and is able to pay off a commercial
loan through subtenant rents.
There are other examples throughout the system where we
have avoided costs, at least, in terms of managing properties
within the national park system. The Boston National Historical
Park was created to allow cooperative agreements with a series
of owners of undeniably nationally significant historic
buildings. Faneuil Hall, which is owned by the city of Boston,
still maintains a commercial operation on the first floor, but
through a cooperative agreement we interpret it to the public.
Similarly, a series of missions at San Antonio remain part
of the Archdiocese of San Antonio, but through agreements with
the archdiocese we spend money on preservation techniques there
and also interpret them to the public.
Some of our attempts to do this have not been successful.
You mentioned the south side of Ellis Island where we've three
times tried to find private interests to occupy and
rehabilitate those buildings. Thus far we have been
unsuccessful. We are trying a fourth time.
Also, at Sandy Hook, which is part of Gateway National
Recreation Area, we have tried a number of times to find
tenants for a series of historic buildings there. We currently
have a contract for a new market analysis and seem to be
generating considerable interest in a mixed-use approach to
that complex.
We have a number of authorities that allow us to do this,
and I just jotted them down here. Some of them are specific to
parks and some of them are general. We have a general authority
to accept donations. We have general authority to enter into
cooperative agreements and some specific ones. Concessions
contracts are important. In many instances, the concessions
that provide public services in parks, restaurants, lodging,
are in government buildings but under contract to the
government.
We have authority to lease historic buildings under the
National Historic Preservation Act. We have some general
leasing authority, just passed by Congress, that liberalizes
our ability to lease nonhistoric buildings, and then as I
mentioned there are specific provisions in individual park
legislation.
Another interaction we have with Federal property laws is
the Federal Lands to Parks program which allows localities to
accept Federal surplus property to turn into parks and open
space in perpetuity. Since 1949 the National Park Service has
deeded more than 1,300 properties totaling approximately
144,000 acres to State and local governments.
That concludes my summary, Mr. Chairman.
[The prepared statement of Mr. Galvin follows:]
[GRAPHIC] [TIFF OMITTED] T2621.047
[GRAPHIC] [TIFF OMITTED] T2621.048
[GRAPHIC] [TIFF OMITTED] T2621.049
[GRAPHIC] [TIFF OMITTED] T2621.050
[GRAPHIC] [TIFF OMITTED] T2621.051
[GRAPHIC] [TIFF OMITTED] T2621.052
[GRAPHIC] [TIFF OMITTED] T2621.053
[GRAPHIC] [TIFF OMITTED] T2621.054
[GRAPHIC] [TIFF OMITTED] T2621.055
[GRAPHIC] [TIFF OMITTED] T2621.056
[GRAPHIC] [TIFF OMITTED] T2621.057
[GRAPHIC] [TIFF OMITTED] T2621.058
[GRAPHIC] [TIFF OMITTED] T2621.059
Mr. Horn. Thank you very much. The last witness on this
panel is Mr. Rudolph Umscheid, vice president of facilities,
U.S. Postal Service. Welcome.
Mr. Umscheid. Good morning, Mr. Chairman and members of the
subcommittee. I'm Rudy Umscheid, and I'm responsible for
managing the design and construction and all real estate
activities of the U.S. Postal Service. Joining me today is Mr.
David Eales who is the manager of Realty Asset Management
Division of our facilities organization; more simply put, he is
responsible for promoting the public-private partnership
endeavors for the disposition of underutilized or excess postal
properties.
The U.S. Postal Service owns and leases more than 37,500
buildings to provide universal mail service. Our building
inventory is in as good a shape as ever. However, it is a
constant challenge to keep our real estate assets up to date.
Continued population growth and increasing mail volume create
the need for additional space. In addition, many of our older
buildings are not suitable for today's mail processing methods.
We also must keep our facilities in good repair and manage
our leases to ensure continued occupancy of the facilities we
rent. In these efforts, we involve the local community in
decisions regarding the location of any new facilities. With
more than 700 new or replacement facilities occupied each year,
we have a good track record in this area, but it can be
difficult to get consensus on some locations, and for our
processing facilities we have problems finding sites which are
suitable for our operation requirements and acceptable to local
residents.
Last year we spent $2 billion on new facilities in upgrades
to existing facilities and paid over $660 million in rent. To
accomplish our primary mission, Facilities has a nationwide
staff of only 500, supplemented by employees at the local level
who administer some of our smaller repairs. We also have a
staff of 30 that's devoted exclusively to the disposition of
our excess assets.
With such an active program to obtain additional space
needed to serve our customers, we find ourselves with former
postal facilities, and sites which are underutilized and excess
to our needs. The Postal Service has a statutory authority to
maximize its excess real estate and to reinvest its proceeds in
postal operations.
When we have vacant space in our buildings, we often are
able to lease this space to other organizations. We work
closely with the General Services Administration to identify
space in our facilities suitable for other government agencies.
In fact, we currently receive some $38 million in rent from our
public and private tenants.
When properties are excess to our needs, in most instances
we simply sell the property. Some assets, however, lend
themselves to development because of the unique aspects of a
property or their location in commercial districts. Since we
lack the expertise to develop and manage these properties, we
have entered into a number of innovative and effective
partnerships with the private sector. In these situations, we
work closely with local public officials and historic
preservation groups to make sure the project meets their needs
as well. Two of these projects, the Grand Central Station
postal unit in New York City and the Rincon postal facility in
San Francisco were highlighted in the February 1999 report of
the General Accounting Office. In my prepared testimony, I have
listed a number of other examples.
Effective use of surplus postal real estate generates
revenue which helps keep postage rates low. Such use also
benefits the community because it contributes to a reuse of
former facilities, many of which are historic buildings in
downtown locations. The Postal Service is proud to be a leader
in the management of real estate within the Federal Government.
Mr. Chairman, that concludes my testimony. I'd be glad to
answer any questions you or your subcommittee members might
have. Thank you very much.
[The prepared statement of Mr. Umscheid follows:]
[GRAPHIC] [TIFF OMITTED] T2621.060
[GRAPHIC] [TIFF OMITTED] T2621.061
[GRAPHIC] [TIFF OMITTED] T2621.062
[GRAPHIC] [TIFF OMITTED] T2621.063
[GRAPHIC] [TIFF OMITTED] T2621.064
[GRAPHIC] [TIFF OMITTED] T2621.065
[GRAPHIC] [TIFF OMITTED] T2621.066
[GRAPHIC] [TIFF OMITTED] T2621.067
[GRAPHIC] [TIFF OMITTED] T2621.068
Mr. Horn. I thank you very much. Chairman Franks, any
questions?
Mr. Franks. Mr. Umscheid, when you enter into these
development proposals, what is the Postal Service's target
return strategies, if any?
Mr. Umscheid. We evaluate each opportunity on its
individual merits. We balance risk and reward. Our mandate from
the Board of Governors is that we are not in the development
business. We are not in a position to take high risks. So, our
returns tend to be more modest, but have an internal rate of
return of 10 to 12 percent depending on the particular project
or opportunity.
Mr. Franks. Could you elaborate on some of the proposals
regarding the GSA?
Mr. Umscheid. Well, I think if I understand clearly, I
think we are looking to partner whenever possible.
Mr. Franks. I'm sorry; particularly as it relates to how
scoring might make those kinds of arrangements more difficult?
Mr. Umscheid. We are looking for opportunities to partner
with the GSA and, in fact, have a very good working
relationship with them. In many instances, we have facilities
that are suitably located where we have excess space, and they
may have the tenancy of another agency who might occupy that
space, and so we would like to find creative ways where we
might partner; we have the building, they bring the tenant, and
we see if we can find an opportunity through the private sector
investment, particularly in the area of financing. We don't
want to invest postal dollars in a real estate opportunity.
The scoring impacts them and us ultimately in that we have
financeable leases and tenants have to be prepared to make
long-term commitments, 15-20 years or more to justify the
investment. Scoring, which in effect, looks at leases above a
certain size, and takes them on a net present value basis,
restricts their ability to make those investments.
Mr. Franks. Thank you, Mr. Chairman.
Mr. Horn. Gentleman from Texas, Mr. Turner, 5 minutes.
Mr. Turner. The occasions I have had to have contact with
the Postal Service have convinced me that you do have a very
good real estate property management operation in the Postal
Service, and I might ask, I mean, is it correct that you have
the legal authority to do more things than most Federal
agencies have? I mean, it seems like you have a great deal of
flexibility that you are able to use. Are there some
characteristics about your authority that make your real
property management options more available than perhaps the
rest of the agencies of the Federal Government?
Mr. Umscheid. I don't know whether we have more. I think we
possibly have more flexibility and leeway because we are a
revenue-producing entity. So, clearly, having money, it's a lot
easier to be a player when you have money to move forward on
opportunities, and I think that's where we are continuing to
try and move toward the private sector model of creative
structures with business to recycle our buildings. Having
personally come from the private sector, I find that there are
no restrictions.
One other area that comes to mind is that there are
limitations in our borrowing capability. We have to do it
either internally or to borrow through the Treasury. Had we
more flexibility to look at other financial markets,
particularly at a time when interest rates are low, possibly
that would enhance our opportunities.
Mr. Turner. Well, as I say, it does impress me, the speed
with which you seem to be able to move with a project when the
decision is made to do so. It seems to show a great deal of
innovation that has come to the Postal Service that perhaps has
not been able to be felt by the other agencies as well.
I have one question for Mr. Garthwaite about the operations
of the VA. It seems that you have been able to use these
enhanced-use leases very effectively, but you also mention that
you wanted to do a pilot asset disposal program, and I guess
what I'd like for you to tell us is what kind of assets do you
have on hand that you need greater flexibility to dispose of?
Give us some examples.
Mr. Garthwaite. Sir, we have, we have 172 hospitals,
approximately, that are often sited on large campuses that
include a lot of different outbuildings, many of which were
part of a previous era of health care delivery and different
functions for the Department of Veterans Affairs. Some of our
facilities are located on Old Soldiers' Home, dating back to
the Civil War, and we have accumulated over time a myriad of
different kinds of buildings, a lot of them support buildings,
which serve a variety of purposes.
We now have moved into a dramatically different way of
delivering health care, which is more outpatient with less time
spent in hospitals waiting for diagnostic tests, more done by
minimally invasive surgery and other procedures. These changes
have left us with hospital and other buildings on campuses that
just simply are not needed. These things do require enough
maintenance to keep them either operational or keep them from
falling down.
Mr. Turner. You proposed to be able to dispose of 30
properties over a 5-year period, and you need congressional
authority, you need a law passed to do this. Is the major
element of the statutory change you need to allow you to then
keep the proceeds of what you generate from the disposed
properties?
Mr. Garthwaite. Right. It's a tremendous undertaking to do
the administrative details to allow disposition of property to
occur, including the selling of the plan in the local
community. And the costs of entering into a project are largely
personnel related; i.e., it's an extra job for which you would
see no appreciable benefit, unless we give them that local
incentive. The previous panel spoke to that well.
Mr. Turner. Thank you very much.
Mr. Horn. I thank the gentleman. I now yield my time of 5
minutes to the gentleman from California who will also have his
5 minutes following that if he wishes, Mr. Ose.
Mr. Ose. I thank the chairman. With great respect, I would
like to converse with Mr. Yim about a particular project in our
area related to a BRAC. It's nice to see you.
Mr. Yim. Nice to see you, sir.
Mr. Ose. Mr. Yim used to work in Sacramento, and much as
when Custer was called to the VIA, he was called to Washington.
Expecting to return, we will deal with that tomorrow. That was
7 years ago and McClellan has suffered since your departure
from what I would call a less degree of attention. You were
very good. Not much has happened since you left.
I am very concerned about the manner in which we are
proceeding with the reuse of McClellan. I know the local
authorities have now selected a master development partner as
of Tuesday evening, and they're going to work forward on a plan
for the reuse of the base, hopefully by August.
My question really delves down to how do we facilitate the
transfer of properties on McClellan in a timely fashion?
There's over 1,000 different structures there scattered about
the base, as you know. Right now, the transfer process takes
about 120 days for any single building. How do we change that?
Are there requirements that we in Congress can give to you and
the administration to facilitate the transfer? There's 26,000
transactions that have to occur at McClellan between now and
July 13, 2001. How do we get that done?
Mr. Yim. I will be meeting with the delegation from
Sacramento on Monday to discuss some of these issues with
Secretary Dishner of the Air Force, Deputy Assistant Secretary
Dishner of the Air Force.
I believe that we've set a good framework at McClellan for
rapid transfer by completion of some of the prerequisites to
property disposal, the compliance with the National
Environmental Policy Act and the California counterpart, CEPA.
One of the concerns we have here is the environmental condition
of many of our military bases, and McClellan in particular as a
Superfund site, will limit the ability to transfer title under
the Federal Superfund statutes until clean-up progresses to a
certain area. I think we need to be vigilant to assure that the
clean-up schedules are adhered to, that those milestones are
met so that those prerequisites to transfer are completed in a
timely manner and do not delay concrete reuse projects.
Mr. Ose. Let me ask a question. I want to make sure I
understand. Federal law right now says that in a BRAC, if we're
going to transfer possession or occupancy, then the property
prior to transfer has to absolutely comply with the not being a
part of Superfund?
Mr. Yim. No. It actually breaks down to two issues, a
transfer of title versus a transfer of possession. Transfer of
fee title to the property could not occur until the clean-up
has progressed, in the words of the statute, until, ``all
remedial action has been taken.'' That has not been interpreted
to be when the last ounce of contaminant has been removed from
the soil but rather when the remedy is in place and
demonstrated to be operating correctly.
If I recall, because of the significant groundwater
contamination, we expected it would take a year, something on
that order of magnitude, for that trigger to be reached at
McClellan so that title to property could be conveyed. However,
in the interim there can be leasing of the property with
appropriate restrictions to protect human health and the
environment. What I would be very interested in, is to be sure
that both the Department of Defense and the Air Force are
leaning forward correctly to accelerate interim leasing of the
property where appropriate, even though title may not be able
to be transferred.
Mr. Ose. The transfers or the leases, whether it be fee
simple or occupancy, how long is that taking in a typical BRAC
situation?
Mr. Yim. Well, again, transfer of title is dependent upon
clean-up actions. So one of the things we are doing here at the
Department since I have been here, is to raise the level of
priority that other members of the Federal family give to base
reuse as we ask the Department and the services to provide.
So, for example, for the regulatory agencies such as the
U.S. Environmental Protection Agency or State counterpart
agencies, we are working with them really to raise the level of
visibility and emphasize the importance reuse has in job
regeneration and job replacement.
Typically, it could take on the order of 2 years to proceed
through all of the wickets to allow interim leasing decisions.
I think we are able to shorten that substantially at McClellan
and other Department of Defense facilities by being more
aggressive on that, sir.
Mr. Ose. How many transactions per day, if you will, are we
currently completing at McClellan in terms of the 26,000 that's
been identified, whether they be paperwork transfers between
agencies and what have you? Of those transactions that the Air
Force has identified as being necessary to complete the
closure, how many of those per day are being done?
Mr. Yim. In all honesty, I'm not familiar with the 26,000
item transactions that you have raised, but I'd be happy to
take that for the record, sir, and try to get back to you. I'm
just not familiar with that particular metric.
Mr. Ose. The source of my information is General Weidemer,
who is commanding officer out there. So it may be paperwork
transfers, transactions and what have you, but again, if we're
going to do 26,000 of them, we got a little over 800 days,
that's 30 a day, in addition to everything else you're doing.
Mr. Yim. Again, I will be happy to look into that, sir, and
provide you an answer for the record.
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] T2621.069
Mr. Ose. All right. Do you have any information relative to
other bases that are being closed as to how long it has been
taking to transfer a structure within the base?
Mr. Yim. Typically, it's on the order of about 12 to 18
months, and I agree with you that that is too long. We need to
be able to be smarter in how we transfer property. I believe
firmly, and I believe the services now with their experience
believe that the key is rapid and smooth transition of the
property. This is not a real estate transaction in the sense
that we're trying to maximize money from the disposal of the
property. When we focused on that in 1988, then the delays were
really enormous at that time.
Since 1993 as we began to emphasize smooth transition,
keeping the property in productive use, getting it back onto
the civilian property tax rolls, as opposed to negotiating for
every last dollar from the local community, I think we have
seen a great speeding up of the process. You may know, sir,
that we are proposing legislation to Congress to accelerate
that by seeking no-cost conveyances of properties for future
rounds if the property is to be used for job generation
purposes.
Mr. Ose. On a relative scale, has McClellan been a success
story in the manner in which it has proceeded toward closure?
Mr. Yim. I think that many of the processes that we have
employed at McClellan are models for the Department of Defense.
We greatly shortened processing time by combining the NEPA, the
Federal environmental requirements, planning requirements, with
CEPA, the California counterparts, and we arrived at a NEPA
document in approximately 12 months when those typically take
about 2 years. I think that was dramatic improvement. We're
able to reach agreement on economic development conveyance in
that same 12-month timeframe when typically it takes 2 years,
2\1/2\ years, to do those negotiations.
There is a master caretaking cooperative agreement there in
which we were working toward a concept of a hot turnover of the
assets, so that as the military draws down capabilities, rather
than to have the asset go dead, there is a concurrent turnover
of base operation supports so that the local community is
familiar with how to run the facilities, the quirks of the
facilities, gets other tenants and private sector entities in.
So I think those are innovations.
In terms of reuse, Sacramento, as we both know, was very
hard hit with three major closures since 1988. So in terms of
recovery, I think that Sacramento has had a harder road than
some other communities where they don't have cumulative
economic impact.
Mr. Ose. Is the methodology that's being employed at
McClellan the model that you're expecting to use on these
future rounds?
Mr. Yim. Well, since I was involved in some of that
methodology, I would have to say yes, because I believe that it
worked properly, and I would like to try to infuse similar
techniques into future rounds.
Mr. Ose. That brings me to my basic question, and I'm
familiar with the proposal on the economic development
conveyances for some transfers at zero cost. In a situation
where a community such as Sacramento has been hit as hard as it
has been hit, and where we have bent over backward trying to
create an innovative process which you've recognized as being
better than the norm, why would we not reward that community
with, for instance, the pilot project of the zero cost
conveyance?
Mr. Yim. We actually have a different legal structure where
we're dealing with pending or anticipated economic development
conveyances and where the economic development conveyance has
already been executed, as in the case of McClellan. So the
Department of Justice and our counsel indicate that to change
or renegotiate already executed transactions, we would have to
either have replacement or additional consideration or maintain
the same present value.
I will say that we have supported and we are going to be
proposing that the services be afforded greater flexibility for
already executed economic development conveyances, provided
again the results are consistent with the new legislation, and
that the revenues would be used for job creation, reinvestment,
either in the installation or in the surrounding community.
So, yes, I am as part of the legislative packet, seeking
some sort of equitable relief for those communities that were
aggressive and stepped forward in partnership with the
Department and the services to proceed down the path before
this new announcement for a change in the legislation.
Mr. Ose. Mr. Chairman, Mr. Franks, am I on my first 5 or
second 5 minutes or have I used it all up? I will be back.
Mr. Franks [presiding]. Would the gentleman like another 2
minutes to ask----
Mr. Ose. Go around again? No, I can't, but I would like
more time, but 2 minutes is not sufficient, so let's go on.
Mr. Franks. The panel, I know, will be willing to respond
in a timely fashion to any further inquiries pertaining to this
matter from the gentleman from California.
Mr. Yim. Yes, sir, certainly.
Mr. Horn. If I may say, in terms of just general policy, we
will submit written questions perhaps to all of you on each
panel. Just remember you are under oath in making answers to
that, so we will send the questions over.
Mr. Ose. I will take I appreciate the chairmen's total
courtesy to a freshman. I have one other question, if I may?
Mr. Franks. Please followup.
Mr. Ose. At McClellan there are certain pockets of the base
that are very similar in characteristics, like the residential
here and the recreational there and the industrial over there
and the microelectronics down here and blah, blah, blah. One of
the difficulties that I have been able to pick up is that the
manner in which the individual structures within each of those
pockets is transferred is unique, that being that this
building, which might be right next door to a very similar
building, has its own 120-day requirement.
I would like to see us bundle similar buildings so that
rather than have 1,000 transactions of four different types of
buildings, we have four transactions of 250 buildings each. I
think that would certainly expedite what we're trying to do
here, which is get these things back on the private roll,
available for private use.
Has the Department given any thought or explored this
particular aspect?
Mr. Yim. I would hope that the policy is already being
implemented. The purpose of our specialized services teams is
to typically identify what the problem is that each structure
has to be screened for any environmental hazards, and a finding
of suitability to transfer a lease which is dependent upon any
site-specific characteristics has to be performed. If everybody
starts from scratch without establishing a baseline in advance
it can be very time consuming.
I will continue to encourage the services to create some
baselines. Essentially 80 percent of the work is common
throughout a particular area. That can be done, and then any
particular characteristics of a building could then be assessed
relatively quickly, and I will encourage the services to do
that.
Mr. Ose. Is the baseline being established at McClellan?
Mr. Yim. Yes, I believe it has already been established at
McClellan.
Mr. Ose. For the various environmental challenges in any
particular structure?
Mr. Yim. I cannot say that universally, but I believe for
the main it has already been established.
Mr. Ose. We will followup with a written question.
Thank you, Mr. Chairman.
Mr. Franks. I'd like to thank the members of the panel for
coming today and being so helpful to us during the course of
the hearing.
I'd like to now call the third panel up to the witness
table. We now have Mr. G. Martin Wagner, the Associate
Administrator of the Office of Governmentwide Policy, General
Services Administration, who will be accompanied by Mr. Robert
Peck, Commissioner of the Public Buildings Service and Mr.
David Bibb, the Deputy Associate Administrator for the Office
of Governmentwide Policy. Consistent with the rules governing
this particular subcommittee joint subcommittee hearing, it is
Chairman Horn who is empowered to swear in the witnesses. So he
is going to undertake that function at this point.
Mr. Horn. These gentlemen know the routine. Raise your
right hands.
[Witnesses affirmed.]
Mr. Horn. The clerk will note that all four witnesses have
affirmed the oath.
Mr. Franks. Gentlemen, we welcome you. Mr. Wagner, please
begin.
STATEMENT OF G. MARTIN WAGNER, ASSOCIATE ADMINISTRATOR, OFFICE
OF GOVERNMENTWIDE POLICY, GENERAL SERVICES ADMINISTRATION,
ACCOMPANIED BY ROBERT PECK, COMMISSIONER, PUBLIC BUILDINGS
SERVICE; AND DAVID BIBB, DEPUTY ASSOCIATE ADMINISTRATOR, OFFICE
OF GOVERNMENTWIDE POLICY
Mr. Wagner. Good morning, Chairman Franks and Chairman Horn
and distinguished members. Thank you very much for inviting us.
I am Marty Wagner, Associate Administrator for Governmentwide
Policy at GSA. I'm accompanied by Robert Peck, the Commissioner
of the Public Buildings Service, and David Bibb, who works as
my Deputy Associate Administrator for Real Property Policy.
Our mandate in governmentwide policy is to focus on working
out ways that the government does a better job of managing
itself, and that certainly includes real property, and I would
like to emphasize that's real property in all Federal agencies,
not GSA's Public Building Service. It's also increasingly clear
that real property is an extremely important strategic asset
for effective government management. It's also one where we
need to do a lot of additional work.
I noted that some of the earlier figures given in the
hearing, we seem to have radically different numbers about how
many dollars we have invested in real property. Part of that is
issues of methodology, but I think part of what is also
indicative in that spread is we need to be thinking more
systematically about this as an economic asset.
In our 3 years of existence in governmentwide policies, I
would like to mention that we have had some significant
accomplishments in real property management. We have
demonstrated that a collaborative policy development model
involving all stakeholders is a good way to develop policy.
We have promulgated a set of asset management principles as
an attempt to get this more strategic look at this as a
strategic asset. We have developed performance measures in
working with the private sector for real estate management. We
have proven that, if you go into the regions, leave Washington,
DC, and go out into the real country and get with government
agencies, that if you find opportunity to put agencies together
on real property, there are opportunities for agencies to
become more effective and to save money for the taxpayers.
And, finally, we have to manage an information technology
system that is used by many agencies for real property
management. Its use is growing. And that is also an effective
strategic tool.
Nonetheless, I have to agree with the panelists earlier
that we have many problems. We lack a strategic focus in real
property management in many areas. Too much of the Federal
inventory is deteriorating or underutilized. Management
incentives are often at odds with good property management. The
focus of the law is at the end of the useful life of real
property assets when the government no longer needs the asset
rather than when we do need the asset. This is also actually an
issue in personal property as well.
Agencies have responded to this in many cases with work-
arounds to deal with those problems, but those are, at best,
piecemeal solutions. And we think a more global approach to the
government as a whole is warranted.
We expect to be proposing very soon legislation to address
these problems. We will focus strategically and on assets
during their useful live. We want to bring in more flexible
tools such as have been mentioned today, out-leasing, use of
public-private partnerships, and I would like to also mention
that in our discussions with many of the players, including the
Office of Management and Budget, our approach to this has not
been an approach to repealing the scoring rules, but to do this
within the scoring rules. Those discussions continue. We would
also like to improve incentives on individual managers with and
agencies by using retention of proceeds.
And, finally, on issues like the McKinney Act, we feel that
a better way to deal with the goals of the McKinney Act would
not deal with properties on a transaction-by-transaction basis
but through a share of the overall proceeds from property
disposal program.
These proposals that we will be making are consistent with
the recommendations of the General Accounting Office and the
National Research Council. We expect them to lead to more
effective real property management, lower cost to the taxpayer,
as well as an increase in the number of properties available
for disposal.
Mr. Chairman, I would be happy to answer any questions you
might have.
[The prepared statement of Mr. Wagner follows:]
[GRAPHIC] [TIFF OMITTED] T2621.070
[GRAPHIC] [TIFF OMITTED] T2621.071
[GRAPHIC] [TIFF OMITTED] T2621.072
[GRAPHIC] [TIFF OMITTED] T2621.073
[GRAPHIC] [TIFF OMITTED] T2621.074
[GRAPHIC] [TIFF OMITTED] T2621.075
[GRAPHIC] [TIFF OMITTED] T2621.076
[GRAPHIC] [TIFF OMITTED] T2621.077
[GRAPHIC] [TIFF OMITTED] T2621.078
[GRAPHIC] [TIFF OMITTED] T2621.079
Mr. Franks. Mr. Wagner, thank you very much. We are going
to be brief because we have just been summoned to the floor for
a vote.
But I would like to ask, what do you mean in your testimony
by judiciously selected cases for the application of long-term
outleases for public-private partnership.
Mr. Wagner. Fundamentally, we would see this as one tool in
the real property toolbox, so it won't apply to all properties.
The properties where we think they would make the most sense or
that they do make sense is one where there is a continuing
government need for the property if the government doesn't need
the property anymore, then we should simply dispose of it one
in which there is value to the private sector, a continuing
need where we can work out a deal that benefits both the
private sector as well as enables the government to continue to
do its job more effectively.
Mr. Franks. My colleague, Mr. Horn, any questions for Mr.
Wagner?
Mr. Horn. Just one question, and that is the McKinney
Homeless Assistance Act. It requires that the surplus property
be screened for use for the homeless prior to the disposal.
Since fiscal year 1990, I am told only 39 cites have been
transferred for use by the homeless under this authority. Do
you think this act is achieving its intended purpose?
Mr. Wagner. I would I think the reason we are proposing, or
we will be proposing a change to the legislation is that we
think a better way to do this is not to put McKinney Act
processes in the middle of every single individual transaction,
which tends to be slower, and, in fact, create incentives to
have more properties disposed of in the first place; and then
take some fraction of those proceeds and apply those to
benefiting the homeless.
Mr. Horn. The witness from the Department of Veterans
Affairs suggested an approach requiring that 10 percent of the
proceeds from Federal property disposal always be transferred
to the Department of Housing and Urban Development for the use
of the homeless assistance groups. What do you think of that
approach?
Mr. Wagner. I would hesitate to go with any specific
percentage. So I really I don't have a good feel. Perhaps----
Mr. Bibb. Well, Mr. Chairman, we are discussing with OMB
what that percentage ought to be. It certainly should be a fair
amount. I don't think we would want to see a shortchanging. But
at the same time, we are trying to balance what we are doing to
protect the incentives to the Federal agencies. So as Mr.
Wagner says, the exact percentage hasn't been determined.
Somewhere in the 5 to 10 percent range, I think we are talking
around those numbers. And that will be something we will be
pursuing.
Mr. Horn. Well, that approach makes sense to me for this
reason. I think you all know we get tied up in knots, taking
month after month after month. Many of these groups have never
run a housing project before. They overestimate. They are
wonderful people with, I'm sure, pure motive. But the fact is
they can't run it, and they often fail. They would be better
off if HUD had a pot of money where they could deal with
housing in some innovative way and mainstream the people rather
than have this is the homeless project. It hasn't worked. But
it takes lawsuits, it takes all the rest of this nonsense to go
on. I think we would be doing more for the homeless if we took
the VA approach to this. That is my only view on this, Mr.
Chairman.
Mr. Franks. I concur. Mr. Peck, if I might real briefly,
what is the current status of the redevelopment of the Boston
City Plaza?
Mr. Peck. That is a very good question. And I am not sure
that anybody in Boston knows the answer. The John F. Kennedy
Federal Building is on the Boston City Hall Plaza and is there
pursuant to an urban renewal scheme which was executed some
time in the mid to late 1960's. The city has proposed doing
something to make the plaza more lively. We have been trying to
cooperate.
I will tell you in short, we took a look at a public-
private partnership proposal to redevelop the low-rise portion
of the JFK building, in part because where our building was
situated and where the city wanted to build things, it didn't
quite work, and we thought that maybe realigning those
boundaries and moving our space differently around in the plaza
might work to the benefit of both parties.
The bottom line that is interesting is that the numbers
just don't work. We recently invested in the low-rise and the
high-rise building there. To make the numbers work would
require significant expansion of space on our site to the point
that I think it would make the cite more dense than the city
planners in Boston would be prepared to see.
So the bottom line is we are talking about less extensive
options on redeveloping the City Hall Plaza. But I have to say
it is a good example of where having the authority to do some
kind of public-private partnership, at least in theory, could
have helped both of us satisfy our own objectives, ours of
keeping 300,000 square feet of usable space on that low-rise
site and the city's of redeveloping it for commercial and other
uses.
Mr. Franks. I thank you for that brief update. We will
probably be making a further inquiry about the status of that
project.
I would like to thank the members of the third panel. Mr.
Wagner, thank you for visiting and offering your testimony. On
that note, seeing no further questions, the meeting is
adjourned.
[Whereupon, at 12:07 p.m., the subcommittee was adjourned.]
[Additional information submitted for the hearing record
follows:]
[GRAPHIC] [TIFF OMITTED] T2621.080
[GRAPHIC] [TIFF OMITTED] T2621.081
[GRAPHIC] [TIFF OMITTED] T2621.082
[GRAPHIC] [TIFF OMITTED] T2621.083
[GRAPHIC] [TIFF OMITTED] T2621.084
[GRAPHIC] [TIFF OMITTED] T2621.085
[GRAPHIC] [TIFF OMITTED] T2621.086
[GRAPHIC] [TIFF OMITTED] T2621.087
[GRAPHIC] [TIFF OMITTED] T2621.088
[GRAPHIC] [TIFF OMITTED] T2621.089
[GRAPHIC] [TIFF OMITTED] T2621.090
[GRAPHIC] [TIFF OMITTED] T2621.091
[GRAPHIC] [TIFF OMITTED] T2621.092
[GRAPHIC] [TIFF OMITTED] T2621.093
[GRAPHIC] [TIFF OMITTED] T2621.094
[GRAPHIC] [TIFF OMITTED] T2621.095
[GRAPHIC] [TIFF OMITTED] T2621.096
[GRAPHIC] [TIFF OMITTED] T2621.097
[GRAPHIC] [TIFF OMITTED] T2621.098
[GRAPHIC] [TIFF OMITTED] T2621.099
[GRAPHIC] [TIFF OMITTED] T2621.100
[GRAPHIC] [TIFF OMITTED] T2621.101
[GRAPHIC] [TIFF OMITTED] T2621.102
[GRAPHIC] [TIFF OMITTED] T2621.103
-