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66–309 PDF 2011

HOW TO STOP SITTING ON OUR ASSETS: 

A REVIEW OF THE 

CIVILIAN PROPERTY REALIGNMENT ACT 

(112–31) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND 

EMERGENCY MANAGEMENT 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MAY 12, 2011 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: http://www.gpo.gov/fdsys/browse/ 

committee.action?chamber=house&committee=transportation 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JOHN L. MICA, Florida, Chairman 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

FRANK A. LOBIONDO, New Jersey 

GARY G. MILLER, California 

TIMOTHY V. JOHNSON, Illinois 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

SHELLEY MOORE CAPITO, West Virginia 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ANDY HARRIS, Maryland 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

JAIME HERRERA BEUTLER, Washington 

FRANK C. GUINTA, New Hampshire 

RANDY HULTGREN, Illinois 

LOU BARLETTA, Pennsylvania 

CHIP CRAVAACK, Minnesota 

BLAKE FARENTHOLD, Texas 

LARRY BUCSHON, Indiana 

BILLY LONG, Missouri 

BOB GIBBS, Ohio 

PATRICK MEEHAN, Pennsylvania 

RICHARD L. HANNA, New York 

JEFFREY M. LANDRY, Louisiana 

STEVE SOUTHERLAND II, Florida 

JEFF DENHAM, California 

JAMES LANKFORD, Oklahoma 

REID J. RIBBLE, Wisconsin 

VACANCY 

NICK J. RAHALL II, West Virginia 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

RUSS CARNAHAN, Missouri 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

MAZIE K. HIRONO, Hawaii 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

STEVE COHEN, Tennessee 

LAURA RICHARDSON, California 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

(II) 

SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY

MANAGEMENT

JEFF DENHAM, California, Chairman 

TIMOTHY V. JOHNSON, Illinois 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas, 

Vice Chair 

RANDY HULTGREN, Illinois 

LOU BARLETTA, Pennsylvania 

BOB GIBBS, Ohio 

PATRICK MEEHAN, Pennsylvania 

RICHARD L. HANNA, New York 

JOHN L. MICA, Florida (Ex Officio) 

VACANCY 

ELEANOR HOLMES NORTON, District of 

Columbia 

HEATH SHULER, North Carolina 

MICHAEL H. MICHAUD, Maine 

RUSS CARNAHAN, Missouri 

TIMOTHY J. WALZ, Minnesota 

DONNA F. EDWARDS, Maryland 

BOB FILNER, California 

NICK J. RAHALL II, West Virginia 

(Ex Officio) 

(III) 

(V) 

CONTENTS Page 

Summary of Subject Matter .................................................................................... vi 

TESTIMONY 

PANEL ONE

Kennedy, Hon. Patrick F., Under Secretary for Management, U.S. Department of State ........................................................................................................ 3 

Werfel, Hon. Daniel I., Controller, Office of Management and Budget .............. 3 

PANEL TWO

Glosserman, Michael, Managing Member, The JBG Companies ........................ 21 

Principi, Hon. Anthony J., Former Secretary, U.S. Department of Veterans 

Affairs, and Former Chairman, 2005 Base Realignment and Closure Commission .................................................................................................................. 21 

Winstead, David L., Former Commissioner, Public Buildings Service, U.S. 

General Services Administration ........................................................................ 21 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Glosserman, Michael ............................................................................................... 35 

Kennedy, Hon. Patrick F. ........................................................................................ 38 

Principi, Hon. Anthony J. ....................................................................................... 46 

Werfel, Hon. Daniel I. ............................................................................................. 52 

Winstead, David L. .................................................................................................. 60 

SUBMISSION FOR THE RECORD 

Werfel, Hon. Daniel I., Controller, Office of Management and Budget, responses to questions from Hon. Randy Hultgren, a Representative in Congress from the State of Illinois ............................................................................ 57 

ADDITION TO THE RECORD 

U.S. General Services Administration, statement for the record ........................ 62 

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Insert offset folio 3 here 66309.003
ix 


Insert offset folio 4 here 66309.004
(1) 

HOW TO STOP SITTING ON OUR 

ASSETS: A REVIEW OF THE CIVILIAN 

PROPERTY REALIGNMENT ACT 

THURSDAY, MAY 12, 2011 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC

BUILDINGS, AND EMERGENCY MANAGEMENT, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:40 a.m., in 

Room 2167, Rayburn House Office Building, Hon. Jeff Denham 

(Chairman of the subcommittee) presiding. 

Mr. DENHAM. The subcommittee will come to order. First, let me 

welcome our distinguished witnesses, and thank them for their testimony today. I especially want to thank OMB controller Danny 

Werfel and Secretary Principi for a second round with our committee. 

Last week I introduced H.R. 1734, the Civilian Property Realignment Act, with—that would establish a civilian BRAC-type commission to help shed waste in the management of Federal buildings 

and properties. 

I am also pleased the administration released its proposal last 

week, along with a list of 14,000 properties already in the disposal 

process. By OMB’s estimates, our proposals could save the taxpayers more than $15 billion. 

But, as discussed in our April hearing, to achieve these savings, 

any solution must incorporate key principles: to consolidate the 

footprint of Federal real estate; house more Federal employees and 

less overall space; reduce our reliance on leased space for long-term 

requirements; sell or redevelop high-value assets that are underutilized or too valuable for housing Federal employees; and lastly, dispose of surplus property much, much quicker. 

I am glad both proposals adopt these principles, and appreciate 

the discussions we have had with OMB to ensure that we have the 

right solutions to generate real savings for the taxpayer. 

Today the purpose of the hearing is to discuss the specifics of the 

legislative proposals, and receiving meaningful input from the witnesses. It is important that we get this right, from the get-go. And 

receiving input from experts and key stakeholders will be critical. 

For example, the administration provides special consideration for 

overseas properties in its proposal, and I am pleased Under Secretary Kennedy is here today to provide input on those provisions. 

2 

In addition, we know we must expedite the disposal of unneeded 

properties through streamlining the current process. But at the 

same time we need to carefully examine how we cut through the 

red tape to ensure there are no unintended consequences. 

I first proposed a civilian BRAC commission at our subcommittee’s first hearing in February, and the President has now proposed 

a commission for the 2012 budget. 

It was clear then, as it is now, that just having a fire sale of surplus property in a bad real estate market is not going to generate 

significant savings for the taxpayer. Instead, redeveloping, consolidating, or selling certain high-value assets can unleash huge cost 

savings for taxpayers. 

For example, it makes less sense for a few hundred Federal 

workers to be sitting on an underutilized asset that could generate 

hundreds of millions of dollars if redeveloped and sold. The big 

question is, will our proposals empower a commission to find these 

opportunities, and will it have the capability to carry them out? 

Unfortunately, I doubt most government agencies would recognize a good real estate opportunity if it stared them in the face. 

Somehow the commission will need to leverage the expertise and 

market knowledge of private sector on behalf of the taxpayer, if we 

are going to achieve real savings. I believe this is an important 

point, and I hope our witnesses can help us find a way to do it. 

We also must ensure this process incorporates the right incentives and tools to maximize the return to taxpayers, and require 

that agencies not conduct business as usual. That is why a process 

that includes an independent commission, similar to the BRAC 

Commission, is needed in this case. Real savings will require a 

commission to look across government and identify ways to unlock 

the value in our properties without turf battles and red tape stalling the process. 

I believe the potential to save billions of dollars is real. And our 

challenge is to create a system where that will be happening. 

Again, I thank the witnesses for being here today, and I look forward to your recommendations for improving our legislation. I 

would like to recognize Ranking Member Norton. When she gets 

here she will have an opening statement, as well. But she has been 

slightly delayed this morning. 

If there are no opening statements from Members this morning, 

then we will move right into our witnesses here today. Our first 

panel, the Honorable Daniel Werfel, controller of the Office of Management and Budget, and the Honorable Patrick F. Kennedy, 

Under Secretary for Management, U.S. Department of State. 

I would ask unanimous consent that our witnesses’ full statements be included in the record. 

[No response.] 

Mr. DENHAM. Without objection, so ordered. Since your written 

testimony has been made part of the record, the subcommittee 

would request that you limit your oral testimony to 5 minutes. 

Gentlemen? 

3 

TESTIMONY OF HON. DANIEL I. WERFEL, CONTROLLER, OFFICE OF MANAGEMENT AND BUDGET; AND HON. PATRICK F. 

KENNEDY, UNDER SECRETARY FOR MANAGEMENT, U.S. DEPARTMENT OF STATE 

Mr. WERFEL. Thank you, Chairman Denham, Ranking Member 

Norton, and other members of the subcommittee, for the invitation 

to discuss how the government can improve its management of 

Federal real estate inventory by enacting the President’s Civilian 

Property Realignment Act proposal. 

In this year’s State of the Union Address, the President acknowledged that we cannot win the future with the government of the 

past. Stated differently, significant improvements in government 

performance will require significant changes in how we conduct our 

business. 

For too long, the American people’s hard-earned tax dollars have 

been wasted on maintaining empty buildings, and holding on to 

valuable properties that the government no longer needs. For this 

reason, the President submitted a bold new proposal to Congress 

on May 4, 2011, to significantly reduce and realign the Federal real 

estate inventory by leveraging the model successfully used in the 

past for Defense properties. 

In addition, Chairman Denham introduced H.R. 1734, Civilian 

Property Realignment Act, which also acknowledges the need to 

make significant changes in how we do business and manage our 

inventory. 

Both bills would create an independent board that would make 

recommendations for congressional action to realize savings 

through reducing property holdings, expediting disposal, reducing 

operating costs, and assisting agencies in sustainability goals. They 

both propose using criteria for the best use of property, while considering such issues as homelessness, parks and recreation, historical preservation, and the environment. And they complement one 

another in the goal to convert unneeded real estate into reductions 

in the Federal deficit, and adapt the government’s real property to 

21st-century realities. 

Both the President’s proposal and Chairman Denham’s build off 

the best practices of a proven approach: the Defense Department’s 

base realignment and closure program to address and overcome 

recognized barriers of red tape, financial disincentives, and competing stakeholder interests. It is important to note proposals by 

the Federal Government to vacate or sell real estate will affect numerous stakeholder interests. These competing interests create a 

powerful disincentive against progress. 

Like BRAC, the CPRA board would overcome this challenge by 

bundling its recommendations as a package that succeed or fail together. Furthermore, like BRAC, Congress would have 45 days to 

consider the recommendations with no ability to line item veto or 

reject a property in the package. Instead, Congress’ sole option 

would be either to endorse or reject the package as a whole. Unlike 

BRAC, the financial proceeds from the sale of properties would not 

only be used to offset future expenses, but could, in potentially 

large portions, be applied directly to Federal debt reduction. 

The President’s 2012 budget includes the initial legislation for 

standing up this board, and our bill provides a more detailed legisVerDate Aug 31 2005 13:37 Oct 27, 2011 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\ED\5-12-1~1\66309.TXT JEAN
4 

lative proposal that builds on the language we included in the 

budget. 

Chairman Denham’s H.R. 1734 and the President’s legislative 

proposal both hold the same core values. There are few areas the 

two bills differ, primarily in the methods of board member appointment, and the review process of the board recommendations. And 

these should be able to be worked out in a manner that best benefits the public. 

The bottom line is we recognize the status quo in our real estate 

inventory is particularly unacceptable today, when we have a 

pressing need to reign in our spending and reduce our deficits. We 

desire to answer the President’s call for action, and we cannot 

achieve these important goals using the same techniques that have 

been failing us for decades. By using the best practices from the 

BRAC model to address the issue, we can leverage our portfolio to 

improve services to the taxpayer, reduce the government’s energy 

footprint, and reduce the deficit. 

We look forward to working together to help pass this bill, and 

include agencies like the State Department and GSA to leverage 

best practices and bring about a transformation of our real property management. We believe the President’s proposal and the recently introduced bill sponsored by Congressman Denham share 

common objectives and leverage similar tools in approaching significant savings and efficiencies in our real estate portfolio. 

We look forward to working with this subcommittee to finalize 

the legislation and begin our important work ahead. Thank you for 

inviting me to testify today. I look forward to answering your questions. 

Mr. DENHAM. Thank you, Mr. Werfel. 

At this time, Under Secretary Kennedy, you may proceed. 

Mr. KENNEDY. Mr. Chairman, Ranking Member Norton, thank 

you very much for inviting me to discuss the State Department’s 

overseas real estate program. As Under Secretary for Management, 

I oversee support for the United States worldwide diplomatic and 

consular presence, including the Bureau of Overseas Buildings Operations, which directs the worldwide real property program for all 

United States Government agencies overseas, under our ambassadors. It is our mission to provide secure, safe, functional, wellmaintained and cost-efficient facilities to promote U.S. national interests, worldwide. 

State’s real property portfolio includes nearly 18,000 owned and 

leased properties in over 260 cities. With Congress, we set priorities for construction, acquisition, maintenance and sale of properties, and the use of sales proceeds. 

Since 1997, State has been reporting to Congress quarterly on 

our acquisitions and disposals. We provide facilities overseas for 

over 30 agencies, ranging from Defense and Commerce to Justice 

and Homeland Security. These agencies implement U.S. foreign 

policy, serve our national security, protect U.S. citizens abroad, secure our borders, advance U.S. trade, and combat terrorism. 

We operate under the Foreign Service Buildings Act of 1926. And 

since an amendment in 1945, State has been allowed to retain proceeds from property sales, and we have successfully been using 

these proceeds to buy properties to replace costly leases. Our abilVerDate Aug 31 2005 13:37 Oct 27, 2011 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\ED\5-12-1~1\66309.TXT JEAN
5 

ity to retain and reinvest our sales proceeds has been the consistent funding source for property management, and reducing the 

need for appropriated funds. 

In the last 10 years, our ongoing efforts have resulted in the sale 

of 195 properties. This authority makes us highly motivated to 

identify and dispose of properties. The proposed Civilian Property 

Realignment Act would codify many practices that State has been 

following for years. 

Mr. Chairman, on May 5th you outlined the CPRA’s goals, and 

State is proud to note that we are already implementing them. I 

have provided written examples in my testimony, so I will simply 

summarize the highlights. 

Since our 2 African embassies were bombed in 1998, we replaced 

numerous unsecure diplomatic properties, completing 79 new facilities with another 33 under design and construction. The Secure 

Embassy Construction and Counterterrorism Act requires that we 

move all U.S. Government staff at a new embassy into one compound. Thus we gain both safe and secure compounds and consolidate our footprint, often giving up five or six separate buildings. 

To maximize our building utilization, our space planners assist 

embassies to use every possible square foot. We consolidate server 

rooms and warehouses. We use floor plate designs to install smaller cubicles for surge capacity, rather than building larger facilities. 

Our owned and leased properties—almost 99 percent—are classified as either fully utilized or overutilized. 

State’s unique ability to keep and utilize sales proceeds reduces 

our reliance on costly leased space, and we constantly seek favorable opportunities to reach our goal of owning 40 percent of our 

housing. From 2004 through 2010, the State Department purchased, with proceeds of sale, 265 properties, and reduced our annual rental by at least $11.2 million. 

In essence, State manages 275 field offices around the world, and 

we strive to reduce overlap in costs. We continually seek to reduce 

operating and maintenance costs, and increase security through design excellence, value engineering, and green construction. Our 

value engineering program has a return of investment of over $47 

for every $1 spent. 

In line with President Obama’s June 2010 memorandum, State 

developed its real property cost savings and innovation plan, and 

State has already achieved nearly 30 percent of its overall goal for 

the end of 2012. To facilitate the disposal of unneeded properties, 

an ambassador must file an annual certification that the embassy’s 

property inventory data is correct, to identify any potential excess 

space. 

Presently, we have 76 U.S. Government-owned properties considered for disposal. The administration draft proposal included a section on diplomatic properties that reflects the unique nature of 

overseas property management. Foreign governments have a right 

to approve or disapprove of the sale of diplomatic properties, a 

right we also invoke in the United States with foreign government 

properties here. It also allows the Secretary of State to remove any 

transaction from the board’s recommendation that involves a civilian overseas real property owned or managed by State. 

6 

The Department must have the maximum ability to negotiate 

with host governments to vacate properties where local conditions 

have changed, and to acquire new properties to carry out our national security interests. Overseeing the State Department’s overseas properties in the same manner as domestic Federal properties 

is not possible, given the very different conditions that prevail overseas, and would hinder the reinvestment of proceeds at favorable 

rates. 

In conclusion, Mr. Chairman, I believe that State has effectively 

managed and implemented its overseas property activities for 

years. The retention of sales proceeds is key. Retaining 100 percent 

of sales proceeds allows us to purchase properties, to address pressing operational needs, and to reduce our reliance on costly leaseholds. It also allows us to reduce our request for appropriated funding. 

We are very conscious of the interest in effective property management by both the Congress and the administration, and we will 

strive to continue our efforts working with you to ensure effective 

and results-oriented asset management. Thank you very much, sir. 

Mr. DENHAM. Thank you, Mr. Kennedy. I would just like to remind our witnesses and Members, because of shortness of time 

today we will be going very, very quickly. We would ask you to 

keep your answers concise, so that we can stick to the 5-minute 

rule. We would like to get a couple rounds of questioning. We have 

certainly got a number of questions today. 

Before we open up the first round of questions, I would like to 

now recognize Ranking Member Norton from the District of Columbia for 5 minutes to make any opening statement she may have. 

Ms. NORTON. Thank you very much, Mr. Chairman. I apologize 

that I have been in a hearing involving the District of Columbia, 

which accounts for my tardiness. And I want to thank you for today’s hearing on two legislative proposals to create a civilian property realignment commission that would function like the Department of Defense base closure and realignment commission, or the 

BRAC. 

On May 4, 2011, both the administration and Chairman Denham 

released legislative proposals to apply a BRAC-like process to civilian properties. Both proposals, which share the title, The Civilian 

Property Alignment Act, would establish a framework through 

which a commission would independently review Federal properties 

and make recommendations for consolidation, collocations, redevelopment, disposal, or other actions, to minimize costs and produce 

savings for the taxpayer. 

We cannot know without a rigorous inventory and analysis, 

whether the Federal Government is really sitting on billions of dollars of underutilized properties for which there is a market. However, the independent commission, as proposed by both the President’s bill and Chairman Denham’s bill, tasked with gathering information about real estate holdings of the government, can provide the objective information necessary to make prudent recommendations, and to right-size the Federal real estate footprint. 

The strength of both legislative proposals is that they follow the 

successful BRAC model. However, unlike the chairman’s bill, the 

administration’s bill contains more environmental protections than 

7 

found in BRAC by including a full environmental review for proposed actions, and has criteria for appropriate evaluation of properties to see whether a property is eligible or potentially eligible for 

a historic designation, and to determine remediation needs of the 

property. 

We are obligated to ensure that final legislation offers the proper 

protection for the stakeholders in the disposal of property, while expediting the process for its disposition. The stakeholders include 

homeless, housing providers, and municipalities eligible for public 

benefit conveyances, groups that are normally part of the Federal 

property disposal process. 

The chairman’s bill, but not the administration’s bill, has one of 

my priorities. For years, the Office of Management and Budget has 

held on to the General Services Administration’s real estate because of the absence of OMB staff with practical and real estate expertise. 

The chairman’s bill recognizes the accumulated experience and 

institutional knowledge of the GSA to make prudent real estate decisions, and gives GSA, in consultation with OMB, a significant 

role in ensuring that the data from all of the 23 landholding agencies is available to the commission. 

I look forward to the testimony of today’s witnesses to help 

evaluate some of the other key distinctions between the two proposals, including the inclusion of properties controlled by the U.S. 

Postal Service and State Department, Senate appointments for 

commission members, and the process for the consideration of public buildings for housing for the homeless and public conveyances. 

The Denham and Obama proposals offer a genuine opportunity 

for a bipartisan solution. Mindful that it is not enough to pass bills 

in the House, I want to work closely with the chairman on the final 

bill. I support the concepts contained in the administration’s and 

Chairman Denham’s proposals, and hope we can proceed quickly to 

get the bill passed and signed into law. 

And thank you for your indulgence, Mr. Chairman. 

Mr. DENHAM. Thank you, Ranking Member Norton. Let’s start 

off the round of questioning. 

First, Mr. Werfel, at our April hearing we agreed that it is critical that key principles are followed to ensure the highest return 

to the taxpayer. Again, these principles are: consolidate the footprint of Federal real estate; house more Federal employees in less 

overall space; reduce our reliance on costly leased space; sell or redevelop high-value assets that are underutilized or too valuable for 

housing Federal employees; and dispose of surplus property quickly. 

We both had an agreement on that. As well, you suggested at the 

hearing adding achieving sustainable goals, which we have included in H.R. 1734. Do you believe that all of these principles are 

being addressed in the bill? 

Mr. WERFEL. Yes, I do. 

Mr. DENHAM. Thank you. Last week, the administration released 

the list of 14,000 excess properties that are going through the disposal process. I think that is a fantastic first step. However, as you 

and I have discussed many times, and highlighted at our previous 

hearing, the major savings will come from not excess properties, 

8 

but high-value properties through sales, consolidations, redevelopment, and cost avoidance, the real big ticket items. 

And I wanted you to just elaborate on OMB’s opinion on where 

the most cost savings will be realized in the process. 

Mr. WERFEL. Thank you, Chairman. Yes, the—we released the 

14,000 excess assets publicly and made them transparent for two 

reasons. One, we wanted to make sure that the public is holding 

us accountable for getting those assets off our inventory in good 

speed. Secondly, we wanted to make sure that the public can help 

us identify assets that are not on that list that should be. 

And, as you mentioned, we believe that the 14,000 assets represent progress, but incremental progress. And there are more 

transformational and larger opportunities for savings that exist beyond those 14,000 assets. But today’s process, both legal and regulatory, financial and political, have not enabled us to tap into those 

higher value opportunities and get them on our excess list. Our bill 

is designed to do that. 

So, if we are successful, that list should grow. It might not grow 

exponentially. But in terms of value proposition, it should grow exponentially. 

Mr. DENHAM. Thank you. And, as private individuals or private 

companies start showing the different properties that are in their 

communities, we would work together to add those to the list and 

put those in front of the commission, as well? 

Mr. WERFEL. Absolutely. 

Mr. DENHAM. As you know, bills are scored by OMB and CBO, 

and that can be a critical part of the process in moving legislation. 

How do you believe the proposal will be scored? And can you explain how you get to the conclusion on what the monetary value 

will be? 

Mr. WERFEL. Thank you, Chairman. I do believe that CBO and 

OMB can come to an agreement and an aligned view on this scoring. There is some work to be done, and we have already started 

those discussions. 

The key is whether—as I understand the scoring rules and, in 

particular, CBO’s perspective—the key is whether the bill is viewed 

as changing the trajectory of current behavior. If the belief is that 

the opportunities can be tapped or realized under existing authorities, then the bill is likely to be scored low, or have no effect. If 

the conclusion is reached that this new legal framework greatly expands the amount of opportunities that are now available and can 

be realized, then the bill would have more of a significant score. 

As part of my presentation to CBO, I would point to the BRAC 

process, and the experience with BRAC. There you have a clear 

historical evidence that a creation of an independent board or commission that can be empowered to bundle together different opportunities that have been held up by a variety of different barriers 

for years and put those together before Congress for up or down 

vote can dramatically change the trajectory of our real estate inventory, in terms of downsizing and in terms of savings. 

So, with that backdrop of BRAC as an experience, and the fact 

that we are adopting a similar framework of creating that independent commission, I think the environment is there for a—the 

score from CBO and OMB to be aligned. 

9 

But again, we have work to do in order to demonstrate the list 

of properties, the opportunities that are there. We are going to 

start that work with CBO and already have, and I hope to be successful in reaching a joint conclusion on scoring. 

Mr. DENHAM. And a big part of CBO’s scoring is not only how 

much you can sell, but how quickly you can sell it. And so, how 

long do you think it will take to implement the commission and 

really start selling a lot of these different properties? 

Mr. WERFEL. It is a difficult question to answer, because embodied in our proposal is the board’s independence in how they 

carry out those activities. But I will offer that I think we—the way 

the bill is structured, we have given the board the right set of tools, 

such that they can make suer that they are moving out on some 

quicker win opportunities in order to start to generate proceeds 

earlier. 

So, what I anticipate, and what we’re working towards now, is 

making sure that when the board is created, that they can hit the 

ground running with a set of analytics and opportunities and suggestions that we can submit, both this committee and the administration. Of course, the board will have the independence to decide 

what it does with that set of recommendations. 

But I would hope that, within that suite of recommendations, 

they look for those early success points where there are high-value 

assets with minimal environmental issues today, and where the 

competing stakeholder interests—where there is a clear path for a 

decision that can be made that is optimal, and start this process 

so that savings start getting generated as early as possible. 

I think if they take it and say, ‘‘All right, let’s say we have 20 

or 30 opportunities, let’s go for them all at once,’’ that could create 

a longer timeframe by which proceeds are generated. 

So, our recommendation to them—and again, it will have to defer 

and see how they want to approach it—is to take a risk management approach in a way that says, ‘‘Where can we start with some 

quick wins, in order to start generating some momentum, some 

success, and some proceeds.’’ 

Mr. DENHAM. Thank you. And as we start our round of questioning, before we do, I would ask unanimous consent that Mr. 

Lankford of Oklahoma, who is a member of the Transportation and 

Infrastructure Committee, be permitted to participate in today’s 

subcommittee hearing. 

[No response.] 

Mr. DENHAM. Without objection, so ordered. At this time the 

chair will recognize Ranking Member Norton for 5 minutes. 

Ms. NORTON. I am—they do not seem to be—there does not seem 

to be a great deal of difference between the chairman’s bill and the 

administration’s bill, so I am trying to understand what those are. 

He says, you know, ‘‘It is bipartisan.’’ What should I expect, I 

guess, especially in this Congress. 

I noted that the administration’s bill has the NEPA, the National 

Environmental Policy Act. And the chairman’s bill contains a waiver of NEPA for the selection process only. I guess that is the first 

stage. So why is it that the administration believes that the commission or the Federal agency action stage should be exempt from 

environmental review? 

10 

Mr. WERFEL. I think the—what we did when we sat down to 

write our bill is we worked very closely with the administration’s 

environmental experts, whether they be from the council of environmental quality, or the EPA, or the Energy Department, and we 

talked to those that have implemented BRAC over the years. 

And we determined that the key improvement that is necessary 

in order to drive a more facilitated and optimized process was some 

of the early transfer authorities that exist within the superfund 

legislation, that the NEPA reviews themselves and the superfund 

requirements would not—which serve enormously important environmental public policy objectives—can still do that without slowing our process down, as long as we can leverage effectively existing flexibilities in the law today to do so. 

So, when we sat down, my bottom line answer, Congresswoman, 

is we determined that the key was, can we do early transfers of 

properties to non-Federal entities while still meeting environmental requirements? The answer is that happens today under current law. It doesn’t happen in every case, but it does happen today. 

And we wanted to make sure we could tap into that. 

All other issues we felt could be resolved within the current environmental rules and regulations, and so we adopted them. Because, 

again, we think they have enormously important public policy objectives. 

Ms. NORTON. Thank you. Now, the long-term leases that the 

GSA uses now, as a requirement of this committee, both administrations have always had GSA pursue a purchase option in the 

lease. We don’t use them often enough, there are scoring problems, 

but it is in there. 

Because of the terrific loss to the Federal building fund of continuing to lease at the level we do—and loss to the taxpayers, for 

that matter—do you think it would be prudent to use the revenue, 

or some of the revenue generated from this new board to exercise 

that purchase option, where we are renting space, for example, 

renting the headquarters of the Department of Transportation, 

which essentially, we built? 

And at the same time, of course, the funds that—or the rents 

that now go to the lessor would go to the Federal building fund, 

which is in dire need of funds. How would you answer that question? 

Mr. WERFEL. I would answer it in the affirmative, Congresswoman. From my perspective, I want the board to maximize savings and efficiencies for the taxpayer. And if in their judgment, in 

their wisdom, they believe that an inefficiency can be avoided by 

using those funds to do a purchase to avoid a long-term lease arrangement, then they should be empowered to do so. 

The challenge will be that there is going to be a lot of opportunities to avoid efficiencies—to avoid inefficiencies. And they are going 

to have to sequence their efforts in a way that maximizes the return on investment. But if one presents itself that allows a purchase to avoid a costly lease, absolutely. 

Ms. NORTON. Let me ask you a final question about the Postal 

Service. I am on another committee that has jurisdiction over that 

giant operation. And I am interested in the order of magnitude of 

postal properties that might be involved. This is the oldest—used 

11 

to be—Federal agency. Of course it is not Federal any more. But 

we have those properties. 

What type of field offices, for example, would you envision being 

collocated? Another efficiency that might occur, as a result of this 

process. And would you need authority, new authority, in order to 

pursue this type of collocation, or, for that matter, to deal with 

Postal Service properties? 

Mr. WERFEL. Well, I start with the premise, Congresswoman, 

that we have—separate from the post office, but in the Federal 

Government elsewhere—we have too many field offices. In multiple 

cases we have agencies that have an office in every county in 

America, which is reflective of the way in which benefits and services were delivered decades ago, or before the Internet era. 

And so, the question that we have had, and that we have been 

unable to do under the current legal, political, and financial situation, is to downsize that footprint. 

And so, in downsizing it, it seems very logical and intuitive that 

the presence of post offices in these same geographies can present 

a collocation opportunity. The way our bill and our proposal is 

structured is that the board would go at it from the perspective of 

looking at agencies, whether it is USDA or Social Security or EPA 

or law enforcement, looking at these field offices and saying, ‘‘Are 

there collocation opportunities that can exist with the post office 

footprint that is there,’’ and raising those as an issue. 

But I do not think it is a one-for-one situation. I do not think 

that, if we have approximately 3,100 counties in America, I don’t 

anticipate that the board would say, ‘‘OK, we need 3,100 postal opportunities for collocation,’’ because I believe first downsizing may 

be appropriate. Because I don’t know that we need an office in 

every county in America, based on the way benefits are delivered. 

Once you downsize—let’s say you downsize 5 percent. You might 

be able to downsize even further by collocating. So you downsize 

the actual presence by 5 percent, and you downsize an additional 

5 percent by collocating into post offices. 

I think the board is going to have to determine what that stress 

point is. How much can we downsize without affecting the operations of these organizations, and how much can the postal service 

absorb? I am not sure I can give you a number right now, I just 

know that it is not every post office in America. It is something 

much smaller than that. 

Ms. NORTON. Thank you, Mr. Chairman. 

Mr. DENHAM. Thank you. The chair now recognizes Mr. Hultgren 

for 5 minutes. 

Mr. HULTGREN. Thank you so much, Mr. Chairman. Just a couple questions. Mr. Werfel, if I can address these to you, that would 

be wonderful. 

I know that it is an incredible challenge for GSA to bring everything together, just realizing that data is collected from over 30 different Federal agencies. Trying to coordinate all of that, bringing 

that together. But I also know that in the past GAO has been criticized for unreliable and limited usefulness of the data that they 

have. 

I just wanted to ask quickly of the current status of the official 

Federal real property inventory. And then, specifically to that, wonVerDate Aug 31 2005 13:37 Oct 27, 2011 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 P:\HEARINGS\112\ED\5-12-1~1\66309.TXT JEAN
12 

dering if there is—with that inventory, if it is geo-referenced. In 

other words, does it have mapping or geospatial components to it? 

Mr. WERFEL. On your first question, like any new start in the 

Federal Government to collect comprehensive information on something, we go through the growing pains of data quality, completeness, and reliability issues. And it is no different with the real 

property profile. We are taking measures to improve its reliability. 

And I will note that when this committee, this subcommittee, 

held a hearing in early April, GAO testified. And in their written 

testimony they pointed specifically to improvements in the reliability of the data in the real property profile. We are continuing 

to look at ways of improving that reliability, and to get into your 

second question, to enhance the granularity. 

The data that we have, we have several data elements associated 

with location, including longitude and latitude, and we have the 

ability, therefore, to enable—if the investment is made, and if there 

is a business need, to enable geospatial technologies that can support our inventory and review. But some of those investments 

haven’t been made yet, but we are positioned well, because the 

data that we collect can enable that type of technology to take hold. 

Mr. HULTGREN. As far as some of the mapping, then, is that— 

that will be part of this, as well, of mapping properties? 

Mr. WERFEL. Absolutely. I mean I think one of the things that 

hasn’t happened, as an example, that I think should—and I think 

the board can do it, and we are going to try to do some of this work 

preliminarily to get the board ready—is taking a city center, 

whether it be Dallas-Fort Worth or the Bay Area San FranciscoOakland, or Miami-Dade County, looking at a city and saying, 

‘‘What is the Federal footprint in that city, across agencies, and 

what administrative buildings do we have, hospitals, warehouses, 

office buildings?’’ 

And when you start breaking down those agency-by-agency barriers, which I don’t think we have done an effective job of, historically, more realignment and right-sizing opportunities are going to 

be at play. And I think mapping is going to be critical to enabling 

that type of analytics. 

Mr. HULTGREN. Yes, I agree with that, and I do think, you know, 

the advancements that we have seen enable that to be done in a 

way that never could have been done in the past, really. So I hope 

that we do that. 

I do commend Chairman Denham, too, and his work, and the bill 

that is coming together, and just the cooperation that is coming 

with the administration, as well, so I am grateful for that. 

I do, as I look past—and being one of the new freshmen here— 

seeing so many inefficiencies of the past, and still some inefficiencies continuing. I was reminded of testimony back in 2005 from 

Secretary Gale Norton—then Interior Secretary—before the House 

Interior Appropriations Subcommittee. And Secretary Norton said, 

‘‘The Department currently uses 26 different financial management 

systems and over 100 different property systems. Employees must 

enter procurement transactions multiple times in different systems, 

so that the data are captured in real property inventories, financial 

systems, and acquisition systems. This fractured approach is both 

costly and burdensome to manage.’’ 

13 

I guess with that, the question is, you know, certainly you are 

aware of that. But steps that are being taken, you know, how many 

property inventories does the Federal Government currently have? 

What are some of the steps that are being done to coordinate this? 

I know this is the first step today, but just want to kind of get 

maybe more of a statement, but also ask you of—is there hope of 

where we are going, and coordinating this, bringing this somewhat 

together so that we don’t have this redundancy and, really, inability to know even what is there? 

Mr. WERFEL. You have raised, Congressman, a question that is 

certainly near and dear to my heart, and to some of the other related missions that OMB has around overseeing and ensuring 

agency investment in their system solution to support their mission 

operations, whether they be financial management or facilities 

management, that those investments are smart and at the right 

cost and at the right risk. 

And so, we have efforts underway that, I think, parallel these efforts to look for efficiencies in the way we invest in technologies. 

And I certainly can provide that information for you and give you 

an update in a separate setting. We are making progress, but it is 

another huge area of inefficiency, the way in which we invest in 

systems. But I am confident that some of the steps the administration is taking on that front are having an impact. 

Mr. HULTGREN. Well, that would be great. I would be very interested in getting that information. 

And if it is all right with you, I have got a couple other questions. My time is limited, so if I can forward that to your office and 

any information you can get us would be wonderful. I do think it 

is so important for us to address this inefficiency. And especially 

with the technological advancements that are out there, where we 

really are capable, like we have never been capable, to coordinate 

this in a new way. So I look forward to working with you on that. 

And again, I thank the chairman for his work and this important 

first step that we are taking today and these next days. Thank you. 

Mr. DENHAM. Thank you, Mr. Hultgren. The chair now recognizes Ms. Edwards for 5 minutes. 

Ms. EDWARDS. Thank you, Mr. Chairman, and thank you, gentlemen, for your testimony. I am actually glad to see OMB here today, 

since I have been trying to meet with you all for months now. So 

it would be good to ask you a couple of questions. 

Mr. Werfel, I am a little curious. When I look, for example, there 

are 243 of the properties that you have actually already identified 

as excess and underutilized properties for consideration. And I am 

wondering how—if you have come up with a pre-identified list, I 

understand that you have already plotted about 7,000 or 14,000— 

how the BRAC process can operate independently to make a judgment about which of the 14,000 properties really should fall under 

consideration, because it seems like you are kind of scripting what 

the end product would be. 

Mr. WERFEL. That is a very good question, Congresswoman. The 

way I would offer to you to think about it is that on our current 

course and speed, the way we operate today under current legal 

and regulatory frameworks, we do have the ability to move assets 

off our books, to sell them, to dispose of them. And that process has 

14 

been going on for decades. And the excess asset portfolio that we 

have today represents where we are in 2011, in terms of our excess 

footprint. 

What we are recognizing here—and as we work with each agency 

to figure out, ‘‘Is this all you have, is this—are there other excess 

assets that can be on the list that are not,’’ what we realized is 

that there are more transformational opportunities within almost 

every agency’s inventory that are not currently moving towards 

that transformation to achieve that savings. 

And there are reasons why. The most powerful of them are the 

competing stakeholder interests that prevent an agency from moving forward, because that asset, or that series of assets, would raise 

all types of issues, whether it be from a Member of Congress, 

whether it be from a higher-up within a given administration, 

whether it be a union issue, or otherwise. 

Ms. EDWARDS. I understand that, and thank you for the clarification, because I am just concerned, though, that if you have already 

got a list, then you run the risk that when a so-called independent 

process is set up, that they begin with that, as opposed to looking 

at the entire—the list in its entirety. But I will leave that to you 

all to try to figure out. 

I have another question regarding how you make determinations 

about the relative value or not of a property. For example, how do 

you assess a property that might go to use as a homeless facility 

or some other public benefit facility, versus something else, and 

what the value is and jurisdiction? 

So, for example, if there is a warehouse in Prince George’s County, how do you value the—a public benefit for that, versus a warehouse in the District of Columbia or Montgomery County or Northern Virginia? Because my experience—and you can correct me if I 

am wrong—is that, at least for the Washington metropolitan region, OMB has a history of valuing those jurisdictions very, very 

differently. And so it would be unfortunate if, yet again in this 

process, say a Prince George’s County or Montgomery County were 

to fall to the same limitations that have befallen Maryland and 

those counties in the leasing process in which GSA leases properties in the metropolitan Washington area. Do you have a response to that? 

Mr. WERFEL. I do. I have several. First, as a premise, I think one 

of the benefits of both the President’s bill and Chairman Denham’s 

bill is it brings more assets into the fray, in terms of potential 

availability for public benefit conveyance. On our current trajectory, we are not producing as many assets as we could that could 

potentially be used for the benefit of either the homeless or a local 

education institution or a local government. And so, goal one is increase the number of assets that are available. 

My second response is that today it is just an enormously complex environment, because you have, you know, approximately 13 

different vettings that these properties have to go through for a variety of different reasons. And it is not a very cohesive decisionmaking process that takes place over—when you start looking 

across the inventory. Why a certain asset didn’t end up with this 

legitimate stakeholder interest versus that one can be difficult to 

15 

kind of weave a common story through, because of how complex 

and case-by-case it is. 

What the proposal that we are—and, oh, by the way, that complexity lengthens the time that these back-and-forths go, and the 

assets sit on our books for longer and longer. 

The benefit of the BRAC model, I think, is that it drives a decision. It listens to all those stakeholder interests in a collective way, 

and it says, ‘‘Based on a broader set of interests, including the community itself, the larger taxpayer, the deficit, the mission of the organization, here is the decision that we are coming to.’’ And those 

decisions tend, in a BRAC environment, to be driven more quickly 

on a larger set of assets than they do when we do it asset by asset. 

Ms. EDWARDS. OK. My time has expired, and so I would just say, 

one, thank you, Mr. Chairman, for bringing this forward, following 

our meetings earlier in the year, but also just to caution OMB that 

there were problems that were—that resulted to local communities 

in terms of the costs that they had to incur when BRAC happened. 

And I hope that we are taking into consideration that we wouldn’t 

be putting on more burden to local communities with the transfer 

of these assets. 

And that would be something that we would look for, having 

learned that lesson, particularly around transportation infrastructure, where the BRAC process was concerned with Defense facilities. 

And with that, Mr. Chairman, thank you very much. 

Mr. DENHAM. Thank you, Ms. Edwards. The chair now recognizes 

Mr. Barletta for 5 minutes. 

Mr. BARLETTA. Thank you. Mr. Werfel, I am encouraged that the 

administration and our subcommittee, through Chairman Denham, 

have made major strides towards achieving real savings for the 

American people. 

One difference in the proposal relates to when the commission 

terminates. Our legislation terminates the commission in 6 years, 

and the administration does so in 12. What are your thoughts 

about the termination date of the commission, and what would the 

benefit be of having a longer period of time? 

Mr. WERFEL. You know, again, I think there are some elements 

of the bill where it is just different on the how and the means, but 

the ends are the same. And I think, as a general principle, we are 

open to any suggestion for the how. And so, if in Congress’ wisdom 

a shorter-termed board is the way to go, I don’t think we would 

have a major objection. 

What I would offer is that, if you look at the BRAC process, 

which has saved a lot of money—in fact, just looking at the numbers we have today it is expected to save $80 billion over the next 

20 years, or about a $4 billion-a-year run, which is much higher 

than we see on the civilian side—it takes a long time. And, there 

has—you know, BRAC has been in place since around 1980, and 

there are still activities underway that have a positive return on 

investment, and still a need for that type of framework, to make 

sure that our opportunities don’t get grinded by the current process 

that we are in. 

So, I would argue for a longer leash, in terms of allowing the 

board—I think they should be driven to start generating savings 

16 

early and often, but I also think that, as we churn forward in our 

inventory, that additional opportunities are going to emerge, and I 

think we are going to find that this independent process is the real 

kind of turnkey towards getting past what we have been involved 

in. 

Of course, we could go with 6 years and then Congress can revisit whether to reauthorize, based on the performance of the board 

over the first 6 years. I think there is a lot of different models here, 

and we are open to discussing the best one. 

Mr. BARLETTA. Thank you. Ambassador Kennedy, thank you for 

sharing the State Department’s successes abroad. Disposing of 

properties in foreign countries is likely to have some unique challenges. Can you give us examples of how the sale or disposal of 

overseas properties may be similar or different from domestic properties? 

Mr. KENNEDY. Yes. Thank you very much, sir. The basic issue 

that we face has two components. 

The first is that in many countries in the world there is not a 

free market, as we have in the United States. One can buy property in the United States, essentially subject to only zoning regulations and the availability of funds. This is not the case overseas; 

many nations do not have a public sector, as we have. The only entity from whom you can buy or sell property is the national government, or parastatal elements thereof. And so, being forced to buy 

or sell to that entity carries with it a very great different number 

of burdens, and potentially some opportunities. 

The second is legal requirements in foreign countries. Foreign 

governments, as does the United States, under the Foreign Mission 

Act that the Congress helped the State Department enact, requires 

us to reach or achieve permissions from a foreign government to 

buy or sell a piece of property. So, those are basically the structural 

issues we face. 

Other issues that the State Department faces is that State Department properties overseas, as you can imagine, are very, very 

special properties, having physical security requirements, technical 

security requirements, communications security requirements. And 

all those have to be factored in. 

So, we fully support both the administration’s proposal and the 

intent of the chairman’s legislation. And these are practices that 

we have been engaged in for many years. We wish to continue, we 

want to be a full participant with OMB and the Congress in going 

forward. 

My major effort here today is to outline why the operations are 

slightly different, not in terms of the goals we wish to achieve, having the most cost-efficient property utilization in the world, but just 

that overseas conditions are radically different from domestic conditions in the United States, and we wish to achieve the goals in 

the right way. 

Mr. BARLETTA. Thank you. And I am happy to see the cooperation. Thank you, Mr. Chairman. I yield back. 

Mr. DENHAM. Thank you, Mr. Barletta. A lot has been talked 

about as we move forward on this bill. Obviously, new properties, 

new agencies, new opportunities are coming up. And one of those 

is the overseas properties. 

17 

How much money do you think can be saved from the overseas 

properties, Mr. Kennedy? And you have touched on some of the 

challenges you think that we may have, but we are going to have 

challenges in every different agency. I mean there are some 

uniquenesses in other agencies. So I am mostly concerned about 

what type of savings you think we can see from the overseas properties. 

Mr. KENNEDY. Well, Mr. Chairman, we have identified, as part 

of our ongoing efforts, we have identified over 76 properties, and 

we are now looking at each one of those in terms of its marketability—can I achieve host government approval to sell it? What is 

the market in that country at this time? And, therefore, we will 

be—as I said—working those right now to achieve a complete list. 

I guess, as the benchmark, if I might, we have been able to sell 

properties over the last few years. And with those properties that 

we have sold, we have taken the proceeds, invested them in purchasing for the United States Government overseas 265 additional 

properties, replacement properties. And that has saved us annually 

over $11 million in rent. 

For a budget the size of the State Department’s operating budget, that is a significant savings. And so, what we do every year, 

every day, is look at our property assets overseas, identify those 

that are underutilized, that are potentially, as you well outlined, 

the opportunity to sell a high-value property. 

One of the activities we are engaged in now is we have three 

aging properties in central London. It will take us hundreds of millions of dollars to upgrade those properties, because they are over 

50 years old, to replace the heating, to replace the air conditioning, 

to replace the wiring, to make them fire safe. And even then, because of their locations, we are not going to have them secure, because of the proximity to the streets in central London. 

We are working through a process now in which we believe that 

we can sell those three properties in central London, and with 

those proceeds of sale build an entirely new embassy in London at 

no cost to the taxpayer. So that is another example of what we try 

to do. 

And going to one of the very good points you have made in your 

5th of May statement is taking a high-value property, and see if 

we can get, literally, the highest and best use for it. And, in the 

case of London, it is to sell the property, and we get an entirely 

new embassy facility at, literally, no cost. 

Mr. DENHAM. Do you have concerns of being included into this 

bill? 

Mr. KENNEDY. I believe, sir, that since we meet the conditions 

that you have already outlined, I have no problem being within the 

bill. 

But I believe that there has to be a legislative acknowledgment 

of the special needs and requirements that I was outlining to Mr. 

Barletta that we have to do, both in terms of what is the market 

and the legal structures overseas, and what are the national security implications of real estate overseas, which, as I noted in my 

statement—when you say ‘‘the American Embassy,’’ that is not just 

the home of the State Department, it is the home of every U.S. 

Government agency operating in a civilian way overseas, and that 

18 

we are, in effect, the consolidated field offices that you referred to 

in your May 5th statement and Controller Werfel referred to in his. 

Mr. DENHAM. Thank you. And, Mr. Werfel, you know, one of the 

things that critics continue to talk about is this whole fire sale. We 

are going to go out there and do this fire sale on all these properties. 

And, first of all, I just don’t think that that is a fair interpretation of what this bill’s goals are, or what we plan on doing in the 

future. You know, we think that there are opportunities, again, to 

sell these high-dollar properties. 

But how do we ensure that Federal agencies evaluate all of the 

options when they are reviewing properties on, you know, some of 

the things that Mr. Kennedy is talking about, and making sure 

that we are still meeting the needs of the American people, at the 

same time being able to consolidate our footprint and sell off the 

things that we just don’t need, or outlive their usefulness. 

Again, our goal that we have talked about is not selling properties on a down market, but actually selling the unique properties 

that we just shouldn’t have in our inventory. 

Mr. WERFEL. Yes, I think you have to be strategic. And there 

are—you know, the real estate market across the country is different in different locations. And some of the high-value assets that 

we believe we have are in areas of urban locations where the markets are still robust, and where a good deal can be made on behalf 

of the taxpayer. And you certainly don’t want to leave those on the 

table. 

At the same time, you have to recognize that there may be better 

approaches to protect the taxpayer interest than just, you know, 

fire-sale’ing assets into a soft market. This is not easy stuff, and 

Federal Government is constantly looking for ways to kind of navigate this terrain. I think GSA, and the expertise they bring to the 

table, and the way in which they serve other agencies plays a critical role there. 

But I think I want to transition a bit into the board itself. The— 

what the board, I think, opens up is two things. First of all, it puts 

properties that—it tends to be that the higher valued properties in 

the more choice locations are the tougher ones to get through, politically. And so, the board enables us to tap into those opportunities. 

And the other key point is it is because we are tapping into those 

opportunities, you are freeing up resources that can be reinvested—some of it will go to deficit reduction, a majority—but can 

be reinvested. And those reinvestments can be used as incentives 

to agencies to get them more motivated and more thinking strategically about how to make the right decisions. We are just trying to 

find the right model, the right set of incentives. And right now we 

are falling short and we are underperforming. 

Mr. DENHAM. The chair now recognizes Ranking Member Norton 

for a second round of questioning. 

Ms. NORTON. I only have another question or two. Mr. Werfel, 

you testified about—in answer to the chairman’s last question 

about fire sales—that you had to be strategic. Well, I notice a difference in the timeline of the two bills. The President’s bill would 

have the board operate for 12 years, the chairman’s bill for 6 years. 

19 

In light of his question on fire sales and—for example, you might 

not want to sell in the kind of market we are just coming out of— 

what difference would the timeline of the board make? 

Mr. WERFEL. I think it would—it could allow the board to pace 

itself differently, knowing it has a longer life span. 

Again, I think the board’s primary challenge—one of its primary 

challenges—is sequence. And what are the right opportunities to go 

for first, that are going to optimize the return for the taxpayer? 

And with the right set of expertise on the board, they are going 

to be able to factor in issues such as, well, this market has six or 

seven properties that would be in our sites for realignment, but 

why don’t we hold back on those properties until the next round, 

because we believe that it’s not the right time, but this market, we 

do think it is the right timing. And with a longer leash, in terms 

of the commission’s life, I think that it releases some of the pressure on trying to push more in. 

At the same time—and these things always have these public 

policy tensions—I think you would want the board to be evaluated 

and feel some pressure that its life depends—its future life depends 

on generating meaningful savings for taxpayers, so they can’t sit 

too long on some of these opportunities. 

The bottom line is, can we find that right equilibrium, or that 

right balance point? I think it is—I think we have probably hit it. 

It is probably somewhere between 6 and 12 years, which is probably sufficient time to allow them to pace themselves, with also the 

accountability that, in that timeframe, we want to see, you know, 

savings in the billions of dollars that were envisioned by the bill. 

So, I think we have triangulated the right timeframe, we just 

have to settle in on what we decide. 

Ms. NORTON. Yes, and this board is going to be subject to the 

same kind of public scrutiny that private sector owners are. If they 

sell and get underpriced relative to somebody else who looks smarter, then the committee is going to have to wonder, ‘‘What were you 

thinking?’’ Because that is what they are going to be—there is a 

comparison out there. It is known as the private sector, and who 

is getting what for what. 

And as you say, the expertise of the commission should allow for 

that. But we also know what the private sector does. The private 

sector, for example, in this city has been buying up property for a 

long time and waiting, waiting, for the time to sell. 

And when—to give you kind of a typical example, with the DHS 

going up in Ward 8, now that is a property that nobody would have 

thought of selling, or could have sold. But now that the Federal 

Government is bringing 14,000 employees to a property it owns, 

but was moribund, property values have begun to rise very substantially. And I can just see the commission being subject to great 

criticism if it did not show that kind of strategic sense of when to 

hold and when to sell. 

And I thank you very much. 

Mr. DENHAM. Just one final question before we go to the final 

panel. Selling off a number of these properties can generate millions of dollars, as we get these properties back on the tax rolls, 

generate millions of dollars for local government, too. The challenge 

is going to be finding a lot of these properties. 

20 

The private sector expertise, and their proposals, can help us to 

generate a lot of those properties that aren’t on the list today. How 

do we inject their expertise and proposals into this process? 

Mr. WERFEL. I think the board itself, once it is created, like 

BRAC, will hold hearings and meetings and sessions on a whole— 

with a whole host of different interest areas. 

And I think the commercial real estate expertise, which I think 

will be embedded in the board itself, because I think you would 

pick members with commercial expertise, but they can reach out to 

broader expertise in commercial real estate. 

I mentioned doing regional reviews of things like Dallas-Fort 

Worth or Miami-Dade or the Bay Area, whatever it happens to be. 

And in that regard, I would imagine that when they are sitting 

down, they are meeting with a whole host of stakeholders to understand how this real estate footprint plays out, and where the opportunities are, including commercial real estate experts with specific 

knowledge of that geography and those issues, as well as community organizers, community developers, the local educational institutions, the mayor. All of this brings together information that 

helps generate their ultimate recommendation. 

The point is none of this is happening in a concerted way today, 

and it should. And if it does, I think that is where the efficiencies 

and the savings will materialize. 

Mr. DENHAM. And, important from the commercial standpoint 

but also—you know, one of the things I saw on the State level, 

when we put this out for the entire public to see, you had some 

people that wanted to expand their backyard, but you know, the 

grass had grown up where the government was not taking care of 

its property, and didn’t know that there was a sliver, or a small 

piece of property, or somebody wanted to expand their parking lot. 

I imagine there is also—as we dive into this across the entire Nation, we will find that the private individuals will find some of 

these properties for us. How would you also accommodate getting 

this out to every taxpayer, so that they can be aware of this opportunity as well? 

Mr. WERFEL. Well, I think transparency is going to be a critical 

element. It is always a critical element of any management initiative and push. And the challenge with real estate transparency is 

the security issue. And we just have to make sure that we are 

cleansing our information that we make public from any kind of 

national security threat that can be had. 

But I think that when—and that is part of the challenge, but it 

is an overcomeable challenge. And so, when the commission or the 

board moves into an analytical phase of a given region or a given 

area, then as part of that they are going to have to make some of 

the footprint, that I described earlier in response to Congressman 

Hultgren’s questions, available so people can see and understand 

it and weigh in. 

So, I don’t know necessarily right now if I know exactly how I 

would articulate how transparency is going to play out, but I know 

that it is a critical objective and piece of this. 

Mr. DENHAM. Thank you. Thank you for testimony. Your comments have been very insightful in helping out today’s discussion. 

I appreciate both of you coming in today. 

21 

We will now call our second panel of witnesses, the Honorable 

Anthony Principi, former Secretary, U.S. Department of Veterans 

Affairs, and former chairman of the 2005 Defense Base Realignment and Closure Commission. Also, Mr. David Winstead, former 

commissioner, Public Buildings Service, U.S. General Services Administration, and Mr. Michael Glosserman, managing partner of 

The JBG Companies. 

I would ask unanimous consent that our witnesses’ full statements be included in the record. 

[No response.] 

Mr. DENHAM. Without objection, so order. 

Since your testimony has been part of the record, the subcommittee would request that you limit your oral testimony to 5 

minutes. 

Thank you. And, Mr. Principi, you may begin. 

TESTIMONY OF HON. ANTHONY J. PRINCIPI, FORMER SECRETARY, U.S. DEPARTMENT OF VETERANS AFFAIRS, AND 

FORMER CHAIRMAN, 2005 BASE REALIGNMENT AND CLOSURE COMMISSION; DAVID L. WINSTEAD, FORMER COMMISSIONER, PUBLIC BUILDINGS SERVICE, U.S. GENERAL SERVICES ADMINISTRATION; AND MICHAEL GLOSSERMAN, MANAGING MEMBER, THE JBG COMPANIES 

Mr. PRINCIPI. Thank you, Mr. Chairman. Good morning, Chairman Denham, Ranking Member Holmes Norton, and members of 

the subcommittee. I welcome your invitation to comment on your 

introduced legislation, H.R. 1734, the Civilian Property Realignment Act. I commend the President and you, Mr. Chairman, for the 

introduction of this much-needed legislation, and I certainly commend Ranking Member Norton for her enormous contribution to 

this effort over the years. 

When I appeared before the committee on April 6th I recommended several changes to the administration’s proposal to establish a civilian property realignment act. I am gratified to note 

that a number of those recommendations are included in the bill. 

For one, the legislation establishes a commission vice a board, 

expands the number of members on the commission to nine vice 

seven, and calls on the President to name individuals to the commission, in consultation with the leadership of the House and Senate, and requires Senate confirmation. 

Further, the legislation holds the President, and not the director 

of the Office of Management and Budget, rightfully accountable for 

the review and submission of commission recommendations. In my 

view, these steps will bring greater independence to the commission, and more transparency to the process. 

As I indicated at the April 6th hearing, independence and transparency are the sine qua non to the success of this process. This 

is especially critical in the independent analysis of all Federal 

properties, whether they are on the list for closure or not. And I 

say this from my experience as chairman of the 2005 BRAC commission. We considered properties that the Secretary of Defense did 

not have on the list. And certainly, as Secretary of Veterans Affairs, I was under enormous pressure not to close any facilities, 

whether they were antiquated or not, that I felt were diverting 

22 

much-needed resources to 21st-century health care for our Nation’s 

veterans. 

You have requested that I review your legislation and provide 

additional comments and recommendations. I have very few. Section 11 calls for the establishment of standards and criteria, and 

outlines 9 principles upon which to develop criteria. It is not clear 

to me if there is a difference between standards and criteria. And 

in the absence of term definitions, I would recommend that the 

term ‘‘standards’’ be defined or deleted. 

I applaud the nine principles, and would suggest that they be established in law as the criteria against which Federal agencies and 

the commission must evaluate each facility for disposition. I cannot 

overemphasize the importance of criteria, independently established and implemented. 

Section 12 outlines the duties of the commission. While the legislative language infers that the commission utilize criteria, it is not 

clear how the commission would utilize that criteria. In the Base 

Realignment and Closure Act, the BRAC Commission, in weighing 

each recommendation submitted by the Secretary of Defense, is required to explicitly state whether the Department significantly deviated from any of the eight criteria, and point out the criteria deviated before making a recommendation. I, therefore, propose that 

the language in section 12 be tightened to more clearly define the 

role of criteria in commission deliberations. 

Finally, I would suggest again the importance of the accounting 

of the real savings to taxpayers generated by the entire process. 

For the 2005 BRAC, the Department utilized an accounting system 

that estimated savings by realignments of nearly $48 billion over 

20 years. According to the GAO, that saving estimate has now declined to less than $20 billion, primarily due to vastly under-estimated implementation costs. I would highlight that our BRAC was 

as much about transformation of our military force structure as it 

was about cost savings. 

I would urge that the GAO be required to track and report to the 

Congress periodically on civilian property realignment cost and 

savings. 

Finally, I note that section 51 provides that implementation of 

the commission’s recommendations are to be undertaken pursuant 

to existing authorities available to GSA and the Federal agencies. 

While the legislation mandates that all recommended actions be 

completed no later than the end of a 6-year period, the legislation 

leaves the ultimate action an open question. 

In order to ensure prompt implementation of the recommended 

actions and the disposal of such properties in a manner that will 

generate the most revenue to the government, and in order to avoid 

fire sale disposals, the legislation should specifically enable the disposing authorities with the ability to enter into ground leases, sale 

lease-backs, or other arrangements pending ultimate implementation of the commission’s recommendation. 

As you know very well, the need for swift disposal of non-performing assets was recognized and well-managed during the savings and loan crisis in the late 1980s and early 1990s, with the establishment of the Resolution Trust Corporation, which I believe 

could be used as a possible model for this commission to dispose 

23 

of properties. Their sole purpose was to dispose of properties 

promptly at a maximum return to the taxpayer. It was a Federal 

agency that had that only purpose to fulfill. 

And finally, with respect to section 20, in order to avoid potential 

confusion with respect to leasing authorities that some Federal 

agencies currently possess, I recommend that subsection A be 

modified, so as to recognize those authorities as not being affected. 

And I might just add one point about overseas properties. Believe 

it or not, the VA owns a property in Paris. I recall, when I was deputy secretary of Veterans Affairs during Bush 41, I was asked by 

the Congress to take ownership of a building, a magnificent, valuable building in the golden area of Paris, France. It was a building 

that the American Legion inherited after World War I called the 

Pershing Hall, named after General Pershing. The government, 

U.S. Government, finally took possession of the building after bailing out the American Legion, but it fell into a state of disrepair. 

Monies were being stolen, artifacts were being stolen. And no one 

seemed to know what to do with this building. 

So, the Congress asked if I, the VA, would take possession of it. 

We did. We closed it down, we cleaned it up. We leased it to a 

major hotel. It is now Pershing Hall Hotel. All the artifacts are intact. It will always bear the name Pershing Hall, and the VA is receiving income on a long-term lease for that property. 

So, I think even overseas it can be done, and done in the right 

way. Thank you, Mr. Chairman. Thank you, Ranking Member Norton. 

Mr. DENHAM. Thank you, Secretary Principi. 

Mr. Winstead, you may proceed. 

Mr. WINSTEAD. Mr. Chairman, Congresswoman Norton, it is 

great to be here. I am David Winstead. I am an attorney with 

Ballard Spahr here in Washington, DC, and I had the pleasure 

from 2005 through 2008 to be commissioner of public buildings at 

GSA. So I would like to provide some perspective to you of both 

that experience, the tools they have, as well as the private sector 

view, which I had prior to going to GSA, and clearly since. 

I would also mention that I chair a committee at the Urban Land 

Institute which is made up of the—of public sector real estate executives. And part of their objective is to show best case management of real estate, and what to do with surplus, as well as existing fully utilized real estate. 

I would like to comment on the bill specifically. I think the Civilian Property Realignment Act, the purpose under section two is 

very targeted. And I think you are looking at the right issues, in 

terms of occupancy of space, footprint of building, utilization, vacancy rates. Obviously, looking at underutilization and value of assets is key. And then, looking at redundancy. And obviously, in 

managing the portfolios of GSA for 3 years, there were cases of redundancy and efforts of the agency to move to limit that and—or 

to surplus those properties. 

I would also mention that during my tenure we did strengthen 

the disposal process at GSA and staffed up sufficiently to basically 

shorten the timeframe of being able to deal with surplus properties. 

So, I think the intent of this bill is focused on resources and, 

most importantly, I think giving an independent review of existing 

24 

portfolio of owned properties, as well as leased actions. This committee knows well that GSA manages leased properties extremely 

well, in terms of limiting vacancies to less than 1 percent, and 

responsing to the market if you need to contract in space or expand 

in space. So, I think that those—you know, that they have done a 

very good job, in terms of the lease side. 

In terms of surplus properties, I do think an independent review 

of a group like this would be worthwhile. There are certainly assets 

that we struggled with, like the Old Post Office, that is very much 

underutilized and is now on the market to look at private sector 

options there. 

On March the 30th, Administrator Johnson did testify about the 

other things underway which are mentioned in this bill, and that 

is look at, actually, the workspace solutions for Federal agencies, 

and to look for the case of DHS consolidation in St. Elizabeths, but 

at the same time reducing the amount of leased space that they 

need. Same with the FDA in White Oak, Maryland. 

So, H.R. 1734 does, I feel, provide a very valuable public-private 

partnership and an independent commission to take another very 

concerted view of these 14,000 assets that Controller Werfel talked 

about, and savings of $15 billion as an objective. 

I would say, though, that it would help this commission, I think 

the value it has to GSA and the Federal Government and all 

landowning agencies on the Federal level, is really managing that 

competing stakeholder process, which the controller talked about at 

great length. 

There are a couple distinctions I would like to make. One is that, 

unlike the Public Building Act did vest in GSA a very flexible 

building authority of a 20-year—up to 20-year ability to lease 

space. And now, over 50 percent of occupancy of the Federal Government is in leased space. And so, it does have the ability, 

through terms and contracts, to move space, to terminate space, to 

react to tenancy consolidation. And I think that does make it a bit 

unusual, compared to some of the BRAC experiences. 

Secondly, I think the Executive Order 13327, which is the— 

which was established the Federal Real Property Council—I 

worked on the asset management subcommittee of that—has, in 

fact, put in place an awful lot of data, much like a private sector 

real estate REIT creates data on performance of individual assets 

achieving return on investments of 6 percent, in the case of GSA. 

That data does exist, and it has been about 7 years now. So I think 

this commission can avail itself of very accurate current data on existing assets and their utilization. 

But looking at packaging a group of assets that would be essentially immune from the politics of local communities, when in fact 

those assets are underutilized and can return better value by being 

disposed, I think has a very worthwhile purpose. 

Last two things I would mention is that the private sector needs 

to be very, very involved in this process, not only in terms of the 

members on the commission, but I would say very much in the implementation of this. I think GSA has those resource, and is the 

landlord of the Federal Government. But I think the private sector 

needs to be involved in that disposition process. 

25 

I would mention one case, just as an example of what can happen—or two, actually—one, a GSA case, very briefly. There was an 

asset we had in Baltimore County—this goes back to 2006, 2007— 

that was valued at about $20 million. It was a part of—our asset 

managers and disposal people at GSA worked closely with the host 

county, Baltimore County, Maryland, who had just master-planned 

and rezoned that whole area around Martin State Airport, a general aviation airport, and increased because we partnered, because 

the government partnered in disposing that property with the host 

county under their zone authority to increase entitlements, increase value, GSA got about $15 million more in disposing of that 

property than if they had acted independently without engaging 

with the host jurisdiction. 

And lastly, very recently I was involved in a conveyance by the 

U.S. Postal Service of a surplus property. And they have a very innovative, very open—more so than even GSA—about ability to look 

at assets and capture value for, obviously, the post office, which is 

under operational constraints and fiscal pressures. 

And what they did in this regard is, looking at fair market value, 

three independent appraisers, but then they looked at entitlement 

value, and they actually had a negotiation session, where they look 

at both what could it be redeveloped as—a hotel, office building, 

multifamily residential—were they able to add a component on to 

fair market value to essentially have a part of the ride that would 

be created over a number of years in the redevelopment. 

So these are the kind of things that are, in fact, happening, and 

can happen. I think this commission can identify those assets as 

a group, move them through the process that you have—will establish on the bill. 

The last thing I would mention—and Ranking Member Norton 

has been very involved in this—I would really encourage Congress 

to look also at the tools that 412 authority gave GSA in the Appropriations Act of 2005, because it did authorize the agency to look 

at conveyance through sale, lease-back exchange, and other tools 

that, to this day, we are still constrained under interpretations of 

the scoring rules. And this might be an opportunity, with the support of OMB that we witnessed earlier—to look at how those tools 

can be applied to the objectives of this commission, and moving 

those assets. 

So, that would be my last comment, and I would be happy to answer any questions. Thank you. 

Mr. DENHAM. Thank you, Mr. Winstead. 

Mr. Glosserman, you may proceed. 

Mr. GLOSSERMAN. Good morning, Chairman Denham and Ranking Member Norton. The JBG Companies has been an active investor, developer, and manager of commercial real estate properties in 

and around the Washington, DC, metropolitan area for over 50 

years. We have developed, owned, and managed over 30 million 

square feet of office space, over 15,000 residential units, approximately 4,000 hotel rooms, and over 5.5 million square feet of retail 

space. 

Over the years we have worked extensively with GSA on a number of high-profile projects, including the development of the 1.4 

million square-foot Department of Transportation headquarters, 

26 

which we still own, and other large leases throughout the city. We 

are moving forward currently with projects for the National Cancer 

Institute and the Social Security Administration. We have enjoyed 

our close, cordial relationship with GSA over the years to create 

highly efficient projects and leases that meet its requirements for 

security, energy efficiency, and functionality. 

While our experience is predominantly with GSA and the Washington metropolitan area, we believe that the Civilian Property Realignment Act is an important step towards providing additional efficiency for all of the government’s real estate portfolio, and will 

generate significant value for the Federal Government. 

Many of the properties in the government’s real estate portfolio 

are in prominent locations on sites with significant excess density, 

and therefore, untapped value. This act would provide the government with the ability to capture that additional value and reduce 

costs for taxpayers through the sale, repositioning, or redevelopment of these assets. 

Many existing government buildings are highly energy inefficient 

and demand significant annual maintenance funding to continue 

their operations. Many of these buildings are in desperate need of 

capital reinvestment, yet the government lacks the funds to make 

the necessary capital improvements. The act would provide a path 

for the government to put its agencies into new or renovated buildings at little or no cost to the taxpayers, given that the government 

would be able to take advantage of the significant value that already exists in many of its sites. 

Put very simply, this act provides a win-win situation for the 

government and the private real estate investment community. 

Under the act, the government would be able to transition many 

of its agencies into new, more energy efficient facilities that require 

significantly less annual maintenance expenses. The private sector 

would be able to invest in prominent real estate sites that were 

previously unavailable. 

Depending on the government’s need in a particular location, the 

government could sell or perhaps lease a portion of the existing site 

to a private investor or developer, and use those proceeds for a 

newly constructed building on the remaining portion of the site. 

The private sector portion of the site could be developed based 

on highest and best use, to create an improved mix of uses, including office, retail, residential, or hotel, that would support the area. 

As I noted previously, the untapped value in many of the existing 

government sites is large enough to cover the cost of constructing 

a new Federal facility without any net outlay by the government 

over the payment received for excess density from the private sector. In fact, I believe many of these sites will even produce excess 

capital that can be returned to the government and used towards 

debt reduction. 

Mr. Winstead mentioned the Old Post Office building. The Old 

Post Office building has been used in recent history as an office 

building. This wonderful building has been sitting, underutilized, 

for almost two decades. During this period, the government has 

spent more money to operate and bandage the building than it has 

received in rent from the current Federal occupants. I believe this 

27 

has been previously reported of being in the range of a $5 million 

loss per year. 

Over this period, the building has also been allowed to slowly degrade through the government’s inability to appropriate sufficient 

dollars to undertake the massive recapitalization that was required. Yet this building has significant value to the private sector. 

If this legislation had been available, this Federal building would 

have been a prime candidate, returning to the government muchneeded funds to reduce the budget deficit or renovate other Federal 

assets. This bill will pave the way for these kinds of opportunities. 

I would like to also add a few suggestions for your consideration. 

I urge that the commission be empowered to identify opportunities 

that are outside the scope of what may be recommended by individual agencies. Many undervalued properties or sites with excess 

density or alternative value-add opportunities are likely to be overlooked by government agencies, which do not possess real estate 

expertise. Some of these opportunities may, in fact, be identified by 

the private sector, and the commission should be permitted to work 

within a framework that encourages and invites the private sector 

participation. 

Second, agencies may need to be incentivized to find real estate 

opportunities. Consider providing funding resulting from the value 

created back to the agencies to pay for replacing antiquated facilities or renovating existing facilities. 

And last, timing of real estate transaction to maximize value is 

difficult, at best. The timeframes proposed appear to work for a 

majority of the transactions that are being considered, especially 

those involving outright sales. However, many transactions may require substantially longer periods to extract potential value and to 

maximize value. I would encourage you to consider imposing longer 

timeframes for certain categories of assets. 

Since my time has run out, I am just going to simply conclude 

by thanking you for inviting me today, and to say that I know that 

my colleagues in the real estate industry stand ready to assist the 

Federal Government in any way they can to further the goals of 

this bill. Thank you. 

Mr. DENHAM. Thank you, Mr. Glosserman, for your testimony. 

And certainly we would agree that we want to invite the private 

sector’s participation. 

How do you think that we can identify—how do you think we can 

maximize the value of the properties, and what are your thoughts 

on how we get that input from the private sector, and actually invite them to be part of the process? 

Mr. GLOSSERMAN. I think if there was a framework that is in 

place that gives the private sector the confidence that there is a 

process that is dependable, timely, and that is going to work, what 

you will find is that the private sector will respond to that, and will 

come forward with ideas and opportunities that probably the government has not thought about, many of which the agencies or the 

commission itself simply doesn’t know about, but that bubble up. 

And Mr. Werfel earlier in his testimony indicated that he 

thought that there were a number of high-value sites that could go 

forward, and there should be a strategic approach. I agree with 

that. I believe that once this process gets started, and the private 

28 

sector sees credible evidence that, in fact, there is a process in 

place that is moving forward, and these transactions are available, 

and that this relationship is available with the Federal Government, you will see folks coming out of the woodwork to propose 

ideas. 

Mr. DENHAM. Thank you. And ideas not only on the sale, but also 

on the redevelopment and—— 

Mr. GLOSSERMAN. Exactly, for—— 

Mr. DENHAM [continuing]. Best use of the property? 

Mr. GLOSSERMAN. For density that could be transferred, density 

that could be used in a variety of ways, exactly. 

Mr. DENHAM. Thank you. Mr. Winstead? 

Mr. WINSTEAD. Mr. Chairman, to that question, I think there— 

and to Michael’s point—I think that a lot of these assets could be 

identified, and there are some—for example, obviously, the Denver 

Federal Center is one where you have a new transit service with 

surplus Federal property—it would kick-start, by being able to look 

at a development profile that a private developer might take 

through a master planning process. 

The incremental building or piece of ground owned by the Federal Government can have huge increase in value, as a result of a 

master plan approach. So I—and there is no question that this 

market, over the last 3 years, has seen an enormous increase in 

hunger by the real estate community, nationwide. I mean 2009 was 

a devastating year. There has been very little, until recently, financing and speculative real estate development. 

So I think the work of this commission would get a lot of focus. 

The government would get enormous input, in terms of ideas, 

about that asset, both in terms of the commission’s view of it, 

through the commission members, as well as private sector involvement, in terms of the conclusion. 

So, I am very optimistic that this will really generate properties 

that are no longer needed and increase value enormously, even 

above fair market value. 

Mr. DENHAM. Thank you. And we want to make sure that, as we 

move forward, we are expediting the process as much as possible, 

and not seeing any roadblocks. 

And, Mr. Winstead, as you know, the Old Post Office building, 

which we have talked about a great deal in this committee—in fact, 

it was the first hearing that we had—I mean, that property sat 

underused for decades. And even after the passage of legislation 3 

years ago by Ranking Member Norton, GSA only recently issued an 

RFP to redevelop the site. 

From your experience at GSA, how can we make sure that we 

are going to have the ability to effectively—that GSA is going to 

have the ability to effectively implement the recommendations of 

the commission, and not just go through more roadblocks and holdups? 

Mr. WINSTEAD. Well, I think—my comment earlier about the 

need, with recommendations from the commission, to have private 

sector involvement, that delivery mechanism is key. I know GSA— 

both at NCR has disposal team at every region. They have four 

zones around the country of people that—all they do is focus on 

disposal. But they don’t have the resources. They don’t have the 

29 

market intelligence to do this in an expeditious manner, to really 

capture market value that might be at hand in 1 year versus a 

year later, when there could be another recession. 

So, I really think that the private sector resources are key to 

this. And, you know, GSA has been—over the years, is increasingly 

privatized. It used to be that we had realty specialists at every 

level. Now the agency has outsourced the brokerage function. So 

that would definitely be needed. The existing management of GSA 

and disposal would need to be augmented by private sector support. 

Mr. DENHAM. Well, and certainly we want private sector support, 

we want their involvement, want them to help us identify. My concern is with government itself. I mean here you have had an agency that has sat on a property for decades. You had Ranking Member Norton, that got to the point where she had to pass legislation 

to get them to actually move on it. 

How do we make sure that, you know, we get all of the information in the world, we are ready to go, the commission gives a recommendation, we have an up or down vote in Congress, we vote 

on it, how do we make sure that it absolutely gets moved quickly, 

and that we don’t just end up with more red tape in the future? 

Mr. WINSTEAD. Well, I think this committee certainly has strong 

oversight responsibilities to ensure that, you know, they are accountable in taking the recommendations and moving out with 

them quickly. 

Obviously, what we heard in the first panel was a commitment 

from the administration, the President, OMB, to support that. So 

I think it is benchmarking. I know that when I was there we shortened the disposal process by 100 days. Now you might say that 100 

days is a long time, but we did improve it, and we staffed it up 

to do it quicker. 

With this kind of input from a commission, you will even need 

more support, I believe. The OPO had distinct issues around it. 

There were current tenancies. The historic advisory council and 

historic preservation loved the building. There were issues about 

current tenancy and other issues that kept it from moving as 

quickly as I would have liked, and others. 

Mr. DENHAM. The chair now recognizes Ranking Member Norton. 

Ms. NORTON. Thank you very much, Mr. Chairman. I have been 

looking at both of these bills. And at the moment, I am closer to 

the chairman’s bill, because I have been measuring the bills by how 

BRAC-like the bill is. 

Now, Mr. Principi knows this well. Let me indicate the 

BRACness notion. DOD has a really clean process. DOD, BRAC, 

President. That is pretty clear, without a whole lot of bureaucratic 

back-and-forth, shall we call it. 

Now, the chairman tries to bridge the gap by putting OMB and 

putting GSA in the process, because he recognizes the historic 

problems OMB has had with real estate matters being not a real 

estate agency, having little expertise of the kind that is necessary. 

He puts the OMB and the GSA together to compile the matter, the 

information. It goes to the board and then to the President. 

Now, the administration puts the OMB right in the middle of it. 

The board, those are the people with the expertise. Then it goes to 

30 

the OMB. Those are the people who have shown historically they 

have almost no expertise. And then, of course, it comes to Congress. 

Now, I have got to ask you your view—particularly you, Mr. 

Principi—of these proposals and how we should view them. 

Mr. PRINCIPI. Well, I agree with you—— 

Ms. NORTON. Particularly with the involvement of OMB. 

Mr. PRINCIPI. Yes—— 

Ms. NORTON. After the board has committed its expertise to this 

process. 

Mr. PRINCIPI. Ranking Member Norton, I certainly agree with 

you about the BRAC process. It is straightforward, it is clean, it 

is to the point. There are strict timelines, and everyone’s feet is 

held to the fire. And at the end of the day you don’t have a postal 

annex type problem. It is going to be done by the end of that 5- 

year period. And I think perhaps the administration’s proposal does 

involve OMB and others in this process that I think is going to 

delay it. 

I was impressed with the controller’s testimony, Mr. Werfel’s testimony this morning. The commitment of this administration to get 

this done is very, very impressive. And I think it is what is going 

to be needed to keep the agency’s feet to the fire. But the less that 

you can have, an outsider’s—you know, agency’s coming into play 

here and stalling the process, I think you will be better off. That 

is why—— 

Ms. NORTON. Mr. Principi, because we have got to ask ourselves, 

what is the value added? You know, if there is going to be somebody else in the process, you’ve got to be able to say, ‘‘Here is the 

value added, this is why you want that other agency in it.’’ 

Mr. PRINCIPI. Yes. Well, what I am concerned about is that, at 

the end of the 6-year period, if an agency says, you know, ‘‘We can’t 

dispose of this property,’’ for whatever reason, they report to OMB, 

but there is no concrete steps after that as to what happens. And 

that is where I think you are going to get into the same situation 

as you had with the postal annex. 

That is why I suggested the Resolution Trust Corporation model. 

I don’t know if that’s the perfect model, but it seems to me somebody has to be held accountable with the internal expertise, the 

dedicated consultants, and real estate matters in management that 

can get this property off of the Federal books and into the private 

sector. 

Ms. NORTON. Well, again, the chairman does try to breach this 

understanding that the administration has of proposals, so I comment him on that. 

I am very interested, Mr. Glosserman, in your testimony, because, you see, I see this as an innovation-laden possibility for the 

government, which does so little in the way of innovations in anything it does. And, of course, real estate market provides numerous 

opportunities for deals and innovations. And you say, in your testimony, that there is a possibility of extracting value from what the 

government owns, and using that value to build new, energy-efficient buildings. Could you describe briefly what you think the mechanics of such a deal would be, how it would operate? 

31 

Mr. GLOSSERMAN. Certainly. There is, in the Washington metropolitan area alone—and I suspect this is the case in other urban 

areas—there is a significant amount of density related to the sites 

that government buildings and assets currently occupy. 

That density is not going to be generally used, if nothing happens with the use of the asset, with the office building. So you have 

a variety of circumstances in which there may be an aged building 

on that land. 

So, one example would be a circumstance where the government 

would literally lease—in other words, monetize—the value of a very 

significant portion of that density. I will just give you an example. 

For instance, if you had a site that had, literally, 500,000 or 1 

million square feet of density, and that site were being occupied 

today by a 200,000 square-foot building that was old, or maybe the 

building didn’t occupy 100 percent of the site, if there were a process in which the government could leverage that density, and monetize that density in return for creating funding—in which you demolish the building, build it on a different part of the site, move 

the use—there are a variety of ways to, if you will, free that density up, or simply move it to another site and to sell it into the private sector. I think Mr. Winstead was alluding to that kind of process. 

But those situations exist in numerous—I can give you probably 

numerous examples—just in Washington. 

Ms. NORTON. Mr. Winstead? 

Mr. WINSTEAD. Ms. Norton, again I think we have a model here. 

Mr. Principi talked about the RTC, but I do differ with this a little 

bit, because the RTC was in a savings and loan crisis with a huge 

amount of action, huge assets that needed to be moved very, very 

quickly. And, in reality, the Federal Government got a small percentage of value in those assets. There were huge fortunes made, 

as a result of the purchase in—under a constrained time period of 

RTC assets. 

I think, as you all evaluate this bill and continue to deliberate, 

I think one of the things that you well know—because I know you 

were chairing the committee when this came about—is that we 

really do have a precedent. I mean the brokerage community— 

across this country with four national contracts, when they have a 

space need they go through an allocation of an even and competitive commissions to try to find those solutions. 

That is what I think is needed here, as well. I think once the 

commission makes a recommendation, there is a way to deal with 

these assets in a very similar manner as they had with the brokerage contract and currently underway. I mean there is plenty of aggression, there is plenty of effort to get out in the community and 

find users and create higher value for the Federal Government 

through the broker contract. 

And they need a little bit different skills. I mean scoping of assets is talking, like Mike, about what are the other attendant values that are created in redevelopment. So it is not just a broker 

function. But I think that privatization approach to the recommendations, and ensuring it is done over a short period of time, 

it is very important. 

32 

One last comment, and it has to do with the time period. I mean 

one bill has 6 and one has 12 years. And the controller talked between 6 and 12. I do think it is important, for the reason of the 

RTC experience, to give GSA, together with, you know, whoever 

supports them in this effort, to give them time to maximize those 

assets. 

I know right now, for example, WMATA has a very competent director of real estate, and he is holding back, because he knows that 

a lot of the WMATA assets are not of the value they should be, or 

could be, in 2 years. Now—and that is the same kind of judgment 

that the team that would be administering these recommendations 

needs to take. 

And yet I think there are huge opportunities and huge returns. 

And, as you know, GSA now—post the ARRA funding—is now very 

much in need of money to maintain existing buildings, and to service expanding needs. So I think it does have a revenue benefit. 

Mr. DENHAM. Thank you, Mr. Winstead. At this time the committee will have one more final round of questioning. The chair 

now recognizes Ranking Member Norton. 

Ms. NORTON. Thank you, Mr. Chairman. I just have one more 

question. It really would be for all three of you, and it comes off 

of comments made with respect to the last question. For example, 

you, Mr. Winstead, mourned about the small value that the government reaped after the redevelopment—the RTC, as a result of the 

RTC. 

Now, I am trying to take the amount of money—I think the administration’s goal is to sell $10 billion to $12 billion. I want to 

know whether you think—the three of you think—that is a realistic 

number. I think they think you can get that out of the first round. 

And I would be particularly interested in how a private sector, 

which had such assets—obviously, not as large—to liquidate, highvalue assets, would go about doing so, particularly if it felt there 

was a time certain of some kind involved. How would that private 

sector, which has a bottom line, protect its interests in a situation 

like that? Or would the private sector simply never encase itself in 

a timeframe with respect to valuable assets? 

Mr. GLOSSERMAN. If I understand the question, as I indicated 

previously, if there is an uncertain timeframe that the private sector is forced to deal with, obviously, that will make it much more 

difficult to proceed in an efficient manner. 

I will say, on the other hand, that having the flexibility on the 

part of the commission—I was alluding to the timeframes involved 

here—the private sector, as long as it knows that there is a process, though it may be lengthy, is willing, I think, to pursue this 

value that it would see in these assets. 

I think the private sector wants to know that the process, 

though, is a certain one, despite the fact that it may take an extensive period of time—— 

Ms. NORTON. Well, I am interested in what the private sector 

would do if it held assets like—— 

Mr. GLOSSERMAN. It—— 

Ms. NORTON. If the private sector held assets, high-value assets, 

it is in a down market, and it has got to protect itself, but it has 

33 

got to get rid of this asset. And that is what the commission will 

find itself—— 

Mr. GLOSSERMAN. This portfolio is overwhelmingly large. It is the 

largest real estate portfolio that one could imagine. So there will 

be assets that the commission, I would think, would want to sell 

right away, because—mainly, it is expensive. That is the way we 

would view it in the private sector. It just is not worth holding an 

enormous percentage of these assets, given the cost to the government of maintaining them. 

On the other hand, there are a number of assets that we would 

view as it is not the right time, but we have a framework within 

which we can take the time to go maximize value. And there are 

the tools that we have to work with. And perhaps not just sales. 

In public-private partnerships, where we have an opportunity to 

take advantage of an upside, so that we make a transaction today 

at a certain base, but we live for the upside, and for the improved 

markets. 

There are a variety of ways to address that, which is how we 

would do it, and how I would think the government would want to 

think about this. 

Ms. NORTON. Mr. Winstead or Mr. Principi, did you have any 

comments on that? 

Mr. PRINCIPI. Well, I would add that I agree that maximizing 

revenue to the Federal Government is critically important. And in 

order to avoid these fire sales of properties, I think the disposing 

agency, whether it be the individual agencies or GSA, should have 

the authority to enter into arrangements such as leases or sale 

lease-backs, until the ultimately implementation of the commission 

recommendations can be done. Maybe in a down market, an economic recession, it might not be the right time to sell a property, 

but enter into some kind of arrangement until that implementation 

can happen. 

Mr. WINSTEAD. Madam Chair, I think that Mr. Glosserman described this issue of maximizing a private-sector asset. And so, 

GSA, together with support team, you know, would be obviously 

needing to be charged to doing the exact same thing. 

And I think the reality is that, fortunately, the market seems to 

be moving up a bit from a 2-year. So we could have a situation 

where values are increasing. So, if this commission gets underway 

quickly with the passage of this legislation and gets staffed up, I 

think it is going to hit the market at the right time. And, obviously, 

that will go to future needs of leasing or Federal building. 

You and I do know a lot of the issues that, in certain sectors, 

where there is surplus capacity, and we dealt with that during 

your tenure. Thank you. 

Mr. DENHAM. Thank you. And just a final question. Mr. Principi, 

you suggested that the Resolution Trust Corporation used in the 

1980s and 1990s could be used as a model. Can you just further 

elaborate on that? 

Mr. PRINCIPI. Again, I think that the Resolution Trust Corporation model worked reasonably well. Now, I—you know, I won’t dispute Mr. Winstead’s characterization, that a lot of people got rich 

and the Federal Government did not get an adequate return on 

their dollar. I really can’t address that. 

34 

But again, I just think that there has to be some independent 

agency—entity that has the taxpayers’ interests at heart, that can 

focus singly on this issue of disposition, and with the in-house experts, the dedicated consultants that can do it. And I just pointed 

out the RTC as a possible model that might work in this case. 

Mr. DENHAM. Thank you. In the aspect of time, I would just say 

finally that we appreciate all of your testimony today, and we are 

looking for further input as this bill moves along. We would ask 

each of you to work with our staff in continuing to move this bill 

forward and amend it in the right way so that we can certainly include as much—and encourage as much—private involvement as 

possible. 

I will also add that we are putting together a working group to 

encourage those in the private industry to work with us to develop 

the right principles and the best practices so that we can have the 

best taxpayers’ concerns at hand. 

With that, I would ask unanimous consent that the record of today’s hearing remain open until such time as our witnesses have 

provided answers to any questions that may be submitted to them 

in writing, and unanimous consent that the record remain open for 

15 days for any additional comments, and information submitted 

by Members or witnesses to be included in the record of today’s 

hearing. 

[No response.] 

Mr. DENHAM. Without objection, so ordered. I would like to thank 

our witnesses again for their testimony today. And if no other 

Members have anything to add, this subcommittee stands adjourned. Thank you. 

[Whereupon, at 12:33 p.m., the subcommittee was adjourned.] 

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