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. The U.S. government’s fiscal year 2002 financial statements show an acquisition cost of more than $335 billion for real property assets held by the federal government on September 30, 2002. In terms of facilities, the latest available governmentwide data from the General Services Administration (GSA) indicated that, as of September 30, 2002, the federal government owned and leased approximately 3.4 billion square feet of building floor area worldwide. The Department of Defense (DOD), U.S. Postal Service (USPS), 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 held by federal agencies; 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. 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. 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. Furthermore, 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. 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 four 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, which became law in December 2001, gave DOD the authority for another round of base realignments and military installation closures in 2005. 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. Although the Department of Energy (DOE) is no longer producing new nuclear weapons, it still maintains a facilities infrastructure largely designed for this purpose. 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. In July 1999, we reported that vacant VA space was costing as much as $35 million to maintain each year. Costs associated with excess DOE facilities, primarily for security and maintenance, exceed $70 million annually. 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. 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. Appendix I discusses some examples of vacant, highly visible properties that are in the federal inventory—the L. Mendel Rivers Federal Building in Charleston, S.C., St. Elizabeths Hospital in Washington, D.C., and the former main post office building in downtown Chicago, Ill. These examples demonstrate the challenges agencies face in disposing of unneeded property. 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. For example: 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. Although DOD no longer reports data on backlog of repairs and maintenance, it reported in 2001 that the cost of bringing its facilities to a minimally acceptable condition was estimated at $62 billion; the cost of correcting all deficiencies was estimated at $164 billion. The Department of the Interior (Interior) has a significant deferred maintenance backlog that the Interior Inspector General (IG) estimated in April 2002 to be as much as $8 billion to $11 billion. This backlog has affected numerous national treasures, such as Ellis Island, Independence Hall, Yellowstone National Park, and Mount Rushmore, just to name a few. GSA has struggled over the years to meet the repair and alteration requirements identified at its buildings. In March 2000, we reported that GSA data showed that over half of GSA’s approximately 1,700 buildings needed repairs estimated at about $4 billion. More recently, in August 2002, we reported that this estimated backlog of identified repair and alteration needs was up to $5.7 billion. Other agencies with repair backlogs that we highlighted in our high-risk report include the Department of State (State), DOE, the Smithsonian Institution, and USPS. Since issuing our high-risk report, we have updated our assessment of facility conditions at DOD and State. 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. Furthermore, there is a lack of consistency in the services’ information on facility conditions, making it difficult for Congress, DOD, and the services to direct funds to facilities where they are most needed and to accurately gauge facility conditions. And, although DOD has a strategic plan for facilities, it lacks comprehensive information on the specific actions, time frames, responsibilities, and funding needed to reach its goals. In May 2003, we also reported on a similar problem with Guard and Reserve facilities. In March 2003, we reported that many of the primary office buildings at overseas embassies and consulates were in poor condition. In 2002, State estimated that its repair backlog was $736 million. In addition, the primary office building at more than half of the posts does not meet certain fire/life safety standards. State officials stated that maintenance costs would increase over time because of the age of many of the buildings, and overcrowding has become a problem at several posts. 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 affected 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 national parks and museums—are deteriorated and in generally poor condition.