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S. Hrg. 112–319 

FEDERAL LEASED PROPERTY: 

ARE FEDERAL AGENCIES GETTING A BAD DEAL? 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

AUGUST 4, 2011 

Available via the World Wide Web: http://www.fdsys.gov 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

NICHOLAS A. ROSSI, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

MARK BEGICH, Alaska 

SCOTT P. BROWN, Massachusetts 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

JOHN KILVINGTON, Staff Director 

WILLIAM WRIGHT, Minority Staff Director 

DEIRDRE G. ARMSTRONG, Chief Clerk 

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(III) 

C O N T E N T S 

Opening statements: Page 

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

Senator Brown .................................................................................................. 5 

Prepared statements: 

Senator Carper ................................................................................................. 39 

Senator Brown .................................................................................................. 41 

WITNESSES 

THURSDAY, AUGUST 4, 2011 

David Foley, Deputy Commissioner, Public Buildings Service, U.S. General 

Services Administration ...................................................................................... 7 

James M. Sullivan, Director, Office of Asset Enterprise Management, U.S. 

Office of Veterans’ Affairs ................................................................................... 9 

Hon. David Kotz, Inspector General, U.S. Securities and Exchange Commission ........................................................................................................................ 11

Jeff Heslop, Chief Operating Officer, U.S. Securities and Exchange Commission ........................................................................................................................ 13

David J. Wise, Director, Physical Infrastructure Issues, U.S. Government 

Accountability Office ............................................................................................ 14 

ALPHABETICAL LIST OF WITNESSES

Foley, David: 

Testimony .......................................................................................................... 7 

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

Heslop, Jeff: 

Testimony .......................................................................................................... 13 

Prepared statement .......................................................................................... 79 

Kotz, Hon. David: 

Testimony .......................................................................................................... 11 

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

Sullivan, James M.: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 50 

Wise, David J.: 

Testimony .......................................................................................................... 14 

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

APPENDIX 

Appendix 1 referenced by Mr. Wise ....................................................................... 97 

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FEDERAL LEASED PROPERTY: ARE FEDERAL 

AGENCIES GETTING A BAD DEAL? 

THURSDAY, AUGUST 4, 2011 

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

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:30 p.m., in room 

342, Dirksen Senate Office Building, Hon. Thomas R. Carper, 

Chairman of the Subcommittee, presiding. 

Present: Senators Carper and Brown 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Good afternoon everyone. On behalf of Senator 

Brown and myself, welcome to today’s hearing. I was just saying 

to Senator Brown that we may be the only hearing in the Senate 

today. I do not know, but the others are dropping like flies. 

But if you see the two of us, you know we are serious about saving some money and we are for our country. We are glad that our 

witnesses can be here today and our guests as well. Today we are 

going to examine the challenges that our Federal Government faces 

managing its real property and in particular, its reliance on spaces 

leased from the private sector to satisfy long-term real estate 

needs. 

I just addressed a group over in the House side a little while ago, 

Scott, and they come from the accounting industry, auditing industry, and actually do a whole lot of work as a firm to support the 

Government Accountability Office’s (GAO’s) efforts with respect 

high-risk list, high risk for using a lot of money, taxpayer money. 

But we have had a number of hearings here in the past about real 

estate, high risk, and we have literally thousands of pieces of property sitting around us. There are a thousand pieces of property that 

the Federal Government owns and we pay utilities for, maintenance for, security for that we are going to get rid of. We do not 

use them. 

And we also find out that there is something else that we are 

spending a lot of money for and that is—GAO has been riding us 

for a couple of years, and that is we have a lot of agencies that 

lease space for years, in some cases for decades, and we save a lot 

of money. They save a lot of money if instead of leasing we actually 

buy this stuff. 

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2 

And there are still a lot of instances where it actually makes a 

lot of sense to lease, like the Department of Census Office. Every 

10 years you do a census. It does not make sense to buy all those 

pieces of property they are going to use once every 10 years. 

But that is a little bit of background here. There is a general consensus that our Federal Government has to get smart about the 

ways we manage our buildings and land. Presidents in both parties 

now have made doing so a top management priority and with concerns over the implication of our deficit and national debt mounting, eliminating waste, achieving cost savings in this area remains 

a top priority for us and I hope for the rest of our colleagues in the 

House and the Senate and the Administration. 

Between 2001 and 2009, we ran up as much debt as we did in 

the first 208 years of our Nation’s history. Last year we ran up 

what may be the largest budget deficit in our Nation’s history. 

Most of us here in Washington are united in our desire to find a 

solution to our Nation’s fiscal problems. We are still facing an 

ocean of red ink as far as the eye can see, even after enactment 

earlier this week of the spending cuts included in the legislation to 

raise our country’s debt ceiling. 

A wide variety of ideas have been put forward on how to reduce 

our budget deficit and begin whittling down our debt. Last fall, the 

majority of the bipartisan deficit commission appointed by President Obama, co-chaired by Alan Simpson, former Republican Senator from Wyoming, and by Erskine Bowles, former chief of staff 

to then President Bill Clinton, they provided us, along with their 

colleagues on the Deficit Commission, a roadmap to reduce cumulative Federal deficits over the next decade by some $4 trillion, and 

at the same time getting a reform of our title programs, tax reform. 

Pretty comprehensive, bipartisan comprehensive and would actually not be just a deal. It would actually have been a solution to 

the challenges that we face. 

Their work is reinforced by the Gang of Six, three Democrats, 

three Republicans, and unfortunately, in my view the President initially followed their lead too late, as it turned out, and the leaders 

of the House and Senate, Democrat and Republican, did not follow 

it at all and that is a sad thing, I think, for this country. 

As a result, we settled this week for a bill that reins in discretionary spending, but does little to tackle our long-term financial 

challenges. In short, it was a deal, not a solution, and not a very 

good deal as far as I am concerned. It only addresses the symptoms 

of our Nation’s fiscal ailments, specifically the debt ceiling, but 

failed to cure our serious disease of debt and deficits. And unfortunately, we largely put off until tomorrow what we ought have been 

doing right now. 

And as Senator Brown has heard me say probably more times 

than he wants to remember now, but I said a lot, and my staff certainly feels that way, but I am going to keep saying it for as long 

as I am around here, a lot of Americans believe that those of us 

here in Washington are not capable of making or taking the difficult steps that are necessary to put our country back on the right 

fiscal track. And given what has happened in recent weeks, it is 

easy to see why they feel that way. 

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3 

They do not think we can do the hard work that we are hired 

to do, that is, to effectively manage the tax dollars that they entrust us with. They look at the spending, the tax decisions we have 

made in recent years and also the poor management across government and question whether the culture here is broken. They question whether we are capable of making the kind of tough decisions 

that American families make with their own budgets. 

And I do not blame folks for being skeptical, especially in light 

of the debate we have seen in recent months and the deal that we 

arrived at in recent days. Now more than ever we need to establish 

a different kind of culture here in Washington. 

When it comes to spending we need to move from what I have 

described here many times as the culture of spendthrift to a culture of thrift. This shift must involve looking in every nook and 

cranny of the Federal Government and asking this question about 

all kinds of programs, domestic programs, discretionary programs, 

entitlement programs, how do we get a better result for less money, 

or how do we get a better result for the same amount of money? 

When it comes to property management, it is clear to me and 

others that we can get better results and we can save money. Federal property management has been on the Government Accountability Office’s high-risk list since January 2003, in part due to significant amounts of underutilized and excess property. This problem is coupled with the fact that Federal agencies depend on costly—too often depend on costly leased space to meet new space requirements, although building ownership has proven to be more 

cost effective over time, not always, but often times. 

The most recent comprehensive data available shows that Federal agencies apparently possess more than 45,000 underutilized 

buildings, totaling more than 340 million square feet in space. 

These buildings cost nearly $1.7 billion annually to secure and to 

maintain. Fixing that problem does not balance the budget, but it 

is a great step in the right direction. 

But in addition to the past 20 years, GAO has been telling us 

that we have been too reliant on leasing. Since 2008, the General 

Services Administration (GSA) has leased more property than it 

owns. In fiscal years (FY) 2011, the agency will spend over $5 billion to house Federal employees in 184 million square feet of private office space. In addition, while GSA serves as the central leasing agent for the Federal Government and is responsible for managing and obtaining space for agencies, many agencies have obtained their own leasing authority and in doing so, have chosen not 

to take advantage of GSA’s expertise in Federal real estate. 

Given that many of these agencies lack experience in performing 

lease procurements, they often bind the government into costly, 

long-term lease obligations that result in millions of dollars in additional cost to the Federal Government, actually tens of millions and 

maybe even hundreds of millions of extra dollars in cost. 

For example, the U.S. Securities and Exchange Commission 

(SEC) is—we know this one all too well—but is an agency that has 

been granted independent leasing authority, along with some other 

agencies. In July 2010, the Commission entered into a sole source 

lease for 900,000 square feet of space at a privately owned building 

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4 

called Constitution Center in Washington. That lease would have 

cost taxpayers some $556 million over 10 years. 

Although the SEC has held independent leasing authority for 

more than 20 years, the Commission’s inspector general has found 

that the agency still lacks adequate policies and procedures for 

managing its leasing actions. The fact, this was the second time 

within the past 5 years in which the SEC was involved in an unnecessarily expensive leasing arrangement. 

Unfortunately, this is not the only agency that operates this way. 

Similarly, in 2006, the Federal Bureau of Investigation (FBI) executed a 30-year operating lease to house employees in its Chicago 

field office that cost an estimated $40 million more than construction over a 30-year period. 

Fortunately, both Congress and the Obama Administration are 

united in their commitment to address these issues. The President’s latest budget included a recommendation to form a Civilian 

Property Realignment Board (CPRA) to review the government’s 

property portfolio and dispose of those deemed excess in an expedited manner. 

I think, if I am not mistaken, Senator Brown may have actually 

introduced legislation to codify that proposal. This is a proposal 

that my colleagues and I on the Homeland Security and Government Affairs Committee (HSGAC) had an opportunity to examine 

on our June 9th real property hearing. And while the proposal, 

folks, is primarily on assisting agencies in the disposal of excess 

and underutilized buildings, it does provide for opportunities to 

consolidate or co-locate operations, which could ultimately help to 

reduce the government’s leasing portfolio. 

I have concerns about the cost and effectiveness of the President’s approach, but I look forward to taking what works in his 

proposal and Senator Brown’s legislation, along with other ideas, 

and introducing a bill in the fall that will help right-size the government’s portfolio in a way that is advantageous for Federal agencies, for community stakeholders and the clientele served by those 

agencies. 

Clearly, the momentum is building to address a widely recognized problem, yet in all of our zeal to save, we must be intelligent 

in our approach. Rome, I am told, was not built in a day. The Federal Government’s bloated property portfolio cannot be un-built in 

a day. We have an opportunity though to do this right and change 

the way the Federal Government manages its hundreds of billions 

of dollars worth of assets. 

That said, the agency should not be waiting for a civilian Base 

Realignment and Closure (BRAC) to solve their problems, or at 

least begin to solve their property management problems now. In 

an era of shrinking budgets and scare resources, it is critical that 

agencies come up with an innovative property management tool 

that will identify opportunities to right-size our real estate portfolio 

to reduce costs and achieve savings by eliminating unneeded assets 

and expensive long-term space. 

Before I turn it over to Senator Brown, let me just say, every 

now and then, and I am sure Scott has noticed this as well, we 

misalign incentives. We misalign incentives in the Federal Government. We incentivize the wrong kind of behavior and then we get 

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5 

the wrong kind of results. And what we do within the Federal Government, we incentivize a lot of Federal agencies to lease. The incentives are to lease. 

With the way that we call, if you ever really want to buy a building or something like that upfront, even if that makes sense long 

term, we incentivize them with the way that we score that expenditure in the first year, as opposed to leasing, which could be scored 

for 10, 20, 30 years or even more. 

And one of the things I hope comes out of this hearing today are 

some good discussion on how we change those incentives, get them 

properly aligned so that we not only meet the space needs of our 

agencies, but we meet the fiscal constraints of our country. 

So I look forward to this hearing, from our witnesses—we both 

do—as you share with us your thoughts on how to transform our 

asset portfolio in a way that generates significant and lasting savings to the public. And with that, I am happy to turn it over to 

Senator Scott Brown of Massachusetts. 

STATEMENT OF SENATOR BROWN 

Senator BROWN. Thank you, Mr. Chairman. Thank you to our 

witnesses. I would venture to guess we are the only hearing in D.C. 

right now. It is interesting listening to you, Mr. Chairman, I want 

to thank you for holding this important hearing. Through a lot of 

our efforts, your efforts, we have been able to help put the spotlight 

on some of the programs that just are not doing it right. 

It is funny. Half a billion dollars for leased office space, it just 

blows my mind how we get in these situations. People wonder 

where the money is going. Well, it is very clear where it is going. 

It is going some places very poorly chosen, whether it is leased 

spaces, programs, whether it be military programs that are not 

working, are obsolete. We are just wasting money all over the 

place, and in the middle of a financial emergency, I find that very, 

very disturbing. 

That is why I was proud to put party politics aside and work 

with the President and Congressman Denham on the Civilian 

Property Realignment Act (CPRA). The bipartisan legislation that 

you referenced will bring private sector discipline to the management of Federal real estate. It will empower an independent commission to break through the longstanding barriers created by red 

tape and politics to facilitate the efficient disposal and realignment 

of unneeded Federal property. 

This bipartisan approach will address a problem GAO has designated as a high-risk area and would achieve savings of approximately $15 billion, and that is real money when we are trying to 

make some very real and tough decisions in the next couple of 

years. 

It is funny, time and time again, government agencies have proven they cannot properly manage their own real estate and today, 

as we already referenced, both of us, that half a billion dollars in 

leased space really will never be used efficiently or properly. And 

not only did they enter into this wasteful lease, but they—the SEC, 

as was referenced—but they did so they could spend their workdays, quite frankly, in a lavish building, complete with panoramic 

views of the city, limestone floors, marble walls and a landscape 

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courtyard that was transformed into a one-acre private garden. I 

guess it is nice if you can get it, especially when it is at the taxpayers’ expense. 

That being said, I came to Washington to look at the way we 

spend our dollars and to be a fiscal watchdog, Senator, to address 

our fiscal challenges so we do not have to leave young Americans 

with a tab that they just cannot afford anymore, Mr. Chairman. 

I am looking forward, as you are, to making those tough decisions. We started already. We will continue to work in that vein 

and hopefully gain the confidence of the American people once 

again. I look forward to hearing from our witnesses. 

Senator CARPER. Thanks very much for that statement. Let me 

just take a moment to introduce each of our witnesses, a Hokie 

from Virginia Tech here to lead off. David Foley, appointed Deputy 

Commissioner of the Public Building Services and U.S. General 

Services Administration in 2010. He is responsible for the real estate acquisition operations of the agency, previously served as the 

Deputy Assistant Commissioner for portfolio management at GSA 

and worked in a number of leadership roles within GSA in offices 

in, get this, Dallas, Kansas City and Atlanta. 

Mr. Foley is a graduate of Missouri State University, has a master’s in business administration from the home of the Hokies, Virginia Tech. 

Mr. Jim Sullivan, also known as James, is the Director of the Office of Asset Enterprise Management at the U.S. Department of 

Veterans’ Affairs (VA). It seems like we pick on the VA a lot and 

we actually use them a lot of times as an example of an agency 

that does things well. 

Sometimes folks in these hearings, they like to conduct these like 

gotcha hearings. What we like to do is when folks are behaving in 

inappropriate ways, managing in inappropriate ways, we like to 

put a spotlight on that. When agencies are actually managing and 

behaving in more appropriate ways and actually serve an example, 

we like to put a spotlight on them and any number of times we 

have done that with the VA. 

But Mr. Sullivan assumed this new leadership role in 2009, after 

serving as a Deputy Director since 2000—I guess since May 2002, 

something like that. But you are now the Director of the Office of 

Asset Enterprise Management at VA. And Mr. Sullivan has over 25 

years of experience in capital budgeting and planning and asset 

management. He plays a pivotal role in managing one of the largest portfolios of property in the Federal Government, including in 

Delaware. 

The Honorable David Kotz has served as the Inspector General 

for the U.S. Securities and Exchange Commission since December 

2007. Prior to joining the SEC, Mr. Kotz served as the Inspector 

General for the Peace Corps and practiced Federal administrative 

law for a decade in the private sector. Inspector General Kotz is a 

graduate of the University of Maryland, which makes him a Terrapin, and the Cornell Law School. 

Jeff Heslop was named the U.S. Securities and Exchange Commission’s first ever Chief Operating Officer (COO) in May 2010. He 

is responsible for the agency’s information technology, financial reporting and record management duties. 

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7 

1The prepared statement of Mr. Foley appears in the appendix on page 43. 

Prior to joining the SEC, Mr. Heslop was managing Vice President at Capital One, which has just acted to acquire ING Direct 

in Wilmington, Delaware, right in my hometown. And there, at 

Capital One, Mr. Heslop was responsible for the company’s information and risk management operations. 

He received his bachelor of arts degree from Davidson College. 

When did you graduate? 

Mr. HESLOP. Seventy-six. 

Senator CARPER. Seventy-six. John Spratt, Congressman John 

Spratt, who is one of your bachelorettes as well. Do you know who 

the president is there, now? 

Mr. HESLOP. Carol Quillen. 

Senator CARPER. She is from Delaware. Delaware. Yes, she just 

became your president the 1st of this month, and I think the first 

woman in the history of the college. 

You have your master’s in business administration from College 

of William and Mary, where our youngest son has started his senior year this fall. Great school. 

David Wise is Director for Fiscal Infrastructure Issues at the 

U.S. Government Accountability Office, affectionately known as 

GAO. He specializes in transportation and communication and Federal real property issues. 

His career at GAO dates back to 1981. Mr. Wise has a bachelor 

of arts in political science from the University of Pittsburgh and a 

master’s in public administration’s degree from Pitts Graduate 

School of Public and International Affairs. And now that the National Football Leagure (NFL) strike has been averted, or lockout 

has been averted, I was going to ask my first question of you. 

What NFL football team will you be rooting for this fall with that 

kind of bio? 

Mr. WISE. Patriots. 

Senator CARPER. All right. Welcome one and all. Your entire 

statement will be made part of the record. If you like to summarize, that would be great. We are asking you keep remarks to 

roughly 5 minutes. If you go a little beyond that, that is OK. If you 

go way beyond that, that is not OK. Just go ahead and once you 

all are finished, Senator Brown and I will take turns just asking 

questions of you. 

Mr. Foley, please proceed. Thank you all for coming. 

STATEMENT OF DAVID FOLEY,1 DEPUTY COMMISSIONER, PUBLIC BUILDINGS SERVICE, U.S. GENERAL SERVICES ADMINISTRATION 

Mr. FOLEY. Thank you. Good afternoon, Chairman Carper, Ranking Member Brown. I appreciate being invited here today to discuss 

GSA’s efforts to reduce our reliance on leased space, our approach 

to lease acquisition, and how we manage delegations of authority. 

GSA searches for the most cost-effective ways to provide space 

for Federal agencies to help them achieve their missions. Our first 

priority is to use existing government-owned space and then lease 

space already under contract to the government. When existing 

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8 

space is not available, GSA determines the best method to acquire 

new space, whether through leasing or new construction. 

We consider the size, duration, cost and complexity of the requirement. For most long-term needs, especially those with unique 

requirements, like courthouses or land ports of entry, it is more 

cost-effective for the government to build and own these facilities. 

For small short-term general office requirements, leasing from the 

private sector is typically more economical. 

GSA currently manages an inventory of over 370 million square 

feet of space, of which roughly 191 million is leased from the private sector. Approximately 80 percent of our 9,000-plus leases are 

for the smaller short-term needs that are less than 20,000 square 

feet. Our lease acquisition process entails carefully sequenced steps 

to ensure adequate competition and a fair rental rate for taxpayers, 

which are outlined in my written statement. 

GSA has multiple internal controls in place for our largest leases with annual rental payments that exceed $2.8 million. These leases 

require additional reviews within the GSA and the Office of Management and Budget (OMB), along with prospectus approval by 

GSA’s congressional authorizing committees. This process ensures 

any growth and cost from staffing or space increases are supported 

in the President’s budget and are transparent to Congress and the 

public. 

Since real property was identified as a high-risk area by GAO in 

2003, GSA has worked closely with Federal agencies to maximize 

the utilization of leased space. At the end of fiscal year 2010, the 

vacancy rate in GSA’s leased inventory was less than 1 percent. 

GSA and the Administration have also made it a priority to reduce the cost of leasing by minimizing the need for build-to-suit 

projects, adjusting requirements to maximize competition for existing space, purchasing leased assets to create Federal ownership, 

and converting costly lease proposals into Federal building renovations or new construction projects. 

For instance, in 2010, GSA exercised a purchase option for Columbia Plaza, a long-term lease here in Washington, DC. The fiscal 

year 2010 budget also provided funding for the FBI field office in 

Miami. This project had previously been authorized as a lease proposal. 

In fiscal year 2012, GSA’s budget request contained funding that 

would retrofit the Phillip Burton Federal Building in San Francisco, California. This would satisfy an FBI requirement and avoid 

a costly lease proposal, saving taxpayers almost $100 million over 

the next 30 years. Congressional cuts to the President’s budget 

threaten this progress. In fiscal year 2011 alone, several key 

projects in the President’s budget were not funded, including the 

next phase of the Department of Homeland Security (DHS) consolidation at St. Elizabeth’s and a purchase option for an Internal Revenue Service (IRS) lease in Martinsburg, West Virginia. Failing to 

move forward with these projects will result in the government’s 

continued leasing of space, costing taxpayers millions more in the 

long run. 

Additional cuts in fiscal year 2012 would only make the situation 

worse. GSA has been aggressive with another opportunity for savings by improving the efficiency of the Federal inventory to faciliH605-41331-79W7 with DISTILLER

9 

1The prepared statement of Mr. Sullivan appears in the appendix on page 50. 

tate consolidation of leases into government-owned space. Our GSA 

headquarters is a good example. By renovating the building and 

opening up the floor plan, we can increase the number of occupants 

from approximately 2,500 to 6,000 people. This will allow us to 

eliminate multiple leases, saving taxpayers millions of dollars annually. 

GSA, as you mentioned, is not the only agency that leases on behalf of the Federal Government. More than 25 agencies and commissions, like the VA and SEC, have their own statutory authority 

to hold land and acquire leasehold interest. GSA is not usually involved in these transactions. 

Some agencies also lease space under a delegation of authority 

from GSA. Agencies using this delegation must abide by the same 

laws and controls that govern GSA and certify that they have a 

properly warranted lease contracting officer to conduct the procurement and execute the lease. We are involved in these transactions 

to provide the appropriate levels of oversight. 

In conclusion, GSA strives to maximize space utilization and 

minimize the cost associated with leasing. We are continually looking for ways to streamline, standardize and simplify our leasing 

process with the appropriate controls to maximize competition and 

find the optimal solution for taxpayers, while helping agencies 

achieve their missions effectively. 

Thank you for inviting me to appear before you today. I appreciate the opportunity to discuss GSA’s leasing practices and expertise and I welcome your questions. 

Senator CARPER. Thanks so much for your testimony. Mr. Sullivan, please proceed. Thank you. 

STATEMENT OF JAMES M. SULLIVAN,1 DIRECTOR, OFFICE OF 

ASSET ENTERPRISE MANAGEMENT, U.S. OFFICE OF VETERANS’ AFFAIRS 

Mr. SULLIVAN. Thank you, Chairman Carper and Ranking Member Brown. Thank you for the opportunity to appear today to discuss the Department of Veterans’ Affairs’ management of its capital asset portfolio, and more specifically its leased property portfolio. 

At the outset, let me say, VA evaluates all of its capital decisions, 

including leasing, based on three following critical principles. First, 

does it directly benefit veterans and their families? Second, does it 

improve the operations of the VA? And third and last, does it allow 

us to be a good member of the local community? 

VA is the operator of one of the largest healthcare real estate 

portfolios in the country. VA also maintains facilities for the Veterans Benefits Administration (VBA), and the National Cemetery 

Administration (NCA) as well. Leasing has been and continues to 

be an essential part of VA’s capital portfolio management practice. 

VA is authorized to acquire facilities, including leased facilities, 

for medical and non-medical purposes, which include hospitals, 

community based clinics, cemeteries, medical research space, and 

other medical related functions. VA enters into leases to meet veteran needs across the Nation. One of VA’s primary goals is to proH605-41331-79W7 with DISTILLER

10 

vide services to veterans and their families where they live, not 

where old hospitals are, but where veterans need the care. 

In many cases, leasing provides more flexibility in lieu of construction to meet demographic shifts, changing service demands, 

technology improvements in terms of medical care and benefit care 

delivery to our Nation’s veterans. The need for space is supported 

by VA’s mission as identified through the Strategic Capital Investment Planning (SCIP) process at VA. 

Through SCIP, VA systematically evaluates all proposed capital 

investments based on how well they address identified performance 

gaps. These gaps identify infrastructure or services needed to enhance or to meet needs of current and more importantly, future 

veterans. Only investments that have scored well against these 

performance gaps are presented to Congress for funding and authorization. 

VA considers the size and mission criticality when deciding between building and leasing. New construction of large inpatient 

and specialty care facilities that we will be in for many years, in 

most cases will be the most cost-effective solution to our need. 

Smaller facilities, such as outpatient or ambulatory care centers, 

can generally be acquired for more efficiently using leasing, as they 

provide more flexibility to meet changing demands in technology. 

VA does follow GSA regulation and complies with all competition 

and contracting act requirements and the Federal Acquisition Regulation (FAR) in conducting its lease procurements. VA’s real property service has years of experience in managing the department’s 

robust leasing program, employing skilled workers comprised of 

highly trained realty specialists and certified contracting officers. 

Oversight of VA’s leasing program is provided internally through 

an extensive series of checks and balances in VA. Externally, all 

leases in excess of $1 million require congressional notification and 

more importantly, authorization. Congress also is notified of any 

significant change in the cost or scope of any authorized lease, or 

for that matter, authorized construction projects. 

In addition, VA has been granted by Congress enhanced-use leasing (EUL) authority. This tool provides VA with an innovative process to partner with public and private sector entities for up to 75 

years. In return, VA receives negotiated monetary or in-kind consideration. The leased property is then developed, used and maintained for uses that support VA’s mission. 

Enhanced-use leases allow VA to reuse properties to meet mission-related needs such as veterans’ homeless housing. EUL program results have included significant cost savings and substantial 

private investment in the department’s capital infrastructure. In 

the last 6 years, VA has received in consideration more than $216 

million from this program. 

VA’s authority to enter into this program will expire on December 31 of this year. Without reinstatement, VA will lose a wellneeded tool to help us manage our property more effectively. 

Mr. Chairman, the department understands the importance of a 

balanced real estate portfolio to address its needs. VA has a rigorous capital planning process that takes into account current and 

future needs of America’s veterans. VA strives to maintain the optimal mix of investments, both owned and leased assets, to achieve 

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1The prepared statement of Mr. Kotz appears in the appendix on page 55. 

its strategic goals and to assure the highest level of performance 

of our assets. 

I thank you and the Subcommittee for the opportunity to be here 

today and will be happy to answer any questions. Thank you. 

Senator CARPER. The pleasure is ours. Thanks so much. Mr. 

Kotz, please proceed. 

STATEMENT OF HON. DAVID KOTZ,1 INSPECTOR GENERAL, 

U.S. SECURITIES AND EXCHANGE COMMISSION 

Mr. KOTZ. Thank you for the opportunity to testify before this 

Subcommittee. I appreciate the interest of the Chairman, the 

Ranking Member, the SEC, and the Office of Inspector General 

(OIG). 

On November 16, 2010, we opened an investigation as a result 

of receiving numerous written complaints concerning the SEC’s decisions and actions relating to the leasing of space at the Constitution Center office building in Washington, DC. As part of our investigative efforts, we analyzed thousands of pages of documents and 

interviewed 29 witnesses with knowledge of facts or circumstances 

surrounding the SEC’s leasing of the space. 

We also searched over 1.5 million e-mails from various time periods pertinent to the investigation. On May 16, 2011, we issued a 

comprehensive report of our investigation containing over 90 pages 

of analysis and 150 exhibits. Our investigation concluded that 

based upon estimates of increased funding and staffing, primarily 

to meet the requirements of the Dodd-Frank Act, between June 

and July 2010, the SEC’s Office of Administrative Services (OAS), 

conducted a deeply flawed and unsound analysis to justify the need 

for the SEC to lease 900,000 square feet of space at the Constitution Center facility. 

We found that OAS grossly overestimated the amount of space 

needed for the SEC’s expansion by more than 300 percent and used 

these groundless and unsupportable figures to justify the SEC committing to an expenditure of over $557 million over 10 years. We 

found that OAS used a standard of 400 square feet per person to 

calculate how much space would be needed for the additional positions it believed it was gaining. 

This standard was an all-inclusive number that included common 

space and amenities and an additional 10 percent for contractors, 

10 percent for interns and temporary staff, and 5 percent of future 

growth. We found that the 400 square feet per person standard 

was described as a back-of-an-envelope calculation. Moreover, notwithstanding this all-inclusive number, when OAS later did its calculations to justify the lease, it added even more unnecessary space 

by double counting for contractors, interns and temporary staff. 

We also found that each one of these estimates was widely inflated and unsupported by the data being used by OAS. After the 

SEC committed itself to the 10-year lease term at a cost of over 

$556 million, it entered into a justification and approval for other 

than full and open competition, a document required by the Federal Acquisition Regulation. 

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12 

The FAR permits other than full and open competition when the 

agency’s need is of such an unusual and compelling urgency that 

the agency would be seriously injured unless the agency is permitted to limit the number of sources from which it solicits bids. 

We found the justification and approval to lease space at Constitution Center without competition was inadequate, not properly reviewed and backdated. 

The OAS official who signed the justification and approval as the 

SEC’s competition advocate, acknowledged in testimony that the 

SEC would in fact not be seriously injured if it lost the opportunity 

to rent the Constitution Center space. She further admitted that 

she took no substantive steps to verify that the information in the 

justification and approval was accurate and that when she signed 

the document she was unaware that the funding had not been appropriated and that she did not have an understanding of when the 

projected personnel were expected to be hired. 

The FAR also requires that the justification and approval be 

posted publicly within 30 days after contract award. As the letter 

contract for Constitution Center was signed on July 28, the deadline for publication of the justification and approval was August 27. 

However, the SEC did not post the justification and approval until 

September 3, although the document was signed by four individuals as dated August 2. 

The investigation found that the justification and approval was 

in fact not finalized until September 2, 2010, and substantial revisions were being made up to that date. We found that three of the 

four signatories executed the signature page on August 2, 2010, before a draft even remotely close to the final version existed. 

We found that the SEC’s competition advocate executed the signature page on August 31, initially backdated her signature to August 27. She then subsequently whited out the 7 to make it appear 

that she had signed the document on August 2. The actions of the 

signatories for justification and approval gave the public a false impression that the document was finalized a few days after the letter contract was signed. 

In light of our findings, we recommended that the SEC’s chief operating officer conduct a thorough and comprehensive review and 

assessment of all matters currently under the purview of OAS. We 

further recommended that the chief operating officer determine the 

appropriate disciplinary actions to be taken. 

We specified that such disciplinary actions should include, at a 

minimum, action up and to and including dismissal against two 

senior individuals and disciplinary action against a third individual. Finally, we recommended that the SEC request a formal 

opinion from the comptroller general as to whether the commission 

violated the Anti-Deficiency Act by failing to obligate funds for the 

Constitution Center lease. 

Subsequent to the issuance of our report of investigation, we received a corrective action plan with regard to the substantive recommendations we made for improvements. We will monitor the 

planned activities carefully to ensure that the necessary improvements are made and to ensure that the individuals who we identified as being responsible for the failures and improprieties in our 

report are held accountable for their actions. 

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1The prepared statement of Mr. Heslop appears in the appendix on page 79. 

Thank you, and I would be happy to answer any questions. 

Senator CARPER. Just add a comment. I leaned over to Senator 

Brown when you were going through that litany and I said to him, 

what were they thinking about? My Lord. 

Mr. Heslop, please proceed. 

STATEMENT OF JEFF HESLOP,1 CHIEF OPERATING OFFICER, 

U.S. SECURITIES AND EXCHANGE COMMISSION 

Mr. HESLOP. Thank you for the opportunity to testify today on 

behalf of the Chairman of the SEC regarding the lease of office 

space at Constitution Center and the steps we are taking going forward. 

The report by the Commission’s Office of Inspector General concerning Constitution Center identified a number of significant 

flaws in the SEC’s leasing process. We are extremely disappointed 

by the failures that have been identified and regret that they have 

taken us all away from our primary mission of protecting investors, 

facilitating capital formation, and ensuring stability in the financial markets. 

The fact that the SEC has not paid any rent to date for this 

property and that the bulk of the space has been leased to other 

tenants does not adequately address a situation that should never 

have occurred. The only appropriate response by the SEC is to resolve the remaining space issues, to correct the deficiencies in our 

leasing process by working with GSA and OMB with respect to future space needs, and to ensure accountability for the events surrounding this lease. 

By way of background, in the spring of 2010, the SEC correctly 

anticipated that it would receive significant new responsibilities 

under the Dodd-Frank Act for derivatives, hedge fund advisors, 

credit rating agencies and much more. This was, of course, on top 

of our longstanding core responsibilities. As a result, we believed— 

and continue to believe—that the SEC needed additional staff to 

fulfill its mission and help further restore investor confidence in 

our markets. 

At the time the agency was considering the leasing decisions, 

Chairman Schapiro indicated her preference for hiring new staff in 

the regions rather than in the headquarters, and she indicated to 

staff her preference that any new space in Washington be within 

walking distance of the Commission’s Station Place building to 

eliminate the need for expensive shuttle services. 

In July 2010, the then executive director, who was responsible 

for the agency’s leasing activities, informed the chairman that all 

of our leasing options no longer existed, that the space at Constitution Center was our only option given our space needs, that the 

pricing was advantageous, and that we had to move quickly as 

there was competition for the space. 

Given the previous discussions with the staff, the chairman assumed the proposal was consistent with both our budget projections, future employee growth, and her preference for the staff to 

be housed, where possible, in the regions. When it subsequently became clear that the SEC would not receive the funding necessary 

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1The prepared statement of Mr. Wise appears in the appendix on page 87. 

to implement its new responsibilities, we took immediate steps to 

release the space to others and to reduce the SEC’s exposure. 

My written testimony details what we have learned from the 

flaws in our recent process and how we intend to address them. I 

would like to emphasize a few of these. First, we are promptly implementing the IG’s recommendations and have already submitted, 

as he indicated, a written corrective action plan to him. 

Second, in light of the failure identified, the SEC recognizes the 

benefits of having GSA manage the Commission’s future lease acquisitions. Leasing is not part of the Commission’s core mission 

and as an agency we cannot allow it to impede that mission. GSA, 

by contrast, has long experience in leasing. 

In a recent meeting at GSA, Chairman Schapiro and I discussed 

with the GSA Administrator ways in which GSA could assist the 

Commission on our leasing efforts going forward. GSA indicated 

that it was open to playing a significant role in these efforts, and 

following that meeting, Commission staff has had further multiple 

discussions with the GSA staff. Earlier this week, the SEC and the 

GSA entered into a Memorandum of Understanding (MOU) that 

contemplates an immediate role for the GSA in managing upcoming SEC leasing activities, as well as all other future leasing needs 

as they arrive. 

Third, the OIG report recommended that the SEC initiate disciplinary proceedings for three individuals involved in the Constitution Center leasing process, and we have begun that process. 

Chairman Schapiro has expressed a desire for this process to move 

forward as quickly as the laws and regulations permit, consistent 

with fundamental fairness, to assess and implement remedial 

measures and discipline as appropriate. 

In the meantime, the individuals for whom the OIG report recommend a disciplinary review have been reassigned. Their current 

duties do not involve any leasing or any other authority that could 

bind the Commission, nor do they involve activities that relate to 

the expenditure of appropriated funds. 

As our chairman indicated, the true test of an organization is not 

whether things go wrong, but how an organization responds to 

problems and whether its leaders take such opportunities to make 

necessary improvements. We are committed to doing that. 

I would be happy to answer your questions. 

Senator CARPER. Thanks, Mr. Heslop. Mr. Wise, you want to 

wrap it up and then we will go to Q and A’s? 

STATEMENT OF DAVID J. WISE,1 DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY 

OFFICE 

Mr. WISE. Chairman Carper, Ranking Member Brown and Members of the Subcommittee, thank you for the opportunity to testify 

today on our work related to real property leasing among civilian 

Federal agencies. The Federal real property portfolio is vast and diverse, totaling over 900,000 buildings and structures worth billions. 

My testimony today will address three topics. First, the factors 

that contribute to the government’s reliance on costly leasing; secH605-41331-79W7 with DISTILLER

15 

ond, how the Administration’s proposed Civilian Property Realignment Act may provide an opportunity to reduce reliance on leasing; 

and third, Federal agencies’ independent leasing authorities and 

GSA delegations of those authorities. 

One of the primary reasons we designated Federal real property 

management as high risk was the Federal Government’s overreliance on costly leased space to meet new space needs. Our work 

over the years has shown that operating leases often cost more 

than ownership, especially for long-term needs. 

Increasing ownership, when appropriate, could save millions of 

dollars over the long term. Federal agencies rely extensively on 

leasing and leased buildings. At the end of fiscal year 2010, for example, GSA’s leased square footage exceeded owned footage 191 

million to 179 million. GSA has relied heavily on operating leases 

to meet new long-term needs because it lacks funds to pursue ownership. 

The decision to lease rather than own space for Federal operations is often influenced by factors other than cost-effectiveness, 

including budget issues and operational requirements. The Budget 

Enforcement Act of 1990 directs that the budget authority to meet 

the government’s real property needs is to be scored, meaning, recorded in the budget in an amount equal to the government’s total 

legal commitment. 

If GSA buys or constructs a building, the budget authority for 

the full cost must be recorded upfront to reflect the government’s 

financial commitment. However, for operating leases, GSA is only 

required to record the government’s commitment for an annual 

lease payment and any potential fees for canceling the lease. 

This reduces the upfront funding commitment, but generally 

costs the Federal Government more over time. We have raised the 

scorekeeping issue as a challenge that needs to be addressed in 

several reports and testimonies in the past. We believe that if the 

issue is not addressed, the reliance on leasing will likely persist. 

Accordingly, in 2007 and 2008, we recommended that OMB develop a strategy to reduce agencies’ reliance on costly leasing where 

ownership could result in long-term savings. OMB agreed that a 

strategy was needed, but has not yet implemented one. 

Agency operational requirements are among the reasons why 

leasing is often preferred by agencies. For example, officials said 

that more than 200 GSA-owned and leased buildings were damaged by Hurricane Katrina, necessitating the relocation of 2,600 

Federal employees from 28 Federal agencies, many of which were 

GSA tenant agencies. To meet this emergency need, GSA expanded 

its use of leases to house agencies in temporary space to fulfill a 

short-term need. 

In May 2011, the Administration proposed CPRA, which may 

have provided an opportunity to reduce overreliance on leasing. 

While CPRA does not explicitly address this issue, one of CPRA’s 

purposes, to realign civilian real property by consolidating, co-locating and reconfiguring space to increase efficiency, could help to reduce the government’s reliance on leasing. 

CPRA also provides for the potential co-location of Federal civilian offices and postal properties, many of which are already owned. 

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1The Appendix referenced by Mr. Wise appears in the appendix on page 97. 

We are currently examining the potential for consolidating leased 

facilities into federally owned sites for this Subcommittee. 

Congress has authorized many agencies independent statutory 

leasing authority, allowing them to acquire leased space. The authority may be for a particular type of space or for general leasing 

authority. Agencies with such authority and their respective authority types are listed in Appendix 11 of my written statement. 

GSA may also delegate leasing authority to agencies. For example, all Federal agencies may acquire a specific type of space, such 

as antennas, depots, piers and greenhouses. Thirteen Federal agencies are authorized to lease their own special purpose space, subject 

to limitations. For example, the Commerce Department has delegated authority to lease space to conduct the decennial census. 

In November 2007, GSA amended its delegation of leasing authority to increase oversight after audits found instances in which 

agencies failed to meet the conditions of their leasing delegation. 

Although GSA’s goal is to cover the administrative cost of private 

sector leases with fees it charges the tenant agencies, it has been 

unable to do so in recent years, losing more than $100 million in 

fiscal year 2009, raising concerns about the agency’s management 

of its leased properties. We have an ongoing engagement examining this issue, among others, for your Subcommittee. 

Mr. Chairman, this concludes my statement. I will be pleased to 

answer questions from you and other Members of the Subcommittee. Thank you. 

Senator CARPER. Yes, thanks, Mr. Wise, and I have asked Senator Brown if he would like to lead off and he has agreed to do so. 

Senator BROWN. Thank you, Mr. Chairman. So Mr. Kotz, I appreciate your initial opening. During the time period where you made 

the recommendations of disciplining three people, what in fact has 

been done at this point; do you know? 

Mr. KOTZ. I have been told that there is a process in place, but 

I do not believe anybody has been disciplined as of yet or any proposal for discipline has been made. 

Senator BROWN. So it has been over a year now since they entered into this lease arrangement, and I guess my question is, what 

does it take to get fired or disciplined at an agency when you enter 

into a lease that is basically a half a billion, no half—yes, billion 

we are talking about, a billion dollars? 

And I guess I should ask you, Mr. Heslop, what does it take to 

get disciplined and fired at your agency when something like this 

happens? 

Mr. HESLOP. Sir, the disciplinary process, essentially our IG’s report was issued I believe on May 17 of this year and since that 

time, we have followed Mr. Kotz’s guidance. We have reviewed that 

report. Our general counsel has analyzed it in great detail. 

We have conducted supplementary investigations and supplementary interviews. There was a slight hold when we—basically 

when Mr. Kotz referred to the Department of Justice (DOJ) the individuals mentioned in the report. As a matter of practice, we do 

not complete investigations or interview the individuals named 

until the Department of Justice comes back to us and gives us their 

H605-41331-79W7 with DISTILLER

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OK that we can, so that it does not interfere with their investigation. We received that OK. The investigation then began to proceed. 

As the investigation unfolded, it became apparent that in the interest of objectivity and fairness, it would be in our best interest 

to hire an external party to help us conduct that investigation, and 

we are in the process right now of employing that external party. 

Senator BROWN. So what about fairness to the taxpayers? It is 

like fairness for the individual. What about fairness to the taxpayers in getting the best bang for our dollar? You were in that— 

you were with the SEC back then when this all happened, right? 

Mr. HESLOP. I was hired in the SEC on May 17, 2010. 

Senator BROWN. OK. So you had no knowledge of any of this 

stuff? 

Mr. HESLOP. No, and this was not under my purview. 

Senator BROWN. Mr. Kotz, based on these types of failures, and 

we seem to hear it over and over, I mean, let’s just talk about the 

SEC, for example. Do you think that Congress should simply revoke their independent leasing authority? 

Mr. KOTZ. I think that certainly Congress should give very serious consideration to that. I mean, I have thought previously that 

perhaps if the SEC completely revamped its leasing area it might 

be given another opportunity. But I do understand now that Chairman Schapiro and Mr. Heslop have said that they intend to get out 

of the leasing business, that they do not feel that there is enough 

competence at the SEC to handle that. 

So I do think at this point it would be prudent to take away the 

independent leasing authority, yes. 

Senator BROWN. Thank you. Mr. Wise, thank you for your testimony as well, your introduction. As you know, I am filing and have 

filed a bill that basically mirrors the President’s idea on how to address these issues when it comes to leasing and buying and the 

like. 

I was wondering if you could describe how one of the CPRA’s 

purposes, which is realignment of civilian real property by consolidating, co-locating and reconfiguring space to increase efficiency, do 

you think that could help reduce the government’s overreliance on 

leasing? I think you kind of hinted on it in your initial opening. 

Mr. WISE. Senator Brown, thank you for your question. And actually, to be perfectly honest with you, the CPRA does not explicitly discuss leasing, but as I think we point out in our testimony, 

it certainly has a provision in it that we think could be very useful 

to help alleviate some of the reliance on leasing that the government has, especially with the discussion about consolidation, co-location and realignment of the Federal footprint. 

So we think, as we go forward, if CPRA does become codified, 

that there is a very good possibility that it could be a contributing 

factor toward helping to reduce the government’s reliance on costly 

leases. 

Senator BROWN. I remember your testimony when you said it takes about $1.66 billion annually to operate and basically keep 

open some of the underutilized buildings. I found that really fascinating. I went back to the office. We talked about it. As a result, 

we are trying to come up with ways to address it and get those 

H605-41331-79W7 with DISTILLER

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properties out the door and get them back on the tax rolls and the 

like. 

One of my goals in my legislation is to address these. How do you 

think we could unlock these savings for the taxpayers? 

Mr. WISE. Well, I think the—as you allude to it in your statement, the key thing for the Federal Government is to get out from 

under costly leases that are not really very useful for the government. Because, as you noted, the operations and maintenance costs 

are costs that keep recurring year after year after year. So, as we 

move forward and the CPRA does become a law, hopefully this will 

lead toward the government’s ability to get out from under leases 

that are not useful and be able to shed property that is not being 

utilized in various ways. 

Senator BROWN. I know in Massachusetts when we were having 

some financial difficulty, a lot of the registries and motor vehicles 

were actually closed and a lot of the leases were canceled at the 

government’s convenience and we were able to find spaces that 

were already owned by the Commonwealth of Massachusetts to put 

them in, whether it would be at a city hall or a State-owned building or work out an arrangement with the Federal Government. So 

I would hope that we could do the same thing. There is plenty of 

Federal buildings around where we could co-locate and combine. 

And Mr. Foley, how would the GSA leverage its expertise in 

asset management to support the CPRA process and specifically 

lease consolidation, do you think? 

Mr. FOLEY. Sure, Senator Brown. Thank you for the question. 

GSA is a leader in asset management for the Federal Government, 

and as I outlined, we have a strong leasing process. I think we are 

already working with client agencies as a part of helping them 

shape—— 

Senator BROWN. Can I just interrupt for one second? 

Mr. FOLEY. Sure. 

Senator BROWN. So if you have such a strong leasing process, I 

do not understand how we get into these messes with the SEC and 

others. Where is the breakdown, if you could, and please finish 

your statement. 

Mr. FOLEY. Sure. 

Senator BROWN. And then if you could say like where is the 

breakdown? Why are we even here? Why are we even having this 

hearing today? Because if you have such a great process, how come 

we are not doing it right? 

Mr. FOLEY. Let me finish. 

Senator BROWN. Yes. 

Mr. FOLEY. And then I will come back and address that. 

Senator BROWN. Yes. 

Mr. FOLEY. I think one of the key things is working with agencies upfront to make sure that we appropriately shape the requirement so that we know how many people—we ensure that we are 

getting the most utilization out of it and that we can make sure 

that we can fit it into existing Federal space wherever possible, or 

minimize the amount of space that we have to lease from the private sector. 

So we are working with agencies on that. I thank you for your 

support of the CPRA bill and we look forward to working with you 

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on that. I think that will do several key things that can really help 

us with consolidation. One, it incentivizes agencies to get rid of 

property, and two, probably more critically, it provides a source of 

funding to deal with some of the upfront costs. 

And I know a lot of people think that is toward getting a property ready for sale, but one of the intents is also to help with existing Federal property, to let us retrofit those, make them more efficient and allow us to consolidate out of leases, or perhaps build or 

buy a new facility to consolidate and shrink the Federal footprint. 

So I think we have a real opportunity under the CPRA legislation 

and we look forward to working with you on that. 

As far as your question of if we have a solid process in place, how 

do we end up in these situations, as I mentioned in my testimony, 

there are multiple agencies with multiple different authorities. The 

SEC lease was done outside of GSA’s authority under their own 

independent authority, and so we were not involved in that transaction. We are working closely with them moving forward and willing to lend our expertise. 

And as Mr. Heslop indicated, we signed an MOU with them earlier this week where we will then be doing their leasing action for 

them moving forward and following the transparent process that 

we currently use at GSA. 

Senator BROWN. Great. Thank you, Mr. Chairman. 

Senator CARPER. Thank you for those questions. Thanks for the 

responses as well. 

I spent a little bit of time this week talking, in light of the deal 

to avoid default on the Nation’s debt, I spent a fair amount of time 

talking with my colleagues and to the American people and the 

people of Delaware through the press, about how we have a tendency around here to focus on addressing symptoms rather than addressing underlying, if you would, using a health analogy, underlying cause of disease. 

In a situation where the Federal Government, the symptom is 

the debt crisis, debt ceiling crisis, the cause, and that is the sick 

patient. The cause of the illness, the sickness is the fact that we 

do not spend money wisely, we do not collect, frankly, all the 

money that is owed, and so what we ended up doing is not addressing the underlying cause, unfortunately. But we addressed the 

symptom by raising the debt ceiling and leave to another day addressing the real underlying cause. 

In reading through the testimony, especially GAO’s testimony, I 

came back to the question—let me just back up. One of the things 

that when we look at Federal agencies, some of whom do a pretty 

good job at disposing of surplus properties, unneeded properties, I 

think VA does an especially good job, but there are others as well. 

One of the reasons why some agencies do a better job than others 

is because we actually incentivize them not to keep underutilized, 

unused property around. 

We actually allow them to sell them, keep some of the proceeds 

to actually fund their operation. Here we have, looking now at the 

situation with lease versus purchase, if you look at the way the 

Congressional Budget Office (CBO), scores a lease versus a purchase, we incentivize agencies to lease even when they ought to be 

purchased. You only know they are going to save money. 

H605-41331-79W7 with DISTILLER

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And I would ask you, Mr. Wise, I am going to ask you to walk 

us through why we have this incentive, I think a misincentive, disincentive? Why do we have the wrong incentive? How do we actually fix it? What would it take to fix it? Does it take CBO changing 

their scoring approach? Is it something that we need to do legislatively to empower, direct CBO to change the way that they score 

lease versus purchase? Please. 

Mr. WISE. Senator, thanks for the question. You bring up a really 

important point and we have recommended a couple different times 

and we have also discussed in other testimonies the really important—OMB is really a key player here because they are kind of the 

orchestrator of the whole Federal property environment and we 

have recommended that they really need to work within the Federal Real Property Council to come up with a strategy to take a 

look at how the entire Federal property portfolio is managed. 

While they have agreed that is a good idea that needs to be done 

to kind of rationalize the entire process, they have yet to implement such a strategy because as you mentioned in your opening remarks and subsequent remarks—the issue having to do with the 

scoring is a major issue for agencies to be able to come up with the 

needed capital in order to take a look at a rational process. 

Another really important point is the necessary analyses that 

need to be done in order to make sure that you are making the 

right kind of decision. While, as you mentioned earlier, generally 

building is a less expensive option in the long run than is leasing, 

it is not always the case. But you need to do the economic analyses 

in order to do that. 

And so it is important to do the 30-year net present value analysis so you see how things will play out over time, and the scoring, 

and do the comparisons so that we can make the right decisions. 

You look at the commercial real estate market. It maybe makes 

sense to lease something where the real estate market is say relatively soft compared to a Boston or a New York or a Chicago 

versus a Dallas or Atlanta perhaps. 

So it is a pretty complex formula that goes into making these 

kinds of decisions, but in order to come up with the right decision, 

you really need to approach it in a multi-faceted way so that at the 

end of the day you are making the best call for the taxpayer. 

Senator CARPER. Let me just ask you to cut through all that. I 

appreciate what you said. What do we need to do? What needs to 

be done so that CBO in the future will not say almost routinely 

that even when it makes economic sense to purchase, we are not 

going to score it that way, instead, we are going to score it in a 

way that almost mandates that agencies lease? How do we change 

that? 

Mr. WISE. Well, it gets into a policy area that is really not so 

much our purview, but as we have discussed, or as we noted, we 

make recommendations to OMB that they need to come up with a 

strategy in order to rationalize this process and so agencies can 

make the right kind of decision of whether to lease or to build. And 

we really believe that OMB is the key player that needs to address 

this scorekeeping issue, otherwise, the reliance on leasing, as we 

noted in our testimony, is likely to persist. 

H605-41331-79W7 with DISTILLER

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Senator CARPER. All right, let me turn to others on the panel. 

Same question. What I would like for you to do is give Senator 

Brown and me and others on our Subcommittee, our colleagues in 

the Senate, give us a to-do list. Put something on our to-do list. Is 

there something we ought to be doing to change this? It is really 

to change the culture. We are always looking for a culture. Anybody have a good idea? 

Mr. SULLIVAN. Mr. Chairman. 

Senator CARPER. Go ahead, Mr. Sullivan. 

Mr. SULLIVAN. Mr. Chairman, I will maybe swim a little up river 

here. VA’s position is a little bit different, I think, than other Federal agencies. Part of our portfolio, only about 11 percent is leasing, 

so out of 165 million square feet, we lease about 12 million square 

feet. Three of it GSA does for it. The rest we do it ourselves. 

Our real problem is our existing infrastructure, not leases. What 

do we do to consolidate? What do we do to get rid of the old infrastructure that cannot be fixed easily? In some places we do not 

need it. 

Right now we have an estimate to fix our current portfolio based upon the needs projected for veterans in 2020. We will need $60 

billion to invest in our infrastructure. Clearly, that is not going to 

be able to be provided for in direct appropriation. I think the key 

to unlock that problem is to be able to tap private sector financing 

in working with public/private ventures or joint ventures or with 

localities or other non-profits to be able to find uses for the 

repurposing for Federal property, to get it off the Federal rolls, to 

put it potentially back on the tax rolls and to relieve agencies of 

the large operation and maintenance (O&M) costs. 

The biggest drag for VA is, and I imagine for some other agencies, is the O&M costs that we have to maintain facilities that 

could be made more efficient, and/or consolidate. So I think it is a 

little bit different and the big issue about third-party financing or 

private sector money is the other side of the score. 

CBO’s scoring treatment of the use of third-party funds, even if 

it is for non-profits or for non-government entities, they scored as 

if it was direct Federal spending, which basically turns off the 

third-party spigot of trying to utilize them to unload unneeded inventory. 

Senator CARPER. All right, I am going to go back to Senator 

Brown. Before I do, one of the things that I may ask this in our 

next round of questions, but I spoke earlier of a need for a comprehensive bipartisan approach on deficit reduction along the lines 

of that recommended by the Deficit Commission co-chaired by Erskine Bowles and Alan Simpson. 

My sense in listening to your testimony and earlier hearings that 

we have had is that we also need a comprehensive approach with 

respect to real property management, not just to deal with the 

lease versus purchase issue, but to deal with all this underutilized 

or unutilized Federal properties that we do have. 

One of the things that I want to do maybe at this hearing, if not 

we will certainly do a followup in writing, is get your input on what 

should be the components of that comprehensive approach. And to 

the extent that we can craft a comprehensive approach where we 

harness market values, we change incentives which I think are 

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22 

misaligned toward more appropriate alignment. I would appreciate 

your input on that. Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. Mr. Sullivan, just to 

followup, I remember your hearing—actually, as a result of your 

testimony telling about some of the challenges with some of the 

prime VA properties that potentially could be sold and taken off 

your rolls and put you back having more money for the veterans 

that need our help, instead of using it to keep buildings open and 

the like, you testified as to how CPRA was a welcome addition to 

the toolkit that you would need in reducing unneeded assets. 

Could you just elaborate on that, as to how that will compliment 

your existing tools? And also, what role does politics, do politicians 

have in interfering with you doing your job? I mean, if you have 

some assets and you want to sell them, how often does State or 

local—State or Federal Government come up and kind of put a 

monkey wrench in the plan? 

Mr. SULLIVAN. Senator, I will try and answer that in a couple of 

different ways. The first way would be our toolkit right now is to 

use our enhanced lease authority and in those cases where we can 

develop, if you will, a win-win strategy with the local community, 

the veterans, the veteran service organizations and the private interest in that area we can forge outlease with a public/private venture under that authority. 

We have done that in many places and it works where we can 

reach consensus. Where we cannot reach consensus at the local 

level with all the interested parties, especially local communities, 

the CPRA process would be a welcomed addition to be able to deal 

with those hard-to-do properties around the country. 

So I think we should use both of these approaches where we 

have something that works and can continue to flourish and shrink 

our footprint and deal with our underutilized properties we want 

to maintain, that authority but there are some places that CPRA 

would assist us in addressing those issues. 

There are a lot of stakeholders involved in real property in VA. 

As other agency and GSA has experienced, stakeholders have different interests and when we cannot align those interests, that is 

when things stop. So those are constant challenges in dealing with 

them and we face it every day. And as we move down this track, 

there needs to be a way to deal with those interests. 

Senator BROWN. So getting back to my final question, I think you 

kind of answered it without wanting to really say it, but what role 

does State or Federal politicians and politics affect it? Do they specifically call and/or stop your efforts when you are trying to do 

some things for the benefit of the VA? 

Mr. SULLIVAN. In some cases, yes. When we cannot get alignment of interests, we have local interests that may not have the 

same interests that VA has, and in cases that happens and things 

come to a grinding halt. 

Senator BROWN. Very smooth. It was a good answer. Very, very 

nice. And that is unfortunate, because Chairman Carper just asked 

for recommendations. I mean, I would think one of the recommendations is to let—you leave the politics out of it and let us 

do our jobs based on fact and based on the necessity to deal with 

these issues without any type of outside influence. And I would 

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23 

hope if you make that recommendation you would include that, 

very frankly, so we do not really beat around the bush in that regard. 

Mr. Wise, generally in larger prospectus level projects over 2.7 

million and lasting over 10 years, the net present value analysis 

indicates it is more advantageous to purchase rather than lease. So 

I was wondering in the CPRA legislation that I am filing, it requires a net present value analysis of the cost of the lease compared to the cost of constructing new space. 

How important is it to provide this information to Congress, do 

you think? 

Mr. WISE. I think it is very important, Senator, because through 

using analyses like net present value and scoring, you can then be 

comparing basically apples to apples, because this is something 

that GSA had done previously and it then enables you to—it enables the agency or enables the decisionmakers to be able to come 

up with a decision based on where the dollar value is today versus 

what it will be 30 years onwards, including any potential inflation 

returns and other factors that get put into the mix. 

So we believe that a net present value analysis is certainly a key 

aspect of the entire economic analysis picture in order to make 

these kinds of decisions. 

Senator BROWN. Thank you. Mr. Foley, what steps does GSA 

take to ensure that the leases contracted on behalf of the Federal 

clients achieve the best value for the taxpayer while also supporting the mission critical requirements? 

Mr. FOLEY. Sure. We do a couple of things and we do perform 

a net present value analysis, so we compare the cost of building a 

new Federal facility, renovating an existing facility and the cost of 

leasing, so we do the 30-year net present value analysis to evaluate 

the financial aspects. 

Again, as I mentioned earlier, one of the key things is making 

sure that we have a firm understanding of the requirements and 

we work with the agencies to understand how they may be able to 

adjust their requirements slightly to get a better deal for the taxpayer. So for instance, instead of having to be in one building of 

a particular size, might drive construction of a new building or 

limit competition to one or two buildings that have a certain 

amount of space available. If they can be in two proximate buildings within a block of each other or right next door or perhaps on 

the same campus, that opens up the competition and drives down 

the cost of leasing. 

So there are a lot of simple things that we can do working with 

client agencies to make sure that we can still find a way to meet 

their mission requirement, but leverage our expertise in the real 

estate market to make sure we get the best value for the taxpayer. 

Senator BROWN. In previous testimony, I note you said that you 

are continually assessing your performance against other rental 

rates in same or similar markets to a lease cost relative to market 

measure. So how is the GSA doing in comparison to the commercial 

market in various sectors? 

Mr. FOLEY. We continue to lease at a cost below the market. I 

believe at the end of last year it was somewhere around 10 percent 

below the private sector benchmarks we were using. 

H605-41331-79W7 with DISTILLER

24 

Senator BROWN. And is that geographically driven? Is this just 

overall? 

Mr. FOLEY. Yes, we do it based upon a geographic market and 

a submarket. So we look at where we are leasing and then we find 

comparable rental rates from the private sector in that particular 

market. 

Senator BROWN. I will just defer to you, Mr. Chairman. 

Senator CARPER. OK, we will have a third round, so feel free. 

I have been jotting down some questions as you all testified and 

responded to questions from Senator Brown and myself. I just want 

to kind of walk through this list briefly if I could. One of the areas 

of jurisdiction that we also have is the U.S. Postal Service. We face 

a situation with the Postal Service literally running out of money, 

running out of cash later this year, if not later this year, then next 

year. It will be unable to make payroll. It will create a huge mess, 

economic mess in our country. I think about eight million jobs that 

depend on the mailing industry. 

So we are looking hard for ways to help the Postal Service right 

itself in a twitter, e-mail, Facebook age, to be able to meet our 

needs, mailing needs, but do so in a way that they cover their 

costs. There has been some discussion here today about consolidation, consolidating property and consolidating activities in ways 

that make sense. We do that through the Base Realignment and 

Closure Commissions and Department of Defense (DOD) about 

every half dozen years. 

Think out loud for me. Think out loud for us, about how the U.S. 

Postal Service might play a role here that would enable us to kill 

two birds with one stone. One is to meet the property needs of a 

number of Federal agencies that have nothing to do with the Postal 

Service, and yet, help the Postal Service with—to better meet its 

revenue obligations in order to free themselves of support from the 

Federal Government, Federal taxpayers. 

OK, whoever wants to take a first shot at that, go right ahead, 

please. Mr. Foley. 

Mr. FOLEY. I will start first. GSA, we worked with the Postal 

Service for a number of years. They are a tenant in many of our 

Federal buildings and we also lease space from the Postal Service. 

So we have many Federal agencies that are located in Postal Service Buildings. 

We have worked with them closely as they have been disposing 

of properties to identify where it makes sense for us to acquire 

those where we have existing Federal needs, as well as we worked 

with them to figure out where we are disposing of properties or 

where we have available underutilized properties where they might 

be able to utilize that. 

Several years ago, going back as far as 1985, we set up an MOU 

at the Postal Service that allowed for an exchange of properties 

and basically a netting of the fair market value of that. And it has 

been very effective, I think, for both agencies. 

Another area where we have been able to partner with them, Mr. 

Sullivan mentioned sort of the enhanced use leasing authorities. 

They have some authorities that we do not at GSA and so we have 

been able to lease from them and develop properties too specific for 

the IRS for service centers in Philadelphia and Kansas City, where 

H605-41331-79W7 with DISTILLER

25 

we have been able to use a former Postal Service facility, renovate 

that and use their authority to create modern, efficient space for 

the IRS and help find a good value for the taxpayer. 

Senator CARPER. Well, that is very encouraging. Anyone else on 

this? That is good stuff. Thank you. Anybody else? 

Mr. SULLIVAN. I am sure Senator, if the Post Office had sites 

that become available due to a downsizing and they were available 

and for us what would be key, would they be located in the place 

where we need space? That would be the critical point, of how close 

they would be to where veterans’ needs are. And if they could be 

easily adapted to deliver healthcare, I am sure we would look at 

those and see if there was a match and take advantage of any 

economies that were there. 

Senator CARPER. Oh, good. Thanks. I will just ask our staffs, 

both Democratic and Republican staff, to please note that. I think 

this is a scenario where we could help the Postal Service help 

themselves and if we are smart about it, could help the Federal 

agencies get better value for their space needs. 

Anybody else have a comment before I ask another question? OK. 

We have had some discussion, delegation of lease authority, some 

instances where it is done well and some instances, most certainly 

SEC, was not done well. 

Let me just ask Mr. Heslop, you used to work at Capital One, 

correct? 

Mr. HESLOP. That is correct. 

Senator CARPER. If you had employees at Capital One who were, 

I will use the term ‘‘guilty’’ for the kind of gross bad judgment in 

terms of preparing the SEC for meeting its space needs going forward, how would those employees be dealt with; what kind of accountability would have been brought to them? 

Mr. HESLOP. I think in a relatively similar manner. Obviously, 

there are not the same level of rules and regulations that the Federal Government has as it relates to their employment practices, 

but there definitely are rules and procedures that apply. 

And so employees in a situation like that would be—they would 

have some availability of due process and it would not be an arbitrary summarial dismissal, if you will. But there would be an investigation and upon the conclusion of that investigation, appropriate disciplinary action would be taken. 

Senator CARPER. I would hope at the end of the day appropriate 

disciplinary action—I think I speak for both of us—that appropriate disciplinary action be taken. One of the things that really 

frosts citizens of this country, taxpayers, and those of us who are 

privileged to represent them, is when we have bad behavior, grossly bad behavior, on the part of Federal employees or others who are 

using Federal—contractors, and there is just little, if any, accountability. And that is not right. I would just ask you keep that in 

mind. 

We want to be fair, but we also want—it is tough love. It is like 

a tough love situation. I think we need to be tough. We need to provide the example. 

At the beginning, I think, of your testimony, Mr. Sullivan, I 

think you may have asked, there were three questions that the VA 

asked. Would you just say those questions again for us, please? I 

H605-41331-79W7 with DISTILLER

26 

looked through your testimony to see if I could find them. I did not 

see them. 

Mr. SULLIVAN. Sure. When we make capital decisions, real property decisions whether to keep something, to renovate it, to sell it, 

to do whatever, our primary priority is how will that impact that 

decision to affect veterans and veteran families, first, and we will 

not be doing anything that will negatively impact them. 

Our second priority is to make sure that decision improves the 

operational efficiency and cost-effectiveness of VA operations, 

whether it is consolidating, whether it is building a new building 

or whether it is buying a piece of property. 

The third one is we want to be a good neighbor. We are located 

in 165 communities around this country with major presence and 

sometimes we are the largest presence in that community and we 

do to the extent possible want to be a good neighbor to the community and reach a decision that helps us, but helps the local community. 

We take them in that priority, first for veterans and families, efficiency and then to try and be a good neighbor. 

Senator CARPER. All right. Let me just ask your other panelists, 

are those three pretty good questions that we could use, not just 

in the VA, but with a little bit of modification, use outside of the 

VA? 

Mr. FOLEY. It is very similar to the process GSA uses and we 

have a broad range. But first we consider is there—what is the requirement? Is there a Federal need for the asset? And so if it is 

the VA, it is looking at how does it serve the VA and their customers? If it is the IRS, how does it serve the IRS and their customers or Social Security? 

And so the first consideration is the operational piece. The second piece that we look at is again the efficiency, the cost-effectiveness, as Mr. Sullivan said. And then the third, we do look at being 

a good neighbor in the community. We are in over 2,000 communities in all 50 States and 6 U.S. territories with governmentowned or leased facilities and so we have a critical role across the 

country that we play, and particularly are focused on transit-oriented development and sustainability as well. 

Senator CARPER. OK. Any other thoughts? Please. OK. I want to 

go back to the issue of delegation of lease authority, some instances 

where it is done well, some instances where it is done badly. 

As I understand it, correct me if I am wrong, but in your testimony, have you asserted that we actually lease more—through 

GSA we actually lease more space than we own; is that correct? 

Mr. FOLEY. Yes, that is correct. 

Senator CARPER. And has that always been the case or is that 

something that has happened in recent years? 

Mr. FOLEY. It is relatively recent. I believe 2008 was the first 

year where we crossed over to having more leased space than government-owned. 

Senator CARPER. Why do you think that changed? 

Mr. FOLEY. I think a couple of things. Some of it is just purely 

shifting demographics and where we had Federal buildings, populations have shifted. Agency missions and needs to serve the public 

have moved and for a lot of the smaller locations, leasing has beH605-41331-79W7 with DISTILLER

27 

come the default mechanism to meet those requirements, because 

you would not build a 5,000-square foot building in a small community with Federal construction dollars. 

We put our focus toward building land ports of entry, courthouses, the major headquarters agencies and consolidations, like 

the Food and Drug Administration (FDA) at White Oak, the St. 

Elizabeth’s for the Department of Homeland Security here in 

Washington, DC. 

And so it is about prioritizing the limited dollars and then for the 

more generic requirements that are basic vanilla office space, they 

often do end up in leased space instead of Federal buildings. 

Senator CARPER. All right, thanks. Thanks very much. Senator 

Brown. 

Senator BROWN. Thanks Chairman. Just a couple more. So Mr. 

Heslop, can you explain—I am still having trouble wrapping my 

arms around the whole concept of having the SEC in kind of a— 

I mean, here the SEC is being used to regulate Wall Street, and 

in fact it looks like Wall Street with the lavish surroundings, the 

fact that they would even take up in an area like this. 

Gosh, I would think they would want to go to a blighted area in 

Washington and bring some economic development, get a good 

value for the taxpayers and kind of it is a win-win-win all around. 

So I guess I know you were not there per se, but I mean, you are 

still there now, right? 

Mr. HESLOP. I am there now, yes, sir. 

Senator BROWN. I mean, how do you explain those kind of lavish 

surroundings when we are in a period of austerity? 

Mr. HESLOP. It is my understanding that the situation that occurred was this. I do not believe that the lavish surroundings was 

as much of a motivator as a very flawed process to develop a space 

estimate and then a very flawed process to get the decision made 

to take the building. 

You have to remember that at the time, Dodd-Frank had just 

passed. The SEC was given a significant amount of new responsibilities, derivatives oversight of a trillion dollar industry, registration of hedge funds, as I mentioned in my testimony, a number of 

new responsibilities. It was going to drive the hiring of a significant 

number of new employees, and those new employees needed space 

to be housed. 

There is a housing versus hiring mismatch. We typically can 

bring employees on in about 90 days. As you know, it takes significantly longer to house them and so I think, it is my understanding, 

but I believe the people at the time felt very much under the gun 

to try to obtain space sufficient for the resources we were bringing 

in. 

Because they used a flawed space estimate, we were originally 

looking at four properties in the D.C. area, oh by the way, against 

the chairman’s guidance. She wanted them to look in the regions 

for housing for our enforcement—— 

Senator BROWN. What chairman? 

Mr. HESLOP. Chairman Schapiro. She wanted them to look in the 

regions for both our enforcement and our examination staff, because that is where a lot of the activity occurs. For whatever reason in this broken process, the staff and the facilities group disH605-41331-79W7 with DISTILLER

28 

regarded that directive and then tried to look for space and when 

they went through the estimate process that Mr. Kotz has described and it was grossly inflated, they arrived at a number of 

900,000 square feet. 

Once they hit that number and landed on that, the other three 

properties that were being considered were suddenly out of the 

equation. And so they believed they were left with one and only one 

property. It was an emergency situation and they felt at the time, 

I think, that they were getting a good deal because the rental rate 

received was below the market rate at the time. And so that is the 

way it was presented. 

Senator BROWN. OK. I am just wondering if that type of office 

space is appropriate for a Federal agency, quite honestly. That is 

top-of-the-line space and I guess I am wondering, I think it would 

be probably Mr. Foley then, what is the square footage rent for the 

clients that I guess are now subletting? Are we subletting with clients in there now? How does it work, because they are in the 

space, but they are not obviously, occupying it? So you have other 

Federal agencies in that space, right? 

Mr. FOLEY. We are working with the SEC to take that on, but 

we have not come to agreement on a lease and a term with them. 

We are still trying to figure out which agencies we might align. 

I understand that they have subleased some space directly with 

other agencies, but we were not a party to that. 

Senator BROWN. Other Federal agencies. What are you getting 

for rent on those? 

Mr. HESLOP. I do not know what they are getting. I do know it 

is at a higher rent than we had originally been on the hook for. 

Senator BROWN. So another Federal agency is paying a higher 

rent? 

Mr. HESLOP. Yes. It is not a sublease. Yes, another Federal agency, as I understand it, is paying a higher rate. 

Senator BROWN. So you guys are paying basically a half a billion 

dollars and then you are subletting it. 

Mr. HESLOP. We are not subletting it, sir. We have been completely released from two-thirds of the space. 

Senator BROWN. OK, so that entity is now paying the landlord 

a higher rent, has nothing to do with you. Another Federal agency 

is now paying a higher rent that you are ultimately paying; is that 

right? 

Mr. HESLOP. That is my understanding, yes, sir. 

Senator BROWN. So how does that happen? Have you been working with those other agencies if it is a higher rent? 

Mr. FOLEY. We have not. As I mentioned, for large leases, we 

have a number of controls in place and particularly for the District 

of Columbia and the National Capital Region, we actually have 

prospectus rent caps that we put in place for all of our leasing actions to ensure that we get a good deal and we stay at or below 

the market. 

Senator BROWN. Right. So let me just make sure I understand 

this. So you entered into a lease. I understand all the background. 

You have been released from two-thirds and now that two-thirds 

is now being rented to another Federal agency, at now a higher 

H605-41331-79W7 with DISTILLER

29 

amount than the half a billion dollars that you ultimately were 

paying. 

Are we just repeating what we just went through with other 

agencies? Do we need to find out who those are? I mean, this is 

like Groundhog Day, you guys. I mean, really, thank you for laughing, because I do not even know how to respond. I did not even realize that in my line of questioning, but I guess if you keep digging 

like we are doing, we find more and more and more. 

I would like to find out, Mr. Chairman, whether we do it—I do 

not know who to ask here. Like who is the new entity? Did they 

go through the process that we have been talking about here? Are 

we doing the same exact thing that the SEC did? I mean, I would 

love to have those answers, because it is just not passing the smell 

test today. Maybe because we are the only hearing here today that 

we are on top of this, because I think that is so critical. 

If you are developing and you have in place appropriate leasing 

guidelines based on all the formulas and everything and you are 

entered into an MOU with the SEC, correct? 

Mr. FOLEY. The MOU is for all leasing actions going forward. 

Senator BROWN. Right, going forward on other things that they 

may want to lease? 

Mr. FOLEY. Yes. 

Senator BROWN. So basically I understand that. 

Mr. FOLEY. Yes. 

Senator BROWN. How about the entities that are now taking 

over; you do not even know who they are, right? 

Mr. FOLEY. That was done under their own independent authorities, I believe. 

Mr. HESLOP. Senator Brown, if I might. The Federal Housing Finance Agency (FHFA) and the Comptroller of the Currency (OCC), 

both self-funded agencies, are in that property now. 

Senator BROWN. Oh. 

Mr. FOLEY. So we are working with them to take, I believe, it 

is 350,000 square feet and we are working through our typical 

process to find a tenant and make sure that the rent is appropriate. 

Senator BROWN. Great. Well, listen, thank you, Mr. Chairman, 

for holding this. Again, it is another area—I mean, every time you 

hold a hearing, I learn more and more about where we are wasting 

money and I am hopeful that the President and both houses are 

listening to what we are doing, because we have given them great, 

great things to just go and fix. Executive Order (EO) No. 1, fix it. 

Senator CARPER. As I have said before, GAO gives us a to-do list 

and you do it through your high-risk list and it is not just a high 

risk for this Subcommittee or for the Senate or the House. It is a 

high risk for all of us, including OMB, including the President, his 

folks, Federal agencies and certainly all of us. 

I want to just followup on Senator Brown’s line of questioning 

and just ask, for the space that I guess the SEC is now occupying 

or about to occupy at Constitution Center, it sounds like they are 

going to be occupying about one-third as much space as was originally thought; is that correct? 

Mr. HESLOP. Senator, we are on the hook for one-third of the 

space. We have no intent to occupy that space. 

H605-41331-79W7 with DISTILLER

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Senator CARPER. At all? 

Mr. HESLOP. At all. 

Senator CARPER. If you look at the—— 

Mr. HESLOP. Rent will be due in January 2013, and we firmly 

believe and are very optimistic in terms of our partnership with 

GSA that we will be able to find a tenant between now and January 2013. 

Senator CARPER. That is good. Give us some idea what the cost 

per square foot of that space would be if the SEC were occupying 

the space on January 1, 2013; what would we be talking about? 

Mr. FOLEY. At the time we were talking about cost per square foot of $44, which would have jumped to $47 per square foot 6 

years later. 

Senator CARPER. Somebody here at the table has better than— 

I know what $44 and $47 per square foot, how that would be regarded in Wilmington, Delaware. It would be pretty steep, maybe 

not so much here. 

But give us some idea how does that number jive with the rest 

of the real estate industry around here, real estate, the market, 

particularly in this area, this area of—— 

Mr. FOLEY. I mean, all real estate is local and there are a number of submarkets in the Washington, DC. area and so rent is fairly 

extreme. But our rent cap for the District of Columbia is $49 a 

square foot, so $44 is below the prevailing market rates. 

That said, there are some submarkets and locations within the 

District where you can get rents below that. 

Senator CARPER. So for the other agencies, which OCC, what was 

the other one? 

Mr. HESLOP. FHFA. 

Senator CARPER. OK—that are going to come in and lease space 

at Constitution Center, if they come in at the same rate, $44 or 

$47, are you saying they would be under the overall rate for this 

kind of office space in D.C.? 

Mr. FOLEY. For the governmentwide prospectus rent cap yes. 

Now, we have seen deals that are below that, as I said, in some 

locations, north of Massachusetts Avenue and some of the developing areas we have received better rates than that. But for that 

part of town, it is—— 

Senator CARPER. All right, a different question and one that 

deals with the corrective activities. 

Mr. Heslop you outlined for us on the corrective activities that 

have taken place at the SEC in light of this, what I would say is 

scandalous behavior on the part of some employees there. But 

what, if any, is the applicability of the corrective action the SEC 

has taken; how does that apply potentially to other Federal agencies. Mr. Foley. 

Mr. FOLEY. I mean, I think it is an example of how important 

it is to get the checks and balances correct. One of the advantages 

we have at GSA is we work with the Office of Management and 

Budget and so I think one of the big issues that SEC had in hearing their testimony and working with them was in developing that 

upfront requirement, figuring out how many people they had, what 

the right utilization rate for the space should be and were they 

going to be fully funded for all of that. 

H605-41331-79W7 with DISTILLER

31 

And so for all of our leasing actions, we not only work with the 

agency to make sure we understand that, but we also work with 

our budget examiner and their budget examiner, as I mentioned in 

my opening testimony, to make sure that the staffing levels are 

supported and the rental payment will be supported in the President’s budget so we know that the people are going to materialize 

and the funding will be there to pay for it before we proceed on a 

acquisition like this. 

Senator CARPER. Thank you. Mr. Heslop, the SEC was granted, 

I believe, independent leasing authority in 1990. However, as the 

IG has pointed out, it took the SEC 19 years to establish a centralized asset management office to handle its leasing activities; is that 

correct? 

Mr. HESLOP. That is my understanding, yes, sir. 

Senator CARPER. The SEC established a leasing branch within its 

Office of Administrative Service in, I believe, April 2009 and did 

not put into place leasing policies and procedures until August 

2010. 

Let me just ask you, if I could, sir, how many leases do you think 

might have been awarded over that 19-year period of time? You 

can do this with 20/20 hindsight, be a Monday morning quarterback, but why did it take the SEC so long to put a system in place 

that would allow the organization to effectively manage its leasing 

activity? 

Mr. HESLOP. Yes, sir. To the first question, it is my understanding that we have entered into 32 total leases over the course 

of the last 20 years. I really cannot speculate as to why they would 

not put one in place. I suppose because 32 leases in 20 years might 

cause some to say ‘‘do you need a full-time leasing staff, a dedicated leasing staff? ’’ 

But again, I cannot really speculate. What I can say, sir, it is 

very apparent to us that this is not a core competency that the 

SEC needs to be engaged in, and that is exactly why we are moving into a partnership with GSA. I would say to my—— 

Senator CARPER. You are the master of understatement. That 

sure is not the—— 

Mr. HESLOP. The GSA, by the way, sir, has just been terrific in 

terms of partnering with us and helping us out of the situation, so 

I would like to thank them for that. 

Senator CARPER. Good. That is good to hear. Mr. Heslop, do you 

have any idea how many leases the SEC currently manages? 

Mr. HESLOP. We currently have 15 in the portfolio. We have 11 

regional offices. We have the Constitution Center space that, as we 

know, we are still on the hook for. And we have the Station Place 

facility, which is where our headquarters is. We have an operation 

center in Northern Virginia, and then we share space with other 

Federal agencies in a very small COOP site. It is in Southern Virginia. 

Senator CARPER. How long did you work at Capital One? 

Mr. HESLOP. I worked at Capital One for approximately 12 years. 

Senator CARPER. Taking your private sector experience at Capital One and then putting it sort of side by side with your—what 

are you in about a year or so now with the SEC? 

Mr. HESLOP. It is about 14 months. 

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32 

Senator CARPER. It probably seems longer. But what kind of lessons learned would you like to impart to the rest of our Federal 

Government given what you have seen at the SEC in terms of real 

property management? 

Mr. HESLOP. In terms of real property management, I would say 

the lesson learned, I think, for small agencies, especially like 

ours—we are a very small agency, 3,900 people and on any given 

day 700 contractors in a very limited real estate footprint. But I 

would say it is about determining what your core competencies are 

and what they are not and divesting yourself of those that are not. 

I was hired to be a change agent, similar to your remarks earlier 

today. I am a taxpayer at heart and I was brought in to try to create change and move the SEC to a more well-managed environment, and one of the things that I have tried to do is move us out 

of those areas that are not our core competencies and giving those 

to agencies that can do them better. 

We are doing the same thing with our financial management reporting system, moving them to the Department of Transportation 

(DOT) as a Federal shared service provider, and I would say going 

in directions like that for small agencies, at least, I think is good 

advice. 

Senator CARPER. Thanks for those comments. Given the size of 

the Constitution Center lease, both in terms of square footage and 

funding, why didn’t the SEC seek assistance from GSA before entering into the lease? You mention they have a pretty good partnership now with GSA. Why do you suppose they did not seek the consultation or assistance from GSA in the first place? 

Mr. HESLOP. Sir, I wish I could answer that. I really cannot Monday morning quarterback that one. 

Senator CARPER. Mr. Wise, in your testimony, I think you indicated the roughly 36 agencies that have independent leasing authority. Generally do some of these other agencies with independent leasing authority have adequate expertise and internal 

controls to ensure that they are not—that they are getting the best 

possible terms for themselves and for their clients who they serve 

and for taxpayers? 

Mr. WISE. Senator, we do not have a large body of work looking 

at exactly that question, but we did have a look at where the National Transportation Safety Board (NTSB), had some issues with 

a lease for its training facility out in Dulles where they 

mischaracterized or misconstrued a lease as an operating lease 

when it should have been a capital lease, which resulted in an antideficiency issue and caused some real issues with the agency in 

terms of its accounting and getting its fiscal house in order. 

That leads to the larger point that Mr. Heslop has talked about, 

as well as what you mention in your opening remarks, is that for 

smaller agencies, especially that are not heavily engaged in real estate activities, as you know better than anyone, I guess, it is a very 

complicated environment to deal with leases and construction and 

if it is not a core mission or it is not even a significant one for a 

small agency, I think it is logical that they need to tread very carefully in this area because it is easy to fall into problems when you 

have capacity issues or it is a challenge for the administrative side 

of an agency to deal with these things. 

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33 

Senator CARPER. On the one hand, agencies can purchase space. 

On the other hand, they can get this designation, independent designation that some have and then they can lease or they can go 

through GSA and lease. How prevalent is the notion of lease purchase and is that something that agencies do from time to time? 

Is it rare? Is it more common? Is it a smarter approach in certain 

instances? Anyone? 

Mr. FOLEY. I will jump in with that. Lease purchase is something 

that GSA has done in the past, but that was prior to the Budget 

Enforcement Act. It is one of those things that triggers capital 

lease treatment if you have a bargain purchase option. So in essence, leasing to own is prohibited because all the funds get scored 

upfront. 

That said, some of our leases done prior to 1990, like the Columbia Plaza example that I mentioned, we were able to acquire that. 

We had a purchase option in the lease for $100 million. As it 

turned out at the time we exercised it, the building was worth 

about $200 million and we are saving rent of somewhere in the 

ballpark of $45 to $50 a square foot that we are no longer going 

to have to pay once we take ownership of the building. 

So there are a lot of advantages to being able to do something 

like that, but it is an area where similar to what Mr. Sullivan said, 

that the Budget Enforcement Act and the budget scorekeeping 

rules limit some of the flexibility that we have had in the past. 

Senator CARPER. That is good to know. Not actually good that it 

exists, but it is good to know. That is helpful. 

Couple more. Senator Brown, do you want to jump in here? I 

think you said you only had those others. 

Senator BROWN. Just one more. Mr. Heslop, I do not want to beat 

a dead horse, but I just want to understand. So when you say we 

are on the hook for this space, but we are not using it, so you are 

not physically in the space, right? 

Mr. HESLOP. That is correct; we are not in the space. 

Senator BROWN. When you say we are on the hook, you mean the 

taxpayers are on the hook? 

Mr. HESLOP. The SEC is funded by fees. However, we get our appropriation from Congress and basically there is a mixed tradeoff. 

So it is not direct taxpayer dollars, but—— 

Senator BROWN. Someone is paying. 

Mr. HESLOP. There is an obligation that will come due in January 2013 if we are unable to find a tenant. However, I think our 

conversation with GSA is they are very optimistic that between 

now and then we will—— 

Senator BROWN. So you are not in that space, but you are already in another space which you are paying for right now, a couple of spaces you indicated, throughout the region; is that right? 

Mr. HESLOP. Right. We have 11 regional offices, our headquarters. 

Senator BROWN. I just want to make sure I understand that. OK, 

that is it, Mr. Chairman. Thank you. 

Senator CARPER. Mr. Kotz, in your May 2011 report you indicated the SEC grossly overestimated the amount of office space it 

needed. It might have violated Federal law when it signed a $556.8 

million 10-year lease last year at Constitution Center. 

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34 

Based on your findings, what internal controls did the SEC have 

in place to ensure that it was leasing the appropriate amount of 

space in the most advantageous location and at the best rate? 

Mr. KOTZ. Yes, I do not think they had any significant internal 

controls. I think that was part of the problem. I know that they are 

making efforts to put controls in now. 

Senator CARPER. Let me just ask, what were they thinking? 

Mr. KOTZ. I do not know. I do not know exactly what they were 

thinking, but—— 

Senator CARPER. Did you ever ask? Did you ever ask—— 

Mr. KOTZ. Yes. 

Senator CARPER [continuing]. What are you guys thinking? 

Mr. KOTZ. No, we did and I think what it came down to was they 

had a misunderstanding of whether they needed this space. I think 

some folks did fall in love with the space and decided that was 

where they wanted to be. They wanted to make sure that they 

could all be in one building and they wanted to have as much of 

the building as possible. 

It was a process that moved forward in relatively quick time 

without a lot of thorough review or analysis. It ended up with a 

very flawed process. 

Senator CARPER. Let me followup to that if I could. As part of 

the authorization process for new leasing proposals, agencies are 

required to receive congressional approval for releases, I think, valued at about $2.8 million or more. 

How is the SEC able to enter into the Constitution lease without 

Congress being aware of the potential problems associated with the 

lease of this magnitude and did the SEC’s independent leasing authority preclude them from having to receive congressional approval prior to executing the lease? 

Mr. KOTZ. Yes, I believe that there were a couple reasons. One 

is the independent leasing authority. I think the other issue is the 

one that you have mentioned several times, the so-called scoring 

issue. So when you have a lease, you can sort of allocate a certain 

amount for each year. If you allocate a certain amount for the first 

year, you do not get over a particular threshold, while if you purchase, you allocate the whole thing in one year and you get over 

thresholds. 

So by using a lease, you cannot be subject to certain notifications 

and I think in this case, that was a very big negative factor because had there been notifications to OMB, Congress, there have 

been communications with GSA, I think somebody would have 

looked at this more carefully and come to a different conclusion. 

Senator CARPER. And two more questions, Mr. Kotz, if I could, 

of you. What would be the consequences if the SEC were required 

to go through GSA for all future lease acquisitions? 

Mr. KOTZ. I think there would be someone looking at the leases 

who was competent, ensured that the taxpayer got the most value, 

I think would be a very good thing. 

Senator CARPER. OK. And was the Constitution Center lease an 

anomaly or does the SEC lack the necessary expertise and internal 

controls to ensure they are getting the best possible term when it 

leases space? I think I know the answer to the question. You do 

not have to answer it. 

H605-41331-79W7 with DISTILLER

35 

Mr. KOTZ. OK. 

Senator CARPER. Mr. Foley, when GSA acquires a leased space 

for many Federal agencies, as you have testified, has delegated 

that authority to many others, how many agencies do you think 

have delegated authority to enter into lease agreements, any idea? 

Mr. FOLEY. Delegated from GSA? 

Senator CARPER. Hmm-hmm. 

Mr. FOLEY. I have that list here. Just a second. It looks like it 

is probably 15. The largest user is USDA and they have probably 

two-thirds of the lease delegations from GSA. Many of the others 

are much smaller in terms of one or two specific transactions. 

Senator CARPER. All right. What criteria does GSA use to determine whether an agency should have delegated authority? 

Mr. FOLEY. Sure. We have a number of different criteria. The 

first is we look at the size of the requirement and for the most 

part, we do not delegate anything over 20,000 square feet that 

comes into our agency. For the smaller requirements, we look at 

their management plan. We make sure that they have a warranted 

contracting officer, as I mentioned, who can execute the lease in 

the procurement. We make sure that they have a plan to follow all 

the appropriate procurement rules and regulations that would be 

under GSA’s, and then we provide oversight to make sure that they 

are following through with that. 

Senator CARPER. What type of oversight does GSA perform after 

agencies with delegated authority enter into lease contracts and 

that said, how does GSA verify that an agency did not lease more 

space than it needed? 

Mr. FOLEY. That is an issue for us and so we do work with the 

agencies post-award and we look at the lease contract to make sure 

that it is in line with what we delegated. 

Senator CARPER. One of the things I like to do when we come to 

the end of a hearing, sometimes and I am going to do it today— 

I do not always do this, but today I would like to do it—is just to 

ask—you have all had the opportunity to prepare for today, had the 

opportunity to present your testimony, to respond to our questions, 

to hear what your fellow panelists have to say. 

Let me just ask you to take maybe a minute a piece and just give 

us any concluding remarks. We always ask you to do opening remarks. Sometimes I find the most valuable input that we receive 

is actually sort of the retrospect and concluding remarks. Let’s see, 

if you do not mind doing this, we will just start with Mr. Wise, 

please. 

Mr. WISE. Senator, thank you. 

Senator CARPER. What I focus on around here is how do we 

build, how do we develop consensus? How do we develop consensus 

within the Executive, Legislative Branch, bipartisan, how do we do 

that in order to get better results for less money? 

I am just interested in getting things done. I think you are as 

well. But keep that in mind. That is what my goal is, consensus, 

how do we get things done? How do we do it in a way that gets 

better results for less money? Please. 

Mr. WISE. Senator, I would conclude with two points. One, when 

you talk about building consensus and bipartisanship, I think 

H605-41331-79W7 with DISTILLER

36 

CPRA is a promising start in that direction that will hopefully lead 

to some efficiencies and some cost savings for the taxpayers. 

So I think that is a good start moving, or a good thought process 

to be developing as this moves toward—the legislation moves forward and the differences are reconciled between the sort of three 

different versions. 

And the second point is that we think it is very important that 

in terms of looking at the whole issue of leasing, purchasing and 

score keeping that OMB continues to work toward developing and 

implementing the strategy that will help rationalize this process. 

Senator CARPER. OK, thanks. Mr. Heslop. 

Mr. HESLOP. Thank you, Senator, for the opportunity. I would 

say two things. One, as a taxpayer, I would certainly be supportive 

of the CPRA type approach as well. As a previous former Army officer, I can tell you, I have seen BRAC work its way through and 

seen the benefit that has added. I also would come back to the comments I made earlier, at least for small agencies, determining what 

your core competencies are and what they are not and finding a 

home for those things that are not and hopefully that would hit 

your agenda about savings tax dollars. 

Senator CARPER. Good. What did you do in the Army? 

Mr. HESLOP. I had a variety of assignments. I had an eclectic career as an Army officer. It ranged from a troop leader through an 

operations research analyst through working as the chief of staff to 

the chief of staff for the Army at one time, so I had a wide variety. 

Senator CARPER. How long did you serve? 

Mr. HESLOP. Twenty-two years. 

Senator CARPER. Twenty-two. Thanks for that service as well. 

Mr. Kotz. 

Mr. KOTZ. Yes, I think the one thing that struck me was what 

you, Mr. Chairman, were saying about disincentives in the beginning of the hearing. There should not be an incentive in place to 

lease versus purchasing. The incentives should be with respect to 

maximizing value for the taxpayer. I mean, that is where the incentive needs to be, whether it is purchasing or leasing, and perhaps we have gone away from that by focusing on one particular 

type of effort. 

So if something was done to put the appropriate incentives in 

place, I think we would all be in better shape. 

Senator CARPER. Good. There might be an exception when leasing actually does make more sense. And a classic example Census 

need a lot of space every 10 years, but not before 10 years. 

Mr. KOTZ. Right. So if the incentive was to maximum value, the 

incentive in that case would be to lease. In other cases it would be 

to buy. 

Senator CARPER. All right, thanks. Mr. Sullivan, please. 

Mr. SULLIVAN. Sure. A couple items, Mr. Chairman. No. 1, I 

think we heard today is the critical nature, having good internal 

controls on a professionally groomed, if you will, contracting and 

project management staff. VA is spending significant amount of effort, time and resources to make sure our leasing staff is fully 

trained, meets all the requirements and also has strict internal 

controls. 

H605-41331-79W7 with DISTILLER

37 

Every lease at VA more than 10,000 square feet is reviewed by 

numerous offices, including our general counsel, including our secretary personally signs them all. I can assure you that if anything, 

at VA most of the folks think there is too much review. I do not 

agree with that, but that is the groundswell. We have strict internal controls. 

The other item is in terms of leasing for providing medical services, is very different from providing office space. Medical leases 

really work well because No. 1, the population may shift of who we 

provide services to. And No. 2, which has become more apparent 

over time is the technology of providing medical services changes. 

So if we do a 10-year lease, the way we provided magnetic resonance imaging (MRIs) 10 years ago, radiology, oncology treatment, 

all of those things have changed. The building needs to be updated 

for the latest medical technology and radiology and other telemedicine, teleradiology as well. Leasing works well for that. 

And No. 3, I think is the key to this in the end is to find some 

way to incentivize the scoring process to be more rational on leases, 

but also to help us disinvest where we need to disinvest. 

Senator CARPER. OK, thanks. Mr. Foley, you get the last word, 

well the next to last. 

Mr. FOLEY. Thank you, Senator. I appreciate your comments 

about consensus. And like the VA, GSA has a well-trained professional staff of leasing folks across the country. 

I think the area where everyone seems to be in agreement, there 

is a little—varying approaches on how to deal with this, but it is 

clear there needs to be some reform in terms of real property. I 

think we need to give agencies the tools to manage their property 

effectively. The Administration’s proposal for CPRA, we estimate as 

much as $15 billion in potential savings that could be achieved. 

So by giving agencies an incentive to get rid of property they do 

not need by finding a way to help them fund some of those upfront 

costs to better utilize existing space or dispose of property they do 

not need, and by creating an independent panel that sort of offsets 

some of those competing stakeholder interests that you yourself 

mentioned and that we spoke about here in the hearing today, I 

think there are ways to streamline the process and make it much 

more effective for the taxpayers and help save those billions of dollars. 

Senator CARPER. All right, thanks. Let me ask a question of our 

staff over here. How long do Members have to submit questions for 

our witnesses? Two weeks, all right. And what period of time is 

there for submitting additional like statements or materials for the 

record? All right, maybe 2 weeks. We will double check that. 

All right, let me say to our Republican staff, anything else you 

guys have for our witnesses? How did they do? Pretty good, huh? 

These guys grade on a curve; so do we. Anything else here? 

All right, well, on behalf of Senator Brown and myself and those 

who have fled our Nation’s Capital and did not join us today, were 

unable to, we appreciate your testimony. 

I was talking with our staff yesterday about this hearing. We actually were talking on Tuesday about whether actually to go forward with the hearing since a lot of Members, House Members, 

H605-41331-79W7 with DISTILLER

38 

Senators had left. I think the House left us on Monday. Some Senators are still around, but a lot are gone. 

But the questions, this is not the sexiest topic to be holding a 

hearing on. We are delighted to have the kind of media coverage 

that is demonstrated here today, appreciate that. We are talking 

about a lot of money here. We are talking about a lot of money that 

is not being spent wisely. 

And going forward, we are going to have to—and almost everything we do in this government of ours, we got to find ways to get 

better results for less money. And whether in this case the leases 

are paid for by user fees or whether they are paid by appropriated 

dollars, we just got to find ways to do almost everything, whether 

it is defense or non-defense, discretionary, entitles, all that stuff, 

got to find ways to get better results for less money. 

And this is an area that has cried out to be addressed for years. 

And for one reason or the other, we have not risen to the occasion 

and addressed it. Maybe we talk about being on watch and I am 

on watch here for at least until the end of next year as the Chairman of this Subcommittee that a number of colleagues serve on. 

But on my watch, we are going to fix this. We are going to fix 

this problem. We are going to put in place a comprehensive solution to fixing this problem. And we appreciate your help today toward maybe getting us heading in the right direction. We appreciate your willingness to help us going forward to make sure we get 

to the destination the taxpayers would have us arrive at. 

And with that having been said, thank you all for joining us 

today, for your testimony, for your preparation, for your responses 

and for your willingness to help make sure we get that ship headed 

to the right port. And that is what we are going to do. Thanks so 

much. 

[Whereupon, at 4:24 p.m., the Subcommittee was adjourned.] 

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