Federal Real Property: Further Actions Needed to Address Long-standing and Complex Problems
Published: 2005-06-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In January 2003, GAO designated federal real property as a high-risk area due to long-standing problems with excess and underutilized property, deteriorating facilities, unreliable real property data, and costly space challenges. Federal agencies were also facing many challenges protecting their facilities due to the threat of terrorism. This testimony discusses the problems with federal real property, particularly those relating to excess and deteriorating property, and what needs to be done to address them.
section_title: What GAO Found
paragraphs: The federal real property portfolio is vast and diverse--over 30 agencies control hundreds of thousands of real property assets worldwide, including facilities and land worth hundreds of billions of dollars. Unfortunately, many of these assets are no longer effectively aligned with, or responsive to, agencies' changing missions. Further, many assets are in an alarming state of deterioration; agencies have estimated restoration and repair needs to be in the tens of billions of dollars. Compounding these problems are the lack of reliable governmentwide data for strategic asset management, a heavy reliance on costly leasing, instead of ownership, to meet new needs, and the cost and challenge of protecting these assets against terrorism. In February 2004, the President added the Federal Asset Management Initiative to the President's Management Agenda and signed Executive Order 13327. The order requires senior real property officers at specified executive branch departments and agencies to, among other things, prioritize actions needed to improve the operational and financial management of the agency's real property inventory. A new Federal Real Property Council at OMB has developed guiding principles for real property asset management and is also developing performance measures, a real property inventory database, and an agency asset management planning process. In addition to these reform efforts, some agencies such as the Departments of Defense (DOD) and Veterans Affairs (VA) have made progress in addressing long-standing federal real property problems. For example, DOD is preparing for a round of base realignment and closures in 2005. Also, in May 2004, VA announced a wide range of asset realignment decisions. These and other efforts are positive steps, but it is too early to judge whether the administration's focus on this area will have a lasting impact. The underlying conditions and related obstacles that led to GAO's high-risk designation continue to exist. Remaining obstacles include competing stakeholder interests in real property decisions, various legal and budget-related disincentives to optimal, businesslike, real property decisions, and the need for better capital planning among agencies.

section_title: Letter
paragraphs: We welcome the opportunity to testify on the actions that are needed to  address the long-standing and complex problems that led to our  designation of federal real property as a high-risk area. As you know, at  the start of each new Congress since 1999, we have issued a special series  of reports, entitled the Performance and Accountability Series: Major  Management Challenges and Program Risks. In January 2003, we  designated federal real property a high-risk area as part of this series, and  we issued an update on this area in January 2005.My testimony is based  on our January 2003 and January 2005 high-risk reports and other GAO  reports on real property issues. My testimony focuses on the problems  with federal real property, particularly those relating to excess and  deteriorating property, and what needs to be done to address them.
subsections: section_title: The Federal Real Property Environment
paragraphs: The federal real property environment has many stakeholders and involves  a vast and diverse portfolio of assets that are used for a wide variety of  missions. Real property is generally defined as facilities; land; and  anything constructed on, growing on, or attached to land. According to its  fiscal year 2003 financial statements, the federal government currently  owns billions of dollars in real property assets. The Department of Defense  (DOD), U.S. Postal Service (USPS), the General Services Administration  (GSA), and the Department of Veterans Affairs (VA) hold the majority of  the owned facility space.
Federal real property managers operate in a complex and dynamic  environment. Numerous laws and regulations govern the acquisition,  management, and disposal of federal real property. The Federal Property  and Administrative Services Act of 1949, as amended (Property Act), and  the Public Buildings Act of 1959, as amended, are the laws that generally  apply to real property; and GSA is responsible for the acts’  implementation. Agencies are subject to these acts, unless they are  specifically exempted from them, and some agencies may also have their  own statutory authority related to real property. Agencies must also  comply with numerous other laws related to real property.
section_title: The Federal Government Has Many Assets it Does Not Need
paragraphs: Despite significant changes in the size and mission needs of the federal  government in recent years, the federal portfolio of real property assets in  many ways still largely reflects the business model and technological  environment of the 1950s and faces serious security challenges. In the last  decade alone, the federal government has reduced its workforce by  several hundred thousand personnel, and several federal agencies have  had major mission changes. With these personnel reductions and mission  changes, the need for existing space, including general-purpose office  space, has declined overall and necessitated the need for different kinds of  space. At the same time, technological advances have changed workplace  needs, and many of the older buildings are not configured to  accommodate new technologies. The advent of electronic government is  starting to change how the public interacts with the federal government.  These changes will have significant implications for the type and location  of property needed in the 21st century. Furthermore, changes in the  overall domestic security environment have presented an additional range  of challenges to real property management that must be addressed.
One reason the government has many unneeded assets is that some of the  major real property-holding agencies have undergone significant mission  shifts that have affected their real property needs. For example, after the  Cold War, DOD’s force structure was reduced by 36 percent. Despite  several rounds of base closures, DOD projects that it still has considerably  more property than it needs. The National Defense Authorization Act for  Fiscal Year 2002, gave DOD the authority for another round of base  realignments and military installation closures in 2005.
In addition, various factors may significantly reduce the need for real  property held by USPS. These factors include new technologies, additional  delivery options, and the opportunity for greater use of partnerships and  retail co-location arrangements. A July 2003 Presidential Commission  report on USPS stated, among other things, that USPS had vacant and  underutilized facilities that had little, if any, value to the modern-day  delivery of the nation’s mail. In April 2005 we reported that USPS faces  future financial challenges due to its declining First-Class Mail volume and  has excess capacity in its current infrastructure that impedes efficiency  gains. USPS has stated that one way to increase efficiency is to realign its  processing and distribution infrastructure.
In the mid-1990s, VA began shifting its role from being a traditional  hospital-based provider of medical services to an integrated delivery  system that emphasizes a full continuum of care with a significant shift  from inpatient to outpatient services. Subsequently, VA has struggled to  reduce its large inventory of buildings, many of which are underutilized or  vacant.
The magnitude of the problem with underutilized or excess federal  property puts the government at significant risk for wasting taxpayers’  money and missed opportunities. First, underutilized or excess property is  costly to maintain. DOD estimates that it is spending $3 billion to $4 billion  each year maintaining facilities that are not needed. It is likely that other  agencies that continue to hold excess or underutilized property are also  incurring significant costs for staff time spent managing the properties and  on maintenance, utilities, security, and other building needs. Second, in  addition to day-to-day operational costs, holding these properties has  opportunity costs for the government, because these buildings and land  could be put to more cost-beneficial uses, exchanged for other needed  property, or sold to generate revenue for the government. Finally,  continuing to hold property that is unneeded does not present a positive  image of the federal government in local communities. Instead, it presents  an image of waste and inefficiency that erodes taxpayers’ confidence in  government. It also can have a negative impact on local economies if the  property is occupying a valuable location and is not used for other  purposes, sold, redeveloped, or used in a public-private partnership.
section_title: The Federal Portfolio Is in an Alarming State of Deterioration
paragraphs: Restoration, repair, and maintenance backlogs in federal facilities are  significant and reflect the federal government’s ineffective stewardship  over its valuable and historic portfolio of real property assets. The state of  deterioration is alarming because of the magnitude of the repair backlog—  current estimates show that tens of billions of dollars will be needed to  restore these assets and make them fully functional. This problem has  accelerated in recent years because much of the federal portfolio was  constructed over 50 years ago, and these assets are reaching the end of  their useful lives. As with the problems related to underutilized or excess  property, the challenges of addressing facility deterioration are also  prevalent at major real property-holding agencies. In recent discussions, a  GSA official said that its $5.7 billion backlog, which we reported in 2003,  has grown to between $6 and $7 billion. In recognition of the importance  of addressing deferred maintenance, federal accounting standards require  agencies to report deferred maintenance as supplementary information in  their financial statements. As of September 30, 2004, the government’s  consolidated financial statements showed a deferred maintenance cost  range of  $13.4 billion to $25.3 billion for the asset category General  Property, Plant, and Equipment—which includes federal real property.
Over the last decade, DOD reports that it has been faced with the major  challenge of adequately maintaining its facilities to meet its mission  requirements. In February 2003, we reported that although the amount of  money the active forces have spent on facility maintenance had increased  recently, DOD and service officials said that these amounts had not been  sufficient to halt the deterioration of facilities. Too little funding to  adequately maintain facilities is also aggravated by DOD’s acknowledged  retention of facilities in excess of its needs.
Our work over the years has shown that the deterioration problem leads to  increased operational costs, has health and safety implications that are  worrisome, and can compromise agency missions. In addition, we have  reported that the ultimate cost of completing delayed repairs and  alterations may escalate because of inflation and increases in the severity  of the problems caused by the delays. As discussed above, the overall cost  could also be reduced by government realignment. That is, to the extent  that unneeded property is also in need of repair, disposing of such  property could reduce the repair backlog. Another negative effect, which  is not readily apparent but nonetheless significant, is the effect that  deteriorating facilities have on employee recruitment, retention, and  productivity. This human capital element is troublesome because the  government is often at a disadvantage in its ability to compete in the job  market in terms of the salaries agencies are able to offer. Poor physical  work environments exacerbate this problem and can have a negative  impact on potential employees’ decisions to take federal positions.  Furthermore, research has shown that quality work environments make  employees more productive and improve morale. Finally, as with excess  or underutilized property, deteriorated property presents a negative image  of the federal government to the public. This is particularly true when  many of the assets the public uses and visits the most—such as those at  national parks and museums—are not well maintained or in generally poor  condition.
section_title: Other Long-standing Problems Continue to Exist
paragraphs: As we reported in October 2003, in addition to the difficulties with excess  and deteriorated property, the federal government faces other long­ standing real property-related problems. For example, there is a lack of  reliable and useful real property data that are needed for strategic  decision-making. In April 2002, we reported that the government’s only  central source of descriptive data on the makeup of the real property  inventory, GSA’s worldwide inventory database and related real property  reports, contained data that were unreliable and of limited usefulness.GSA agreed with our findings and has revamped this database and  produced a new report on the federal inventory; we have not evaluated  GSA’s revamped database and related report. In addition to the problems  with the worldwide inventory, in February 2005, we reported that as in the  7 previous fiscal years, certain material weaknessesin internal control  and in selected accounting and financial reporting practices resulted in  conditions that continued to prevent us from being able to provide an  opinion as to whether the consolidated financial statements of the U.S.  government were fairly stated in conformity with U.S. generally accepted  accounting principles. We have reported that because the government  lacked complete and reliable information to support asset holdings—  including real property—it could not satisfactorily determine that all  assets were included in the financial statements, verify that certain  reported assets actually existed, or substantiate the amounts at which they  were valued.
In addition to problems with unreliable real property data, the government  continues to rely on costly leasing for much of its space needs. As a  general rule, building ownership options through construction or purchase  are the least expensive ways to meet agencies’ long-term and recurring  requirements for space. Lease-purchase—under which payments are  spread over time and ownership of the asset is eventually transferred to  the government—are generally less costly than using ordinary operating  leases to meet long-term space needs. However, over the last decade, we  have reported that GSA—as the central leasing agent for most agencies—  relies heavily on operating leases to meet new long-term needs because it  lacks funds to pursue ownership. Operating leases have become an  attractive option in part because they generally look cheaper in any given  year, even though they are generally more costly over time. Budget  scorekeeping rules allow these costly operating leases to look cheaper in  the short term and have encouraged an overreliance on them for satisfying  long-term space needs. Finding a solution for this problem has been  difficult; however, change is needed because the current practice of  relying on costly leasing to meet long-term space needs results in  excessive costs to taxpayers and does not reflect a sensible or  economically rational approach to capital asset management.
Federal agencies also face challenges in protecting their facilities due to  the threat of terrorism. Terrorism is a major threat to federally owned and  leased real property, the civil servants and military personnel who work in  them, and the public who visits them. This was evidenced by the 1995  Oklahoma City bombing; the 1998 embassy bombings in Africa; the  September 11, 2001, attacks on the World Trade Center and Pentagon; and  the anthrax attacks in the fall of 2001. Since the 2001 attacks, the focus on  security in federal buildings has been heightened considerably. Real  property-holding agencies are employing such measures as searching  vehicles that enter federal facilities, restricting parking, and installing  concrete bollards. As the government’s security efforts intensify, the  government will be faced with important questions regarding the level of  security needed to adequately protect federal facilities and how the  security community should proceed.
section_title: Various Efforts Initiated, but Real Property Problems Persist Due to Factors that Require Attention
paragraphs: In February 2004, the President added the Federal Asset Management  Initiative to the President’s Management Agenda and signed Executive  Order 13327 to address challenges in this area. The order requires senior  real property officers at specified executive branch departments and  agencies to, among other things, develop and implement an agency asset  management plan; identify and categorize all real property owned, leased,  or otherwise managed by the agency; prioritize actions needed to improve  the operational and financial management of the agency’s real property  inventory; and make life-cycle cost estimations associated with the  prioritized actions. In addition, the senior real property officers are  responsible, on an ongoing basis, for monitoring the real property assets of  the agency. The order also established a new Federal Real Property  Council (the Council) at OMB.
In April 2005, OMB officials updated us on the status of the  implementation of the executive order. According to these officials, all of  the senior real property officers are in place, and the Council has been  working to identify common data elements and performance measures to  be captured by agencies and ultimately reported to a governmentwide  database. In addition, OMB officials reported that agencies are working on  their asset management plans. Plans for the DOD, VA, Energy, and GSA  have been completed and approved by OMB. The Council has also  developed guiding principles for real property asset management. These  guiding principles state that real property asset management must, among  other things, support agency missions and strategic goals, use public and  commercial benchmarks and best practices, employ life-cycle cost-benefit  analysis, promote full and appropriate utilization, and dispose of unneeded  assets.
In addition to these reform efforts, Public Law 108-447 gave GSA the  authority to retain the net proceeds from the disposal of federal property  for fiscal year 2005 and to use such proceeds for GSA’s real property  capital needs. Also, Public Law 108-422 established a capital asset fund  and gave VA the authority to retain the proceeds from the disposal of its  real property for the use of certain capital asset needs such as demolition,  environmental clean-up, repairs, and maintenance to the extent specified  in appropriations acts. And, agencies such as DOD and VA have made  progress in addressing long-standing federal real property problems and  governmentwide efforts in the facility protection area are progressing. For  example:
VA has established a process called Capital Asset Realignment for  Enhanced Services (CARES) to address its aging and obsolete portfolio of  health care facilities. In March 2005, we reported that through CARES, VA  identified 136 locations for evaluation of alternative ways to align inpatient  services—99 facilities had potential duplication of services with another  nearby facility or low acute patient workload. VA made decisions to  realign inpatient health care services at 30 of these locations. For example,  it will close all inpatient services at 5 facilities. VA’s decisions on inpatient  alignment and plans for further study of its capital asset needs are tangible  steps in improving management of its capital assets and enhancing health  care. Accomplishing its goals, however, will depend on VA’s success in  completing its evaluations and implementing its CARES decisions to  ensure that resources now spent on unneeded capital assets are redirected  to health care.
In DOD’s support infrastructure management area, which we identified as  high-risk in 1997, DOD has made progress and expects to continue making  improvements. In May 2005, we testified that DOD implemented the  recommendations from the previous BRAC rounds within the 6-year  period mandated by law. As a result, DOD estimated that it reduced its  domestic infrastructure by about 20 percent, as measured by the cost to  replace the property; about 90 percent of unneeded BRAC property is now  available for reuse. Substantial net savings of approximately $29 billion  have been realized over time. DOD’s expectations for the 2005 BRAC  round include further eliminating unneeded infrastructure and achieving  savings. It also expects to use BRAC to further transformation and related  efforts such as restationing of troops from overseas as well as efforts to  further joint basing among the military services. The results of the 2005  BRAC round will be known later this year, once the legislatively mandated  Defense Base Closure and Realignment Commission completes its work  and its recommendations are considered by the President and the  Congress.
In light of the need to invest in facility protection since September 11,  2001, funding available for repair and restoration and preparing excess  property for disposal may be further constrained. The Interagency  Security Committee (ISC), which is chaired by the Department of  Homeland Security (DHS), is tasked with coordinating federal agencies’  facility protection efforts, developing standards, and overseeing  implementation. In November 2004, we reported that ISC had made  progress in coordinating the government’s facility protection efforts by, for  example, developing security standards for leased space and design  criteria for security in new construction projects. Despite this progress, we  found that its actions to ensure compliance with security standards and  oversee implementation have been limited. Nonetheless, the ISC serves as  a forum for addressing security issues, which can have an impact on  agencies’ efforts to improve real property management.
The inclusion of real property asset management on the President’s  Management Agenda, the executive order, and agencies’ actions are  clearly positive steps in an area that had been neglected for many years.  However, despite the increased focus on real property issues in recent  years, the underlying conditions—such as excess and deteriorating  properties and costly leasing—continue to exist and more needs to be  done to address various obstacles that led to our high risk designation. For  example, the problems have been exacerbated by competing stakeholder  interests in real property decisions, various legal and budget related  disincentives to businesslike outcomes, and the need for better capital  planning among real property-holding agencies.
Competing Stakeholder Interests - In addition to Congress, OMB, and the  real property-holding agencies themselves, several other stakeholders also  have an interest in how the federal government carries out its real  property acquisition, management, and disposal practices. These include  foreign and local governments; business interests in the communities  where the assets are located; private sector construction and leasing firms;  historic preservation organizations; various advocacy groups; and the  public in general, which often views the facilities as the physical face of  the federal government in local communities. As a result of competing  stakeholder interests, decisions about real property often do not reflect  the most cost-effective or efficient alternative that is in the interests of the  agency or the government as a whole but instead reflect other priorities.
Legal and Budgetary Disincentives -The complex legal and budgetary  environment in which real property managers operate has a significant  impact on real property decisionmaking and often does not lead to  economically rational and businesslike outcomes. For example, we have  reported that public-private partnerships might be a viable option for  redeveloping obsolete federal property when they provide the best  economic value for the government, compared with other options, such as  federal financing through appropriations or sale of the property. Resource  limitations, in general, often prevent agencies from addressing real  property needs from a strategic portfolio perspective. When available  funds for capital investment are limited, Congress should weigh the need  for new, modern facilities with the need for renovation, maintenance, and  disposal of existing facilities, the latter of which often gets deferred. In the  disposal area, a range of laws intended to address other objectives—such  as laws related to historic preservation and environmental remediation—  makes it challenging for agencies to dispose of unneeded property.
Need for Improved Capital Planning - Over the years, we have reported  that prudent capital planning can help agencies to make the most of  limited resources, and failure to make timely and effective capital  acquisitions can result in increased long-term costs. GAO, Congress, and  OMB have identified the need to improve federal decisionmaking  regarding capital investment. Our Executive Guide, OMB’s Capital  Programming Guide, and its revisions to Circular A-11 have attempted to  provide guidance to agencies for making capital investment decisions.  However, agencies are not required to use the guidance. Furthermore,  agencies have not always developed overall goals and strategies for  implementing capital investment decisions, nor has the federal  government generally planned or budgeted for capital assets over the long  term.
As you know, GSA is required by law to charge agencies for renting space  in federal office buildings, courthouses, and other assets GSA owns. The  rental receipts are deposited into the Federal Buildings Fund (FBF), a  revolving fund used to fund GSA real property services, including space  acquisition and asset management for federal facilities that are under  GSA’s control. Over the years, there have been various efforts to restrict or  exempt agencies from paying rent to GSA for some or all of their space.  This, however, can have a negative impact on the government’s ability to  “re-invest” in its portfolio. Currently, the federal judiciary is seeking such  an exemption. This is a very important issue, since it would serve to  provide a precedent with significant governmentwide implications.
More specifically, GSA has historically been unable to generate sufficient  revenue through FBF and has thus struggled to meet the requirements for  repairs and alterations identified in its inventory of owned buildings. We  reported in 2003 that the estimated backlog of repairs had reached $5.7  billion, and consequences included poor health and safety conditions,  higher operating costs, restricted capacity for modern information  technology, and continued structural deterioration. Restrictions imposed  on the rent GSA could charge federal agencies have compounded the  agency’s inability to address its backlog in the past. Consequently, we  recommended in 1989 that Congress remove all rent restrictions and not  mandate any further restrictions, and most rent restrictions have been  lifted. The GSA Administrator has the authority to grant rent exemptions,  and all of the current exemptions are limited to single buildings or were  granted for a limited duration. Together, these current exemptions  represent about $170 million, a third of the $483 million permanent  exemption the judiciary is requesting from GSA. The judiciary has  requested the exemption, equal to about half of its annual rent payment,  because of budget problems that it believes its growing rent payments  have caused. GSA data show that one reason the judiciary’s rent is  increasing is that the space it occupies is also increasing. We are currently  studying the potential impact of such an exemption on FBF, however our  past work shows that rent exemptions were a principal reason why FBF  has accumulated insufficient money for capital investment.
section_title: A Transformation Strategy Is Needed
paragraphs: The magnitude of real property-related problems and the complexity of  the underlying factors that cause them to persist put the federal  government at significant risk in this area. Real property problems related  to unneeded property and the need for realignment, deteriorating  conditions, unreliable data, costly space, and security concerns have  multibillion-dollar cost implications and can seriously jeopardize mission  accomplishment. Because of the breadth and complexity of the issues  involved, the long-standing nature of the problems, and the intense debate  about potential solutions that will likely ensue, current structures and  processes may not be adequate to address the problems. In addition, a  governmentwide perspective regarding the extent of excess or  underutilized space, deferred maintenance, and the costs of real property  would improve transparency. That is, all stakeholders would know the  condition of the problem and overall, the government could better manage  its real property. Given this, we concluded in our high-risk report and in  our update in January 2005, and still believe that a comprehensive and  integrated transformation strategy for federal real property is needed.  Such a strategy could build upon the executive order by providing  decisionmakers with a road map of actions for addressing the underlying  obstacles, assessing progress governmentwide, and for enhancing  accountability for related actions. Based on input from agencies, the  private sector, and other interested groups, the strategy could  comprehensively address these long-standing problems with specific  proposals on how best to realign the federal infrastructure and dispose of unneeded property, taking  into account mission requirements, changes in technology, security needs,  costs, and how the government conducts business in the 21st century; address the significant repair and restoration needs of the federal  portfolio; ensure that reliable governmentwide and agency-specific real property  data—both financial and program related—are available for informed  decisionmaking;  resolve the problem of heavy reliance on costly leasing; and consider the impact that the threat of terrorism will have on real property  needs and challenges, including how to balance public access with safety.
To be effective in addressing these problems, it would be important for the  strategy to focus on minimizing the negative effects associated with competing stakeholder  interests in real property decisionmaking; providing agencies with appropriate tools and incentives that will facilitate  businesslike decisions—for example, consideration should be given to  what financing options should be available; whether agencies should keep  some of the disposal proceeds to recoup the costs of preparing properties  for disposal; what process would permit comparisons between  rehabilitation/renovation and replacement and among construction,  purchase, lease-purchase, and operating lease; and how public-private  partnerships should be evaluated; addressing federal human capital issues related to real property by  recognizing that real property conditions affect the federal government’s  ability to attract and retain high-performing individuals and the  productivity and morale of employees;  improving real property capital planning in the federal government by  helping agencies to better integrate agency mission considerations into the  capital decision-making process, make businesslike decisions when  evaluating and selecting capital assets, evaluate and select capital assets  by using an investment approach, evaluate results on an ongoing basis,  and develop long-term capital plans; and ensuring credible, rational, long-term budget planning for facility  sustainment, modernization, or recapitalization.
The transformation strategy should also reflect the lessons learned and  leading practices of organizations in the public and private sectors that  have attempted to reform their real property practices. Over the past  decade, leading organizations in both the public and private sectors have  been recognizing the impact that real property decisions have on their  overall success. For example, we at GAO are currently leasing space to the  U.S. Army Corps of Engineers to better utilize our space, generate  revenue, and reduce the Corps’ need to lease space from the private  sector. The revenue we receive provides us with an incentive to efficiently  manage our space. Better managing real property assets in the current  environment calls for a significant departure from the traditional way of  doing business. Solutions should not only correct the long-standing  problems we have identified but also be responsive to and supportive of  agencies’ changing missions, security concerns, and technological needs in  the 21st century. If actions resulting from the transformation strategy  comprehensively address the problems and are effectively implemented,  agencies will be better positioned to recover asset values, reduce  operating costs, improve facility conditions, enhance safety and security,  recruit and retain employees, and achieve mission effectiveness.
In addition to developing a transformation strategy, it is critical that all the  key stakeholders in government—Congress, OMB, and real property­ holding agencies—continue to work diligently on the efforts planned and  already under way that are intended to promote better real property  capital decisionmaking, such as enacting reform legislation, assessing  infrastructure and human capital needs, and examining viable funding  options. Congress and the administration could continue to work together  to develop and enact additional reform legislation to give real property­ holding agencies the tools they need to achieve better outcomes, foster a  more businesslike real property environment, and provide for greater  accountability for real property stewardship. These tools could include,  where appropriate, the ability to retain a portion of the proceeds from  disposal and the use of public-private partnerships in cases where they  represent the best economic value to the government. Congress and the  administration could also elevate the importance of real property in policy  debates and recognize the impact that real property decisions have on  agencies’ missions.
Regarding this Committee’s draft legislation known as the “Federal Real  Property Disposal Pilot Program and Management Improvement Act of  2005,” we believe that the objectives of the legislation and several of its  provisions have strong conceptual merit. For example, it would establish a  pilot program for the expedited disposal of excess, surplus, or  underutilized real property assets identified and would enact many of the  requirements of Executive Order 13227 into law. In particular, pursuing  this pilot program, as outlined in Title I, would allow for assessing lessons  learned and help determine the merits of the program and whether it  should continue. Furthermore, making the requirements of the executive  order law, as outlined in Title II, would serve to elevate their importance  and show that Congress and the administration are unified in pursuing real  property reform. We would respectfully suggest that the Committee give  consideration to including a requirement that a transformation strategy for  federal real property be developed, as we have recommended.
Solving the problems in this area will undeniably require a reconsideration  of funding priorities at a time when budget constraints will be pervasive.  Without effective incentives and tools; top management accountability,  leadership, and commitment; adequate funding; full transparency with  regard to the government’s real property activities; and an effective system  to measure results, long-standing real property problems will continue and  likely worsen. However, the overall risk to the government and taxpayers  could be substantially reduced if an effective transformation strategy is  developed and successfully implemented, reforms are made, and property­ holding agencies effectively implement current and planned initiatives.  Since our high-risk report was issued, OMB has informed us that it is  taking steps to address the federal government’s problems in the real  property area. Specifically, it has established a new Federal Real Property  Council to address these long-standing issues. To assist OMB with its  efforts, we have agreed to meet regularly to discuss progress and have  provided OMB with specific suggestions on the types of actions and  results that could be helpful in justifying the removal of real property from  the high-risk list.
Mr. Chairman, this concludes my prepared statement. I would be happy to  respond to any questions you or other Members of the Committee may  have at this time.
section_title: Contacts and Acknowledgements
paragraphs: For further information on this testimony, please contact Mark Goldstein  on (202) 512-2834 or at goldsteinm@gao.gov. Key contributions to this  testimony were made by Christine Bonham, Daniel Hoy, Anne Izod, Susan  Michal-Smith, and David Sausville.
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