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Testimony:

Before the Committee on Government Reform, House of Representatives:

United States General Accounting Office:

GAO:

For Release on Delivery
Expected at 10:00 a.m. EDT
June 5, 2003 :

FEDERAL REAL PROPERTY: 

Executive and Legislative Actions Needed to Address Long-standing and 
Complex Problems:

Statement of Bernard L. Ungar
Director, Physical Infrastructure Issues

GAO-03-839T:

GAO Highlights:

Highlights of GAO-03-839T, a testimony before the Committee on 
Government Reform, House of Representatives

Why GAO Did This Study:

Long-standing problems with excess and underutilized real property, 
deteriorating facilities, unreliable real property data, and costly 
space challenges are shared by several agencies. These factors have 
multibillion-dollar cost implications and can seriously jeopardize 
agencies’ missions. Federal agencies face many challenges securing 
real property due to the threat of terrorism.  This testimony 
discusses long-standing, complex problems in the federal real property 
area and what actions are needed to address them.

What GAO Found:

Over 30 agencies control hundreds of thousands of real property assets 
worldwide, including facilities and land, which are worth hundreds of 
billions of dollars. Unfortunately, much of this vast, valuable 
portfolio reflects an infrastructure based on the business model and 
technological environment of the 1950s. Many of the assets are no 
longer effectively aligned with, or responsive to, agencies’ changing 
missions and are therefore no longer needed. Further, many assets are 
in an alarming state of deterioration; agencies have estimated 
restoration and repair 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 needs, and the cost and 
challenge of protecting these assets against potential terrorism.

Resolving these problems will require high-level attention and 
effective leadership by both Congress and the administration. Also, 
because of the breadth and complexity of the issues, the long-standing 
nature of the problems, and the intense debate that will likely ensue, 
current structures and processes may not be adequate to address the 
problems. Thus, as we have reported, there is a need for a 
comprehensive, integrated transformation strategy for real property 
that will focus on some of the underlying causes that contribute to 
these problems, such as competing stakeholder interests in real 
property decisions; various legal and budget-related disincentives to 
businesslike outcomes; inadequate capital planning and the lack of 
governmentwide focus on real property issues. It is equally important 
that Congress and the administration work together to develop and 
enact needed reform legislation to give real property-holding agencies 
the tools they need to achieve better outcomes. This would also foster 
a more businesslike real property environment and provide for greater 
accountability for real property stewardship.

What GAO Recommends:

This testimony discusses recommendations that we have previously made 
in GAO reports.  Generally, there is a need for a comprehensive and 
integrated real property transformation strategy that could identify 
how best to realign federal real property and dispose of unneeded 
assets; address significant real property repair and restoration 
needs; develop reliable, useful real property data; resolve the 
problem of heavy reliance on costly leasing; and minimize the impact 
of terrorism on real property. 

An independent commission or governmentwide task force may be needed 
to develop this strategy and legislative actions are needed to provide 
agencies with tools—such as retaining a portion of disposal proceeds—
to help them address the problems.

www.gao.gov/cgi-bin/getrpt?GAO-03-839T.

To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Bernard Ungar at (202) 512-4232 or 
ungarb@gao.gov.

[End of section]

Mr. Chairman and Members of the Committee:

We welcome the opportunity to testify on the executive and legislative 
branch actions that are needed to address the long-standing and complex 
problems that led to our designation of federal real property as a 
high-risk area. As you know, at the start of each new Congress since 
1999, we have issued a special series of reports, entitled the 
Performance and Accountability Series: Major Management Challenges and 
Program Risks. In January 2003, we designated federal real property a 
high-risk area as part of this series.[Footnote 1] My testimony is 
based on our January 2003 high-risk report; work we have done to update 
information on some of the example properties from our January 2003 
high-risk report; and other GAO reports on real property issues, 
including public-private partnerships.[Footnote 2] My testimony 
focuses on the problems with federal real property and what needs to be 
done to address them.

Summary:

Over 30 agencies control hundreds of thousands of real property assets 
worldwide, including facilities and land. These assets are worth 
hundreds of billions of dollars. Unfortunately, much of this vast, 
valuable portfolio reflects an infrastructure based on the business 
model and technological environment of the 1950s. Many of the assets 
are no longer effectively aligned with, or responsive to, agencies' 
changing missions and are therefore no longer needed. Further, many 
assets are in an alarming state of deterioration; agencies estimate 
that restoration and repair needs are 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.

Resolving these long-standing problems will require high-level 
attention and effective leadership by both Congress and the 
administration. Also, because of the breadth and complexity of the 
issues, the long-standing nature of the problems, and the intense 
debate that will likely ensue, current structures and processes may not 
be adequate to address the problems. Thus, there is a need for a 
comprehensive, integrated transformation strategy for real property. 
This strategy should also reflect lessons learned and leading practices 
of public and private organizations. Realigning the government's real 
property, considering the future federal role and workplace needs, will 
be critical to improving the government's performance and ensuring 
accountability within expected resource limits.

The Federal Real Property Environment:

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.[Footnote 
3] 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.[Footnote 4] 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 applies to real property held by federal agencies; and GSA is 
responsible for the acts' implementation.[Footnote 5] 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.

The Federal Government Has Many Assets It Does Not Need:

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,[Footnote 6] 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.[Footnote 7] Costs associated with excess 
DOE facilities, primarily for security and maintenance, exceed $70 
million annually.[Footnote 8] 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.

The Federal Portfolio Is in an Alarming State of Deterioration:

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.[Footnote 9]

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.[Footnote 10] 
More recently, in August 2002, we reported that this estimated backlog 
of identified repair and alteration needs was up to $5.7 
billion.[Footnote 11]

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.[Footnote 12] 
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.[Footnote 13]

In March 2003, we reported that many of the primary office buildings at 
overseas embassies and consulates were in poor condition.[Footnote 14] 
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.[Footnote 15]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.

Key Decisionmakers Lack Reliable and Useful Data on Real Property 
Assets:

Compounding the problems with excess and deteriorated property is the 
lack of reliable and useful real property data that are needed for 
strategic decisionmaking. GSA's worldwide inventory database and 
related reports are the only central source of descriptive data on the 
makeup of the real property inventory, such as property address, square 
footage, acquisition date, and property type. However, in April 2002, 
we reported that the worldwide inventory contained data that were 
unreliable and of limited usefulness.[Footnote 16] GSA agreed with our 
findings and has recently revamped this database and produced a new 
report on the federal inventory, as of September 30, 2002.[Footnote 17]

In addition to problems with the worldwide inventory, real property 
data contained in the financial statements of the U.S. government have 
been problematic.[Footnote 18] In April 2003, we reported that--for the 
sixth consecutive year--we were unable to express an opinion on the 
U.S. government's consolidated financial statements for fiscal year 
2002.[Footnote 19] 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. Aside from the problematic financial data, some of the major 
real property-holding agencies--including DOD, State, GSA, and 
Interior--have faced challenges in developing quality management data 
on their real property assets. The problems at these agencies are 
discussed in more detail in our high-risk report.

Reliance on Costly Leasing:

As a general rule, building ownership options through construction or 
purchase are the least expensive ways to meet agencies' long-term 
requirements for space. Lease-purchases--where payments are spread out 
over time and ownership of the asset is eventually transferred to the 
government--are generally more expensive than purchase or construction 
but are generally less costly than using ordinary operating leases to 
meet long-term space needs.[Footnote 20] However, over the last decade, 
we have reported that GSA--as the central leasing agent for most 
agencies--relies heavily on operating leases to meet new long-term 
needs because it lacks funds to pursue ownership. In 1999, we reported 
that for nine major operating lease acquisitions that GSA had proposed, 
construction would have been the least-cost option in eight cases and 
would have saved an estimated $126 million. Lease-purchase would have 
saved an estimated $107 million, compared with operating leases but 
would have cost $19 million more than construction.[Footnote 21] A 
prime example of this problem was the Patent and Trademark Office's 
long-term requirements in northern Virginia, where the cost of meeting 
this need with an operating lease was estimated to be $48 million more 
than construction and $38 million more than lease-purchase. In August 
2001, we also reported that GSA reduced the term of a proposed 20-year 
lease for the Department of Transportation headquarters building to 15 
years so that it could meet the definition of an operating lease. GSA's 
fiscal year 1999 prospectus for constructing a new facility for this 
need showed the cost of construction was estimated to be $190 million 
less than an operating lease.

Operating leases have become an attractive option in part because they 
generally look cheaper in any given year. Pursuant to the scoring rules 
adopted as a result of the Budget Enforcement Act of 1990, the budget 
authority to meet the government's real property needs is to be scored-
-meaning recorded in the budget--in an amount equal to the government's 
total legal commitment. For example, for lease-purchase arrangements, 
the net present value of the government's legal obligations over the 
life of the lease contract is to be scored in the budget in the first 
year. For construction or purchase, the budget authority for the full 
construction costs or purchase price is to be scored in the first year. 
However, for many of the government's operating leases--including GSA 
leases, which, according to GSA, account for over 70 percent of the 
government's leasing expenditures and are self-insured in the event of 
cancellation--only the budget authority to cover the government's 
commitment for an annual lease payment is required to be scored in the 
budget.[Footnote 22] Given this, although operating leases are 
generally more costly over time, compared with other options, they add 
much less to a single year's appropriation total than these other 
arrangements, making an operating lease a more attractive option from 
an annual budget perspective, particularly when funds for ownership are 
not available. Although the requirement for "up-front funding" permits 
disclosure of the full costs to which the government is being 
committed, the budget scorekeeping rules allow costly operating leases 
to "look cheaper" in the short term and have encouraged an overreliance 
on them for satisfying long-term space needs.

Decisionmakers have struggled with this matter since the scoring rules 
were established and the tendency for agencies to choose operating 
leases instead of ownership became apparent. We have suggested the 
alternative of scoring all operating leases up-front on the basis of 
the underlying time requirement for the space so that all options are 
treated equally.[Footnote 23]Although this could be a viable 
alternative, there would be implementation challenges if this were 
pursued, including the need to evaluate the validity of agencies' 
stated space requirements. Another option--which was recommended by the 
President's Commission to Study Capital Budgeting in 1999 and discussed 
by GAO[Footnote 24]--would be to allow agencies to establish capital 
acquisition funds to pursue ownership where it is advantageous, from an 
economic perspective. To date, none of these options has been 
implemented, and debate continues among decisionmakers about what 
should be done. Finding a solution for this problem has been difficult; 
however, change is needed because the current practice of relying on 
costly leasing to meet long-term space needs results in excessive costs 
to taxpayers and does not reflect a sensible approach to capital asset 
management.

Security Against Terrorism Is an Overarching Concern:

Terrorism is a major threat to federally owned and leased real property 
assets, the civil servants and military personnel who work in them, and 
the public who visits them. This was evidenced by the 1995 Oklahoma 
City bombing; the 1998 embassy bombings in Africa; the September 11, 
2001, attacks on the World Trade Center and Pentagon; and the anthrax 
attacks in the fall of 2001. Since the Oklahoma City bombing, the 
federal government has spent billions of dollars on security upgrades 
within the country and overseas. A study of federal facilities done by 
the Justice Department in 1995 resulted in minimum-security standards 
and an evaluation of security conditions in the government's 
facilities. In October 1995, the President signed Executive Order 
12977, which established an Interagency Security Committee (ISC) to 
enhance the quality and effectiveness of security in nonmilitary 
federal facilities. Since the attacks on the World Trade Center and the 
Pentagon, the focus on security in federal buildings has been 
heightened considerably. Real property-holding agencies have gone on 
high alert and are employing such measures as searching vehicles that 
enter federal facilities, restricting parking, and installing concrete 
barricades. As the government's security efforts intensify, the 
government will be faced with important questions regarding the level 
of security needed to adequately protect federal facilities and how the 
security community should proceed. Furthermore, the 1995 Justice study 
placed an emphasis on increasing security where large numbers of 
personnel are located. However, a risk-based approach--which GSA is 
using for the federal buildings it controls--appears to be more 
desirable in light of this new round of threats. In September 2001, we 
reported that the Department of Defense uses a risk-based approach to 
reduce installation vulnerabilities, but this approach was applied 
primarily to installations with 300 or more personnel assigned on a 
daily basis.[Footnote 25] We recommended that DOD improve this approach 
by ensuring all critical military facilities receive a periodic 
vulnerability assessment conducted by their higher headquarters 
regardless of the number of personnel assigned. DOD concurred and began 
taking action.

Since 1996, we have produced more than 60 reports and testimonies on 
the federal government's efforts to combat terrorism. Several of these 
reports have recommended that the federal government use risk 
management as an important element in developing a national 
strategy.[Footnote 26] We have also reported extensively on the 
security problems and challenges at individual real property-holding 
agencies. Our high-risk report identifies the problems and challenges 
faced by State, DOD, Interior, GSA, USPS, and the ISC. More recently, 
we testified on security conditions of overseas diplomatic 
facilities.[Footnote 27] We found that State has done much over the 
last 4 years to improve physical security at overseas posts by, for 
example, constructing perimeter walls, anti-ram barriers, and access 
controls at many facilities. However, even with these improvements, 
most office facilities do not meet security standards. As a result, 
thousands of U.S. government employees may be vulnerable to terrorist 
attacks. Furthermore, our work has shown that agency coordination is 
critical to addressing security challenges. In our February 2003 report 
on threats to selected agencies' critical computer and physical 
infrastructures, selected agencies identified challenges, including 
coordinating security efforts with GSA, which may often be responsible 
for protecting facilities that house critical assets.[Footnote 28] We 
recommended, and the selected agencies concurred, that steps be taken 
to complete the identification and analysis of their critical assets 
and their dependencies, including setting milestones, developing plans 
to address vulnerabilities, and monitoring progress.

In addition to the clear challenges agencies will continue to face in 
securing real property assets, the security issue has an impact on the 
other problems that we have discussed. To the extent that more funding 
will be needed to increase security, funding availability for repair 
and restoration, preparing excess property for disposal, and improving 
real property data systems may be further constrained. Furthermore, 
real property managers will have to dedicate significant staff time and 
other human capital resources to security issues and thus may have less 
time to manage other problems. Another broader effect is the impact 
that increased security will have on the public's access to government 
offices and other assets. Debate arose in the months after September 
11, 2001, and continues to this day on the challenge of providing the 
proper balance between public access and security. In November 2002, 
legislation was enacted establishing the Department of Homeland 
Security (DHS).[Footnote 29] DHS was given responsibility to protect 
buildings, grounds, and property owned, occupied, or secured by the 
federal government that were previously under the Federal Protective 
Service, which was part of GSA. In addition, the Act provided DHS with 
authority to protect the buildings, grounds, and property of any other 
agency whose functions were transferred under the Act. In September 
2002, we reported on the implications that the creation of DHS would 
have on ISC. We concluded that the need to address the ISC's lack of 
progress in fulfilling its responsibilities should be taken into 
account in establishing this new department.[Footnote 30]

Various Efforts Initiated, but Real Property Problems Persist Due to 
Factors that Require High-Level Attention:

Although the federal government faces significant, long-standing 
problems in the real property area, it is important to give Congress, 
Office of Management and Budget (OMB), GSA, and the major real 
property-holding agencies credit for proposing several reform efforts 
and other initiatives in recent years. Legislative proposals in the 
107th Congress (S. 1612[Footnote 31] and H.R. 3947[Footnote 32]) were 
aimed at improving real property data, establishing senior real 
property managers at agencies, developing asset management principles, 
and identifying specific conditions under which GSA and other agencies 
can enter into real property partnerships with the private sector. In 
July 2001, we reported that public-private partnership authority could 
be an important management tool to address problems in deteriorating 
federal buildings, but that further study of this tool was 
needed.[Footnote 33] Appendix II summarizes this report and discusses 
two examples of public-private partnership opportunities. Another 
initiative in the National Defense Authorization Act for fiscal year 
2002 gave DOD the authority for another round of base realignment and 
military installation closures in 2005. DOD officials testified that 
these actions could result in recurring annual net savings of about $3 
billion. Despite these and other initiatives agencies have undertaken 
and the sincerity with which the federal real property community has 
embraced the need for reform, the problems have persisted and have been 
exacerbated by several factors that will require high-level attention 
from Congress and the administration. These factors include competing 
stakeholder interests in real property decisions; various legal and 
budget-related disincentives to businesslike outcomes; the need for 
improved capital planning; and the lack of a strategic, governmentwide 
focus on federal real property issues. More specifically:

Competing Stakeholder Interests - In addition to Congress, OMB, and the 
real property-holding agencies themselves, several other stakeholders 
also 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 
businesslike outcomes. For example, 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. However, most agencies-
-except for DOD, VA, and USPS--are precluded from entering into such 
arrangements.[Footnote 34] Resource limitations, in general, often 
prevent agencies from addressing real property needs from a strategic 
portfolio 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 the disposal 
area, a range of laws intended to address other objectives--such as 
laws related to historic preservation and environmental remediation--
make it challenging for agencies to dispose of unneeded property.

Need for Improved Capital Planning - 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,[Footnote 35] OMB's 
Capital Programming Guide and its revisions to Circular A-11 have 
attempted to provide guidance to agencies for making capital investment 
decisions. However, the guidance is not required to be used by 
agencies. 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.

Lack of a Strategic, Governmentwide Focus on Real Property Issues - 
Historically, there has not been a strategic governmentwide focus on 
real property issues among decisionmakers. Although some efforts in 
recent years have attempted to address real property issues with some 
limited success, the problems have persisted and will continue to grow 
in magnitude unless they are adequately addressed from a governmentwide 
standpoint. Resolving the long-standing problems will require high-
level attention and effective leadership by Congress and the 
administration and a governmentwide, strategic focus on real property 
issues. Also, it is important that key stakeholders develop an 
effective system to measure results. Having quality data would be 
critical to evaluate the progress of various reforms as they evolve.

A Transformation Strategy Is Needed:

The magnitude of real property-related problems and the complexity of 
the underlying factors that cause them to persist put the federal 
government at significant risk in this area. Real property problems 
related to unneeded property and the need for realignment; 
deteriorating conditions, unreliable data, costly space, and security 
concerns have multibillion-dollar cost implications, and can seriously 
jeopardize mission accomplishment. Because of the breadth and 
complexity of the issues involved, the long-standing nature of the 
problems, and the intense debate about potential solutions that will 
likely ensue, current structures and processes may not be adequate to 
address the problems. Given this, we concluded in our high-risk report 
that a comprehensive and integrated transformation strategy for federal 
real property is needed, and that an independent commission or 
governmentwide task force may be needed to develop this strategy. Such 
a strategy, based on input from agencies, the private sector, and other 
interested groups, could comprehensively address these long-standing 
problems with specific proposals on how best to:

realign the federal infrastructure and dispose of unneeded property, 
taking into account mission requirements, changes in technology, 
security needs, costs, and how the government conducts business in the 
21st century;

address the significant repair and restoration needs of the federal 
portfolio;

ensure that reliable governmentwide and agency-specific real property 
data--both financial and program related--are available for informed 
decisionmaking;

resolve the problem of heavy reliance on costly leasing; and:

consider the impact that the threat of terrorism will have on real 
property needs and challenges, including how to balance public access 
with safety.

To be effective in addressing these problems, it would be important for 
the strategy to focus on:

minimizing the negative effects associated with competing stakeholder 
interests in real property decisionmaking;

providing agencies with appropriate tools and incentives that will 
facilitate businesslike decisions--for example, consideration should 
be given to what financing options should be available; how disposal 
proceeds should be handled; what process would permit comparisons 
between rehabilitation/renovation and replacement and among 
construction, purchase, lease-purchase, and operating lease; and how 
public-private partnerships should be evaluated;

addressing federal human capital issues related to real property by 
recognizing that real property conditions affect the federal 
government's ability to attract and retain high-performing individuals 
and the productivity and morale of employees;

improving real property capital planning in the federal government by 
helping agencies to better integrate agency mission considerations into 
the capital decisionmaking process, make businesslike decisions when 
evaluating and selecting capital assets, evaluate and select capital 
assets by using an investment approach, evaluate results on an ongoing 
basis, and develop long-term capital plans; and:

ensuring credible, long-term budget planning for facility sustainment, 
modernization, or recapitalization.

The transformation strategy should also reflect the lessons learned and 
leading practices of organizations in the public and private sectors 
that have attempted to reform their real property practices. Over the 
past decade, leading organizations in both the public and private 
sectors have been recognizing the impact that real property decisions 
have on their overall success. Better managing real property assets in 
the current environment calls for a significant departure from the 
traditional way of doing business. Solutions should not only correct 
the long-standing problems we have identified but also be responsive to 
and supportive of agencies' changing missions, security concerns, and 
technological needs in the 21st century. If actions resulting from the 
transformation strategy comprehensively address the problems and are 
effectively implemented, agencies will be better positioned to recover 
asset values, reduce operating costs, improve facility conditions, 
enhance safety and security, and achieve mission effectiveness.

In addition to developing a transformation strategy, it is critical 
that all the key stakeholders in government--Congress, OMB, and real 
property-holding agencies--continue to work diligently on the efforts 
planned and already under way that are intended to promote better real 
property capital decisionmaking, such as enacting reform legislation, 
assessing infrastructure and human capital needs, and examining viable 
funding options. Congress and the administration need to work together 
to develop and enact reform legislation to give real property-holding 
agencies the tools they need to achieve better outcomes, foster a more 
businesslike real property environment, and provide for greater 
accountability for real property stewardship. These tools could 
include, where appropriate, the ability to retain a portion of the 
proceeds from disposal and the use of public-private partnerships in 
cases where they represent the best economic value to the government. 
Congress and the administration could also elevate the importance of 
real property in policy debates and recognize the impact that real 
property decisions have on agencies' missions. Solving the problems in 
this area will undeniably require a reconsideration of funding 
priorities at a time when budget constraints will be pervasive. 
However, experimenting with creative financing tools where they provide 
the best economic value for the government and allocating sufficient 
funding will likely result in long-term benefits.

Without effective tools; top management accountability, leadership, and 
commitment; adequate funding; and an effective system to measure 
results, long-standing real property problems will continue and likely 
worsen. However, the overall risk to the government and taxpayers could 
be substantially reduced if an effective transformation strategy is 
developed and successfully implemented, reforms are made, and property-
holding agencies effectively implement current and planned initiatives. 
Since our high-risk report was issued, OMB has informed us that it is 
taking steps to address the federal government's problems in the real 
property area. Specifically, it has formed a team within OMB to 
determine how to approach the resolution of these long-standing issues. 
To assist OMB with its efforts, we have agreed to meet regularly to 
discuss progress and are providing OMB with specific suggestions on the 
types of actions and results that could be helpful in justifying the 
removal of real property from the high-risk list.

Mr. Chairman, this concludes my prepared statement. I would be happy to 
respond to any questions you or other members of the Committee may have 
at this time.

Contacts and Acknowledgements:

For further information on this testimony, please contact Bernard L. 
Ungar on (202) 512-2834 or at ungarb@gao.gov. Key contributions to this 
testimony were made by Kevin Bailey, Christine Bonham, John Brummett, 
Maria Edelstein, Anne M. Kidd, Mark Little, Susan Michal-Smith, David 
E. Sausville, and Gerald Stankosky.

APPENDIX I:

Examples of Vacant Federal Property:

Three examples of vacant, highly visible federal properties are the L. 
Mendel Rivers Federal Building in Charleston, S.C., St. Elizabeths 
Hospital in Washington, D.C.; and the former Main Post Office in 
downtown Chicago.

L. Mendel Rivers Federal Building, Charleston, S.C.

The Charleston building, held by the General Services Administration 
(GSA), is a 7-story, 100,000-square-foot office building on just over 2 
acres (see fig. 1). The building is contaminated with asbestos and has 
been unoccupied since it sustained damage in 1999, from Hurricane 
Floyd. In July 2001, we reported that although there was a weak federal 
demand for space where the property is located, the property is located 
in a highly desirable location and that there was a strong potential 
for private sector demand.[Footnote 36]Although the building is vacant, 
in fiscal year 2002, GSA still incurred almost $28,000 in costs related 
to operations and maintenance such as utilities and fire protection. 
GSA receives a minimal amount of revenue by occasionally renting out 
the parking lot. According to GSA, although it may be advantageous for 
the government to retain the property, there are limited options for 
redevelopment; and funding has not been made available. Furthermore, 
GSA lacks authority to pursue a public-private partnership to address 
the needs of the property.

Given this situation, GSA has been in discussion with the city of 
Charleston officials for the last few years to exchange the Rivers 
building for a new building. Under the proposal, the city would 
construct a 27,000 square foot building for the federal government in 
the historic downtown business area adjacent to the existing federal 
building-courthouse in exchange for the Rivers building. GSA would also 
get use of 60 parking spaces in a city parking garage. Although the new 
building would be smaller than the Rivers building, appraisals have 
shown that the exchange sites are of comparable value because of the 
new building's location in the central business district where land 
values are high. According to a GSA official, as of April 2003, GSA and 
the city of Charleston developed a memorandum of understanding (MOU) 
that outlines the conditions under which the L. Mendel Rivers Building 
would be exchanged. The MOU is currently with the city of Charleston 
and is expected to be signed shortly. Figure 1 shows the vacant 
Charleston building and its rear parking lot. The federal government 
owns the lot on the left side where the tent is located.

Figure 1: The Vacant L. Mendel Rivers Federal Building and Parking Lot 
in Charleston, S.C.

[See PDF for image]

[End of figure]

St. Elizabeths Hospital, Washington, D.C.

The west campus of St. Elizabeths, which has 61 mostly vacant buildings 
containing about 1.2 million square feet of space on 182 acres, is held 
by the Department of Health and Human Services (HHS). During the Civil 
War, the hospital was used to house soldiers recuperating from 
amputations, and the property contains a civil war cemetery. In 1990, 
the property--which contains magnificent vistas of the rivers and the 
city--was designated a national historic landmark. This is the same 
designation given to the White House, the U.S. Capitol building, and 
other buildings that have historic significance. HHS has not needed the 
property for many years. In April 2001, we reported that the property 
had significantly deteriorated and had environmental and historic 
preservation issues that would need to be addressed in order for the 
property to be disposed of or transferred to another federal 
agency.[Footnote 37]

In the last year, GSA, the District of Columbia (the District), HHS, 
and various public interest groups have been working to resolve the 
situation at St. Elizabeths. In May 2002, the Urban Land Institute 
formed an advisory panel that reported on several options for 
redeveloping the site.[Footnote 38] The panel recommended that the 
federal government transfer the west campus to the District and that 
the District should identify a master developer for the site. The panel 
further recommended that the master developer consider redeveloping the 
site into four campus areas without changing the character of the 
surrounding neighborhoods and without displacing existing residents. 
The panel recommended preserving the historic buildings through 
adaptive use and sensitive addition of new buildings. In addition to 
the panel, an executive steering committee and a working group, each 
consisting of representation from the District, HHS, GSA, and public 
interest groups, have been established and HHS and GSA have proceeded 
with a number of actions to prepare the property for disposal. These 
include preparing the property for "mothballing," which is work done to 
minimize further deterioration of the property while the disposal 
process proceeds; determining the extent of environmental remediation 
needed; and conducting community outreach. Figure 2 shows the vacant, 
boarded-up Center Building, which opened in 1855 and served as the main 
hospital building.

Figure 2: The Vacant Center Building, St. Elizabeths Hospital, District 
of Columbia:

[See PDF for image]

[End of figure]

Source: GAO.

Note: Photograph taken in January 2001.

Former Chicago Main Post Office:

The former Chicago main post office is a 2.5 million square foot 
facility that was vacated when it was replaced with a new facility in 
1997. United States Postal Service (USPS) is incurring about $2 million 
in annual holding costs for the property. According to USPS, the 
property was listed for sale and publicly offered. About five offers 
were received and the property was placed under contract of sale for 
$17 million. According to USPS, completion of the sale has been delayed 
due to the weakness of the Chicago real estate market and the lack of 
an agreement between the developer and the city of Chicago that would 
abate real estate taxes on a portion of the redevelopment cost for a 
number of years. According to USPS, this situation has created a 
"chicken and egg" situation for the developer. Potential tenants are 
unwilling to commit to the project unless they are sure it will go 
ahead. The city appears unwilling to grant the tax abatement until the 
users of the building are known. USPS is hopeful that the city will 
begin to address the issue.

In addition to the holding costs USPS is incurring, a deteriorating 
façade will add additional repairs costs to USPS's annual budget. 
Furthermore, deterioration of the system that funnels train exhaust up 
through eight shafts to the roof of the building is a problem that will 
have to be addressed. The estimated cost of repair is about $10 million 
and is a condition of the sale. According to USPS, another factor, 
which bears on the cost of redevelopment, is that the State Historic 
Preservation Office wants to impose requirements on the redevelopment 
of the building. Currently, according to USPS, these requirements will 
add millions of dollars to the redevelopment costs and the buyer and 
USPS are reviewing them. USPS said that this project is challenging 
because of the large amount of space that needs to be developed. 
According to USPS, a breakthrough in current market conditions will 
have to be achieved, together with an agreement with the city before 
this project can move forward. Figure 3 shows downtown Chicago with the 
vacant post office building highlighted.

Figure 3: The Former Main Post Office in Downtown Chicago:

[See PDF for image]

[End of figure]

APPENDIX II:

Use of Public-Private Partnerships to Redevelop Federal Property:

Under a public-private partnership, a contractual arrangement is formed 
between public and private sector partners that can include a variety 
of activities that involve the private sector in the development, 
financing, ownership, and operation of a public facility or service. In 
the case of real property, the federal government typically would 
contribute the property and a private sector entity contributes 
financial capital and borrowing ability to redevelop or renovate the 
property. Public-private partnerships can be a viable option for 
redeveloping obsolete federal property if they provide the best 
economic value for the government, compared with other options, such as 
federal financing through appropriations or sale of the property. 
However, most agencies are precluded from entering into such 
arrangements. DOD, VA, and USPS, however, have this authority. Proposed 
real property reform legislation in the last Congress--S. 1612 and H.R. 
3947--would have allowed most agencies to enter into such partnerships. 
In May 2002, the Congressional Budget Office concluded that the 
partnerships, like lease-purchase arrangements, should be recorded up 
front in the budget. S.1612 and H.R. 3947 were not enacted by the 107TH 
Congress.

Public-private partnerships need to be carefully evaluated to determine 
whether they offer the best economic value for the government, compared 
with other available options. In July 2001,[Footnote 39] we reported 
that 8 of 10 GSA properties were strong to moderate candidates for a 
partnership because there were potential benefits for both the private 
sector and the government. The potential internal rates of return 
(IRR)[Footnote 40] for the private partner ranged from 13.7 to 17.7 
percent. We did not calculate the IRR for the government if the 
government had financed the entire project. However, public-private 
partnerships will not necessarily work or be the best option available 
to address the problems in all federal properties. Two examples of 
properties that were strong candidates for a partnership were the 
Internal Revenue Service (IRS) Service Center in Andover, MA and an 
office building in Portland, OR that houses the Immigration and 
Naturalization Service known as the 511 Building. Since we profiled 
these properties in 2001, GSA officials said that they have been unable 
to pursue public-private partnerships for these properties because GSA 
continues to lack authority to enter into such arrangements.

IRS Service Center, Andover, Mass.

The Andover Service Center was a strong candidate for a partnership in 
terms of strong federal demand, moderate private sector interest in 
development, and strong nonfederal demand for use of the property. The 
property is a 375,000 square foot, single story, highly secured 
building that is in need of capital repairs on 37 acres. At the time of 
our review, the IRS currently was leasing about 336,000 square feet in 
additional space in the area. GSA and IRS would like to consolidate 
IRS's operations, and the property would be desirable for the city of 
Andover and local developers to develop. The redevelopment strategy 
involved a partnership to develop a small office park consisting of 
six, 5-acre pads. Under this plan, the project could progress as 
follows:

* Year 1: Build a new 4-story, 700,000 square foot IRS facility and 
parking structure for current and expiring IRS leases; the complex 
would be at rear of site to allow for security and a phased development 
of the rest of the site.

* Year 2: IRS moves into the new facility and the old building is 
demolished; the partnership constructs another 250,000 square foot 
federal office building for non-IRS expiring leases.

* Years 3 and 4: Partnership constructs two more 250,000 square foot 
federal office buildings for compatible agency and private sector 
occupancy.

The analysis of this strategy projected a 14.4 percent lifetime IRR for 
the private partner and a 9.4 percent lifetime IRR for the government. 
Figure 4 is an aerial view of the IRS Service Center in Andover, Mass.

Figure 4: IRS Service Center, Andover, Mass.

[See PDF for image]

[End of figure]

Portland, Ore., 511 Building:

The 511 building was also a strong candidate for a partnership in terms 
of strong federal demand, strong private sector interest in 
development, and moderate nonfederal demand for use of the property. 
The 511 building is an historic, 6-floor building in a desirable 
location between downtown Portland and the trendy "Pearl District" that 
housed offices of the Immigration and Naturalization Service. The 
property includes a parking lot that was sought by the city for a 
pedestrian mall. The redevelopment strategy included renovating the 
existing historic office building, to include storage use in the 
basement and retail or restaurant on the first floor. In addition, the 
strategy included acquiring an additional site for construction of a 
240,000 square foot, federal office building across the street. This 
strategy projected a 15.7 percent lifetime IRR for the private partner 
and a 12.7 percent lifetime IRR for the government. Figure 5 shows the 
511 building (building in center of the picture).

Figure 5: 511 Building, Portland, Ore.

[See PDF for image]

[End of figure]

If the federal government were to completely finance the Andover and 
Portland projects, it would not have to share returns with a private 
sector partner. However, we did not determine what the returns would be 
in such a situation and how the returns would compare to the returns 
under a partnership arrangement.

(543064):

FOOTNOTES

[1] The report on real property is a companion to GAO's 2003 high-risk 
update, U.S. General Accounting Office, High-Risk Series: An Update, 
GAO-03-119 (Washington, D.C.: Jan. 2003). These reports are intended to 
help the new Congress focus its attention on the most important issues 
and challenges facing the federal government.



[2] Under a public-private partnership, a contractual arrangement is 
formed between public and private sector partners that can include a 
variety of activities that involve the private sector in the 
development, financing, ownership, and operation of a public facility 
or service. In the case of real property, the federal government 
typically would contribute the property and a private sector entity 
contributes financial capital and borrowing ability to redevelop or 
renovate the property. 

[3] This value does not include stewardship assets, which are not 
reported on the government's balance sheet. These assets include 
wilderness areas, scenic river systems, monuments, defense facilities 
(including military bases), and national defense assets. Also, real 
property data contained in the financial statements of the U.S. 
government have been problematic. As discussed in more detail later, we 
were unable to express an opinion on the U.S. government's consolidated 
financial statements for fiscal year 2002. 



[4] U.S. General Services Administration, Federal Real Property 
Profile, as of September 30, 2002 (Washington, D.C.).



[5] For the Property Act, see 40 U.S.C. § 101 et. seq; the Property Act 
excludes certain types of property, such as public domain assets and 
land reserved or dedicated for national forest or national park 
purposes; for the Public Buildings Act, see 40 U.S.C. § 3301 et. seq.



[6] P.L. 107-107, 115 Stat. 1012, 1342 (2001).



[7] U.S. General Accounting Office, VA Health Care: Challenges Facing 
VA in Developing an Asset Realignment Process, GAO/T-HEHS-99-173 
(Washington, D.C.: July 22, 1999).



[8] DOE Office of the Inspector General, Disposition of the 
Department's Excess Facilities, DOE/IG-0550 (Washington, D.C.: Apr. 3, 
2002).



[9] U.S. Department of Defense, Report to Congress: Identification of 
the Requirements to Reduce the Backlog of Maintenance and Repair of 
Defense Facilities (Washington, D.C.: Apr. 2001).

[10] U.S. General Accounting Office, Federal Buildings: Billions Are 
Needed for Repairs and Alterations, GAO/GGD-00-98 (Washington, D.C.: 
Mar. 30, 2000).



[11] U.S. General Accounting Office, Financial Condition of Federal 
Buildings Owned by the General Services Administration, GAO-02-854R 
(Washington, D.C.: Aug. 8, 2002).



[12] U.S. General Accounting Office, Defense Infrastructure: Changes in 
Funding Priorities and Strategic Planning Needed to Improve the 
Condition of Military Facilities, GAO-03-274 (Washington, D.C.: Feb. 
19, 2003).



[13] U.S. General Accounting Office, Defense Infrastructure: Changes in 
Funding Priorities and Management Processes Needed to Improve Condition 
and Reduce Costs of Guard and Reserve Facilities, GAO-03-516 
(Washington, D.C.: May15, 2003).



[14] U.S. General Accounting Office, Overseas Presence: Conditions of 
Overseas Diplomatic Facilities, GAO-03-557T (Washington, D.C.: Mar. 20, 
2003).



[15] U.S. General Accounting Office, Federal Buildings: Funding Repairs 
and Alterations Has Been a Challenge--Expanded Financing Tools Needed, 
GAO-01-452 (Washington, D.C.: Apr. 12, 2001).



[16] U.S. General Accounting Office, Federal Real Property: Better 
Governmentwide Data Needed for Strategic Decisionmaking, GAO-02-342 
(Washington, D.C.: Apr. 16, 2002).



[17] U.S. General Services Administration, Federal Real Property 
Profile as of September 30, 2002 (Washington, D.C.).



[18] The Chief Financial Officers Act of 1990 (CFO Act), as expanded by 
the Government Management Reform Act, required the annual preparation 
and audit of individual financial statements for the federal 
government's 24 major agencies. The Department of the Treasury was also 
required to compile consolidated financial statements for the U.S. 
government annually, which we audit.



[19] U.S. General Accounting Office, Fiscal Year 2002 U.S. Government 
Financial Statements: Sustained Leadership and Oversight Needed for 
Effective Implementation of Financial Management Reform, GAO-03-572T 
(Washington, D.C.: Apr. 8, 2003).

[20] In an operating lease, the government makes periodic lease 
payments over the specified length of the lease in exchange for the use 
of the property. 



[21] U.S. General Accounting Office, General Services Administration: 
Comparison of Space Acquisition Alternatives--Leasing to Lease-
Purchase and Leasing to Construction, GAO/GGD-99-49R (Washington, D.C.: 
Mar. 12, 1999).

[22] According to the scoring rules (OMB Circular A-11, app. B), in 
cases where the operating lease does not have a cancellation clause or 
is not paid for with federal funds that are self-insuring, budget 
authority to cover the total costs expected over the life of the lease 
is to be scored in the first year of the lease.



[23] U.S. General Accounting Office, Supporting Congressional 
Oversight: Budgetary Implications of Selected GAO Work for Fiscal Year 
2003, GAO-02-576 (Washington, D.C.: Apr. 26, 2002).



[24] U.S. General Accounting Office, Accrual Budgeting: Experiences of 
Other Nations and Implications for the United States, GAO/AIMD-00-57 
(Washington, D.C.: Feb. 18, 2000).



[25] U.S. General Accounting Office, Combating Terrorism: Actions 
Needed to Improve DOD Antiterrorism Program Implementation and 
Management, GAO-01-909 (Washington, D.C.: Sept. 19, 2001).



[26] U.S. General Accounting Office, Homeland Security: A Risk 
Management Approach Can Guide Preparedness Effort, GAO-02-208T 
(Washington, D.C.: Oct. 31, 2001).



[27] GAO-03-557T.



[28] U.S. General Accounting Office, Critical Infrastructure 
Protection: Challenges for Selected Agencies and Industry Sectors, GAO-
03-233 (Washington, D.C.: Feb. 28, 2003); the agencies reviewed were 
the Departments of Health and Human Services, Energy, and Commerce, and 
the Environmental Protection Agency.



[29] P.L. 107-296; 116 Stat. 2135 (2002).



[30] U.S. General Accounting Office, Building Security: Interagency 
Security Committee Has Had Limited Success in Fulfilling Its 
Responsibilities, GAO-02-1004 (Washington, D.C.: Sept. 17, 2002).



[31] Title III of the Managerial Flexibility Act of 2001 (2001) is 
entitled Federal Property Asset Management Reforms. 



[32] The Federal Property Asset Management Reform Act of 2002 (2002).



[33] U.S. General Accounting Office, Public-Private Partnerships: Pilot 
Program Needed to Demonstrate the Actual Benefits of Using 
Partnerships, GAO-01-906 (Washington, D.C.: July 25, 2001).

[34] When agencies have additional flexibilities, we have found that 
they can still face impediments. For example, VA is required to use the 
proceeds from disposal of property for nursing home construction and 
DOD has lacked personnel with sufficient experience to undertake 
complex real estate transactions. See U.S. General Accounting Office, 
VA Health Care: Improved Planning Needed for Management of Excess Real 
Property, GAO-03-326 (Washington, D.C.: Jan. 29, 2003); U.S. General 
Accounting Office, Defense Infrastructure: Greater Management Emphasis 
Needed to Increase the Services' Use of Expanded Leasing Authority, 
GAO-02-475 (Washington, D.C.: June 6, 2002).



[35] U.S. General Accounting Office, Executive Guide: Leading Practices 
in Capital Decision-Making, GAO/AIMD-99-32 (Washington, D.C.: Dec. 
1998).

[36] GAO-01-906.



[37] U.S. General Accounting Office, St. Elizabeths Hospital: Real 
Property Issues Related to the West Campus, GAO-01-434 (Washington, 
D.C.: Apr. 16, 2001).



[38] Urban Land Institute, An Advisory Services Panel Report: Saint. 
Elizabeths Campus, Washington, D.C. (Washington, D.C.: May 2002).

[39] GAO-01-906.



[40] IRR is the present value interest rate received for an investment 
consisting of payments and income that occur at regular periods; IRR 
measures the return, expressed as an interest rate, that an investor 
would earn on an investment.