Background

		Federal Real Property

The federal government’s vast real property inventory reflects the  diversity of agencies’ missions and includes office buildings, prisons, post  offices, courthouses, laboratories, and border stations. The Federal Real  Property Profile (FRPP) is a database of owned and leased space held by  executive branch agencies. It is maintained by GSA on behalf of the  FRPC, although FRPC controls access to the data. In 2010, FRPP data  indicated that 24 executive branch agencies held about 3.35-billion  square feet of building space. These agencies reported that 79 percent  of the total reported building space was federal-government owned; 17  percent was leased, and 4 percent of the space was otherwise  managed. The eight agencies we reviewed—USDA, DOD, DOE, DHS,  DOI, VA, GSA, and USPS—reported holding over 3.32-billion square feet  of building space or about 99 percent of reported square footage.

		Owned and Leased Space

GSA and USPS are the largest civilian holders of federally owned  property. They hold the largest amounts of space, by square foot, of the  civilian agencies that we examined. As noted previously, we excluded  much of DOD’s property from the scope of our review because of the  security requirements of traditional military bases, which would make  colocation with other agencies unlikely. GSA and USPS together hold  more square footage—almost 660-million square feet—than the other  agencies we reviewed, excluding DOD, combined—over 454-million  square feet. (See fig. 1.) Additionally, both agencies have a wide national  presence—GSA-held properties exist in over 750 markets and USPS- held property is in almost 36,000 cities and towns.
Federal agencies, particularly GSA in its role as broker and property  manager to the civilian portion of the U.S. government, rely on costly  leasing, and the number of federal government leases has increased in  recent years. The civilian federal agencies we reviewed held leases in  close to 41,000 assets covering nearly 324-million square feet of space,  with GSA and USPS leasing the most space. Nearly all of GSA’s leases  are for other tenant agencies—for example, its four largest customers in  the leased inventory are the Department of Justice, DHS, the Social  Security Administration (SSA), and Department of Treasury (Treasury)— based upon those agencies’ identified needs. According to GSA’s annual  portfolio report, since fiscal year 2008, its leased inventory has  experienced faster growth than its owned inventory. We have reported  that over time GSA has relied heavily on operating leases to meet new  long-term needs because it lacks up-front funding needed to purchase  buildings or space. In addition, GSA has reported operational losses  related to leasing, once indirect overhead expenses have been allocated,  in recent years.

		GSA’s Role

GSA is authorized by law to acquire, manage, utilize, and dispose of real  property for most federal agencies. GSA is able to enter into lease  agreements for up to 20 years that the Administrator of GSA considers to  be in the interest of the federal government and necessary to  accommodate a federal agency. GSA uses this authority to lease space  on behalf of many federal government agencies.
In 2004, the administration added managing federal real property to the  President’s Management Agenda and the President issued an executive  order, applicable to 24 executive departments and agencies 1)  establishing FRPC and 2) requiring FRPC to work with GSA to establish  and maintain a single, comprehensive database describing the nature,  use, and extent of all federal real property held by executive branch  agencies, except when otherwise required for reasons of national  security. FRPC worked with GSA to create the FRPP to meet this requirement. FRPC is chaired by the Deputy Director for Management of  OMB and is composed of Senior Real Property Officers from the 24  executive departments and agencies, the Controller of OMB, the  Administrator of GSA, and any other full-time or permanent part-time  federal officials or employees as deemed necessary by the Chairman of  the Council. The order does not apply to USPS and FRPC does not work  directly with USPS on the management of its real property. These  efforts notwithstanding, we have previously reported that the federal  government continues to face a number of challenges to effectively  managing its real property. In particular, we have reported on  challenges to disposing of excess properties, making better use of  properties that are underutilized, and reducing overreliance on leasing.

		USPS Challenges

USPS, which is an independent establishment of the executive branch, is  authorized to sell, lease, or dispose of property and is exempt from most  federal laws dealing with real property and contracting. Although  declining mail volume and changes to its operations have resulted in  excess capacity and facility space throughout the postal network, our  recent work has shown that USPS faces challenges, such as legal  restrictions and local stakeholder influences, that have limited its ability to  close postal facilities in order to restructure its retail and processing  network. For example, USPS has often faced resistance from affected  employees, communities, and elected officials when it has attempted to  consolidate its processing operations and networks or close mail- processing facilities because of concerns about possible effects on  service, employees, and communities. USPS recently announced that it  will maintain existing retail locations, with modified operating hours. As a  result of these issues, USPS has more space than it needs. Our recent  work has also shown that USPS faces a deteriorating financial condition.  For example, at the end of fiscal year 2011, the USPS had incurred a  $5.1-billion loss for the year, had $2 billion remaining on its $15-billion  borrowing limit, and projects it will be unable to make its $5.5 billion  scheduled retiree health benefits payment to the federal government. In  addition, USPS was conceived as a financially self-sufficient entity, but its  revenues do not cover costs at about 80 percent of its retail facilities.

	Underutilized Owned Federal Space Exists, but Size, Location, and Condition Affect Colocation Potential

		Underutilized Owned Space

The federal government owns facilities that are underutilized in locations  where it also leases space for different purposes. This is particularly true  for USPS, as declining mail volume and changes in operations have freed  space in many owned facilities. While there are problems with using  governmentwide data to identify underutilized space, as will be discussed  later in this report, we observed underutilized space held by multiple  federal entities in the case study markets we visited for this report. For  example, in each case study market, we observed one or more cases of  vacant or underutilized space in post offices, including both offices and  space on the processing floor, that officials said could be re-configured  and physically separated from USPS operations (see fig. 2.)
In some cases, spaces within these underutilized owned properties could  be used by other government agencies. According to a recent report by  the USPS Office of Inspector General (OIG) related to post office  utilization, excess floor and retail window space exists nationwide that  could be used by other government agencies or used to perform  transactions on behalf of other government agencies. The USPS OIG’s  office also conducted several regional studies examining excess USPS  space and noted a correlation between space leased by GSA and the  ability of USPS to significantly accommodate federal space needs. For  example, one of those studies estimated that of the USPS districts  reviewed, USPS excess space may accommodate 147 of 175 (or 84  percent) of agencies’ current federal leases, and noted that GSA paid  considerably more per square foot than the value assigned to USPS  space. However, the Inspector General (IG) did not determine whether  the excess space identified was usable for sharing with other agencies, in  part because USPS systems and policies do not identify usable areas,  and noted that more information would be necessary to determine  whether USPS’s excess space would be suitable for another government  tenant.

		Space Size, Location, and Condition Affect Colocation Potential

We observed several attributes that could affect using underutilized space  for colocation. These attributes included size, location, and condition,  which would likely render some spaces more appropriate for sharing than  others. Much of the underutilized space we observed was small—only  several hundred to a few thousand square feet. We also observed  underutilized space that was not contiguous. Both of these attributes  could limit those spaces’ suitability for effective colocation. Furthermore,  underutilized space that we observed varied in terms of its location within  facilities. For example, GSA and VA officials described having some  space that is less desirable to potential tenants. Although we observed  generally high occupancy in GSA’s multi-agency federal buildings, GSA  officials showed us some space they said is not easily leased because of  its location, such as a first floor interior office bordering the building’s  maintenance hallways or windowless basement spaces, and noted that  these extra spaces can remain in GSA buildings when an agency does  not require the entirety of a vacant space. VA officials noted similar  issues, in that empty or available space at its campuses is often located  in buildings surrounded by other VA buildings, which can make it harder  for outside parties to access and use.
Additionally, we observed underutilized space in a wide range of  conditions, from rundown to newly renovated, which could also affect  colocation options. GSA officials said that a variety of physical aspects of  the space may factor into the desirability of the space for colocation,  including ceiling height, support column size, lighting, and windows. For  example, Figure 3 shows interior office space in a GSA-held federal  building in downtown Dallas that GSA officials told us has been vacant for  years, a vacancy that they attributed to the lack of natural light and the  large support columns that make it difficult to place workstations.

	Colocation Could Yield Service-Delivery Efficiency and Cost- Avoidance Benefits in Some Cases

Federal officials we spoke with indicated that colocation could result in  improved government operations through increased efficiencies for  service access or delivery to the public in some cases. For example, VA  officials stated that their incentive for colocation is to expand veterans’  medical care efficiently, and that sharing space with other agencies with  similar missions, such as the U.S. Army, could help achieve that goal and  avoid duplicating medical capacity. Moreover, according to a recent report  by the USPS OIG, the Postal Service would benefit from sharing post  office space with other government entities while generating revenue and  increasing efficiency by expanding citizen access to government  operations. For example, USPS currently has interagency agreements to  provide non-postal government services, such as accepting passport  applications and Selective Service registration forms. DHS officials  discussed broadly how DHS is often colocated with USDA, the Drug  Enforcement Administration (DEA) and the Federal Bureau of  Investigation (FBI) because those agencies have complementary  missions to certain DHS operations. These colocations take place in both  GSA-held and DHS-held space. While not inter-agency, Interior officials  described how the agency has tried to colocate its various bureaus for the  sake of agency synergies, especially since the public often does not  distinguish among the roles of the bureaus. They noted that integrating  services in space or function is a good practice that could occur across  agencies. USDA officials also said that the colocation of the Farm Service  Agency (FSA) and the Natural Resources Conservation Service (NRCS)  provided synergies because they are able to share databases and pass  information more readily between the two entities.
Federal officials also said that, under certain circumstances, colocation  could result in cost savings or avoidance for the federal government. For  example, DHS officials described the department’s examination of  colocation opportunities within the department, and cited one case it  studied where cost savings could result from productivity gains, reduced  redundancy, and cost avoidance. USPS officials in multiple locations  noted USPS would benefit from revenue from a federal agency tenant.  For example, USPS could share underutilized floor and retail window  space with other government agencies, generating revenue to offset  some building costs. Additionally, GSA officials described the motivation  to accomplish savings from consolidation and colocation as responsible  asset stewardship.
While federal officials seemed to agree that colocation can produce  efficiencies, data limitations, such as the lack of a national, multi-agency  asset-management tool as discussed in the next section, make it difficult  to estimate the financial and nonfinancial benefits from colocating federal  agencies, because the quality of any estimate is a direct function of the  input data. Moreover, colocation will not always be more cost-effective  than leasing in the short run, particularly if the costs to reconfigure owned  space are high. For example, DOD officials said that it cost $20 million to  renovate a vacant 70,000-square-foot warehouse within the Naval  Support Facility in suburban north Philadelphia and move the Navy  Human Resources Service Center there from leased commercial space.  They estimated that the payback period for the move would exceed 30  years. Information on cost and service delivery improvements from  colocations can help agencies decide whether to proceed with  colocations and aid agencies in evaluating completed colocations.  Generally, however, agencies lack the tools—such as a standardized  approach for quantifying costs and benefits—to determine whether, and  to what extent, colocations will generate or are generating intended  savings or financial benefits, metrics that are key to helping agencies  manage their resources. Moreover, some federal officials indicated that  quantitatively measuring the nonfinancial results of colocations, such as  intergovernmental collaboration, was difficult to do because these are  difficult concepts to monetize, as they can be subjective. We found that  agencies generally lacked the tools to measure the costs and benefits of  colocation efforts. Our work on capital decision making has shown that  establishing an analytical framework for review, approval, and selection of  projects; evaluating a project’s results; and incorporating lessons learned  into the decision-making process are all key principles and practices of  such an effort. Establishing a framework with a mixture of financial and  nonfinancial benefits, such as service delivery improvements, allows  entities to better evaluate performance.

	Greater Inter-Agency Collaboration Could Mitigate Some Challenges to Colocation

Agency officials said that greater collaboration—through strategic  partnerships among federal agencies targeted to meet specific needs and  a formal local coordination mechanism—could mitigate some  administrative, financial and data challenges to colocation. Agencies’  varying real property-management authorities can create administrative  challenges, which officials said could be addressed through a strategic  partnership with GSA. Acquiring the needed up-front financing for repair  or renovation remains challenging for agencies, although some agencies  have secured up-front financing through partnerships with private entities.  Agencies face challenges identifying colocation opportunities because of  limitations with available data and the lack of a coordination mechanism.  Officials from a few agencies suggested that structured local or regional  coordination could best identify opportunities where the missions of  various agencies could be “matched” to appropriate space because of  local and regional federal officials’ more detailed knowledge of local  needs, conditions, and opportunities.

		Administrative Challenges

Agencies have varying real property management authorities related to  colocation, including the ability to share property and retain the proceeds,  and this variation can create administrative challenges for agencies  seeking to increase inter-agency colocation opportunities. For example,  USPS can share its property with private or government entities and retain  the proceeds, but other agencies may not be able to do so.officials reported that the agency is allowed, under certain circumstances,  to share government-owned real property, but it is not allowed to retain the  proceeds, unless provided for in its annual appropriation. In addition, even  if an agency has the authority to share real property, it may not be well- prepared to handle tasks such as setting lease rates and managing the  financial arrangements for renovations. For example, GSA officials said  some agencies do not know what rates to charge for the space they would  share with other agencies. Moreover, Navy officials said agencies with the  authority to share properties can face administrative challenges managing  the many various sources of funds potentially needed should extensive  renovations be necessary to bring properties up to usable condition.
Officials from six agencies as well as commercial real estate officials said  that to overcome some of these administrative challenges and improve  colocation efforts, agencies could address specific challenges through a  strategic partnership with GSA. They said GSA has administrative  structures and experiences that could benefit less-experienced agencies.  For example, GSA, as the federal government’s property manager,  already possesses the capability to market and price properties and  manage leases on a large scale. Our previous work on the Government  Performance and Results Act (GPRA)  also supports the idea that  strategic partnerships could be beneficial to overcoming these  challenges. We have reported that cross-government agency  collaboration can produce more public value than can be produced when  agencies act alone. Specifically, agencies can enhance and sustain  their collaborative efforts by engaging in a variety of practicesestablishing policies and procedures to operate across agency  boundaries, by, for example, developing interagency handbooks that  define common standards, policies, and procedures. During our review,  officials from four agencies suggested that increased collaboration  through some of these practices could help mitigate some of the  administrative challenges of colocation. As a potential approach for these  types of strategic partnerships, OMB officials described GSA’s effort to  work with selected agencies to develop strategic plans for future property  needs and identify potential areas for consolidation.
USPS has some experience collaborating with other agencies on real  property issues, and as it explores further options to better utilize excess  space, strategic partnerships with other agencies, particularly GSA, could  help USPS overcome administrative challenges that may be impeding  colocation. A February 2012 USPS OIG report said USPS has experience  with intergovernmental collaboration because it already shares space in  federal buildings and conducts transactions for other federal entities. For example, the Mansfield, Ohio, federal building hosts a post office as  well as offices of SSA, the Internal Revenue Service (IRS), and the U.S.  Department of Labor. The report noted that because many postal facilities  are near many GSA-leased properties, sharing space could potentially  lower overall federal lease costs. The report recognized USPS’s need to  optimize its network through internal consolidations and closures, but said  USPS could use its underutilized resources better through external  collaboration. USPS management agreed with the OIG recommendation  to develop and implement a strategy to address these findings.
United States Postal Service, Office of Inspector General. 21st Century Post Office:  Opportunities to Share Excess Resources – Management Advisory, DA-MA-12-003  (Arlington, VA: February 9, 2012.)

		Financial Challenges

During our site visits, we found federally owned properties that could be  made available for leasing; however, many of the spaces would need  substantial repair or renovation, and acquiring the needed up-front  financing remains challenging for agencies. For example, we saw  several USPS properties in which the available space required substantial  renovation to replace old carpet, peeling paint, and outdated fixtures, and  to repair water damage (see fig. 4). However, USPS’s deteriorating  financial condition may limit the costs it can incur to renovate its facilities  prior to sharing them with other agencies.
We also observed spaces that would need potentially costly specialized  repairs or renovations. For example, some of the U.S. Navy properties we  visited at the mixed-use Philadelphia Navy Yard (see fig. 5) would need  asbestos abatement and water damage repair. Navy officials told us that  the properties could be leased from the Navy by other government  agencies, and that some agencies have made inquiries to do so.  However, they said that the agencies were alarmed by the complexity and  costs of repairs, which effectively ended any further consideration of the  properties for colocation. Had any agencies pursued leasing the  properties, Navy officials said they likely would lack sufficient up-front  financing. In addition to general and specialized renovation costs, Navy  officials said DOD Unified Facilities Criteria (UFC) requirements prescribe  certain antiterrorism measures, such as blast-proof windows and security  gates, which can further elevate the costs of renovations to DOD-owned  buildings, both on and off-base.
The up-front costs of renovations present a challenge to GSA that hinders  its colocation efforts. GSA regional officials said that financing  renovations is the most serious challenge they face in improving the  utilization of their assets. Regional officials said they have considered  acquiring vacant USPS facilities that could support colocation, but have  been reluctant to do so in part because of the up-front cost of the  extensive renovations needed to make the properties usable. As we have  previously reported, in recent years budgeting and appropriations  decisions, made by the executive branch and Congress, have limited the  amount of resources made available from the Federal Buildings Fund to  GSA to fund real property operations, acquisition, and maintenance.GSA headquarters officials told us that these limitations make it  challenging for the agency to effectively manage its portfolio and result in  delayed or cancelled projects.
In downtown Philadelphia, GSA had considered purchasing USPS’ large, underutilized  30th St. Mail Processing and Distribution Center Station, but was dissuaded by the  substantial cost of the renovation that would be needed for the building, which was  constructed in 1935. Instead, in April 2007, USPS signed a deal with a private developer  to renovate nearby facilities and, in August 2007, signed a memorandum of understanding  with GSA for private redevelopment of the building into IRS offices. In September 2008,  USPS moved its retail operations and distribution unit out of 30th St. into its new facilities.  When the 30th St. renovation was complete, IRS moved into the property (see fig. 6). In  exchange for financing the $184-million renovation, the developer received all interest and  rights from USPS for the 30th St. land, building, and a nearby 1,661-space parking  garage, and until August 25, 2030, will receive lease payments from GSA, who in turn will  receive rent from IRS. reported, renovations financed by the private sector will generally cost  more than those financed by Treasury borrowing.
The only national-level, multi-agency real property database—the  FRPP—was not designed to be an active asset management system.As such, it does not possess the level of detail necessary to support the  identification of colocation opportunities. The FRPP can provide basic  descriptive information about the government’s federal property holdings,  such as address, square footage and facility type; however, colocation  decisions would require more data elements than would be practical to  add to the FRPP. For example, the FRPP provides square footage  information, but it does not provide information on orientation or use of  space. We visited a DHS-held site where most of the facility was  underground and much of the unoccupied space was used by  environmental systems such as air filtration units and pumps that could  not be removed. (See fig. 7.) The FRPP does not reveal that the facility is  underground, nor does it convey the substantial challenges to  reconfiguring the space. Similarly, we found that one building under  renovation was characterized as “underutilized” in the FRPP. While not  technically incorrect, characterizing this space as underutilized can be  misleading because the simple utilization designation does not  necessarily indicate if the space can be immediately occupied or used for  colocation.
As a result, local and regional federal officials are generally better  positioned than headquarters officials to manage the colocation process  because of their more detailed knowledge of local needs, conditions, and  opportunities. We found that detailed property knowledge necessary to  facilitate colocations was concentrated at the regional and local levels,  rather than at headquarters. When we asked for detailed information  about specific properties, we were referred to local and regional federal  officials, who were knowledgeable about specific sites and facilities.  Some headquarters officials were familiar with attempts at colocation and  could describe overall situations, but they were not the primary contacts  for these efforts, nor could they readily describe the properties’ attributes  or local office needs. In general, local and regional federal officials said  that they knew property details—such as space configuration, access  routes, and parking availability—that would be important for facilitating  colocations. In addition, FRPC, which created the FRPP database, is a  national, policy-oriented body. As such, the scope of FRPC’s mission  does not include managing the local-level negotiations that colocation  would require.
The detailed property knowledge held by local federal officials is  important for ensuring an appropriate match between the agency that  owns the property and the agency that would lease space. Officials from  many agencies reported that matching the location of available property  to the mission and security needs of the agency searching for space is an  important consideration; for example, DOE’s need for isolated, remote  sites as compared to VA’s interest in sites readily accessible to veterans.  However, officials noted that that there are no universal requirements  regarding their respective agencies’ property needs—rather, the property  needs vary across the country in response to mission needs. In some  cases, agencies have operational requirements that would make  colocation inappropriate if the potential tenant and potential lessor did not  share the same mission needs. For example, USPS officials noted the  Postal Service’s need to keep mail secure and separate from potential  tenant agencies or members of the public who may need to access the  facility. Additionally, officials from DOD told us that in some  circumstances their security requirements would make them ill-suited to  share space with other agencies, such as when public access would be  required. However, in instances where mission needs were similar,  potential tenants might see enhanced security as desirable.
In other cases, an agency’s mission may dictate the need for a  specialized facility that could make colocation inappropriate. For example,  USDA officials in a few regions told us that farmers often drove farm  vehicles, including tractors, to Service Center locations and that in these  cases, underground parking in a federal building would be problematic. In  addition, we visited a leased Interior site that required a blacksmith and  carpentry shop, cold storage for artifacts, and parking for large  maintenance vehicles, such as wood-chippers and industrial mowers (see  photos in fig. 8 below). An Interior official said that these needs would  have to be taken into account to share space. None of these details are  included in the FRPP, but local and regional officials from several  agencies noted that they can speak readily on how mission needs and  facility details may impact colocation.
Officials from several agencies acknowledged that property knowledge is  sometimes communicated informally. However, various officials noted  that the lack of a systematic mechanism to share information hinders any  efforts to colocate. Officials from a few agencies suggested that  structured local or regional coordination could best identify opportunities  where the missions of various agencies could be “matched” to  appropriate space. Several local officials who showed us vacant federal  spaces said there is currently no online or formal mechanism they can  use to share vacancy details with officials from other agencies who might  need space. A previous effort at local coordination—the Governmentwide  Real Property Information Sharing program (GRPIS)—experienced some  success, according to GSA officials, which they attributed to connections  made at the local level. The program was tasked with encouraging and  facilitating the sharing of real property information among federal  agencies, and it revolved around the formation of real property councils  within major federal communities nationwide. GSA officials said that local  councils were an effective method for sharing information. However,  officials said the program became essentially inactive after responsibility  for the program was transferred within GSA and local connections were  lost.

	Conclusions

Colocating federal agencies into government-owned space represents an  opportunity to improve government operations while simultaneously  addressing two of the federal government’s long-standing real-property  management challenges: reducing over-reliance on costly leasing and the  presence of underutilized owned property. Our analysis of eight markets  shows that there are underutilized owned properties near areas where the  government also leases space for other purposes. However, colocations  are far more complicated than just matching the square feet needed with  the square feet available. Agencies’ mission needs and building-specific  issues that include security, condition, configuration, and use must align  for the colocation to fully succeed. FRPC has coordinated federal real  property actions for almost a decade at the national level, but detailed  local knowledge of agency missions and facility needs combined with  systematic communication channels are needed to match owners with  compatible tenants.
Once matched, numerous capacity and administrative hurdles remain as  challenges to successful colocation. GSA is the only agency that has a  core mission of managing real property. Several landholding agencies  lack the experience and administrative tools necessary to effectively  market and manage their property as a landlord. Creating cross-agency  relationships with GSA to assist in tasks such as setting rental rates,  crafting lease documents, renovating space, and otherwise managing the  property would improve consistency of approach and allow each agency  to remain focused on its core mission.
Colocation is not always the right answer. We found that agencies can  force relocations into ill-suited locations, pushing the financial breakeven  point out decades into the future. Without the tools to measure the  benefits and costs of colocation efforts or proposals, policy makers are  unable to effectively weigh colocation as an option. Understanding the  financial costs and savings associated with colocation efforts, as well as  the nature and extent of synergies and improved services, will allow  agencies to better demonstrate that the benefits can be worth the costs of  renovating and moving an agency out of privately leased space.

	Recommendations for Executive Action

To promote colocation across agencies, the Director of the Office of  Management and Budget (OMB) should work with the Federal Real  Property Council (FRPC) and the U.S. Postal Service (USPS) to  implement GAO’s three recommendations:    Establish a mechanism, which includes USPS, for local coordination  in markets with large concentrations of federal agencies to identify, on  a case by case basis, specific opportunities to share space and  improve coordination of real property use across agencies.    Develop strategic partnerships and a coordinated strategy with  assigned roles and tasks between the General Services  Administration (GSA) and other federal landholding agencies (USPS  specifically) with less experience sharing real property.    Develop and implement tools, along with supporting guidance, to  measure, evaluate, and disseminate information on financial and  nonfinancial benefits, such as service delivery improvements, from  colocating federal agencies.

	Agency Comments

We provided a draft of this report to OMB, GSA, USPS, VA, USDA, DOE,  Interior, DHS, DOD, and IRS for review and comment. In commenting on  a draft of this report, officials from OMB said that they agreed with the  report’s findings, conclusions, and recommendations and offered  technical comments that we incorporated as appropriate. They said that  OMB has little power over how USPS manages its real property assets.  The officials also said that GSA has already started looking at  consolidating tenant field operations within its portfolio, and suggested  that the report clarify the role that we recommend GSA takes in facilitating  consolidations. USPS agreed with the facts and findings in the report and  provided comments regarding our recommendations. USPS’s comments  are contained in appendix III. GSA agreed with our recommendations and  provided technical comments that we incorporated as appropriate. DHS  and VA provided clarifying technical comments which we incorporated,  where appropriate. VA’s comments are contained in appendix IV. USDA,  DOE, Interior, DHS, DOD, and IRS did not provide comments.
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Appendix I: Scope and Methodology

Our objective was to review the issues surrounding colocation—that is,  moving federal operations from one stand-alone location to a federal  location occupied by another entity. To accomplish this, we addressed  (1) if the potential for cross-agency colocation exists, what factors can  affect that potential; (2) the potential benefits of colocation; and (3) the  challenges associated with colocation, and what solutions, if any, can  mitigate these challenges. During the course of our work we used the  Federal Real Property Portfolio (FRPP), a government-wide database of  owned and leased space, maintained by GSA on behalf of the Federal  Real Property Council (FRPC). We recently reported that the FRPC has  not followed sound data collection practices—related to data consistency,  performance measures, collaboration, and data reporting—when  collecting FRPP data, that would help them collect these data in a way  that is sufficiently consistent and accurate to be useful making property  management decisions. We recommended that GSA develop a plan to  improve the FRPP consistent with sound data collection practices.  Nonetheless, we also reported that the FRPP can be used in a general  sense to track assets. As such, for this report, we used FRPP data for the  limited purposes of identifying agencies within our scope, selecting case  study markets and summarizing agency-level statistics on owned and  leased property.
We used the 2010 Federal Real Property Portfolio (FRPP) summary  report and U.S. Postal Service property data to identify the agencies  which hold the largest amounts of property. We then limited our scope to  8 of the top 10 agencies, which include the Departments of Agriculture  (USDA), Defense (DOD), Energy (DOE), Homeland Security (DHS), the  Interior (Interior), Veterans Affairs (VA), the General Services  Administration (GSA), and the U.S. Postal Service (USPS).
To determine the factors that can affect cross-agency consolidation, we  analyzed detailed data and interviewed agency officials about the  property holdings in 8 specific U.S. markets: Allentown PA, Cleveland  OH, Dallas TX, Kansas City KS, Kerrville TX, Philadelphia PA, San  Antonio TX, and Waco TX. To select these areas and provide nationwide  statistics on owned and leased facilities, we analyzed basic inventory  data, including location, occupant, size, owned/leased data from the  FRPP for the 7 agencies in our scope that are represented in the FRPP.  USPS, which is not represented in the FRPP, provided data from its  internal systems. While case studies are not generalizable, we selected  diverse markets in terms of market size, geographic region, owned and  leased federal properties, and agencies present. Although we used GSA- defined markets as a guideline, to better reflect the interests of this review  we delineated markets by using an estimated 60-minute commute radius,  and selected the borders based on professional judgment (for example, in  more rural areas, following the direction of development.) We identified  the primary cities of large and medium markets using GSA data, and then  selected small markets within driving distance of a large or medium-sized  market in order to facilitate travel.
Because there are no reliable real property cost and benefit data, we  primarily relied on interviews with federal agency officials at the national,  regional, and local levels to determine the potential benefits of colocation.  We focused on benefits that were mentioned by officials from more than  one agency and more than one market. We also reviewed relevant GAO  and other reports and documents, including USPS Office of Inspector  General reports, and laws, regulations, and guidance.
To determine the challenges associated with colocation and what  solutions, if any, could mitigate these challenges, we visited facilities that  were both owned and leased, with a particular emphasis on owned offices  and warehouses that were categorized as underutilized. We did not  include properties categorized as inactive, excess, or disposed in our  scope, and we did not include land. Using this information, we conducted  an analysis to identify key challenges that agencies face when making  property decisions and the options, if any, for mitigating those challenges.
We also interviewed agency officials at the national, regional, and local  level, and reviewed documentation provided to us regarding specific  properties. We did not examine any screenings for other potential uses of  real property, such as use for the homeless or public benefit. To  determine which challenges were the most pressing, we only included  challenges which were raised in more than one market and by more than  one agency.
We conducted this performance audit from July 2011 through July 2012 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Appendix II: Selected Leasing and Retention of Proceeds Authorities for In-Scope Agencies

This list is not intended to be inclusive of all of an agency’s real property  authorities; there may be other authorities not included below that may  authorize colocation.
Relevant statute and description of authority  Enhanced Use Lease Authority Pilot Program  7 U.S.C. § 3125a note  The Secretary of Agriculture is authorized to establish a pilot program and lease nonexcess  real property at the Beltsville Agricultural Research Center and the National Agricultural  Library to any individual or entity, including agencies or instrumentalities of State or local  governments, if the Secretary determines that the lease is consistent with, and will not  adversely affect, the mission of the agency administering the property; will enhance the use  of the property; will not permit any portion of the property or facility to be used for the public  retail or wholesale sale of merchandise or residential development; will not permit the  construction or modification of facilities financed by nonfederal sources to be used by an  agency, except for incidental use; and will not include any property or facility required for  any agency purpose without prior consideration of the needs of the agency. Consideration  for any lease shall be for fair market value and for cash. The Secretary is authorized to  enter into leases until June 18, 2013, and the term of the lease shall not exceed 30 years.
Retention of Proceeds/Enhanced Use Lease Authority Pilot Program  7 U.S.C. § 3125a note  Consideration for leases shall be deposited in a capital asset account, which is available  until expended, without further appropriation, for maintenance, capital revitalization, and  improvements to the department’s properties and facilities at the Beltsville Agricultural  Research Center and the National Agricultural Library.
Leases of Non-Excess Property of Military Departments  10 U.S.C. § 2667  The Secretary of a military department is authorized to lease nonexcess real property under  the control of the department that is not needed for public use if the Secretary considers the  lease to be advantageous to the United States and upon such terms that will promote the  national defense or be in the public interest. The term of the lease may not be more than 5  years, unless the Secretary determines the term should be longer to promote the national  defense or to be in the public interest. Lease payments shall be in cash or in-kind  consideration for an amount not less than fair market value. In-kind consideration includes  maintenance, protection, alteration, repair, or environmental restoration of property or  facilities; construction of new facilities; providing facilities; or providing or paying for utility  services.

	Agency

Relevant statute and description of authority  appropriation act. Beginning in fiscal year 2005, any amounts deposited into a special  account from the disposition of property are appropriated and available for obligation or  available to the Secretary without additional congressional action.
Conveyance or Lease of Existing Property and Facilities  10 U.S.C. § 2878  The Secretary concerned is authorized to convey or lease property or facilities, including  ancillary supporting facilities to eligible entities at such consideration the Secretary  concerned considers appropriate for the purposes of the alternative authority for acquisition  and improvement of military housing and to protect the interests of the United States.
Retention of Proceeds/Conveyance or Lease of Existing Property and Facilities  10 U.S.C. § 2883  Proceeds from the conveyance or lease of property or facilities under 10 U.S.C. § 2878  shall be credited to the Department of Defense Housing Improvement Funds. Proceeds may  be used to carry out activities with respect to the alternative authority for the acquisition and  improvement of military housing, including activities required in connection with the  planning, execution, and administration of contracts subject to such amounts as provided in  appropriation acts.
Leasing of Property  42 U.S.C. § 7256  The Secretary of Energy is authorized to lease acquired real property located at a DOE  facility that is to be closed or reconfigured and is not needed by DOE at the time the lease is  entered into if the Secretary considers the lease to be appropriate to promote national  security or is in the public interest. The term of the lease may be up to 10 years, with an  option to renew the lease for another 10 years, if the Secretary determines that a renewal of  the lease will promote national security or be in the public interest. Lease payments may be  in cash or in-kind consideration and may be for an amount less than fair market value. In  kind consideration may include services relating to the protection and maintenance of the  leased property.
Retention of Proceeds/Leasing of Property  42 U.S.C. § 7256  To the extent provided in advance in appropriations acts, the Secretary is authorized to use  the funds received as rents to cover administrative expenses of the lease, maintenance and  repair of the leased property, or environmental restoration activities at the facility where the  leased property is located.
General Services Administration (GSA)   Disposition of Real Property  40 U.S.C. § 543  The Administrator of GSA is authorized to dispose of surplus real property by sale,  exchange, lease, permit, or transfer for cash, credit, or other property.
Conveyance of Property Consolidated Appropriations Act of 2005, Pub. L. No. 108-447,  §412, 118 Stat. 2809, 3259 (2004)  The Administrator of GSA, notwithstanding any other provision of law, is authorized to  convey by sale, lease, exchange, or otherwise, including through leaseback arrangements,  real and related personal property, or interests therein.

	Agency

Relevant statute and description of authority  Retention of Proceeds/Conveyance of Property Consolidated Appropriations Act of 2005,  Pub. L. No. 108-447, § 412, 118 Stat. 2809, 3259 (2004)  Net proceeds from the disposition of real property are deposited in GSA’s Federal Buildings  Fund (FBF) and are used for GSA real property capital needs to the extent provided in  appropriations acts.
General Powers of the Commandant, U.S. Coast Guard  14 U.S.C. § 93(a)(13)  The U.S. Coast Guard may rent or lease real property, not required for immediate use, for a  period not exceeding 5 years. Payments received from the rental or lease, less amount of  expenses incurred (exclusive of governmental personal services), to be deposited in the  Treasury.
Leases for National Park System (NPS)  16 U.S.C. § 1a-2(k)(1)-(4)  Interior is authorized to enter into a lease with any person or governmental entity for the use  of buildings and associated property administered by the Secretary as part of the National  Park System. Leases shall be for fair market value rental. Buildings and associated property  leased shall be used for an activity that is consistent with the purposes established by law  for the unit in which the building is located; shall not result in degradation of the purposes  and values of the unit; and shall be compatible with National Park Service programs.
Retention of Proceeds/Leases for NPS  16 U.S.C. § 1a-2(k)(5)  Rental payments must be deposited into a special Treasury account where the availability of  funds is not subject to an appropriation act. Funds are available for infrastructure needs  such as facility refurbishment, repair and replacement, infrastructure projects associated  with park resource protection, and direct maintenance of the leased buildings and  associated properties.
Leases for Housing NPS employees  16 U.S.C. § 17o  Interior is authorized where necessary and justified to make available employee housing, on  or off the lands under the administrative jurisdiction of the National Park Service, and to rent  or lease such housing to field employees of the National Park Service at rates based on the  reasonable value of the housing.
Housing for NPS employees  16 U.S.C. § 17o  Subject to the appropriation of necessary funds in advance, Interior is authorized to lease  federal lands and interests in land to qualified persons for up to 50 years for the construction  of field employee quarters.

	Agency

Relevant statute and description of authority  agency is authorized to enter into leases with the Presidio Trust which are necessary and  appropriate.
USPS Real Property Authorities  39 U.S.C. § 401(5)  The Postal Service is authorized to acquire in any legal manner, real property or any  interest therein, as it deems necessary or convenient in the transaction of its business and  to hold, maintain, sell, lease, or otherwise dispose of such property or any interest therein.
USPS Real Property Authorities  39 U.S.C. § 401(6)  The Postal Service is authorized to construct, operate, lease, and maintain buildings,  facilities, or equipment, and to make other improvements on any property owned or  controlled by it.
USPS Retention of Proceeds/Real Property Authorities  39 U.S.C. §§ 2003, 2401  Proceeds are deposited into the Postal Service Fund and remain available to the Postal  Service without fiscal year limitation to carry out the purposes, functions, and powers of the  Postal Service. All revenues received by the Postal Service are appropriated to the Postal  Service and are available without additional congressional action.
VA Transfer Authority – Capital Asset Fund  38 U.S.C. § 8118  The Secretary of VA is authorized to transfer real property under VA’s control or custody to  another department or agency of the United States, to a state or political subdivision of a  state, or to any public or private entity, including an Indian tribe until December 31, 2018.  The property must be transferred for fair market value, unless it is transferred to a homeless  provider. Property under this authority cannot be disposed of until the Secretary determines  that the property is no longer needed by the department in carrying out its functions and is  not suitable for use for the provision of services to homeless veterans by the department  under the McKinney-Vento Act.
Authority to Outlease  38 U.S.C. § 8122  The Secretary may lease for a term not exceeding 3 years lands or buildings, or parts or  parcels thereof, belonging to the United States and under the Secretary’s control. A lease  made to any public or nonprofit organization may provide for the maintenance, protection, or  restoration, by the lessee, of the property leased, as a part or all of the consideration for the  lease. Prior to the execution of any such lease, the Secretary shall give appropriate public  notice of the Secretary’s intention to do so in the newspaper of the community in which the  lands or buildings to be leased are located. The proceeds from such leases (less expenses  for maintenance, operation, and repair of buildings leased for living quarters) shall be turned  over to the Treasury of the United States as miscellaneous receipts.

	Agency

Relevant statute and description of authority  transfer costs such as demolition, environmental remediation, and maintenance and repair;  costs associated with future transfers of property under this authority; costs associated with  enhancing medical care services to veterans by improving, renovating, replacing, updating,  or establishing patient care facilities through minor construction projects; and costs  associated with the transfer or adaptive use of property that is under the Secretary’s  jurisdiction and listed on the National Register of Historic Places.
This pilot program was enacted in the Food, Conservation, and Energy Act of 2008, Pub. L. No. 110- 246, § 7409, 112 Stat. 1651, 2014-2016 (2008).  Our review of DOD did not include real property at a military installation designated for closure or  realignment under a base closure law. Therefore, for purposes of this appendix we have excluded  DOD authorities relating to base closure or realignment. Additionally, while some authorities in this  enclosure, such as 10 U.S.C. § 2667, contain subsections relating to base closure and realignment,  for purposes of this enclosure we are referring to the other subsections of the statute.  Department of Defense Appropriations Act for Fiscal Year 2005, Pub. L. No. 108-287, § 8034, 118  Stat. 951, 978 (2004).
This authority does not apply to property or facilities located on or near a military installation  approved for closure under a base closure law. See 10 U.S.C. § 2878(b).

Appendix III: Comments from the U.S. Postal Service

Appendix IV: Comments from the Department of Veterans Affairs

Appendix V: GAO Contact and Staff Acknowledgments

	GAO Contact

David J. Wise, (202) 512-2834 or wised@gao.gov.

	Staff Acknowledgments

In addition to the contact named above, Keith Cunningham (Assistant  Director); Jessica A. Evans; Colin Fallon; Gary Guggolz; Alison Hoenk;  Hannah Laufe; SaraAnn Moessbauer; Joshua Ormond; Susan Sachs;  and Crystal Wesco made key contributions to this report.

Related GAO Products

Federal Real Property: National Strategy and Better Data Needed to  Improve Management of Excess and Underutilized Property.  GAO-12-645. Washington, D.C.: June 20, 2012.
Federal Buildings Fund: Improved Transparency and Long-term Plan  Needed to Clarify Capital Funding Priorities. GAO-12-646. Washington,  D.C.: July 12, 2012.
U.S. Postal Service: Postal Service: Challenges Related to Restructuring  the Postal Service’s Retail Network. GAO-12-433. Washington, D.C.:  April 17, 2012.
Decennial Census: Census Bureau and Postal Service Should Pursue  Opportunities to Further Enhance Collaboration. GAO-11-874.  Washington, D.C.: September 30, 2011.
Federal Real Property: Overreliance on Leasing Contributed to High-Risk  Designation. GAO-11-879T. Washington, D.C.: August 4, 2011.
Federal Real Property: Proposed Civilian Board Could Address Disposal  of Unneeded Facilities. GAO-11-704T. Washington, D.C.: June 9, 2011.
Federal Real Property: Progress Made on Planning and Data, but  Unneeded Owned and Leased Facilities Remain. GAO-11-520T.  Washington, D.C.: April 6, 2011.
High-Risk Series: An Update. GAO-11-278. Washington, D.C.:   Feb. 16, 2011.
VA Real Property: VA Emphasizes Enhanced-Use Leases to Manage Its  Real Property Portfolio. GAO-09-776T. Washington, D.C.: June 10, 2009  Federal Real Property: Authorities and Actions Regarding Enhanced Use  Leases and Sale of Unneeded Real Property. GAO-09-283R.  Washington, D.C.: February 17, 2009.
Federal Real Property: Strategy Needed to Address Agencies’ Long- standing Reliance on Costly Leasing. GAO-08-197. Washington, D.C.:  January 24, 2008.
Federal Real Property: Progress Made Toward Addressing Problems, but  Underlying Obstacles Continue to Hamper Reform. GAO-07-349.  Washington, D.C.: April 13, 2007.

Summary:
Why GAO Did This Study

GAO designated the federal governments management of its nearly 400,000 real property assets as high-risk in part because of overreliance on leasing and the retention of excess facilities. Real property management is coordinated nationally by the FRPCan association of landholding agencies chaired by the Deputy Director for Management of the Office of Management and Budget (OMB). To explore the potential to reduce leasing by better utilizing owned properties, GAO was asked to examine: (1) the potential for collocation and the factors that can affect that potential, (2) the possible benefits of collocation, and (3) the challenges associated with collocation, and what solutions, if ny, can mitigate these challenges. GAO reviewed property data and documents from eight of the largest propertyholding agencies; laws, regulations and guidance; and prior GAO reports. GAO also analyzed eight case study markets of varying size and federal agency presence, and interviewed agency officials.

What GAO Found

The federal government owns facilities that are underutilized in locations where it also leases space. In some cases, space within these government-owned properties could be occupied by other government agencies. This is particularly true for the U.S. Postal Service (USPS), for which declining mail volume and operational changes have freed space in many facilities. However, this potential for collocation of federal agencies is affected by such factors as the size, location, and condition of the available space.
Officials from various agencies said that, in some cases, collocation could result in more efficient service delivery and cost savings or avoidance. For example, underutilized USPS floor and retail window space could be used by other federal agencies, generating space-use efficiencies for USPS and expanding citizen access to government services. Collocation could also help achieve agency synergies, such as shared technology infrastructure.
Agency officials said that strategic partnerships among federal agencies targeted to meet specific needs and a formal local coordination mechanism could mitigate certain challenges to collocation, including administrative and data challenges. Agencies have varying authorities to share available space in their properties and differing capabilities to handle the administrative tasks associated with sharing space. The General Services Administration (GSA), as the federal governments property manager, possesses the capability and experience to market properties and manage leases on a large scale. Officials from other agencies suggested that partnerships with GSA or a private entity could address some administrative challenges and improve collocation efforts. However, the ability to identify collocation opportunities is hindered by the lack of a formal information-sharing mechanism. The Federal Real Property Council (FRPC) is a national, policyoriented body and, as such, does not manage the local-level negotiations that collocation would require. The FRPC established a database describing all executive branch properties, but it was not designed to identify and manage collocation opportunities, nor does it include USPS data. In contrast, local federal officials indicated that they possess detailed knowledge of specific properties owned by their respective agencies and, with more structured local coordination, could share that knowledge to support collocation efforts. GSA officials said that local councils were an effective method for sharing information

What GAO Recommends

OMB should work with FRPC and USPS to, among other things, (1) lead the creation of strategic partnerships between GSA and other property-owning federal agencies with less experience sharing real property, and (2) establish a mechanism (including USPS) for local coordination to improve coordination and identify specific opportunities to share space. OMB, GSA, and USPS generally agreed with the recommendations. The details of agencies comments and GAOs response are addressed more fully within the report.