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S. Hrg. 110–418 

FEDERAL REAL PROPERTY: REAL WASTE IN NEED 

OF REAL REFORM 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

MAY 24, 2007 

Available via http://www.access.gpo.gov/congress/senate 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

BARACK OBAMA, Illinois 

CLAIRE McCASKILL, Missouri 

JON TESTER, Montana 

SUSAN M. COLLINS, Maine 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

PETE V. DOMENICI, New Mexico 

JOHN WARNER, Virginia 

JOHN E. SUNUNU, New Hampshire 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, 

FEDERAL SERVICES, AND INTERNATIONAL SECURITY SUBCOMMITTEE 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

BARACK OBAMA, Illinois 

CLAIRE McCASKILL, Missouri 

JON TESTER, Montana 

TOM COBURN, Oklahoma 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

PETE V. DOMENICI, New Mexico 

JOHN E. SUNUNU, New Hampshire 

JOHN KILVINGTON, Staff Director 

KATY FRENCH, Minority Staff Director 

LIZ SCRANTON, Chief Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

Senator Carper ................................................................................................. 1 

Senator Coburn ................................................................................................. 4 

WITNESSES 

THURSDAY, MAY 24, 2007 

Clay Johnson III, Deputy Director for Management, Office of Management 

and Budget ........................................................................................................... 5 

Mark L. Goldstein, Director, Physical Infrastructure Issues, U.S. Government 

Accountability Office ............................................................................................ 6 

Boyd K. Rutherford, Assistant Secretary for Administration, U.S. Department 

of Agriculture ........................................................................................................ 20 

Robert J. Henke, Assistant Secretary for Management, U.S. Department of 

Veterans Affairs ................................................................................................... 21 

Philip W. Grone, Deputy Under Secretary of Defense, Installations and Environment, U.S. Department of Defense ............................................................... 23 

David Winstead, Commissioner of Public Buildings Service, U.S. General 

Services Administration ...................................................................................... 24 

ALPHABETICAL LIST OF WITNESSES

Goldstein, Mark L.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 43 

Grone, Philip W.: 

Testimony .......................................................................................................... 23 

Prepared statement .......................................................................................... 87 

Henke, Robert J.: 

Testimony .......................................................................................................... 21 

Prepared statement .......................................................................................... 75 

Johnson, Clay, III: 

Testimony .......................................................................................................... 5 

Prepared statement with an attachment ....................................................... 39 

Rutherford, Boyd K.: 

Testimony .......................................................................................................... 20 

Prepared statement .......................................................................................... 68 

Winstead, David: 

Testimony .......................................................................................................... 24 

Prepared statement .......................................................................................... 95 

APPENDIX 

Chart entitled ‘‘Excess/Underutilized Property At the Department of Energy’’ . 105 

Chart entitled ‘‘Construction vs. Operating Leases’’ ............................................. 106 

Copy of the ‘‘State of the Portfolio, fy 2007’’ submitted by Mr. Winstead .......... 107 

(1) 

FEDERAL REAL PROPERTY: REAL WASTE IN 

NEED OF REAL REFORM 

THURSDAY, MAY 24, 2007 

U.S. SENATE, SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:02 a.m., in 

room SD–342, Dirksen Senate Office Building, Hon. Thomas R. 

Carper, Chairman of the Subcommittee, presiding. 

Present: Senators Carper and Coburn. 

OPENING STATEMENT OF CHAIRMAN CARPER 

Chairman CARPER. The hearing will come to order. Welcome, Dr. 

Coburn. To our first panel, to Clay Johnson, to Mark Goldstein, 

thank you for joining us today. 

I just got some good news. The good news is that it looks like 

our first vote may not be until a little bit after noon, so we may 

be able to finish this hearing without interruption, which would be 

very nice. 

We appreciate our witnesses taking the time to participate in the 

hearing. I think this is the third in a series of hearings on property 

management and what needs to be done and what is being done 

and what further action is required by the Administration and by 

us in the Legislative Bbranch. 

This hearing will examine the findings and conclusions in GAO’s 

most recent update of the high-risk report on Federal property 

management. Federal property management has been on GAO’s 

high-risk list, I believe, since 2003, and as many of those watching 

and listening to this hearing will know the high-risk list details the 

most serious management issues that the Federal Government 

faces. It is not a good list to be on, but it is an important list to 

keep, and it is an important list for us to hold oversight over in 

many instances. 

But just casual reading of the testimony we have before us today 

should tell most of us why the way in which agencies are handling 

their property is problematic and why the Financial Management 

Subcommittee that we serve on will continue to exercise oversight 

in this area. 

Many Federal agencies have a presence, sometimes a major presence, not just here in Washington but in communities large and 

2 

small across our country. That is not the problem. The problem is 

that too many of the properties that agencies make use of to serve 

the American people appear to be managed in ways that are likely 

wasting billions of dollars that taxpayers are paying each year. 

The Administration, as they have in several other key management areas, has begun to address this problem, and some initial 

progress is being made toward improving Federal property management, and we will hear about that today, as well as a to-do list 

of what lies ahead. The President has responded to GAO’s high-risk 

designation for property management by setting up for the first 

time a team of qualified senior leaders at key agencies whose sole 

job is to better manage agencies’ property assets and to align their 

physical infrastructure with their agencies’ missions. The President 

also set up a Federal Real Property Council, which is working to 

develop a reliable inventory of all Federal property and to set property management standards and to put systems in place for measuring agency performance. 

Agencies are now graded on their adherence to sound property 

management principles through the President’s Management Agenda, and we applaud that. As GAO has pointed out, however, there 

are still a number of very costly challenges that remain. Chief 

among the management deficiencies that we will hear discussed 

today is the fact that many agencies hold onto, year in and year 

out, thousands of pieces of property that are unneeded, underutilized, or, as Senator Coburn and I found out during a field hearing 

in Chicago, just completely vacant, and I think Mr. Goldstein was 

there with us at that time. 

When an agency maintains possession of a property it does not 

need to carry out its mission, taxpayers must shell out large sums 

to pay for unnecessary security, to pay for maintenance, and to pay 

utility costs. It is apparently a major problem at several agencies, 

among them NASA and the Departments of Energy and Homeland 

Security. At those agencies, GAO has reported that more than 10 

percent of agency assets are sitting idle and could be taken off the 

books. 

Dr. Coburn and I hope to address this problem later this year 

with legislation we are currently working on, legislation that the 

President has recommended in his budget, that would streamline 

the property disposal process and give agencies the financial incentive to get rid of what they no longer need. Agencies such as the 

VA that have the ability to retain some of the proceeds when they 

dispose of properties they own carry very few unneeded assets, and 

we will hear about that later. We should take what works at those 

agencies, like the VA, and use it to help make other more sensible 

management decisions. 

Another expensive property management problem that has been 

highlighted by GAO is the overreliance that some agencies place on 

leases to meet their space needs, even when purchases or new construction may be the most cost-effective way to meet these needs 

over the long run. This is another issue that Senator Coburn and 

I plan to spend some time working on. GAO, at this Subcommittee’s request, is currently examining the cost differences between 

leases and other available options so that we can get a better sense 

of how much these lease agreements that agencies are entering 

3 

into with increasing regularity are costing us. The costs, I suspect, 

are likely to be quite significant. 

GAO has testified, for example, that the true costs of the lease 

the Patent and Trademark Office entered into for their new headquarters building in Alexandria, Virginia, several years ago will 

cost taxpayers $38 million more than a lease-purchase agreement 

would have cost. And it will cost us $48 million more than it would 

have cost us to construct a new building from scratch. And that is 

just unacceptable, and I fear that may be only the tip of the iceberg. 

Our witness from GSA will testify today that, by the end of this 

year, his agency will reach the point for the first time where the 

majority of GSA’s portfolio will consist of leased buildings. 

Now, do not get me wrong. Leases make sense in some cases, but 

they do not make sense in others, and what we have got to do is 

make certain that agencies are doing their due diligence at the outset in making sure to the best of their abilities that they are going 

about meeting their space needs in the most cost-effective manner. 

We will also need, in all likelihood, to revisit the arcane budget 

rules that encourage agencies to go with leases when it does not 

make sense in the long run for them to do so. 

These two problems are just the most costly of those highlighted 

by GAO and others. Maintenance backlogs are another. When an 

agency, either due to incompetent management or lack of resources, ignores a routine maintenance problem until it becomes a 

catastrophic one, taxpayers are at risk of spending significant 

amounts of money to repair or restore something which could have 

been addressed early on for significantly less money. According to 

GAO, just seven agencies they contacted reported more than $77 

billion in maintenance backlogs, and the Department of Defense 

alone reported $57 billion in maintenance backlogs. 

And, finally, there is the fact that at least some of the data agencies have on their property inventory is just flat out unreliable. For 

fiscal year 2006, as it has been for, I guess, the last 9 years, GAO 

reported that the Federal Government could not satisfactorily determine that information on Federal property was properly reported in its annual financial statement. Without reliable information in this area, agencies do not fully know the assets they own 

and do not know the location and condition of that property. They 

also cannot effectively manage their assets to achieve their mission 

in the most efficient way possible. 

Well, there is a road map out there for us to follow. That is the 

good news. We have made a start, and that is good news as well. 

We look forward to working with our witnesses today, the agencies 

that they represent and others that are not at the table, to working 

with my colleague Senator Coburn and others on this Subcommittee to provide the oversight and give agencies the tools and 

maybe sometimes the push that they need to give taxpayers the 

kind of property management system that they expect and they deserve. 

Dr. Coburn. 

4 

1The chart entitled ‘‘Excess/Underutilized Property At the Department of Energy’’ appears in 

the Appendix on page 105. 2The chart entitled ‘‘Construction vs. Operating Leases’’ appears in the Appendix on page 106. 

OPENING STATEMENT OF SENATOR COBURN 

Senator COBURN. Well, thank you, Senator Carper, and welcome 

to our witnesses. This is a sleepy, little, non-invigorating area of 

the Federal Government that is costing the American taxpayers 

billions every year because we are not doing the appropriate thing. 

A chart was just put up that shows the Department of Energy’s 

unneeded space—20 million square feet.1 To get a handle on what 

that means, that is 19 times the size of this building, this entire 

office building, or 3 times the size of the largest office building in 

the world, the Pentagon. And that is just in the Department of Energy, space that we do not need, that we have not sold, that we 

have not turned over, that we are continuing to spend money on. 

The Administration is to be congratulated as it works towards 

getting a handle on the real property. I know Clay Johnson is involved in that as well. But it is difficult for us to have any credibility, and this really is not a problem with you all as much as it 

is with Congress. We have set so many road blocks up so that you 

cannot get rid of buildings. The difficulty in terms of meeting the 

requirements to ever put a building up for sale is almost impossible. The requirements associated with that in terms of what happens and the requirements that it goes through; it can be used for 

an airport, prison, education, public health, homelessness, the 

whole works. These are the things that, in fact, are mandated and 

must be used for before it can be sold. Some of those things are 

realistic, and some are not. 

What is probably more important is to really identify the problem, which is part of what this hearing is. We need to try to effect 

a legislative solution so that we can handle real property in a way 

that makes sense and that does not cause us to continue to spend 

tremendous amounts of money maintaining buildings that we do 

not need. 

Finally, Senator Carper mentioned leases.2 That is our problem, 

too. Because of the way the budget rules are set up, we actually 

force agencies because we expense a lease-purchase agreement all 

in the year in which it is made. That is crazy. Nobody else does 

that in the world. That is not even a generally accepted accounting 

standard. So the fact is that we need to be changing that, and we 

need to give the agencies the ability to do lease-purchase and then 

accurately reflect the cost of that in the budget year on an annual 

basis over the life of that lease-purchase. 

So I am thankful that we are going to have this hearing. My 

hope is that as we raise awareness, Senator Carper on his side of 

the aisle and I on my side of the aisle can build a consensus, can 

alleviate the fears that we might leave somebody out who might 

have some need in this country and do the common-sense thing of 

handling real property in a way that gives taxpayers value, and 

also making sure—I am not sure I agree with Senator Carper that 

there is ever a time that the Federal Government should be leasing 

space. If we fix it to where it is easily turned, then there is no reason that we should not purchase it and then turn it rather than 

5 

1The prepared statement of Mr. Johnson with an attachment appears in the Appendix on 

page 39. 

lease it. Leasing is basically the least valuable way to hold a property in terms of return for the taxpayers. 

But I thank you again, Senator Carper, for holding this hearing. 

My hope is that this year we can start down the road and probably 

have something the President can sign that will change this archaic system into something that is smart, flexible, meets the 

needs of the agencies, and also is good financial management. 

Thank you. 

Chairman CARPER. Thank you, Dr. Coburn. 

We have two panels before us today, and our lead-off witness is 

Clay Johnson, and we welcome you today. Your full statement and 

that of your counterpart here, Mark Goldstein, are going to be 

made part of the record, so I am not going to go into any elaborate 

introductions. I think Mr. Johnson comes by about every other 

month, and so we are always happy to see him and both of our witnesses. 

I am going to ask you to use maybe roughly 5 minutes. If you 

go a little bit over that, that is OK, but go ahead and get started. 

If you get too far into it, if it gets past lunch, I will rein you in 

and we will go to questions. 

Senator COBURN. Can I interrupt for just a second? I have a Judiciary hearing that I may have to leave for, so it will not be anything you said. It will be because I am getting a page that I need 

to be there. 

Chairman CARPER. Fair enough. 

Alright. Mr. Johnson, why don’t you lead us off? Thank you. 

TESTIMONY OF CLAY JOHNSON III,1 DEPUTY DIRECTOR FOR 

MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET 

Mr. JOHNSON. Thank you, sir. Senators, thank you very much. I 

just have a few very general comments before getting to your questions. 

One, we really applaud your interest in this subject. You both 

are very well known for asking the question at every one of your 

hearings: What can we do to help? We have some answers to that, 

and I think your support, to work with us, to figure out how to 

structure this pilot program, to figure out how to dispose of these 

properties more readily, more effectively, and in a more businesslike fashion, I am confident working together we can figure out 

how to do that and do that this year and get on about it. 

Chairman CARPER. Sometimes we ask that question—What can 

we do to help?—and we do not get much back. But in this case—— 

Mr. JOHNSON. Well, we have some proposals. 

Chairman CARPER [continuing]. It looks like there is plenty we 

can do. 

Mr. JOHNSON. And I know how genuine and deep your interest 

is in this subject, and so we welcome that and applaud that. 

I was reading all the testimony from the other panelists the last 

couple days, and I was thinking that 3 or 4 years ago, you could 

not even have had this panel discussion. We would not have been 

6 

1The prepared statement of Mr. Goldstein appears in the Appendix on page 43. 

able to answer any of the questions that you want to ask today. We 

just did not have the information. 

What we have today that we did not have until a couple years 

ago, starting a couple years ago, is that there is leadership in every 

agency, there is information, a whole lot of information, about real 

property, and we have asset management tools that we have never 

had before. And so we have the ability now to tackle these issues 

that we have never had before. The 100 largest, most unnecessary 

real property assets, that would have been a laughable question 4 

or 5 years ago. We can answer that question now, and we have 

been challenged to answer that in this report that is due to Congress on June 15, identifying all the unnecessary property, and 

particularly the 100 largest and most unnecessary. 

But, anyway, we are prepared, and as GAO has pointed out in 

the report, we have made a great start, but now it is time to start 

using all these tools to start delivering and start disposing of properties and start managing things more effectively. And agencies are 

really excited about doing this. They are real proud of what they 

have accomplished so far, and we are real proud of them. And we 

look forward to working with you in the months and years ahead 

to actually deliver on the promise of all these new-found capabilities. Thank you. 

Chairman CARPER. Fair enough. Thank you for that statement, 

and your full statement will be made a part of the record. 

Mr. Goldstein, why don’t you share with us your thoughts? 

TESTIMONY OF MARK L. GOLDSTEIN,1 DIRECTOR, PHYSICAL 

INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. GOLDSTEIN. Sure. Good morning, Mr. Chairman. 

Chairman CARPER. Good morning. By the way, thanks very much 

for the most recent report, which we have had a chance to read and 

to try to digest. A lot of good substance here. Thank you. 

Mr. GOLDSTEIN. Thank you very much. Our team did a very 

great job, and we appreciate the Subcommittee’s—— 

Chairman CARPER. Are any of them here today? 

Mr. GOLDSTEIN. The team is, in fact, right behind me. 

Chairman CARPER. Will the team members raise their hands? 

Good. Thanks very much. Front-row seat. 

Mr. GOLDSTEIN. Exactly. That is not always a good thing, but we 

will do our best. 

Thank you for the opportunity to testify today on the progress 

and the challenges that the Federal Government has made in managing its real property. At the start of each Congress since 1999, 

GAO has issued its ‘‘Performance and Accountability Series: Major 

Management Challenges and Program Risks.’’ In January 2003, we 

designated Federal real property as a high-risk area as part of this 

series, and we issued updates on this area in January 2005 and 

January 2007. My testimony is based largely on a recent report on 

Federal real property that you just mentioned, and as well as other 

GAO reports on real property issues that we have talked about 

over the years. My testimony focuses on the progress made by the 

7 

Administration and the major real property-holding agencies to 

strategically manage real property and address longstanding 

issues, and what problems and obstacles, if any, remain today to 

be addressed still. 

The major points of my testimony are as follows: 

First, the Administration and major real property-holding agencies have made progress toward strategically managing Federal 

real property and addressing some longstanding problems. In response to the President’s Management Agenda and related Executive order, relevant agencies have, among other things, designated 

senior real property officers, established asset management plans, 

standardized real property data reporting, and adopted various performance measures to track progress. The Administration has also 

established a Federal Real Property Council to help support real 

property improvements. Additional initiatives seek to provide agencies with other management tools to more effectively manage real 

property, such as broader authority for enhanced-use leases. 

Second, although progress toward strategically managing real 

property and addressing some longstanding problems has been 

made, many problems have not been fixed, and several underlying 

obstacles that hinder progress remain unresolved. For example, 

Energy, DHS, and NASA reported that over 10 percent of their facilities are excess or underutilized. In addition, Energy, NASA, 

GSA, Interior, State, and VA reported repair and maintenance 

backlogs that total over $16 billion. DOD reported a backlog of 

more than $57 billion, which includes the cost of restoring and 

modernizing obsolete buildings. Furthermore, Energy, Interior, 

GSA, State, and VA reported an increased reliance on operating 

leases—an approach which we have reported is often more costly 

for long-term space needs. While agencies had made progress in 

collecting and reporting standardized real property data, data reliability is still a challenge in some agencies, and agencies lack a 

standard framework for data validation. Finally, all the major real 

property-holding agencies reported using risk-based approaches to 

prioritize security needs, as we have suggested, but cited a lack of 

resources for security enhancements as an ongoing problem. 

In our past high-risk reports, we called for a transformation 

strategy to address the longstanding problems in this area. The 

Administration’s approach is generally consistent with what we 

have envisioned, but certain areas warrant further attention. More 

specifically, underlying obstacles such as competing stakeholder interests, legal and budgetary limitations, and a need for improved 

capital planning persist. For example, some agencies cited local interest as barriers to disposing of excess property. Furthermore, 

agencies’ limited ability to pursue ownership often leads them to 

lease property that may be more cost effective over time for them 

to own. And, finally, long-term capital planning efforts to improve 

the efficiency of government operations continues to be a challenge, 

and these efforts are not clearly linked with the real property initiative. 

The Federal Government has generally not planned or budgeted 

for capital assets such as real property over the long term. In our 

April 2007 report on real property, we made recommendations in 

three areas: One, to ensure the validity of agency data; two, to 

8 

focus reform efforts to better address the leasing problems and security challenges; and, three, addressing obstacles that included 

competing stakeholder interests and the need for improved capital 

planning. 

Mr. Chairman, this concludes my opening statement. I would be 

happy to answer any questions that the Subcommittee has. 

Chairman CARPER. Good. Thanks very, very much. 

Let me just start off, if I can, and we will maybe do 7-minute 

segments here, but not that I will stick to that too closely. Let me 

just start off by asking you, Mr. Goldstein, when you looked at the 

work that the Administration has done in response, I guess, to the 

news in 2002 and 2003 that real property management was on the 

high-risk list, when you look at what has been done to date, what 

do you especially admire? And where do you find that there is still 

more that they can do without our help? And I am going to get into 

what we can do as well. What are the things especially meritorious 

and what are some areas where you think they are still falling a 

bit short? 

Mr. GOLDSTEIN. Sure. I think that—— 

Mr. JOHNSON. Should I step out of the room? [Laughter.] 

Chairman CARPER. You have got to stay for this part. 

Mr. JOHNSON. OK. 

Mr. GOLDSTEIN. No. Actually, I was about to compliment Mr. 

Johnson. I think the Administration has done a very good job and 

a lot of progress has been made. His comment that we could not 

hold this kind of a hearing 4 or 5 years ago I think is absolutely 

true. When GAO put real property on its high-risk list in 2003, we 

did so for five reasons: Issues with data reliability, excess property, 

backlogs, leasing, and security. And I think you would find today 

that there has been progress made in all five of those areas. 

At the same time, as I have mentioned—and I suspect Mr. Johnson would agree—we have still got a long way to go. These problems are not fixed, and some of the underlying obstacles that I 

have talked about—some of the legal and budgetary disincentives, 

the competing stakeholder interests, and the like—could hamper 

progress in the future if we do not continue to address these issues. 

But there has been considerable progress made. 

Chairman CARPER. When you look at the areas where the Administration without our help could do more, or agencies could do 

more, what are some that come to mind? 

Mr. GOLDSTEIN. Clearly, in the area of data validation, I do not 

think they need the help of the Congress. 

Chairman CARPER. Talk a little bit more about that point, please. 

Mr. GOLDSTEIN. Sure. Within the Federal Real Property Council, 

the database that has been established by the Administration and 

the agencies, collecting Federal real property data, over the years 

that data has been quite sketchy. The effort underway now is to 

try to improve that by standardizing the kind of data elements that 

are used and the definitions that are used to collect data. But there 

are still some holes in the collecting of the data, and there are still 

some discrepancies and differences of how agencies are actually defining that information and, therefore, reporting it. So that it is not 

uniform at this point in time, and there has not been any validation, certainly that I am aware of, at the Administration level to 

9 

determine that what is being reported is completely accurate and 

complete. And so agencies need to get, I think, more involved in 

having accountability and control mechanisms in place that will assure both the Administration as well as Congress that the information that is being reported in the database is accurate and complete 

and so that the government does know what it owns, where it is, 

and what its disposition status is. 

Chairman CARPER. Mr. Johnson, do you want to respond to that 

at all? 

Mr. JOHNSON. Just a comment on the data validity. All the agencies have been charged to come back to us, I think by the end of 

the third quarter, with their plan—or fourth quarter of this year— 

with their plan, what they are going to do to validate this data. I 

do not know whether that is a sampling or they are getting the Inspectors General involved or announce that they need to confirm 

the validity of the information. 

A couple of examples of indications that the data may not all be 

100 percent accurate is a building would be reported on their inventory as being in good condition and go in as such on the inventory, and 2 months later it is condemned for asbestos problems or 

something. Well, that suggests that the original designation was 

not accurate. Or an agency, unnamed, would submit information 

and maybe there are 50,000 more assets than last year. Well, we 

did not acquire 50,000, so that number is wrong—this year or last 

year? 

So it is those kinds of things that says, Oh, maybe this is not 

all 100 percent accurate, and maybe agencies need to be doing 

something every year to look at the accuracy of the condition information or the number information or the replacement value information to ensure that we have the most valid data that we can 

possibly get. 

Chairman CARPER. OK, good. 

Mr. Goldstein, anything else that comes to mind in terms of a todo list for the Administration without our help? 

Mr. GOLDSTEIN. Well, I think they will need your help, obviously, 

on excess property. On backlogs, I think the agencies can do a fair 

amount themselves by getting a better handle on what their backlog requirements are, which some of them are starting to do, but 

trying to understand at a more detailed level what the funding requirements to deal with repair and maintenance backlogs are going 

to be and perhaps approaching it in a smarter way. They need to 

make better cases to agency management that these funds are 

needed up front, not later, because obviously, as you mentioned, 

the longer you wait to do these kinds of repairs, the worst shape 

you are going to be. Not one of your agencies here today, but to me 

one of the most glaring examples of this problem sits on the National Mall. It is the Arts and Industries Building of the Smithsonian, which for years has had an increasingly growing problem, 

and now the entire building, of course, is closed because the roof 

could cave in at any point. It is now going to cost hundreds of millions of dollars to repair an American treasure sitting in the middle 

of the National Mall. It could have been repaired at a much earlier 

date for a lot less money. 

10 

Chairman CARPER. Yes. Mr. Johnson, would you make a comment or two in response to what Mr. Goldstein just said? 

Mr. GOLDSTEIN. Well, is that all the suggestions that you are 

talking about Congress could do or not, or just—— 

Mr. GOLDSTEIN. These are ones that agencies and the Administration—— 

Chairman CARPER. That agencies might be able to do on their 

own. 

Mr. GOLDSTEIN. Not all, but some of them. 

Mr. JOHNSON. The costs of disposing of properties that are a real 

issue, particularly in an area of tight budgets, which is what we 

are in now. And so changing this pilot program proposal where 

agencies are allowed to keep for a period of time 20 percent—— 

Chairman CARPER. No. I think the point he was talking about 

was getting—and the Smithsonian is just one example where agencies are not asking—are not getting the money. I do not know if 

they are asking in their budget request that they are sending to 

the folks who run the agencies or to OMB, but apparently there is 

a concern are they getting the money that they need to maintain 

the—— 

Mr. JOHNSON. So it is the deferred maintenance question. 

Chairman CARPER. Yes. 

Mr. JOHNSON. OK. In tight budgets, you look at the things you 

absolutely have to have, and deferred maintenance is usually one 

of the first things that you could go without for one more year, and 

then it is the same answer the next year, and pretty soon you have 

a whole bunch of accumulated years of deferred maintenance that 

is not funded. 

The one thing that we are doing in this initiative is causing 

agencies to prioritize, understand here is all your deferred maintenance needs, here is how much money you might be able to get, 

what are your highest priorities, and make sure that they are not— 

that their highest priority deferred maintenance issues are being 

addressed. That is the one thing that we can do now with existing 

resources, and being smart about what is deferred maintenance 

and if they can get rid of properties versus continue to maintain 

them or upgrade them or really do not need them, that kind of 

thing. 

The issue of available resources, spending more money on it, is 

a budget issue and a deficit issue, and all of a sudden politics gets 

into it, and how big do we want the deficit to be and what do we 

want the top line to be and so forth. So it is a much bigger issue. 

Chairman CARPER. Alright. As I prepare to turn this over to Dr. 

Coburn for questioning, one thought that comes to mind—I have 

not asked yet what could we do, and we are getting there. Dr. 

Coburn will probably get into that, and I will as well. But to the 

extent that we allow some agencies—VA comes to mind—to retain 

a portion of the value of the assets that they dispose of, the excess 

property that they dispose of, to the extent that they can use that 

for deferred maintenance, that would seem to make a whole lot of 

sense. It would provide a good incentive for agencies to get rid of 

some excess property knowing that they could keep the portion of 

that and use it for something that is hard to get through—dollars 

11 

that are hard to get through the budgetary process. We can explore 

that later. I am sure we will. 

Alright. Dr. Coburn. 

Senator COBURN. Do we know how much excess Federal property 

we have? 

Mr. JOHNSON. We are supposed to produce a report for Congress 

June 15. The preliminary information is that it is approximately 

21,000 distinct assets with a replacement value of about $17 billion. 

Senator COBURN. Seventeen billion dollars for 21,000? There was 

an estimate put out by Vista that has tons of management contracts with the Federal Government. It estimated that approximately one-third of all Federal property or 1.2 billion square feet 

is considered excess. Do you have any comments on that? 

Mr. JOHNSON. It sounds high to me. 

Senator COBURN. It sounds high? OK. 

Do we have any idea what the cost is to us as a Nation for maintaining that excess property? 

Mr. JOHNSON. No, we do not. But we have the information to get 

in the ballpark of what that is. We just do not have that now. But 

let us pick a date, and we will get back to you by that date with 

that estimate. 

Senator COBURN. OK. I think the testimony was from the Department of Defense in Chicago—and, Senator Coburn, you might 

correct me on this, but I think they spend about $3 billion a year 

maintaining properties they do not want. Just think about what 

that would do for us, and that is the Department of Defense, and 

I know that is one of the larger ones. 

Let us talk about this pilot project and what the President has 

requested. A couple of things. If an agency did not have to go 

through—put that list of steps you have to go up through—the list 

of steps that are required, and let me more accurately describe 

this. This is from 2002 to 2006. In 2006 alone, there were over 

1,000 properties disposed of, and if you just extrapolate that back 

over 5 years, that means you have 5,000 properties. So you have 

less than 4 percent of the properties that actually went. But every 

one of those properties had to go through every one of those steps 

to do it. Do you believe that agencies would be more effective if we 

could limit the number of steps or maybe even eliminate the steps 

and say if we have a need over here, we will buy a property and 

we will not connect it to the disposal of present property? 

Mr. JOHNSON. Yes. These rules were established for, I am sure, 

good reasons at the time. A lot of these rules, I think a number 

of them, a majority of them, were established in 1949. I am thinking maybe the needs have changed. The world has certainly 

changed. They need to be rethought. And the McKinney Act, the 

homeless provision, also is a very sensitive issue. A lot of advocates 

of making all the properties possible to be available for the homeless, the fact of the matter is in the last 30 years, less than 1 percent of all the properties we have disposed of have ended up going 

for the use by the homeless. 

So we have to go through a very protracted—we have to go over 

some hurdles to end up with less than 1 percent of the properties 

end up being conveyed to the homeless. 

12 

Senator COBURN. Has anybody gone back to look at the properties that were available to the homeless to see if they are still 

being used for the homeless? 

Mr. JOHNSON. I do not know. 

Mr. GOLDSTEIN. Dr. Coburn, may I? 

Senator COBURN. Yes, please. 

Mr. GOLDSTEIN. Maybe I can answer your question a little bit. 

GAO did a report several years ago on public benefit conveyances, 

and we found out a number of things that I think are pertinent. 

One is—and the Chairman asked this question a little while ago— 

about what more could agencies do on their own. One of the things 

we found in that report was that many of the properties that were 

up to be conveyed through the public conveyance process had not 

been communicated in any way to the public that was successful. 

There were many properties out there, and people tended to find 

out about them in an ad hoc basis. In other words, GSA could better—we recommended could better use its website and other public 

communications vehicles to try and get those properties out there 

so that the public could deal with them and know that they were 

available. 

In terms of taking a look at whether anyone has gone back, when 

we did our report, I think 2 or 3 years ago now, we went and 

looked at some 40 properties that had been conveyed to ensure that 

they were still being used for the purposes that they were supposed 

to be used and the like. And we found in almost all cases that they 

were still being used properly, whether they were for the homeless 

or for other reasons. 

Senator COBURN. OK. 

Mr. JOHNSON. On the subject of those conveyance rules, homeless 

provisions, nobody is proposing that we completely eliminate those 

and we let the agencies do as they please, although the thought 

has entered some of our minds. But I think we need to use the pilot 

project and sit down with you and other interested parties and figure out how we can test doing this differently, determining what 

resources are potentially of interest to the homeless, have an expanded set of criteria beyond the ones now that agencies—that we 

look at in the first review of properties, and just be able to do it 

faster. This whole process can take up to a year for just a review 

of the McKinney process. 

Senator COBURN. Which is one step. 

Mr. JOHNSON. Which is one of the steps, right. And it was concurrent with other things, so it is not additive. But, still, it is a 

year. And that and the cost of disposition of properties is a major 

obstacle to agencies to dispose of properties. Most of the properties 

that are disposed of are destroyed. They are not sold. The vast majority are destroyed. 

Senator COBURN. You mean razed? 

Mr. JOHNSON. Razed, right. And that costs money, and that is 

usually money that agencies do not have. And so you add a lot of 

time to it and you add a lot of cost to it, and those are two pretty 

big hurdles for paying attention to other things on your to-do list. 

Senator COBURN. OK. Let me get you to repeat. I think your testimony was 21,000 properties, $17 billion. 

13 

Mr. JOHNSON. That is our estimate now, but we will come forward—— 

Senator COBURN. That cannot be right because that makes the average property worth $1,235. Would you check that number? 

Mr. JOHNSON. OK. 

Senator COBURN. If you take $17 billion divided by 21,000, there 

is something wrong with that number. If you would check that for 

me. 

Do earmarks play a role at all in how properties are either acquired or disposed of? 

Mr. JOHNSON. I do not know, but I remember when Rob Portman 

came into the Director’s job at OMB, we were talking about what 

goes on in the management world, and I was telling him about real 

property, and he was smiling sheepishly. I said, ‘‘What are you 

smiling for?’’ And he said, ‘‘I used to love to get Federal properties 

and make them available for the city of Cincinnati.’’ I said, ‘‘Well, 

you are on the other side of that effort now.’’ 

So I do not know to what extent earmark mechanisms play a role 

in that or not, but, of course, every elected official representing 

their State or district would love to get Federal properties made 

available for their local municipalities. 

Senator COBURN. Let me go back again. Real numbers, deficit added to the debt last year, excess of $300 billion. All the States 

are running a surplus. When we are running a deficit, why would 

we be giving excess property to the States or the municipalities? 

Mr. JOHNSON. You would have to ask them that, but I think the 

answer to that is because they can. 

Senator COBURN. But does anybody agree that is smart? I mean, 

when we are running a deficit and they are running surpluses and 

all what we are, in fact, doing is enhancing our deficit? 

If we get this pilot program going, what do you hope to achieve? 

At the end of 5 years, what is the goal? 

Mr. JOHNSON. The goal is—not necessarily in any particular 

order—to demonstrate that when agencies are allowed to keep a 

portion of the proceeds—and we are recommending they keep 20 

percent of the net, so there is some cost of disposition offset there— 

that it shows how much of a—there is a huge increase in the activity so that it is scored as a plus for the Federal Government. Right 

now, if you went in and said let the agencies keep 20 percent, it 

is scored as a cost to the Federal Government because less goes to 

the Treasury than would otherwise go to the Treasury. So we want 

to demonstrate the impact that this has on the level of disposition 

activity. 

We also want to, in a controlled environment with a 5-year time 

frame set on it, engage you all and think through these public conveyance provisions, McKinney Act provisions and so forth, and see 

if we cannot agree on a more sensible, current view of the world 

approach to this so we can still address all the issues that need to 

be addressed, but in a more expeditious fashion. 

Those are the two primary benefits of conducting this pilot. 

Chairman CARPER. Just talk to us, if you will, with some specificity, Mr. Johnson, about what we can do to get this moving. 

Mr. JOHNSON. This bill on the pilot almost made it to voting status last year, and the thing that held it up, as I understand it, was 

14 

concerns about McKinney, and what we were proposing ostensibly 

was that all be put on the sideline for 5 years and not be a factor. 

What we would like to do is, knowing now that there is real, honest to goodness seriousness here about moving forward on this, let 

us sit down and agree on some language—we do not have anything 

to propose to you today, but develop some language that we think 

addresses these public conveyance issues and McKinney issues that 

we think will be satisfactory on a trial basis for this pilot, and then 

figure out how we can help you build a consensus around this on 

both sides of the aisle to get it done. 

Chairman CARPER. Mr. Goldstein, you are sitting over there sort 

of outside of the legislative process. Any advice as an objective observer on how you think we ought to get this thing moving? 

Mr. GOLDSTEIN. I think, Mr. Chairman, that Mr. Johnson is right 

in that there are definitely some—and as you point out, too, there 

is clearly flexibility and incentives that can be put into this process, and they do seem to need to come out of the legislative framework because the authorities are not present for most agencies 

today. And so it will take input from the Congress to make that 

work. But, clearly, greater incentive and greater flexibility would, 

I think, help agencies deal with some of the problems in an environmental remediation in having money if demolition is the appropriate response and in dealing with other kinds of factors that they 

would have to do to prepare properties for sale or for surplusing 

in some other fashion. So I think it would be beneficial. We have 

long been in favor of that. 

Chairman CARPER. Just kind of thinking out loud, if you are a 

Federal agency and you do not have money in your budget to pay 

for demolition, a pretty good disincentive to demolish and get rid 

of a property, if you know that even if you had something—land, 

if you will—to sell, at the end of the day you knew you were not 

going to get any of that money back to help pay for the demolition 

costs, that is a pretty good incentive not to do anything. 

On the other hand, if it is a property that needs to be heated, 

cooled, whatever, maintained, that is a drain on the Treasury. 

There has got to be a good, common-sense way here to change the 

way we operate. What are some agencies that have already been 

a pilot, if you will—I always like to talk about the States being laboratories of democracy, 50 of them, and we learn from what they 

do well or not so well. But give us some examples of some Federal 

agencies that already has served as a pilot, and we have had a 

chance to watch what they do and to learn from them. The idea 

of waiting a number of years for us to be able to make real 

progress here is not appetizing. 

Mr. JOHNSON. Well, there are agencies, a number of agencies 

have the flexibilities—and correct me if I am wrong, but DOD has 

retention flexibilities, GSA, VA, USDA, State Department. State 

Department international facilities, I think. So they are allowed to 

keep, I think, all of the proceeds for use on real property, maintenance, investment, whatever. And I do not know if they could demonstrate that before they had those flexibilities, here was the situation, and once they got the flexibilities, here is what happened to 

the activity. But they have those flexibilities now and are glad they 

have them. Those are our largest real property agencies, so it is a 

15 

good thing. So we are talking about similar flexibility, but they retain only 20 percent for the other agencies. 

Chairman CARPER. Given the fact that we have so much experience, obviously years of experience with some of these other agencies that have a lot of property, how long is this pilot program 

going to run? 

Mr. JOHNSON. We are proposing 5 years—which is a long time. 

Chairman CARPER. Yes. Do we really need 5 years? 

Mr. JOHNSON. I do not think so. The question that is going to be 

raised, as I understand it, by elected officials is these public conveyance issues and homeless issues, because some of those are very 

sensitive issues. But I do not think we are saying let us take those 

out of the consideration; let us do it in a much more businesslike— 

that is a bad term—a much more effective, efficient, expeditious 

fashion. 

Chairman CARPER. OK. Dr. Coburn, I know you have a couple 

more questions. You go ahead, and I might ask one more. 

Senator COBURN. Our numbers were wrong. Yours were right on 

the previous comment. 

Mr. JOHNSON. Well, we will be glad to say that we were wrong, 

if that helps. 

Senator COBURN. No. [Laughter.] 

Mr. JOHNSON. Always trying to help out, sir. 

Senator COBURN. It is not often people on this side of the table 

are saying we are wrong, so you ought to take that and run with 

it. 

Mr. Goldstein, as far as this proposal, this pilot, is it the GAO’s 

position that this is an effective method of looking at another way 

of disposing that might be more expeditious? Do they have a position on what we are trying to do or what we are suggesting? 

Mr. GOLDSTEIN. Yes, Senator. GAO has been in favor of providing increased flexibility and giving agencies more of an incentive, and part of the way to do that is to have them retain some 

of the proceeds that they can then put to offsetting costs in future 

excess property activities and the like. So we have been in favor 

of this for a number of years. We typically believe that demonstrations of this kind can certainly help the government better understand what works and what does not work and to be able to make 

changes certainly at the margins and then transfer those positive 

benefits, if there are some, to other activities, to other agencies of 

the government. So we are in favor of it. We were in favor of that 

legislation when it was before the House last year. 

Senator COBURN. I am just sitting here thinking about the average American homeowner, and if they had a lot next door and a 

building on it, and the freedom that they have to say, ‘‘The cost of 

maintaining this lot and paying the taxes on it for me, I think I 

will get rid of this lot. I am tired of mowing the grass. I am tired 

of the city code saying I have to keep it up. It is not economically 

feasible for me to use anymore. I think I will sell it.’’ And yet that 

common-sense approach based on economics and the situation they 

find themselves in is not available to us in the Federal Government. You just have to ask yourself the question. Is it not because 

we want to do good things for other things? 

16 

I would venture to say that we could develop a homeless program 

for a whole lot less than the costs of doing the homeless survey for 

every piece of Federal property that we want. We could just take 

a chunk of that money from properties and say we are going to put 

this over here for homeless, and we would be far better off than 

what we are doing, well intended but very costly and not efficient. 

Go ahead and comment. 

Mr. JOHNSON. My understanding is that when thinking has been 

thrown out on the table in the past, the representatives of the 

homeless, whoever that is, have said they do not want the money. 

Why, I do not know. But I think that what I suggest we do is we 

pick a date here, not too far down the road—this summer, perhaps 

before the August recess—and all these hurdles we have to go over, 

public benefit conveyances and so forth, homeless, whatever, let us 

try to rethink what—fresh thinking, what they ought to be for a 

pilot over some period of time, how they would be implemented, 

who would have to sign off on them and so forth, and try, at least 

amongst ourselves, to figure out what that would be, get the appropriate people to look at it, GAO, whomever to look at it, and then 

start working that with the appropriate people that have expressed 

concerns about we might change this or change the homeless—— 

Senator COBURN. Well, the other way to go is to have the GAO 

say go in and look at, under the methods we have today, what are 

we spending to try to be able to get property available to finally 

be sold. You know, that is the other thing. And how much money 

are we spending just on this process that we have set up, and could 

we spend that money in a way that achieves the goal? I mean, if 

we are really talking about 4 percent of the properties—— 

Mr. JOHNSON. Less than 1 percent. 

Senator COBURN. Less than 1 percent being conveyed. 

Mr. JOHNSON. To the homeless, anyway. 

Senator COBURN. No, I am talking about total. All conveyances. 

We are talking about less than 4 percent of the—so that means 96 

percent is not going that way, yet we are going through these 

steps, these 17 steps, on every piece of property. That has to cost 

a fortune. So maybe we could look at what are we spending now 

as we go through all these steps on all the pieces of property and 

look at that and say wouldn’t it be advantageous to try to create 

something to serve these needs outside of the property and not tie 

it to it, so we can make good economic decisions about properties. 

Mr. Goldstein, would you have any thoughts on that? 

Mr. GOLDSTEIN. That is something we could certainly look at, sir. 

We would be happy to work with the Subcommittee to develop 

that, if that is the direction they wish to go in, sure. 

Mr. JOHNSON. Why don’t we get back to you with a date by 

which we will come back to you and say here is the approach we 

suggest taking to look at this particular impediment. It is not 20 

percent, 30 percent, that is the retention percentage. It is the impediment, and what analyses, what discussions, what ruminations, 

whatever we want to engage in to come back before we start trying 

to convince other Senators and Congressmen that this is the way 

to go. 

Senator COBURN. The other thing I am thinking is how many 

agencies never put a property that truly is excess up because they 

17 

do not want to have to go through this bureaucratic nightmare, to 

go through all the steps and spend the money. They are just saying 

that the cost of maintaining this building is less than the cost of 

getting it ready to be disposed of. Do you have any idea on that? 

Mr. JOHNSON. I do not, but I hear agencies talk about that, because they are going to eat their maintenance costs this year, they 

are going to each the destruction costs, the razing costs this year, 

and this year’s budget is real. And then on top of that, they have 

a lot of bureaucratic hurdles they have to go through, so, ‘‘Tell me 

why I am doing this.’’ 

Senator COBURN. And don’t we have an agency for housing and 

urban development? Why are we tying up this whole idea of real 

property management for a function that we already have an agency that sat there and designed to address? 

Mr. JOHNSON. Right. 

Senator COBURN. I do not have any other questions. 

Chairman CARPER. Let me go back, if I can, to this issue of 

leases versus buy or build. There has been some discussion in recent years, I believe regarding the Patent and Trademark headquarters, I think, in Alexandria. It is apparently costing the Trademark Office, I am told, tens of millions dollars more to lease its facility than it would to buy it or even to build something similar 

from the ground up. And I suspect there are similar examples out 

there, especially now that agencies’ reliance on leases continues to 

increase. And I think we said earlier that we expect sometime this 

year or next that more properties will be leased than actually 

bought or built. 

Is there anything that the Administration is doing to encourage 

agencies to rely less on leases? 

Mr. JOHNSON. The things that we are doing to question the level 

of leases, the number of leases, there are several things. One, agencies in their plans are asked to look at opportunities to combine 

leased spaces to see if they can consolidate them in fewer locations 

and have less separate facilities. The Department of Labor has 

done a really good job of this. There is more information now about, 

in a particular neighborhood, all the different Federal entities that 

have space, so there is more information that an agency—the Agriculture Department could look at and say, ‘‘I need some space. 

What other Federal agencies might have space in this geographical 

area that I might be able to utilize,’’ instead of lease something 

new. So there is information available now that was not available 

before that allows us to potentially avoid leases. 

Then when an agency in their budget wants to propose creating 

a new structure or a new physical asset, they have to propose a 

purchase or a lease arrangement in that, and OMB then agrees to 

that or does not agree with that. In some cases, the things that 

drive leasing—and Dave McCormack can talk more professionally 

and intelligently about this than I; he is going to be on the next 

panel—is that sometimes we need space for a very short period of 

time and it is a very small amount of space. And so leasing is the 

way to get into it the fastest and also be able to get out of it when 

we no longer need it. 

But the other thing, quite frankly, is money. And maybe a less 

expensive thing to do, all things considered, is to buy. That is true 

18 

for you and me and so forth, but sometimes we just cannot afford 

to pay cash for things, and so we lease it. That is the same thing 

for the Federal Government. 

Chairman CARPER. Alright. One more question, if I could, for Mr. 

Goldstein. I am sure you know that Federal property management 

is now part of the President’s Management Agenda, and agencies 

are scored based on their success in meeting property management 

goals that are set by OMB, and I assume by the Federal Real Property Council. There is some discussion in your testimony on how 

agencies are scored and which ones received green, yellow, or red 

scores. 

In your view, is it clear that why some agencies receive the 

scores that they do receive, is it clear to you what an agency has 

to do to receive a higher score, and what some agencies, like the 

Departments of Agriculture, Labor, or Defense, for example, have 

done in the past to see their scores drop? 

Mr. GOLDSTEIN. Our April report, Mr. Chairman, on real property examined pretty much at a high level by surveying agencies 

the kind of progress they were facing. And so we did not specifically look at the scores that the agencies were getting in the scorecard. However, because we wanted to understand generally the 

process that the Administration was going through and working 

with the agencies, we did ask OMB about the process and about 

how agencies were scoring so we could understand it. 

Unfortunately, OMB’s response to us was that the kind of information was pre-decisional to the Executive Branch, and so consequence we do not have access to that information, so I cannot answer that question for you, unfortunately, at this point in time. It 

is something, I think, that would be important to know so that we 

could have a better understanding and be able to assure Congress 

so that the process itself is working as it should and that agencies 

do have a very clear understanding of how they can get from red 

to yellow to green. 

There is guidance out there—it is on OMB’s website—about how 

they can do that. It seems to be relatively clear when we read it. 

Also, we found when we did our survey of the major property-holding agencies and we asked them to describe that process, then most 

of them seemed, at least in their written responses to us, to have 

a pretty good understanding. But, nevertheless, I cannot directly 

answer your question. 

Chairman CARPER. Alright. Well, we are probably going to have 

some more questions we would like to send you to respond to for 

the record. Before we send you on your way, I do not know, Mr. 

Goldstein, if you might be able to stick around for the second panel, 

but if you could, that would be much appreciated. 

Mr. GOLDSTEIN. I would be happy to, sir. 

Chairman CARPER. Thank you. Senator Coburn and I talked a 

good deal about the size of the budget deficit and what we can do 

to rein it in. There is a lot that we can do. We can collect some 

of the taxes that are owed but that are not being collected. We can 

reduce improper payments. There are all sorts of things that we 

can do to right our fiscal ship. 

We can also do a better job of managing our properties. We could 

eliminate all the missteps that we take with respect to managing 

19 

our properties, and we would still have a budget deficit, but it 

would be a smaller one. And I think the taxpayers of this country 

would probably appreciate any progress that we might continue to 

make. 

I applaud the fact that we have gotten started. I applaud GAO 

for raising the flag, the danger signal, several years ago, 4 or 5 

years ago, along with the Adminidstration for responding to that. 

And we have an opportunity here to build on the steps that have 

already been taken. And what I want us to do is just to pick up 

the pace. 

My father used to say to me when I was a kid growing up, he 

would say to my sister and me—we would do some boneheaded 

stunt, and he would say, ‘‘Just use some common sense.’’ He said 

it a lot. We must not have had much. And by the time we finished 

up and we went on our way in the world, my sister and I spent 

a lot of time in our lives, professionally and otherwise, saying, 

‘‘Well, if we used some common sense, what would we do?’’ 

This is a real good one to apply some common sense on. It is a 

real good issue. Obviously, there are some things that the Administration can and cannot do on their own, and it is pretty clear as 

the noses on our face that if you say to an agency, ‘‘We are going 

to put you through the hassle of trying to figure out how to get rid 

of a property, we are going to make you pay for it, and we are not 

going to reimburse you for that, then if there is anything left, any 

money left over from the sale and disposal of the building or the 

ground, you do not get any of it,’’ we should not be surprised if we 

got a lot of excess properties and they are costing us money. And 

whether it is a couple million dollars in property or a couple of billion dollars, that is real money. And we can do better on this, and 

we want to. 

I am going to talk with Senator Coburn. I am sure he is as interested in this issue as I am, and we will find ways to work with one 

another and with others on this Subcommittee, but especially with 

the Administration and with GAO. We are sort of in this one together, and we are making some progress, but we can make a 

whole lot more progress if we figure out collectively what our next 

steps could be. 

Dr. Coburn, do you want to add anything else? 

Senator COBURN. No. Nothing. 

Chairman CARPER. Alright. Gentlemen, thanks very much, and 

it was good to see you both. And, Mr. Goldstein, I especially appreciate you sticking around. 

Thank you. 

With that, I am going to ask our second panel to come forward. 

Gentlemen, welcome. I had a chance to shake all your hands a little bit earlier, and we are glad that you stuck around through the 

first panel, and we look forward to your testimony. 

I am just going to ask, Mr. Rutherford, if you would like to lead 

us off, and we will ask you to keep your comments to about 5 minutes. If you run a little over, we will not throw you out, but when 

you have all finished, we will be asking some questions. Welcome. 

We are glad you are here. Your full statement will be made a part 

of the record. If you would like to summarize, feel free. 

20 

1The prepared statement of Mr. Rutherford appears in the Appendix on page 68. 

TESTIMONY OF BOYD K. RUTHERFORD,1 ASSISTANT SECRETARY FOR ADMINISTRATION, U.S. DEPARTMENT OF AGRICULTURE 

Mr. RUTHERFORD. Thank you. Good morning. 

Chairman CARPER. Good morning. 

Mr. RUTHERFORD. Chairman Carper, thank you for the opportunity to come before you today to discuss real property asset management at the U.S. Department of Agriculture. I would like to 

begin by providing a brief overview of USDA’s real property profile. 

USDA is a leader in America’s food and agricultural systems, helping the farm and food sectors operate in a highly competitive marketplace to respond to changing consumer demand for high-quality, 

nutritious, and convenient food and agricultural products. USDA 

also carries out a wide variety of services and activities related to 

the management, research, and conservation of the Nation’s agricultural resources. As a result of such a huge mission, USDA manages an extensive asset portfolio. Land, facilities, and other real 

property held by USDA are an integral support component to its 

mission. 

As the second largest landholder in the Federal Government, 

USDA occupies approximately 89 million square feet of owned, 

commercially leased, and General Services Administration-assigned 

space. USDA also manages 193 million acres of land, of which 99 

percent is National Forest land, and a Roads Program totaling 

383,900 miles. USDA operates in 23,400 buildings and 31,000 

structures having a replacement value of approximately $46 billion. 

With such a large footprint, USDA has made rightsizing the Department’s asset portfolio a priority. Executive Order 13327 has 

provided a framework for addressing the many areas of real property asset management. Since the implementation of the Executive 

order, USDA has taken the following actions: 

In May 2004, USDA established the Corporate Property Automated Information System (CPAIS)—I think that is ‘‘Inventory 

System,’’ excuse me. CPAIS is a system of record for all real property assets controlled by the Department. 

USDA developed a comprehensive asset management plan which 

guides managers’ activities to ensure that assets are in the right 

place, at the right price, and in the right condition to support mission requirements. 

USDA established asset management performance measures, 

consistent with those published by the Federal Real Property Council. 

USDA has developed a Capital Programming and Investment 

Process that will formalize project management for capital improvement projects. And, locally, USDA is currently undertaking a 

project to consolidate staff from seven different leased locations 

within the National Capital Region into a single lease, which will 

result in an 18-percent improvement in space efficiency and potentially $24.3 million in cost avoidance over the term of the lease. 

Whereas USDA was not subject to the GAO study, the Department is working to address the longstanding problems mentioned 

in the study through implementation of the USDA’s asset manageVerDate Aug 31 2005 12:49 Jun 24, 2008 Jkt 036610 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 P:\DOCS\36610.TXT SAFFAIRS PsN: PAT
21 

1The prepared statement of Mr. Henke appears in the Appendix on page 75. 

ment plan. USDA agencies are evaluating program requirements, 

asset performance, and facility conditions to determine whether an 

asset fits within the long-term mission of the Department. The recent GAO study highlights the Federal Government-wide problem 

with holding excess assets. A number of factors must be considered 

when deciding between disposal through sale or transfer and demolition and the time frames for carrying out the decision. 

As was pointed out by the GAO, remediation of hazardous materials must be performed prior to disposal or demolition. Delays in 

carrying out a decision often occur, as remediation projects are subject to the availability of funds. USDA understands the importance 

of maintaining its real property portfolio. Unfortunately, as with 

most Federal agencies and State governments, USDA has a significant backlog of maintenance and repair projects. Using guidance 

provided by the Executive order and the Office of Management and 

Budget, the Department is developing a strategy to address the 

asset backlog. 

USDA generally agrees with the GAO’s assessment of the challenges to improving Federal real property management. Some challenges can be overcome through enhanced real property authority. 

The ability to retain all or a portion of the proceeds from the disposal of excess property provides a real incentive for agency heads 

to thoroughly analyze their facility requirements. In addition, authority to enter into enhanced-use leases provides a means for 

making meaningful upgrades to facilities while adding to their 

overall mission. 

In conclusion, USDA is committed to ensuring that effective 

management of real property assets is ingrained in the culture and 

business processes of the Department. I would like to thank you 

again for this opportunity to discuss USDA’s successes in managing 

its real property assets, and I am ready to answer any questions 

you have. 

Chairman CARPER. Thank you, Mr. Rutherford. 

Mr. Henke, do you pronounce your name ‘‘Henke’’? 

Mr. HENKE. Yes, sir. That is correct. 

Chairman CARPER. That is the way I will pronounce it. Thank 

you. Welcome. 

TESTIMONY OF ROBERT J. HENKE,1 ASSISTANT SECRETARY 

FOR MANAGEMENT, U.S. DEPARTMENT OF VETERANS AFFAIRS 

Mr. HENKE. Yes, sir. Mr. Chairman, I am pleased to be here 

today on behalf of Secretary Nicholson to talk to you and the Subcommittee about the VA, how about how we manage our real property portfolio, and some of the many initiatives we have in place 

to sustain real reform in Federal real property. 

Our priority, of course, and our dominant value is our commitment to meet the needs of America’s veterans in providing them 

with world-class health care, benefits, and memorials. Just to give 

you some perspective on how busy the VA is lately, in health care 

this year we will treat 5.7 million unique patients, an increase of 

34 percent over 2001. This year, we will have about 65 million outVerDate Aug 31 2005 12:49 Jun 24, 2008 Jkt 036610 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 P:\DOCS\36610.TXT SAFFAIRS PsN: PAT
22 

patient visits, an increase of 47 percent since 2001. Our Benefits 

Administration last year processed its 18 millionth home loan, and 

we processed almost 800,000 claims for disability benefits. 

All this is to put into context our real property program, the 

main components of which are: One, to have a strategic plan; two, 

manage what we have most effectively; three, make prudent investments in what we need for tomorrow; four, measure our performance; and, five, dispose of assets we do not need, which brings revenue for health care and other services that we can reinvest directly to provide benefits for veterans. 

In many ways, VA is ahead of the power curve. We have had a 

Capital Asset Realignment for Enhanced Services (CARES) process 

underway now for a number of years. This document was approved 

in May 2004, and it is our blueprint for meeting the current and 

future health care needs of our veterans in modern, efficient health 

care facilities, and it is updated regularly. 

Based on the capital investment process for CARES, VA has 

plans to develop and build four new medical centers and also to 

consolidate existing campuses—for example, the Cleveland campus 

from two campuses to one, and the Pittsburgh campus from three 

to two. At the same time, we are putting facilities where veterans 

live and where the demographics required them, for example, in 

Las Vegas, Nevada, and Orlando, Florida. 

VA uses performance metrics to evaluate and analyze how well 

our assets are performing, and these measurements are aligned 

with the Federal Real Property Council, and they have the performance measures of cost, condition, utilization, and mission dependency. 

VA uses every means available to dispose of unneeded assets. We 

have disposed of 156 buildings since 2004, and we have plans to 

dispose of 146 more, and 2.7 million gross square feet, this year 

and next year. 

While we have many challenges, we are using innovative ways 

to deal with the situation in today’s real estate market, and the 

way to succeed, we believe, is to find a win-win-win for the local 

community, for the Federal Government, and, most importantly, for 

veterans. The reuse of Federal buildings through, for example, VA’s 

enhanced-use lease authority, allows for us to transfer buildings 

and real estate from the Federal to the non-Federal sector without 

adversely affecting the local community, VA facilities, or, most importantly, veterans. 

Our great enhanced-use lease program provides a proven method 

of leveraging our real estate portfolio, and it has brought significant cost savings, realignment of underperforming assets, and also 

produces the ‘‘highest and best use return’’ for veterans and taxpayers. 

We have processes in place to ensure that dollars spent on capital assets make business sense and meet the goals of the Department and align with the goals of the FRPC and the President’s Executive order. We have processes in place also to evaluate leasing 

and major equipment purchases, and we are always striving to link 

our real property initiatives with our capital planning process. 

Of course, throughout this process, we have worked with OMB 

and the Congress and will continue to do so. 

23 

1The prepared statement of Mr. Grone appears in the Appendix on page 87. 

So, Mr. Chairman, thank you for the opportunity to be here 

today to tell you about some of the progress we have made and the 

efforts we have underway, and I am happy to answer your questions. 

Chairman CARPER. Mr. Henke, that is a pretty good story, and 

we look forward to coming back and asking some questions about 

it. 

Mr. Grone, welcome. Your full statement will be entered into the 

record, and we are anxious to hear what you have to say. Thank 

you. 

TESTIMONY OF PHILIP W. GRONE,1 DEPUTY UNDER SECRETARY OF DEFENSE, INSTALLATIONS AND ENVIRONMENT, 

U.S. DEPARTMENT OF DEFENSE 

Mr. GRONE. Mr. Chairman, I appreciate the opportunity to appear before the Subcommittee today on the management of Federal 

real property and to provide some insight to the progress being 

made within the Department of Defense. 

Federal real property was first designated in January 2003 as a 

high-risk area by the Government Accountability Office because of 

issues concerning inaccurate inventory reporting, deteriorating facilities, unidentified underutilized facilities, and the challenge of 

protecting facilities from future terrorist attacks. 

Realizing that the Department of Defense has challenges with 

properly managing and maintaining its assets, DOD has undertaken an aggressive, comprehensive program to transform business 

processes with the end goal of having complete integrated lifecycle 

asset management—from planning through disposal. 

Management of the Department of Defense portfolio, which currently comprises over 533,000 buildings and structures, over 51,000 

square miles of real estate, and a plant replacement value in excess 

of $710 billion, is founded on a multitiered strategy that is designed to prevent deterioration, counter obsolescence, enhance the 

military readiness and capability of real property assets, and eliminate excess capacity. 

To support this strategy, the Department’s business practices on 

real property inventory controls are being fundamentally transformed through the Business Management Modernization Program. 

DOD has established standardized business processes, business 

rules, and data elements for real property assets to drive accurate, 

authoritative, comprehensive, secure, and timely enterprise property information. In support of these requirements, the systems of 

the military departments and the components and their processes 

are currently being modified, and all of this is scheduled to be completed in fiscal year 2009. A real property registry is being established in this calendar year, which will assign unique identifiers to 

all DOD real property to enable consistent management of real 

property across the Department. 

The Department’s efforts to reshape and reposition installation 

assets through base realignment and closure and the Global Posture Review are also significant. BRAC 2005 affects over 800 locations across the Nation—which, I may add, is 21⁄2 times the size 

24 

1The prepared statement of Mr. Winstead appears in the Appendix on page 95. 

of all prior rounds of BRAC combined—through 24 major closures, 

24 major realignments, and 765 lesser actions. In the end, State facilities amounting to a net of roughly $20 billion of plant replacement value will come off the Federal books through BRAC, and an 

equivalent number will come off through our overseas Global Posture Realignment. 

The elimination of excess and obsolete facilities in the inventory, 

an effort separate and distinct from the BRAC process, continues 

to be another key element of the Department’s asset management 

plan. Efforts are underway to refine the manner in which disposals 

are forecast and to reflect them more accurately in the real property inventory. The Department is also in the midst of a second 

demolition initiative, separate from BRAC, which targets 50 million 

square feet of facilities and additional excess infrastructure by the 

year 2013. This follows our successful completion in 2003 of the 

demolition of 86 million square feet. 

The Department continues to refine our modeling for recapitalization, facilities sustainment, installation support, and real property services, all of which are benchmarked to best practices in the 

public and private sector and each of which is designed to guide investment choice and to enhance our understanding of lifecycle asset 

management cost. 

Mr. Chairman, the Department recognizes the need to ensure improved real property asset management practices and accountability. I sincerely thank you and this Subcommittee for the opportunity to highlight the Department’s success as well as our challenges in the management of DOD’s real property portfolio and to 

outline our plans for continued improvement in the future. 

I appreciate your continued support, and we look forward to 

working with you as we continue to transform and move these 

plans to action. Thank you, Mr. Chairman. 

Chairman CARPER. Mr. Grone, thank you so much. 

Mr. Goldstein, I will not put you through this one more time, but 

we will skip over you. Thanks for staying around. 

Mr. Winstead, welcome. 

TESTIMONY OF DAVID WINSTEAD,1 COMMISSIONER OF PUBLIC BUILDINGS SERVICE, U.S. GENERAL SERVICES ADMINISTRATION 

Mr. WINSTEAD. Thank you. Chairman Carper, thank you so 

much. I am David Winstead. I am the Commissioner of Public 

Buildings at the GSA. I am pleased to be here to address this important issue of Federal property asset management as well as disposal. And as you know, we are the primary landlord to most civilian agencies, and our real estate portfolio is driven very much by 

our customer agencies’ missions and needs while our performance 

of our portfolio is driven really by a strategic approach to asset 

management, much as some of the other panelists have talked 

about. 

GSA, like many landholding agencies, has made significant 

progress in addressing the issues outlined in the GAO high-risk series. Today, I would like to address GSA’s asset management stratVerDate Aug 31 2005 12:49 Jun 24, 2008 Jkt 036610 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 P:\DOCS\36610.TXT SAFFAIRS PsN: PAT
25 

egy and our progress towards reducing vacant and underutilized 

space, our data reporting efforts, and our participation on the Federal Real Property Council, which Clay Johnson is a key part of. 

I would like to also discuss two related issues: The issue of current reinvestment challenges in terms of reinvestment of our own 

portfolio, as well as increased reliance on operating leases. 

In terms of asset management and property utilization, as highlighted in today’s first panel, GAO described the continuing challenge of managing Federal real property and identifying several 

agencies with over 10 percent of their property inventory as vacant 

or underutilized. GSA has two very vigorous efforts underway to 

reduce the amount of vacant space and underutilized property, as 

well as government-wide, our Office of Real Property Disposal assists other landholding Federal agencies in terms of their disposal 

of underutilized assets. 

Internally, GSA has made significant progress, we think, over 

the last 4 years or so in reducing the amount of vacant and underutilized property in our owned inventory. In fiscal year 2003, we 

initiated a strategy to restructure our portfolio of owned assets. We 

have made, I think, credible progress nationwide, and since the end 

of fiscal year 2006, we have reduced the percentage of under- or 

non-performing assets from 45 percent to 30 percent. We have reduced vacant space from 9.2 percent to 7 percent, which is significantly below, by the way, the private sector average of 11.6-percent 

vacancy in the commercial market. We have reported as excess 258 

assets, disposing of 52 buildings totaling 15 million square feet, 

and this has avoided carrying costs of about $588 million in terms 

of capital reinvestment needs. 

As a result of this restructuring initiative, by the end of fiscal 

year 2006 less than 3 percent of our nearly 9,000 owned and leased 

properties met the FRPC’s definition of vacant or underutilized. 

The 251 assets identified as vacant or underutilized included 149 

government-owned and 102 leased properties. Of these assets considered vacant or underutilized, 84, or 56 percent, have already 

been reported excess to the needs of the agency and are in the disposal process; 4 additional assets are planned for disposal; 22, or 

15 percent, are mission-critical facilities such as courthouses; and 

13, or 9 percent of inventory, are vacant due to a major modernization and will be fully occupied once those modernizations are completed. 

Senator, I would mention, because it was commented on earlier 

in questions, about the speed which we are now doing this. I would 

like to mention that under our disposal process, we are taking 

about 240 days average in terms of disposal through utilization and 

also donation, and only about 170 days if we are going to public 

sale or negotiated sale. So we really have addressed the issue of 

timing and getting these excess properties out of our inventory. 

Under the real property inventory data issue—and I know GAO 

addressed that, and Federal real property—and Mr. Grone actually 

chairs the Subcommittee on this—a key element of GSA’s process 

is managing our portfolio is the ability to capture data, to look at 

performance and analysis of our real estate assets, and strategically move forward on decisions we are making about retaining 

that asset or disposing of that asset or reinvesting in it. 

26 

1 Copy of the ‘‘State of the Portfolio, fy 2007’’ submitted by Mr. Winstead appears in the Appendix on page 107. 

Under the Federal property government-wide standards, GSA’s 

inventory consists of almost 8,900 total assets, about 380 million 

gross square feet. When these assets are separated between leased 

and owned—your comments earlier about the fact we are now just 

surpassing our owned inventory in terms of leased inventory—but 

we still have 1,788 owned assets totaling about 219 million gross 

square feet and another 7,100 leased assets. The annual operating 

costs for fiscal year 2006 were $4.8 billion, $850 million for government-owned, and $3.9 billion for leased portfolio. 

I think that Mr. Johnson and others have testified about the 

Federal Real Property Council activities. I am pleased to not only 

advance their objectives and the President’s management objectives, but I am also pleased to chair the Asset Management Subcommittee, and I think that we are very proud at GSA for being 

the first agency to be recognized as ‘‘Green’’ status under the Federal Real Property Standards. We did that by improving by 3.2 percent over the last 5 years. We did that by looking at reducing operating costs to about 4.2 percent below market, and also reporting 

the assets, as I mentioned earlier. 

Just to conclude, I would mention, because I know my time is up, 

on the reinvestment side, we do have enormous needs in reinvesting in our buildings. The Federal Triangle, our landmark, Cabinet agency headquarters, do require a lot of investment now in 

terms of their age. We are looking very carefully, about $6.6 billion 

in terms of reinvestment needs that we have, and we are moving 

aggressively as we can to do that. I will tell you, though, with cases 

like the Department of Interior, we do have to have phased modernization. The EOB is now in a three-phase modernization of the 

White House’s Executive Office Building. But we are, I think, doing 

aggressive reinvestment of the proceeds from the sale of assets, 

and I think we are also applying the almost $8 billion coming to 

us through Federal property and the Federal building fund to reinvest in these inventories. 

I would mention just in closing that our reliance increasingly on 

lease is accurate. We have, in fact—and OMB’s overview of us for 

almost two decades has said focus on uniquely government-owned 

buildings and utilize the efficiencies in the private sector to provide 

general office space. And that is what we are seeing, and now we 

have a little bit over 50 percent leased space to the governmentowned space. 

I would like to put my statement in the record, Senator, for the 

Subcommittee. I would also like to give to all the Subcommittee 

Members—every year we produce a State of the Portfolio.1 This is 

our fiscal year 2007 document. I would also like to enter this into 

the record of the hearing. 

Chairman CARPER. Without objection, that will be part of the 

record. 

Mr. WINSTEAD. We also are trying on our own in terms of utilizing our buildings and leased space, helping Federal agencies to 

do a better job in the workplace environment design. We just came 

out with a new program we are calling ‘‘Workplace Matters,’’ which 

27 

is now being implemented through our realty specialists around the 

country, and I have also provided a document of that, as to how 

we can get better value out of both our own space as well as our 

leased inventory. And I will tell you with great pride, and I think 

this Subcommittee, in looking at the whole issue of real estate, 

Federal real estate, should recognize that for almost 17 years now, 

GSA has administered the Design Excellence Program. The 

Prettyman Courthouse across the street and the new ATF building 

over on New York Avenue are examples of our effort and success 

in drawing in the best architectural minds in the world to build 

these new Federal landmarks. And just recently I presided over the 

award of our GSA Design Awards given to some of the winners. 

Thank you. 

Senator CARPER. Let me again thank you for what you all have 

brought to the table and to us today. And I want to go back to a 

question I asked of the first panel, and that is, what do we need 

to do on the legislative side in order to save some money here and 

to really use common sense and enable our agencies to use common 

sense, to incentivize them to do the kinds of things that Mr. Henke 

talked about. 

Mr. Rutherford, let me just start with you. What do we need to 

do on the legislative side here? 

Mr. RUTHERFORD. Well, I mentioned in terms of some of the enhanced authority with—— 

Chairman CARPER. Go through that again, please. 

Mr. RUTHERFORD. Well, I mentioned in my testimony with regard 

to having the authority to retain a portion of the proceeds, if not 

the total proceeds. The Forest Service, which is part of USDA, has 

that authority through—I believe it is calendar year 2008. They 

have been able to utilize that to take money that they can then 

apply to the maintenance of existing facilities, critical facilities. 

Chairman CARPER. Let me just interrupt you. Mr. Winstead, why 

is it that we have some agencies that have authority and in the 

case of USDA one portion of a larger agency has authority? And 

it sounds like it expires in a year or so. How does that happen? It 

sounds like a bit of a mish-mash here. 

Mr. WINSTEAD. Right. Senator, it is, and we have those three 

agencies with enhanced-use leasing authority. We did not have it 

until our retention efforts in the fiscal year 2006 appropriations 

act—2005, rather. We actually got now retention of proceeds for the 

first time. Although we do not have enhanced-use leasing, we do 

have under disposal authority of Section 412 that we are now looking at that gives us some of the same options that we have under 

enhanced-use leasing. 

I think Congress has continually looked at this issue with the 

purview and, basically the blinders on, of the scoring roles in the 

Budget Act of 1988, and that has been driving much of this in 

terms of where can an agency look at special purpose authority 

such as VA and get that from Congress to deal with certain real 

estate assets or through BRAC and other means. We do not have 

it yet, still, and yet we do feel optimistic that under new authority 

under Section 412 we can do some of the things that are being 

done under enhanced-use leasing. 

28 

I will tell you, though, as all of us on this panel would admit, 

we do not have the authorities and the tools that the private sector 

has to look at lease-to-own options, to look at bargain purchase options. Federal Building Bank actually gave us financing authority 

on several buildings, the last one of which is opening in July, the 

San Francisco Federal Building. But it has been a disjointed approach, and there have been separate authorities gotten for a specific purpose. So that is really the record to date. 

Mr. RUTHERFORD. If I can add? 

Chairman CARPER. Please. 

Mr. RUTHERFORD. Specific to Agriculture, we have split authority 

when it comes to Congress. The Forest Service jurisdiction is—the 

oversight jurisdiction has to do with the same as Interior, whereas 

the rest of us are under the Agriculture Committee. So whereas 

those who are looking at the Forest Service—which is our largest 

landholding agency. They were given specific authority, but it did 

not necessarily transcend into some of the other areas. 

Chairman CARPER. Alright. Mr. Henke, I was impressed by all 

that you have done at the VA, and as a veteran myself, I applaud 

a lot of what you are doing outside of real property management. 

But in terms of what we can do, not necessarily just to help VA, 

but maybe some of the other agencies that even are not represented here, Mr. Henke, your advice and counsel would be appreciated. We are talking about doing a 5-year pilot, which may or 

may not make sense. It seems like a long time to wait to get where 

we need to go. But I think you and some other agencies, forestry 

and others, have been the pilot, and what we need to do is learn 

from you and shorten that 5-year time frame to something a lot 

less. 

Mr. HENKE. Sir, I would think that any proposal that allows 

quicker disposal for agencies, that allows a more streamlined process, and that allows, most importantly, the agency to retain the 

proceeds of it to carry out its mission would be—— 

Chairman CARPER. All the proceeds? A portion of the proceeds? 

Mr. HENKE. Sir, in the case of VA, we have a particularly wonderful authority in Title 38 to retain the proceeds from our enhanced-use leases to provide better services for veterans. And if I 

could give you two examples of that, I would appreciate it—— 

Chairman CARPER. How did you happen to get that? Do you 

know the genesis of that? 

Mr. HENKE. Sir, I believe it was authorized in the 1992 or 1993 

time frame. I am not sure of the origin, but a recognition that VA’s 

capital infrastructure was very wide and divergent, and that the 

best use of those assets was, if not for direct care for veterans by 

VA, then to retain the resources for VA. But I am not sure about 

the exact legislative history. 

Chairman CARPER. Alright. Thank you. 

Mr. HENKE. One example of our enhanced-use lease authority 

that is really fantastic, in the fall of 2002, as part of our CARES 

process, we decided to realign medical care in the Baltimore area. 

We moved some facilities, some care from Fort Howard, into the 

Baltimore downtown area. And what we have done, as recently as 

last fall we signed a lease. I remember it was September 28 last 

year. It is not every day that I get to sign a 75-year document that 

29 

takes us into 2081, so I remember that. But we have a lease with 

a private sector entity to finance, design, and build what we call 

a ‘‘life care community,’’ which provides a veteran-focused retirement community with over 1,300 units. 

As part of the package there for VA, the developer is going to 

build a brand-new outpatient clinic (OPC), 10,000 square feet, that 

will provide medical care for the residents there and for other veterans in the area. So that is really a great win for vets and VA, 

and that is what we try to do, is to set up an arrangement where 

the local community wins, the VA manages its portfolio better, and 

veterans receive the care they need in the setting that they deserve. 

The other example, if I may, sir, we have authority under our enhanced-use lease provisions actually to dispose of assets, and we 

have used that provision in Chicago. I think 4 or 5 years ago, we 

enhanced-use-leased what we call our Lakeside facility, and then 

sometime later, we determined that the facility was no longer required for VA, and we would consolidate those to another campus 

in Chicago. VA received $22 million for the lease and—on the sale 

of the property, $28 million on disposal, so $50 million retained by 

VA to enhance services, and in that local area, in Chicago, in that 

network. So our enhanced-use lease authority is fantastic. 

One thing we would ask for support for is that the authority expires in 2011, and we will need to have that authority reauthorized 

so we can continue to make progress. 

Chairman CARPER. Mr. Grone, what can we do to help what you 

have begun with BRAC? 

Mr. GRONE. Well, Mr. Chairman, following in—I do not want to 

repeat a good deal of what has already been said. I think Mr. Johnson and my colleagues have spent a good deal of time emphasizing, 

I think, what is the central point, which is something—a framework that is more flexible and more aligned with private sector 

practice. Not that we will always behave as we are the private sector, because we do have public sector responsibilities. But something that is more flexible and respective of the market dynamics 

in which particularly my colleagues who do not sit behind large installation complexes have to deal with or they are in the market, 

but not always able to behave in the market. 

And while we at Defense have certain authorities—enhanced-use 

leasing has been mentioned—we also have authorities for real 

property exchange, which the Army in particular is using to exchange reserve centers in exchange for real property and other construction considerations. We also have some fairly powerful authorities in BRAC. To the extent that we are able to retain dollars, 

they stay, not for the deferred maintenance question, but they are 

retained within the program to be used for other BRAC purposes, 

which could be used to offset our construction requirements, and in 

the out-years, after implementation, to mitigate any additional environmental costs that the Department may incur. 

But the reason why we have some of the budget restrictions that 

we have goes back to the whole question in the early 1990s about 

the liabilities incurred by government-sponsored enterprises, and a 

lot of the provisions that were in the Budget Enforcement Act of 

1990 were designed to get at the question of appropriate visibility 

30 

of liability to the taxpayer for long lead costs, whether it was for 

GSA or leasing or whatever it might be. 

So the question that I believe Senator Coburn raised earlier 

about accounting standards, if we can find a way to combine flexibility with transparency and visibility in budgetary terms, that 

should provide the surety that we need. But what is also critical 

is that we standardize some of the tools between and among the 

agencies, because as the inventory chairman of the FRPC, what we 

are trying to do is standardize data between and among the agencies, which, yes, will provide better reliability for congressional and 

other oversight, but from a management perspective, if we are all 

proceeding from a common framework of data, it then allows for 

the interagency collaboration that Mr. Johnson suggested was necessary so we would make better investment choices. And if we have 

the data standard but our tool sets are not aligned, that is not as 

optimal. 

So I think it is critically important that whatever we do, that it 

be a set of authorities that can apply to all agencies, while recognizing that we each have some unique missions that need to be carried out. 

Chairman CARPER. Alright. Thanks. Mr. Winstead, do you want 

to add your comments to my question? 

Mr. WINSTEAD. Yes. I think that Mr. Grone addressed it quite 

well in terms of the uniformity and through the Federal Real Property Council, looking at our relative authorities and see how they 

can be more effective and more uniform. Obviously, from a legislative standpoint, the proposal that you all are considering about for 

other agencies, the retention of 20 percent is a good incentive to 

get, define, analyze excess properties, get them in the marketplace, 

or get them to public use. Obviously, as mentioned before, more 

flexibility in terms of the budget rules and looking at transparency 

as well. Additional authorities that are commonplace in the private 

sector are obviously those that we always sort of strive for, but we 

do feel that under this Section 412 we are beginning to get some 

of those tools to allow us to lease, ground lease or lease back facilities for renovation, but still maintain Federal ownership, which 

would be good. And also allowing the concept that we see, is the 

value of approaching. In several cases, we have been very effective, 

the consolidation of properties for Federal construction use, which, 

as mentioned before, under a 30-year analysis is always cheaper. 

And two of those instances over the last number of years, which 

I think are very effective and demonstrating the value, is our proposal for St. Elizabeth’s campus for the Department of Homeland 

Security, which is well underway and a master planning process, 

has got historic property issues and others. And the other one, I 

was just with the Commissioner of FDA last night, the Food and 

Drug Administration new headquarters in White Oak, Maryland, 

where we have $1.4 billion. Again, we are taking, in the case of 

White Oak, a lot of private sector leases that are in the Rockville 

area in private buildings and bringing them onto a piece of ground 

we acquired 5 years ago and building a very efficient headquarters 

for the FDA in government-owned space. That is also a cure for a 

lot of this. 

31 

Chairman CARPER. Thank you. I know that some of the agencies, 

at least those that are represented on this panel today, have the 

authority to retain a portion of the proceeds from the disposal of 

properties. We have been talking about that. And as I understand 

things, this gives our agencies the incentives, as we have been talking about, to dispose of properties and the proceeds going to the 

Treasury. 

Let me just ask, this authority gives those who have it a little 

more flexibility to make good use of a piece of property that otherwise would be sitting idle. And the question that I have—and the 

responses to the questions you have given me, I think you have 

pretty much answered this question, so I am going to skip over 

that one and go to the next one. 

Mr. Winstead has testified today that GSA is about to reach the 

point at which the majority of its portfolio will consist of leased facilities. And Mr. Goldstein has testified that agencies are increasing their reliance on leases, sometimes even when other more costeffective options are available. And I have got a couple of questions 

about this phenomenon. 

My first is: How did we get to this point? I think I have an idea 

how we got to this point, but I would like to ask it anyway. What 

is in current law and agencies’ property management processes 

that encourages leases when leases may not make sense? And then 

in what circumstance do you think leases are appropriate and 

when are they not appropriate? Senator Coburn said earlier that 

they are almost never appropriate, but I can envision sometimes 

when they would be appropriate. But in what circumstances do you 

think leases are appropriate and when are they not appropriate? 

Have any of your agencies ever decided to go with a lease knowing 

that it was not the most cost-effective option? I would especially 

like you to focus on those last two questions. In what circumstances do you think leases are appropriate or maybe not appropriate? And, finally, have any of your agencies ever decided to 

go with a lease knowing that it is not the most cost-effective option? 

Mr. WINSTEAD. Senator, GSA has a very aggressive analysis, a 

30-year lifecycle cost analysis, looking at net present value of the 

options that we bring up here to Congress. You all authorize everything we do, both owned, built, as well as leased actions. And we 

are always looking at the owned solution versus the leased solution 

versus the lease-construction solution to meet our clients’ needs. 

And I will tell you that the overview both from the budgetary 

standpoint has been for a couple of decades—I have only been with 

the agency since October 2005, but the philosophy has been use the 

competitiveness and the economies in the private sector office market, general use market, to tap good leases, good actions to get 

space solutions for Federal agencies. 

When I say that—and 70 percent of our leases for our 60-some 

agency clients are less than 10,000 square feet. So what generally 

is a policy—— 

Chairman CARPER. Say that number again? 

Mr. WINSTEAD. About 70 percent are less than 10,000 square 

feet, so they are small leases, the majority of them are. So what 

we tend to do and find is that when you are in the market for a 

32 

small space, a lot of times the efficiency of the private sector, where 

you do not have—our first rule is always go to a GSA federally 

owned building to meet that need. Where we do not have that, we 

do find with the shorter-term leases and the small-space leases, the 

efficiencies in the private lease market and our ability to tap, competitive lease rates, we are actually achieving about 8 to 9 percent 

below the market rates that most private sector tenants are getting 

and, in fact, through this national brokerage contract over the last 

couple of years, we are seeing we are even getting in some cases 

13 percent what the private sector rate is. So we are getting economies. 

With that said, this analysis that we perform, our portfolio management people right behind me, a very capable group, when they 

do a 30-year pro forma on our options, space options, it is almost 

in every case that government-owned is the best solution from a 

cost standpoint. 

Senator Coburn mentioned—and you did as well—the Patent and 

Trademark Office. I was not around when that was negotiated by 

the National Capital Region, but you are correct. Under the 30- 

year analysis, basically the operating lease was $48 million more 

expensive than a government solution. 

The reality in that instance—and I think also in the Department 

of Transportation’s new headquarters—is the ability to address a 

one-point-some-billion-dollar headquarters with the constraints of 

an $8 billion annual budget for GSA in the Federal building resources. We could not get to the construction solution. We could not 

deliver the needs with the expiring lease DOT had and their need 

for new headquarters without going a private sector route or lease. 

Our preference is—and the economics in most deals—these new 

FBI field offices, if you look at the 36 field offices we are building 

for the FBI since September 11, 2001, their new requirements and 

their new mission, we are seeing if we were to build those 36 field 

offices, it would be a $1.7 billion cost to the Federal Government. 

Some of the lease-constructs we are entering now, the aggregate 

costs for those lease-constructs will be about $160 million. So we 

are able actually coming here with these perspectives to analyze 

that and obviously get your approval. But in every instance, we do 

try to find federally owned property and provide that space. But 

what I am suggesting is increasingly, now about 50–50, we are 

finding the solution in the private sector lease market. 

Chairman CARPER. Alright. Let me go back to the question I 

asked. Have any of your agencies ever decided to go with a lease 

knowing that it was not the most cost-effective option? I would be 

surprised if the answer were no. 

Mr. HENKE. Mr. Chairman, I would have a couple of observations 

on that. 

In the case of VA, leasing gives us the opportunity to respond 

more quickly to the health care dynamics in the marketplace, and 

particularly with regard to demographics of where veterans are 

and where they need access points to care, and also the delivery 

methodology of care, the modality. In other words, a more outpatient-focused basis than an inpatient basis. 

The example of the post-Hurricane Katrina situation in New Orleans, the VA Medical Center in downtown New Orleans was deVerDate Aug 31 2005 12:49 Jun 24, 2008 Jkt 036610 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 P:\DOCS\36610.TXT SAFFAIRS PsN: PAT
33 

stroyed, and we were able to very quickly establish on the outer 

perimeter of Greater New Orleans three outpatient clinics, community-based outpatient clinics (CBOCs), and we have about 880 of 

those across the country, typically in leased space, typically not 

large structures and not medical-unique space. But in the case of 

Katrina, we were able to establish clinics in Hammond, LaPlace, 

and Slidell, Louisiana, to re-establish care in that area. So in that 

situation, leasing was flexible and made a lot of sense, and the cost 

considerations were certainly secondary to providing access to care 

for vets in that area. 

Chairman CARPER. Alright. 

Mr. RUTHERFORD. Can I add a little bit? 

Chairman CARPER. Please. 

Mr. RUTHERFORD. With regard to the Department of Agriculture, 

whereas GSA’s average lease is about 10,000 square feet, our average lease is about 3,000 square feet. In our agencies which we consider our customer service agencies, which is the Farm Service, 

Rural Development, Natural Resource Conservation, the key there 

is often being close to the customers that they serve. And in many 

cases, we do a cost/benefit analysis, but in many cases our best approach is to either house in a GSA facility or we will share in many 

cases with a county or State office, which also requires a lease, but 

usually at very favorable rates. So often ours is geographically dictated. 

Chairman CARPER. Alright. Thanks. 

Mr. Henke, in our State, in Delaware, we only have three counties. In our southernmost county, Sussex County, we have two community-based outpatient clinics for our veterans. We have a large 

veterans population in southern Delaware, large and growing. The 

VA in our State wants to consolidate those two from one in the 

western side of Sussex County, the other in the eastern side, and 

consolidate them in Georgetown into a single space. We talked it 

through with the veterans organizations in our State, and they believe they will get better care, more comprehensive care at that one 

central location in Sussex County. 

At the same time, VA has been working to find a site for a community-based outpatient clinic in Kent County in the southern part 

of our State in the Dover area, and I think what they are doing 

there is they found land, will knock down a structure, and they are 

going to bring in, I think, about a 6,000-foot modular unit to put 

it to use and be able to stand it up within just literally days—a 

couple of weeks. 

Mr. HENKE. Yes, sir. The decision package for the next round of 

community-based clinics is with the Secretary now, and he is about 

to make a decision and move forward with 30 or more additional 

CBOCs across the country, and I would expect that decision and 

announcement to be made very imminently. But we recognize there 

are situations where there is a great demand and a need to put a 

clinic in that community, and we will work very aggressively to do 

that. 

Chairman CARPER. Good. Maybe one or two more questions, and 

then we will call it a morning. GAO has presented us with some 

startling figures on maintenance backlogs, and apparently the 

seven agencies they contacted in putting together the high-risk reVerDate Aug 31 2005 12:49 Jun 24, 2008 Jkt 036610 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 P:\DOCS\36610.TXT SAFFAIRS PsN: PAT
34 

port that inspired this hearing reported more than $77 billion in 

maintenance backlog. I think I mentioned that number earlier. 

About $57 billion of that amount is attributable to the Department 

of Defense alone. 

Mr. Grone, I will ask you a question separately about why Defense’s backlog is so significant, but to the rest of you, what is it 

that makes up these backlogs? What kind of problems do they 

present to you operationally? Is there something that needs to be 

done, such as a change in management practice or an increase in 

resources, to help address this problem? If the others want to respond first, and then I will go back to Mr. Grone. 

Mr. WINSTEAD. Sure. Senator, I will be happy to respond. In the 

2008 prospectus program that is up here, we have about $6.6 billion in the repair and alteration portion of our budget, and the Federal Triangle is an example. They have aged inventory that does 

require modernization—substantial in the case of the Executive Office Building, a couple hundred million dollars. 

But what we are seeing is that it is forcing us to have to manage 

this renovation in a much more innovative way and phased approach. With that $6.6 billion, we would need on average about $1 

billion a year to address it, and we are now getting about $700 million a year. So there is a gap there that we are very concerned 

about it, and it would take 8 years to essentially resolve that backlog of renovation needs. So we do have about an 8-year backlog 

that we need to address. 

But I would stress to the Subcommittee that what you have 

heard today is a sort of consistent approach of the Federal Real 

Property Council on how to manage our assets, and we are exchanging best practices, and what we are—you have had evidence 

today is that we are all approaching this from the standpoint of 

let’s retain those assets that are most mission critical, that we, for 

example, have full tenant, we only have 4-percent vacancy in our 

own spaced inventory, that we are really utilizing them to the 

highest level of efficiency, and that is our tier one assets, and then 

maintaining those that still have a lifecycle value for a period of 

years, and then disposing of them, the third tier, disposing of them, 

getting them out. 

What that will allow us to do as we continue on this path that 

was started in fiscal year 2002 is the more we get out of underperforming and underutilized and excess properties, the more from the 

rent revenues coming to the Federal building fund we can put back 

into repair and alteration and modernization projects. 

So exactly what we are trying to do here and what this bill that 

would incentivize retention from disposal will do is to help refocus 

this Federal building—from our perspective—fund resources into 

modernization and repair work. So I think what we have gotten 

started here very aggressively will help. 

Chairman CARPER. Before I call on Mr. Grone, anyone else on 

the maintenance backlogs? 

[No response.] 

Chairman CARPER. Mr. Grone. 

Mr. GRONE. How much time do we have, Mr. Chairman? [Laughter.] 

35 

Chairman CARPER. Ten minutes. I will ask you to use half of 

that. 

Mr. GRONE. Well, I joke, but the answer has a great deal of lineage to it. 

Chairman CARPER. Feel free to respond more fully for the record. 

Mr. GRONE. I understand, sir. Mr. Johnson talked about the phenomenon in the context of deferred maintenance of the ability to 

wait one more year, and a lot of this, quite frankly, with an inventory the size of the Department, you can get to large numbers rather quickly. So when we have a plant value of over $710 billion with 

a legacy of many decades and years of that deferral issue, waiting 

one more year, how were we in that position because we really 

could not truly define the requirement. 

One of my predecessors many times removed, when he began 

what became then known as the Excellent Installations program, 

had a target established of 2 percent of plant replacement value to 

be plowed back into maintenance on an annual basis, which was 

also, frankly, the state of industry thinking at the time. But there 

was no real way to calibrate what was a true requirement. 

That thinking later evolved to 3 percent of plant, but in the last 

5, 6 years, we have actually begun to deploy, which GAO has had 

ready access to throughout the process, our modeling techniques for 

how do we think about the sustainment and maintenance of an 

asset, how do we think about how to recapitalize it and think about 

those in portfolio terms so we can think about the investment 

choice we need to make. 

Those models are being benchmarked to both the best practices 

in the public and the private sector, so the leadership can now see 

what the requirement is and that it has some foundation in fact 

other than a calculation, which is 3 percent of some number. 

We will work through a good deal of that backlog, particularly 

through BRAC, as we undertake a fairly significant and sizable recapitalization of the plant as we move and reposition missions. But 

the critical piece here is that a lot of that backlog is associated with 

some of the more mundane aspects of the inventory. Over a fifth 

of our plant is associated with utilities and improvements, like 

roads, curbing, parking lots, and the like. That is a fifth of the inventory. When we talk about repair and maintenance backlog, we 

are also talking about repair and maintenance backlog in relation 

to those types of assets. 

So the $57 billion is not, strictly speaking, just the built environment above the ground. It is also is the wires and pipes, the roads, 

the sidewalks that are associated with those assets, and those are 

equally important, and we will continue to work through that. 

I am less, frankly, focused on backlog of maintenance repairs and 

management construct because that then becomes part of our recapitalization target. Do we have the business processes in place 

and the decision tools in place based on real data to understand 

what we own, where it is, what is its condition, what does it cost 

us to operate it, and what is its operational availability and capability? 

Everything we are doing is built on answering or trying to answer those five questions about any asset with data that is standardized, and then rolling those into our predictive modeling to get 

36 

a sense of cost. If we are able to do that effectively, I think over 

time we will have that number, and we will always have a backlog 

of maintenance and repair of some number. But in the future, I 

would expect that it would be far less significant than the $57 billion number. But how we got here is simply because in many ways 

we did not have the tools to do anything else. And what we have 

said about doing in the last 5, 6, 7 years is building the tool set 

that allows the leadership, not just of our Department but of any 

Department, because Department of Energy and others and NASA 

have looked at the way in which we think about recapitalizing assets and sustainment, and are incorporating some of the things 

that we have learned into their management models as well. 

So there is a lot of sharing, and I want to be very optimistic 

about chewing our way through that number. But a lot of it, frankly, was because we did not have the know-how and we did not have 

the tools. And now we have them. The question is understanding 

the requirement, making risk-based trades against everything else, 

the other investments we need to make, and for this Department 

it is a Nation at war, reinvesting in not just our fixed assets but 

the military hardware that is necessary to transport the force, our 

people and their costs, some of which we share with my friend to 

my right, in terms of the things that we need to be concerned 

about. 

So, I think we are on the path, but I do think that number is 

sort of a significant target of what it is, a constant reminder of the 

legacy of poor management practice. And that is what we have to 

work through to make sure that we do not leave that as a legacy 

for my successors down the road. 

Chairman CARPER. Well said. 

Mr. Goldstein, you have been good to stay here with us to the 

bitter end, and for your trouble, I am going to ask you not to give 

the benediction. I will give that. But I would like to ask you just 

to sort of reflect on what we discussed with you and Mr. Johnson 

in the first panel and just reflect on the comments that we have 

heard here with the second panel, their statements and responses 

to questions, and just give me what you think should be some of 

our most important takeaways for the Members of this Subcommittee and our staff. 

Mr. GOLDSTEIN. Sure. Thank you, Mr. Chairman, and I appreciate not giving a benediction. 

I think a couple things are important. One, I just want to mention that some of the things you have asked today, GAO is continuing to look at. In part for this Subcommittee, we are looking 

at the whole issue of leasing—some of the things you have asked 

today you will be seeing in the study that you have requested from 

us in the near future. 

We are also going to shortly begin studies that the Congress has 

asked us to prepare looking at the backlog as well as looking the 

whole issue of retained earnings. So many of the things that we 

have talked about today, we will be able to help shed some light 

on in the coming months. So I wanted to mention that to you. 

I think one of the biggest takeaways that the Subcommittee 

should have here is that a lot of progress has been made in the last 

couple years, and you had asked at the beginning if there are 

37 

things that the Congress might consider doing, and we have talked 

about some of those in terms of additional authorities. But one 

thing that you have not mentioned this morning is the whole structure that is in place. At the moment much of the progress that has 

occurred through the President’s Management Agenda and the Executive order has occurred because of the work that this Administration has done and the seriousness with which they have taken 

the high-risk issue that we presented a number of years ago. But 

this Administration will not be here forever, and the focus that 

they place on this issue may not be here forever, either. And so 

Congress may want to consider whether or not they ought to codify 

the Executive order or some of the other things that are part of the 

structure so that the kind of emphasis that has been placed on real 

property can continue to be placed on it in the future. Because, obviously, initiatives come and go as Administrations come and go, so 

I think that may be an important aspect of this whole puzzle to ensure success in the future. 

Chairman CARPER. Anyone else have anything you want to get 

off your mind that pertains to this subject before we wrap it up? 

[No response.] 

Alright. I want to thank each of you for coming, for preparing for 

the hearing. I want to just express my appreciation for the work 

that has been done by GAO over the last 5 or so years on this subject and more recently by the Administration in response to GAO’s 

findings and the placement of property management on the highrisk list. 

There is obviously a role for the Administration to do more. 

There is a role for the GAO to be our watchdog. And there is an 

opportunity for us to conduct oversight, but not just conduct oversight. This is, I think, our third hearing on this subject, and I do 

not know about the rest of my colleagues, but I am ready to get 

going with respect to legislation that might be helpful to 

incentivize the agencies to really—maybe not just incentivize them, 

but to help unleash them, unleash some energy and incentivize 

them to use common sense. They all have it. We want to make sure 

what we have is not precluding their use of that common sense. 

As I said before, when you say to an agency that you have this 

surplus property and you are not using it, we are not going to reimburse you to destroy it or to sell it, if you sell it, you do not get 

to keep the proceeds, not even the value of the land, you cannot 

use the proceeds to help work down your unfunded maintenance 

costs that are out there standing out there by the billions of dollars, that does not make much sense. And we ought to be smarter 

than that, and we have to find a way to address that and to do so 

not 5 years from now but more recently. And the idea that we have 

all these agencies that are leasing space—and it sounds like more 

all the time—in some cases that makes sense. These VA clinics 

that we are talking about that Mr. Henke—it might make perfect 

sense to do that. There are a lot of instances where it does not. But 

we have a situation where our budget scoring rules say that if you 

go out and build a property and it maybe takes $10 million, but 

you decide instead because you can do a long-term lease at a fraction of that cost for 1 year, and because of the way we score that, 

we incentivize people to make what is over the lifetime of the propVerDate Aug 31 2005 12:49 Jun 24, 2008 Jkt 036610 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 P:\DOCS\36610.TXT SAFFAIRS PsN: PAT
38 

erty the wrong decision, the wrong decisions for the taxpayers. We 

ought to be smarter than that. And my hope is that by working together we will be smarter than that. 

We have made a good start. I am anxious to pick up the pace. 

I suspect some of you and some of the other agencies that are not 

here today would like to pick up the pace as well. And the folks 

that will benefit will be the people that you serve, the people who 

work with you, and your employees, and the taxpayers who pay the 

freight for all of us. That is a good agenda to work on, and we look 

forward to working on it with you. 

With that having been said, this hearing is adjourned. Thanks 

very much. 

[Whereupon, at 12:01 p.m., the Subcommittee was adjourned.] 

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