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entitled 'Federal Real Property: Government's Fiscal Exposure from 
Repair and Maintenance Backlogs Is Unclear' which was released on 
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Report to the Committee on Oversight and Government Reform, House of 
Representatives: 

United States Government Accountability Office: 
GAO: 

October 2008: 

Federal Real Property: 

Government's Fiscal Exposure from Repair and Maintenance Backlogs Is 
Unclear: 

GAO-09-10: 

GAO Highlights: 

Highlights of GAO-09-10, a report to the Committee on Oversight and 
Government Reform, House of Representatives. 

Why GAO Did This Study: 

In 2003, GAO designated federal real property as a high-risk area. In 
2007, GAO reported that real-property-holding agencies and the 
administration had made progress toward managing their real property, 
but underlying problems, such as backlogs in repair and maintenance, 
still existed and six agencies reported having over $1 billion in 
repair and maintenance backlogs. Owning real property creates a fiscal 
exposure for the government from the expectation that agencies will 
incur future maintenance and operations costs. 

GAO was asked to (1) describe how six agencies estimate their repair 
and maintenance backlogs, (2) determine how these agencies manage their 
backlogs and the expected future changes in these backlogs, and (3) 
identify how backlogs have affected operations at some sites. GAO 
reviewed agency documents, interviewed officials, and visited two sites 
at each of the six agencies. 

What GAO Found: 

The six agencies that GAO reviewed all periodically assess the 
condition of their assets to identify needed repairs and maintenance 
but then use different methods to define and estimate their repair and 
maintenance backlogs. As a result, the agencies’ estimates are not 
comparable. Three of the six agencies—the Departments of Energy (DOE), 
the Interior (DOI), and the National Aeronautics and Space 
Administration (NASA)—defined their backlogs as work that was 
identified to correct deficiencies. A fourth agency, the Department of 
Veterans Affairs (VA), also defined its backlog as work identified to 
correct deficiencies, but VA’s backlog included only work on systems, 
such as mechanical and plumbing systems, found to be in poor or 
critical condition. The General Services Administration (GSA) and the 
Department of Defense (DOD) both did not track a backlog. Instead, GSA 
calculated its reinvestment liability—the cost of repairs and 
maintenance needed now and in the next 10 years. DOD assigned a quality 
rating to each facility which was based on the ratio of repair costs to 
the asset’s value. The backlog estimates do not necessarily reflect the 
costs the agencies expect to incur to repair and maintain assets 
essential to their missions or to avert risks to their missions. For 
example, these estimates could understate an agency’s backlog because 
they are based on industry-standard costs, or could overstate an 
agency’s backlog because they include inactive assets that are not 
essential to the agency’s mission or may be demolished. 

The six agencies GAO reviewed generally manage their backlogs as part 
of their overall real property management and expect the size of their 
future backlogs to increase. Agencies focus on maintaining and 
repairing real property assets that are critical to their missions and 
have processes to prioritize maintenance and repair items based on the 
effects those items may have on their missions, regardless of whether 
the items are considered part of the backlogs. For example, VA 
officials told us that their first priority is to perform maintenance 
and repairs at places that directly affect patient care, such as 
operating rooms. Agencies are using strategies such as demolishing 
assets that are no longer needed to reduce their overall backlogs. 
However, agency officials generally expect their backlogs to increase 
as the federal portfolio of real property continues to age and 
construction costs increase. 

At the six agencies GAO reviewed, officials have managed their facility 
repairs and maintenance to minimize the impact of their backlogs on 
their operations. Officials said that postponing repairs and 
maintenance generally leads to higher operating and maintenance costs 
and short-term inconveniences, but they have managed the risks so that 
the agencies can continue to accomplish their missions. For example, 
maintenance costs increase when a roof that is due for replacement is 
repeatedly patched rather than replaced. While several officials said 
their maintenance staffs have been able to limit the impact of backlogs 
on operations, they cautioned that there is a real potential for an 
incident to adversely affect an agency’s mission. At one site GAO 
visited, a multimillion-dollar piece of equipment could have been 
damaged by a leak from an air conditioning system if it had not been 
covered with a tarp. 

What GAO Recommends: 

To provide a realistic estimate of the government’s fiscal exposure 
from backlogs, GAO recommends that the Office of Management and Budget 
(OMB), in consultation with the Federal Accounting Standards Advisory 
Board, explore the potential for adding a uniform reporting requirement 
to the Federal Real Property Profile to capture the government’s fiscal 
exposure related to real property repair and maintenance. OMB agreed 
with GAO’s recommendation. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-10]. For more 
information, contact Mark Goldstein at (202) 512-2834 or 
goldsteinm@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Agencies Estimate Their Backlogs through Condition Assessments, Though 
Estimates Are Not Comparable: 

Agencies Manage Their Backlogs as Part of Their Overall Mission-Driven 
Real Property Management Programs: 

Impact of Backlogs Has Been Limited at Sites We Visited: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Office of Management and Budget: 

Appendix III: Comments from the Department of Defense: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Selected Agencies' Processes for Conducting Condition 
Assessments and Estimating Repair Needs to Calculate FRPP Condition 
Index for Fiscal Year 2007 (Backlogs): 

Table 2: DOD Services' Definitions of Quality Ratings and Corresponding 
Condition Indexes Reported to FRPP: 

Table 3: Deferred Maintenance Reported by Selected Agencies, Fiscal 
Year 2007: 

Figures: 

Figure 1: Dilapidated Maintenance Shed: 

Figure 2: Steam Escaping from Pipes: 

Figure 3: Roof Leak Drainage System: 

Abbreviations: 

API: asset priority index: 

DOD: Department of Defense: 

DOE: Department of Energy: 

DOI: Department of the Interior: 

FASAB: Federal Accounting Standards Advisory Board: 

FIRP: Facilities, Infrastructure, and Recapitalization Program: 

FRPC: Federal Real Property Council: 

FRPP: Federal Real Property Profile: 

GSA: General Services Administration: 

NASA: National Aeronautics and Space Administration: 

NNSA: National Nuclear Security Administration: 

OMB: Office of Management and Budget: 

PRV: plant replacement value: 

VA: Department of Veterans Affairs: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

October 16, 2008: 

The Honorable Henry A. Waxman: 
Chairman: 
The Honorable Tom Davis: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives: 

In January 2003, we designated federal real property as a high-risk 
area, in part due to deteriorating facilities and unreliable real 
property data.[Footnote 1] In 2007, we reported that the administration 
and real-property-holding agencies had made progress toward 
strategically managing federal real property but that underlying 
problems, such as backlogs in repair and maintenance, still existed. 
Federal agencies reported holding real property assets valued at about 
$1.5 trillion and spending over $47 billion in fiscal year 2007 to 
maintain and operate these assets. Yet, these agencies estimated they 
would need additional tens of billions of dollars to repair or restore 
their assets--which include office buildings, military bases, 
hospitals, national parks, and laboratories--to a fully functional 
condition. 

We have reported that our nation's fiscal policy is on an unsustainable 
course and that Congress, the President, and the public should have 
information about any long-term commitments embodied in a current 
policy decision. While we have also reported that it can be more cost- 
effective to own real property assets than to lease them,[Footnote 2] 
such ownership represents a long-term commitment for the government in 
that agencies incur maintenance and operating costs associated with 
their assets. We use the term "fiscal exposures" to provide a framework 
for considering the range of responsibilities that may expose the 
government to future spending. We identified real property as an 
implied fiscal exposure because it creates an implied commitment for 
the government. The decision to own a building or other real property 
asset implicitly commits the government to the life-cycle costs 
associated with its future operation and maintenance. 

Concerned about the high cost estimates for repair and maintenance 
backlogs associated with real property, you asked us to review how 
agencies develop these estimates and manage their backlogs. 
Accordingly, this report (1) describes how selected agencies estimate 
their repair and maintenance backlogs, (2) determines how agencies 
manage their backlogs and the expected future changes in repair and 
maintenance backlogs, and (3) identifies how backlogs have affected 
operations at some sites. 

To accomplish our objectives, we reviewed the six agencies that had 
each told us in 2007 that they had over $1 billion in repair and 
maintenance backlogs associated with their held assets: the Departments 
of Defense (DOD), Energy (DOE), the Interior (DOI), and Veterans 
Affairs (VA); the General Services Administration (GSA); and the 
National Aeronautics and Space Administration (NASA). For each agency, 
we interviewed officials, reviewed agency documents, and visited two 
sites at each of these six agencies to determine how the sites estimate 
and manage their repair and maintenance backlogs as well as the extent 
to which the sites' operations have been affected by the backlogs. To 
select each site, we used agency data reported in the governmentwide 
federal real property profile (FRPP) on the condition of each real 
property asset identified as a building or structure and agency- 
provided data on the repair and maintenance backlog for each asset. 
While the definition of real property includes land, our review focused 
on buildings and structures and excluded land because backlogs are 
generally associated with buildings (such as offices and hospitals) or 
structures (such as airfields or ports). We performed our site visits 
in two geographic areas of the country--Washington, D.C., and San 
Francisco, California--because each agency had significant sites in 
these areas. Within the geographic locations, using FRPP data, we 
determined the average condition for each agency's assets and then 
selected sites that (1) were at or near the average condition of the 
agency's assets, and (2) reported a relatively high repair and 
maintenance backlog compared to other sites in average or near-average 
condition. Although our site selection was systematic, the information 
from our 12 site visits is illustrative and cannot be generalized to 
sites agencywide. 

We conducted this performance audit from September 2007 through October 
2008 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. We 
determined the data were sufficiently reliable for the purposes of this 
report. Appendix I contains a detailed description of our scope and 
methodology. 

Results in Brief: 

The six agencies that we reviewed all periodically assess the condition 
of their assets to identify needed repairs and maintenance and schedule 
the needed work but then use different methods to define and estimate 
their repair and maintenance backlogs. As a result, the agencies' 
estimates are not comparable. Three of the six agencies--DOE, DOI, and 
NASA--define and estimate their backlogs as work that was identified to 
correct deficiencies. A fourth agency, VA, defines its backlog as work 
required to correct deficiencies and estimates the cost to address 
deficiencies associated with sites and systems, such as mechanical and 
plumbing systems, found to be in poor or critical condition. While GSA 
and DOD both periodically inspect their facilities to assess their 
condition, neither agency tracks a backlog. Instead, GSA calculates its 
reinvestment liability--that is, the cost of repairs and maintenance 
needed now to bring its assets up to current standards plus the cost of 
any additional repairs and maintenance that it expects will be needed 
within the next 10 years. Instead of calculating a backlog, each DOD 
military service assigns a quality rating to its facilities as an 
indicator of their condition. DOD quality ratings are based on the 
ratio of repair costs to an asset's value. These estimates include a 
variety of items, from current repair and maintenance costs and costs 
estimated up to 10 years into the future for all assets to only costs 
associated with correcting deficiencies on building systems in the 
poorest condition. The backlog estimates do not necessarily reflect the 
costs the agencies expect to incur to repair and maintain assets 
essential to their missions or to avert risks to their missions. 
Instead, agency officials told us that their estimate reflects the 
magnitude of identified repair needs associated with their assets. 

The six agencies we reviewed generally manage their backlogs as part of 
their overall real property management and most expect the size of 
their future backlogs to increase. Agencies focus on maintaining and 
repairing real property assets that are critical to their missions and 
have processes in place to prioritize maintenance and repair items 
based on the effects those items may have on their missions, regardless 
of whether the items are considered part of the backlogs. For example, 
officials at a VA Medical Center told us that their first priority is 
to perform maintenance and repairs at places that directly affect 
patient care, such as operating rooms. Thus, replacing an aging air 
conditioning system in a hospital would take priority over replacing 
the same type of system in an office building. Agencies are using 
strategies such as disposing assets that they determine are no longer 
needed to reduce their overall repair and maintenance backlogs. Agency 
officials generally expect their backlogs to increase as the federal 
portfolio of real property continues to age and construction costs 
increase. 

At the six agencies we reviewed, officials have managed their facility 
repairs and maintenance to minimize the impact of their backlogs on 
their operations. Officials said that postponing repairs and 
maintenance generally leads to higher operating and maintenance costs 
and short-term inconveniences, but they have managed the risks so the 
agencies can continue to accomplish their missions. For example, 
maintenance costs increase when a roof that is due for replacement is 
repeatedly patched rather than being replaced. While several officials 
said their maintenance staff has been able to limit the impact of 
backlogs on operations at their sites, they cautioned that there is a 
real potential for an incident to adversely affect an agency's mission. 
For example, at one site we visited, a multimillion-dollar piece of 
equipment, which the agency needed to carry out its mission, could have 
been damaged by a leak from an air conditioning system if the equipment 
had not been covered with a tarp. 

We are recommending that the Deputy Director for Management, Office of 
Management and Budget (OMB), explore the potential for developing a 
uniform reporting requirement to the FRPP that would capture the 
government's fiscal exposure from repair and maintenance backlogs, 
since this exposure may have a significant effect on future budget 
resources and our nation's long-term fiscal sustainability. OMB agreed 
with our recommendation. 

Background: 

In January 2003, we designated federal real property as a high-risk 
area because of long-standing problems with excess and underutilized 
property, deteriorating facilities, unreliable real property data, and 
overreliance on costly leasing.[Footnote 3] Real property is generally 
defined as land and anything constructed on, growing on, or attached to 
land.[Footnote 4] In updates to our high-risk report, we acknowledged 
that the administration and real-property-holding agencies had made 
progress toward strategically managing federal real property and 
addressing some long-standing problems. Real-property-holding agencies 
had, among other things, designated senior real property officers, 
established asset management plans, standardized real property data 
reporting, and adopted various performance measures to track progress. 
The administration also established a Federal Real Property Council 
(FRPC) that supports reform efforts. FRPC has created the FRPP to be 
the inventory system for the federal real property portfolio. FRPP, 
which is overseen by OMB, includes 25 data elements[Footnote 5] that 
agencies are mandated to report annually, including performance 
measures on asset utilization, condition, mission dependency, and 
operating cost. Although progress has been made, in 2007, we also 
reported that the problems that led us to designate real property as a 
high-risk area still largely persisted, such as repair and maintenance 
backlogs, and the underlying obstacles remained. We also reported on 
the condition of facilities at the Smithsonian Institution, where we 
found that the deterioration of facilities had threatened collections 
and increased the cost of restoring historic items.[Footnote 6] We 
recommended that the Smithsonian make improvements to its cost 
estimates for facilities projects. 

According to data reported in the 2007 FRPP, the federal government 
owns about 1,115,000 real property assets worldwide with a replacement 
cost of over $1.5 trillion. The six agencies we reviewed reported that 
they had 568,618 real property assets in the U.S. with a replacement 
cost of approximately $1.2 trillion. Five of the six agencies estimated 
that their assets had approximately $30.5 billion in repair needs. 
[Footnote 7] DOD did not estimate repair needs for its FRPP reporting. 
FRPP does not require agencies to report their repair and maintenance 
backlogs, but requires agencies to determine a condition index for each 
asset by computing a formula that compares the asset's repair needs 
with its plant replacement value (PRV). Specifically a condition index 
equals (1-repair needs/PRV) * 100. Based on this formula, a condition 
index is reported as a whole number from 1 to 100, with 100 
representing the best possible condition for an asset. FRPP guidance 
defines repair needs as "the amount necessary to ensure that a 
constructed asset is restored to a condition substantially equivalent 
to the originally intended and designed capacity, efficiency, or 
capability." 

Real-property-holding agencies are generally responsible for the cost 
of maintaining and repairing their assets. We have reported that owning 
an asset creates an implicit fiscal exposure for the government. 
[Footnote 8] This fiscal exposure is created because there is an 
expectation that the government will incur costs associated with 
maintaining and operating the assets it owns. As the National Research 
Council has observed, federal assets must be well maintained to operate 
adequately and cost effectively; protect their functionality and 
quality; and provide a safe, healthy, productive environment for the 
American public, elected officials, federal employees, and foreign 
visitors who use them every day. Facilities and the systems within the 
facilities such as electrical, heating, and air conditioning systems 
and roofs generally have a finite, expected useful life, over which 
time they should be maintained and after which time they can be 
reasonably expected to need replacement. The useful lives of facilities 
can be extended through adequate and timely repairs and maintenance. 
Conversely, delaying or deferring repairs and maintenance can, in the 
short term, diminish the quality of building services, and in the long 
term, shorten building lives and reduce asset values. Deferring needed 
maintenance indefinitely may ultimately result in significantly higher 
costs. 

Agencies Estimate Their Backlogs through Condition Assessments, Though 
Estimates Are Not Comparable: 

At the six agencies we reviewed, we found processes in place for the 
agencies to periodically assess the condition of their assets-- 
processes that the agencies also generally used to identify repair and 
maintenance backlogs for their assets. However, the agencies differed 
in how they conducted these condition assessments and how they define 
and estimate their repair and maintenance backlogs. Thus, the 
information is not comparable across agencies and cannot be used to 
understand the government's potential fiscal exposure associated with 
its real property repair and maintenance needs. 

Agencies Have Processes to Determine the Condition of Their Assets and 
Estimate Their Backlogs: 

Each agency we reviewed conducted facility condition assessments either 
itself or through a contractor to identify repair and maintenance 
deficiencies associated with their assets. The intent of conducting a 
facility condition assessment is to obtain an overall understanding of 
the condition and repair and maintenance needs of an asset. Condition 
assessments can range from staff walking through a facility and 
visually inspecting its condition and identifying repair and 
maintenance issues to a more comprehensive assessment in which the 
individual building systems, such as the plumbing, heating, and 
electrical systems, are assessed by a professional and deficiencies are 
identified. Condition assessments may also identify projects for future 
years, such as a roof replacement expected within the next couple of 
years. As shown in table 1, each of the six agencies we reviewed 
periodically conducted condition assessments. How agencies define and 
estimate their repair needs or backlogs varies. This variation is not 
unexpected because, according to OMB officials, FRPP was purposefully 
vague in defining repair needs so agencies could use their existing 
data collection and reporting processes. In addition, there is no 
governmentwide definition or reporting requirement for repair and 
maintenance backlogs.[Footnote 9] 

Table 1: Selected Agencies' Processes for Conducting Condition 
Assessments and Estimating Repair Needs to Calculate FRPP Condition 
Index for Fiscal Year 2007 (Backlogs) (Dollars in billions): 

Agency: DOE; 
Assets assessed: All assets; 
Frequency of assessments: At least every 5 years; 
What is included in the estimate of repair needs (backlog): Work not 
done in time frame identified; 
Identified repair needs: $3.3. 

Agency: NASA; 
Assets assessed: All assets; 
Frequency of assessments: Annually; 
What is included in the estimate of repair needs (backlog): Work 
required to bring the asset up to current standards; 
Identified repair needs: $2.3. 

Agency: DOI; 
Assets assessed: Assets valued at $5,000 or more; 
Frequency of assessments: Every 5 years; 
What is included in the estimate of repair needs (backlog): Work not 
done in time frame identified; 
Identified repair needs: $12.0[A]. 

Agency: VA; 
Assets assessed: All assets; 
Frequency of assessments: At least every 3 years; 
What is included in the estimate of repair needs (backlog): Work 
required to correct identified deficiencies in systems determined to be 
in poor or critical condition; 
Identified repair needs: $5.9. 

Agency: GSA; 
Assets assessed: All assets; 
Frequency of assessments: Every 2 years; What is included in the 
estimate of repair needs (backlog): Work identified to be done now or 
within the next 10 years; 
Identified repair needs: $7.0. 

Agency: DOD; 
Assets assessed: All assets; 
Frequency of assessments: Varies by military service; 
What is included in the estimate of repair needs (backlog): No backlog 
estimated; 
Identified repair needs: [B]. 

Source: GAO analysis. 

[A] According to DOI officials, DOI recognizes that due to the scope, 
nature and variety of DOI assets, exact estimates of backlogs are very 
difficult to determine. As a result, DOI prefers to think of its 
estimate as a range. 

[B] DOD did not compute a dollar amount for repair needs in 2007. 

[End of table] 

DOE requires its sites to perform condition assessments on all real 
property assets at least once during any 5-year period (some assets, 
such as nuclear facilities, are assessed more frequently). The results 
of the assessments are reported to a DOE-wide database. While 
individual DOE sites have some flexibility in which assessment surveys 
they use, inspection methods must be in accordance within general DOE 
guidelines. For example, one DOE laboratory developed its own 
assessment tool in the early 1990s and uses in-house inspectors to 
perform the assessments, while other sites use contractors to conduct 
their assessments. For all the assessments, each identified deficiency 
is assigned an optimum year for correction through maintenance. If a 
maintenance activity is not performed within the optimum period, it is 
considered deferred maintenance and part of DOE's backlog.[Footnote 10] 
The condition assessments also include cost estimates, developed using 
nationally-recognized databases of repair costs, for correcting the 
deficiencies. 

NASA has used a contractor since 2002 to conduct annual deferred 
maintenance assessments of all its facilities and their component 
systems. NASA contractors visually assess nine different systems within 
each facility (such as the roof and the electrical system), and rate 
each facility using an overall condition index with a scale from 0 to 
5. Based on that rating, the contractor uses an industry cost database 
and other information to estimate the costs of correcting the 
identified deficiencies. According to NASA officials, using a 
contractor and a standard estimating methodology to assess all its 
facilities provides consistent information across sites. 

DOI has comprehensively assessed the condition of what it calls its 
standard assets such as roads, bridges, trails, water structures, and 
buildings but has not yet conducted contractor-performed comprehensive 
assessments of the condition of heritage assets such as monuments, 
fortifications, and archaeological sites. In May 2008, DOI issued 
guidance on how to estimate the condition of and maintenance costs 
associated with its heritage assets. For assessed assets with a value 
over $5,000, DOI conducts annual inspections to determine the condition 
of an asset and to determine the nature of needed repairs. DOI conducts 
condition assessments of assets with a value over $50,000 at least 
every 5 years to identify and estimate the cost of correcting repair 
and maintenance deficiencies. Either contractors or internal bureau 
staff perform the assessments and industry-standard cost-estimating 
databases are used, if available, to estimate the costs to correct 
identified deficiencies. If maintenance is needed, work is scheduled; 
if the work is not completed on time, it becomes part of DOI's backlog. 

VA uses contractors to conduct facility condition assessments to 
evaluate the condition of its assets at least once every 3 years. 
[Footnote 11] The contractor inspects all major systems in each 
building (e.g., structural, mechanical, plumbing, and others) and gives 
each a grade of A (for a system in like-new condition) through F (for a 
system in critical condition that requires immediate attention). As 
part of this assessment, the contractor uses an industry cost database 
to estimate the correction costs for each system graded D or F--in poor 
or critical condition. VA's reported backlog is the sum of all 
identified correction costs. In addition, if repair and maintenance is 
not completed, VA escalates the correction cost each year for 
inflation. 

GSA assesses all of its assets and estimates all repair and maintenance 
needs that may need to be done in the next 10 years. GSA conducts 
inspections known as physical condition surveys every 2 years on each 
asset. From these, GSA develops what it refers to as its reinvestment 
liability, which includes cost estimates for repair and maintenance 
items that GSA has determined need to be done now and expects will need 
to be done within the next 10 years. To conduct physical condition 
surveys, GSA staff walk throughout each facility answering a list of 37 
standard questions about the asset and identifying the time frame 
within which the identified needs should be corrected, ranging from 
immediately to 6 to 10 years from now. GSA staff also develop cost 
estimates to repair each identified need. According to agency 
officials, the use of a standard survey allows some comparison between 
assets. 

DOD reported a condition index to FRPP based on what it calls a quality 
rating (Q-rating), ranging from Q1 (best condition) to Q4 (poorest 
condition). As shown in table 2, three of the four services determined 
the Q-rating by comparing an asset's estimated repair and maintenance 
costs to the asset's value. The fourth service assigned Q-ratings by 
considering the adequacy and age of the asset. DOD reported one of four 
condition indexes for its assets to FRPP based on the Q-rating of the 
asset. Thus, DOD did not provide an estimate of its repair and 
maintenance backlog.[Footnote 12] In determining Q-ratings for their 
assets, officials from the Army, Navy, and Marines told us that they 
used the results of facility assessments. According to these officials, 
these assessments were conducted either annually (by the Army), in 2005 
(by the Navy) or at various times (by the Marines). According to Air 
Force officials, the Air Force totaled the cost of all maintenance 
projects for each asset but did not inspect the assets to determine if 
the assets had other repair and maintenance needs. For its fiscal year 
2008 reporting, DOD plans to report the condition index for its assets 
as a percentage value consistent with FRPP rather than using the Q1-Q4 
rating scheme. 

Table 2: DOD Services' Definitions of Quality Ratings and Corresponding 
Condition Indexes Reported to FRPP: 

Quality rating: Q1; 
Definition used by Army, Navy, and Air Force: Cost of repairs was 10 
percent or less of the asset's value; 
Definition used by Marines: Adequate asset less than 25 years old; 
Condition index assigned by DOD: 95. 

Quality rating: Q2; 
Definition used by Army, Navy, and Air Force: Cost of repairs was 11 to 
20 percent of an asset's value; 
Definition used by Marines: Adequate asset more than 25 years old; 
Condition index assigned by DOD: 85. 

Quality rating: Q3; 
Definition used by Army, Navy, and Air Force: Cost of repairs was 21 to 
40 percent of an asset's value; 
Definition used by Marines: Substandard asset; 
Condition index assigned by DOD: 70. 

Quality rating: Q4; 
Definition used by Army, Navy, and Air Force: Cost of repairs was more 
than 40 percent of an asset's value; 
Definition used by Marines: Inadequate asset; 
Condition index assigned by DOD: 30. 

Source: GAO analysis of DOD information. 

[End of table] 

Backlog and Deferred Maintenance Estimates Are Not Comparable Across 
Agencies and Do Not Capture the Government's Fiscal Exposure: 

Because agencies define their backlogs differently, estimates cannot be 
compared across agencies or totaled to obtain a governmentwide 
estimate. For example, as discussed above, DOE, NASA, and DOI include 
the costs of all backlog work identified on their assessed assets while 
VA includes the cost of work on asset systems in the poorest condition 
and GSA includes costs for work it has identified to be done up to 10 
years in the future. Additionally, because these estimates are not 
comparable, the condition indexes reported in FRPP cannot be compared 
across agencies to understand the relative condition or management of 
agencies' assets. Thus, condition indexes should not be used to inform 
or prioritize funding decisions between agencies. While not comparable 
between agencies, backlog information collected in a consistent manner 
over several years can be useful within individual agencies for 
tracking trends. NASA officials noted, as of October 2008, they have 5 
years of data from their annual assessment reports, which they are 
using to examine trends.[Footnote 13] The data show that NASA's 
backlogs have been increasing recently, but the rate at which it has 
increased dropped between fiscal years 2007 and 2008. The consistency 
of reporting established by FRPC should allow for trend analysis for 
individual agencies starting with the 2008 data. While intra-agency 
trends could provide useful information for policymakers, it is not 
possible to compare backlog data between agencies since agencies 
develop their estimates differently. 

While there is no governmentwide reporting of repair and maintenance 
backlogs, agencies have been required to report deferred maintenance as 
part of their annual financial statements since 1996, and 
governmentwide totals for deferred maintenance have then appeared 
annually in the Financial Report of the U.S. Government. Since 1999, 
agencies have reported deferred maintenance as required supplemental 
information, which is not audited. For the six agencies we reviewed, we 
found differences in the basis of their deferred maintenance reported 
in their financial statements similar to the differences we found in 
their reporting of repair and maintenance backlogs. Statement of 
Federal Financial Accounting Standards No. 6, as amended, defines 
deferred maintenance as "maintenance that was not performed when it 
should have been or was scheduled to be and which, therefore, is put 
off or delayed for a future period." The definition excludes any 
activities that would expand or upgrade an asset from its originally 
intended use (such as capital improvements) and any maintenance on an 
asset that is in acceptable condition.[Footnote 14] Federal Accounting 
Standards Advisory Board (FASAB) standards allow each agency's 
management to both define "acceptable condition" and determine if its 
assets are in acceptable condition. FASAB staff told us that agencies 
use different methods to estimate their deferred maintenance and the 
standards for reporting are designed to accommodate these different 
methods. FASAB is currently considering a project to review 
requirements for reporting deferred maintenance as well as asset 
impairment. 

Table 3: Deferred Maintenance Reported by Selected Agencies, Fiscal 
Year 2007 (Dollars in billions): 

Agency: DOE; 
2007 deferred maintenance: $3.4[A]. 

Agency: NASA; 
2007 deferred maintenance: $2.3. 

Agency: DOI; 
2007 deferred maintenance: $11.3-$19.8. 

Agency: VA; 
2007 deferred maintenance: $3.7. 

Agency: GSA; 
2007 deferred maintenance: 0. 

Agency: DOD; 
2007 deferred maintenance: $72.0. 

Source: Agency financial reports. 

[A] Numbers in FRPP and financial statements vary due to timing. 

[End of table] 

We found that the six agencies' deferred maintenance estimates reported 
in their financial statements, like their backlog estimates, were not 
comparable. Specifically, DOE, NASA, and DOI equate deferred 
maintenance with their backlogs. For these agencies, the estimated 
repair and maintenance costs identified through their condition 
assessments for all assets are reported in the agencies' deferred 
maintenance estimate.[Footnote 15] However, officials from all three 
agencies said that they do not consider their assets be in unacceptable 
condition just because they have some identified deferred maintenance 
associated with them. DOD reported about $72 billion in deferred 
maintenance for 2007.[Footnote 16] This figure represents the cost to 
repair and modernize each facility so that it is in acceptable 
operating condition, which is defined differently within each of DOD's 
services. According to DOD's 2007 Financial Report, this estimate 
includes costs that are not precisely equivalent to deferred 
maintenance, but the costs were reported because they are considered 
"generally representative" of the magnitude of the agency's deferred 
maintenance requirements. GSA officials said that GSA has no reportable 
deferred maintenance because it has determined that, at the overall 
portfolio level, their building inventory is in acceptable condition. 
However, GSA noted in its 2007 financial statements that it has 
approximately $6.3 billion in capital improvements that are not normal 
repair and maintenance costs. Since capital improvements are not 
classified as deferred maintenance under the accounting standard, these 
costs are not considered deferred maintenance. Similarly, VA's reported 
deferred maintenance does not include capital projects or assets with 
less than $100,000 in estimated repairs. VA officials told us that VA's 
deferred maintenance estimate is used only to comply with FASAB's 
requirement and does not represent the cost to repair and maintain VA's 
facilities. 

The estimates for both backlogs and deferred maintenance cannot be used 
to provide a governmentwide perspective on the cost of repair and 
maintenance needs. While officials at the six agencies we reviewed use 
these estimates internally to help inform their real property 
decisionmaking, the estimates are based on industry-standard cost 
factors and are not detailed estimates of project costs. According to 
officials at each agency, these estimates should not be viewed as 
accurate cost estimates for repair and maintenance, but are valid as an 
indicator of the magnitude of work that an asset needs. In addition, 
these estimates occur at a single point in time. The actual repair and 
maintenance project for an asset may occur well after the deferred 
maintenance or repair needs are estimated, and construction costs can 
rise significantly after the estimates are made but before the project 
is undertaken. Also, some officials told us that while these estimates 
address the cost to correct identified deficiencies, as projects are 
bundled together and a work plan is determined, additional work may 
need to be done to complete the project. For example, additional work 
such as removing and replacing ceilings to access pipes or 
reconfiguring a space to accommodate new systems equipment may need to 
be done although it was not in the estimate to correct the identified 
deficiency. 

In addition, FRPP requires agencies to report data on every asset. As a 
result, agencies reported backlog estimates associated with assets that 
are inactive, that are not critical to their missions, or that have 
been identified for demolition in the next few years. In addition, for 
those agencies that equate deferred maintenance with backlogs, their 
deferred maintenance estimate also included the costs associated with 
these assets. Agencies may not have any intention of repairing some 
assets and would not seek funding for the identified repair and 
maintenance deficiencies. Thus, for some agencies, simply totaling the 
estimated repair and maintenance cost for each asset may overstate the 
costs. 

Agencies Manage Their Backlogs as Part of Their Overall Mission-Driven 
Real Property Management Programs: 

Each agency that we reviewed manages its backlog as part of its overall 
real property management. Agencies focus on maintaining and repairing 
assets that are critical to safety and accomplishing their missions, 
and each agency has processes in place to prioritize repair and 
maintenance work based on the potential impact of not doing the work on 
the agency's mission. In addition to performing the identified repair 
and maintenance work, agencies use other techniques, such as asset 
disposal and replacement, to reduce their overall repair and 
maintenance backlogs. In spite of these efforts, agency officials 
generally expect their backlog estimates to increase as the federal 
portfolio of real property continues to age and the cost of making 
repairs increases. 

Agencies Manage Repair and Maintenance Work Based on Safety and 
Potential Impact on Mission: 

Real property managers at the six agencies told us that it is more 
important to prioritize repair and maintenance work on the basis of 
safety and the potential impact of not doing the work on the agencies' 
missions rather than on when the work was identified to be done. DOE is 
the only agency we reviewed with a specific program to reduce its 
repair and maintenance backlog. DOE's National Nuclear Security 
Administration (NNSA) has the Facilities, Infrastructure and 
Recapitalization Program (FIRP), which was established in 2000 to 
reduce NNSA's repair and maintenance backlog from the 1990s. The 
current goal for the program is to eliminate $900 million of this 1990s-
era backlog by 2013. The program does not address new growth in the 
backlog. So far, the program has eliminated about $500 million of this 
backlog. For example, one DOE laboratory recently used FIRP funds to 
build four new office buildings because staff were moved into the new 
buildings from older buildings that had a backlog from the 1990s. 

Agency officials--both at headquarters and at the sites we visited-- 
told us that they prioritize repair and maintenance for assets that 
they consider to be important to their mission when deciding which 
projects to fund. Many of the sites we visited used a risk assessment 
process to prioritize their projects for funding. This process 
considers the probability of a failure, such as an electrical outage or 
a roof leak, and the probable impact of such a failure on the agency's 
mission. The higher the probability of failure and the higher the 
probable impact of such a failure on the agency's mission, the higher 
the priority the project would receive for funding. Projects related to 
safety also received high priority for funding. 

The following are illustrative of comments we heard from agency 
officials on our site visits: 

* At VA's Palo Alto Medical Center, mission is the main factor that 
determines project priorities, and the focus is on patient care 
buildings. Administrative buildings are always a lower priority. If a 
building does not house any patients or research, then it may not be as 
thoroughly studied for seismic issues and is a lower priority for 
funding. 

* At NASA's Ames Research Center, officials told us that they 
prioritize repair and maintenance projects based on how the project 
will affect the center's mission, safety, or compliance with new 
regulatory requirements. As a result, employees at Ames are able to 
accomplish the center's mission. According to NASA officials, this 
prioritization is typical for all NASA Centers. 

* At DOD's Travis Air Force Base, maintenance officials told us that 
they focus their repair and maintenance funds on those buildings that 
directly affect the mission of the base, such as airplane hangars and 
runways. As a result, those facilities are in good condition. 

* At DOI's Patuxent Wildlife Refuge, priority is given to health and 
safety concerns and those assets that are concerned with wildlife. 
According to Patuxent officials, caring for wildlife is the core 
mission of the refuge and therefore repair and maintenance items for 
facilities that affect wildlife receive higher priority than items that 
affect other buildings, such as offices. 

* At GSA's federal office building in New Carrollton, Maryland, 
officials told us that they prioritize repair and maintenance work 
based on how the repair need affects the customer and the extent of any 
safety concerns. 

* At DOE's Lawrence Livermore National Laboratory, a facilities 
governance board develops a prioritized list of repair and maintenance 
projects by considering the effect on the laboratory's mission and the 
probability of failure. The laboratory's program staff determine the 
potential effect on mission and provide input into the prioritization 
of projects. 

Some agencies have developed other tools, processes, and performance 
measures to help manage their real property portfolios and prioritize 
repair and maintenance projects. For example, DOI established an 
agencywide process for prioritizing assets based on its mission. 
Specifically, DOI uses an asset priority index (API) in combination 
with information on an asset's condition to establish a clearer link 
between individual assets and mission, and to assist managers in 
deciding where to focus their resources. API scores range from 0 to 100 
and are based on two components--mission dependency (80 percent) and 
asset substitutability (20 percent). Mission dependency criteria are 
determined at the bureau level and reflect each bureau's unique 
mission. For example, the National Park Service ranks its assets as 
having high, medium, low, or no importance in three areas: resource 
protection, visitor services, and park operations. Assets are scored on 
substitutability depending on whether there is a substitute asset that 
can perform comparable functions and serve a comparable purpose. The 
Washington Monument, for example, is unique and would receive the 
highest score in this category. On the other hand, if there are two 
similar warehouses close to each other, they would score much lower. 
After considering health and safety priorities, API scores are compared 
with the condition of each asset and those with high API scores and low 
condition ratings are generally given priority for repair and 
maintenance projects while those with low API scores and low condition 
ratings are considered for disposal. 

NASA requires their Centers to conduct their own detailed condition 
assessments at least every 5 years. These assessments, which are 
separate from the annual deferred maintenance assessments, are used by 
the Centers to identify and prioritize repair and maintenance projects. 
According to officials at the Ames Research Center, their assessment 
focuses more on active, mission-critical assets and repairs and 
maintenance that they will try to get funded within the next 5 years. 
Information provided by NASA's centers identified a backlog of about $1 
billion, far lower than the $2.3 billion in deferred repair and 
maintenance needs NASA report for fiscal year 2007. According to NASA 
officials, the backlog reported by these individual NASA centers is 
lower than the deferred repair and maintenance needs NASA reported 
because the centers include only the most important projects that they 
believe should receive funding, instead of all projects to address 
their backlog as estimated in NASA's annual deferred maintenance 
assessment report. 

Within each agency that we reviewed, repair and maintenance projects 
can be prioritized at different levels. For example, while DOI has an 
agencywide policy about how each bureau should prioritize repair and 
maintenance projects, DOD generally provides the base commander (or 
equivalent official responsible for a military base) with substantial 
discretion in deciding how to prioritize repair and maintenance 
projects. GSA officials told us that their prioritization process is a 
collaborative effort between property managers, asset managers, and 
other regional staff, and headquarters staff. At NASA, the centers 
assign priorities, with headquarters involved in the funding decisions 
for more expensive projects. At VA, projects are prioritized first at 
the local level, then at the regional and national levels. While 
projects are prioritized at different levels within an agency, each 
project competes against other potential projects within that agency 
but does not compete with projects at other agencies. 

Agencies Have a Few Strategies to Reduce Maintenance Backlogs but 
Expect Backlogs to Increase: 

Agency officials told us that they have a few strategies to address 
their repair and maintenance backlogs aside from correcting the 
identified deficiencies. Specifically, officials at DOD, DOE, DOI, GSA, 
and NASA told us that disposing of buildings and structures that no 
longer serve their missions, including through demolition, is an 
effective way to reduce their repair and maintenance backlogs. As these 
buildings are disposed, the repair and maintenance backlogs at the 
buildings are eliminated. However, agency officials told us that it can 
be expensive to demolish a building and they cannot always demolish as 
many as they would like. Officials at DOI's Patuxent Wildlife Refuge 
told us that they would like to demolish 20 to 25 buildings, but they 
have not received the funds to do so. NASA has a program to demolish 
buildings that has been funded at $10 million annually, but officials 
said that this is just "a drop in the bucket" when compared to the 
buildings it would like to demolish. According to DOE officials, it has 
eliminated 15 million square feet of space since fiscal year 2002. 
Officials at multiple agencies also told us that, when they determine 
it is appropriate to dispose of a building, their primary motivation is 
not always to reduce their backlog, but this can be an added benefit. 

Agencies can also reduce their backlogs through "replacement by 
construction." Using this strategy, an agency can decide that while it 
still needs the space it is more cost-effective to dispose of a 
building and build a new one than to repair the existing building. For 
example, NASA plans to demolish seven older buildings and replace them 
with a new multi-use office building at one of its Centers. When this 
work is done, the repair and maintenance backlogs at the seven 
buildings will be eliminated. GSA officials also said that they are 
using this tool at ports of entry to replace border stations. These 
officials noted that GSA and other agencies are often limited in their 
ability to use this tool because of its impact on the federal budget, 
since federal budget scorekeeping rules require the full cost of 
construction to be recorded up-front in the budget. 

Despite these strategies, agency officials told us that they generally 
expect their repair and maintenance backlogs to increase. Specifically, 
officials at five of the six agencies we reviewed told us that needs 
increase as buildings age and a good portion of their current portfolio 
is more than 30 years old. As a result, these assets will require more 
money for operations and maintenance and building systems are reaching 
the point where they are expected to be replaced. For example, 
officials at one site told us that given current conditions, they 
estimate that their backlog may grow from $75 million in fiscal year 
2008 to $107 million in fiscal year 2012, mainly because a large number 
of assets are nearing the end of their useful lives and will need 
replacing over the next 5 years. Agency officials also told us that, as 
facility inspections and real property information continue to improve, 
agencies could discover greater repair and maintenance needs. For 
example, while park staff have conducted annual condition assessments 
of the Golden Gate National Park's fortifications and other unique 
assets, they expect the backlog associated with the assets to increase 
significantly once a contractor performs a comprehensive condition 
assessment. Finally, as construction costs increase, as they have done 
over the last several years, the cost of repair and maintenance work 
may increase contributing to a rise in agencies' backlogs. 

Officials at the six agencies we reviewed told us that there is a 
relationship between the level of repair and maintenance funding and 
agencies backlogs. DOD officials told us that they have invested in 
restoring, modernizing, and replacing some assets and they expect their 
backlog associated with these assets to decrease in the next 4 years. 
As mentioned earlier in this report, DOD has developed a model to 
determine the cost of sustaining its facilities.[Footnote 17] In 
theory, if repair and maintenance work is funded to sustain facilities, 
backlogs will not occur. According to a DOE official, DOE is committed 
to funding maintenance at industry standard levels. The Department's 
maintenance expenditure grew by about 64 percent from fiscal year 2003 
through fiscal year 2007 and reported backlog decreased by 3 percent. 
In contrast, the maintenance budget at one NASA Center went down by 
about 40 percent from fiscal year 2005 (when the maintenance budget was 
$14.5 million) to fiscal year 2006 (when the maintenance budget was 
$10.4 million). The maintenance budget has since remained fairly 
constant through fiscal year 2008. According to officials at this 
Center, this funding history has directly contributed to the growth of 
the center's repair and maintenance backlog, and they expect their 
backlog will continue to increase. 

Impact of Backlogs Has Been Limited at Sites We Visited: 

At the six agencies we reviewed, officials have managed their facility 
repairs and maintenance to minimize the impact of their backlogs on the 
agencies. Officials said that their repair and maintenance backlogs 
have generally not affected the ability of their agencies to accomplish 
their missions, but the backlogs have led to higher operating and 
maintenance costs and short-term inconveniences. Also, some officials 
cautioned that their backlogs create a real potential for an 
unanticipated incident to occur that could adversely affect an agency's 
mission. 

At some sites, agency officials told us that a key responsibility of 
the maintenance staff is to keep the facilities up and running, and 
they praised their staff for creating work-arounds that allow agency 
staff, despite problems, to continue to work to accomplish the agency's 
mission. At some of the sites we visited, the costs included in the 
backlog estimate were to replace basic systems--such as electrical, 
heating, and air-conditioning systems and roofs--that have exceeded 
their expected useful lives. The staff said that they spend a lot of 
time, effort, and money to patch these systems and keep them going, 
which allows the agency to continue to operate but it is not efficient. 
In addition, the failure of one of these systems at a critical location 
could adversely affect an agency's mission. 

At the sites we visited, we did not identify or hear of any instances 
in which an agency's mission had been significantly hampered as a 
result of a repair and maintenance backlog. Most of the examples cited 
affected operations and maintenance costs and staff's quality of life 
or raised concerns about the potential for a failure that would 
adversely affect/hinder an agency's mission. Agency officials at some 
of the sites told us that the effect of their repair and maintenance 
backlog is difficult to see, because the maintenance staff have 
prioritized projects that directly affect the mission and have done an 
excellent job of keeping the facility operating while facing increased 
repair needs. For example, officials at one site told us that repair 
and maintenance are often deferred on facilities that do not directly 
affect the site's mission. As shown in figure 1, a maintenance shed has 
been allowed to deteriorate and now has rotting wood and missing 
shingles on the roof. According to officials, the shed has not been 
repaired because funding has been spent on more mission-critical 
facilities. 

Figure 1: Dilapidated Maintenance Shed (Photograph): 

[See PDF for image] 

Source: GAO. 

[End of figure] 

Repair and maintenance backlogs can lead to higher costs because 
affected assets are generally not operating as efficiently as possible. 
At some sites, officials showed us building systems that are 30 or more 
years old that they are trying to keep operational. Newer systems, such 
as heating and air-conditioning systems, could operate more 
efficiently, provide more reliable service to the tenants, and reduce 
operating costs. In addition, overall maintenance costs increase when a 
roof that is due for replacement is repeatedly patched rather than 
replaced. At one site we visited, leaking steam pipes are creating a 
hazard as hot steam is released. The leaks are also increasing 
operating costs for energy, water, and maintenance chemicals because 
additional cold water must be heated to make new steam and must also be 
chemically treated. Officials said that repairing the steam 
distribution system is not critical to the site's mission and the 
leaking steam pipes mostly just increase operating costs. A project to 
repair the steam system has been proposed for about 10 years and would 
cost about $7 million. 

Figure 2: Steam Escaping from Pipes (Photograph): 

[See PDF for image] 

Source: GAO. 

[End of figure] 

We found that maintenance staff sometimes devise creative solutions, 
such as the system that the maintenance staff at one site we visited 
set up to funnel water from a roof leak into a water bottle that then 
directs the water to a drain. This solution stopped the water from 
further damaging the building and leaking into areas occupied by staff 
while deferring the cost of correcting the problem. 

Figure 3: Roof Leak Drainage System (Photograph): 

[See PDF for image] 

Source: GAO. 

[End of figure] 

We saw one building that had been flooded, from which some offices had 
to be evacuated due to the water and subsequent mold growth. 
Maintenance staff at one site we visited had to move staff from a 
building where the floor was beginning to rot into another building 
with little available space, which they described as "squeezing in" the 
staff. 

Repair and maintenance backlogs can interrupt agencies' work. Officials 
at one site told us that the age of the fire alarm systems contributed 
to an increase in false fire alarms. The fire alarm systems are old and 
beyond their useful life expectancy and part of the agency's identified 
backlog. In addition, some alarms were triggered when air conditioning 
systems were restarted causing changes in air pressure and velocity and 
dust blown into the air stream. During each alarm, staff had to stop 
working and leave the building. As a result, the site lost labor time 
and concerns arose about staff becoming complacent and not taking the 
fire alarms seriously. Replacement of the fire alarm system in each 
building on the site is underway. The fire alarm system replacement is 
scheduled to be completed in all buildings in 2011. 

We heard from several officials that while they prioritize their work 
based on the expected impact an incident might have on the agency's 
mission, they cannot necessarily predict when or where an incident 
might occur. At one agency, officials told us that it is standard 
operating procedure to cover sensitive equipment during off hours to 
protect it from dust, debris, moisture, humidity, and unexpected 
incidents. Covering equipment is one way to mitigate the risk of damage 
to equipment from repair and maintenance backlogs. At one site we 
visited, officials said that a cooling coil from an old heating, 
ventilation, and air-conditioning system that is part of their backlog 
leaked water into a clean room that contained multimillion dollar 
equipment. Fortunately, the equipment was covered with a tarp and the 
leak was down the perimeter wall, not on the equipment. However, had 
the equipment gotten wet, it could have been severely damaged and 
directly affected the agency's ability to carry out its mission. 

Conclusions: 

Many believe that the overall condition of the federal government's 
real property assets continues to deteriorate, and it is difficult to 
predict when or where an incident might occur that would severely 
impact an agency's mission. However, governmentwide information on the 
estimated costs to repair and maintain agencies' real property assets 
that are important to their missions is not currently available. The 
tens of billions of dollars that agencies have reported to us in 
backlogs or in their financial statements as deferred maintenance 
associated with their real property does not capture the federal 
government's true fiscal exposure. The flexibility that agencies were 
given to facilitate their reporting of repair costs in FRPP and 
deferred maintenance in their financial statements has resulted in 
estimates that include different items. Trying to use current estimates 
to understand the government's fiscal exposure related to real 
properties backlogs in some cases would understate and in other cases 
overstate the exposure. For example, agencies may understate the 
government's exposure if they have estimated only the cost of 
correcting assets in the poorest condition or if they have incomplete 
information about the condition of their assets. Conversely, they may 
overstate the government's exposure if they include costs associated 
with repair and maintenance projects they do not plan to do or include 
the costs of those projects that would not impact the agency's mission 
even if completed. 

In addition, the requirement to report on all assets has resulted in 
agencies reporting estimated repair and maintenance costs associated 
with projects they do not plan to undertake because, for example, they 
intend to demolish the asset or expect there to always be projects with 
a higher priority. With information that reflects the government's 
fiscal exposure from repairing and maintaining its real property that 
is important to its mission, decisionmakers are better positioned to 
address future costs. 

Recommendation for Executive Action: 

To provide a realistic estimate of the government's fiscal exposure 
resulting from repair and maintenance backlogs and minimize the 
potential for duplicative reporting requirements, we recommend that the 
Deputy Director for Management, Office of Management and Budget, in 
conjunction with FRPC and in consultation with FASAB, explore the 
potential for developing a uniform reporting requirement in the FRPP 
that would capture the government's fiscal exposure related to real 
property repair and maintenance. Such a reporting requirement should 
include a standardized definition of repair and maintenance costs 
related to all assets that agencies determine to be important to their 
mission and therefore capture the government's fiscal exposure related 
to its real property assets. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to OMB, DOD, DOE, DOI, GSA, NASA, 
and VA for review and comment. OMB generally concurred with the report 
and agreed with our recommendation. OMB's letter is contained in 
appendix II. DOD, DOE, DOI, GSA, NASA, and VA provided technical 
clarifications, which we incorporated where appropriate. 

In addition to its technical comments, DOD also raised some concerns 
about our recommendation to OMB. DOD was concerned that we recommended 
OMB develop a new uniform federal reporting requirement, based in part 
on an inaccurate and misleading characterization of DOD's condition 
rating process. We recommend that OMB, in conjunction with FRPC and in 
consultation with FASAB, explore the potential for developing a uniform 
reporting requirement in the FRPP that would capture the government's 
fiscal exposure related to real property repair and maintenance. Our 
recommendation is based on the lack of governmentwide information 
specifically related to the costs to repair and maintain those real 
property assets that are important to the agencies missions. We believe 
it is important for OMB to explore the potential of capturing such 
information to quantify the government's fiscal exposure in this area. 
Through the incorporation of DOD's technical comments, we have 
clarified our discussion of DOD's condition rating process and DOD 
informed us that we have accurately described its process. DOD's letter 
is contained in appendix III. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to the Director and Deputy Director of OMB, the Secretaries of Defense, 
Energy, the Interior, and Veterans Affairs, and the Administrators of 
GSA and NASA. Additional copies will be sent to interested 
congressional committees. We also will make copies available to others 
upon request, and the report will be available at no charge on the GAO 
Web site at [hyperlink, http://www.gao.gov]. 

If you have any questions about this report, please contact me at (202) 
512-2834 or at goldsteinm@gao.gov. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. GAO staff who made key contributions to this 
report are listed in appendix IV. 

Signed by: 

Mark L. Goldstein: 
Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: Scope and Methodology: 

Our objectives were to (1) describe how agencies estimate their repair 
and maintenance backlogs, (2) determine how agencies manage their 
backlogs and the expected future changes in maintenance and repair 
backlogs, and (3) identify how backlogs have affected some facilities. 
To accomplish our objectives, we reviewed the six agencies that each 
told us in 2007 that they had over $1 billion in repair and maintenance 
backlogs associated with their held assets: the Departments of Defense, 
Energy, the Interior, and Veterans Affairs, the General Services 
Administration, and the National Aeronautics and Space Administration. 
For each agency, we interviewed headquarters officials, reviewed agency 
documents, obtained data on repair and maintenance backlogs for the 
agency's held assets, and visited two agency sites to determine how the 
sites estimate and manage their backlogs as well as the extent to which 
the sites' missions have been affected by their backlog. In selecting 
sites to visit, working with our Applied Research and Methods team, we 
reviewed agency inventory and performance measurement data from the 
Federal Real Property Profile (FRPP), including information on the 
condition of each real property asset, issued by the Federal Real 
Property Council as well as data on deferred maintenance and repair 
needs from the agencies. We performed our site visits in two geographic 
areas of the country--the Washington, D.C./Virginia/Maryland area and 
the San Francisco Bay area in California--because each agency had 
significant sites in these areas. Within the geographic locations, 
using FRPP data, we determined the average condition for each agency's 
assets and then selected sites that (1) were at or near the average 
condition of the agency's assets, and (2) reported a high repair and 
maintenance backlog compared to other sites in average or near-average 
condition. Our criteria for selecting each agency included asset types 
and uses--focusing on core assets, geographic location, quantitative 
indicators (such as asset value, condition index, and amounts of 
backlog), and the mission dependency ranking for assets. The 
information from our site visits is illustrative and cannot be 
generalized to sites agencywide. 

We also interviewed officials from the Office of Management and Budget 
(OMB) because it oversees the implementation of Executive Order 13327, 
which addresses federal real property management. We reviewed guidance 
documents related to this order and obtained relevant agency data from 
OMB implementing the order. Additionally, we interviewed officials from 
the Federal Accounting Standards Advisory Board (FASAB) to obtain 
information on FASAB's accounting standards for required governmentwide 
reporting of deferred maintenance by agencies in their annual financial 
statements. We reviewed these FASAB standards, examined agencies' 
current reporting of their deferred maintenance to meet the standards, 
and consulted with our Financial Management and Assurance team about 
the standards. We also reviewed relevant GAO reports--especially those 
related to our designation, in 2003, of federal real property as a high-
risk area because of long-standing problems--problems that included 
alarming backlogs of repair and maintenance in federal facilities. 
While the definition of real property includes land, our review focused 
on buildings and structures and excluded land because backlogs are 
generally associated with buildings (such as offices and hospitals) or 
structures (such as airfields or ports). 

We conducted this performance audit from September 2007 through October 
2008 in accordance with generally accepted audit standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe the 
evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. We determined the data were 
sufficiently reliable for the purposes of this report. 

[End of section] 

Appendix II: Comments from the Office of Management and Budget: 

Executive Office Of The President: 
Office Of Management And Budget: 
Office Of Federal Financial Management: 
Washington, D.C. 20503: 

September 26, 2008: 

Mr. Mark L. Goldstein: 
Director, Physical Infrastructure Issues: 
U.S. General Accounting Office: 
Washington, DC 20548: 

Dear Mr. Goldstein: 

Thank you for the opportunity to comment on the Government 
Accountability Office's (GAO's) draft report entitled "Federal Real 
Property: Government's Fiscal Exposure from Repair and Maintenance 
Backlogs is Unclear" GAO-09-010. The Office of Management and Budget 
(OMB) agrees with your recommendation to explore the potential for 
adding a uniform reporting requirement to the Federal Real Property 
Profile (FRPP) that would capture government's fiscal exposure related 
to real property repair and maintenance. We further agree that a 
standard measure for repair and maintenance costs will help drive 
better asset management decisions at both the agency and government-
wide level. 

In evaluating this (or any) change to the FRPP, we examine the costs of 
such a change against the expected value. Further, we must evaluate the 
extent to which changes to the FRPP have the potential to degrade the 
usefulness of the existing data. These issues will need to be carefully 
considered. As your report recommends, we will coordinate our efforts 
with the Federal Accounting Standards Advisory Board (FASAB) as well as 
the Inventory Committee of the Federal Real Property Council (FRPC). 

Again, we want to thank GAO for the opportunity to comment on this 
draft report. We look forward to our continuing work in the area of 
improving Federal Real Property Asset Management. 

Sincerely, 

Signed by: 

Danny Werfel: 
Deputy Controller: 

[End of section] 

Appendix III: Comments from the Department of Defense: 

Office Of The Under Secretary Of Defense: 
Acquisition Technology And Logistics: 
3000 Defense Pentagon: 
Washington, DC 20301-3000: 

October 8, 2008: 

Mr. Mark L. Goldstein
Director, Physical Infrastructure Issues: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Goldstein: 

This is the Department of Defense (DoD) response to the GAO draft 
report, GAO-09-010, "Federal Real Property: Government's Fiscal 
Exposure From Repair and Maintenance Backlogs Is Unclear," dated 
September 5, 2008 (GAO Code 544143). 

The Department does not concur with the recommendation to OMB to 
develop a new uniform Federal reporting requirement for real property 
repair and maintenance. It appears this recommendation is based, at 
least in part, upon an inaccurate and misleading characterization of 
the Department's condition rating process and terminology. This faulty 
assessment overstates differences between the Department and the other 
surveyed Federal agencies and would institute processes already in 
place through the Federal-wide implementation of a facilities condition 
index. The enclosed technical annex provides additional explanation and 
clarification. 

Thank you for the opportunity to comment on this report. 

Sincerely, 

Signed by: 

Alex A. Buhler, for: 
Wayne Arny: 
Deputy Under Secretary of Defense: 
(Installations and Environment): 

Enclosure: As stated: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Mark Goldstein (202) 512-2834 or goldsteinm@gao.gov: 

Staff Acknowledgments: 

In addition to the contact person named above, Nancy Boardman, Maria 
Edelstein, Elizabeth Eisenstadt, Carol Henn, Yumiko Jolly, and John W. 
Shumann also made key contributions to this report. 

[End of section] 

Footnotes: 

[1] In 1997, we designated the Department of Defense's management of 
its support infrastructure as a high-risk area because infrastructure 
costs have affected the Department's ability to devote funds to other 
more critical programs and needs. High-risk areas are those that either 
have greater vulnerabilities to waste, fraud, abuse, and mismanagement 
or major challenges associated with their economy, efficiency, or 
effectiveness. 

[2] GAO, Federal Real Property: Strategy Needed to Address Agencies' 
Long-standing Reliance on Costly Leasing, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-08-197] (Washington, D.C.: Jan. 
24, 2008). 

[3] GAO, High-Risk Series: Federal Real Property, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-122] (Washington, D.C.: 
January 2003). 

[4] FRPP categorizes real property into three types: buildings, 
structures, or land. In this report, when we refer to real property, we 
are referring to assets identified in FRPP as buildings or structures. 

[5] For fiscal year 2007 reporting, FRPP included 24 data elements. 

[6] GAO, Smithsonian Institution: Funding Challenges Affect Facilities' 
Conditions and Security, Endangering Safety, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-07-1127](Washington, D.C.: Sept. 
28, 2007). 

[7] According to FRPP, "repair needs" is the amount necessary to 
restore an asset to its originally intended and designed capacity. 

[8] GAO, Fiscal Exposures: Improving the Budgetary Focus on Long-Term 
Costs and Uncertainties. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-213] (Washington, D.C.: Jan. 24, 2003). 

[9] The terms "repair and maintenance backlog" and "deferred 
maintenance" are sometimes used interchangeably. Deferred maintenance 
is defined governmentwide for reporting in agencies' financial 
statements, and as discussed later in this report, some agencies report 
the same estimates for backlogs and deferred maintenance while others 
report different estimates. 

[10] DOE defines optimal period as that time in the life cycle of an 
asset when maintenance actions should be accomplished to preserve and 
maximize the useful life of the asset. Facility managers have some 
flexibility to revise the optimum period. 

[11] The assessment process described here refers mainly to VA's 
Veterans Health Administration, which holds the majority of VA's real 
property assets. Other VA administrations have recently adopted similar 
assessment processes. 

[12] According to DOD officials, DOD has focused on the cost of 
sustaining its facilities, rather than its backlog. DOD has developed a 
model to determine the cost of sustaining its facilities in good 
working order, and is developing a model to determine the cost of 
recapitalizing its facilities, which includes restoring and modernizing 
DOD facilities. DOD has set a goal for services to fund restoration and 
capital annually so that DOD can replace a facility every 67 years. See 
GAO, Defense Infrastructure: Continued Management Attention Is Needed 
to Support Installation Facilities and Operations, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-08-502] (Washington, D.C.: April 
2008), for further discussion of DOD's models. 

[13] NASA officials said that adjustments were made to the process in 
the first couple of years; therefore, they do not use this data in 
their trend analyses. 

[14] Federal Accounting Standards Advisory Board Standard Number 6, as 
amended, Accounting for Property, Plant, and Equipment, June 1996, GPO 
#041-001-00462-9. 

[15] Numbers in FRPP and financial statements may differ, however, due 
to timing. Numbers are a snapshot at one point in time. 

[16] In April 2008, we reported that DOD had approximately $58 billion 
in restoration and modernization needs (see [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-08-502]). However, that estimate 
only included needs that were not funded in fiscal years 2005- 2007. In 
contrast, DOD's deferred maintenance estimate is based on the 
cumulative deferred amount of all restoration and modernization 
requirements, including restoration and modernization needs identified 
prior to fiscal year 2005. 

[17] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-502]. 

[End of section] 

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