Property Reform

GENERAL SERVICES ADMINISTRATION
BEFORE THE
SUBCOMMITTEE ON ON TECHNOLOGY AND PROCUREMENT POLICY
COMMITTEE ON GOVERNMENT REFORM
AND THE
UNITED STATES HOUSE OF REPRESENTATIVES

OCTOBER 1, 2001

Chairman Davis and Members of the Subcommittee:

Thank you for inviting me to this hearing today to discuss the General Services Administration's (GSA) views on ways to promote efficient and effective stewardship in property management. I am pleased to be with you to discuss various reform proposals to improve the more than 50-year old statute under which Federal agencies manage and dispose of their real and personal property assets. GSA believes that agencies should be provided the freedom to manage their assets more effectively through the use of appropriate and up-to-date management practices and incentives. Accordingly, we believe that changes to the property management statutes are necessary to reflect the current needs of the government and the commercial marketplace. This will help agencies achieve their missions and goals by reducing the amount of deteriorated, vacant, and underutilized space in the existing Federal buildings inventory.

Before I begin my testimony I'd like to introduce the GSA team with me today, which includes Mr. Joe Moravec, the Commissioner of the Public Buildings Service, and Mr. David Bibb, the Deputy Associate Administrator for Real Property in GSA's Office of Governmentwide Policy.

I would like to applaud this Subcommittee and its predecessor on their concern and efforts to improve Federal property management as a priority management reform issue. During the past two years the Subcommittee has provided GSA and other Federal agencies the unique opportunity to discuss the problems, policies, and procedures surrounding the management and disposal of Federal assets. As we know, Representative Sessions took the lead on this issue in the House by introducing, H.R. 3285, the "Federal Asset Management Improvement Act of 1999." In the Senate, Senators Thompson and Lieberman introduced, by request, S. 2805, the "Federal Property Asset Management Reform Act of 2000." This bill was developed by GSA in consultation with Federal landholding agencies for the purpose of improving the management of the Federal Government's billions of dollars worth of real and personal property.

GSA would like to discuss a number of the provisions included in these bills that we believe should be a part of any final legislative package considered by the Congress. We also appreciate your continued interest and support of GSA's efforts to provide Federal agencies with the appropriate management practices and incentives, and look forward to working with the members of the Subcommittee and others in Congress to ensure legislation is passed this Congress to provide these authorities governmentwide.

Background.

The Federal Property and Administrative Services Act of 1949, as amended (the Property Act) is the law that governs the use and disposal of most classes of Federal real and personal property. This law has served Federal agencies for more than 50 years without significant revision. However, certain elements of the Property Act do restrict the Government's ability to adapt many "best practices" that are now common, every day business practices for the commercial sector. GSA believes the law needs to be amended to provide for the use of these efficient and effective practices that satisfy the current needs and requirements of the Federal agencies.

For example, effective asset management requires that agencies consider all phases of the life cycle (i.e., acquisition, use, and disposal) of property. However, the current Property Act is heavily oriented toward only the disposal phase. Additionally, most agencies lack a full range of policy guidance, accountable management structures, information on their property holdings, and planning processes necessary to manage their property holdings effectively in support of their missions.

We believe that any legislation considered by Congress should address these shortcomings and incorporate a strategic perspective into property management decisionmaking during all phases of the property's life cycle. Specifically, any bill should achieve the following goals:

Goal #1 - Establish Effective Property Management Processes and Procedures.

• Asset Management Principles. Life cycle asset management should be emphasized through the issuance of governmentwide real and personal property Asset Management Principles (AMPs). These principles will serve as the baseline for agencies in their decisionmaking processes. Also specific principles should be considered when entering into outlease arrangements.
  
• Strategic Real Property Planning. Real property assets are vital to accomplishing many agencies' goals. Legislation should require agencies to develop asset management plans to ensure that decisions on their real property holdings through all life cycle phases are consistent with and supportive of the agency missions, strategic goals, and objectives.
  
• Senior Real Property Officer. Each landholding agency should appoint a Senior Real Property Officer to oversee and ensure that assets meet strategic objectives, to ensure the observance of AMPs, to prepare asset management plans and to generally coordinate agency real property functions and processes. Many corporations clearly recognize the importance and value of their real property and have placed strategic emphasis on asset management. Government landholders should do the same.
  In the personal property area, agencies already have Property Management Officers to provide this level of support.
  
• Governmentwide Real Property Information Database. A foundation of any coordinated asset planning/management effort is a database of reliable information regarding the needed assets. Agencies should be required to maintain and use the information to support sound capital asset management decisions government-wide and assure the reliability of the information system.

Goal #2 - Help Agencies Maintain Assets Needed to Accomplish Agency Mission Requirements.

More and more, Federal managers are being encouraged to improve agency performance through the use of good management practices linked to their strategic goals. GSA believes that legislation should be drafted to provide agencies with common sense, businesslike practices and techniques to manage their property holdings strategically.

As mentioned previously, the focus of the current Property Act is oriented toward the disposal phase of assets. It has been very successful in providing an orderly way to dispose of surplus property. However, the Act's success has been limited in helping agencies manage their real and personal property assets that are needed for their missions.

• To improve this situation, GSA suggests you consider legislation that would give agencies several new authorities, such as:
  
• Exchange/Sale of Real Property. Authorize landholding agencies to exchange or transfer property with other Federal agencies and enter into agreements with non-Federal entities to exchange or sell property as a means of acquiring replacement property better suited for their mission purposes.
  
• Subleasing. Authorize agencies to sublease unexpired portions of government-leased property.
  
• Outleasing. Authorize agencies to outlease to the private sector assets that must remain in Federal ownership and underutilized portions of non-excess government-owned property to ensure full use and optimum performance of assets. Under certain circumstances, such outleasing arrangements could take the form of public private partnerships to use private sector resources and expertise to repair and renovate Federal facilities.
  
• Exchange/Sale of Personal Property. Expand existing authority for agencies to replace personal property or acquire services that perform the functions of such replacement property.

On the subject of public-private partnership, as you know, the L. Mendel Rivers Federal Building in Charleston, SC was favorably reviewed as a pilot for a public-private partnership in the General Accounting Office Report of July 2001, titled Public-Private Partnerships: Pilot Program Needed to Demonstrate the Actual Benefits of Using Partnerships. Public-private partnership could have worked here according to the GAO.

GSA supports appropriate uses of public-private partnership authority to enable agencies to use private sector resources and expertise to repair and renovate their Federal facilities.

A legislative proposal should include criteria to assure that agencies use public-private partnership and other tools (i.e., exchange/sale, subleasing, and outleasing) in an economically advantageous manner to the government. Public-private partnership authority should also require pre-transaction notices to Congress in all cases over $2 million.

Goal #3 - Provide Incentives to Dispose of Assets Not Needed for Agency Mission Requirements.

As Federal agencies and programs evolve, facilities need to change accordingly. The average age of Government-owned buildings is now over 50 years old and many have not been adequately maintained. As a result, many buildings have become inefficient and functionally obsolete.

Unlike the private sector, most Federal agencies have no opportunity to obtain the equity that may be recoverable from the disposal of underused or obsolete property and apply the proceeds toward meeting their on-going facilities needs. This results from the fact that these agencies are simply not authorized to sell, exchange, sublease or outlease capital assets that no longer support their missions, and to use the proceeds for new replacement or capital projects. Consequently, agencies have to divert resources to hold such underused and unproductive property when in fact those resources could be used to improve other facilities that continue to support agency missions. This has resulted in agencies not optimizing property holdings and retaining assets that have little or no functional value to their missions. Legislation should be considered which would include a catalyst for sound asset management decisionmaking, and permit agency use of proceeds as follows:

• Personal Property. Authorize agencies to retain proceeds from the sale of surplus personal property to offset direct and indirect disposal costs.
  
• Real Property. Authorize agencies to retain the bulk of proceeds from real property transactions and allow such funds to be used to offset direct and indirect disposal costs and in meeting agency capital asset needs.

Goal #4 - Streamline and Enhance Existing Processes.

As mentioned earlier, the Property Act has been in existence for over 50 years, and the fundamental provisions governing property assets have generally remained unchanged. GSA's review of the Property Act has led us to identify other opportunities to redefine various sections of the Act, which could deliver savings to the government. GSA believes that making changes to these policies could increase efficiency, deliver savings, reduce administrative burdens, and streamline Federal asset management processes. Below are some of the changes that should be considered by the Subcommittee:

• Historic Preservation Conveyances. Permit qualified non-profit institutions to be eligible to receive surplus real property for historic preservation purpose. An example would be that a non-profit institution could obtain Federal land or a building for use as a historic monument when it was no longer needed by the Federal Government and if a State or local government was not interested in or financially able to maintain the property. The non-profit institution would be required to maintain it under the historic preservation statute.
  
• Congressional Review of Negotiated Disposals of Surplus Property. Eliminate obsolete limitations and the requirement for explanatory statements on personal property negotiated sales and increase from $100,000 to $2 million the value threshold for explanatory statements concerning real property.
  
• Property for Homeless Assistance. Streamline the process associated with making real property available for homeless assistance purposes under Title V of the McKinney-Vento Homeless Assistance Act while protecting the rights and priority consideration of homeless groups.

Closing.

In conclusion, I would like to say that improving Federal asset management is critical to improving each agency's ability to meet its mission requirements and improving governmentwide performance results. Any legislation considered by this Subcommittee and Congress should incorporate the life cycle property management practices outlined here to provide the asset management principles, incentives, and flexibility needed by agencies to effectively manage their portfolios of real and personal property assets. This will lead to better use and maintenance of needed Federal property and a reduction in unneeded Federal property. Again, thank you for the significant steps the Subcommittee members have taken to highlight the need for property reform. We look forward to working with you to ensure that legislation is passed this Congress.

Mr. Chairman, this concludes my statement. I am happy to answer any questions you or other Subcommittee Members may have.