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. 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. 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. 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.