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88–504 PDF 2003

WASTED SPACE, WASTED DOLLARS: REFORMING

FEDERAL REAL PROPERTY TO MEET 21ST CENTURY NEEDS

HEARING

BEFORE THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

JUNE 5, 2003

Serial No. 108–35

Printed for the use of the Committee on Government Reform

(

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

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, JR., Tennessee

JOHN SULLIVAN, Oklahoma

NATHAN DEAL, Georgia

CANDICE S. MILLER, Michigan

TIM MURPHY, Pennsylvania

MICHAEL R. TURNER, Ohio

JOHN R. CARTER, Texas

WILLIAM J. JANKLOW, South Dakota

MARSHA BLACKBURN, Tennessee

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland

ELEANOR HOLMES NORTON, District of

Columbia

JIM COOPER, Tennessee

CHRIS BELL, Texas

———

BERNARD SANDERS, Vermont

(Independent)

PETER SIRH, Staff Director

MELISSA WOJCIAK, Deputy Staff Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHILIP M. SCHILIRO, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on June 5, 2003 ................................................................................. 1

Statement of:

Perry, Stephen, Administrator, General Services Administration; Linda

Springer, Controller, Office of Federal Financial Management, Office

of Management and Budget; Bernard Ungar, Director, Physical Infrastructure Issues, General Accounting Office; Mark Catlett, Principal

Deputy Assistant Secretary for Management, Department of Veterans

Affairs; Major General Charles Williams, Director, Overseas Buildings

Operations, Department of State; and Brent Bitz, executive vice president, Charles E. Smith Commercial Realty, on behalf of the Building

Owners and Managers Association ............................................................. 18

Letters, statements, etc., submitted for the record by:

Bitz, Brent, executive vice president, Charles E. Smith Commercial Realty, on behalf of the Building Owners and Managers Association, prepared statement of ........................................................................................ 107

Catlett, Mark, Principal Deputy Assistant Secretary for Management,

Department of Veterans Affairs, prepared statement of ........................... 86

Davis, Chairman Tom, a Representative in Congress from the State of

Virginia, prepared statement of ................................................................... 4

LaTourette, Hon. Steven C., a Representative in Congress from the State

of Ohio, prepared statement of .................................................................... 9

Perry, Stephen, Administrator, General Services Administration, prepared statement of ........................................................................................ 21

Springer, Linda, Controller, Office of Federal Financial Management,

Office of Management and Budget, prepared statement of ....................... 45

Ungar, Bernard, Director, Physical Infrastructure Issues, General Accounting Office, prepared statement of ....................................................... 53

Waxman, Hon. Henry A., a Representative in Congress from the State

of California, prepared statement of ........................................................... 14

Williams, Major General Charles, Director, Overseas Buildings Operations, Department of State, prepared statement of ................................. 90

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WASTED SPACE, WASTED DOLLARS: REFORMING FEDERAL REAL PROPERTY TO MEET

21ST CENTURY NEEDS

THURSDAY, JUNE 5, 2003

HOUSE OF REPRESENTATIVES,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The committee met, pursuant to notice, at 10:06 a.m., in room

2154, Rayburn House Office Building, Hon. Tom Davis of Virginia

(chairman of the committee) presiding.

Present: Representatives Tom Davis of Virginia, Ose, LaTourette,

Souder, Shays, Janklow, Duncan, Schrock, Mrs. Davis of Virginia,

Deal, Ms. Miller, Turner, Mrs. Blackburn, Waxman, Owens,

Cummings, Kucinich, Tierney, Clay, Ruppersberger, Norton, and

Cooper.

Staff present: Peter Sirh, staff director; Melissa Wojciak, deputy

staff director; Ellen Brown, legislative director and senior policy

counsel; Robert Borden, counsel/parliamentarian; David Marin, director of communications; Scott Kopple, deputy director of communications; Drew Crockett, professional staff member; Teresa Austin,

chief clerk; Joshua E. Gillespie, deputy clerk; Robin Butler, financial administrator; Michael Layman, Susie Schulte, and Jason

Chung, legislative assistants; Brien Beattie, staff assistant; Phil

Schiliro, minority staff director; Phil Barnett, minority chief counsel; Michelle Ash and Tony Haywood, minority counsels; Tania

Shand, minority professional staff member; Earley Green, minority

chief clerk; Jean Gosa, minority assistant clerk; Cecelia Morton,

minority office manager; and Christopher Davis, minority staff assistant.

Chairman TOM DAVIS. A quorum being present, the Committee

on Government Reform will come to order.

I want to welcome everyone to today’s hearing on the current

conditions of the Federal Government’s real property holdings and

the reforms that could be implemented to revitalize these extensive

assets.

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

propertyholders. Its real estate portfolio has over 3.2 billion square

feet and nearly 525,000 buildings valued at over $328 billion. Literally hundreds of millions of taxpayer dollars are spent each year

just to maintain these extensive properties.

Many Federal properties are in disrepair, lack up to date technological infrastructure, are ill equipped for adequate security protection and pose health and safety threats to workers and visitors

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alike. Others are no longer suitable to meet the Federal Government’s changing mission. For instance, of the 8,000 buildings managed by GSA, more than half are over 50 years old and are in deteriorating conditions that require an estimated $5.7 billion in repairs.

The State Department alone faces an estimated $736 million in

repairs for deteriorating buildings. The situation has led the GAO

to include vacant, underutilized and deteriorating Federal real

property to its high risk list. GAO finds that the magnitude of this

problem puts the Government at significant risk for lost revenues

and opportunities. Specifically, GAO points to the fact that underutilized or excess property is costly to maintain. The Department

of Defense spends between $3-$4 billion annually just for maintenance of unneeded facilities. Also, GAO finds that excess government buildings and land can be put to more effective uses, exchanged for more useful property, or even sold. Clearly, these findings should concern every American taxpayer. Every Member of

Congress can likely identify at least one Federal property site in

his or her district that is either vacant or deteriorating and in need

of revitalization.

The adverse effects to the agency, the workers of that agency and

the local community are apparent. Reuse would result in enormous

benefits. One such example can be found right here in the District

of Columbia. The old General Post Office occupying the entire block

bordered by E, F, 7th and 8th Streets, NW, near MCI Center was

built in the 1830’s and has fallen into disrepair. In fact, by the

1990’s this national landmark had become a crack house. Then,

through congressional authority granted to GSA, the site was

leased to a private entity and transformed into the Hotel Monaco.

As I believe you will see in the GSA Administrator’s testimony

later this morning, its architectural significance has been preserved

and restored, the waste of taxpayer dollars in maintenance has

been stopped, and the local community is benefiting from this revitalized area.

We are clearly facing a critical situation in Federal real property

management. We must take action to stem this tide of deterioration to Federal buildings and subsequent waste of taxpayer dollars.

We can’t just throw more money at the problem. Fiscal responsibility requires that we also grant agencies alternative property management authority. We must expand the agency incentives to dispose of unneeded properties and extend their authority to enter

into partnerships with the private sector.

Federal agencies are subject to several laws that limit their authority to acquire, manage and dispose of real property. GSA has

broad responsibility over Federal real property but its freedom to

effectively manage holdings is severely restricted by law. Other

agencies, such as State, VA, Defense, have separate authority that

gives them limited flexibility to outlease or dispose of their property under specific conditions.

GSA and other agencies need broader management authority in

order to efficiently and cost effectively manage their properties.

The first step in solving this problem is to require an accurate and

updated inventory of all Federal real property and to establish a

3

real property officer in each agency. Improving asset management

is consistent with the President’s management agenda.

Next, agencies must be given expanded authority to exchange or

transfer property with other Federal agencies. Subleased, unexpired portions of leased property now lease under utilized property.

In addition, agencies should be permitted in appropriate circumstances to retain the proceeds from disposition of excess real

property to meet the agency’s capital asset needs.

In the last Congress, I co-sponsored with Representative Pete

Sessions, H.R. 3947, ‘‘The Federal Property Asset Management Reform Act of 2002.’’ That contained these reforms and provided for

adequate congressional oversight. That bill had bipartisan support

in the last Congress and it passed out of this committee. We have

to continue to pursue solutions to the crisis in Federal property

management disposal.

We had hoped to have the Honorable Pete Sessions as our first

witness. He has been an outspoken advocate for providing authority to agencies to enter into public/private partnerships but responsibilities on the House floor this morning prevent him from being

here. If he can break away during this hearing, we will give him

the opportunity to testify at that point.

Our panel today is a distinguished panel and includes witnesses

from government agencies having responsibility for property management as well as from the private sector. We are going to hear

from the Honorable Stephen Perry, Administrator of the General

Services Administration; Linda Springer, the Controller of the Office of Federal Financial Management of OMB; Bernard Ungar, Director, Physical Infrastructure Issues, GAO; Mark Catlett, Principal Deputy Assistant Secretary for Management, Department of

Veterans Affairs; Major General Williams is not here but on his

way and Brent Bitz representing the Building Owners and Managers Association and executive vice president, Charles E. Smith

Commercial Realty.

I want to thank all our witnesses for appearing before the committee and look forward to their testimony.

Do any other Members wish to make an opening statement? The

gentleman from Ohio, Mr. LaTourette.

[The prepared statement of Chairman Tom Davis follows:]

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Mr. LATOURETTE. Thank you very much, Mr. Chairman, and

thank you for having this important hearing today. You have assembled a distinguished panel.

The issue of underutilized property is one that has vexed us for

quite some time. I don’t believe there is an easy answer to the

question of how we maintain our Federal building inventory to continually meet the needs of the myriad of agencies and departments

of the Federal Government in an age of ever declining appropriations to the GSA.

As we proceed in our discussions of this issue, it is vital that we

keep in mind that all real property is not the same. The Federal

inventory ranges from parklands as small as the grounds of the

White House to the Yellowstone in Montana, office buildings in cities as large as New York City and as small as Asheville, NC and

landmarks like the Statute of Liberty. While I use those examples

as hyperbole, I don’t think we should kid ourselves as to what we

are really talking about, and that is the enormous inventory of

Federal office buildings.

I am pleased Administrator Perry is with us today, As the head

of the GSA, he runs the Federal agency that controls the majority

of the general purpose office space in the Federal inventory. GSA

acts as the government’s landlord, controlling approximately 1,900

Federal buildings with 184 million square feet of space and leases

approximately 6,400 facilities with 153 million square feet of space.

GSA’s total inventory of 337 million square feet represents about

10 percent of the total governmentwide inventory but again, that

is the vast majority of the Governments general purpose office

space.

In addition to its role as the Government’s landlord, GSA acts as

a central management agency for governmentwide real property. It

provides policy guidance to agencies concerning real property matters and disposes of surplus property. GSA also is charged with the

construction, alteration and acquisition of general purpose office

space for Federal agencies without landholding authority.

It is important to note that a few agencies do have independent

landholding authority apart from GSA. They do so only for a limited purpose and limited scope and the types of properties that authority extends to. The Department of Defense, the Veterans Administration and Park Service, for example, do not have the authority to acquire and construct general purpose office space. This

authority has rested with the GSA since its creation. At that time,

the Congress recognized the need to centralize these functions to

reduce waste and ensure that the real property policy proceeded in

a coordinated manner.

While I support giving the executive branch enhanced tools to

manage its real property inventory, I believe this authority should

be limited to those agencies already with similar authorities and in

terms of general purpose office space solely within the GSA. The

diminution of this authority to every agency that occupies space

threatens the ability of the Congress to oversee the use of Federal

property and exposes the Government to waste, fraud and abuse

and risks the loss of valuable Federal assets.

I agree with my colleagues that each agency has a role to play

in the process of determining the best use of the property they ocVerDate 11-MAY-2000 08:20 Sep 02, 2003 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 D:\DOCS\88504.TXT HGOVREF1 PsN: HGOVREF1
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cupy and as such, I support many of the changes that have been

recommended. The requirement of an accurate and up to date inventory of real property and the establishment of a real property

officer in each agency to coordinate with GSA on the use of each

agency’s facilities would go a long way to ensure we are maximizing our resources.

I also support the use of public/private partnerships. In the

106th Congress we authorized legislation that would revitalize the

Southeast Federal Center and the response to that initiative has

so far been very positive.

With ever decreasing appropriations for the repair, alteration

and renovation of Federal real property, we must continually be

looking for new and innovative ways to pay for this work. However,

new authorities to conduct this work should be limited to those

agencies with the expertise to use them efficiently and effectively.

I believe that only the GSA has that expertise.

I look forward to hearing from the witnesses today. I thank you

for having this hearing and I thank you, Mr. Chairman, for your

intense interest in this subject. I also want to commend Mr. Sessions for his work not only in the last Congress but in this Congress as well.

[The prepared statement of Hon. Steven C. LaTourette follows:]

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Chairman TOM DAVIS. I thank my friend from Ohio who has also

taken a leadership role in this on the other committee that has jurisdiction on these issues and look forward to continuing to work

with you to resolve this issue as expeditiously as possible.

I will now recognize our ranking member, the gentleman from

California, Mr. Waxman.

Mr. WAXMAN. Thank you very much, Mr. Chairman.

We are here today to examine the very genuine, costly and pressing problems the Federal Government has managing its real property, its public buildings and lands. As GAO has indicated by placing this issue on its high risk list, problems abound. Unneeded and

under-used buildings are in the Federal inventory. Some buildings

are literally falling apart. Accurate data on Federal real property

is hard to obtain from agencies and costly leasing of office space is

too often the quick answer.

These are far from trivial problems. In fact, they are costing the

Federal Government and the American taxpayers billions of dollars. We are spending $3-$4 billion a year on buildings we don’t

need. In addition, the amount of money required to bring needed

Federal facilities up to minimally acceptable standards is truly

staggering, $63 billion at the Department of Defense, $11 billion at

Interior, close to $6 billion at GSA facilities. We probably can’t get

reliable data but we could be looking at $100 billion in needed repairs.

One approach to specifically addressing the problem of the maintenance of Federal buildings is to provide agencies the ability to engage in public/private partnerships on specific properties. The basic

idea is that the Government provides the property, the private sector provides capital for improvements and the property is then

managed for the benefit of both parties.

I know that Chairman Davis supports this approach and therefore, in the last Congress I worked with him to develop a bipartisan bill on property reform that built on this concept and gave

agencies new tools to modernize Federal property management.

The bill gave agencies the authority to sublease or outlease vacant

space or land use and to use the proceeds to make other capital

asset improvements. In addition, it contained important safeguards

to ensure local community input is given appropriate consideration.

Last year, the bill was never considered by the full House. It was

referred to the Transportation and Infrastructure Committee.

While that committee seems to agree in principle with many of the

approaches the bill took, it had jurisdictional concerns with the

way it was drafted and never reported out the measure. Continuing

staff discussions on the issue in this Congress have so far failed to

resolve these jurisdictional concerns which seemed to boil down to

whether we amend the Federal Property Administrative Services

Act of 1949 over which we have jurisdiction or the Public Buildings

Act of 1959 over which the Transportation Committee has jurisdiction.

I hope we can surmount these procedural and jurisdictional

issues. I hope we can work together to make appropriate revisions

to the substance of the legislation to address issues raised by the

Congressional Budget Office and others.

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Mr. Chairman, we have a widely recognized and quite serious

problem with the management of Federal real property. I am ready

to work with you, with Representatives Norton and LaTourette, the

Chair and ranking members of the Public Buildings Subcommittee

of the Transportation and Infrastructure Committee to find a solution to this impasse.

[The prepared statement of Hon. Henry A. Waxman follows:]

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Chairman TOM DAVIS. I thank my friend for his statement. I will

be introducing some legislation shortly on that and again, will

work with you to bring to our committee quickly. We have to resolve these jurisdictional disputes between the committee because

of this issue every day millions of taxpayer dollars are being used

to keep up buildings we can’t use. It is a waste and we are going

to move quickly on that. I appreciate my friend’s pledge to work

with us.

Any other opening statements at this point? The gentleman from

Ohio.

Mr. TURNER. This certainly is a wonderful initiative that is going

to result in significant savings to the Federal Government and

sounds as if it will constitute responsible management of Federal

property.

One of the concerns I have concerning this proposal, and some

of the examples we have received, is the impact it might have on

urban cores. As we look to buildings that are dilapidated and need

to either be renovated or abandoned we must not have a migration

of Federal jobs to the suburbs. Some of the examples we have here

include a statement of a suburban location that would be more desirable for prospective Federal tenants and probably cheaper. We

all know that suburban locations are going to be cheaper but there

are also Federal interests in making certain we maintain our urban

core.

Being a former mayor, we know that through Federal mandated

programs, cities are significantly burdened with issues of schools,

Brownfields, social services, special needs populations, public housing, environmental mandates and infrastructure burdens that support an entire urban area. I am interested as to how the process

of relocation might also include some interest in looking to supporting the urban core.

Chairman TOM DAVIS. Thank you very much.

Any other opening statements? The gentleman from Maryland.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

The Federal Government is one of the world’s largest

propertyowners with more than 400,000 buildings and 500 million

acres of land. In fiscal year 2001, the Federal Government’s real

property assets were valued at $328 billion, with the Government

spending billions annually to maintain its properties. More than 30

agencies control the real property assets.

In January 2003, the Government Accounting Office designated

Federal real property as new, high risk area in its report ‘‘High

Risk Series, Federal Real Property.’’ The GAO found that many assets are in an alarming state of deterioration with an estimated

restoration and repair cost to be in the tens of billions of dollars.

The property is managed with outdated technology and business

models dating back to the 1950’s. GAO further found that

compounding these problems are the lack of reliable, governmentwide data for strategic asset management and the costs and challenges of protecting these assets against potential terrorism.

The General Services Administration has broad responsibility

over Federal property including the sale of surplus Federal property to State and local governments, non-profit organizations, private individuals and companies. This authority is given to GSA

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through the Federal Property and Administrative Services Act.

During the 107th Congress, the Federal Property and Asset Management Reform Act passed out of this committee by voice vote.

That bill would have given agencies the authority to sublease vacant space or land and use the proceeds to offset the cost of holding

such property and to make other capital asset improvements.

Given the rise of the Federal deficit and the numerous unfounded mandates from Congress like the No Child Left Behind

Act, I hope that similar legislation can be introduced to enhance

Federal asset management. The Government should not be wasting

billions of dollars. Federal managers of these properties confront a

multitude of challenges securing the property due to the threat of

terrorism and problems managing deteriorating facilities.

I look forward to hearing from our colleague, Pete Sessions,

today and all of our witnesses as we explore the best ways to ensure the effective and economical use of Federal and real property.

I have said many times there is one that Republicans and Democrats agree on and that is that peoples’ tax dollars should be spent

effectively and efficiently.

I thank you for this hearing.

Chairman TOM DAVIS. Any other statements? Mr. Janklow.

Mr. JANKLOW. Thank you very much, Mr. Chairman. I am going

to be extremely brief.

Looking at the two page precis that preceded this hearing, you

have one paragraph that says it all. Federal agencies are subject

to several laws that limit their authority to acquire, manage and

dispose of real property. The GSA has broad responsibility over

Federal real property but its freedom to effectively manage buildings is severely restricted. Other agencies such as DOD, the Department of State, the Veterans Administration have separate authority that gives them limited flexibility to outlease or dispose of

their property under specific conditions.

The problem we have is everybody in the Congress wants to run

the executive branch. Everybody wants to micromanage, everybody

wants to tell everybody how to do everything. No one has the freedom to run this like a $3 billion real estate enterprise ought to be

run. The net result is what we have today. We can entitle any bill

we want with all the grand titles about reform, reform, reform, but

the reality is unless we are really willing to reform something, unless we are willing to turn loose people to make independent, sensible, discretionary decisions, unless we turn them loose to make

them property asset managers, we are going to continue to have

the mess we have and for the next 50 years, they will be holding

hearings discussing things and what we ought to do to fix the Federal property.

Thank you for having this hearing today, Mr. Chairman.

Chairman TOM DAVIS. Thank you. I am glad we have a former

Governor on the committee because I think you bring that executive perspective to this.

The gentleman from Ohio.

Mr. LATOURETTE. I was out of the room when Mr. Waxman

spoke and I listened to Mr. Cummings as well. I want to make one

comment so the record is clear. H.R. 3947 passed by a voice vote

out of this committee during the last Congress but it was never reVerDate 11-MAY-2000 08:20 Sep 02, 2003 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 D:\DOCS\88504.TXT HGOVREF1 PsN: HGOVREF1
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ported by the Government Reform Committee because of some scoring questions, so there was not a delay in the Transportation and

Infrastructure Committee because it wasn’t actually reported out of

this committee. I just want that to be clear.

Chairman TOM DAVIS. Again, we look forward to working with

you. You hold a critical subcommittee chairmanship over there and

time is important. I think the testimony today is going to show us

that everyday that goes by, we are wasting millions of dollars. We

have a unique opportunity in this Congress to give our agencies the

appropriate flexibility to dispose of these in some innovative ways.

There are literally billions of savings over the years that we can

make.

Any other opening statements? If not, let us move to our distinguished panel. Mr. Perry, thank you so much for being with us.

You have been very innovative, very proactive in this, you have

some great ideas. Your entire testimony is a part of the record, as

are all the others. I would like you to try to limit your testimony

to 5 minutes. It looks like we are not going to have that early vote,

so we may be able to move straight through and then do questions.

Your light after 4 minutes will turn yellow and that gives you 1

minute to sum up and when it is red, your time is up.

I have to swear you in because that is the way the committee

works.

[Witnesses sworn.]

Chairman TOM DAVIS. Thanks for being with us, Commissioner

Perry.

STATEMENTS OF STEPHEN PERRY, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION; LINDA SPRINGER, CONTROLLER, OFFICE OF FEDERAL FINANCIAL MANAGEMENT,

OFFICE OF MANAGEMENT AND BUDGET; BERNARD UNGAR,

DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, GENERAL

ACCOUNTING OFFICE; MARK CATLETT, PRINCIPAL DEPUTY

ASSISTANT SECRETARY FOR MANAGEMENT, DEPARTMENT

OF VETERANS AFFAIRS; MAJOR GENERAL CHARLES WILLIAMS, DIRECTOR, OVERSEAS BUILDINGS OPERATIONS, DEPARTMENT OF STATE; AND BRENT BITZ, EXECUTIVE VICE

PRESIDENT, CHARLES E. SMITH COMMERCIAL REALTY, ON

BEHALF OF THE BUILDING OWNERS AND MANAGERS ASSOCIATION

Mr. PERRY. I also want to thank you for holding this hearing to

bring more focus to what obviously is an urgent need for Congress

to pass legislation which will enable the Government to use authorities which will enable us to be more effective in the management of real property assets. It is the only way in which those of

us who have that responsibility at least from the agency point of

view can effectively carry out our stewardship of this Nation’s vast

inventory of real property assets, most of which are used to provide

work space for Federal workers.

Since 1999, GSA has strongly supported congressional proposals

for legislative reform to authorize effective real property management practices. We believe this is the most viable option at our disposal to address the longstanding and extraordinary and perhaps

emerging crisis we are facing. It was clear from opening comments

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made by members of this committee a moment ago that this is well

understood. The issue is where do we go from here, how do we address this longstanding, extraordinary problem we have.

The problem manifests itself in the form of a huge and growing

multibillion dollar backlog of deferred maintenance which is resulting in significant deterioration, under utilization and vacancy of

many Federal buildings. If we continue to let this problem fester

and grow, it will surely have an unacceptable, adverse impact on

our Government’s ability to function efficiently and effectively.

GSA which manages only about 10 percent of the Government’s total space has a backlog of deferred maintenance of $5.7 billion.

Looking at the Federal Government as a whole, this figure is estimated to be well over $100 billion.

In addition to GSA’s support of legislative action, the Department of Defense, Department of Veterans Affairs, Department of

State, NASA and many other Federal agencies have strongly advocated for congressional passage of real property reform legislation.

Also, as we know, the General Accounting Office issued and conducted studies which concluded that this extraordinary problem is

not being addressed adequately. This is due in large part to the

lack of authority in agencies to use effective real property management practices. My written statement for the record gives the details and rationale that we have for the kinds of property management practices we believe this Congress should enact and I will

just mention them and talk about one in particular.

They include the use of public/private partnerships to enable private sector funds to be used to help address the backlog of deferred

maintenance; they include out leasing so that the Government

could lease to private organizations vacant space not needed for

Federal purposes, subleasing and exchange and sale of real property and financial incentives to assist agencies in the disposal of

real property that they no longer need for agency purposes.

For purposes of this testimony, I will just focus on public/private

partnerships. This would be modeled on the common practice in the

commercial sector where an owner of property leverages their equity in the property to secure funding from private sources to help

cover the cost of renovating a deteriorated building. The GAO report in 2001 recommended that a pilot project be authorized where

this approach could be tested further. While Congress did not authorize that pilot project, certainly we have lots of evidence that

public/private partnership in the Federal Government can work. It

is being done at DOD, at VA, State, soon at NASA and there will

be many examples we could cite and some are cited in my testimony regarding that.

GSA has even used public/private partnerships successfully. You

may know that under Section 111 of the National Historic Preservation Act we have limited authority to use this approach as it

would relate to a historical building and a historical building which

has been determined to have no further Federal need. In those very

limited situations, we have used this authority successfully. One

example of it is shown in the exhibits we have over there, the top

tier of building show the old Tariff Building when it was

mothballed, when were spending millions of dollars to keep it in

that moth-balled condition. We used the authority for public/priVerDate 11-MAY-2000 08:20 Sep 02, 2003 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 D:\DOCS\88504.TXT HGOVREF1 PsN: HGOVREF1
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vate partnership to convert that with the private sector partner

into the facility you see on the right. Other examples abound. My

point is this is not a new process that isn’t tried and true. We know

we can do it.

Another example at GSA is the case of the Southeast Federal

Center along the Anacostia River. There was special legislation

provided that enabled us to use public/private partnership to develop that site and that project is proceeding.

The bottom tier of slides is another facility which happens to be

near Seattle, WA which is an example of another site. The left slide

shows a deteriorated Federal facility we now have which could be

renovated into something you see on the right.

In conclusion, I will agree with the sentiment of the comments

made in the opening remarks, that we do have a very extraordinary problem, as I said, perhaps an emerging crisis. It will only

be addressed successfully with an extraordinary solution. This

means Congress and the administration will have to be aggressive

and creative and focused on results to overcome the many obstacles

that to this point have impeded our progress in addressing this

problem.

We look forward to working with you and the members of the

committee in addressing them.

[The prepared statement of Mr. Perry follows:]

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Chairman TOM DAVIS. Thank you very much.

Ms. Springer, thanks for being with us.

Ms. SPRINGER. Thank you, Mr. Chairman, for asking me to testify today.

The administration’s Asset Management Initiative is critical to

meeting our stewardship responsibilities in improving the overall

management of the Federal Government. I would like to share with

you the following excerpt on asset management.

‘‘There is substantial evidence of weakness in the Federal Government’s management of assets including acquiring and retaining

unneeded and poorly performing assets, excess holding costs and

ineffective asset disposal. Agencies are hampered in their efforts to

identify and correct these problems by lack of strategies, procedures, and incentives to manage a wide range of assets.’’

This could very easily have been taken from the GAO report in

the high risk series but in fact it was included in the 2002 Federal

Financial Management Report published by the Office of Management and Budget. Accordingly, we agree wholeheartedly with

GAO’s addition in their January 2003 Real Property Management

addition to the High Risk list update. This is a confirmation of the

administration’s efforts beginning in 2001 to address this issue.

Much of the Government’s real property no longer serves the

needs for which it was acquired in the first place. The current laws

and regulations make it difficult if not impossible for agencies to

maximize the use of its real property investments. For these reasons, the administration has taken several important steps to improve the Government’s asset management. We are making improved asset management a part of the President’s management

agenda. We expect the results of this new focus to include expanded asset portfolio tracking and analysis capabilities, comprehensive asset management strategies, increased sales of underperforming assets and reduced maintenance and operating costs.

GAO recently credited the administration for proposing several

reform efforts and other initiatives to address asset management

challenges. The administration proposed in the last Congress, as

part of the Managerial Flexibility Act, legislation to establish these

practices and provide the incentives and tools necessary to bring

about sound asset management.

Our proposal reforms the Federal Property Administration Services Act of 1949 by addressing all phases of an asset’s life cycle and

would support an integrated portfoliowide approach for overall

property management decisionmaking. This proposal would not

alter existing authorities for properties under the current Property

Act structure, nor would it alter authorities that were granted

under other statutes. Rather, it would provide incentives and flexibility in addition to those authorities and grant agencies the necessary tools to manage their assets more effectively and efficiently.

Absent these authorities, we will be unable to improve sufficiently

the asset management practices currently in place throughout the

Government. Even if we improve the data we have and condition

of our assets, we will not have a sufficient range of options with

which to execute the best asset management solutions for specific

situations.

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In the spirit of the administration’s initiative, some agencies

have moved aggressively to collect data about their asset management practices even now but better information is just the first

step. We are asking agencies in the upcoming budget process to

provide us with concrete examples of what they might do to maximize the use of their property with these new authorities.

One of the hurdles to enactment of the administration’s proposal

is the high cost attributed to it by the Congressional Budget Office.

We believe that CBO’s scoring of the property sales provision ignores the near certainty that agencies would sell almost no excess

property without the incentive provided by the administration’s

proposal. Therefore, the additional spending scored by CBO should

be offset by the additional property sales receipts that would be

generated by the incentives provided in the administration’s proposal.

In any event, we believe that the issues raised by CBO can be

addressed by making proceeds from any property sale or from the

exercise of new public/private partnership authorities granted

under the proposal subject to appropriations.

Mr. Chairman and members of the committee, I ask for your support for this common sense proposal. If we look to the examples set

for us recently in the area of erroneous payments, we can see that

the combined work of the executive and legislative branches can

enhance our management improvement efforts considerably.

The administration launched an initiative to reduce erroneous

payments but it was only able to reach its full impact when this

committee crafted and shepherded through the legislative process

legislation that would require erroneous payment reduction efforts

of all programs and activities administered by the Federal Government. This is the kind of partnership that I hope we can have in

the area of asset management.

The administration has an initiative to improve our stewardship

over the Government’s holdings. With your help, we can provide

Federal agencies with the tools they need to meet their asset management responsibilities.

This concludes my statement. I look forward to answering your

questions and working with the committee.

[The prepared statement of Ms. Springer follows:]

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Chairman TOM DAVIS. Excellent. Finished right on time. Great

debut before the committee.

Mr. Ungar, see if you can follow Ms. Springer’s lead.

Mr. UNGAR. Mr. Chairman, this is going to be a hard act to follow.

We are pleased to be here to assist the committee as well as Mr.

LaTourette’s subcommittee which we have worked with before, to

address this very important problem of Federal real property. For

the reasons that have been cited this morning, the amount of property that the Federal Government owns and the dollar values associated with that property, this is clearly a very, very important

problem.

As mentioned, in January of this year we did add the issue of

Federal real property to our high risk list. We did that for a number of reasons, primarily because Federal real property has been

experiencing some very significant, complex and longstanding problems. The Federal Government has not been postured very well to

address those problems from either the legislative authorization

standpoint or the management of the issue from the administration

standpoint for a variety of reasons.

One of the major issues that has been discussed and specifically

the leading reason why we did put the issue on the high risk list

was the subject of excess property, under used or under utilized

property. The Federal Government owns a substantial amount of

this property. Just for three agencies alone, the Postal Service, the

VA and GSA, we have identified over 900 properties as of the beginning of this fiscal year, that were vacant or under utilized.

There are a number of these properties in a variety of agencies.

Just a couple of examples, one that we see over here is the Charleston Federal Building which has been vacant since 1999 due to hurricane damage; it has asbestos; it has been condemned. It is a very

nice piece of property in a very desirable area in Charleston. Unfortunately, it was a candidate for public/private partnership but GSA

lacks the authority to enter such an agreement or arrangement for

this type of property and it is currently negotiating with the city

of Charleston for an exchange of property.

Another example is the St. Elizabeth’s Hospital here in Washington, DC, a very large piece of property that has not been used as

a Federal hospital for many years. It has been a long time in coming but finally in the last couple of years, HHS has been working

with GSA to address the problems of the property. A number of

problems are associated with those that are typical of Federal properties. It has deteriorated, it has environmental issues and it is historic. So there are a number of challenges there.

Finally, I would like to point out a third example which is the

old Chicago Post Office, a very large facility which has been vacant

for several years when it was replaced by a new facility. This property costs the Postal Service over $2 million a year to hold. A sale

has been agreed to but there have been complications that have

arisen for a variety of reasons. So it is still vacant and still costing

the Postal Service money. There are many other examples but I

won’t go into those.

There are other reasons that we put this issue on the high risk

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ment relies too often on leasing rather than ownership. One example of that is the Patent and Trademark Office complex currently

being constructed in Alexandria. It has been estimated that is

going to cost the Government almost $50 million to lease as opposed to own. There are other examples. Finally, the Government

faces many challenges these days as a result of the events of September 11 in securing its property. Of course, to the extent the

Government has to secure property it doesn’t really need, those

funds could be used for other purposes.

As I indicated, we don’t see that the Federal Government is in

a good position to address these issues. One, there has been no central focus on this because over 30 agencies have responsibility and

jurisdiction to own property. Agencies lack, as indicated, the authority to do many of the things that need to be done. In our view

agencies need to have appropriate tools and authority to deal with

this problem and the executive branch needs to pull together its efforts and basically provide leadership, oversight and a comprehensive transformation plan that would lay out what needs to be done.

We are very pleased that OMB has taken the initiative. We all

came to the same conclusion I think pretty much at the same time

and we are very pleased to be able to work with OMB, GSA, your

committee and Mr. LaTourette’s subcommittee to address these

problems in the future.

[The prepared statement of Mr. Ungar follows:]

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Chairman TOM DAVIS. Thank you very much.

Mr. Catlett.

Mr. CATLETT. Thank you, Mr. Chairman and members of the

committee for asking me to testify today regarding new legislation

for Federal agencies to enter into public/private partnerships, arrangements and Federal real property management.

At the VA, our public/private partnership is known as enhanced

use leasing authority. It authorizes the department to lease its

property or facilities for up to 75 years. VA has 12 years of experience with this program which is an integral part of our asset management program. In return for allowing VA property to be used

for VA or non-VA mission compatible uses, VA can require rent in

the form of reduction in the cost of free use of facilities or services

for VA programs, monetary payments or other in-kind considerations which in the opinion of the Secretary enhances a particular

VA activity mission.

Since its inception, VA has studied over 100 enhanced use leasing initiatives, we have awarded 27 projects, and we are actively

developing 29 new initiatives. This program allows VA to maximize

return from underutilized properties while protecting flexibility to

retain, reuse or to dispose as dictated by future needs. It utilizes

private resources instead of appropriation and creates a win-win

situation for VA and the local communities by encouraging economic development of otherwise underutilized lands.

VA has been able to acquire office buildings, transitional housing, energy facilities, garages, lodging facilities, research and medical facilities, hospice care and adult and child care centers through

this program.

As stated earlier, the enhanced use lease program is just one aspect of VA’s overall asset management program. VA has been developing a capital asset portfolio that consists of six asset classes

which are owned and leased real property, land, information technology, equipment and agreements. Business processes and decision frameworks covering long term management of VA’s assets are

being developed for each of these asset classes.

VA is also striving to move beyond asset management to portfolio

management which involves leveraging and investment or combination of investments in order to minimize risk and maximize

cost effectiveness and performance of assets.

VA has seven approved portfolio goals and is working to define

the metrics for these goals.

Again, it is a pleasure to be here to discuss with you this important issue.

[The prepared statement of Mr. Catlett follows:]

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Chairman TOM DAVIS. Thank you.

Major General Williams.

General WILLIAMS. Thank you, Mr. Chairman and members of

the committee, for the opportunity to discuss the work of the Overseas Buildings Operations in the Department of State and managing our real properties overseas. It is a very delicate and complex

set of responsibilities involving property valued at over $12 billion.

I have submitted a full statement for the record which outlines this

and I will briefly summarize some points.

Our mission was reshaped after the 1998 bombings in East Africa and was reinforced after September 11 and required the State

Department to accelerate the construction of new facilities and use,

quite frankly, new and improved best practices and different concepts.

GAO reported in January 2000 that the need to adequately protect our people overseas from threatened terrorist attacks well may

be the single most important management issue facing the Department of State and OBO. The Overseas Buildings Operations and

the Department have put in place a number of new reforms starting with the creation of a long range capital strategic plan which

outlines how we would deal with both construction and disposal of

properties.

Second, the Department put in place a more systematic way of

gathering information to make certain that we build at the right

size and obviously eliminate excess properties.

Third, the Department introduced a standard embassy design

concept which allows us to achieve the objective.

Moving to management of overseas real estate, needless to say

the backlog of unmet needs is really substantial. To the extent that

we must maintain underutilized or unneeded facilities we are creating an even larger financial burden. The State Department is

vigorously pursuing the disposal of excess and underutilized and

overstandard properties. The significant changes in our security

standards over the last few years have made this more of a challenge.

As stewards of the Department of State’s real estate investments

and representatives of the taxpaying public, we recognize our obligation. The authority to use the proceeds of sales, and I might add

we are on a glad path this year for producing some $90 million

through sales of underutilized properties and to use these proceeds

of sales to replace and rehabilitate our existing facilities, is a further incentive to pursue the prompt and economically sound sale

of these properties.

We might point out as well that there are some foreign policy

considerations that we have that make us unique from the rest of

the colleagues here. There are a number of reasons why we cannot

connect as well as we would like the public/private dimension.

However, we are using very effectively the build to lease concept

where we do leverage the private sector in order to help us in many

areas on certain types of facilities.

We have a reciprocity issue as well which is connected to international law which disallows us again to deal with some of the

matters as related to public/private partnerships.

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Unique expertise obviously is a requirement in the State Department in as much as we have to deal with the laws and rules of 260

locations around the world, that is where we have diplomatic facilities today. We have been very aggressive on this matter, we think

we have a concept and program in place which allows us to effectively manage the assets.

GAO has made several recent inquiries into this matter and we

have made presentations before Mr. Shays’ subcommittee as well

on this same matter.

I appreciate the opportunity on behalf of the State Department

to participate today and look forward to answering your questions.

[The prepared statement of Major General Williams follows:]

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Chairman TOM DAVIS. Thank you very much.

Mr. Bitz.

Mr. BITZ. Good morning, Chairman Davis and members of the

committee.

My name is Brent Bitz. I am executive vice president of Charles

E. Smith Commercial Realty, a division of Vornado Realty Trust.

I am here today representing the Building Owners and Managers

Association International, the largest and oldest trade association

representing the commercial real estate industry.

BOMA greatly appreciates the opportunity to appear before the

committee to discuss how GSA and other Federal agencies can

more effectively manage the Government’s aging and underutilized

properties. BOMA International supported H.R. 2710 and H.R.

3947 during the 107th Congress and looks forward to once again

showing its support for similar legislation in the 108th Congress.

We are here today because BOMA’s membership, owners, managers and investors in commercial office real estate are ideally suited and are eagerly awaiting the opportunity to enter the type of

public/private partnerships envisioned by the GSA and the committee.

For private sector investors to participate in a public/private

partnership, Congress must carefully balance the need for oversight with flexibility and the opportunity for a sound return on investment. Deals will not be done if they take too long and if unnecessary regulatory burdens diminish any returns the investor could

hope to make.

Several different types of deals have the potential to appeal to

private sector companies and provide clear benefits to the Federal

Government. Outright sales of Federal buildings or land that is

underutilized or obsolete could generate income for the Federal

Government to purchase or lease space more suitable to its specific

needs.

A long term ground lease could be an effective tool for office or

warehouse space that may be in need of repair but is in a marketable location. The private sector company partnering with the Government would invest in the repairs, lease the space to private sector companies and make a profit through tenant rents. After the

expiration of the ground lease, the building would revert to the

Government who would inherit the improved property. The length

of lease terms would need to tie into the underlying debt and equity financing of the project. Lease terms in excess of 50 years

would be expected for major projects.

Subleases should also be considered where a Federal agency

owns a property but is not occupying the entire building. GSA or

the Federal agency should be allowed to rent the vacant portion of

the building to private sector tenants. However, the Government

does need to understand that restrictive operating practices such as

the new high levels of security may seriously diminish the economic attractiveness of such subleases.

In a lease-back arrangement, the Government would have a private sector entity take economic control of a building and renovate

it. The Government would have a first right of refusal option to

lease the building back for a rent that would include a return on

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tee to lease back the building, there would have to be strong private sector demand for the space based on either location or physical attributes for this arrangement to work. The private developer

would need a reasonable expectation that the building could be

leased at a rate that would allow for investments to be recouped.

Transfers or exchanges of properties could help the Government

dispose of underutilized or obsolete buildings in exchange for properties that more closely serve their needs. All of these should be allowed in cases where it makes sound business sense and results in

the agency or GSA receiving fair market value. This would allow

the GSA to look at each need within the context of their entire

portfolio.

Chairman Davis, you and Mr. Perry of GSA mentioned the Hotel

Monaco here in Washington as an existing successful example that

we all could see. This is a very good prototype for consideration.

In summation, BOMA International supports congressional action on this issue. However, we must once again caution that GSA

and the private sector will need flexibility in crafting these types

of arrangements. Every building is different, every real estate market is different and every real estate transaction is different. The

GSA and private sector partners must have the ability to enter into

arrangements that are mutually beneficial. Otherwise, nothing will

be accomplished.

Thank you for the opportunity to appear before you today. BOMA

International welcomes the opportunity to work with the committee

and provide additional expertise on these issues in the future.

Thank you.

[The prepared statement of Mr. Bitz follows:]

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Chairman TOM DAVIS. Thank you very much. Let me start the

questioning.

Ms. Springer, what we are trying to do is give the Federal Government ability to lease, joint partner, selling, that clearly from the

testimony of everybody here saves the Government money and allows us to do innovative things with property that right now is deteriorating, that we have carrying costs on, and yet we get back

scoring from the Congressional Budget Office that is a net decrease

to taxpayers. I don’t understand it. We have been dealing with

them. How do we get around that? Any thoughts?

Ms. SPRINGER. There are a couple of thoughts I would have.

First, as I mentioned in my testimony, we believe these sales of excess properties would not occur absent the flexibilities in the legislation. To the extent there are outlays with respect to purchases off

those sales, we believe the proceeds of the sales should also be accounted for in any scoring. In the scoring from last May they were

not recognized. That is one point.

Chairman TOM DAVIS. Let me ask you this. Could we draw a criteria in the legislation that would ensure that?

Ms. SPRINGER. What we have suggested is exactly along that line

which would be, speaking for the administration and not just OMB,

not only utilization of the proceeds but also any new private/public

partnership transaction should be made subject to appropriation.

We believe that addresses that issue.

Chairman TOM DAVIS. Commissioner Perry, would that still give

us the flexibility you need to carry this out?

Mr. PERRY. Yes, I think it would, and you hit on obviously one

of the real sticking points in this and that is the budget scoring

process. In addition to the points Linda made, I think the legislation includes a lot of things that accommodate what some people

would be concerned about in that area. For example, the Government would have limited liability, that there would be no guarantee as to the fact that a Federal tenant would move into a building,

we would not guarantee the loans or financing of the private sector

partner in the case of these items. So when we went through that

discussion last time, we did talk about a lot of things we would do

in administering public/private partnerships that are in fact to

some extent limiting but in fact address some of the concerns the

scoring people had raised. I think those are addressed.

Chairman TOM DAVIS. This is so common sense. I think everybody has spelled out here, the representative from the private sector, Governor Janklow in his earlier testimony, you want to give

your executive branch the tools they need to do common sense

things to protect a real estate portfolio of $328 billion. It is not

your fault the law is written in such a way now that your hands

are tied but getting it through here has two major problems. One

is the scoring issue, getting it through the Congressional Budget

Office where they are looking at only one side of the equation. We

have to satisfy that, I think.

Second is the jurisdictional fight between the 1949 Act and the

1959 Act that go between the Transportation Committee and this

committee. We may just have to escalate this. Mr. LaTourette and

I are working on it. We have staffs that are conscious of committee

jurisdiction but this is something we are going to have to try to

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write the law and share jurisdiction, whatever, as we move through

but those are the two things we need to focus on, it seems to me.

The rest of this is pretty common sense. Mr. Waxman and I last

year negotiated some language and we have some differences over

how to best do it and how much authority you give your different

agencies, the GSA and checks and balances, but those can be

worked through as well. As I said, we have a $328 billion portfolio. We are spending billions on maintenance and upkeep of excess or under utilized property that wastes literally billions of dollars over time. Commissioner Perry starting with you, I would like to hear what tools you

would really like to have in an ideal world that would give you the

flexibility to run this as professionally and in the taxpayers’ interest as you could?

Mr. PERRY. I think among the various challenges we face, the

biggest one or certainly one of the bigger ones is this issue of addressing the large and growing backlog of deteriorated and vacant

space. We find that it is sort of a death spiral. First of all, as we

have this deteriorated space, we either have to have Federal workers working in substandard space, which we do in some instances,

or also the agency will move to other space, oftentimes to leased

space. We might think we are solving the problem but we are continuing to incur the expense and we are adding expense on top of

that when agencies move to leased space.

The public/private partnership portion of this would enable us to

begin to address some of that $5.7 billion backlog as it relates to

GSA and a larger number in other agencies, if you add all the

other agencies together. So that management practice would be

very helpful to us.

I would just mention that on previous occasions when it appeared that management flexibility was going to be granted to us,

we began to move in anticipation and getting our people ready with

the training they need to move ahead identifying specific projects

that we would work on. Everyone at GSA was ready to go.

I will tell you that when we weren’t able to get it across the finish line, that was a significant setback in terms of our peoples’

thoughts but we are very, very hopeful that as we gear up this

time around that we will be able to put this in place.

Chairman TOM DAVIS. Let me make this pledge to you and I

think Mr. LaTourette will also, we are going to get something done

this time and we have some difficult issues to work through, both

jurisdictionally and scoring and the like but we know how important this is. The importance of taxpayers trumps any other issues

that may arise in my opinion. I know Mr. Waxman and Ms. Norton

would agree with that. So we are going to work together as quickly

as we can to try to work through these issues at least on the House

side. I will let you handle the Senate side. We don’t handle the

other body and make no promises on what happens there but we

need to initiate it and get this through here.

As I said, it wasn’t the Transportation Committee that held it up

last year, it was a scoring issue we had with CBO and coming back

with some additional language may be able to solve that.

Mr. PERRY. I agree with you and my understanding is those

three things. One, as you point out, the question of scoring and

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that can be dealt with, I am sure it must be dealt with. The other

you have also talked about is the issue of jurisdiction and I think

we are going to have to find a way to move beyond that because

as I say, Rome is burning, we are still having problems. The third

one that has come up is the question of the retention of proceeds

and whether or not that can be done in such a way that the congressional committees will still have oversight of how those proceeds are used and whether or not this is in any way a violation

of the appropriations process. Here again, we have incorporated

ways in which to deal with that so that the committees are made

aware of what is being done and have an opportunity to authorize

it.

Chairman TOM DAVIS. Great. Thank you very much.

Who should I recognize on this side. Mr. Ruppersberger was here

first, Ms. Norton is ranking on the Transportation Committee. Who

would like to go first?

The gentleman from Maryland is recognized for 5 minutes.

Mr. RUPPERSBERGER. This issue is really relevant to us as far as

the cost point of view, the performance point of view and we are

probably talking about hundreds of billions of dollars. Would you

agree with that? I see everyone shaking their heads yes.

I think before we really decide what we are going to do we have

to set a strategy. That strategy, I think the first thing is to get the

inventory, the information. My first question is basically we need

to get a comprehensive inventory. I don’t know whether we have

the expertise in-house or not to not only identify all the properties

we have, the type of properties, whether they are deteriorating, are

there asbestos issues involved, as far as the heating, is the building

or the property really worth keeping or should we get rid of it because every property you keep is going to cost you money, especially the ones you are not using.

My notes here say because of the budget and the tax cut this

year, we have had to cut Veterans’ spending and I have information here that the Department of Veterans Affairs spends $235 million annually to maintain vacant properties. That money could be

used to help veterans when we need money.

My question is, first, do we have the comprehensive data base

and information that we need to start to implement a program to

deal with this massive issue. Do we have that type of data base,

that information?

Mr. PERRY. If I may venture and answer first, I will answer that

the answer is yes, we have enough information to proceed with this

right away and then I will qualify my answer a bit and say we

don’t have a comprehensive, accurate and reliable data base of all

the Federal Government asset information. We will continue to

work to put that together.

GSA, for example, in our portfolio management process, identifies every asset under our management, we do know with some

specificity where the vacancies are, where the under utilization is,

where the deteriorated buildings are. We have more than enough

information to keep ourselves busy in the office space type arena

which is where this problem is the greatest, I believe for a very

long period of time based on the information we have.

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As we step out and begin the process, we can work with the

other agencies to refine the governmentwide data but we have the

GSA portion of that which is a sizable part.

Mr. RUPPERSBERGER. GSA is really the agency dealing with most

the agencies on that, correct?

Mr. PERRY. No, we have 10 percent of the Federal Government’s

total, most of the office type.

Mr. RUPPERSBERGER. What do you need from a resource point of

view to be more aggressive to make sure this happens?

Mr. PERRY. The major thing we need is the authorization to use

these management practices which we do not have today.

Mr. RUPPERSBERGER. I think of the management practices Mr.

Bitz brought up. One of the things is a government lease is probably one of the best leases you can take to get financing or whatever. Would you agree, Mr. Bitz? We have a great leverage with respect to that lease but we have to deal with today’s world and today’s business environment and work with the business community. I heard testimony today we feel purchasing is probably the

best way to go but if you don’t have the money you might have to

have a long term lease with an option to come back. That is the

issue.

I would like someone else to address the issue because if we

want to get anything out of this hearing, we are talking about

where we need to go and do you need Congress to act on this. The

chairman has said he wants to move forward.

Mr. UNGAR. I would like to add we would agree that at least

some of the agencies now have enough information to get started

but as he indicated, the inventory of information GSA has is not

as comprehensive or complete as it needs to be for a couple of reasons. One, GSA depends upon over 30 agencies to provide the information it needs and some of those agencies do a better job than

others in providing complete, current and accurate information.

One of the pieces of the previous perform proposal was to mandate that an inventory be kept and give GSA additional leverage

and the individual independent agencies like Agriculture and Energy leverage for securing resources for providing accurate information.

Another area where some agencies have better information than

others is identifying vacant and underutilized properties. Some of

the agencies we have contacted do not have this kind of information centrally. GSA does have a regulation that requires agencies

to annually identify this kind of information but unfortunately the

regulation does not require the agencies to pull it together centrally

within that agency or to report it to any central location within the

Federal Government. That is a gap that probably needs to be addressed.

Mr. RUPPERSBERGER. My time is up. The other issue I would like

to address if I had the time is maintenance which if you spend

$1,000 it might save you $1 million down the road.

Mr. SHAYS [presiding]. We will definitely cover that territory.

Mr. LaTourette.

Mr. LATOURETTE. Mr. Ungar, Administrator Perry talked about the death spiral and the $5.7 billion of unmet requirements to rehabilitate buildings. Is it your experience and observation that this

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condition exists because of a lack of willingness on the part of the

GSA or lack of resources, or both to address that problem?

Mr. UNGAR. I think it is primarily a lack of resources. We have

looked at this issue at GSA and other agencies. At GSA, there were

some management issues that we suggested GSA could improve in

terms of getting better information and perhaps improved planning

but the real issue was resources and tools that have been talked

about to deal with this problem.

Mr. LATOURETTE. I think most people who have looked at it have

looked favorably at these public/private partnerships. Does GAO

have an opinion as to who would be best able to manage these public/private partnerships for the disposition of Federal properties?

Mr. UNGAR. We haven’t looked at all the agencies. We certainly

think that, whoever is going to do this on behalf of the Federal

Government needs to have appropriate expertise. We know that all

30 agencies would not have the kind of expertise needed to deal

with these complex arrangements. For example, recently the Department of Defense which obviously has a lot of property was

given enhanced use lease authority or expanded authority to do

leasing and in effect, engage in public/private partnerships. We

looked at this within the last year or so and found it has only implemented that authority in a very limited way. One of the reasons

is because it didn’t have appropriate expertise.

If this authority were granted governmentwide, there would

probably need to be some control in place to go through an organization like GSA or a comparable organization to make sure the

Government is doing the appropriate thing.

Mr. LATOURETTE. The other issue, Ms. Springer, CBO was mentioned but OMB also engages in scoring as well. I would ask if the

goal is to maximize the Federal dollar? Is the OMB considering

changing its scoring rules to allow leases of longer than 10 years?

Ms. SPRINGER. OMB is currently looking at leasing scoring and

I think that is an issue they are going to be looking at as part of

that effort. That has arisen as a result of the anticipation of this

legislation and what is going on in agencies like VA that have current opportunities today. I would expect that would be a part of it.

We would also look forward to working with the committee and

the committee staff and CBO as we go forward.

Mr. LATOURETTE. Your testimony and your comments in response to the chairman’s question of do you support the notion, as

does everybody that I think has looked at this issue of public/private partnerships, but been made aware that OMB has not released a prospectus that would allow the outlease of the old Post

Office Pavilion. Are you able to give us an update on where that

stands at the OMB today?

Ms. SPRINGER. I do not have that with me today but I could get

back to you with that.

Mr. LATOURETTE. If you could maybe send the committee something in writing, I would appreciate that.

Mr. Perry, first of all, let me publicly commend you for the work

you are doing on behalf of the administration and the country. I

think folks are going to be more than impressed with the legislation Ms. Norton wrote allowing the public/private partnership at

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the Southeast Federal Center. I think that is going to be something

we are all going to be very proud of.

As all committees talk about the idea of these public/private

partnerships, do you foresee any difficulties if the GSA was tasked

with the administration of those public/private partnerships? I

guess specifically I am asking whether or not GSA is in a position

to handle the additional workload that might be occasioned as a result of that change in policy?

Mr. PERRY. Given our mission to be the stewards of the real

properties that have been entrusted to us, we will handle that as

a priority. We have already identified it as a priority and we will

rise to the occasion of getting it done.

Will that be a challenge for us? Of course it will but my answer

to your question is yes, we are fully prepared to take on this responsibility. We are advocating for it, we have the people who have

the expertise, we have processes we are using to identify how to

make this work and we know we can do it.

I would add to that given the degree to which this backlog has grown, now that it is $5.7 billion, this is something that will have

to be taken on over a period of time. We obviously will not complete

it in a year or two but we will begin the journey, we will stay the

course and using appropriated funds as well as the moneys that

might be available to us through these other techniques, we will

make a significant improvement in the near term.

Mr. LATOURETTE. Thank you.

Mr. SHAYS. We will go to Ms. Norton.

Ms. NORTON. Thank you, Mr. Chairman.

No one perhaps has been more frustrated with Federal property

policies than this member in large part because this is the Nation’s

Capital with a fair amount of unused Federal property.

My good friend, Chairman Davis, made a very important point

that I really think as we look at cause and effect, needs to be put

on the table. Read my lips, scoring and scoring has not always been

done for Federal property the way it has been done for the last decade. Indeed, the way we score the management of Federal assets

is unique. We who give lip service to the private sector don’t have

a capital budget or even a Federal version of a capital budget. We

manage assets through scoring rules that have no application to

the private sector, would be considered abundantly wasteful, nobody in his right mind in the private sector would use them, the

way we score leases, for example.

Therefore, this hearing is important but it is important to put on

the record that this is not a hearing about why GSA has just allowed a backlog of properties to develop when all it had to do was

go out and do something with them. The scoring rules of the

United States of America obviously made that impossible. So do the

priorities of our country as to how we should spend money. That

is why the notion of public/private partnerships are indeed the only

way to go.

Mr. Perry, my bill on the Southeast Federal Center was done by

the time you came to GSA but I take it you are aware of the Southeast Federal Center?

Mr. PERRY. Yes, ma’am, and I specifically mentioned that as an

example or model in my opening remarks.

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Ms. NORTON. Is this a model that GSA would be prepared to replicate throughout the country, the use of Federal land, the Federal

Government retains the land but allows the private sector to build

on it, to use it with the returns coming to the Federal Government?

Mr. PERRY. Yes. I believe there are a number of examples of

other properties that we manage where that could apply. We talked

earlier about a property in Seattle, our Federal Center there which

is along the waterway as was the case with the Southeast Federal

Center, very desirable location, happens to exist in a market where

the market conditions would be conducive to this type of public/private investment.

There is a continuing Federal need but that could be mixed or

associated with some private sector or mixed use needs. This property happens to be 37 acres which is of sufficient size to do something like that. So there are those examples.

Then there are some individual buildings where the same process

could work. I believe there is more than we could handle in terms

of identifying how this authority could be applied.

Ms. NORTON. In the case of the Southeast Federal Center, to get

around any possible scoring problem, we simply did the natural

thing, we left open the private sector to come back to us to tell us

what to do with the property which is the way it ought to happen

anyway if you are in partnership with the private sector. What

does the market want to do and therefore this obviously is not a

Federal scoring problem.

I note that the homeland security bill gave to the new department the right to acquire its own headquarters. My understanding

is that the Department turned around and asked the GSA what to

do, correct?

Mr. PERRY. That is correct. We are working with the new Department of Homeland Security in that area.

Ms. NORTON. I just mention this because it points up the need

for expertise when you are dealing in property. I am a lawyer, I

wouldn’t begin to deal with property, even my house, without talking to a real estate lawyer.

Mr. SHAYS. The gentlelady’s time has expired. If we could get to

the other Members, I thank her for that.

Mr. Schrock.

Mr. SCHROCK. You can see from where I sit, I haven’t been here

many years and a couple of years ago I might have believed that

when we said something was going to come out of committee and

we would get it to the floor and provide relief for you, I might have

bought it. I don’t buy it anymore. We are the ones who should be

down there testifying, you should be up here asking us why we

haven’t done what we are supposed to do. I think the monkey is

on our back to get this done.

As my friend, Governor Janklow said, for God’s sake, let us get

it done. How many more hearings do we have to have to get this

done? There are a lot of agencies out there, especially the Department of Defense, that are hurting because of all this excess property. That is why they are going to go through a BRAC here to get

rid of some of that. We are tying your hands in the process.

Mr. Perry, you talked about PPVs. The military, as you know, is

going to do that with regards to housing. The military shouldn’t be

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the Charles E. Smith’s of the world, they should be fighting wars

and let Charles E. Smith, and I am not promoting your company

because I live in Hampton Roads and you are not down there, but

PPVs I think are very important and can save our government a

lot of money so we don’t have to be in this maintenance crunch.

You agree with that obviously?

Mr. PERRY. Yes, I certainly do agree with it and I agree with

your earlier sentiment that we must really make a proactive step.

We can’t afford to continue to let this fester.

Mr. SCHROCK. If agencies had senior real property officers with

experience in place to manage the portfolio, why wouldn’t they be

in a position to use management tools we have discussed today,

namely to do PPVs?

Mr. PERRY. Well, they wouldn’t be able to use the public/private

partnership because it wouldn’t be authorized. The statute would

prevent that but they certainly could use other good management

practices for life cycle management of assets including better planning, thoughts about maintenance and disposal but would still be

limited to not use public/private partnerships under current law.

Mr. SCHROCK. Why can’t we change that?

Mr. PERRY. That is what we are here to ask.

Mr. SCHROCK. You should be asking that question. I understand.

The CBO scoring kind of bothers me too, Ms. Springer. Maybe

there is a problem with the scoring. I agree with Chairman Davis

that when you score something and getting rid of excess property

is going to cost more money, something is wrong there. I don’t

quite understand that. Is the scoring the problem? Is that voodoo

economics as I have heard people say from time to time?

Ms. SPRINGER. One of the first things I looked at when I came

here last fall was scoring for this particular piece of legislation and

I had the same reaction you just did. Certainly with respect to use

of proceeds when there is no recognition of the proceeds themselves

and it is viewed solely as an outlay, I think that needs to be addressed.

Either way, we believe at OMB and I know I speak for Mr.

Perry, that we can work with the committee to resolve that issue.

That is an obstacle we need to take out of the way. Let me say

without a bill, we won’t even be getting to the scoring. It is important for us to get the bill. Whichever version it turns out to be, we

need to get the bill. That is what we are here to say.

Mr. SCHROCK. This excess property didn’t create any revenue.

This is the same issue revisited and is creating revenue. We need

to get some of this stuff off the rolls.

Mr. Ungar, I think you wanted to say something?

Mr. UNGAR. I just wanted to add that I wouldn’t underestimate

the difficulty and complexity that will be associated with dealing

with the scoring issue. One of the main obstacles—one of the issues

that CBO raised is—that it would basically account for or score

these partnerships as a lease-purchase arrangement which is another issue aside from retaining funds.

Scoring is a double edged sword. There certainly is a very good

reason for the scoring process. On the other hand, it unfortunately

results in some adverse consequences. One thing the committee

might want to think about is perhaps forming, getting, or promptVerDate 11-MAY-2000 08:20 Sep 02, 2003 Jkt 000000 PO 00000 Frm 00122 Fmt 6633 Sfmt 6633 D:\DOCS\88504.TXT HGOVREF1 PsN: HGOVREF1
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ing some sort of a working group with members of the committee

staff, OMB, CBO and maybe relevant committees and agencies like

VA and DOD to really tackle the scoring issue.

Mr. SCHROCK. I agree. Mr. Chairman, that is something we need

to get our hands around because it sounds like that is one of the

main flies in the ointment. If we could get that resolved, then we

could go forward on this a lot quicker than we are.

Mr. Ungar, the vacant St. Elizabeth’s Hospital building is historical, which means you can’t knock it down, which means you have

to protect it. What are you going to do with that building?

Mr. UNGAR. That is a tough issue. HHS and GSA are wrestling

with that now. Because it is historic, they have to work within

some constraints and work with the folks who administer the provisions of that act. I don’t know that it is impossible to knock it

down. VA I think and maybe other agencies have had some experience with this and have been able to work with the Historic Preservation people, but it does make it much more complicated and

takes much more time.

Mr. SCHROCK. If you want to know how to knock down a building

like that, come see me. We did it with 11 buildings at the Naval

Base in Norfolk that were historic. We said baloney, we won and

tore them down and new buildings are there now. So it can be

done.

Mr. SHAYS. The gentleman’s time has expired.

We have a committee meeting after and we can allow for a second round if there a few folks that need to ask some questions.

Mr. Cooper, you have the floor.

Mr. COOPER. I thank the gentleman from Connecticut.

As I understand it, the rationale for treating public/private partnerships like operating leases or direct appropriations, forcing an

up-front score from CBO is something OMB doesn’t agree with but

has OMB been working with CBO to resolve this internally? I realize the gentleman from Virginia’s request for a working group on

this committee but the new head of the CBO came from the White

House. I would have expected some sort of coordination on this

issue. Is that right?

Ms. SPRINGER. OMB is taking a fresh look at scoring of these

leases as the proposal is seriously being revisited, so we contemplate working with CBO.

Mr. COOPER. Has CBO put up fixed resistance? Are they battling

this to the end or they just haven’t had meetings on it yet?

Ms. SPRINGER. We are at the beginning stages of essentially restarting this discussion with them on it.

Mr. COOPER. Another question would be the issues addressed by

CBO can be addressed by making the proceeds from any property

sales from the exercise of new private/public partnership authorities granted under the proposal subject to appropriations. I don’t

understand that. How exactly does making the exercise a public/

private authority subject to appropriations address CBO’s concerns?

Ms. SPRINGER. What we had in mind would be as each opportunity arose for entering into a public/private partnership or using

the proceeds of a sale for a new purchase, that opportunity would

be evaluated and scored on its own merits and according to whatVerDate 11-MAY-2000 08:20 Sep 02, 2003 Jkt 000000 PO 00000 Frm 00123 Fmt 6633 Sfmt 6633 D:\DOCS\88504.TXT HGOVREF1 PsN: HGOVREF1
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ever type of lease it was, whether operating, capital or what have

you and would be subject to the full review with Congress from an

appropriations standpoint, rather than anticipation up front that

wouldn’t recognize specifically all the merits of each one, so it

would be subject to an appropriation rather than just scoring of an

anticipation.

Mr. COOPER. I am still not sure I understand that but I yield the

balance of my time.

Mr. SHAYS. The gentleman yields. We are going to Mr. Turner.

Mr. TURNER. Thank you.

As I stated in my opening comments, one of the things I am very

concerned about is the issue of a policy of abandonment of cities.

One of the examples we have in front of us says, ‘‘GSA also owns

a courthouse in downtown Jacksonville, FL but we vacated in less

than a year. Although there are Federal agencies in the Jacksonville area that need space, the agencies would prefer to locate in

suburban locations because of access and parking constraints

downtown. The city of Jacksonville has expressed interest in acquiring this building. The freedom to manage the proposal would

give GSA the authority to sell the building to the city, use the proceeds to build in a suburban location that would be more desirable

for prospective Federal tenants and probably cheaper.’’

First, I want to say that in looking at the proposals for increased

flexibility, I think the flexibilities themselves are very important

but the outcome is what I am concerned about because basically

what we are talking about doing to host communities is we are saying because we have deferred maintenance in these buildings, we

have created something that is a blighting influence and we are

going to leave, you are going to have the responsibility. I am certain the city of Jacksonville is not acquiring this property because

it is a gold mine. They are acquiring it most likely because it

doesn’t have any other marketable use. It will probably require significant subsidy by the local community to bring it up to something

that is viable.

Then we are going to take the Federal jobs, move them out to

the suburbs because our rules are going to provide a preference for

suburban locations instead of cities, so all the people who would eat

lunch, all the people who would shop, all the people who would pay

payroll taxes in the Federal jobs that would help support the community that is now subsidizing blighted influence we are leaving

behind are going to be gone off to the suburbs.

As a former mayor of a city I have dealt with this issue of looking at Federal rules as to where jobs locate. Working with the Postal Service, we were told in an initial attempt to get Federal jobs

located in our downtown area that because of the rules, we would

be virtually unable to compete.

Ultimately we were able to win, but we were often told that the

constraints of issues of convenience and parking, all of the definitions that we would give to a normal, downtown, urban area were

actually used against us as opposed to in favor of an urban core.

We all know there are Federal mandates that burden our urban

cores, Brownfields, social services, special needs populations, public

housing, environmental mandates without compensation, infraVerDate 11-MAY-2000 08:20 Sep 02, 2003 Jkt 000000 PO 00000 Frm 00124 Fmt 6633 Sfmt 6633 D:\DOCS\88504.TXT HGOVREF1 PsN: HGOVREF1
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structure burdens for supporting the entire metropolitan urban

area.

I am very concerned we are getting a Federal policy that is almost anti-cities. As I look at this, it goes on to say ‘‘you may provide a lease back option to the Federal Government to occupy space

in any facility, require construction, repair or renovation by the

non-governmental entity provided that the agreement does not

guarantee government occupancy in any subsequent agreements.

To lease back in such facilities must be in accordance with the competition requirements of Title III.’’

I would like you to speak on the issue of why our Federal rules,

as the process goes, if we are going to go to leasing, don’t have a

preference for us to support and maintain our Federal jobs in our

urban core with the tax bases necessary and where the synergies

of workers are necessary in order for us to maintain our cities

which, as you know, are the jewels of this country?

Mr. PERRY. Thank you for that question. That is a very important point with two parts to it. One has to do with the exchange

of property. If my facts are right, that is something that we would

be doing under our present authority which does not enable us to

enter into public/private partnerships. Rather, if we have a situation like the one you describe, the only tool available to us today

is to do a like kind exchange where the city would grant us something and we would grant them something so that we could provide

an appropriate workspace for Federal workers and the city would

do the best it could do to protect the development in the urban

core.

If we had the authority we are talking about today, that would

have enabled us to do the development of the downtown facility. In

fact, the list we prepared entitled our ‘‘100 Most Egregious Cases,’’

many were in fact Federal buildings in the urban core that had we

had this authority or as we get this authority, they would be candidates for development in the downtown as opposed to our having

to go to a second option which is to exchange property which is the

only authority we would have had today.

Mr. TURNER. My time is almost up so let me just add to that.

It seemed to me in reading it that you are subject to the same rules

in determining what would be the competition property, the one

that you are disposing. Those rules might cause it to have a suburban preference. Is that not accurate?

Mr. PERRY. I can’t read that into that. If I understand the issue,

if there is a building and we had the ability either through appropriation or through public/private partnership bring that building

up to standard, we would do it at that location. We wouldn’t get

into the swap.

You could assume possibly the agency had a mission related reason why it wanted to move but lacking that, our approach, our policy would be to opt for the urban core location.

Mr. TURNER. That is great to hear.

Chairman TOM DAVIS [presiding]. The gentleman’s time has expired.

Mr. Janklow.

Mr. JANKLOW. Thank you.

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I would like to apologize for my preliminary remarks made when

I came in here. I had read some of this testimony as I had indicated. I thought we were discussing a country where the authority

to acquire, manage and dispose of property was limited, freedom to

effectively manage holdings was severely restricted, separate authority to give people flexibility to out lease and dispose of property

under specific conditions wasn’t allowed, I thought we were talking

about a country where the National Park Service will think it is

really a great management technique in fiscal year 2003 to develop

a facility inventory to see what buildings it maintains and perform

asset assessments to determine the condition of these assets and

establish a baseline facility condition index and that would be an

accomplishment where we spend $50 million more in acquiring a

patent office than we need for the taxpayers while everybody sits

around talking about the difficulty to fund things like education in

this country and medical issues and the other kinds of issues that

we deal with, that environmental laws stifle what it is we are trying to do with property and we have inventory and historical problems. Frankly, I thought I walked into a meeting on how the old

Soviet Union operated. I had no idea we were discussing the

United States of America until I heard you people testify. I would

have never made those comments had I known it was my country.

I thought we were talking about the Peoples Republic of China or

the old Soviet Union.

Given the fact we are talking about the United States of America, how do we fix this? This is insane. This is absolutely insane.

Everybody in Congress knows it and we sit around talking about

our specific projects. We don’t want to give you any authority to do

this for all of America, so every one of us can find a project or two

in our State or city that we want to make a pilot project.

I don’t care what party you are in, Presidents of recent vintage

don’t have any trouble hiring top, competent talent to come into the

government to work. Are you folks really too dumb to do this? Are

you crooked? Are you on the take? Do you want to be on the take?

What is it that prevents us from giving you the authority? In your

perspective, what is it that prevents us from giving you the authority to do it or are we too stupid or on the take? [Laughter.]

Chairman TOM DAVIS. Let us see if there is a volunteer to take

the question.

Mr. UNGAR. I can’t answer your last question but in terms of why

this problem has gone on so long and why it hasn’t been solved,

I can address these.

Chairman TOM DAVIS. Mr. Ungar, you are fully vested in your

retirement?

Mr. UNGAR. Yes, absolutely and I will say that I can leave at any

time.

Mr. JANKLOW. I used to be able to pardon people but I can’t anymore.

Mr. UNGAR. Maybe you can put in a good word with the President or the Comptroller General depending on what happens.

Mr. JANKLOW. I will do that. We will score you OK.

Mr. UNGAR. It is a very, very complex problem and there are

many factors to it. One is leadership and a plan.

Mr. JANKLOW. Go to No. 2.

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Mr. UNGAR. No. 2 is legislative action.

Mr. JANKLOW. Go to three.

Mr. UNGAR. Three would be individual actions by Federal agencies to basically do the right thing once they have the tools to do

that.

Mr. JANKLOW. What is four?

Mr. UNGAR. Four would be to make more resources available.

Five would be maybe even higher up in your order, addressing the

scorekeeping rules so they make sense from both a budget standpoint and a real property management standpoint.

Mr. JANKLOW. Nothing you described is complicated. It is simple.

It takes leadership and it takes the courage to move forward. It

takes people that have the intelligence level to know the difference

between right and wrong and when someone is getting ripped off

and $2 million to maintain a post office every year, I come from

a small State and you could buy a reading book for every first

grade child in my State for $2 million. For what the post office is

wasting every year to maintain a building in Chicago, you could

buy a reading book for every first grader and an advanced reading

course for the whole State of South Dakota. That is how ludicrous

this all is.

Thank you, Mr. Chairman. I don’t have any other questions. This

is crazy and everyone knows it.

Chairman TOM DAVIS. Let me make one comment. We are going

to be introducing legislation in the next week or so. There have

been basically two problems legislatively. One has been the scoring

issues which are arcane, which we are trying to work around with

the Congressional Budget Office but the fact is you bring this bill

forward at this time, you have to show offsets or it goes nowhere

and significant offsets. We are looking at wording that will get

around that.

Second are jurisdictional issues between what is called the 1949

Act and the 1959 Act that puts it before different committees. Mr.

LaTourette, who is on both committees, has pledged to work with

us. This is a priority for our leadership.

The third problem is going to be the Senate but let us take care

of the House. We can do what we can do and I will tell you that

we will have a bill out of here this year that meets your needs.

I want to commend Commissioner Perry. From the minute he

stepped in, he headed GSA in Ohio.

Mr. JANKLOW. These are all competent people. Listen to them,

they know what they are talking about.

Chairman TOM DAVIS. Exactly but he has taken the lead, made

it a priority and we did get it through the committee last year before we ran into problems at CBO.

Mr. Waxman worked closely with us to make it a bipartisan but

let us just make it a priority and move it.

Mr. JANKLOW. Thank you, Mr. Chairman. I bet these folks drive

home every night from work and say I can’t believe these idiots I

have to deal with.

Chairman TOM DAVIS. They are under oath and I am not going

to ask them.

Ms. Blackburn.

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Ms. BLACKBURN. Thank you. It is always hard to follow the good

Governor because he brings so much common sense to the table for

all of us.

Mr. Ungar, I think you probably are sitting there looking at us

and agreeing with everything Governor Janklow has said.

Mr. UNGAR. Yes, ma’am.

Ms. BLACKBURN. Being one from the private sector, I felt that

probably was the thought running through your mind. Ms. Springer, is always a delight to have you come before us. I know being

the lowly freshman, I am hard to see down here on the end.

A couple of thoughts. Looking at the stewardship assets, when

you think about we are the steward of 28 percent of the Nation’s

land mass. Going to that as we talk about having a law and you

all being able to do a bit more with your management and public/

private partnerships, has there been any movement or do you have

a process in place for evaluation of the stewardship assets which

are not included in the consolidated financial statements? If you

don’t have a process in place, how long do you think that is going

to take?

Ms. SPRINGER. That is a good question and I want to thank you

for it because it does recognize that OMB does more than just deal

with scoring. On the management side as part of the President’s

management agenda in anticipation of this legislation, we are asking agencies in this 2005 cycle to pick some very specific properties,

including not only the ones reported in the financial balance statements but also the stewardship assets so that would cover things

like the parks and other types of assets reported there, to actually

pick a sampling of those and report on the values, the maintenance

condition, what opportunities and things they could do. So we want

some very concrete examples in anticipation of opening that once

we have the authorities under the legislation.

Ms. BLACKBURN. Do you anticipate that being done through the

rulemaking process or do you feel our bill should include a structure for that?

Ms. SPRINGER. We can take a first step in the A–11 guidance

that we issue and we are working up that right now to come out

for the beginning of the 2005 budget cycle. That will only go so far,

it will be a first step, a good first step but it will be done with the

expectation that we would have the broader legislation to really

open it up.

Ms. BLACKBURN. Mr. Chairman, I would like for the record and

for our process to recommend that we give some special thought to

the stewardship assets as we look at the totality of the bill and

then make provisions for addressing that.

One other thing, either you or Mr. Ungar, as we are looking at

asset management and the President’s management agenda, knowing this is kind of a weak link as we look at our entire budgeting

process, developing a financial statement for the Federal Government, do you have a corporate model that you are working from

with your asset management and the real property and also the

stewardship assets or are you kind of taking the lessons learned

and trying to develop a template we will work from?

Ms. SPRINGER. We will be moving from that latter view of lessons

learned and kind of reactive to a more proactive formulation of

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structure for how we would like some standard metrics, some

standard reporting mechanisms. Clearly the financial statements,

an important point to take note of, the FSAV which covers the financial reporting of the assets that are in the balance sheet has

some very strict rules on reporting that we think covers comprehensively these types of transactions that are envisioned in the

legislation.

The financial statements themselves are pretty well governed.

Beyond that, we think there is a certain aspect of performance we

need to capture more fully and we will be looking to provide direction on that.

Ms. BLACKBURN. Thank you.

Chairman TOM DAVIS. Mr. Duncan.

Mr. DUNCAN. Thank you.

This is something I have been very interested in because I spent

10 years on the Public Buildings Subcommittee and first of all, I

want to say to my colleague, Mr. Turner, he is exactly right. I

agree with everything he said in his statement. This business of

moving to a suburban location in Jacksonville, oftentimes we have

found it is just some high level official in that particular building

who wants to get a new office or wants to get an office closer to

home and they cook the figures so they can so in a convoluted way

that some money is going to be saved.

If people look at these moves closely it would save much more

money to stay in the building where they are. In fact, we have

found also that some of these people complain about the buildings

they are in when they are Federal buildings and they are buildings

that were built in the 1960’s and 1970’s, not old buildings at all.

We are working in a building that opened in 1800, the Capitol. It

is just ridiculous as Governor Janklow said, what is going on here.

We dealt I guess most often with Federal courthouses and what

we found was State governments were building beautiful Supreme

Court buildings and courthouses for $125 and $150 a square foot

and the Federal Government was building courthouses for $265

and $285 a square foot because nobody would say to the Federal

judges you can’t just have all the gold and high furnishings that

you want. It has gotten totally out of hand. The National Security

Administration building in Virginia cost $320 a square foot. Somebody has got to get on top of this thing and say no.

I noticed in the report that the Department of Defense has so many unneeded buildings that it is costing $3-$4 billion a year the

GAO report says just to maintain those buildings. Mr. Ungar, are

they making any progress, really doing a lot to get rid of these

buildings or sell these properties?

Mr. UNGAR. Some progress is being made. Each agency is grappling with this problem but unfortunately the problem is so big

that without a much more aggressive effort, probably what is going

to happen is the properties that become unneeded or underutilized

or in serious disrepair are going to overtake the ones getting off

that list.

Without a more intensive effort, the problem will probably get

worse.

Mr. DUNCAN. In the report on the Mendell Rivers building in

South Carolina, that looks like a fairly new building, it doesn’t look

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like an old building but apparently they moved out because of the

asbestos. The report says there is very little Federal demand there

and yet they are trying to get the city to take the building and

build them a 27,000 square food building. It is crazy as Mr.

Schrock just said. Why don’t they just go in and remove the asbestos because if it is good enough to turn over to the city, it should

be good enough for the Federal Government to clean up and keep

working in there.

Mr. UNGAR. That is a very good question. There are a couple

issues. One, the building was actually damaged by the hurricane.

It could have been repaired conceptually but the asbestos really

made it a big problem. There is a funding issue to get the money

to repair it.

The reason our report said there wasn’t strong demand was that

at the time we looked at this property a couple of years ago, the

Federal agencies that were there were moved out into leased space

for the most part and they had leases of several years. It wasn’t

that the property was not a good candidate, it was at that particular time, those agencies couldn’t move back in right away.

On the other hand, it is a very desirable location and I don’t

know that the exchange is really the optimal solution but right now

it is probably the only solution that GSA has unless it has additional authority.

Mr. DUNCAN. Let me say this. These prices are getting ridiculous

and somebody, the GSA, the OMB, needs to start putting more

pressure to hold down the cost of these Federal buildings and not

just go so lavishly overboard.

I will tell you one quick story. The Secret Service a few years ago, we found they were paying $7,723,000 for a 1.3 acre piece of

property in downtown Washington for a new headquarters. We ran

a computer search and found nine other parcels of property all

costing between $10-$30 million that were within the parameters.

We fussed about that.

The head of the Secret Service came to see me and four of their

heads and said, will you stop fussing about this if we agree to

knock $50 million off the price of the building. I said yes, because

I thought at least we are saving $50 million.

Mr. SHAYS [presiding]. Would the gentleman suspend? We have

an option of possibly clearing this panel, the red light is on. I

haven’t asked questions.

Mr. DUNCAN. I will stop, Mr. Chairman.

Mr. SHAYS. Finish your sentence if you want but I just need to

move on here.

Mr. DUNCAN. All I was saying was they instantly agreed to knock

off $50 million of the price of the building just because we raised

some questions at a hearing. That shows you how much fluff and

surplus is in these buildings and it is getting ridiculous. It is not

fair to the taxpayers.

Mr. SHAYS. Mr. Souder.

Mr. SOUDER. I have two brief comments and I have two questions. One is that we have been hearing all morning about the

basic problem of why the Federal Government is different than the

private sector cash-flow annual budgeting or biannual budgeting

which simply does not work when your cash-flow expenses are comVerDate 11-MAY-2000 08:20 Sep 02, 2003 Jkt 000000 PO 00000 Frm 00130 Fmt 6633 Sfmt 6633 D:\DOCS\88504.TXT HGOVREF1 PsN: HGOVREF1
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ing that year and your income is a later year. We have all kinds

of scoring problems and this whole thing of trying to separate assets from income and how we score that leads us to do really dumb

things, en bloc, good things. We have to address some fundamental

process questions of how we account income and assets because it

leads to other short term decisions that aren’t wise long term decisions. Anybody who has been in business can see this every time

we deal with our annual statements.

I also want to resist the temptation to ask Mr. Bitz about why

it takes so long to get the air conditioning in the spring. I am a

constituent.

Mr. BITZ. I will look into that, sir.

Mr. SOUDER. No, I think it is a standard procedure.

It is a Charles Smith Co. operated building that I stay in when

I am here in Washington.

I had a question for Mr. Catlett. In your testimony, you referred

to the VA and how you have been able to do a number of things

in local communities with flexibility. Do you involve the local communities in the enhanced use leasing projects and what is the review process you have in those local communities?

Mr. CATLETT. Yes, sir. There is a public hearing for each of these

proposals we put forward to get comments both from the private

sector as well as other government officials. There is a public hearing at the location for each of these projects.

Mr. SOUDER. That is well publicized and groups come in. Have

you had the experience of people coming in and participating in

that process?

Mr. CATLETT. Yes, sir, very much so.

Mr. SOUDER. Can you give an example of one where you saw

such participation and how that might have affected the project?

Mr. CATLETT. The one that would come to mind now would be

just north of Baltimore at a facility we call Fort Howard. We had

a public hearing there about a month or 6 weeks ago in which

about 40 participants came in. Again, we don’t need the property,

we are looking for a use there for a long term care type of community, not just a facility for institutional care. Obviously the neighborhood is very much interested, the developers were interested, so

we had over 45 participants there representing what we feel was

the most interest in that community or affected by that proposal.

Mr. SOUDER. General Williams, I also had a question for you.

Can you give us some examples of how revenues from sales and

leases of Department of State property have been used to improve

other Department of State properties?

General WILLIAMS. I would be happy to. We are able to take the

proceeds and identify, we have a long range strategic plan that is

in place with the next most urgent project, so once the proceeds are

identified and we make the necessary reporting to our oversight

apparatus, then we are able to proceed ahead very expeditiously

with projects. For example, we have built embassies out of proceeds

of sales.

Mr. SOUDER. Does it have to stay in the same region?

General WILLIAMS. No, it does not.

Mr. SOUDER. Could you give an example of an embassy where

that might have occurred?

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General WILLIAMS. Regarding the use of proceeds of sale, for example, we are in the process now of gathering the funds for our

Berlin Embassy. The proceeds of sales came from other regions

other than Europe, they go to a central pot. The next most urgent

requirement we have in State is if the option is to fund from the

proceeds of sales, it comes out. So Berlin would be an example.

Uganda and Angola would be other examples.

Mr. SOUDER. Thank you very much.

Mr. SHAYS. I thank the gentleman.

Let me say I do have questions but time is running out and I

don’t want you to have to wait for us to get back. I think most has

been covered. I do take a little bit of pride in the oversight of our

committee with VA and State. I think you all have tried to move

forward and use the instruments you have available to be a bit

more efficient here.

I do appreciate the testimony of all our witnesses. Is there anything we need to put on the record that you might have thought

about last night that you wanted to make sure was part of the

record before we adjourn this hearing?

Thank you all for your participation. This is a noble cause and

I think we are going to see action and don’t underestimate the

power of our chairman to get this through even the Senate.

With that, before adjourning, I will announce we have a committee business meeting that will begin promptly at 1:30 p.m.

The record will remain for 2 weeks on this hearing for anyone

who wants to submit information.

Thank you all for participating and this hearing is adjourned.

[Whereupon, at 11:36 a.m., the committee was adjourned, to reconvene at the call of the Chair.]

[Additional information submitted for the hearing record follows:]

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