**General Service Administration** July 18, 2006 **Washington, DC
20405**

GSA BULLETIN FMR 2006-B5\
Real Property Asset Management Guiding Principles

TO: Heads of Federal Agencies

SUBJECT: Real Property Asset Management Guiding Principles

1\. [What is the purpose of this bulletin?]{.underline} This Bulletin
introduces new guiding principles to help Federal agencies manage and
improve real property performance effectively in support of Executive
Order (EO) 13327. This Bulletin rescinds and supersedes GSA Bulletin
FPMR D-240, Public Buildings and Space, dated October 2, 1996.

> The guiding principles are strategic objectives and goals designed for
> Federal agencies to adopt into their asset management programs.
> Agencies are encouraged to implement these principles to enhance real
> property performance. The guiding principles are as follows:
>
> I. Support agency missions and strategic goals.
>
> 2\. Use public and commercial benchmarks and best practices.
>
> 3\. Employ life-cycle cost benefit analyses.
>
> 4\. Promote full and appropriate utilization.
>
> 5\. Dispose of unneeded assets.
>
> 6\. Provide appropriate levels of investment.
>
> 7\. Accurately inventory and describe all assets.
>
> 8\. Employ balanced performance measures.
>
> 9\. Advance customer satisfaction.
>
> 10\. Provide for safe, secure and healthy workplaces.

2\. [What is the effective date of this bulletin?]{.underline} This
bulletin is effective June 16, 2006

3\. [When does this bulletin expire?]{.underline} This bulletin will
remain in effect indefinitely until specifically cancelled.

4\. [What is the background?]{.underline}

a\. Over the past decade, the Federal Government increasingly has become
aware of the significant challenges it faces in managing its real
property portfolio. These challenges include deteriorating facilities,
an increasing number of excess and underperforming assets, limited
capital investment funds, a reliance on costly leasing, and unreliable
governmentwide data for strategic asset management. Since 2000, Congress
and each Administration have attempted to improve Federal real property
asset management through legislative reform, including:

> • H. R. 3285 - \"Federal Property Asset Management Improvement Act of
>
> 1999,\" 106^th^ Congress

-   S. 2805 - \"Federal Property Asset Management Reform Act of 2000,\"

> 106^th^ Congress

-   S. 1612 - \"Managerial :Flexibility Act of 2001,\" 107^th^ Congress

-   H. R. 2710 - \"Federal Asset Management Improvement Act of 2001,\"

> 107^th^ Congress

-   **H.R.** 2548 - \"Federal Property Asset Management Reform Act of
    2003,\" 108\" Congress

-   H.R. 2573 - \"Public - Private Partnership Act of 2003,\" 108^th^
    Congress

-   H.R. 3134 - \"Federal Real Property Disposal Pilot Program and
    Management Improvement Act of 2005,\" ^1091h^ Congress

The proposed legislation would have amended title 40, United States Code
to authorize landholding agencies to use enhanced real property asset
management tools, including the ability to enter into public/private
partnerships, to manage their real property more effectively. To date,
none of these legislative initiatives have been enacted.

b\. **In January 2003,** the Government Accountability Office (GAO)
issued two reports discussing Federal real property asset management.

-   The first, \"High Risk Series: Federal Real Property\" (GAO-03-122),
    identified Federal real property as a high-risk area. The report
    stated that \"\...long-standing problems in the Federal real
    property area include excess and underutilized property,
    deteriorating facilities, unreliable real property data, and costly
    space.\"

-   The second, \"Strategic Human Capital Management\" (GAO-03-120),
    identified the challenges of a declining Federal workforce and the
    need to provide cost-effective and flexible work environments. The
    report discussed the connection between cost-effective,
    high-performance workplaces and a dynamic, results-oriented
    workforce.

c\. **In October 2003,** GAO issued \"Federal Real Property: Actions
Needed to Address Long-standing and Complex Problems\" (GAO-04-119T),
which concluded that Federal real property was in an alarming state of
deterioration, with a significant repair, restoration, and maintenance
backlog. Among their findings, GAO identified that key decision makers
lack the data required for strategic real property asset management.

d\. **On February** 4, 2004, the President signed EO 13327, \"Federal
Real Property Asset Management,\" and subsequently added Federal real
property to the President\'s Management Agenda. Designed to promote the
efficient and economical use of the Federal Government\'s real property
assets and rightsize the inventory of Federal real property, EO 13327
established the role of Senior Real Property Officer in every

2

executive branch agency (cited in sections 901(b)(1) and (b)(2) of title
31, United States Code, and the Department of Homeland Security) to
manage and oversee asset management activities. The EO also established
a Federal Real Property Council (FRPC), chaired by the Office of
Management and Budget (OMB), to develop guidance, collect best
practices, and help Senior Real Property Officers improve the management
of real property assets.

e\. **In December 2004,** the FRPC issued \"Guidance for Improved Asset
Management,\" which established ten governmentwide standards - or
**guiding principles -** for improving agency asset management. This
information may be accessed at:
[http:/www.whitehouse.gov/omb/financial/fia_asset.html](http://www.whitehouse.gov/omb/financial/fia_asset.html)

5\. [What is the action?]{.underline} Federal agencies should use the
guiding principles to manage and optimize their real property
portfolios. When implemented effectively, the guiding principles are
designed to promote:

-   Sound real property asset management decisions;

-   Healthy and productive workplaces;

-   Reduced costs associated with real property asset management;

-   Disposal of unneeded Federal real property;

-   Repair and maintenance for deteriorating facilities;

-   Incentives to improve real property asset management;

-   Assemblage and maintenance of reliable real property data;

-   Increased efficiency and maximized performance of Federal real
    property assets; and

-   Strategic use of limited budgetary resources to maximize asset
    management.

Federal real property asset managers should apply these principles
throughout the life-cycle of a real property asset.

6\. [Who should we contact for further information?]{.underline} For
further information, contact Stanley C. Langfeld, Director, Regulations
Management Division, Office of Real Property Management (MP) at (202)
501-1737 or
*[[stanley.langfeld@gsa.gov]{.underline}](mailto:stanley.langfeld@gsa.gov).*

![](media/image1.png){width="2.9131944444444446in" height="0.825in"}

John G. Sindelar

Acting Associate Administrator Office of Governmentwide Policy

3

**REAL PROPERTY ASSET MANAGEMENT\
GUIDING PRINCIPLES**

> **[EXECUTIVE SUMMARY]{.underline}**

Asset management defines the relationship between a property holding
agency (i.e., the \"owner\") and its property assets. This relationship
includes, but is not limited to: financial asset management, day-to-day
property management, and occupant satisfaction. The asset management
relationship lasts for the entire property life-cycle - from acquisition
and utilization to disposal.

Real property asset management presents a variety of challenges that are
global in nature and affect both the public and private sectors. Asset
management succeeds when organizations implement and use an effective
strategic-planning framework to make real property decisions. The
guiding principles that comprise this framework are summarized below.
The principles are later defined and illustrated with case study
examples.

**1. Support Agency Missions and Strategic Goals** by aligning real
property decisions with the agency\'s strategic mission.

> *Case Study:* Lease Consolidation at the Department of the Treasury\'s
> Internal Revenue Service Consolidated Processing Center in Kansas
> City, Missouri.

2\. Use **Public and Commercial Benchmarks and Best Practices** to
assess Federal agency asset management performance.

> *Case Studies:* \"Experience Exchange Report\" from the Building
> Owners and Managers Association; \"Real Property Performance Results\"
> report from the General Services Administration (GSA); and \"Data
> Report\" from the Society of Industrial and Office Realtors.

**3. Employ Life-Cycle Cost-Benefit Analyses** to justify asset
management and acquisition decisions.

> *Case Study:* Department of the Interior and Department of Energy
> Partnership in the Design and Construction of the Zion National Park
> Visitor Center in Zion, Utah.

**4. Promote Full and Appropriate Utilization** by operating the
property asset to its maximum capacity during its useful economic life
(determined by using the Government\'s financial accounting standards) -
while satisfying the occupying agency\'s mission requirements.

> *Case Studies:* Renovation of Eastern Stables in Stockholm, Sweden and
> GSA\'s Renovation and Reuse of the Federal Building on South Clark
> Street in Chicago, Illinois.

\'For additional information, contact the agency\'s Chief Financial
Officer (CFO) staff.

> **5. Dispose of Unneeded Assets** by redeploying, demolishing, or
> replacing the asset when it fails to support the agency\'s mission.
>
> *Case Study:* Disposition of the Volunteer Army Ammunition Plant in
> Chattanooga, Tennessee.
>
> **6. Provide Appropriate Levels of Investment** by making and
> prioritizing capital investment decisions, such as whether to
> construct, alter, repair, and/or acquire space to meet changing agency
> needs.
>
> *Case Study:* Financial Analyses Employed by Lockheed Martin
> Corporation.
>
> 7\. **Accurately Inventory and Describe All Assets** by submitting
> real property data at the constructed asset level (e.g., each
> building/structure within a complex) as defined by the Federal Real
> Property Council.
>
> *Case Study:* Federal Real Property Profile Inventory System Developed
> and Maintained by GSA.
>
> **8. Employ Balanced Performance Measures** to track progress toward
> achieving real property management objectives and enable benchmarking
> against public and private sector organizations.
>
> *Case Study:* Balanced Scorecard Approach Used by the Real Property
> Services Branch of Public Works and Government Services Canada.
>
> **9. Advance Customer Satisfaction** by promoting productive work
> spaces and focusing on the tenant\'s needs, primarily changing space
> requirements.
>
> *Case Study:* Surveys used by GSA.

**10. Provide for Safe, Secure and Healthy Workplaces** by implementing
standard policies and procedures, documenting asset conditions, and
developing action plans and strategies to support a productive
workforce.

> *Case Study:* Design of the New Federal Building in San Francisco,
> California.

**PRINCIPLE #1\
SUPPORT AGENCY MISSIONS AND STRATEGIC GOALS**

Real property is the physical foundation that enables Federal agencies
to accomplish their missions. Effective asset management - including
property acquisition, operation, maintenance, and disposition - requires
alignment with the agency\'s core mission and key decisions. This
integration involves having a clear understanding of the agency\'s core
mission, its strategic plan, and how real property supports that plan.

Real property managers should collaborate with their customers to
develop workplaces - including real property products and services -
that adequately support the occupants\' short- and long-term goals.

**Case Study: Lease Consolidation at the Department of the Treasury\'s
Internal Revenue Service Consolidated Processing Center in Kansas City,
Missouri.**

The Department of the Treasury\'s Internal Revenue Service (IRS) lease
consolidation in Kansas City, MO, illustrates a real property
transaction that will support the agency\'s core mission and strategic
goals successfully. This consolidation is part of the larger IRS
reorganization, which is focused on agency-wide restructuring to better
align operations and serve taxpayers.

The Kansas City Service Center serves as the main hub for IRS
activities - receiving, processing, and storing Federal income tax
submissions - in the midwestern United States. The center is currently
dispersed across seven different locations, including two
Federally-owned buildings and five leased properties. To improve
operational efficiency and meet IRS\'s strategic reorganization goals,
GSA\'s Public Buildings Service (PBS) is assisting the IRS in
consolidating the agency\'s space needs into a single location.

On behalf of the IRS, PBS entered into a 15-year lease for 1.14 million
rentable square feet of space with the U.S. Postal Service (USPS) to
house support activities for the consolidated IRS Service Center. The
leased facilities are currently under construction and will be comprised
of new and adaptively used buildings, including the historic
475,000-square foot Kansas City Main Postal facility. The lease is
scheduled to commence in late 2006. USPS will hold the master lease, and
GSA has entered into a Memorandum of Understanding and will pay rent
directly to USPS or its representative. IRS will pay rent to GSA
pursuant to an occupancy agreement.

Once the new space is available, IRS will move out of its seven existing
Kansas City Service Center facilities. Of the two Federally-owned
buildings, one has been determined to be excess to GSA\'s needs and is
being evaluated for disposal.

GSA intends to fill the other building with new tenants.

This lease consolidation meets the priorities identified in a study,
resulting from the 1998 IRS Restructuring and Reform Act, which
evaluated how to improve service to taxpayers while increasing
productivity. The study identified as a high priority the need to
consolidate the

Kansas City Service Center into a new site to accommodate all the IRS
functions in a single facility.

**PRINCIPLE** #2\
**USE PUBLIC AND COMMERCIAL BENCHMARKS AND BEST PRACTICES**

Federal agencies should leverage leading public and private sector
benchmarks to evaluate asset performance and help plan for future
investments. Given the diversity of the Government\'s real property
portfolio, Federal agencies may find it useful to benchmark against
other agencies. Benchmarking property performance and sharing best
practices have proven to be effective tools for optimizing asset
management.

To be defined as a best practice, the initiative must:

-   Produce superior results;

-   Lead to exceptional performance;

-   Be recognized by an industry expert;

-   Be deemed a best practice by an agency\'s customers; and

-   Be a new or innovative use of human capital, resources, or
    technology.

By routinely benchmarking performance and sharing best practices,
Federal agencies can better manage their portfolios, thereby developing
high performance workplaces, improving citizen services, and protecting
the environment.

> Benchmarking is the process of continuously comparing and measuring an
> organization\'s performance - against that of other comparable
> organizations - to gain information on philosophies, practices, and
> data for measures. This comparison encourages organizations to take
> appropriate action(s) to improve their performance.
>
> Best practices are specific business methods, processes, or
> initiatives that work for one agency. Sharing best practices promotes
> innovation and provides ideas, options, and insights for other
> agencies.

**Case Studies: \"Experience Exchange Report\" from the Building Owners
and Managers Association; \"Real Property Performance Results\" report
from the General Services Administration; and \"Data Report\" from the
Society of Industrial and Office Realtors.**

The \"Experience Exchange Report,\"^2^ published annually by the
Building Owners and Managers Association, provides valuable real estate
benchmarking standards. The 2005 edition, which features 2004 data,
contains operating income and expense data on over 5,000 public and
private sector office buildings and an analysis of current real estate
industry trends. Agencies can track cleaning, maintenance, and utility
costs (calculated at the asset level on a per-square-foot basis) and
compare them to the standards provided in the report.

In addition, agencies can use GSA\'s \"Real Property Performance
Results\" report^3^ to compare performance with Federal real property
performance data and private sector benchmarks.

Agencies can determine if leasing costs are comparable to private sector
markets by referencing private sector benchmarks provided in the
\"Society of Industrial and Office Realtors Data

^2^To view highlights of the \"Experience Exchange Report,\" go to
[www.boma.org,]{.underline} The BOMA Store, Benchmarking. ^3^To view
\"Real Property Performance Results\" from the Office of Real Property
Management, go to [www.gsa.gov,]{.underline} Policy, Real Property
Management, Performance Measures, Library.

Report. \"4

Finally, the Federal Government is committed to continuously collecting
and developing innovative tools, methods, and best practices to improve
asset management for its 3.7 billion square foot inventory. GSA
recognizes and disseminates governmentwide best practices through the
annual Real Property Innovations Awards Program^s^, annual \"Best
Practices Special Edition Real Property Policysite\" newsletter^6^, and
the Office of Real Property Management website^7^.

^4^For more information on the \"SIOR Data Report\", go to
[www.sior.com,]{.underline} Publications.

^5^To learn more about GSA\'s Real Property Innovations Awards Program,
go to [www.gsa.gov,]{.underline} Policy, Real Property Management, Award
Program.

^6^To learn more about GSA\'s \"Best Practices Special Edition Real
Property Policysite,\" go to [www.gsa gov,]{.underline} Policy, Real
Property Management, Newsletters, Real Property Policysite.

^7^To view best practices from the Office of Real Property Management,
go to [www.gsa.;ov,]{.underline} Policy, Real Property Management, Best
Practices.

**PRINCIPLE #3\
EMPLOY LIFE-CYCLE COST-BENEFIT ANALYSES**

**OMB** Circular No. A-94 requires Federal agencies to justify asset
management and acquisition decisions using life-cycle cost-benefit
analyses. Life-cycle cost analysis (LCCA) is a method of assessing the
overall costs of project alternatives. It is used to select the design
that will provide the lowest overall cost of a facility\'s ownership
consistent with its quality and function.

LCCA accounts for initial (capital) and recurring costs (maintenance,
refurbishment, and operations) and residual asset value upon
decommissioning or disposal. LCCA is well suited for evaluating design
alternatives that satisfy a required level of building performance, but
may have different initial investment, operation, maintenance and/or
repair costs, and possibly different useful lives.

LCCA is especially useful when project alternatives that fulfill the
same performance requirements - but differ with respect to initial and
operating costs - have to be compared to select the one that maximizes
net savings. For example, LCCA will help determine whether the
incorporation of a high-performance heating, ventilating and air
conditioning or glazing system, which may increase the initial cost but
result in reduced operating and maintenance costs, is cost-effective or
not. These analyses help agencies make improved real property investment
decisions.

LCCA should be applied within a life-cycle assessment framework that
accounts for both the costs over the asset life and the environmental
consequences of investment decisions on upstream (e.g., extraction,
production, transportation, and construction), ongoing (e.g., health
impacts on tenants and the community), and downstream (e.g.,
decommissioning and disposal) costs.

Sustainable design and development, defined as meeting the needs of the
present without compromising the ability of future generations to meet
their own needs, represents the simplest model for comprehensive
life­cycle costing. It offers the longest view of direct and possible
side effects of investment decisions.

**Case Study: Department of the Interior, National Park Service and
Department of Energy Partnership in the Design and Construction of the
Zion National Park Visitor Center in Zion, Utah.**

The Zion National Park Visitor Center in Zion, Utah, illustrates a
design and construction project that considered LCCA and sustainable
development.^8^ The mission of the National Park Service (NPS) is to
promote and regulate the use of national parks, monuments, and
reservations in a manner consistent with the principles of sustainable
development; that is, to conserve the scenery, natural and historic
objects, and wildlife within and to provide for their enjoyment in a
manner that will leave them unimpaired for the enjoyment of future
generations.

In creating the Zion National Park Visitor Center, NPS, working with the
U.S. Department of Energy\'s National Renewable Energy Laboratory,
effectively aligned their mission with the new

^8^For additional information about the Zion National Park Visitor
Center, go to [www.cere.enerRy.gov,]{.underline} Buildings, A­Z Index,
High Performance Zion Visitors Center.

facility by considering the life-cycle costs associated with both. In so
doing, they created a building that uses seventy percent (70%) less
energy at a cost less than that of a conventional visitor center.

While performing LCAA, the design team found the optimal space
configuration that led to decreased construction costs. They separated
the restroom facilities from the main building, which improved
pedestrian traffic flow. In addition, they used landscaping and covered
areas to create shaded outdoor rooms, which increased the effective
space available for visitor amenities. By moving these circulation and
exhibit spaces outdoors, the total area of the buildings is now
approximately 6,500 square feet less than the original plan.

NPS\'s comprehensive approach to LCCA also involved the following
strategies:

-   **Transportation -** Automobile traffic of more than 2.5 million
    annual visitors caused air and noise pollution as well as
    congestion, which were detrimental to the park\'s resources and
    visitor experience. Visitors now leave their vehicles at facilities
    outside the park and ride clean-running propane buses to stops in
    the park and nearby town.

-   **Energy Management Computer** (EMC) - A computer collects weather
    data and makes decisions so that all the building\'s
    energy-efficient features work together.

-   **Lighting -** Daylight is the primary source of light in the
    Visitor Center. The EMC adjusts the fluorescent lamps and
    compact-fluorescent lamps, as needed.

-   **Windows -** EMC-controlled clerestory windows are part of the
    lighting and heating and cooling systems. Alternatives for window
    size, material, and placement were analyzed to keep the space
    primarily naturally heated in winter and cooled in summer.

-   **Passive Down-Draft Cooltowers -** When natural cooling is not
    adequate, \"cooltowers\" help bring the indoor temperature down by
    producing cool air that is circulated throughout the building under
    the control of the EMC.

-   **Energy-Efficient Landscaping -** Landscaping provides outdoor
    \"rooms\" for permanent displays and minimizes heat gain in the
    building, resulting in lower capital and operation costs.

-   **Photovoltaics -** Photovoltaic panels (7,200 watts) provide the
    majority of the electricity. The use of these photovoltaic panels is
    possible because the building requires minimal lights and does not
    use an air-conditioning system, which eliminated the need for large
    electric loads.

By employing LCAA and including sustainable development, NPS designed
and constructed a building that incorporates the area\'s natural
features and energy-efficient building concepts into an attractive
design, saves energy and operating expenses, and protects the
environment.

**PRINCIPLE #4\
PROMOTE FULL AND APPROPRIATE UTILIZATION**

The Federal Government is responsible for fully and effectively using
its real property assets to their maximum capacity during their useful
economic life (determined by using the Government\'s financial

> Holding on to assets that no longer support the agency\'s mission
> represents mismanagement of Federal resources. To help agencies
> monitor an asset\'s utilization, the FRPC established a utilization
> rate performance metric in the Federal Real Property Profile (FRPP).

accounting standards).^9^ Moreover, Federal agencies should use space
for the purpose for which it was intended (e.g., office space should not
be used for storage/warehouse purposes).

When planning and continually evaluating space needs, agencies should
explore alternatives that meet the goals of EO 13327 and other Federal
laws and EOs concerning agency location.^10^ Such alternatives include
adapting, supplementing, or consolidating into existing historic
facilities that can be cost-effectively upgraded and operated, including
underutilized properties available from other Government agencies.
Converting and upgrading existing assets are viable alternatives to
constructing new buildings, especially given the limited availability of
new construction funding.

OMB Circular No. A-11 requires agencies to determine the usefulness of
an asset and identify assets suitable for disposal. Real property
holding agencies must continuously analyze their space needs. If a
property is no longer needed, the agency should take steps toward
removing that asset from the agency\'s inventory, rather than retaining
the asset for an undetermined future

need. t t

**Case Studies: Renovation of Eastern Stables in Stockholm, Sweden and
GSA\'s Renovation and Reuse of the Federal Building on South Clark
Street in Chicago, Illinois.**

The renovation of Eastern Stables, Sweden\'s oldest surviving military
establishment, represents a re-utilization success story. The rebuilding
of Eastern Stables occurred through close cooperation between the
tenant, the National Heritage Board, and the National Property Board,
which owns and manages Government buildings in Sweden\'s Krubban block.
Eastern Stables was dilapidated and needed extensive rebuilding and
restoration.

Given Eastern Stables\' historical significance dating back to the early
19^th^ century, the Swedish Government wanted to preserve as much of the
original character as possible, maintaining the building\'s historical
dimension. The National Property Board and the National Heritage Board
considered cultural, historic, technical, and functional aspects of the
building. Their collaboration resulted in the preservation and
redevelopment of the historic asset into an acceptable and modern work
environment.

Another example of full and appropriate space utilization is the
renovation and reuse of the Federal Building on South Clark Street in
Chicago, IL. The 10-story, 590,000 gross square foot Federal Building
was built in 1912 and had deficiencies that negatively affected safety,
building operations, tenant comfort, and energy efficiency. The building
housed tenants from numerous agencies; however, since the Department of
the Treasury\'s Financial Management Service vacated a large portion of
the building in November 2000, the building was underutilized.

^9^The useful life of an asset is primarily related to its economic
value and not its physical life. Elements affecting an asset\'s useful
life include: 1) Physical deterioration; 2) Functional obsolescence; 3)
Technological obsolescence; and 4) Economic obsolescence. For additional
information, agencies should consult with the agency\'s Chief Financial
Officer.

^10^Other federal laws and EOs include the Rural Development Act of
1972, as amended, EO 13006 \"Locating Federal Facilities on Historic
Properties in our Nation\'s Central Cities,\" and EO 12072 \"Federal
Space Management.\" ^11^For additional information on assessing
utilization, contact your agency\'s Senior Real Property Officer.

In 1999, to support full utilization of the building, GSA proposed a
\$61-million renovation and tenant alteration project, which was
significantly more cost-effective than new construction. The project
will consolidate the Department of Homeland Security operations from
several leased and Federally-owned locations around Chicago into the
Federal Building. Renovation activities began in FY 2002 and are
expected to be completed in FY 2006. The previous, smaller tenants were
moved into leased space.

Upon completion, the project will result in an effectively utilized,
modern facility that meets the Department of Homeland Security\'s
mission and long-term space requirements.

**PRINCIPLE #5\
DISPOSE OF UNNEEDED ASSETS**

An asset should be designated as **surplus property - and redeployed,
demolished, or replaced -** when it no longer meets a Federal need. The
decision to dispose of an asset is best made when it is based on an
in-depth strategic portfolio review. This approach includes assessing
market availability, supply and demand, property performance, physical
conditions, future mission needs, and prospective housing profiles.

Retaining ownership of underutilized or unneeded properties results in:

-   Lost equity value, while not contributing to the Government\'s
    mission or strategic goals;

-   Negative impact on local economies, tax revenues, and employment;

-   Increased operating costs;

-   Drain on limited agency resources; and

-   Ineffective property stewardship for the Federal real property
    portfolio.

The most common options for asset disposition, depending on agency
specific authorities, include:

-   Transferring the asset to another Federal agency;

-   Exchanging it for another mission-related property;

-   Outleasing to non-Federal organizations;

-   Making property available for public benefit conveyances; and

-   Selling or leasing the property to generate revenue for the Federal
    Government.

Selection of the disposition option should be based on an economic
analysis of the alternatives. If the transaction is handled properly, it
will result in a smooth transition of ownership and produce a return to
the Government that is in the best interest of the taxpayers.

> EO 13327 is intended to reduce the number of unneeded Federal assets.
> An asset that has no potential use by any Federal agency should be
> designated as \"surplus property\" and appropriately disposed of in
> accordance with Federal statutes.
>
> Agencies should consider outleasing space in historic properties to
> non­Federal entities under Section 111 of the National Historic
> Preservation Act. Section 111 enables private reinvestment and re-use
> of Federal historic buildings while the Government holds title to the
> property.

**Case Study: Disposition of the Volunteer Army Ammunition Plant in
Chattanooga, Tennessee.**

The Volunteer Army Ammunition Plant (VAAP) in Chattanooga, TN, is a
successful disposition project of an underutilized, unneeded,
contaminated property that was effectively reused for economic
development purposes.

The plant, consisting of 6,350 acres, 370 buildings and structures, 80
miles of roadway, and 20 miles of railroad, was located on undeveloped
land in a prime area for redevelopment purposes. The Department of the
Army (Army) reported the facility as excess property in 1998.

The VAAP disposal was complicated because the property was contaminated.
The Army was responsible for phased remediation of the site. The
remediation process involved numerous stakeholders, including the Army,
the City of Chattanooga and Hamilton County (CCHC), GSA, the Tennessee
Department of Environment and Conservation, and the Environmental
Protection Agency, prior to disposal.

The planned reuse of VAAP was to support local and regional goals for
economic development and sustainable growth. CCHC believed re-use of the
VAAP would elevate the region\'s business and industry profile; increase
the availability of jobs; and provide opportunities for active and
passive recreation, educational needs, and open space. In collaboration
with GSA, CCHC developed a comprehensive re-use plan including park and
recreation, education, law enforcement, industrial and manufacturing,
and emergency management uses. The plan involved identifying and
separating parcels, based on factors such as highest and best-use
analyses and levels of contamination.

CCHC purchased 940 acres of VAAP in September 2000, and the local
government marketed the property to large-site users, such as automotive
assembly and parts manufacturers and medical components manufacturers.
In April 2005, CCHC purchased an additional 1,800 acres for economic
development purposes. GSA also made approximately 3,000 acres of land
available for public benefit conveyances - at up to a one hundred
percent (100%) discount - including 2,800 acres for park and
recreational uses.

**PRINCIPLE #6\
PROVIDE APPROPRIATE LEVELS OF INVESTMENT**

The Federal Government is accountable for providing appropriate asset
investment, which includes determining the costs and benefits of the
investment and how the assets are designed, constructed, maintained,
managed, protected, and disposed. Ultimately, the Government must
effectively manage its global property portfolio - consisting of
approximately \$1.2 trillion in assets (plant replacement value) - to
obtain optimal use and efficiency.

> There is a high level of deterioration in existing federal assets,
> which has significant financial implications. GAO estimates the repair
> backlog to be in the range of tens of billions of dollars.

Effective portfolio management requires agencies to continuously analyze
investment decisions, such as whether to construct, alter, repair,
and/or acquire workspace, to meet changing mission needs. Decisions for
major investments should be based on an investment framework consisting
of financial analyses, valuation criteria, and other required
information to determine the proper level of investment. The Capital
Programming Guide, Supplement to 3 of OMB Circular No. A-11, provides
guidance for employing a disciplined capital programming process,
focusing on key principles such as thorough planning, risk management,
full funding, portfolio analysis, performance-based acquisition
management, accountability for meeting goals, and cost effective
life-cycle management.\' ^2^

Agencies are encouraged to modernize and maintain real property so that
it continues to support the Government\'s mission. Appropriate
reinvestment:

-   Provides healthy and safe workplaces;

-   Increases the asset\'s desirability and its fair market value;

-   Supports advancing business practices and technologies; and

-   Enhances hiring, retention, morale, and productivity of associates.

An agency can also reinvest in existing high-value assets by
supplementing them with new construction instead of completely replacing
them. This type of investment increases the Government\'s equity in
high-value assets.

**Case Study: Financial Analyses Employed by Lockheed Martin
Corporation.**

Lockheed Martin Corporation (LMC) is one of the world\'s largest
technology companies, with \$35.5 billion in net sales and 135,000
employees operating in nearly 500 cities, 45 states and 56 countries.

> Reinvestment projects are major renovation or reconstruction
> activities necessary to keep existing facilities modern and relevant
> in an environment of changing standards and missions. Reinvestment
> extends the service life of facilities or restores lost service life.

LMC Properties, Inc. (LMCPI), the wholly-owned real estate subsidiary of
LMC, is responsible for 81 million square feet of space, of which 36

^12^ To view the Capital Programming Guide, go to
<http://www.whitehouse.gov/omb/circulars/a11/cpgtoc.html>

percent is owned and 64 percent is leased. The portfolio is diverse,
spanning office facilities, manufacturing plants, warehouses, service
centers, and laboratory sites across the globe. LMCPI responsibilities
include the acquisition and disposition of corporate real estate,
commercial leasing, capital projects involving construction and
infrastructure, and facilities management of selected properties.

LMCPI aggressively seeks to align real estate capital expenditures with
LMC\'s corporate growth needs and risk tolerance. To guide profitable
capital investment decisions, LMCPI uses several valuation models for
evaluating building purchases or new construction. The models include:

> **1) Net Present Value,** embedded with the Corporate Hurdle Rate:
> analyzes a project\'s cash flow and associated risk;
>
> 2\) **Internal Rate of Return:** Directly links the project to an
> economic return; and **3) Lease versus purchase:** Gauges the effect
> of not using internal capital for a new real estate project.

When making capital investment decisions related to real property
expansions, upgrades, energy projects, or maintenance replacement items,
LMCPI uses a combination of internal rate of return, discounted payback
period, return on invested capital, and lifecycle benefit analysis.
LMCPI also combines discounted payback period and return on invested
capital techniques to consider the time value of money, impact of the
initial investment, and life-cycle analysis.

By using these techniques, LMCPI has been able to prioritize and
allocate funding for hundreds of projects on an annual basis. Even
though the Federal Government is subject to different constraints than
the private sector, agencies could adopt some of the valuation
techniques used by LMCPI, particularly for reinvestment projects.

**PRINCIPLE** #7\
**ACCURATELY INVENTORY AND DESCRIBE ALL ASSETS**

Real property holding agencies must develop and maintain
inventory-tracking systems to assist in managing their asset portfolios.
The collection of reliable, uniform data enables agency decision makers
to:

-   Improve asset management;

-   Provide data to aid in timely and informed portfolio management
    decisions; and

-   Respond to inquiries from Congress, the Administration,
    stakeholders, and the private sector.

**Case Study: Federal Real Property Profile Inventory System Developed
and Maintained by** GSA.

GSA has been collecting governmentwide real property inventory data and
producing a summary report for Congress since 1955. The database that
originally collected the data has been modified over the years into the
system currently known as the Federal Real Property Profile (FRPP) - a
single, centralized and descriptive database of all real property
managed by executive branch agencies.

In consultation with the FRPC, GSA\'s Office of Governmentwide Policy
evaluated several technology approaches and determined that enhancing
the existing FRPP was the most cost­effective solution for developing the
governmentwide real property inventory system mandated by EO 13327.
Consequently, the FRPP was enhanced in 2005 to provide a more
user-friendly, easily-navigable interface, improved security policies,
increased asset search capabilities, and enhanced online data
transmission, validation, and error-correction functions. Executive
branch agencies are required to submit real property data to the FRPP at
the \"constructed asset level\" (e.g., each building/structure within a
complex).

In upcoming years, the FRPP will continue to be modified as the
system/application matures. Modifications and enhancements may include:

-   Establishment of additional data elements and/or performance
    metrics;

-   Refinement of existing data elements;

-   Accommodation of uploads from agencies more than once per year;

-   Storing historic data (even after an asset is disposed of and is no
    longer in the agency\'s inventory);

-   Improved reporting and querying facilities (e.g., ad hoc reporting,
    graphics/charts, mapping data); and

-   A portal environment (offering application web features to save and
    customize user environments).

By supplementing agency-specific data, the FRPP provides important
inventory-related information and assists the agency in making timely
and informed portfolio decisions.

GSA uses the data gathered in the FRPP to produce a governmentwide real
property inventory summary report. The report provides an overview of
the Federal Government\'s owned and leased real property portfolio and
summarizes the data submitted by holding agencies. The report, in
combination with other available data, is used for:

-   Planning space needs;

-   Promoting fuller utilization of assets;

-   Conducting property management and property accounting surveys;

-   Evaluating funding requests for acquisition of real property
    (office, warehouse, industrial, etc.); and

-   Facilitating on-site inspection activities.

The inventory summary report provides a centralized source of
information for Congress, OMB, GAO, GSA, and other Federal agencies, as
well as universities, libraries, trade associations, the press, the
private sector, and the general public.

**PRINCIPLE #8\
EMPLOY BALANCED PERFORMANCE MEASURES**

The FRPC promotes the use of balanced performance measures and
management techniques to monitor and evaluate asset efficiency
regularly. The FRPC identifies and defines performance measures that
Federal agencies are required to collect and report to GSA\'s
Governmentwide inventory system. The results of these performance
measures assist Federal agencies in determining the effectiveness of
their asset management decisions. The FRPC has defined four \"First
Tier\" performance measures:^13^

> 1\) Utilization;
>
> 2\) Condition index;
>
> 3\) Mission dependency; and
>
> 4\) Annual operating and maintenance costs.
>
> Performance measures are specific data definitions that enable
> agencies to track their progress toward achieving management
> objectives. Performance measures provide vital
>
> management information through the life of an asset, providing senior
> management with a reliable monitoring mechanism.

The FRPC continues to evaluate additional performance measures that may
be included in the inventory reporting system in the future.

In addition to these governmentwide performance measures, many agencies
currently maintain and track their own agency-specific performance
measures.

**Case Study: Balanced Scorecard Approach Used by the Real Property
Services Branch of Public Works and Government Services Canada.**

\"Results of Using the Balanced Scorecard in the Public Sector,\"
published in the *Journal of Corporate Real Estate* (December 2003),
discusses the development of performance measures within organizations.
The article presents a generic balanced scorecard framework that allows
the global real estate community to monitor the effectiveness of its
strategies and benchmark performance across organizations. ^14^ This
framework uses logic models to describe:

-   An organization\'s core activities;

-   Major outputs;

-   Desired outcomes; and

-   How these outcomes benefit the client.

The balanced scorecard approach includes four perspectives - financial,
client, internal business process, and learning and growth - that have
specific key performance indicators.

^13^ For additional information on the \"First Tier\" performance
measures, contact your agency\'s Senior Real Property Officer.

^14^ For additional information on using the balanced scorecard
approach, refer to the following source: Hagarty, D. Wilson, C.
Gauthier, J. \"Results Using the Balanced Scorecard in the Public
Sector,\" Journal of Corporate Real Estate, Volume Six, Number 1,
December 2003.

> The Real Property Services Branch of the Public Works and Government
> Services Canada, the Canadian government organization responsible for
> providing cost-effective and productive work environments, uses the
> balanced scorecard approach to measure organizational performance. The
> following table provides an example of RPS\'s categories of desired
> outcomes and key performance indicators.

**Balanced Scorecard Approach Used by Canada\'s\
Real Property Services Branch**

+--------------+------------------------+-----------------------------+
| **P          | **CATEGORIES OF**      | > **KEY PERFORMANCE         |
| ERSPECTIVE** |                        | > INDICATORS**              |
|              | **DESIRED OUTCOMES**   |                             |
+--------------+------------------------+-----------------------------+
| Financial    | > • Financial          | > • Budget management       |
|              | > management           | > (e.g., operating and      |
|              |                        | > capital)                  |
|              |                        | >                           |
|              |                        | > • Accuracy of financial   |
|              |                        | > forecasting               |
|              |                        | >                           |
|              |                        | > compared to year-end      |
|              |                        | > results                   |
+--------------+------------------------+-----------------------------+
| Client       | > • Client relations   | > • Overall client          |
|              | >                      | > satisfaction with RPS     |
|              | > • Expanding RPS\'s   | > services                  |
|              | > policy role          | >                           |
|              |                        | > • Overall tenant          |
|              |                        | > satisfaction with         |
|              |                        | > property management       |
|              |                        | > services                  |
|              |                        | >                           |
|              |                        | > • Contribution to public  |
|              |                        | > policy priorities, such   |
|              |                        | > as the Workplace of the   |
|              |                        | > Future Program and        |
|              |                        | > Greening of Government    |
|              |                        | > Operations                |
+--------------+------------------------+-----------------------------+
| Asset        | > • Real property      | > • Accommodation usage     |
| Management   | > assets               | > (e.g.,                    |
|              | >                      | >                           |
| (Internal    | > • Valued services    | > cost/rentable m^2^)       |
| Business     |                        | >                           |
|              |                        | > • Vacancy rates in owned  |
| Process)     |                        | > office space              |
|              |                        | >                           |
|              |                        | > • Return on investment    |
+--------------+------------------------+-----------------------------+
| People       | > • RPS\'s people      | > • Overall staff           |
| (Learning    | >                      | > satisfaction              |
|              | > • Strategic          | >                           |
| and Growth)  | > relations            | > • Workforce profile       |
|              |                        | > (total population by      |
|              |                        | > employment status)        |
+--------------+------------------------+-----------------------------+

> The *Journal of Corporate Real Estate* article concludes that applying
> performance measurement techniques is critical for effective asset
> management and \"should be viewed as a key management tool in telling
> a performance story on strategy implementation.\"

**PRINCIPLE #9\
ADVANCE CUSTOMER SATISFACTION**

To advance customer satisfaction, agencies need to assess their customer
relationships holistically by:

-   Focusing on a tenant\'s mission;

-   Proactively monitoring changing space; and

-   Providing a productive workplace.

> High-performance workplaces are those that meet agency business needs,
> are best suited to their employees\' work functions, and are readily
> adapted to accommodate new work practices and strategies with minimal
> expense and delay.

Customer satisfaction is increased when agencies work collaboratively
with their tenants to define specific requirements, integrate these
requirements into asset management decisions, and transform decisions
into innovative and responsive workplaces. Agencies should continually
strive to improve tenant relations and advance customer satisfaction.

As part of these efforts, agencies are encouraged to develop
high-performance workplaces and alternative workplace strategies
tailored to the tenant\'s needs.

**Case Study: Customer Satisfaction Surveys Used** by GSA - the Tenant
Satisfaction Survey, Ordering Official Survey, Realty Transaction
Survey, and Workforce Engagement Survey.

GSA\'s PBS works to increase customer and employee satisfaction by
collecting information through the following three surveys:

> *1) Tenant Satisfaction Survey:* Collects information from tenants in
> Government-owned and leased buildings (approximately 8,300 nationwide)
> by conducting surveys adapted from the International Facilities
> Management Association. Administered by the Gallup Organization, the
> survey provides building reports that identify how each building
> scored in the previous survey, the ten drivers of satisfaction for the
> building, and building tenants\' written comments. The survey is
> administered to one-third of the building inventory each year. PBS has
> established a goal of attaining 80 percent customer satisfaction
> nationwide.
>
> *2) Ordering Official Survey:* Assesses specific customer agency
> experience in doing business with PBS. The survey has five questions
> related to:
>
> a\. Overall satisfaction with services provided;
>
> b\. Overall satisfaction with value received;
>
> c\. If a customer agency would recommend PBS to another agency; d. If
> services provided contribute to agency productivity; and
>
> e\. If there is an anticipated change in the volume of work the agency
> will
>
> request from PBS next year.
>
> The survey is delivered to customers via phone and is completed in
> approximately eight minutes. PBS uses the Ordering Official Survey to
> obtain perceptions of agency leadership, ordering officials, and
> billing contacts.
>
> *3) Realty Transaction Survey:* Helps determine how well PBS provides
> new owned and leased space to its clients by measuring their
> satisfaction with each space transaction. PBS uses the survey results
> to assess its real estate services, program efficiency, training
> needs, and level of customer service. Real estate specialists and
> building managers use the data to develop action plans and to improve
> their processes for providing clients with new space and the most
> productive workplaces possible. Portions of the Realty Transaction
> Survey are combined with the Tenant Satisfaction Survey to generate a
> Customer Relationship Index performance measure.

GSA measures employee engagement in the workplace agencywide by
collecting information through the *Workplace Engagement Survey (Q12).*
Developed by The Gallup Organization, the survey consists of 12
questions that measure employee engagement in the workplace. Research
has found a statistical relationship between work units whose associates
have high scores on the Q 12 questions and an increase in the following
five business outcomes:

> a\. Productivity;
>
> b\. Profit;
>
> c\. Employee retention;
>
> d\. Customer satisfaction; and e. Workplace safety.

Agencies that understand their customer\'s requirements are best
equipped to provide highly customized workplaces, increasing customer
satisfaction and the potential for successful business performance.

**PRINCIPLE #10\
PROVIDE FOR SAFE, SECURE AND HEALTHY WORKPLACES**

Effective management of Federal facilities requires that buildings
provide safe, secure, and healthy working environments that support a
productive workforce. Implementing standard policies and procedures and
developing action plans to monitor and maintain workplaces complement
the development of, and are basic requirements for, robust asset
management strategies. These policies include:

-   Minimizing environmental problems and liabilities;

-   Complying with building security, fire, and life-safety codes and
    standards; and

-   Meeting historic building and Americans with Disabilities Act
    requirements.

The highest priority for real property holding agencies is to protect
their most important assets - their employees.

In today\'s world, agencies are developing concepts to promote safe,
secure, and healthy workplaces that go beyond simple compliance.
Referring to principles established by President John F. Kennedy in 1962
in the *Guiding Principles for Federal Architecture,* agencies are
designing Government facilities that are not only \"efficient and
economical\" but also contemporary architectural expressions of \"the
dignity, enterprise, vigor, and stability of the American Government.\"
As this ideal has matured, the goal has been to establish a definition
of excellence that makes safe, secure, and healthy workplaces integral
aspects of Federal building projects.

**Case Study: Design of the New Federal Building in San Francisco,
California.**

The new Federal Building in San Francisco, California, represents a
model of a safe, secure, and healthy working environment. The project
consists of two structures, totaling 575,000 square feet, separated by a
public plaza and 3,000-square-foot cafeteria.

The first structure is an 18-story glass tower. The tower is 60 feet
wide with high ceilings, which enables natural light to fill the offices
and provides almost all employees outside views. Above the fifth floor,
operable windows bring in fresh air and cool the building with natural
ventilation, replacing a mechanical heating and cooling system. On the
11th floor, a three-story sky-garden provides a dramatic venue for
conversation and creative thinking.

The second structure, a four-story building, houses Federal employees
that interact with the public. This structure includes a neighborhood
daycare center and a restaurant for casual dining, creating a total
environment where adults can work productively and enjoy leisure time
and children can safely run and play.

The building\'s facades, setbacks, and perimeter design meet the latest
security requirements in ways that create a vibrant landmark and
landscaped plaza in the dense \"South of Market\" section

of the city. The innovative architecture is also safe and secure, not
only by physically protecting the facility and its inhabitants, but by
encouraging lively public use.

The Federal Building exemplifies the most effective strategies for
developing an environment where inhabitants are not only physically
safe, secure, and healthy as they work, but also feel that way -
facilitating tenant satisfaction and high productivity. In serving the
public and reflecting the openness of American democracy and the
*Guiding Principles of Federal Architecture,* it promises to be one of
the Government\'s most desirable and productive offices.