Over 30 federal agencies control hundreds of thousands of real property assets—including both facilities and land—in the United States and abroad. According to available data, the government owns or leases about 3.3 billion square feet of building floor area worldwide in roughly a half- million buildings. About 380 million square feet of this space is leased. These assets are worth hundreds of billions of dollars. However, much of this vast and valuable asset portfolio presents significant management challenges and reflects an infrastructure based on the business model and technological environment of the 1950s. Many assets are no longer effectively aligned with, or responsive to, agencies’ changing missions and are therefore no longer needed. Our high-risk reports, updated most recently in January 2005, highlighted problems with excess and underutilized property at several agencies, including the Departments of Defense (DOD), Veterans Affairs (VA), Energy, and State; USPS; and the General Services Administration (GSA). Furthermore, many assets are in an alarming state of deterioration; agencies have estimated restoration, repair, and maintenance 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 space needs, and the cost and challenge of protecting these assets against potential terrorism. Regarding the federal government’s reliance on costly leasing, we testified on this issue before this Subcommittee in October 2005. Building ownership options through construction or purchase and lease-purchase are generally less costly than using operating leases to meet long-term space needs. However, as GAO reported over the last decade, GSA relies heavily on operating leases to meet new long-term space needs because it lacks funds to pursue ownership. The excess and underutilized property problem was, and continues to be, a major reason the real property area remains high risk. 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. For example, agencies are employing such measures as searching vehicles that enter federal facilities, restricting parking, and installing concrete barriers. The experiences of several of the major real property-holding agencies illustrate how mission changes have affected agencies’ real property needs. For example, after the Cold War, DOD reduced its force structure by 36 percent. Despite several rounds of base closures, DOD projected that it still had considerably more property than it needed. 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. The results of the 2005 BRAC process, which will be discussed in more detail later, became final in November 2005. For USPS, various factors may significantly reduce its need for some of the real property it holds. 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 added 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 business 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. The former main post office building in Chicago, near the Sears Tower, is an example of a vacant USPS-owned property (see fig.1). USPS is currently incurring about $2 million in annual holding costs for this property, which was replaced by a new facility and vacated in 1997. Redevelopment of this property has taken several years because, according to USPS, the real estate market was weak and the City of Chicago and the developer have been unable to agree on terms. According to USPS, the property buyer is currently in negotiations with the City of Chicago regarding the property’s redevelopment and the granting of certain tax exemptions from the City. 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. In August 2003, we reported that VA had 577 vacant and underutilized properties. Figure 2 shows an example of a vacant VA-owned property in Milwaukee, Wisconsin. The L. Mendel Rivers Federal Building in Charleston, South Carolina is an example of a vacant, highly visible federal building owned by GSA (see fig. 3). This property, which is contaminated with asbestos, has been unoccupied since it sustained damage from Hurricane Floyd in 1999. In the last 10 years, GSA has unsuccessfully explored various options for disposal or reuse. Currently, GSA is planning, under existing authority, to exchange this building with a property owned by the City that would suit the federal government’s needs. The magnitude of the problem with underutilized or excess federal property puts the government at significant risk for wasting taxpayers’ money and missing opportunities to benefit taxpayers. First, underutilized or excess property is costly to maintain. In our 2003 high-risk report, we reported that DOD estimated that it was spending $3 billion to $4 billion each year maintaining facilities that were 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 is costly 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. 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. Finally, 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, or used in a public-private partnership. The excess and underutilized property problem, as well as the other problems that led to our high-risk designation, has been exacerbated by a number of factors that inhibit the government’s ability to efficiently dispose of or reuse excess and underutilized property. These include competing stakeholder interests in real property decisions, various legal and budget-related disincentives to businesslike outcomes, and the need for better capital planning by real property-holding agencies. More specifically: Competing Stakeholder Interess - In addition to Congress, OMB, and the real property-holding agencies themselves, several other stakeholders 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, GSA does not have the authority to enter into public-private partnerships to redevelop property. 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. Furthermore, resource limitations, in general, often prevent agencies from addressing real property needs from a strategic perspective. When available funds for capital investment are limited, Congress must 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 disposing of excess property, agencies also need to consider a range of laws intended to address other objectives—such as historic preservation and environmental remediation. Need for Improved Cap al Plannng - 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, Programming Guide, and OMB’s 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.