U.S. GOVERNMENT PRINTING OFFICE

62–621 CC WASHINGTON : 2000

FEDERAL REAL PROPERTY MANAGEMENT: OBSTACLES AND

INNOVATIVE APPROACHES TO EFFECTIVE PROPERTY

MANAGEMENT

JOINT HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,

INFORMATION, AND TECHNOLOGY

OF THE

COMMITTEE ON GOVERNMENT REFORM

AND THE

SUBCOMMITTEE ON SUBCOMMITTEE ON ECONOMIC

DEVELOPMENT, PUBLIC BUILDINGS, HAZARDOUS

MATERIALS AND PIPELINE TRANSPORTATION

OF THE

COMMITTEE ON TRANSPORTATION AND

INFRASTRUCTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

APRIL 29, 1999

Committee on Government Reform

Serial No. 106–86

Committee on Transportation and Infrastructure

Serial No. 106–61

Printed for the use of the Committee on Government Reform and the

Committee on Transportation and Infrastructure

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

BOB BARR, Georgia

DAN MILLER, Florida

ASA HUTCHINSON, Arkansas

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

JOHN T. DOOLITTLE, California

HELEN CHENOWETH, Idaho

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

CHAKA FATTAH, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

HAROLD E. FORD, JR., Tennessee

JANICE D. SCHAKOWSKY, Illinois

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

DAVID A. KASS, Deputy Counsel and Parliamentarian

CARLA J. MARTIN, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY

STEPHEN HORN, California, Chairman

JUDY BIGGERT, Illinois

THOMAS M. DAVIS, Virginia

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

JIM TURNER, Texas

PAUL E. KANJORSKI, Pennsylvania

MAJOR R. OWENS, New York

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

J. RUSSELL GEORGE, Staff Director and Chief Counsel

RANDY KAPLAN, Professional Staff Member

MASON ALINGER, Clerk

JOHN BOUKER, Minority Counsel

Page

III

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

BUD SHUSTER, Pennsylvania, Chairman

DON YOUNG, Alaska

THOMAS E. PETRI, Wisconsin

SHERWOOD L. BOEHLERT, New York

HERBERT H. BATEMAN, Virginia

HOWARD COBLE, North Carolina

JOHN J. DUNCAN, JR., Tennessee

THOMAS W. EWING, Illinois

WAYNE T. GILCHREST, Maryland

STEPHEN HORN, California

BOB FRANKS, New Jersey

JOHN L. MICA, Florida

JACK QUINN, New York

TILLIE K. FOWLER, Florida

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

STEVEN C. LATOURETTE, Ohio

SUE W. KELLY, New York

RAY LAHOOD, Illinois

RICHARD H. BAKER, Louisiana

CHARLES F. BASS, New Hampshire

ROBERT W. NEY, Ohio

JACK METCALF, Washington

EDWARD A. PEASE, Indiana

ASA HUTCHINSON, Arkansas

MERRILL COOK, Utah

JOHN COOKSEY, Lousiana

JOHN R. THUNE, South Dakota

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

JOHN T. DOOLITTLE, California

LEE TERRY, Nebraska

DON SHERWOOD, Pennsylvania

GARY G. MILLER, California

JOHN E. SWEENEY, New York

JIM DEMINT, South Carolina

DOUG BEREUTER, Nebraska

STEVEN T. KUYKENDALL, California

MICHAEL K. SIMPSON, Idaho

JOHNNY ISAKSON, Georgia

DAVID VITTER, Louisiana

JAMES L. OBERSTAR, Minnesota

NICK J. RAHALL II, West Virginia

ROBERT A. BORSKI, Pennsylvania

WILLIAM O. LIPINSKI, Illinois

ROBERT E. WISE, JR., West Virginia

JAMES A. TRAFICANT, JR., Ohio

PETER A. DEFAZIO, Oregon

BOB CLEMENT, Tennessee

JERRY F. COSTELLO, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JERROLD NADLER, New York

PAT DANNER, Missouri

ROBERT MENENDEZ, New Jersey

CORRINE BROWN, Florida

JAMES A. BARCIA, Michigan

BOB FILNER, California

EDDIE BERNICE JOHNSON, Texas

FRANK MASCARA, Pennsylvania

GENE TAYLOR, Mississippi

JUANITA MILLENDER-MCDONALD,

California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

MAX SANDLIN, Texas

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

LEONARD L. BOSWELL, Iowa

JAMES P. MCGOVERN, Massachusetts

TIM HOLDEN, Pennsylvania

NICK LAMPSON, Texas

JOHN ELIAS BALDACCI, Maine

MARION BERRY, Arkansas

RONNIE SHOWS, Mississippi

BRIAN BAIRD, Washington

SHELLEY BERKLEY, Nevada

SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, HAZARDOUS

MATERIALS AND PIPELINE TRANSPORTATION

BOB FRANKS, New Jersey, Chairman

JOHN COOKSEY, Louisiana, Vice Chairman

TOM EWING, Illinois

STEVEN C. LATOURETTE, Ohio

BUD SHUSTER, Pennsylvania

(Ex Officio)

ROBERT E. WISE, JR., West Virginia

ELEANOR HOLMES NORTON, District of

Columbia

RONNIE SHOWS, Mississippi

JAMES L. OBERSTAR, Minnesota

(Ex Officio)

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C O N T E N T S

Page

Hearing held on April 29, 1999 .............................................................................. 1

Statement of:

Gregory, William, member, Committee to Assess Techniques for Developing Maintenance and Repair Budgets for Federal Facilities National

Research Council; and J. Christopher Mihm, Associate Director, Federal Management and Workforce Issues, General Accounting Office ....... 19

Wagner, G. Martin, Associate Administrator, Office of Governmentwide

Policy, General Services Administration, accompanied by Robert Peck,

Commissioner, Public Buildings Service; and David Bibb, Deputy Associate Administrator, Office of Governmentwide Policy .............................. 110

Yim, Randall, Acting Deputy Under Secretary of Defense for Installations, Department of Defense; Denis Galvin, Deputy Director, National

Park Service, Department of the Interior; Thomas Garthwaite, Deputy

Under Secretary for Health, Department of Veterans Affairs, accompanied by Charles Yarbrough, Chief Facilities Management Officer,

and D. Mark Catlett, Deputy Under Secretary for Budget; and Rudolph

Umscheid, vice president, facilities, U.S. Postal Service ........................... 52

Letters, statements, et cetera, submitted for the record by:

Franks, Hon. Bob, a Representative in Congress from the State of New

Jersey, prepared statement of ...................................................................... 7

Galvin, Denis, Deputy Director, National Park Service, Department of

the Interior, prepared statement of ............................................................. 79

Garthwaite, Thomas, Deputy Under Secretary for Health, Department

of Veterans Affairs, prepared statement of ................................................. 67

Gregory, William, member, Committee to Assess Techniques for Developing Maintenance and Repair Budgets for Federal Facilities National

Research Council, prepared statement of ................................................... 23

Horn, Hon. Stephen, a Representative in Congress from the State of

California, prepared statement of ................................................................ 4

Mihm, J. Christopher, Associate Director, Federal Management and

Workforce Issues, General Accounting Office, prepared statement of ..... 35

Turner, Hon. Jim, a Representative in Congress from the State of Texas,

prepared statement of ................................................................................... 12

Umscheid, Rudolph, vice president, facilities, U.S. Postal Service, prepared statement of ........................................................................................ 94

Wagner, G. Martin, Associate Administrator, Office of Governmentwide

Policy, General Services Administration, prepared statement of ............. 113

Wise, Hon. Robert E., a Representative in Congress from the State of

West Virginia, prepared statement of ......................................................... 15

Yim, Randall, Acting Deputy Under Secretary of Defense for Installations, Department of Defense:

Information concerning land transactions .............................................. 107

Prepared statement of ............................................................................... 55

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FEDERAL REAL PROPERTY MANAGEMENT:

OBSTACLES AND INNOVATIVE APPROACHES

TO EFFECTIVE PROPERTY MANAGEMENT

THURSDAY, APRIL 29, 1999

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY, COMMITTEE ON GOVERNMENT REFORM, JOINT

WITH THE SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, HAZARDOUS MATERIALS AND

PIPELINE TRANSPORTATION, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,

Washington, DC.

The subcommittees met, pursuant to notice, at 10 a.m., in room

2167, Rayburn House Office Building, Hon. Stephen Horn (chairman of the subcommittee on Government Management, Information, and Technology) presiding.

Present for the Subcommittee on Government Management, Information, and Technology: Representatives Horn, Biggert, and

Ose.

Present for the Subcommittee on Economic Development, Public

Buildings, Hazardous Materials and Pipeline Transportation: Representatives Franks, Norton, and Shows.

Staff present for the Subcommittee on Government Management,

Information, and Technology: J. Russell George, staff director and

chief counsel; Bonnie Heald, director of communications, professional staff member; Randy Kaplan, professional staff member;

Mason Alinger, clerk; Jon Bouker and Faith Weiss, minority counsels; and Earley Green, minority staff assistant.

Staff present for the Subcommittee on Economic Development,

Public Buildings, Hazardous Materials and Pipeline Transportation: Rick Barnett, professional staff member; and Susan Brita,

minority professional staff member.

Mr. HORN. A quorum being present, the joint hearing of the

House Subcommittee on Government Management, Information,

and Technology and the Subcommittee on Economic Development,

Public Buildings, Hazardous Materials and Pipeline Transportation

will come to order.

The Federal Government is one of the world’s largest owners of

real estate. Its vast portfolio consists of more than 500,000 buildings located on more than 560 million acres of land. These holdings

are under the custody and control of more than 30 Federal departments and agencies. They represent a taxpayer investment of more

than $300 billion.

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We are here today to examine the ways to improve the management of these assets. Overall, the Federal Government has not

been a good steward. There is mounting evidence that the physical

condition of Federal buildings has been allowed to deteriorate.

Roughly half of these buildings are more than 50 years old.

Last year, a National Research Council Committee independently

studied the status of many of these Federal facilities. The committee found that maintenance and repair programs have persistently been underfunded. As a result, many buildings have deteriorated to a point that they now require major repairs to bring them

up to an acceptable health and safety standard.

Federal facilities program managers are being encouraged to be

more businesslike and innovative. However, the committee found

that current management and financial processes create disincentives and, in some cases, barriers to cost effective property management and maintenance.

For example, Ellis Island in New York Harbor—and this committee has walked that ground—is a highly visible example of this

neglect. For nearly 100 years, the buildings and structures on Ellis

Island housed and received 12 million immigrants, including my

own father in 1903. Among its 36 historic buildings, 32 have been

so neglected that two-thirds of this national treasure could soon be

lost to catastrophic structural failure.

And if we could turn these pages, we will find out what great

mystery is next.

At the same time, millions of dollars are being spent on buildings

that no longer serve their intended purpose. Downsizing of the Federal work force and changing agency missions have resulted in an

excess of Federal buildings and work space that are costly and an

inefficient use of the taxpayers’ money.

However, in many cases, the laws and regulations governing the

disposition of these excess facilities create disincentives that, in

fact, make the process expensive, time consuming and difficult.

On March 10 of this year, for example, the General Accounting

Office testified before the House Subcommittee on Health that the

Department of Veterans Affairs could spend billions of dollars over

the next 5 years operating hundreds of unneeded buildings. The

General Accounting Office concluded that the Department of Veterans Affairs could greatly enhance veterans’ health care simply by

reducing the resources it spends on underused buildings.

We cannot continue to ignore the consequences of not maintaining our public buildings. The investment made in these assets warrants sustained, appropriately timed, and targeted maintenance.

The Federal Government needs to develop a strategy for facility

management, maintenance, and accountability for stewardship that

will optimize limited resources while protecting the value and

functionality of the Nation’s public buildings and facilities.

Today, we are going to look at how the Federal Government

manages its vast portfolio of real property. There are currently a

variety of laws governing the acquisition, maintenance, and disposal of these assets. We will examine whether these laws help

agencies effectively and efficiently manage this property and

whether the agencies have some suggestions of what else needs to

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be amended in the laws to make their life a little easier and more

effective.

We have before us many knowledgeable witnesses to discuss the

problems, policies, and procedures surrounding the management

disposal of Federal real estate. Among our panelists are representatives from five of the largest land-holding agencies. This important issue affects hundreds of communities across our Nation. We

welcome them. And we look forward to their testimony.

I now yield to Chairman Franks, whose committee is meeting

with us in this joint session for his opening statement.

[The prepared statement of Hon. Stephen Horn follows:]

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Mr. HORN. Mr. Franks.

Mr. FRANKS. Thank you, Chairman Horn. It is a delightful opportunity to share jurisdiction of this hearing with you. I would like

to not only recognize but thank you and commend you for your extraordinary leadership you have displayed in so many areas of government management and particularly in the area of Y2K compliance, forcing the government to look at itself in the mirror and

make certain that we were leading the way in terms of being prepared for the turn of the new millenium. I want to thank you on

behalf of all Americans.

I will keep my opening statement brief. Before I begin, though,

I would like to ask unanimous consent that my colleague from the

Transportation Committee, Mr. Blumenauer, be able to submit a

statement for the record.

Mr. HORN. Without objection, so ordered.

Mr. FRANKS. I would like to welcome the Members and our witnesses to this hearing today. I would also like to thank Chairman

Horn for working closely with the subcommittee which I chair in

planning and developing this hearing on alternatives for funding

Federal capital investment projects with public pride and partnerships.

We welcome new ideas to better manage our Federal assets.

Managing our Federal assets is something that needs to be done

with the assistance and cooperation of the private sector. I am sure

some of our witnesses here today will agree with that.

One facility management component that is often overlooked is

the role the facility places in promoting an agency’s mission. As the

mission changes, so does the agency’s facility’s needs. These needs

have to be accounted for in the context of the Federal budgetary

constraints. This is in the form of repair and alteration projects,

new Federal construction projects, or in the case of downsizing, disposing of underutilized facilities.

I am well aware in the case of the General Services Administration that short-term expensive operating leases are increasingly

used instead of long-term capital improvement projects to meet

space needs. Short-term leases reduce the overall government

budget at the present time only because these expenditures are

counted as annual costs.

The overall impact of this decision places an ever-increasing burden on GSA’s buildings’ budget. This year, GSA will devote 50 percent of its budget for lease payments. Each year, GSA has less to

spend on the important areas of repairs, innovations, and new construction.

The current budget process also emphasizes design and construction cost of a new facility. When these costs account for 5 to 10 percent of the total life cost of the building, operations and maintenance account for 60 to 85 percent of the total cost of ownership.

Public-private partnerships could be in the government’s best economic interest in meeting the long-term needs of a facility.

With that, Mr. Chairman, I would like to join you in welcoming

our witnesses and look forward to the creative ideas that they will

share with us today.

Mr. HORN. I thank the gentleman.

[The prepared statement of Hon. Bob Franks follows:]

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Mr. HORN. The ranking member on the Subcommittee on Government Management, Information, and Technology is Mr. Turner.

The gentleman from Texas and your opening statement would be

welcome.

Mr. TURNER. Thank you, Mr. Chairman. We are here today to exercise the responsibility of the Congress to oversee the management of Federal property. As we know, the Federal Government’s

real estate portfolio is vast and diverse, and one size clearly does

not fit all.

As we move into the next millenium, and the government hopefully continues to operate more like a business, Federal property

management must also become more flexible and more innovative.

Today, we will hear about recent efforts to engage in alternative

and innovative management practices at the Federal level. We will

also hear about unique Federal partnerships with other public,

nonprofit, and for profit entities.

For the past 50 years, Federal property has been purchased,

managed, and disposed of under the authority of the Federal Property and Administrative Services Act of 1949. The principles established by this law have worked extremely well over the years, assuring the American people the value of Federal property will be

maximized.

While discussing this issue today, I think it’s appropriate to recognize the invaluable contribution and achievements of a former

Government Reform Committee staff member, Mr. Miles Romney,

who devoted his career to public service and devoted his attention

to Federal property management issues. He recently succumbed to

cancer.

Mr. Romney left an indelible mark on Federal property management and the Government Reform Committee, serving on this committee staff continuously from 1956 to 1997. As we look to new approaches, we would do well to remember Mr. Romeny, who was

guided by the belief that Federal property was a sacred trust held

by the government for the American people.

It is my belief that it is the government’s responsibility to use

Federal property wisely and efficiently; and when it is no longer

needed, the government must assure that its disposal occurs without prejudice or favor.

While the policies and principles of the 1949 Property Act have

served us well, it may be time to consider modifying particular aspects of the law to encourage more innovative and modern approaches to management and disposal.

For example, certain types of public-private partnerships have

proven to be very successful, and we will hear about the characteristics of their success today. In addition, Congress could consider

increasing incentives for agencies to dispose of property that they

no longer need by allowing them to retain a portion of the revenue

generated by the sale. These are just a few ideas that we should

explore vigorously.

I look forward to the testimony from all of the witnesses today

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and thank Chairman Horn and Chairman Franks for holding this

hearing today.

Thank you, Mr. Chairman.

Mr. HORN. I thank the gentleman.

[The prepared statement of Hon. Jim Turner follows:]

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Mr. HORN. And now the ranking member for Mr. Franks’ subcommittee, the Subcommittee on Economic Development, Public

Buildings, Hazardous Materials and Pipeline Transportation of the

full Committee on Transportation and Infrastructure, Ms. Norton,

the Delegate from the District of Columbia.

Ms. NORTON. Thank you, Mr. Chairman.

I ask unanimous consent to incorporate the statement of the

ranking member, Mr. Wise, who is unable to be here this morning

before I make my own statement.

Mr. HORN. Without objection.

[The prepared statement of Hon. Robert E. Wise follows:]

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Ms. NORTON. I appreciate your leadership, Mr. Chairman, and

that of my own chairman, Mr. Franks, in organizing this important

hearing about a subject badly in need of oversight, the oversight of

real property management of the Federal Government.

I have two concerns that I would like to discuss in opening this

hearing. The first is my long-time interest in the effect of the scoring rules, which have essentially destroyed any National Building

Program of the United States of America.

Originally proposed as a way to control the budget, these rules

have had an unintended effect that we have not been able to overcome. They have wreaked havoc on GSA’s ability to house the Federal work force. And they cost us billions of dollars in rent because

we are unable to build on Federal land often in order to house Federal facilities.

This matter is of such urgency that I went and testified last year

before the President’s Commission on Capital Budgeting. I myself

favor a capital budget for the Federal Government and believe it

is only out of a long tradition that we don’t have a capital budget.

States, localities, and cities have learned how to work capital

budgets so that they don’t get out of hand and so that they do control expenditures and so that you do spend capital funds for capital

budgeting and operational funds for operational matters. It is time

that the Federal Government learns that, and we will not be able

to effectively manage our real property for the Federal Government

unless we come into the 20th century when it comes to capital

budgeting.

I have a special interest as well, Mr. Chairman, in the discussion

that we will take here today about public-private partnerships.

Among the ways in which this will be discussed undoubtedly will

be the report of the GAO entitled, ‘‘Public-Private Partnerships Key

Elements of Federal Building and Facility Partnerships.’’ I note that the report focuses on a number of elements that all

of these effective partnerships had. One of those elements was specific legislation. And among the six projects that is studied as an

effective public-private partnership is the Presidio.

I note, for the record, that in the Nation’s Capital, there is an

enormous tract of land owned by the Federal Government, 57 acres

55 acres at the Southeast Federal Center. If this land were in the

hands of private developers, its worth would be off the charts. The

Federal Government has let this land, within 5 minutes of the Capitol, lie fallow.

The Defense Department understood what to do when Crystal

City, a naval operation closed in Arlington. They moved to renovate

the Navy Yard in the District of Columbia, which is right next to

the Southeast Federal Center. And, of course, it is now well along

the way of being rehabilitated.

They are anxious that the Federal Government take this strip of

land and do something with it. If you don’t do something with it,

we are going to sell it to somebody who will because it is one of

the most expensive pieces of land on the East Coast, given its location and its proximity.

The major difficulty has been that Federal agencies want to be

on Constitution Avenue or K Street. And somehow or the other,

OMB and GAO, despite the billions it costs us now to rent for

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space for Federal agencies that don’t have the wherewithal to, in

fact, get agencies to come to this location so close to the Capitol.

One way to utilize this land might be to form some form of Federal public-private partnership like the ones that the GAO has

studied. I welcome the opportunity to hear more about how this

has been done in other jurisdictions.

And I particularly commend your leadership and that of Mr.

Franks for the hearing that you called today.

Thank you, Mr. Chairman.

Mr. HORN. Thank you.

The gentlewoman from the District of Columbia makes a number

of very important points, especially with regard to the capital budget. Mr. Clinger, when he a chaired the Committee on then Government Operations, now Government Reform, he was very interested

that we have held hearings on it. We haven’t forgotten it. This is

a case of getting some people to wind down and others to wind up.

I think some of the testimony this morning will be immensely helpful.

Let me just give you the procedural way this hearing will be conducted. Since we are an investigating Committee of Government

Reform, all witnesses will be sworn in. And the first two panels I

will preside over. The third panel, the tough one, Mr. Franks will

preside over. That’s the General Services Administration, our good

friends. They have testified before us many times, and Mr. Franks

knows more about them than I do. So he will preside over the third

panel.

Also, we would like you to summarize your statements as best

you can. We have your statements. We have read your statements.

If you could do it in 5 or 8 minutes, that would be fine, but that

would leave us more time for a dialog with you. And that is what

we like is to, having read your statement, having heard your summary, we can get down to some questions. Your full statement is

automatically put in the minute we call on you. So we don’t need

a lot of ‘‘without objection, we will do this and that.’’ It is in the

record.

We will ask the first panel that is here, we have Mr. William

Gregory, member, Committee to Assess Techniques for Developing

Maintenance and Repair Budgets for Federal Facilities of the National Research Council. It sort of sounds like a doctoral dissertation. Usually, there is something and a colon that goes on for three

sentences in science. But we are deeply grateful for the work the

Research Council has done.

And a long time friend of both our subcommittees, Mr. Christopher Mihm, the Associate Director of Federal Management and

Workforce Issues, General Government Division, General Accounting Office, part of the legislative branch, does a splendid job. We

always use the GAO to be the principal nonpartisan above-the-battle type of witness to pull all the pieces together. We might well

ask the GAO and others to sit with the third panel. We always ask

them if they have any comments after their formal statements

after they have listened to the testimony.

I think let’s just start with panel one. And you have some assistants with you. Let’s swear them all in at once so that we don’t if

there are others that are going to speak behind you, I am used to

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the Pentagon and bringing a squad or company or maybe a battalion of aides, and I just like to have a mass baptism of swearing

in, and then we get down to business.

So if you will stand and raise your right hands.

[Witnesses sworn.]

Mr. HORN. I note seven members standing, and the clerk will

note that for the record.

We will now begin with Mr. Gregory, the member of the National

Research Council committee that has taken a real look at these

questions on maintenance and repairing of bridges for Federal facilities. So please proceed, Mr. Gregory.

STATEMENTS OF WILLIAM GREGORY, MEMBER, COMMITTEE

TO ASSESS TECHNIQUES FOR DEVELOPING MAINTENANCE

AND REPAIR BUDGETS FOR FEDERAL FACILITIES NATIONAL

RESEARCH COUNCIL; AND J. CHRISTOPHER MIHM, ASSOCIATE DIRECTOR, FEDERAL MANAGEMENT AND WORKFORCE ISSUES, GENERAL ACCOUNTING OFFICE

Mr. GREGORY. Good morning, Chairman Horn and Chairman

Franks and members of the Subcommittee on Government Management, Information, and Technology and the Subcommittee on

Economic Development, Public Building, Hazardous Materials and

Pipeline Transportation.

My name is William L. Gregory. I am manager of environmental

and facilities management at Kennametal, a global provider of industrial tooling systems with annual revenues of nearly $2 billion

per year and 13,000 employees.

At Kennametal, I am responsible for environmental health and

safety, real estate, corporate building operations, strategic facility

planning, and construction management for all major facility

projects on a global basis. I am also past international president of

the International Facility Management Association in which capacity I oversaw IFMA’s operations consisting of 13,000 members and

130 chapters as well as international development and formation

of public alliances.

I am testifying here today in my capacity as a member of the National Research Council appointed committee that produced the report ‘‘Stewardship of Federal Facilities: A Proactive Strategy for

Managing the Nation’s Public Assets.’’ The National Research

Council is the operating agency of the National Academy of

Sciences and the National Academy of Engineering.

Jack E. Buffington, the chairman of the NRC committee sends

his regrets that he is not able to be here today. Ms. Lynda Stanley

of the National Research Council who provided staff support to our

committee is here.

The ‘‘Stewardship of Federal Facilities’’ report addresses a wide

range of management and budgeting issues related to the maintenance and repair of the 500,000 buildings and facilities owned by

the Federal Government worldwide. They represent an investment

of more than $300 billion taxpayer dollars. Upwards of $20 billion

per year is spent to acquire new facilities or substantially renovate

existing ones. Yet, it is difficult, if not impossible, to determine how

much money the Federal Government spends for the maintenance

and repair of these facilities once they are acquired.

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Over the course of the study, our committee came to two overriding conclusions. No. 1, the Federal Government should plan

strategically for the maintenance and repair of its facilities in order

to optimize available resources, to maintain the functionality and

quality of Federal facilities, and to protect the public’s investment.

No. 2, greater accountability for the stewardship or responsible

care of facilities is needed at all levels of the Federal Government.

Accountability includes responsibility for the condition of facilities

and for the allocation, tracking, and effective use of maintenance

and repair funds.

The committee’s specific findings relating to Federal facilitiesmaintenance budget and management issues are extensive. I will

highlight the 7 key findings related to the current state of Federal

facilities and their management to provide the context for the committee’s recommendations.

No. 1, evidence is mounting that the physical condition,

functionality, and quality of Federal facilities continues to deteriorate. Many Federal buildings require substantial repairs to bring

them up to acceptable standards of health, safety, and quality.

No. 2, inadequate funding for facilities maintenance and repair

programs is a persistent, long-standing and well-documented problem.

No. 3, some agencies own and are responsible for more facilities

than they need to support their missions or that they can maintain

with current or projected budgets.

No. 4, the relationship of facilities to agency missions is not recognized adequately in Federal strategic planning and budgeting

processes.

No. 5, there are few rewards or incentives for Federal facilities

program managers to act in a cost-effective fiscally responsible

manner to be innovative or to take risks that might result in better

management practice. In fact, current management, budgeting, and

financial processes have disincentives and institutional barriers to

cost-effective facilities management and maintenance practices.

No. 6, agencies have not been able to make effective use of the

data they gather through condition assessments for timely budget

development or for ongoing management of facilities.

And last, No. 7, the type of information that decisionmakers find

compelling to support maintenance and repair budget requests is

not available.

Public officials and decisionmakers want to know how much

money will be saved in the future by spending money today on

maintenance and repair. That information is not available because

only a limited amount of research has been done to identify effective facility management strategies for achieving cost savings, identifying cost avoidances, and providing safe, healthy productive

work environments.

To address these findings systematically, our committee developed a strategic framework of methods, practices, and strategies

that can lead to a better maintained and better managed inventory

of Federal facilities.

To plan strategically for maintenance and repair and to create

greater accountability for the stewardship of Federal facilities, the

committee made the following 11 recommendations.

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No. 1, facility investment and management should be directly

linked to agency mission. A facility element should be incorporated

into each agency’s strategic plan to link facilities to agency mission

and establish a basis and rationale for maintenance and repair

budget requests.

No. 2, long-term requirements for maintenance and repair expenditures should be reduced by reducing the size of the Federal

facilities portfolio. New construction should be limited. Existing

buildings should be adapted to new uses. And the ownership of

unneeded buildings should be transferred to other public and private organizations. Facilities that are functionally obsolete, are not

needed to support an agency’s mission, are not historically significant, and are not suitable for transfer or adaptive reuse should be

demolished when it is cost effective to do so.

No. 3, the condition assessment programs should be restructured

to focus first on facilities that are critical to an agency’s mission on

life, health, and safety issues, and on building systems that are

most critical to a facility’s performance. This restructuring is needed to optimize available resources, provide timely and accurate

data for formulating maintenance and repair budgets, and provide

critical information for the ongoing management of facilities.

No. 4, the government and private industry should work together

to further develop and integrate technologies for performing automated facility condition assessments and eliminate barriers to their

deployment.

No. 5, the government should support research to develop quantitative data that can be used for planning and implementing cost

effective maintenance and repair programs and strategies. Research data are also needed to better understand the programmatic

impacts of maintenance on mission delivery and on building users’ health, safety, and productivity.

No. 6, the government should encourage accountability for the

stewardship of Federal facilities at all levels. Within Federal agencies, facilities program managers should justify, identify the resources necessary to maintain facilities effectively and should be

held accountable for the use of these resources.

No. 7, at the executive level, an advisory group of senior level

Federal managers and other public sector managers, nonprofit and

private sector representatives, should be established to develop

policies and strategies to foster accountability for the stewardship

of facilities and to allocate resources strategically for their maintenance and repair.

The committee believes such a group is needed to give greater

visibility to the issue of Federal facilities maintenance, management, and plan more strategically. A senior level advisory group

could focus on a wide range of facility management related topics,

some of which are suggested on pages 73 and 74 of this report.

No. 8, the government should adopt more standardized cost accounting techniques and processes to allow for more accurate tracking of maintenance and repair funding requests, allocations, and

expenditures, and reflect the total cost of facilities ownership. The

committee developed an illustrative budget template that differs

from current practices because of it accounts for the full range of

facility management costs in one place.

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No. 9, governmentwide performance measures should be established to evaluate the effectiveness of facilities maintenance and repair programs and expenditures.

No. 10, facility program managers should be empowered to operate in a more businesslike manner. By removing institutional barriers and providing incentives for the cost-effective use of maintenance and repair funds. The carryover of unobligated funds and the

establishment of revolving funds for nonrecurring maintenance

needs should be allowed if they are justified.

And No. 11, and last, the government should provide appropriate

and continuous training for a staff performing condition assessments and/or developing and reviewing maintenance and repair

budgets to foster an informed decisionmaking process.

In summary, the Federal Government has a significant opportunity to strategically redirect Federal facilities management and

maintenance practices for the 21st century. This will require longterm vision, commitment, leadership, and stewardship by decisionmakers and agency managers. The results will be a significant improvement in the quality and performance of Federal facilities,

lower overall maintenance costs, and protection of the public’s investment.

Thank you for the opportunity to review the findings and recommendations of the ‘‘Stewardship of Federal Facilities’’ report. I

will try and answer any questions you may have.

Mr. HORN. Thank you very much.

[NOTE.—The GAO publication, ‘‘Public-Private Partnerships,

Terms Related to Building and Facilities Partnerships,’’ may be

found in subcommittee files.]

[The prepared statement of Mr. Gregory follows:]

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Mr. HORN. We now move to Mr. Mihm. And after he finishes, we

will have questions of panel one.

Mr. Mihm, as I noted earlier, is the Associate Director of Federal

Management Workforce Issues, General Government Division of

the General Accounting Office.

Mr. Mihm.

Mr. MIHM. Thank you, Mr. Horn, Mr. Franks, and members of

the subcommittees. It is a pleasure and an honor to be here today

to discuss the findings of our recent report on public-private partnerships. We did this report at the request of Chairman Horn.

I am fortunate today to be joined by Don Bumgardner, who is the

project manager for our work on partnerships, and in addition, our

colleague, Peter Del Toro, was also instrumental to our work on

this partnership report.

I am also pleased to provide the subcommittee with a Glossary

of Terms, Practices and Techniques related to Buildings and Facility Partnerships that was released earlier this week. We did this,

of course, at the request of you Mr. Horn and Mr. Franks as well.

In the interest of brevity and getting to the discussion as you requested, I will just hit a couple of high points this morning. First,

I would like to note some of the long-standing management weaknesses that are leading agencies to think more strategically when

managing buildings and facilities.

Second, I will discuss one response to those challenges, the public-private partnerships and highlight the common elements of the

six Federal partnerships we examined for our report.

In terms of my first point, the need to think strategically about

the Federal Government’s assets, as you noted in your opening

statement, Mr. Horn, the Federal Government is one of the world’s

largest property owners. Our work and that of others, certainly of

our colleagues here today, over the last several years has identified

several important weaknesses in Federal agencies management

and maintenance of facilities and real property.

At the most fundamental level, as Mr. Horn and Mr. Franks

have noted in their opening statements, is a need to think strategically about the use of Federal assets, Mr. Gregory covered many of

these issues very well, so I won’t reiterate them here.

But just to underscore the point, over half of the government’s

office buildings are roughly 50 years old and were designed and located to meet the needs of an earlier era. Clearly we need to think

more strategically as we approach the 21st century on how we are

going to use public assets. To make better use of their buildings

and facilities, Federal agencies are responding by increasingly

striving to manage them in a more businesslike manner.

I want to now discuss with you my second point by describing

our recent work on partnerships between the Federal Government

and the private, not for profits and other public entities through

contracts or agreements. These arrangements are vehicles that

agencies have used to better manage their assets.

Partnerships typically involve a government agency contracting

with the partner to renovate, construct, operate, maintain, and/or

manage a facility that provides a public service. As you know from

our report, we reviewed six partnerships and found five common

elements that appeared to play key rolls in the effective implemenVerDate 11-MAY-2000 13:40 Mar 29, 2001 Jkt 010199 PO 00000 Frm 00038 Fmt 6602 Sfmt 6601 E:\HEARINGS\62621 pfrm11 PsN: 62621
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tation of those partnerships. These elements are shown on the figure on page 4 of my written statement and are discussed in detail

in our report. I will touch on each of these.

First, a catalyst for change was needed. Fiscal and community

pressures were among the factors that lead agencies to seek better

ways of managing their properties, including considering the use of

partnerships.

For example, these pressures were the catalyst at the two Park

Service projects that we reviewed, including the Presidio, in which

the Park Service entered into partnerships to help finance needed

preservation efforts.

Second, Congress had to provide statutory authority for the partnership to move forward, including allowing the agency to keep the

revenues it received. The legislation was either project specific, as

was the case for the Park Service projects, or broader in scope, as

was the 1991 law that authorized the Department of Veterans Affairs to lease its properties and retain the resulting revenues.

According to building and facility managers and all of the agencies we reviewed, a primary reason for an agency to enter into the

partnerships is the authority to keep for its own use the revenue

that it would receive from the partnership. In short, Federal managers told us they needed to have incentives before they were willing to undertake the risks.

A third common element is that agencies established organizational units and acquired the necessary expertise to work effectively with the private sector. For example, the Department of Veterans Affairs established an Office of Asset and Enterprise Development to promote the partnership concept within VA, to design

and implement public-private partnership projects, and to be a single point of contact with VA’s private sector partners. The office

was staffed with professions experienced in portfolio management,

architecture, civil engineering, and contracting.

The fourth common element is that agencies used business plans

or similar documents to make informed decisions and to protect the

government’s interests. According to Postal Service officials, the development and execution of business plan, which included information about the division of risks and responsibilities between the

Postal Service and its private sector partner, was critical to the

success of implementing its large-scale development projects.

For each of the projects we reviewed, business plans were drafted

jointly between the public and private sector entities to help ensure

the close involvement of both parties in the design and implementation of the project. I would just add that this close involvement

in designing these business plans underscores the importance of

the point that I was making earlier of making sure that agencies

have the human capital and the knowledge base so that they can

deal effectively with the private sector.

Finally, a fifth common element was that support for project

stakeholders was an important element in developing the partnerships. In all of the projects we reviewed, agencies had to obtain the

support of the local community and other stakeholders to create

the partnership.

For example, in both of the Park Service projects we reviewed,

community leaders who were worried about preserving historic

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structures without overcommercializing them, became important

and active stakeholders for those projects.

In conclusion, Congress and the Federal agencies need to continue to work together to find approaches that will encourage prudent management of Federal buildings and facilities. When accompanied by sound financial management and appropriate congressional oversight, public-private partnerships are one approach to

facilitate effective building and facility management.

The set of common elements that we identified appear to be key

to the implementation of the six partnerships we examined. Of particular importance to us is the critical roll that Congress played in

providing the authority for—and continuing its oversight of—these

projects.

This concludes my statement, and I would be happy to answer

any questions that the subcommittee may have.

Mr. HORN. I thank the gentleman.

[The prepared statement of Mr. Mihm follows:]

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Mr. HORN. Now we will have 5 minutes per person alternating

between parties, and we will stick to that very strictly. If you can

get the question in before the red light goes on, the answer can

take longer. But we will make a second round if we need to. So

don’t feel you are being rushed, but this gives everybody a chance

to participate.

We will start with Mr. Franks’ 5 minutes for questioning the witnesses.

Mr. FRANKS. Thank you, Mr. Chairman.

Mr. Gregory, how would you impress upon building managers

the importance of not deferring scheduled maintenance.

Mr. GREGORY. Not deferring scheduled maintenance? The deferring of scheduled maintenance catches up with you. It ends up

being a very large issue that soon becomes insurmountable. That

is what we heard many times from the people that were testifying

before our committee. They had a large backlog that seemed to be

insurmountable. To encourage someone not to do that suggests it

becomes too expensive to attack all at once. It grows to something

that eventually starts eating away at the facility. There are no

positive benefits to allow that to happen.

Mr. FRANKS. I think you’re absolutely right. But I guess I’m looking for what kind of motivation can you inject into building managers to convince them of the needs that you just very confidently

spoke to.

Mr. GREGORY. The issues that we talked about in our committee

were some of the disincentives. These are the things that are common at the Federal facilities management level. As they look at

some of their issues, they have little incentive to improve because

of the way the budget dollars are determined.

Mr. FRANKS. I don’t mean to interrupt again, but how can we

provide them the incentive that you say is—— Mr. GREGORY. To give them incentives in the budget, give them

more freedom in the budget to allow their budget dollars to be used

more effectively. For an example, savings end up being a negative.

Savings are subdivisions from the budget in the next year. They

need more ability to handle those kinds of issues.

Mr. FRANKS. What kind of information do decisionmakers find

compelling as it relates to increased building maintenance and repair budgets?

Mr. GREGORY. The facility is a if you look at facilities as a holistic approach, facilities in fact the real definition of facility management is integration of people, process, and place. The process is the

business that happens there.

When you look at it from a holistic point, there are huge savings

to a quality facility management program impacting the people.

The people in that work environment are subjected by the work environment that they are in, either positively or negatively. The real

savings in all of this are productivity savings by the work force and

the health benefits that accrue by working in a healthy environment. These are very significant issues that can make the facility

work better.

Those, to me, are the more compelling reasons that a senior level

agency manager should be focused on facility and facility issues. It

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ing, it is what more is happening in the overall facility that impacts productivity. The people cost on a life-cycle basis is almost 80

percent of the cost of running a building.

Mr. FRANKS. Thank you, Mr. Chairman.

Mr. HORN. I thank the chairman. I now call on Mr. Turner, the

gentleman from Texas, and the ranking member on the Subcommittee on Government Management, Information, and Technology for 5 minutes of questioning.

Mr. TURNER. Thank you, Mr. Chairman.

I would like to ask each of you to comment on and share with

us some examples where Federal agencies have utilized public-private partnerships successfully to give us some feel for, you know,

where we are, seeing some progress, and perhaps even highlight

the agencies that have done the best job in utilizing some of the

tools that the Congress has given them, and then beyond that offer

your suggestions for what new legislation we might need to give

flexibility to agencies to be able to move forward with some of these

new innovative approaches.

Mr. GREGORY. I would like to defer to Mr. Mihm. Our report

dealt with the public-private partnerships as a tool, and we didn’t

get into the specifics. But I think you can address that.

Mr. MIHM. Yes, sir. I guess a good starting point would be to look

at the success stories experienced by the six partnerships that we

profiled. We profiled two from the National Park Service, two from

Department of Veterans Affairs, and two from the Postal Service,

including one from Veterans Affairs outside Houston, which I understand is near and dear to your heart, sir.

The focus was not to audit the results of these cases but to try

and learn from their successes. We spoke with numerous agency officials and private-sector partners, to seek whether or not there

were any negative feedback from the public on these projects. We

found that, universally, there were positive responses.

And in some cases, this has been fairly well documented. In the

cases, for example, of the Park Service partnerships, those out at

the Presidio and Fort Mason, one of the major advantages that

they got out of that was that the restoration and preservation of

some historically very important property. The valuable property

near Golden Gate Bridge could easily imagine could have gone a

different route if it had been just exclusively developed for commercial purposes. So, the prevention of historic property was certainly

one major advantage to these partnership arrangements.

In terms of the Postal Service, they currently recover about $16.5

million a year from the two partnerships we received. This revenue

is returned to their general operating fund.

In terms of the VA partnerships, the money is earmarked to

serve veterans. So it goes into mission-related efforts that assist

the veterans.

In all of the partnerships that we looked at, there seem to be

these common elements that were keys to their success of these

partnerships as well as some advantages from both the Federal

and the partnership standpoint and the public and the private

partners standpoint that these partnerships gave.

Now in terms of the second half of your question, dealing with

some of the statutory authorities on this, there are a number of

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things that clearly can be done; first, we have found in each of the

partnerships there is a need to give incentives to the agencies to

participate in the partnership.

The single most overriding incentive that we heard from all the

asset managers that we talked to was to allow them to keep the

proceeds from the partnership or at least a portion of those proceeds. In specific cases that can be earmarked for certain projects

within the agency. But if they have to return all revenues earned

to the Treasury, there is very little incentive for them to enter into

these ventures.

I think, taking a look more broadly at the enabling legislation for

the Veterans Affairs, which was the Enhanced Use Leases is what

the partnership approach at Veterans Affairs is called, and which

Congress laid out expectations for consultation with stakeholders

and expectations for congressional review of the projects before

they received final approval. I think that law and the incentives together provide good framework for where to go in terms of statutory changes.

Mr. TURNER. Give me a good example of let’s take maybe the example of the VA. Tell us about the legal relationship between the

government and the private partner and how that is established.

Mr. MIHM. My colleague Don Bumgardner did most of the work

at the VA, and I am going to ask him to speak to that.

Mr. BUMGARDNER. In terms of the VA specifically, the key part

of allowing them to enter into partnership arrangements was the

1991 enhanced-use leasing law. Without that type of enabling law,

there is no incentive for any asset manager in any Federal agency

to take on the risk of a public-private partnership.

The legal relationship is outlined pretty much in our report and,

as Chris stated, the partnership has to have the approval of the

Secretary, the Congress. A large part of the legal relationship revolves around the detailed business plans that layout both the public and private sector’s responsibilities, and assure that the public’s

interests are protected. But, really, the overarching thing here is

the law itself.

Mr. TURNER. Thank you, Mr. Chairman.

Mr. GREGORY. I would like to add a couple of comments.

Mr. HORN. Please. Go ahead.

Mr. GREGORY. One of the things we talked about in our committee was the problem of confusing expense budgets with capital

budgets. We talked about a separation of the two items that more

clearly defines and helps to identify the cost of running a facility

by removing the capital portion.

The other concern that we talked about is that partnerships are

very good. We hear a lot today about business like. That is very

good. The proceeds that go back into the agency budget, is a concern that maybe they support the program and still don’t get to the

facilities’ people that need those dollars. That is a cautionary note.

Mr. HORN. Let me pursue what Mr. Frank started here, and

what some of you have responded to. I would sort of just like in

one place Mr. Mihm, if you could sum up how the executive branch

of the Federal Government funds the long-term maintenance for

particular buildings that it operates. And is this mostly administered by the General Services Administration? What does OMB do

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when they’re looking at budgets of a particular agency? Do they

just leave it for a reprogramming purpose, or how does this thing

work across the board in general?

Mr. MIHM. The short answer, sir, is poorly.

Mr. HORN. What’s the process right now?

Mr. MIHM. The process is it comes in as part of the standard

budget process through that agencies would submit through OMB.

And then subsequent appropriations up here on the Hill. There is

not a separate or necessarily focused attention to capital issues. In

fact, the budget process has been seen pretty widely as creating a

bias against these long-term spending issues. So, they have a tendency to fall out or not get the full weight because long-term benefits are not considered with short-term costs.

Mr. HORN. Is there a percentage that they use as a rule of thumb

as to the amount of money that is available for deferred maintenance and all of that?

Mr. MIHM. If there is, I am not aware of it. I have heard numbers of 2 to 4 percent.

Mr. GREGORY. The earlier report that was done, the cost of

ownership—— Mr. HORN. Do you want to put the microphone up to you.

Mr. GREGORY. The earlier report that was done prior to our report dealt with the cost of ownership and strongly recommended a

2 to 4 percent of replacement cost for buildings. All of the testimony or presentations that we heard in our committee, everyone

was under 2 percent. No one was in the 2 to 4 percent range. They

were not able to get there.

Mr. HORN. What would the private sector or the nonprofit sector,

if its universities with vast buildings and so forth, put aside for

maintenance?

Mr. GREGORY. That is a difficult question to answer, because of

the the different ways that people look at facilities. The earlier report looked at the government facilities in terms of replacement

cost in arriving at what is a nominal number. When trying to compare that with business or private industry, numbers were sometimes in excess of 4 percent. But, clearly, they were upwards of the

4 percent range.

Mr. HORN. Is there any role the executive branch has pursued

to identify certain structures by some coding that where more

maintenance would be required in terms of a long-term basis, because we know a lot of schlock buildings have been built in this

city, among others, because for the last 30 years, you could go

down and get an agency to say, yeah, we will move into your building. And they then go to the bank and get a mortgage and up goes

this thing, which probably is depreciated over 20 years or so, and

they might well stay there for 80 years.

Now what do we know about how you evaluate that if you are

trying to put a budget together and you have got maybe 150 buildings or facilities of one sort or the other? I mean, is there any part

of OMB’s, and this I am asking both of you here, is does OMB have

any formulas in this area? Are there any common sense rule of

thumb.

Mr. GREGORY. We were very impressed at the committee level

with the capital planning guide as part of the OMB. It talked about

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a very good process. It was a draft at the time. I don’t know that

it’s even been finalized.

Mr. MIHM. It is out.

Mr. GREGORY. It talked very specifically about planning, budgeting procurement, management, use, and ultimately disposal. It’s

the total life cycle consideration. As you connect mission and facilities, decisions start to be made easily as you better understand the

agency’s mission. Facilities programs that wrap around the business part enable a proper facility for the business and the mission.

Mr. HORN. Mr. Mihm, I have got 23 seconds to go here. Is there

an identification on that OMB document you are saying now that

is policy?

Mr. MIHM. There is a capital programming guide that is out from

OMB. It was based on some of the work that we did looking at capital planning and best practices.

Mr. HORN. How thick is the guide?

Mr. MIHM. Not an inch.

Mr. HORN. About 100 pages, 200?

Mr. MIHM. Yes, 100 pages.

Mr. HORN. Without objection, we will put as much of it as we can

in the record.

Mr. MIHM. We will get you that as well as our best practice

guide.

Mr. HORN. Please. That would be very helpful. Well, my time is

up. Let me now go to Mrs. Norton for 5 minutes of questioning.

Ms. NORTON. Thank you, Mr. Chairman.

I have a question about how to encourage essentially more public-private partnerships, how we get there from here. First let me

ask you whether or not how important you think the statutory

basis you describe as one of the key elements in all of these

projects has been for the development of these projects?

Mr. MIHM. It was Ms. Norton, it was absolutely critical. None of

the projects could proceed without a statutory basis. Now, some of

this was project specific. In other cases, for example, the VA, and

even more broadly with the Postal Service and the creation of the

Postal Service, it was more general enabling legislation that allowed them to do it. But in all cases, they had to have a statutory

basis in order to move forward with the partnership.

In terms more broadly, though, the question that you are asking

about, the incentives, there are actually two areas that I think that

we can really put some effort into and incentivize agencies to start

thinking strategically.

First is continuing congressional oversight. In very pointed questions from the Congress to the agency that has jurisdiction over the

property or buildings that you’re interested in is, how are you

thinking about this strategically? How does this fit or not fit in

with what you are trying to achieve. Could it fit in with what

you’re trying to achieve?

I think the case study of the Park Service and the growing attention that the Park Service is giving to the issue of deferred maintenance, certainly indicate that they care very deeply about it. But

I think Congress, and the persistent questioning that Park Service

officials they have gotten from Congress in recent years, and I

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know we have done quite a bit of work on that, has helped to bring

that even closer to the front of their minds.

I think the second thing that needs to be done is to create incentive. This is something that Congress has already done by passing

the Government Performance and Results Act requires agencies to,

in their annual performance plans, think about all the various resources which includes their physical assets and how the assets are

being used to achieve their goals.

So it requires some very reasonable questioning on the part of

Congress. When we’re assessing those plans on the behalf of Congress, we will ask how agencies are using their assets and help determine if they are using them strategically.

So those two areas, questions from Congress, and certainly our

continuing work I think will help to elevate this in a general sense

on the agenda for agencies.

Ms. NORTON. I note that there are some agencies that have authority to enter into partnerships to do innovative leasing arrangements. The DOD has it, VA has it, Park Service has it. Now I can

only what I can charitably call on anomaly, however, in the Federal

structure because there is one agency that has real estate responsibility, that is GSA, doesn’t have it.

So here you have Defense, VA, Park Service, you have other missions who can enter into partnerships and proceed some of the way,

even before one even gets to the statutory point, and may not need

the statutory point in some instances, and the GSA, which has control of the most Federal land, most Federal buildings, is left there

without any authority to do any of this. I think that’s part of responsibility for the horrible waste we see down in Southeast Federal Centers.

They actually had a plan, had a very good plan, that there would

have been a mall there that would have encouraged Federal employees to come there, and that hadn’t done it, and that hasn’t

brought agencies there. I wonder if you think the GSA ought to

have some of the authority that DOD, VA and Park Service already

have?

Mr. MIHM. We haven’t looked at that directly, so I am going to

have to give you an, admittedly, a bit of a roundabout answer on

this, and that is that I note there’s a lot of effort that’s going on

in GSA now. And I think the statement for the record from OMB

alluded to some of the legislative package that’s being put together

that would amend statutory requirements for this disposal of property and liberalize the authority to engage into partnerships.

I think one of the problems encountered government-wide, and

certainly this is shared at GSA, is the culture which in the past

has not viewed Federal property as an asset. They have viewed

them basically as sunken costs. For example, we may view an office

building simply as the building we work in but not something that

can be used to further the mission of the organization.

And so this is why, when I mentioned one of the common elements, is that, each of the partnerships we looked at, the Federal

agency found it necessary to establish a new organizational unit

and bring in new expertise that was used to and comfortable in

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sets. And that’s something that capacity is needed at GSA and elsewhere on that.

Ms. NORTON. Imagine GSA not even having the authority to help

agencies use assets, which is part of their bottom-line responsibility

in very many ways. So you’d think the GSA should have some authority of the kind DOD and VA and Park Service have now.

Mr. MIHM. Well, we haven’t looked at it directly, but it’s something that I know that they are working on. If Congress views it

as making sense for others, it’s certainly worthy to explore for

GSA, the government’s largest landlord.

Ms. NORTON. Thank you. Thank you, Mr. Chairman.

Mr. HORN. I thank you.

Let me just round out some of this testimony on the budget process and the training process for property managers, if any, and I’d

be curious what both of your studies tell us in terms of the degree

to which we have a program somewhere in the executive branch

that we can upgrade the understanding and provide the skills, if

property managers don’t have those skills.

What did you find as you looked at this question? I mean, are

there certain essential skills that are needed in a property manager to do the kind of things you are recommending be done and

you have already seen done in some areas?

So, Mr. Mihm who’d like to jump at this?

Mr. GREGORY. What we experienced at the committee level is the

facilities people know the job. They know what they need to do.

They are good, well-intentioned people. They find their hands tied

when they come up with suggestions for savings or implement programs that reduce their costs. It’s not friendly to the budgeting

process. That’s the one issue.

Mr. HORN. Well, is that a matter of they’re afraid to make the

money or they feel they have to turn it back or what is it?

Mr. GREGORY. My understanding, sir, is they are driven by the

budget process, that they have to turn it back, spend it or lose it,

and that maybe gets into an issue of not spending it as well as you

would like to. If you could pool money, if you had a revolving account where funds could be pooled and used for some of these nonroutine maintenance things that happen, that would really allow

them to manage their facilities better.

The overall thought was that the facilities maintenance backlog

and facilities issues in general could be much better handled if

there was relief in the budget area of how budgets and dollars are

allocated.

Mr. HORN. What you are talking about? Can they carry it forward into a new fiscal year?

Mr. GREGORY. Right. That’s one of the issues that we talked

about.

Mr. HORN. And you would favor that, obviously, because it gives

flexibility?

Mr. GREGORY. Some type of flexibility, but there is a caveat to

that, in not being able to carry funds forward or use funds differently. But, more importantly, we identified the ability to have a

cost system that better identifies the true cost of facility management, and that’s one of the things that’s very obscure in a number

of presentations that we heard.

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Mr. HORN. Mr. Mihm.

Mr. MIHM. We found in a couple of various Mr. Chairman, first,

is that there was a need for real leadership. I know it’s easy to say

that, but in the projects that we reviewed, often they didn’t get

going or weren’t even conceived until a new woman or man came

in and said, look, you know, we are going to do things differently

here. The old ways of doing business just aren’t going to work anymore.

The Postal Service, for example, had the authority to enter into

partnerships for a number of years until they got some new leadership, not at the very top but in terms of managing their assets.

This manager began to think differently about how we can do that.

So leadership is key.

Second, there is clearly the need for skills and basic business

management, as opposed to traditional property management. This

includes skills like how to negotiate with the private sector, draw

up a business plan, and monitor the execution of the business plan.

I mentioned in my opening statement about the importance of

how in the partnerships that we reviewed it wasn’t the normal contracting procedures where the government figures out everything

that it wants, sends out a request for proposals, and then accepts

the lowest bid. This was something where the public and private

sectors engage in a partnership. In this partnership there’s an

awful lot of give and take that goes on. These business plans are

jointly developed, and that’s a different set of skills than you routinely find in Federal asset management offices.

Mr. HORN. Well, on this point and the management of assets, to

what could be done on, one, the strategic plan that we now require

and, two, just in the general framework of the Government Performance and Results Act, and what is your understanding if, let’s

say the next round we got this pretty pitiful last round from most

agencies, hardly any that were worth reading should that be

worked in as part of it? Does it need a change in the law to assure

that it’s worked in or is it simply a matter of getting OMB to provide guidelines or Congress in some way to provide guidelines?

What’s your reaction on that?

Mr. MIHM. I think this is an area where we have the statutory

basis. The law is pretty clear about what Congress was expecting

in terms of the level of detail in the annual performance plans

versus the strategic plans. And OMB has recently, with the capital

programming guide and the revisions to A–11, which is the circular

that governs the preparation of the President’s budget, given agencies adequate guidance.

Nevertheless, when we reviewed both the fiscal year 1999 plans

and the 2000 plans, the ones that came up here to Congress in

February, one of the consistent failures that we saw in the plans

was a lack of attention to how resources in general, whether it be

information technology, budgeting, or assets, will be used to

achieve the goals of the organization. This is just a consistent

theme that we have seen.

Even when we knew it was separate budget documents, that an

organization was going to be undertaking a large capital project,

you wouldn’t see it reflected in the annual performance plan.

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At GAO one way that we’re trying to contribute, is by consistently sending these messages back to the agencies, in both our

audit reports and in the guidance that we issue. I know in the evaluations that congressional staff was looking at of the annual performance plans this year, that was one of the factors that they

were looking at as well.

I think it’s just a matter more and more of agencies kind of getting the message and that the fiscal pressures, the pressures that

are coming from Congress, the pressures that are coming from

OMB, I think we will see more progress over time on this.

Mr. HORN. Mr. Turner, do you have some more questions you’d

like to ask? How about Ms. Norton? Chairman Franks, any more?

Well, anything else you’d like to add?

We’re going to round out panel one, and if there is something we

have missed that you’d like to make an extra comment on, feel free.

Mr. GREGORY. Just in conclusion, that the title of our report, the ‘‘Stewardship of Federal Facilities,’’ applies to all levels. There has

to be a better understanding of what facilities means to the mission

of the agency. We believe that if our report is embraced with the

key items and serving as a guidance document will be a great first

step.

Mr. HORN. Now, have you and the OMB sat down to discuss that

report?

Ms. STANLEY. No, we haven’t. I mean, OMB briefed the committee during their deliberations, but there hasn’t been followup

action.

Mr. HORN. Is there going to be followup with them?

Ms. STANLEY. There’s nothing planned. We’d be very glad to do

that.

Mr. HORN. Well, I was going to say, we ought to get a letter one

way or the other out of us and suggesting they sit down and get

the ideas in their bloodstream, as well as your bloodstream and

ours and GAO’s. So, well, we will work that out with staff and your

own staff.

Well, we thank you both for very worthwhile studies and for giving us that in-depth and overall view that is always needed if

something good is going to happen. So, thank you very much for

the work, and thank you very much for coming, presenting this to

us. We appreciate it.

The next panel is panel two, Mr. Randall Yim, the Deputy Under

Secretary of Defense for Installations of the Department of Defense; Mr. Thomas Garthwaite, Deputy Under Secretary for Health

of the Department of Veterans Affairs, and Mr. Garthwaite will be

accompanied by Charles Yarbrough, the Chief Facilities Management Officer, Mr. D. Mark Catlett, the Deputy Under Secretary for

Budget; and the next witness will be Mr. Denis Galvin, Deputy Director of National Parks Service; and Mr. Rudolph Umscheid, vice

president, facilities, U.S. Postal Service.

OK. Gentlemen, I think you were in the room, and your testimony will automatically go in once we call on you, and we need to

swear you in. So if you’d stand, raise your right hands, and those

behind you that are perhaps going to testify, please get all of them

up. We have seven possible witnesses.

[Witnesses affirmed.]

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Mr. HORN. OK. The clerk will note that all seven witnesses took

the oath and affirmed it.

We will now start with Mr. Randall Yim, Deputy Under Secretary of Defense for Installations.

You got the, I think, the approach earlier. Your statements were

all fine. We have all read them; staff read them. We would now

like a summary, if possible, in 5 minutes. If you need to go to 6

or 8, I’m not going to be offended, especially if you spent a lot of

work on it. But, basically, I go by the rule that if they can’t explain

something in two pages, they don’t understand it. So I think you

can do that.

But go ahead, Mr. Yim.

STATEMENTS OF RANDALL YIM, ACTING DEPUTY UNDER SECRETARY OF DEFENSE FOR INSTALLATIONS, DEPARTMENT

OF DEFENSE; DENIS GALVIN, DEPUTY DIRECTOR, NATIONAL

PARK SERVICE, DEPARTMENT OF THE INTERIOR; THOMAS

GARTHWAITE, DEPUTY UNDER SECRETARY FOR HEALTH,

DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY

CHARLES YARBROUGH, CHIEF FACILITIES MANAGEMENT

OFFICER, AND D. MARK CATLETT, DEPUTY UNDER SECRETARY FOR BUDGET; AND RUDOLPH UMSCHEID, VICE

PRESIDENT, FACILITIES, U.S. POSTAL SERVICE

Mr. YIM. Thank you, Chairman Horn and Chairman Franks and

distinguished members of these two subcommittees. I am very

pleased to be here today to discuss the Department of Defense initiatives for reshaping our installation infrastructure to support our

changing military needs.

Secretary Cohen recently testified before the House Armed Services Committee about the important role that our installations play

in our defense missions. Installations are platforms from which diverse strategies and missions are executed. They contain facilities

and equipment for training and mobilizing our forces and their

communities where our people live and work. Our installation programs must enhance our readiness, our mission accomplishment

and maintain a high quality of life.

As most of you know, our military mission needs have changed.

We must be vigilant to assure that our installation structure similarly changes to match these new mission requirements. To this

end, we are embarking on a series of interrelated initiatives to reshape our installation infrastructure. These include privatization of

housing and utilities, enhanced outleasing of underutilized real

property and facilities, competitive sourcing of noninherently governmental functions, certain aspects of base operations, for example, demolition of excess facilities, and construction supporting improved standards and conditions for critical facilities such as our

barracks and dormitories. And let me emphasize this, and, most

importantly, authorization for two additional rounds for base closure and realignment.

We need legislative authority for additional rounds of BRAC now.

Additional BRAC has proven to be the only fair, open and realistic

way that the Department of Defense can align its base structure

to support the military’s changing mission requirements and support operations.

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We are actively seeking from Congress two additional BRAC

rounds in 2001 and 2005 to reduce what we estimate to be a 23

percent excess in our infrastructure requirements. We estimate,

and the GAO agrees, that we may save approximately $3.6 billion

per year through additional BRAC, and we sorely need to use these

funds on our enduring facilities to support high-priority programs

such as readiness and modernization, quality of life, and all of the

above.

BRAC, however, is only one initiative in a multipart strategy to

reshape the DOD base structure. I spoke earlier about some. Let

me highlight a few of these.

First, on quality of life and housing in particular. When we embark on our various initiatives to reshape our installation’s infrastructure, we are not only interested in saving costs but we are

dedicated to maintaining mission readiness and protection of the

people that have served our country. So quality of life and housing

is a very important program.

Last year, we established clear goals for improving the quality of

our housing. We directed the services to program resources to

eliminate the worst of the barrack conditions our single service

members endure, that’s permanent party, gang latrine barracks, no

later than fiscal year 2008 and directed the services to continue to

implement the one plus one building construction standard.

Based on established goals the service have also developed plans

to eliminate our inventory of inadequate family housing by 2010.

Our housing privatization initiatives have progressed over the

last years. We’ve devolved more execution authority to the services,

while maintaining oversight within the Department. I am committed to making this program work and to move the projects to

completion. They provide very sorely needed housing for our service

members and our families.

Next, is leasing of our facilities. The Department is considering

how to better use our fallow assets, both land and buildings. Our

challenge is to determine if we can realize the unused economic

value of a property at a given installation to fund facility maintenance and revitalization. We are recommending changes to our current leasing authority, Section 2667, Title 10, of the United States

Code, that we believe could result in better economic use of our assets, additional revenues, as well as cost avoidance scenarios such

as military construction.

This initiative could result in upwards of $100–$150 million of

annual revenue by the end of fiscal year 2005, but this is very important. We are going to pursue this, but let me again emphasize

that $150 million compared to $3.6 billion of savings from BRAC

is no substitute for BRAC.

Before closing, let me address briefly two other areas.

The first is real property maintenance. For fiscal year 2000, we

are requesting $5.2 billion for real property maintenance, which is

a 7 percent increase over last year’s program. Keeping our facilities

in operational and safe condition is an absolute high priority for

the Department. As you know, lack of proper maintenance, as other

witnesses have testified previously, and timely repairs leads to facilities’ failure that will jeopardize our missions and our readiness.

And we have also emphasized disposing or demolishing facilities

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that we no longer can afford to maintain, that are excess to our

needs. And, again, closing bases will free up additional real property and maintenance funds.

Second, let me voice my support for OMB’s comments that our

proposed legislative changes on leasing, coupled with those proposed by GSA and VA, will enhance the Federal assets across the

Federal Government. This is clearly a move in the right direction.

As your subcommittees consider these changes, let me add, however, one note of caution. The Department of Defense currently has

authority to implement enhanced outleasing that is in part broader

than that being considered by GSA and OMB, and I would not

want DOD to take a step backward as the rest of the Federal Government moves forward in this important area.

Chairman Horn, Chairman Franks, thank you and committee

members, thank you for this opportunity to present the Department’s programs, and I’ll be pleased to answer any questions.

Mr. HORN. Thank you.

[The prepared statement of Mr. Yim follows:]

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Mr. HORN. The next witness is Dr. Thomas Garthwaite, the Deputy Under Secretary for Health, Department of Veterans Affairs.

Dr. GARTHWAITE. Mr. Chairman and members of the subcommittees, the Department of Veterans Affairs is the second largest of

the 14 cabinet departments and operates nationwide programs of

health care, assistance services and cemeteries for veterans.

The Department’s capital portfolio currently consists of over

22,000 acres of land, 5,300 buildings, to the total of 140 million

square feet of owned and leased space. This inventory is spread

over nearly 1,200 locations in all 50 States, the District of Columbia, Puerto Rico, Guam, and Samoa. A large percentage of the Department’s capital assets are devoted to providing health care to

the Nation’s veterans. In this portfolio we have 1,700 historic buildings which require special consideration and treatment.

A significant discordance between our actual capital assets and

our capital asset needs has developed in large part due to the ongoing massive transformation of VA health care that began in 1995.

As part of this transformation, we have closed more than 52 percent of our hospital beds. We’ve integrated the management and

services of 48 facilities into 23 systems of care and have opened or

are in the process of opening 272 new community-based outpatient

clinics, some built, many leased.

At least three factors contribute to the discordance between our

current asset array and our needs. First, the rapid changes in the

delivery of health care which require radically different physical

structures and significantly less space. The rate of change in medical practice is far faster than the capital asset cycle.

Second, the location of facilities is often outside the veteran population centers which leads to inconvenience for access for many

veterans.

And third, the age of many of our facilities requires constant investment to maintain function and is associated with intrinsic barriers to efficiency.

To align our physical infrastructure to more effectively support

our current needs, we are in the process of implementing a new

strategic planning process beginning at the local level. Each of our

22 geographic service areas will establish a government community

committee, including membership representing veterans, the State,

our academic and business affiliates and our local leaders. The

committee will develop plans aimed at realigning any imbalance

between VA capital assets and veteran needs.

The process will emphasize the use of data as the basis of recommendations and will encourage the suggestion of alternative

ways to deliver service, enhance access and improve the quality of

care.

Following such strategic review, any proposal for capital investments are documented in a capital asset plan for which we currently follow the principles of the OMB Capital Programming

Guide. Proposed investments are reviewed by the VA Capital Investment Board in Washington to assess their linkage to strategic

planning budget and performance goals. The board then provides

an analysis to the Secretary about each proposal’s viability for inclusion in our VA capital plan and our request of the VA budget

to OMB.

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While the Department uses all of the traditional legal authorities

available to Federal agencies for managing and disposing of its assets, two unique efforts may be of interest to the committees. The

first has already been described in some detail by the first panel,

and that is our enhanced use leasing program. It is unique among

Federal agencies and has recently been recognized by the GAO as

an example of a key element in an efficient and effective property

management program.

The Department has used this authority to consolidate operations and dispose of unneeded facilities, to co-locate Veterans Administration office space with VA medical center space, to obtain

child care services for employees, to expand parking facilities for

veterans and for employees, and to redirect operational funds from

managing golf courses into direct medical care. In doing so, these

leases have achieved significant cost savings, have enhanced employee recruitment, have added substantial private investment to

the Department’s capital assets, have provided new long-term

sources of revenue and have created jobs and tax revenues for local

economies. My full statement provides examples of our use of this

authority.

Finally, the Department is also proposing a pilot program to encourage and streamline the conversion of the value in the properties we no longer need into service for veterans. This proposal

would allow the VA to dispose of unneeded properties, including

land structures or equipment associated with those properties by

sale, transfer or exchange, and to reinvest the bulk of the proceeds

to support its health care program. The pilot would be restricted

to 30 dispositions over its 5-year life.

Mr. Chairman, the turmoil on health care you read about daily

is all about a quest to define and provide value. Similarly, our capital asset program seeks value for veterans and for taxpayers. We

believe we are making progress, but would welcome creative new

options and incentives. We’d be pleased to answer any questions

you and the committee may have.

Mr. HORN. Thank you very much for being so punctual. You have

2 seconds left.

[The prepared statement of Dr. Garthwaite follows:]

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Mr. HORN. Mr. Denis Galvin, the Deputy Director of National

Park Service, Department of the Interior.

Mr. GALVIN. Thank you, Mr. Chairman. Since its establishment

in 1916, the National Park System has grown to 80 million acres

of land and 378 national parks. There are 16,000 structures in

those parks. Some have none, and some have thousands. We have

building capacity frequently that exceeds the requirement for park

operations. These are frequently historic buildings. We have an obligation to try and preserve them.

We have a certain amount of authority to enter into agreements

with private or other government entities to help pay for rehabilitation, maintenance and operation of structures through leasing,

cooperative agreements and partnerships. The GAO report previously cited mentions our experience in San Francisco at Fort

Mason and the Presidio.

There, a good real estate market has allowed us to enter into

some successful partnerships with nonprofits and for-profits to both

rehabilitate and operate rather extensive structures that result in

a savings to the government. Fort Mason was part of the Presidio

turned over to the Park Service immediately upon the creation of

Golden Gate. That was in the early 1970’s. In an effort to reduce

the rather significant operating costs associated with the major

pier structures on San Francisco Harbor, the then superintendent

made approaches to nonprofit groups to provide cultural educational and recreational activities to the park. Ultimately, that became the Fort Mason Foundation which represents a number of

nonprofit groups that lease space at the site. Since 1972, the National Park Service has spent about $3.5 million dollars on the rehabilitation while the Fort Mason Foundation

has spent $13 million. Operating expenses for the Park Service are

about $250,000 a year; for the foundation, about $2.3 million. A

more recent example cited in the GAO report was the leasing of the

old Letterman Hospital, again at the Presidio within Golden Gate

National Recreation Area. That complex was transferred to us in

1994.

Legislation enacted in 1993 by the Congress, specifically aimed

at the Presidio, allowed us to lease the Letterman Complex.

Through a competitive procedure, we selected the Thoreau Center

Partners, a for-profit real estate partnership, to lease and rehabilitate the building. That has been successful. The partnership generates $170,000 thousand annually in rents and fees, and is able

to pay off a commercial loan through subtenant rents.

There are other examples throughout the system where we have

avoided costs, at least, in terms of managing properties within the

national park system. The Boston National Historical Park was

created to allow cooperative agreements with a series of owners of

undeniably nationally significant historic buildings. Faneuil Hall,

which is owned by the city of Boston, still maintains a commercial

operation on the first floor, but through a cooperative agreement

we interpret it to the public.

Similarly, a series of missions at San Antonio remain part of the

Archdiocese of San Antonio, but through agreements with the archdiocese we spend money on preservation techniques there and also

interpret them to the public.

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Some of our attempts to do this have not been successful. You

mentioned the south side of Ellis Island where we’ve three times

tried to find private interests to occupy and rehabilitate those

buildings. Thus far we have been unsuccessful. We are trying a

fourth time.

Also, at Sandy Hook, which is part of Gateway National Recreation Area, we have tried a number of times to find tenants for a

series of historic buildings there. We currently have a contract for

a new market analysis and seem to be generating considerable interest in a mixed-use approach to that complex.

We have a number of authorities that allow us to do this, and

I just jotted them down here. Some of them are specific to parks

and some of them are general. We have a general authority to accept donations. We have general authority to enter into cooperative

agreements and some specific ones. Concessions contracts are important. In many instances, the concessions that provide public

services in parks, restaurants, lodging, are in government buildings

but under contract to the government.

We have authority to lease historic buildings under the National

Historic Preservation Act. We have some general leasing authority,

just passed by Congress, that liberalizes our ability to lease nonhistoric buildings, and then as I mentioned there are specific provisions in individual park legislation.

Another interaction we have with Federal property laws is the

Federal Lands to Parks program which allows localities to accept

Federal surplus property to turn into parks and open space in perpetuity. Since 1949 the National Park Service has deeded more

than 1,300 properties totaling approximately 144,000 acres to State

and local governments.

That concludes my summary, Mr. Chairman.

[The prepared statement of Mr. Galvin follows:]

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Mr. HORN. Thank you very much. The last witness on this panel

is Mr. Rudolph Umscheid, vice president of facilities, U.S. Postal

Service. Welcome.

Mr. UMSCHEID. Good morning, Mr. Chairman and members of

the subcommittee. I’m Rudy Umscheid, and I’m responsible for

managing the design and construction and all real estate activities

of the U.S. Postal Service. Joining me today is Mr. David Eales

who is the manager of Realty Asset Management Division of our

facilities organization; more simply put, he is responsible for promoting the public-private partnership endeavors for the disposition

of underutilized or excess postal properties.

The U.S. Postal Service owns and leases more than 37,500 buildings to provide universal mail service. Our building inventory is in

as good a shape as ever. However, it is a constant challenge to keep

our real estate assets up to date. Continued population growth and

increasing mail volume create the need for additional space. In addition, many of our older buildings are not suitable for today’s mail

processing methods.

We also must keep our facilities in good repair and manage our

leases to ensure continued occupancy of the facilities we rent. In

these efforts, we involve the local community in decisions regarding

the location of any new facilities. With more than 700 new or replacement facilities occupied each year, we have a good track

record in this area, but it can be difficult to get consensus on some

locations, and for our processing facilities we have problems finding

sites which are suitable for our operation requirements and acceptable to local residents.

Last year we spent $2 billion on new facilities in upgrades to ex- isting facilities and paid over $660 million in rent. To accomplish

our primary mission, Facilities has a nationwide staff of only 500,

supplemented by employees at the local level who administer some

of our smaller repairs. We also have a staff of 30 that’s devoted exclusively to the disposition of our excess assets.

With such an active program to obtain additional space needed

to serve our customers, we find ourselves with former postal facilities, and sites which are underutilized and excess to our needs. The

Postal Service has a statutory authority to maximize its excess real

estate and to reinvest its proceeds in postal operations.

When we have vacant space in our buildings, we often are able

to lease this space to other organizations. We work closely with the

General Services Administration to identify space in our facilities

suitable for other government agencies. In fact, we currently receive some $38 million in rent from our public and private tenants.

When properties are excess to our needs, in most instances we

simply sell the property. Some assets, however, lend themselves to

development because of the unique aspects of a property or their

location in commercial districts. Since we lack the expertise to develop and manage these properties, we have entered into a number

of innovative and effective partnerships with the private sector. In

these situations, we work closely with local public officials and historic preservation groups to make sure the project meets their

needs as well. Two of these projects, the Grand Central Station

postal unit in New York City and the Rincon postal facility in San

Francisco were highlighted in the February 1999 report of the GenVerDate 11-MAY-2000 13:40 Mar 29, 2001 Jkt 010199 PO 00000 Frm 00098 Fmt 6602 Sfmt 6601 E:\HEARINGS\62621 pfrm11 PsN: 62621
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eral Accounting Office. In my prepared testimony, I have listed a

number of other examples.

Effective use of surplus postal real estate generates revenue

which helps keep postage rates low. Such use also benefits the community because it contributes to a reuse of former facilities, many

of which are historic buildings in downtown locations. The Postal

Service is proud to be a leader in the management of real estate

within the Federal Government.

Mr. Chairman, that concludes my testimony. I’d be glad to answer any questions you or your subcommittee members might

have. Thank you very much.

[The prepared statement of Mr. Umscheid follows:]

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Mr. HORN. I thank you very much. Chairman Franks, any questions?

Mr. FRANKS. Mr. Umscheid, when you enter into these development proposals, what is the Postal Service’s target return strategies, if any?

Mr. UMSCHEID. We evaluate each opportunity on its individual

merits. We balance risk and reward. Our mandate from the Board

of Governors is that we are not in the development business. We

are not in a position to take high risks. So, our returns tend to be

more modest, but have an internal rate of return of 10 to 12 percent depending on the particular project or opportunity.

Mr. FRANKS. Could you elaborate on some of the proposals regarding the GSA?

Mr. UMSCHEID. Well, I think if I understand clearly, I think we

are looking to partner whenever possible.

Mr. FRANKS. I’m sorry; particularly as it relates to how scoring

might make those kinds of arrangements more difficult?

Mr. UMSCHEID. We are looking for opportunities to partner with

the GSA and, in fact, have a very good working relationship with

them. In many instances, we have facilities that are suitably located where we have excess space, and they may have the tenancy

of another agency who might occupy that space, and so we would

like to find creative ways where we might partner; we have the

building, they bring the tenant, and we see if we can find an opportunity through the private sector investment, particularly in the

area of financing. We don’t want to invest postal dollars in a real

estate opportunity.

The scoring impacts them and us ultimately in that we have

financeable leases and tenants have to be prepared to make longterm commitments, 15–20 years or more to justify the investment.

Scoring, which in effect, looks at leases above a certain size, and

takes them on a net present value basis, restricts their ability to

make those investments.

Mr. FRANKS. Thank you, Mr. Chairman.

Mr. HORN. Gentleman from Texas, Mr. Turner, 5 minutes.

Mr. TURNER. The occasions I have had to have contact with the

Postal Service have convinced me that you do have a very good real

estate property management operation in the Postal Service, and

I might ask, I mean, is it correct that you have the legal authority

to do more things than most Federal agencies have? I mean, it

seems like you have a great deal of flexibility that you are able to

use. Are there some characteristics about your authority that make

your real property management options more available than perhaps the rest of the agencies of the Federal Government?

Mr. UMSCHEID. I don’t know whether we have more. I think we

possibly have more flexibility and leeway because we are a revenue-producing entity. So, clearly, having money, it’s a lot easier

to be a player when you have money to move forward on opportunities, and I think that’s where we are continuing to try and move

toward the private sector model of creative structures with business to recycle our buildings. Having personally come from the private sector, I find that there are no restrictions.

One other area that comes to mind is that there are limitations

in our borrowing capability. We have to do it either internally or

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to borrow through the Treasury. Had we more flexibility to look at

other financial markets, particularly at a time when interest rates

are low, possibly that would enhance our opportunities.

Mr. TURNER. Well, as I say, it does impress me, the speed with

which you seem to be able to move with a project when the decision

is made to do so. It seems to show a great deal of innovation that

has come to the Postal Service that perhaps has not been able to

be felt by the other agencies as well.

I have one question for Mr. Garthwaite about the operations of

the VA. It seems that you have been able to use these enhanceduse leases very effectively, but you also mention that you wanted

to do a pilot asset disposal program, and I guess what I’d like for

you to tell us is what kind of assets do you have on hand that you

need greater flexibility to dispose of? Give us some examples.

Mr. GARTHWAITE. Sir, we have, we have 172 hospitals, approximately, that are often sited on large campuses that include a lot

of different outbuildings, many of which were part of a previous era

of health care delivery and different functions for the Department

of Veterans Affairs. Some of our facilities are located on Old Soldiers’ Home, dating back to the Civil War, and we have accumulated over time a myriad of different kinds of buildings, a lot of

them support buildings, which serve a variety of purposes.

We now have moved into a dramatically different way of delivering health care, which is more outpatient with less time spent in

hospitals waiting for diagnostic tests, more done by minimally

invasive surgery and other procedures. These changes have left us

with hospital and other buildings on campuses that just simply are

not needed. These things do require enough maintenance to keep

them either operational or keep them from falling down.

Mr. TURNER. You proposed to be able to dispose of 30 properties

over a 5-year period, and you need congressional authority, you

need a law passed to do this. Is the major element of the statutory

change you need to allow you to then keep the proceeds of what

you generate from the disposed properties?

Mr. GARTHWAITE. Right. It’s a tremendous undertaking to do the

administrative details to allow disposition of property to occur, including the selling of the plan in the local community. And the

costs of entering into a project are largely personnel related; i.e.,

it’s an extra job for which you would see no appreciable benefit, unless we give them that local incentive. The previous panel spoke to

that well.

Mr. TURNER. Thank you very much.

Mr. HORN. I thank the gentleman. I now yield my time of 5 minutes to the gentleman from California who will also have his 5 minutes following that if he wishes, Mr. Ose.

Mr. OSE. I thank the chairman. With great respect, I would like

to converse with Mr. Yim about a particular project in our area related to a BRAC. It’s nice to see you.

Mr. YIM. Nice to see you, sir.

Mr. OSE. Mr. Yim used to work in Sacramento, and much as

when Custer was called to the VIA, he was called to Washington.

Expecting to return, we will deal with that tomorrow. That was 7

years ago and McClellan has suffered since your departure from

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what I would call a less degree of attention. You were very good.

Not much has happened since you left.

I am very concerned about the manner in which we are proceeding with the reuse of McClellan. I know the local authorities

have now selected a master development partner as of Tuesday

evening, and they’re going to work forward on a plan for the reuse

of the base, hopefully by August.

My question really delves down to how do we facilitate the transfer of properties on McClellan in a timely fashion? There’s over

1,000 different structures there scattered about the base, as you

know. Right now, the transfer process takes about 120 days for any

single building. How do we change that? Are there requirements

that we in Congress can give to you and the administration to facilitate the transfer? There’s 26,000 transactions that have to occur

at McClellan between now and July 13, 2001. How do we get that

done?

Mr. YIM. I will be meeting with the delegation from Sacramento

on Monday to discuss some of these issues with Secretary Dishner

of the Air Force, Deputy Assistant Secretary Dishner of the Air

Force.

I believe that we’ve set a good framework at McClellan for rapid

transfer by completion of some of the prerequisites to property disposal, the compliance with the National Environmental Policy Act

and the California counterpart, CEPA. One of the concerns we have

here is the environmental condition of many of our military bases,

and McClellan in particular as a Superfund site, will limit the ability to transfer title under the Federal Superfund statutes until

clean-up progresses to a certain area. I think we need to be vigilant

to assure that the clean-up schedules are adhered to, that those

milestones are met so that those prerequisites to transfer are completed in a timely manner and do not delay concrete reuse projects.

Mr. OSE. Let me ask a question. I want to make sure I understand. Federal law right now says that in a BRAC, if we’re going

to transfer possession or occupancy, then the property prior to

transfer has to absolutely comply with the not being a part of

Superfund?

Mr. YIM. No. It actually breaks down to two issues, a transfer of

title versus a transfer of possession. Transfer of fee title to the

property could not occur until the clean-up has progressed, in the

words of the statute, until, ‘‘all remedial action has been taken.’’

That has not been interpreted to be when the last ounce of contaminant has been removed from the soil but rather when the remedy is in place and demonstrated to be operating correctly.

If I recall, because of the significant groundwater contamination,

we expected it would take a year, something on that order of magnitude, for that trigger to be reached at McClellan so that title to

property could be conveyed. However, in the interim there can be

leasing of the property with appropriate restrictions to protect

human health and the environment. What I would be very interested in, is to be sure that both the Department of Defense and the

Air Force are leaning forward correctly to accelerate interim leasing of the property where appropriate, even though title may not

be able to be transferred.

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Mr. OSE. The transfers or the leases, whether it be fee simple or

occupancy, how long is that taking in a typical BRAC situation?

Mr. YIM. Well, again, transfer of title is dependent upon cleanup actions. So one of the things we are doing here at the Department since I have been here, is to raise the level of priority that

other members of the Federal family give to base reuse as we ask

the Department and the services to provide.

So, for example, for the regulatory agencies such as the U.S. Environmental Protection Agency or State counterpart agencies, we

are working with them really to raise the level of visibility and emphasize the importance reuse has in job regeneration and job replacement.

Typically, it could take on the order of 2 years to proceed through

all of the wickets to allow interim leasing decisions. I think we are

able to shorten that substantially at McClellan and other Department of Defense facilities by being more aggressive on that, sir.

Mr. OSE. How many transactions per day, if you will, are we currently completing at McClellan in terms of the 26,000 that’s been

identified, whether they be paperwork transfers between agencies

and what have you? Of those transactions that the Air Force has

identified as being necessary to complete the closure, how many of

those per day are being done?

Mr. YIM. In all honesty, I’m not familiar with the 26,000 item

transactions that you have raised, but I’d be happy to take that for

the record, sir, and try to get back to you. I’m just not familiar with

that particular metric.

Mr. OSE. The source of my information is General Weidemer,

who is commanding officer out there. So it may be paperwork

transfers, transactions and what have you, but again, if we’re going

to do 26,000 of them, we got a little over 800 days, that’s 30 a day,

in addition to everything else you’re doing.

Mr. YIM. Again, I will be happy to look into that, sir, and provide

you an answer for the record.

[The information referred to follows:]

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Mr. OSE. All right. Do you have any information relative to other

bases that are being closed as to how long it has been taking to

transfer a structure within the base?

Mr. YIM. Typically, it’s on the order of about 12 to 18 months,

and I agree with you that that is too long. We need to be able to

be smarter in how we transfer property. I believe firmly, and I believe the services now with their experience believe that the key is

rapid and smooth transition of the property. This is not a real estate transaction in the sense that we’re trying to maximize money

from the disposal of the property. When we focused on that in

1988, then the delays were really enormous at that time.

Since 1993 as we began to emphasize smooth transition, keeping

the property in productive use, getting it back onto the civilian

property tax rolls, as opposed to negotiating for every last dollar

from the local community, I think we have seen a great speeding

up of the process. You may know, sir, that we are proposing legislation to Congress to accelerate that by seeking no-cost conveyances

of properties for future rounds if the property is to be used for job

generation purposes.

Mr. OSE. On a relative scale, has McClellan been a success story

in the manner in which it has proceeded toward closure?

Mr. YIM. I think that many of the processes that we have employed at McClellan are models for the Department of Defense. We

greatly shortened processing time by combining the NEPA, the

Federal environmental requirements, planning requirements, with

CEPA, the California counterparts, and we arrived at a NEPA document in approximately 12 months when those typically take about

2 years. I think that was dramatic improvement. We’re able to

reach agreement on economic development conveyance in that

same 12-month timeframe when typically it takes 2 years, 21⁄2

years, to do those negotiations.

There is a master caretaking cooperative agreement there in

which we were working toward a concept of a hot turnover of the

assets, so that as the military draws down capabilities, rather than

to have the asset go dead, there is a concurrent turnover of base

operation supports so that the local community is familiar with

how to run the facilities, the quirks of the facilities, gets other tenants and private sector entities in. So I think those are innovations.

In terms of reuse, Sacramento, as we both know, was very hard

hit with three major closures since 1988. So in terms of recovery,

I think that Sacramento has had a harder road than some other

communities where they don’t have cumulative economic impact.

Mr. OSE. Is the methodology that’s being employed at McClellan

the model that you’re expecting to use on these future rounds?

Mr. YIM. Well, since I was involved in some of that methodology,

I would have to say yes, because I believe that it worked properly,

and I would like to try to infuse similar techniques into future

rounds.

Mr. OSE. That brings me to my basic question, and I’m familiar

with the proposal on the economic development conveyances for

some transfers at zero cost. In a situation where a community such

as Sacramento has been hit as hard as it has been hit, and where

we have bent over backward trying to create an innovative process

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which you’ve recognized as being better than the norm, why would

we not reward that community with, for instance, the pilot project

of the zero cost conveyance?

Mr. YIM. We actually have a different legal structure where we’re

dealing with pending or anticipated economic development conveyances and where the economic development conveyance has already

been executed, as in the case of McClellan. So the Department of

Justice and our counsel indicate that to change or renegotiate already executed transactions, we would have to either have replacement or additional consideration or maintain the same present

value.

I will say that we have supported and we are going to be proposing that the services be afforded greater flexibility for already

executed economic development conveyances, provided again the

results are consistent with the new legislation, and that the revenues would be used for job creation, reinvestment, either in the installation or in the surrounding community.

So, yes, I am as part of the legislative packet, seeking some sort

of equitable relief for those communities that were aggressive and

stepped forward in partnership with the Department and the services to proceed down the path before this new announcement for a

change in the legislation.

Mr. OSE. Mr. Chairman, Mr. Franks, am I on my first 5 or second 5 minutes or have I used it all up? I will be back.

Mr. FRANKS [presiding]. Would the gentleman like another 2

minutes to ask—— Mr. OSE. Go around again? No, I can’t, but I would like more

time, but 2 minutes is not sufficient, so let’s go on.

Mr. FRANKS. The panel, I know, will be willing to respond in a

timely fashion to any further inquiries pertaining to this matter

from the gentleman from California.

Mr. YIM. Yes, sir, certainly.

Mr. HORN. If I may say, in terms of just general policy, we will

submit written questions perhaps to all of you on each panel. Just

remember you are under oath in making answers to that, so we

will send the questions over.

Mr. OSE. I will take I appreciate the chairmen’s total courtesy to

a freshman. I have one other question, if I may?

Mr. FRANKS. Please followup.

Mr. OSE. At McClellan there are certain pockets of the base that

are very similar in characteristics, like the residential here and the

recreational there and the industrial over there and the microelectronics down here and blah, blah, blah. One of the difficulties that

I have been able to pick up is that the manner in which the individual structures within each of those pockets is transferred is

unique, that being that this building, which might be right next

door to a very similar building, has its own 120-day requirement.

I would like to see us bundle similar buildings so that rather

than have 1,000 transactions of four different types of buildings, we

have four transactions of 250 buildings each. I think that would

certainly expedite what we’re trying to do here, which is get these

things back on the private roll, available for private use.

Has the Department given any thought or explored this particular aspect?

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Mr. YIM. I would hope that the policy is already being implemented. The purpose of our specialized services teams is to typically identify what the problem is that each structure has to be

screened for any environmental hazards, and a finding of suitability to transfer a lease which is dependent upon any site-specific

characteristics has to be performed. If everybody starts from

scratch without establishing a baseline in advance it can be very

time consuming.

I will continue to encourage the services to create some baselines.

Essentially 80 percent of the work is common throughout a particular area. That can be done, and then any particular characteristics of a building could then be assessed relatively quickly, and I

will encourage the services to do that.

Mr. OSE. Is the baseline being established at McClellan?

Mr. YIM. Yes, I believe it has already been established at McClellan.

Mr. OSE. For the various environmental challenges in any particular structure?

Mr. YIM. I cannot say that universally, but I believe for the main

it has already been established.

Mr. OSE. We will followup with a written question.

Thank you, Mr. Chairman.

Mr. FRANKS. I’d like to thank the members of the panel for coming today and being so helpful to us during the course of the hearing.

I’d like to now call the third panel up to the witness table. We

now have Mr. G. Martin Wagner, the Associate Administrator of

the Office of Governmentwide Policy, General Services Administration, who will be accompanied by Mr. Robert Peck, Commissioner

of the Public Buildings Service and Mr. David Bibb, the Deputy Associate Administrator for the Office of Governmentwide Policy.

Consistent with the rules governing this particular subcommittee

joint subcommittee hearing, it is Chairman Horn who is empowered to swear in the witnesses. So he is going to undertake that

function at this point.

Mr. HORN. These gentlemen know the routine. Raise your right

hands.

[Witnesses affirmed.]

Mr. HORN. The clerk will note that all four witnesses have affirmed the oath.

Mr. FRANKS. Gentlemen, we welcome you. Mr. Wagner, please

begin.

STATEMENT OF G. MARTIN WAGNER, ASSOCIATE ADMINISTRATOR, OFFICE OF GOVERNMENTWIDE POLICY, GENERAL

SERVICES ADMINISTRATION, ACCOMPANIED BY ROBERT

PECK, COMMISSIONER, PUBLIC BUILDINGS SERVICE; AND

DAVID BIBB, DEPUTY ASSOCIATE ADMINISTRATOR, OFFICE

OF GOVERNMENTWIDE POLICY

Mr. WAGNER. Good morning, Chairman Franks and Chairman

Horn and distinguished members. Thank you very much for inviting us. I am Marty Wagner, Associate Administrator for Governmentwide Policy at GSA. I’m accompanied by Robert Peck, the

Commissioner of the Public Buildings Service, and David Bibb, who

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works as my Deputy Associate Administrator for Real Property Policy.

Our mandate in governmentwide policy is to focus on working

out ways that the government does a better job of managing itself,

and that certainly includes real property, and I would like to emphasize that’s real property in all Federal agencies, not GSA’s Public Building Service. It’s also increasingly clear that real property

is an extremely important strategic asset for effective government

management. It’s also one where we need to do a lot of additional

work.

I noted that some of the earlier figures given in the hearing, we

seem to have radically different numbers about how many dollars

we have invested in real property. Part of that is issues of methodology, but I think part of what is also indicative in that spread is

we need to be thinking more systematically about this as an economic asset.

In our 3 years of existence in governmentwide policies, I would

like to mention that we have had some significant accomplishments

in real property management. We have demonstrated that a collaborative policy development model involving all stakeholders is a

good way to develop policy.

We have promulgated a set of asset management principles as an

attempt to get this more strategic look at this as a strategic asset.

We have developed performance measures in working with the private sector for real estate management. We have proven that, if

you go into the regions, leave Washington, DC, and go out into the

real country and get with government agencies, that if you find opportunity to put agencies together on real property, there are opportunities for agencies to become more effective and to save money

for the taxpayers.

And, finally, we have to manage an information technology system that is used by many agencies for real property management.

Its use is growing. And that is also an effective strategic tool.

Nonetheless, I have to agree with the panelists earlier that we

have many problems. We lack a strategic focus in real property

management in many areas. Too much of the Federal inventory is

deteriorating or underutilized. Management incentives are often at

odds with good property management. The focus of the law is at

the end of the useful life of real property assets when the government no longer needs the asset rather than when we do need the

asset. This is also actually an issue in personal property as well.

Agencies have responded to this in many cases with workarounds to deal with those problems, but those are, at best, piecemeal solutions. And we think a more global approach to the government as a whole is warranted.

We expect to be proposing very soon legislation to address these

problems. We will focus strategically and on assets during their

useful live. We want to bring in more flexible tools such as have

been mentioned today, out-leasing, use of public-private partnerships, and I would like to also mention that in our discussions with

many of the players, including the Office of Management and

Budget, our approach to this has not been an approach to repealing

the scoring rules, but to do this within the scoring rules. Those discussions continue. We would also like to improve incentives on inVerDate 11-MAY-2000 13:40 Mar 29, 2001 Jkt 010199 PO 00000 Frm 00117 Fmt 6602 Sfmt 6601 E:\HEARINGS\62621 pfrm11 PsN: 62621
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dividual managers with and agencies by using retention of proceeds.

And, finally, on issues like the McKinney Act, we feel that a better way to deal with the goals of the McKinney Act would not deal

with properties on a transaction-by-transaction basis but through

a share of the overall proceeds from property disposal program.

These proposals that we will be making are consistent with the

recommendations of the General Accounting Office and the National Research Council. We expect them to lead to more effective

real property management, lower cost to the taxpayer, as well as

an increase in the number of properties available for disposal.

Mr. Chairman, I would be happy to answer any questions you

might have.

[The prepared statement of Mr. Wagner follows:]

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Mr. FRANKS. Mr. Wagner, thank you very much. We are going to

be brief because we have just been summoned to the floor for a

vote.

But I would like to ask, what do you mean in your testimony by

judiciously selected cases for the application of long-term outleases

for public-private partnership.

Mr. WAGNER. Fundamentally, we would see this as one tool in

the real property toolbox, so it won’t apply to all properties. The

properties where we think they would make the most sense or that

they do make sense is one where there is a continuing government

need for the property if the government doesn’t need the property

anymore, then we should simply dispose of it one in which there

is value to the private sector, a continuing need where we can work

out a deal that benefits both the private sector as well as enables

the government to continue to do its job more effectively.

Mr. FRANKS. My colleague, Mr. Horn, any questions for Mr. Wagner?

Mr. HORN. Just one question, and that is the McKinney Homeless Assistance Act. It requires that the surplus property be

screened for use for the homeless prior to the disposal. Since fiscal

year 1990, I am told only 39 cites have been transferred for use by

the homeless under this authority. Do you think this act is achieving its intended purpose?

Mr. WAGNER. I would I think the reason we are proposing, or we

will be proposing a change to the legislation is that we think a better way to do this is not to put McKinney Act processes in the middle of every single individual transaction, which tends to be slower,

and, in fact, create incentives to have more properties disposed of

in the first place; and then take some fraction of those proceeds

and apply those to benefiting the homeless.

Mr. HORN. The witness from the Department of Veterans Affairs

suggested an approach requiring that 10 percent of the proceeds

from Federal property disposal always be transferred to the Department of Housing and Urban Development for the use of the

homeless assistance groups. What do you think of that approach?

Mr. WAGNER. I would hesitate to go with any specific percentage.

So I really I don’t have a good feel. Perhaps—— Mr. BIBB. Well, Mr. Chairman, we are discussing with OMB

what that percentage ought to be. It certainly should be a fair

amount. I don’t think we would want to see a shortchanging. But

at the same time, we are trying to balance what we are doing to

protect the incentives to the Federal agencies. So as Mr. Wagner

says, the exact percentage hasn’t been determined. Somewhere in

the 5 to 10 percent range, I think we are talking around those

numbers. And that will be something we will be pursuing.

Mr. HORN. Well, that approach makes sense to me for this reason. I think you all know we get tied up in knots, taking month

after month after month. Many of these groups have never run a

housing project before. They overestimate. They are wonderful people with, I’m sure, pure motive. But the fact is they can’t run it,

and they often fail. They would be better off if HUD had a pot of

money where they could deal with housing in some innovative way

and mainstream the people rather than have this is the homeless

project. It hasn’t worked. But it takes lawsuits, it takes all the rest

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of this nonsense to go on. I think we would be doing more for the

homeless if we took the VA approach to this. That is my only view

on this, Mr. Chairman.

Mr. FRANKS. I concur. Mr. Peck, if I might real briefly, what is

the current status of the redevelopment of the Boston City Plaza?

Mr. PECK. That is a very good question. And I am not sure that

anybody in Boston knows the answer. The John F. Kennedy Federal Building is on the Boston City Hall Plaza and is there pursuant to an urban renewal scheme which was executed some time in

the mid to late 1960’s. The city has proposed doing something to

make the plaza more lively. We have been trying to cooperate.

I will tell you in short, we took a look at a public-private partnership proposal to redevelop the low-rise portion of the JFK building,

in part because where our building was situated and where the city

wanted to build things, it didn’t quite work, and we thought that

maybe realigning those boundaries and moving our space differently around in the plaza might work to the benefit of both parties.

The bottom line that is interesting is that the numbers just don’t

work. We recently invested in the low-rise and the high-rise building there. To make the numbers work would require significant expansion of space on our site to the point that I think it would make

the cite more dense than the city planners in Boston would be prepared to see.

So the bottom line is we are talking about less extensive options

on redeveloping the City Hall Plaza. But I have to say it is a good

example of where having the authority to do some kind of publicprivate partnership, at least in theory, could have helped both of

us satisfy our own objectives, ours of keeping 300,000 square feet

of usable space on that low-rise site and the city’s of redeveloping

it for commercial and other uses.

Mr. FRANKS. I thank you for that brief update. We will probably

be making a further inquiry about the status of that project.

I would like to thank the members of the third panel. Mr. Wagner, thank you for visiting and offering your testimony. On that

note, seeing no further questions, the meeting is adjourned.

[Whereupon, at 12:07 p.m., the subcommittee was adjourned.]

[Additional information submitted for the hearing record follows:]

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