Federal Real Property: Strategic Partnerships and Local Coordination Could Help Agencies Better Utilize Space
Released: 2012-09-14T00:00:00

Letter

Background

Federal Real Property

The federal government’s vast real property inventory reflects the diversity of agencies’ missions and includes office buildings, prisons, post offices, courthouses, laboratories, and border stations. The Federal Real Property Profile (FRPP) is a database of owned and leased space held by executive branch agencies. It is maintained by GSA on behalf of the FRPC, although FRPC controls access to the data. In 2010, FRPP data indicated that 24 executive branch agencies held about 3.35-billion square feet of building space. These agencies reported that 79 percent of the total reported building space was federal-government owned; 17 percent was leased, and 4 percent of the space was otherwise managed. The eight agencies we reviewed—USDA, DOD, DOE, DHS, DOI, VA, GSA, and USPS—reported holding over 3.32-billion square feet of building space or about 99 percent of reported square footage.

Owned and Leased Space

GSA and USPS are the largest civilian holders of federally owned property. They hold the largest amounts of space, by square foot, of the civilian agencies that we examined. As noted previously, we excluded much of DOD’s property from the scope of our review because of the security requirements of traditional military bases, which would make colocation with other agencies unlikely. GSA and USPS together hold more square footage—almost 660-million square feet—than the other agencies we reviewed, excluding DOD, combined—over 454-million square feet. (See fig. 1.) Additionally, both agencies have a wide national presence—GSA-held properties exist in over 750 markets and USPS- held property is in almost 36,000 cities and towns.

Federal agencies, particularly GSA in its role as broker and property manager to the civilian portion of the U.S. government, rely on costly leasing, and the number of federal government leases has increased in recent years. The civilian federal agencies we reviewed held leases in close to 41,000 assets covering nearly 324-million square feet of space, with GSA and USPS leasing the most space. Nearly all of GSA’s leases are for other tenant agencies—for example, its four largest customers in the leased inventory are the Department of Justice, DHS, the Social Security Administration (SSA), and Department of Treasury (Treasury)— based upon those agencies’ identified needs. According to GSA’s annual portfolio report, since fiscal year 2008, its leased inventory has experienced faster growth than its owned inventory. We have reported that over time GSA has relied heavily on operating leases to meet new long-term needs because it lacks up-front funding needed to purchase buildings or space. In addition, GSA has reported operational losses related to leasing, once indirect overhead expenses have been allocated, in recent years.

GSA’s Role

GSA is authorized by law to acquire, manage, utilize, and dispose of real property for most federal agencies. GSA is able to enter into lease agreements for up to 20 years that the Administrator of GSA considers to be in the interest of the federal government and necessary to accommodate a federal agency. GSA uses this authority to lease space on behalf of many federal government agencies.

In 2004, the administration added managing federal real property to the President’s Management Agenda and the President issued an executive order, applicable to 24 executive departments and agencies 1) establishing FRPC and 2) requiring FRPC to work with GSA to establish and maintain a single, comprehensive database describing the nature, use, and extent of all federal real property held by executive branch agencies, except when otherwise required for reasons of national security. FRPC worked with GSA to create the FRPP to meet this requirement. FRPC is chaired by the Deputy Director for Management of OMB and is composed of Senior Real Property Officers from the 24 executive departments and agencies, the Controller of OMB, the Administrator of GSA, and any other full-time or permanent part-time federal officials or employees as deemed necessary by the Chairman of the Council. The order does not apply to USPS and FRPC does not work directly with USPS on the management of its real property. These efforts notwithstanding, we have previously reported that the federal government continues to face a number of challenges to effectively managing its real property. In particular, we have reported on challenges to disposing of excess properties, making better use of properties that are underutilized, and reducing overreliance on leasing.

USPS Challenges

USPS, which is an independent establishment of the executive branch, is authorized to sell, lease, or dispose of property and is exempt from most federal laws dealing with real property and contracting. Although declining mail volume and changes to its operations have resulted in excess capacity and facility space throughout the postal network, our recent work has shown that USPS faces challenges, such as legal restrictions and local stakeholder influences, that have limited its ability to close postal facilities in order to restructure its retail and processing network. For example, USPS has often faced resistance from affected employees, communities, and elected officials when it has attempted to consolidate its processing operations and networks or close mail- processing facilities because of concerns about possible effects on service, employees, and communities. USPS recently announced that it will maintain existing retail locations, with modified operating hours. As a result of these issues, USPS has more space than it needs. Our recent work has also shown that USPS faces a deteriorating financial condition. For example, at the end of fiscal year 2011, the USPS had incurred a $5.1-billion loss for the year, had $2 billion remaining on its $15-billion borrowing limit, and projects it will be unable to make its $5.5 billion scheduled retiree health benefits payment to the federal government. In addition, USPS was conceived as a financially self-sufficient entity, but its revenues do not cover costs at about 80 percent of its retail facilities.

Underutilized Owned Federal Space Exists, but Size, Location, and Condition Affect Colocation Potential

Underutilized Owned Space

The federal government owns facilities that are underutilized in locations where it also leases space for different purposes. This is particularly true for USPS, as declining mail volume and changes in operations have freed space in many owned facilities. While there are problems with using governmentwide data to identify underutilized space, as will be discussed later in this report, we observed underutilized space held by multiple federal entities in the case study markets we visited for this report. For example, in each case study market, we observed one or more cases of vacant or underutilized space in post offices, including both offices and space on the processing floor, that officials said could be re-configured and physically separated from USPS operations (see fig. 2.)

In some cases, spaces within these underutilized owned properties could be used by other government agencies. According to a recent report by the USPS Office of Inspector General (OIG) related to post office utilization, excess floor and retail window space exists nationwide that could be used by other government agencies or used to perform transactions on behalf of other government agencies. The USPS OIG’s office also conducted several regional studies examining excess USPS space and noted a correlation between space leased by GSA and the ability of USPS to significantly accommodate federal space needs. For example, one of those studies estimated that of the USPS districts reviewed, USPS excess space may accommodate 147 of 175 (or 84 percent) of agencies’ current federal leases, and noted that GSA paid considerably more per square foot than the value assigned to USPS space. However, the Inspector General (IG) did not determine whether the excess space identified was usable for sharing with other agencies, in part because USPS systems and policies do not identify usable areas, and noted that more information would be necessary to determine whether USPS’s excess space would be suitable for another government tenant.

Space Size, Location, and Condition Affect Colocation Potential

We observed several attributes that could affect using underutilized space for colocation. These attributes included size, location, and condition, which would likely render some spaces more appropriate for sharing than others. Much of the underutilized space we observed was small—only several hundred to a few thousand square feet. We also observed underutilized space that was not contiguous. Both of these attributes could limit those spaces’ suitability for effective colocation. Furthermore, underutilized space that we observed varied in terms of its location within facilities. For example, GSA and VA officials described having some space that is less desirable to potential tenants. Although we observed generally high occupancy in GSA’s multi-agency federal buildings, GSA officials showed us some space they said is not easily leased because of its location, such as a first floor interior office bordering the building’s maintenance hallways or windowless basement spaces, and noted that these extra spaces can remain in GSA buildings when an agency does not require the entirety of a vacant space. VA officials noted similar issues, in that empty or available space at its campuses is often located in buildings surrounded by other VA buildings, which can make it harder for outside parties to access and use.

Additionally, we observed underutilized space in a wide range of conditions, from rundown to newly renovated, which could also affect colocation options. GSA officials said that a variety of physical aspects of the space may factor into the desirability of the space for colocation, including ceiling height, support column size, lighting, and windows. For example, Figure 3 shows interior office space in a GSA-held federal building in downtown Dallas that GSA officials told us has been vacant for years, a vacancy that they attributed to the lack of natural light and the large support columns that make it difficult to place workstations.

Colocation Could Yield Service-Delivery Efficiency and Cost- Avoidance Benefits in Some Cases

Federal officials we spoke with indicated that colocation could result in improved government operations through increased efficiencies for service access or delivery to the public in some cases. For example, VA officials stated that their incentive for colocation is to expand veterans’ medical care efficiently, and that sharing space with other agencies with similar missions, such as the U.S. Army, could help achieve that goal and avoid duplicating medical capacity. Moreover, according to a recent report by the USPS OIG, the Postal Service would benefit from sharing post office space with other government entities while generating revenue and increasing efficiency by expanding citizen access to government operations. For example, USPS currently has interagency agreements to provide non-postal government services, such as accepting passport applications and Selective Service registration forms. DHS officials discussed broadly how DHS is often colocated with USDA, the Drug Enforcement Administration (DEA) and the Federal Bureau of Investigation (FBI) because those agencies have complementary missions to certain DHS operations. These colocations take place in both GSA-held and DHS-held space. While not inter-agency, Interior officials described how the agency has tried to colocate its various bureaus for the sake of agency synergies, especially since the public often does not distinguish among the roles of the bureaus. They noted that integrating services in space or function is a good practice that could occur across agencies. USDA officials also said that the colocation of the Farm Service Agency (FSA) and the Natural Resources Conservation Service (NRCS) provided synergies because they are able to share databases and pass information more readily between the two entities.

Federal officials also said that, under certain circumstances, colocation could result in cost savings or avoidance for the federal government. For example, DHS officials described the department’s examination of colocation opportunities within the department, and cited one case it studied where cost savings could result from productivity gains, reduced redundancy, and cost avoidance. USPS officials in multiple locations noted USPS would benefit from revenue from a federal agency tenant. For example, USPS could share underutilized floor and retail window space with other government agencies, generating revenue to offset some building costs. Additionally, GSA officials described the motivation to accomplish savings from consolidation and colocation as responsible asset stewardship.

While federal officials seemed to agree that colocation can produce efficiencies, data limitations, such as the lack of a national, multi-agency asset-management tool as discussed in the next section, make it difficult to estimate the financial and nonfinancial benefits from colocating federal agencies, because the quality of any estimate is a direct function of the input data. Moreover, colocation will not always be more cost-effective than leasing in the short run, particularly if the costs to reconfigure owned space are high. For example, DOD officials said that it cost $20 million to renovate a vacant 70,000-square-foot warehouse within the Naval Support Facility in suburban north Philadelphia and move the Navy Human Resources Service Center there from leased commercial space. They estimated that the payback period for the move would exceed 30 years. Information on cost and service delivery improvements from colocations can help agencies decide whether to proceed with colocations and aid agencies in evaluating completed colocations. Generally, however, agencies lack the tools—such as a standardized approach for quantifying costs and benefits—to determine whether, and to what extent, colocations will generate or are generating intended savings or financial benefits, metrics that are key to helping agencies manage their resources. Moreover, some federal officials indicated that quantitatively measuring the nonfinancial results of colocations, such as intergovernmental collaboration, was difficult to do because these are difficult concepts to monetize, as they can be subjective. We found that agencies generally lacked the tools to measure the costs and benefits of colocation efforts. Our work on capital decision making has shown that establishing an analytical framework for review, approval, and selection of projects; evaluating a project’s results; and incorporating lessons learned into the decision-making process are all key principles and practices of such an effort. Establishing a framework with a mixture of financial and nonfinancial benefits, such as service delivery improvements, allows entities to better evaluate performance.

Greater Inter-Agency Collaboration Could Mitigate Some Challenges to Colocation

Agency officials said that greater collaboration—through strategic partnerships among federal agencies targeted to meet specific needs and a formal local coordination mechanism—could mitigate some administrative, financial and data challenges to colocation. Agencies’ varying real property-management authorities can create administrative challenges, which officials said could be addressed through a strategic partnership with GSA. Acquiring the needed up-front financing for repair or renovation remains challenging for agencies, although some agencies have secured up-front financing through partnerships with private entities. Agencies face challenges identifying colocation opportunities because of limitations with available data and the lack of a coordination mechanism. Officials from a few agencies suggested that structured local or regional coordination could best identify opportunities where the missions of various agencies could be “matched” to appropriate space because of local and regional federal officials’ more detailed knowledge of local needs, conditions, and opportunities.

Administrative Challenges

Agencies have varying real property management authorities related to colocation, including the ability to share property and retain the proceeds, and this variation can create administrative challenges for agencies seeking to increase inter-agency colocation opportunities. For example, USPS can share its property with private or government entities and retain the proceeds, but other agencies may not be able to do so.officials reported that the agency is allowed, under certain circumstances, to share government-owned real property, but it is not allowed to retain the proceeds, unless provided for in its annual appropriation. In addition, even if an agency has the authority to share real property, it may not be well- prepared to handle tasks such as setting lease rates and managing the financial arrangements for renovations. For example, GSA officials said some agencies do not know what rates to charge for the space they would share with other agencies. Moreover, Navy officials said agencies with the authority to share properties can face administrative challenges managing the many various sources of funds potentially needed should extensive renovations be necessary to bring properties up to usable condition.

Officials from six agencies as well as commercial real estate officials said that to overcome some of these administrative challenges and improve colocation efforts, agencies could address specific challenges through a strategic partnership with GSA. They said GSA has administrative structures and experiences that could benefit less-experienced agencies. For example, GSA, as the federal government’s property manager, already possesses the capability to market and price properties and manage leases on a large scale. Our previous work on the Government Performance and Results Act (GPRA) also supports the idea that strategic partnerships could be beneficial to overcoming these challenges. We have reported that cross-government agency collaboration can produce more public value than can be produced when agencies act alone. Specifically, agencies can enhance and sustain their collaborative efforts by engaging in a variety of practicesestablishing policies and procedures to operate across agency boundaries, by, for example, developing interagency handbooks that define common standards, policies, and procedures. During our review, officials from four agencies suggested that increased collaboration through some of these practices could help mitigate some of the administrative challenges of colocation. As a potential approach for these types of strategic partnerships, OMB officials described GSA’s effort to work with selected agencies to develop strategic plans for future property needs and identify potential areas for consolidation.

USPS has some experience collaborating with other agencies on real property issues, and as it explores further options to better utilize excess space, strategic partnerships with other agencies, particularly GSA, could help USPS overcome administrative challenges that may be impeding colocation. A February 2012 USPS OIG report said USPS has experience with intergovernmental collaboration because it already shares space in federal buildings and conducts transactions for other federal entities. For example, the Mansfield, Ohio, federal building hosts a post office as well as offices of SSA, the Internal Revenue Service (IRS), and the U.S. Department of Labor. The report noted that because many postal facilities are near many GSA-leased properties, sharing space could potentially lower overall federal lease costs. The report recognized USPS’s need to optimize its network through internal consolidations and closures, but said USPS could use its underutilized resources better through external collaboration. USPS management agreed with the OIG recommendation to develop and implement a strategy to address these findings.

United States Postal Service, Office of Inspector General. 21st Century Post Office: Opportunities to Share Excess Resources – Management Advisory, DA-MA-12-003 (Arlington, VA: February 9, 2012.)

Financial Challenges

During our site visits, we found federally owned properties that could be made available for leasing; however, many of the spaces would need substantial repair or renovation, and acquiring the needed up-front financing remains challenging for agencies. For example, we saw several USPS properties in which the available space required substantial renovation to replace old carpet, peeling paint, and outdated fixtures, and to repair water damage (see fig. 4). However, USPS’s deteriorating financial condition may limit the costs it can incur to renovate its facilities prior to sharing them with other agencies.

We also observed spaces that would need potentially costly specialized repairs or renovations. For example, some of the U.S. Navy properties we visited at the mixed-use Philadelphia Navy Yard (see fig. 5) would need asbestos abatement and water damage repair. Navy officials told us that the properties could be leased from the Navy by other government agencies, and that some agencies have made inquiries to do so. However, they said that the agencies were alarmed by the complexity and costs of repairs, which effectively ended any further consideration of the properties for colocation. Had any agencies pursued leasing the properties, Navy officials said they likely would lack sufficient up-front financing. In addition to general and specialized renovation costs, Navy officials said DOD Unified Facilities Criteria (UFC) requirements prescribe certain antiterrorism measures, such as blast-proof windows and security gates, which can further elevate the costs of renovations to DOD-owned buildings, both on and off-base.

The up-front costs of renovations present a challenge to GSA that hinders its colocation efforts. GSA regional officials said that financing renovations is the most serious challenge they face in improving the utilization of their assets. Regional officials said they have considered acquiring vacant USPS facilities that could support colocation, but have been reluctant to do so in part because of the up-front cost of the extensive renovations needed to make the properties usable. As we have previously reported, in recent years budgeting and appropriations decisions, made by the executive branch and Congress, have limited the amount of resources made available from the Federal Buildings Fund to GSA to fund real property operations, acquisition, and maintenance.GSA headquarters officials told us that these limitations make it challenging for the agency to effectively manage its portfolio and result in delayed or cancelled projects.

In downtown Philadelphia, GSA had considered purchasing USPS’ large, underutilized 30th St. Mail Processing and Distribution Center Station, but was dissuaded by the substantial cost of the renovation that would be needed for the building, which was constructed in 1935. Instead, in April 2007, USPS signed a deal with a private developer to renovate nearby facilities and, in August 2007, signed a memorandum of understanding with GSA for private redevelopment of the building into IRS offices. In September 2008, USPS moved its retail operations and distribution unit out of 30th St. into its new facilities. When the 30th St. renovation was complete, IRS moved into the property (see fig. 6). In exchange for financing the $184-million renovation, the developer received all interest and rights from USPS for the 30th St. land, building, and a nearby 1,661-space parking garage, and until August 25, 2030, will receive lease payments from GSA, who in turn will receive rent from IRS. reported, renovations financed by the private sector will generally cost more than those financed by Treasury borrowing.

The only national-level, multi-agency real property database—the FRPP—was not designed to be an active asset management system.As such, it does not possess the level of detail necessary to support the identification of colocation opportunities. The FRPP can provide basic descriptive information about the government’s federal property holdings, such as address, square footage and facility type; however, colocation decisions would require more data elements than would be practical to add to the FRPP. For example, the FRPP provides square footage information, but it does not provide information on orientation or use of space. We visited a DHS-held site where most of the facility was underground and much of the unoccupied space was used by environmental systems such as air filtration units and pumps that could not be removed. (See fig. 7.) The FRPP does not reveal that the facility is underground, nor does it convey the substantial challenges to reconfiguring the space. Similarly, we found that one building under renovation was characterized as “underutilized” in the FRPP. While not technically incorrect, characterizing this space as underutilized can be misleading because the simple utilization designation does not necessarily indicate if the space can be immediately occupied or used for colocation.

As a result, local and regional federal officials are generally better positioned than headquarters officials to manage the colocation process because of their more detailed knowledge of local needs, conditions, and opportunities. We found that detailed property knowledge necessary to facilitate colocations was concentrated at the regional and local levels, rather than at headquarters. When we asked for detailed information about specific properties, we were referred to local and regional federal officials, who were knowledgeable about specific sites and facilities. Some headquarters officials were familiar with attempts at colocation and could describe overall situations, but they were not the primary contacts for these efforts, nor could they readily describe the properties’ attributes or local office needs. In general, local and regional federal officials said that they knew property details—such as space configuration, access routes, and parking availability—that would be important for facilitating colocations. In addition, FRPC, which created the FRPP database, is a national, policy-oriented body. As such, the scope of FRPC’s mission does not include managing the local-level negotiations that colocation would require.

The detailed property knowledge held by local federal officials is important for ensuring an appropriate match between the agency that owns the property and the agency that would lease space. Officials from many agencies reported that matching the location of available property to the mission and security needs of the agency searching for space is an important consideration; for example, DOE’s need for isolated, remote sites as compared to VA’s interest in sites readily accessible to veterans. However, officials noted that that there are no universal requirements regarding their respective agencies’ property needs—rather, the property needs vary across the country in response to mission needs. In some cases, agencies have operational requirements that would make colocation inappropriate if the potential tenant and potential lessor did not share the same mission needs. For example, USPS officials noted the Postal Service’s need to keep mail secure and separate from potential tenant agencies or members of the public who may need to access the facility. Additionally, officials from DOD told us that in some circumstances their security requirements would make them ill-suited to share space with other agencies, such as when public access would be required. However, in instances where mission needs were similar, potential tenants might see enhanced security as desirable.

In other cases, an agency’s mission may dictate the need for a specialized facility that could make colocation inappropriate. For example, USDA officials in a few regions told us that farmers often drove farm vehicles, including tractors, to Service Center locations and that in these cases, underground parking in a federal building would be problematic. In addition, we visited a leased Interior site that required a blacksmith and carpentry shop, cold storage for artifacts, and parking for large maintenance vehicles, such as wood-chippers and industrial mowers (see photos in fig. 8 below). An Interior official said that these needs would have to be taken into account to share space. None of these details are included in the FRPP, but local and regional officials from several agencies noted that they can speak readily on how mission needs and facility details may impact colocation.

Officials from several agencies acknowledged that property knowledge is sometimes communicated informally. However, various officials noted that the lack of a systematic mechanism to share information hinders any efforts to colocate. Officials from a few agencies suggested that structured local or regional coordination could best identify opportunities where the missions of various agencies could be “matched” to appropriate space. Several local officials who showed us vacant federal spaces said there is currently no online or formal mechanism they can use to share vacancy details with officials from other agencies who might need space. A previous effort at local coordination—the Governmentwide Real Property Information Sharing program (GRPIS)—experienced some success, according to GSA officials, which they attributed to connections made at the local level. The program was tasked with encouraging and facilitating the sharing of real property information among federal agencies, and it revolved around the formation of real property councils within major federal communities nationwide. GSA officials said that local councils were an effective method for sharing information. However, officials said the program became essentially inactive after responsibility for the program was transferred within GSA and local connections were lost.

Conclusions

Colocating federal agencies into government-owned space represents an opportunity to improve government operations while simultaneously addressing two of the federal government’s long-standing real-property management challenges: reducing over-reliance on costly leasing and the presence of underutilized owned property. Our analysis of eight markets shows that there are underutilized owned properties near areas where the government also leases space for other purposes. However, colocations are far more complicated than just matching the square feet needed with the square feet available. Agencies’ mission needs and building-specific issues that include security, condition, configuration, and use must align for the colocation to fully succeed. FRPC has coordinated federal real property actions for almost a decade at the national level, but detailed local knowledge of agency missions and facility needs combined with systematic communication channels are needed to match owners with compatible tenants.

Once matched, numerous capacity and administrative hurdles remain as challenges to successful colocation. GSA is the only agency that has a core mission of managing real property. Several landholding agencies lack the experience and administrative tools necessary to effectively market and manage their property as a landlord. Creating cross-agency relationships with GSA to assist in tasks such as setting rental rates, crafting lease documents, renovating space, and otherwise managing the property would improve consistency of approach and allow each agency to remain focused on its core mission.

Colocation is not always the right answer. We found that agencies can force relocations into ill-suited locations, pushing the financial breakeven point out decades into the future. Without the tools to measure the benefits and costs of colocation efforts or proposals, policy makers are unable to effectively weigh colocation as an option. Understanding the financial costs and savings associated with colocation efforts, as well as the nature and extent of synergies and improved services, will allow agencies to better demonstrate that the benefits can be worth the costs of renovating and moving an agency out of privately leased space.

Recommendations for Executive Action

To promote colocation across agencies, the Director of the Office of Management and Budget (OMB) should work with the Federal Real Property Council (FRPC) and the U.S. Postal Service (USPS) to implement GAO’s three recommendations:  Establish a mechanism, which includes USPS, for local coordination in markets with large concentrations of federal agencies to identify, on a case by case basis, specific opportunities to share space and improve coordination of real property use across agencies.  Develop strategic partnerships and a coordinated strategy with assigned roles and tasks between the General Services Administration (GSA) and other federal landholding agencies (USPS specifically) with less experience sharing real property.  Develop and implement tools, along with supporting guidance, to measure, evaluate, and disseminate information on financial and nonfinancial benefits, such as service delivery improvements, from colocating federal agencies.

Agency Comments

We provided a draft of this report to OMB, GSA, USPS, VA, USDA, DOE, Interior, DHS, DOD, and IRS for review and comment. In commenting on a draft of this report, officials from OMB said that they agreed with the report’s findings, conclusions, and recommendations and offered technical comments that we incorporated as appropriate. They said that OMB has little power over how USPS manages its real property assets. The officials also said that GSA has already started looking at consolidating tenant field operations within its portfolio, and suggested that the report clarify the role that we recommend GSA takes in facilitating consolidations. USPS agreed with the facts and findings in the report and provided comments regarding our recommendations. USPS’s comments are contained in appendix III. GSA agreed with our recommendations and provided technical comments that we incorporated as appropriate. DHS and VA provided clarifying technical comments which we incorporated, where appropriate. VA’s comments are contained in appendix IV. USDA, DOE, Interior, DHS, DOD, and IRS did not provide comments.

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Appendix I: Scope and Methodology

Our objective was to review the issues surrounding colocation—that is, moving federal operations from one stand-alone location to a federal location occupied by another entity. To accomplish this, we addressed (1) if the potential for cross-agency colocation exists, what factors can affect that potential; (2) the potential benefits of colocation; and (3) the challenges associated with colocation, and what solutions, if any, can mitigate these challenges. During the course of our work we used the Federal Real Property Portfolio (FRPP), a government-wide database of owned and leased space, maintained by GSA on behalf of the Federal Real Property Council (FRPC). We recently reported that the FRPC has not followed sound data collection practices—related to data consistency, performance measures, collaboration, and data reporting—when collecting FRPP data, that would help them collect these data in a way that is sufficiently consistent and accurate to be useful making property management decisions. We recommended that GSA develop a plan to improve the FRPP consistent with sound data collection practices. Nonetheless, we also reported that the FRPP can be used in a general sense to track assets. As such, for this report, we used FRPP data for the limited purposes of identifying agencies within our scope, selecting case study markets and summarizing agency-level statistics on owned and leased property.

We used the 2010 Federal Real Property Portfolio (FRPP) summary report and U.S. Postal Service property data to identify the agencies which hold the largest amounts of property. We then limited our scope to 8 of the top 10 agencies, which include the Departments of Agriculture (USDA), Defense (DOD), Energy (DOE), Homeland Security (DHS), the Interior (Interior), Veterans Affairs (VA), the General Services Administration (GSA), and the U.S. Postal Service (USPS).

To determine the factors that can affect cross-agency consolidation, we analyzed detailed data and interviewed agency officials about the property holdings in 8 specific U.S. markets: Allentown PA, Cleveland OH, Dallas TX, Kansas City KS, Kerrville TX, Philadelphia PA, San Antonio TX, and Waco TX. To select these areas and provide nationwide statistics on owned and leased facilities, we analyzed basic inventory data, including location, occupant, size, owned/leased data from the FRPP for the 7 agencies in our scope that are represented in the FRPP. USPS, which is not represented in the FRPP, provided data from its internal systems. While case studies are not generalizable, we selected diverse markets in terms of market size, geographic region, owned and leased federal properties, and agencies present. Although we used GSA- defined markets as a guideline, to better reflect the interests of this review we delineated markets by using an estimated 60-minute commute radius, and selected the borders based on professional judgment (for example, in more rural areas, following the direction of development.) We identified the primary cities of large and medium markets using GSA data, and then selected small markets within driving distance of a large or medium-sized market in order to facilitate travel.

Because there are no reliable real property cost and benefit data, we primarily relied on interviews with federal agency officials at the national, regional, and local levels to determine the potential benefits of colocation. We focused on benefits that were mentioned by officials from more than one agency and more than one market. We also reviewed relevant GAO and other reports and documents, including USPS Office of Inspector General reports, and laws, regulations, and guidance.

To determine the challenges associated with colocation and what solutions, if any, could mitigate these challenges, we visited facilities that were both owned and leased, with a particular emphasis on owned offices and warehouses that were categorized as underutilized. We did not include properties categorized as inactive, excess, or disposed in our scope, and we did not include land. Using this information, we conducted an analysis to identify key challenges that agencies face when making property decisions and the options, if any, for mitigating those challenges.

We also interviewed agency officials at the national, regional, and local level, and reviewed documentation provided to us regarding specific properties. We did not examine any screenings for other potential uses of real property, such as use for the homeless or public benefit. To determine which challenges were the most pressing, we only included challenges which were raised in more than one market and by more than one agency.

We conducted this performance audit from July 2011 through July 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix II: Selected Leasing and Retention of Proceeds Authorities for In-Scope Agencies

This list is not intended to be inclusive of all of an agency’s real property authorities; there may be other authorities not included below that may authorize colocation.

Relevant statute and description of authority Enhanced Use Lease Authority Pilot Program 7 U.S.C. § 3125a note The Secretary of Agriculture is authorized to establish a pilot program and lease nonexcess real property at the Beltsville Agricultural Research Center and the National Agricultural Library to any individual or entity, including agencies or instrumentalities of State or local governments, if the Secretary determines that the lease is consistent with, and will not adversely affect, the mission of the agency administering the property; will enhance the use of the property; will not permit any portion of the property or facility to be used for the public retail or wholesale sale of merchandise or residential development; will not permit the construction or modification of facilities financed by nonfederal sources to be used by an agency, except for incidental use; and will not include any property or facility required for any agency purpose without prior consideration of the needs of the agency. Consideration for any lease shall be for fair market value and for cash. The Secretary is authorized to enter into leases until June 18, 2013, and the term of the lease shall not exceed 30 years.

Retention of Proceeds/Enhanced Use Lease Authority Pilot Program 7 U.S.C. § 3125a note Consideration for leases shall be deposited in a capital asset account, which is available until expended, without further appropriation, for maintenance, capital revitalization, and improvements to the department’s properties and facilities at the Beltsville Agricultural Research Center and the National Agricultural Library.

Leases of Non-Excess Property of Military Departments 10 U.S.C. § 2667 The Secretary of a military department is authorized to lease nonexcess real property under the control of the department that is not needed for public use if the Secretary considers the lease to be advantageous to the United States and upon such terms that will promote the national defense or be in the public interest. The term of the lease may not be more than 5 years, unless the Secretary determines the term should be longer to promote the national defense or to be in the public interest. Lease payments shall be in cash or in-kind consideration for an amount not less than fair market value. In-kind consideration includes maintenance, protection, alteration, repair, or environmental restoration of property or facilities; construction of new facilities; providing facilities; or providing or paying for utility services.

Agency

Relevant statute and description of authority appropriation act. Beginning in fiscal year 2005, any amounts deposited into a special account from the disposition of property are appropriated and available for obligation or available to the Secretary without additional congressional action.

Conveyance or Lease of Existing Property and Facilities 10 U.S.C. § 2878 The Secretary concerned is authorized to convey or lease property or facilities, including ancillary supporting facilities to eligible entities at such consideration the Secretary concerned considers appropriate for the purposes of the alternative authority for acquisition and improvement of military housing and to protect the interests of the United States.

Retention of Proceeds/Conveyance or Lease of Existing Property and Facilities 10 U.S.C. § 2883 Proceeds from the conveyance or lease of property or facilities under 10 U.S.C. § 2878 shall be credited to the Department of Defense Housing Improvement Funds. Proceeds may be used to carry out activities with respect to the alternative authority for the acquisition and improvement of military housing, including activities required in connection with the planning, execution, and administration of contracts subject to such amounts as provided in appropriation acts.

Leasing of Property 42 U.S.C. § 7256 The Secretary of Energy is authorized to lease acquired real property located at a DOE facility that is to be closed or reconfigured and is not needed by DOE at the time the lease is entered into if the Secretary considers the lease to be appropriate to promote national security or is in the public interest. The term of the lease may be up to 10 years, with an option to renew the lease for another 10 years, if the Secretary determines that a renewal of the lease will promote national security or be in the public interest. Lease payments may be in cash or in-kind consideration and may be for an amount less than fair market value. In kind consideration may include services relating to the protection and maintenance of the leased property.

Retention of Proceeds/Leasing of Property 42 U.S.C. § 7256 To the extent provided in advance in appropriations acts, the Secretary is authorized to use the funds received as rents to cover administrative expenses of the lease, maintenance and repair of the leased property, or environmental restoration activities at the facility where the leased property is located.

General Services Administration (GSA) Disposition of Real Property 40 U.S.C. § 543 The Administrator of GSA is authorized to dispose of surplus real property by sale, exchange, lease, permit, or transfer for cash, credit, or other property.

Conveyance of Property Consolidated Appropriations Act of 2005, Pub. L. No. 108-447, §412, 118 Stat. 2809, 3259 (2004) The Administrator of GSA, notwithstanding any other provision of law, is authorized to convey by sale, lease, exchange, or otherwise, including through leaseback arrangements, real and related personal property, or interests therein.

Agency

Relevant statute and description of authority Retention of Proceeds/Conveyance of Property Consolidated Appropriations Act of 2005, Pub. L. No. 108-447, § 412, 118 Stat. 2809, 3259 (2004) Net proceeds from the disposition of real property are deposited in GSA’s Federal Buildings Fund (FBF) and are used for GSA real property capital needs to the extent provided in appropriations acts.

General Powers of the Commandant, U.S. Coast Guard 14 U.S.C. § 93(a)(13) The U.S. Coast Guard may rent or lease real property, not required for immediate use, for a period not exceeding 5 years. Payments received from the rental or lease, less amount of expenses incurred (exclusive of governmental personal services), to be deposited in the Treasury.

Leases for National Park System (NPS) 16 U.S.C. § 1a-2(k)(1)-(4) Interior is authorized to enter into a lease with any person or governmental entity for the use of buildings and associated property administered by the Secretary as part of the National Park System. Leases shall be for fair market value rental. Buildings and associated property leased shall be used for an activity that is consistent with the purposes established by law for the unit in which the building is located; shall not result in degradation of the purposes and values of the unit; and shall be compatible with National Park Service programs.

Retention of Proceeds/Leases for NPS 16 U.S.C. § 1a-2(k)(5) Rental payments must be deposited into a special Treasury account where the availability of funds is not subject to an appropriation act. Funds are available for infrastructure needs such as facility refurbishment, repair and replacement, infrastructure projects associated with park resource protection, and direct maintenance of the leased buildings and associated properties.

Leases for Housing NPS employees 16 U.S.C. § 17o Interior is authorized where necessary and justified to make available employee housing, on or off the lands under the administrative jurisdiction of the National Park Service, and to rent or lease such housing to field employees of the National Park Service at rates based on the reasonable value of the housing.

Housing for NPS employees 16 U.S.C. § 17o Subject to the appropriation of necessary funds in advance, Interior is authorized to lease federal lands and interests in land to qualified persons for up to 50 years for the construction of field employee quarters.

Agency

Relevant statute and description of authority agency is authorized to enter into leases with the Presidio Trust which are necessary and appropriate.

USPS Real Property Authorities 39 U.S.C. § 401(5) The Postal Service is authorized to acquire in any legal manner, real property or any interest therein, as it deems necessary or convenient in the transaction of its business and to hold, maintain, sell, lease, or otherwise dispose of such property or any interest therein.

USPS Real Property Authorities 39 U.S.C. § 401(6) The Postal Service is authorized to construct, operate, lease, and maintain buildings, facilities, or equipment, and to make other improvements on any property owned or controlled by it.

USPS Retention of Proceeds/Real Property Authorities 39 U.S.C. §§ 2003, 2401 Proceeds are deposited into the Postal Service Fund and remain available to the Postal Service without fiscal year limitation to carry out the purposes, functions, and powers of the Postal Service. All revenues received by the Postal Service are appropriated to the Postal Service and are available without additional congressional action.

VA Transfer Authority – Capital Asset Fund 38 U.S.C. § 8118 The Secretary of VA is authorized to transfer real property under VA’s control or custody to another department or agency of the United States, to a state or political subdivision of a state, or to any public or private entity, including an Indian tribe until December 31, 2018. The property must be transferred for fair market value, unless it is transferred to a homeless provider. Property under this authority cannot be disposed of until the Secretary determines that the property is no longer needed by the department in carrying out its functions and is not suitable for use for the provision of services to homeless veterans by the department under the McKinney-Vento Act.

Authority to Outlease 38 U.S.C. § 8122 The Secretary may lease for a term not exceeding 3 years lands or buildings, or parts or parcels thereof, belonging to the United States and under the Secretary’s control. A lease made to any public or nonprofit organization may provide for the maintenance, protection, or restoration, by the lessee, of the property leased, as a part or all of the consideration for the lease. Prior to the execution of any such lease, the Secretary shall give appropriate public notice of the Secretary’s intention to do so in the newspaper of the community in which the lands or buildings to be leased are located. The proceeds from such leases (less expenses for maintenance, operation, and repair of buildings leased for living quarters) shall be turned over to the Treasury of the United States as miscellaneous receipts.

Agency

Relevant statute and description of authority transfer costs such as demolition, environmental remediation, and maintenance and repair; costs associated with future transfers of property under this authority; costs associated with enhancing medical care services to veterans by improving, renovating, replacing, updating, or establishing patient care facilities through minor construction projects; and costs associated with the transfer or adaptive use of property that is under the Secretary’s jurisdiction and listed on the National Register of Historic Places.

This pilot program was enacted in the Food, Conservation, and Energy Act of 2008, Pub. L. No. 110- 246, § 7409, 112 Stat. 1651, 2014-2016 (2008). Our review of DOD did not include real property at a military installation designated for closure or realignment under a base closure law. Therefore, for purposes of this appendix we have excluded DOD authorities relating to base closure or realignment. Additionally, while some authorities in this enclosure, such as 10 U.S.C. § 2667, contain subsections relating to base closure and realignment, for purposes of this enclosure we are referring to the other subsections of the statute. Department of Defense Appropriations Act for Fiscal Year 2005, Pub. L. No. 108-287, § 8034, 118 Stat. 951, 978 (2004).

This authority does not apply to property or facilities located on or near a military installation approved for closure under a base closure law. See 10 U.S.C. § 2878(b).

Appendix III: Comments from the U.S. Postal Service

Appendix IV: Comments from the Department of Veterans Affairs

Appendix V: GAO Contact and Staff Acknowledgments

GAO Contact

David J. Wise, (202) 512-2834 or wised@gao.gov.

Staff Acknowledgments

In addition to the contact named above, Keith Cunningham (Assistant Director); Jessica A. Evans; Colin Fallon; Gary Guggolz; Alison Hoenk; Hannah Laufe; SaraAnn Moessbauer; Joshua Ormond; Susan Sachs; and Crystal Wesco made key contributions to this report.

Related GAO Products

Federal Real Property: National Strategy and Better Data Needed to Improve Management of Excess and Underutilized Property. GAO-12-645. Washington, D.C.: June 20, 2012.

Federal Buildings Fund: Improved Transparency and Long-term Plan Needed to Clarify Capital Funding Priorities. GAO-12-646. Washington, D.C.: July 12, 2012.

U.S. Postal Service: Postal Service: Challenges Related to Restructuring the Postal Service’s Retail Network. GAO-12-433. Washington, D.C.: April 17, 2012.

Decennial Census: Census Bureau and Postal Service Should Pursue Opportunities to Further Enhance Collaboration. GAO-11-874. Washington, D.C.: September 30, 2011.

Federal Real Property: Overreliance on Leasing Contributed to High-Risk Designation. GAO-11-879T. Washington, D.C.: August 4, 2011.

Federal Real Property: Proposed Civilian Board Could Address Disposal of Unneeded Facilities. GAO-11-704T. Washington, D.C.: June 9, 2011.

Federal Real Property: Progress Made on Planning and Data, but Unneeded Owned and Leased Facilities Remain. GAO-11-520T. Washington, D.C.: April 6, 2011.

High-Risk Series: An Update. GAO-11-278. Washington, D.C.: Feb. 16, 2011.

VA Real Property: VA Emphasizes Enhanced-Use Leases to Manage Its Real Property Portfolio. GAO-09-776T. Washington, D.C.: June 10, 2009 Federal Real Property: Authorities and Actions Regarding Enhanced Use Leases and Sale of Unneeded Real Property. GAO-09-283R. Washington, D.C.: February 17, 2009.

Federal Real Property: Strategy Needed to Address Agencies’ Long- standing Reliance on Costly Leasing. GAO-08-197. Washington, D.C.: January 24, 2008.

Federal Real Property: Progress Made Toward Addressing Problems, but Underlying Obstacles Continue to Hamper Reform. GAO-07-349. Washington, D.C.: April 13, 2007.