GSA is the federal government’s real property manager, providing office space for most federal agencies. In this capacity, GSA is responsible for keeping the approximately 1,700 federal buildings it manages in good repair to ensure that the value of these assets is preserved and that tenants occupy safe and modern space. Maintaining these buildings is particularly challenging because many buildings in GSA’s portfolio are more than 50 years old, monumental in design, and historically significant. Unlike a private sector company, GSA cannot always dispose of a building simply because it would be economically advantageous to do so. GSA is responsible for identifying, funding, and completing needed repairs and alterations at the federal buildings it manages. These needs are identified primarily through detailed building inspections and evaluations done by GSA regional staff or private sector architect-engineering firms under contract with GSA. The scope of repair and alteration work varies, but the work generally falls into one of three broad categories: recurring repairs, such as periodic painting, and minor repairs of defective building systems that cost less than $10,000; nonrecurring repairs and alterations that cost more than $10,000, but less than a prospectus-level threshold ($1.99 million for fiscal year 2001 projects) that is adjusted annually; and major repairs and alterations estimated to cost more than the prospectus- level threshold. Building repair and alteration projects expected to cost more than the prospectus-level threshold cannot start unless they are approved by OMB and funded by Congress. To obtain approval for these projects, GSA provides OMB and Congress with a prospectus for each repair and alteration project included in its annual budget submission. The prospectus includes information on the size, cost, location, and other features of the proposed work; a justification for proceeding with the work; and an economic analysis of the alternatives to doing the requested repairs and alterations. On the basis of the individual prospectuses, OMB recommends funding for various proposed repair and alteration projects, and Congress decides whether or not to approve the funding. In addition to prospectus-level funding, OMB and Congress consider proposals for funding that GSA can use to complete nonrecurring projects costing less than the prospectus-level and recurring projects regardless of cost. For fiscal years 1995 through 2001, GSA was authorized about $2 billion dollars for prospectus-level projects and $2.3 billion for nonprospectus- level projects. This report deals primarily with GSA’s process for assessing and selecting prospectus-level projects. Repairs and alterations, as well as other capital and operating expenses associated with maintaining federal buildings, are financed by FBF, a revolving fund administered by GSA that was authorized and established by the Public Buildings Amendments of 1972. Beginning in 1975, FBF replaced direct appropriations to GSA as the primary means of financing the operating and capital costs associated with federal space. GSA charges federal agencies rent for the space that they occupy, and the receipts from the rent are deposited into FBF. In addition, Congress may appropriate additional money to the fund. Congress exercises control over FBF through the annual appropriations process that sets limits, known as obligational authority, on how much of the fund can be expended for various purposes. FBF revenues must first be used to meet its building operating expenses, such as payments for leased space and utility costs. Congress then allocates revenues between the two capital programs–the construction of new federal buildings and the repair and alteration of existing buildings. GSA headquarters management recommended 12 of the 27 prospectus- level design projects proposed by GSA regional staff for fiscal year 2001 funding. In examining the 27 projects, GSA officials used a multifaceted process that relied on empirical data and professional judgment coupled with specific selection criteria and computer analysis that compared each of the competing projects. The criteria included such factors as a project’s economic return, risk, and urgency. Each project examined was given a numerical score and ranked in priority order. The projects with the highest initial rankings usually became the projects that GSA recommended for funding. However, GSA recommended two projects for funding that were not among those with the highest initial ranking. GSA provided explanations for moving the lower ranked projects ahead of the higher ranked projects. GSA’s process resulted in buildings with well documented repair and alteration needs being recommended for funding in fiscal year 2001. Under the oversight of GSA’s headquarters, GSA’s regional staffs, who operate and maintain the federal buildings, are responsible for identifying the prospectus-level projects. GSA headquarters staff is responsible for establishing a coherent national program and budget request. Each year, GSA’s Capital Investment and Leasing Program Call plays a key role in the agency’s obtaining the necessary resources to maintain its buildings. This planning document, commonly referred to as the Program Call, is prepared each year by the portfolio management staff in GSA’s headquarters. The Program Call provides, among other things, the guidance and criteria that the regions are to follow in identifying and proposing prospectus-level repair and alteration projects for funding consideration. According to GSA officials, the Program Call for fiscal year 2001 emphasized that the regions should follow a portfolio rather than a traditional facilities management approach in proposing repair and alteration projects, and GSA headquarters would follow this approach in selecting the projects to be included in its budget request. GSA management decided to adopt the portfolio management approach because they believed it was a more effective way to manage real property and its Repairs and Alterations Program. Under a portfolio approach, GSA chooses to make reinvestment decisions on the basis of what is best for its overall inventory of buildings rather than the need to repair or modernize an individual building. The Program Call stressed that because of limited resources, the funds that were available for completing repair and alteration projects would be given to cost-effective projects with high income-producing potential. Thus, projects that would improve the buildings’ functionality and income-producing potential were favored over other repair and alteration projects, such as full building modernization. GSA recognized that by implementing this approach, some buildings, such as those in low-rent or declining markets, may receive limited repair and alteration funding and therefore would be maintained at a more basic level as compared to other buildings in the inventory. GSA officials also told us that they recognized that implementing the portfolio management approach meant that those buildings needing repairs and alterations that were not expected to increase rent revenues would face difficulty in competing for limited prospectus-level funding. This was true for the proposed repair and alteration projects that were assessed and ranked in fiscal year 2001. For example, recapturing vacant space or other revenue enhancement was a primary reason for selecting 9 of the 12 projects included in GSA’s fiscal year 2001 budget request. GSA officials said they recognized that they cannot totally ignore projects that do not increase rent revenues. They said that GSA plans to request $75 million in fiscal year 2002, and additional funds in future years, for prospectus-level projects that focus on keeping buildings operational and safe rather than on significantly increasing rent revenues. We agree that GSA cannot ignore nonrevenue-generating projects, especially when they involve health and safety risks to employees and visitors as discussed later in this report. GSA officials emphasize that they are very concerned with health and safety issues, which is evidenced by language in their fiscal year 2002 and 2003 Program Calls. GSA officials said their policy is to take action to alleviate immediate health and safety problems when they occur and continuously monitor potential problem areas with the intent of avoiding dangerous situations. GSA officials believe that no employee or visitor to a federal building faces imminent danger because the building is unsafe. However, GSA officials said that they must sometimes take a Band-Aid and monitoring approach as a result of limited funding, and this approach does not always remove the long- term risk associated with the deterioration that could cause health and safety problems. Given this, it is important that GSA continuously focus on buildings that have significant operational deficiencies and health and safety concerns, identify needed funding, and give sufficient funding priority to those projects that would effectively eliminate the deterioration that is causing, or likely to cause, significant health and safety problems. Using the guidance contained in the Program Call, their knowledge about the buildings’ physical condition and the needs of their tenants, GSA’s regional staff identified 27 repair and alteration design projects and submitted them to GSA headquarters for funding consideration in fiscal year 2001. According to the officials with whom we met, the regions are given a great deal of discretion in determining which buildings they propose for repair and alteration funding. These officials said that such discretion is needed because each building in GSA’s inventory is unique in its construction, operating systems, repair and alteration needs, and client agency needs. Our analysis of project proposals and supporting documentation as well as discussions with GSA staff in the three regions that we visited indicated that they had selected and prioritized the buildings for funding in fiscal year 2001 on the basis of detailed analyses and discussions about the condition of their buildings and the repair and alteration needs at these buildings. Furthermore, the prospectus-level projects submitted by the three regions requested funding to satisfy well- documented repair and alteration needs. Our analysis found that all were prepared in accordance with GSA’s criteria and guidance. Once the regions had identified their proposed projects, they submitted the proposals, along with all supporting data, to GSA headquarters for review and funding consideration. There, portfolio management staff and the Capital Investment Panel assessed the merits of each proposed project and ranked the projects with the aid of computer-based decisionmaking software. This software–Expert Choice–employs an analytic hierarchy process decisionmaking methodology. Five weighted criteria, which were developed by GSA’s Capital Investment Panel, were used to rank the projects competing in fiscal year 2001.