Overseas Real Property: Prioritizing Key Assets and Developing a Plan Could Help State Manage Its Estimated $3 Billion Maintenance Backlog
Fast Facts
More than a quarter of the State Department's overseas buildings and other real properties are in poor condition by State's condition standards, including almost 400 buildings and other assets that State considers critical to its mission.
State's allocated maintenance funding stayed steady, averaging $505 million annually, even as it added real property—square footage grew 11% from 2015-19. State estimates it has a $3 billion deferred maintenance backlog that would take 30-40 years to eliminate at current funding levels.
We made 5 recommendations, including that State develop a plan—and specify the funding needed—to address the backlog.
Highlights
What GAO Found
The Department of State's portfolio of overseas assets and expenditures to operate them have grown, but State-allocated funding for maintenance has stayed nearly the same. For fiscal years 2015 through 2019, both the number and square footage of State's assets increased 11 percent and operations expenditures grew 24 percent. However, maintenance and repair funding has remained nearly unchanged. For example, State's allocation for Maintenance Cost Sharing—for projects collectively funded by State and tenant agencies overseas—was $399 million in fiscal year 2016 and $400 million in 2020.
GAO found that more than one-quarter of State's overseas assets are in poor condition according to State's condition standard. Further, 20 percent (almost 400) of assets that State identifies as critical to its mission are in poor condition. Federal accounting standards recognize that what constitutes acceptable asset condition may vary by the importance of specific assets to agencies' missions. However, State set a single acceptable condition standard of “fair” for all assets and did not consider whether some assets, like chancery office buildings, were more critical to State's mission when estimating its $3 billion deferred maintenance backlog. Had State set a higher condition standard for critical assets, its backlog would be higher. By reassessing its condition standard, State could determine whether to adopt an approach that considers asset importance and that could help guide maintenance funding to key assets.
Condition of U.S. Embassy Manila, Philippines – Left: Chancery Office Building; Right: Chancery Courtyard Showing Maintenance Issues, Including Mold and Water Damage
State follows most, but not all, leading practices for managing deferred maintenance backlogs. Of the nine leading practices, GAO found that State followed five, partially followed three, and did not follow one. For example, State has goals, baselines, and measures for its facility management performance. However, State did not specifically request funding to address the backlog in its congressional budget requests. Officials said they had not found it necessary to specifically request such funding because they only determined that the backlog had substantially increased from $96 million in fiscal year 2019 to $3 billion in fiscal year 2020 after using a new methodology for estimating deferred maintenance and repair. In addition, State does not have a plan to address the backlog, but officials estimated it could take 30 to 40 years to eliminate the backlog with current funding levels. Developing such a plan with specific information on the funding and time frames needed to reduce the backlog would help decision makers better understand how funding levels affect backlog reduction.
Why GAO Did This Study
State's Bureau of Overseas Buildings Operations operates and maintains over 8,500 owned and leased real property assets, including both buildings and structures. According to State, at least 60 percent of a building's total lifecycle cost stems from operations and maintenance costs. GAO has reported that deferring maintenance and repairs can lead to higher costs in the long term and pose risks to agencies' missions.
GAO was asked to review State's efforts to manage its operations and maintenance needs. This report examines (1) how operations and maintenance funding for overseas assets changed from fiscal years 2016 through 2020, (2) the condition and maintenance needs of State's overseas assets, and (3) the extent to which State has followed leading practices to address its deferred maintenance backlog. GAO analyzed State data on operations and maintenance funding and asset condition, as well as documentation related to leading facility management practices. GAO also met with State officials in headquarters and in seven embassies.
Recommendations
GAO is making five recommendations, including that State should reassess its acceptable asset condition standard and fully follow leading facility management practices, such as developing a plan to address the backlog and specifically identifying the funding and time frames needed to reduce it. State concurred with these recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of State | The Secretary of State should ensure that that the Director of OBO reassess State's acceptable condition standard for all asset types and mission dependencies, to include whether mission criticality justifies a different standard among assets. (Recommendation 1) |
State concurred with this recommendation. OBO reassessed State's acceptable condition standard for all asset types and mission dependencies-the value an asset brings to each mission. OBO determined assets State has identified as critical to its mission, such as chancery office buildings and communications towers, warranted a higher acceptable condition standard and raised the standard from a 70 to 75 percent condition index rating. There would be adverse impacts to the post's mission if such assets were not functional, according to OBO's Building Dependency Index. By reassessing its condition standard and adopting an approach that considers asset importance, State is better positioned to develop a deferred maintenance and repair backlog estimate that reflects the need to more fully restore assets that are key to conducting the U.S. mission overseas. In addition, State is better positioned to guide funding to address the deferred maintenance needs of State's key assets.
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| Department of State | The Secretary of State should ensure that the Director of OBO incorporates the mission criticality of its assets when deciding how to target maintenance and repair investments. (Recommendation 2) |
State concurred with this recommendation. OBO refined its mission criticality categories-the value an asset brings to the mission-by establishing a Building Dependency Index (BDI) for each type of asset. OBO also developed a System Priority Index (SPI) for each type of building system. State officials said BDI measures the importance of a building's functions to a post's ability to meet its mission, while SPI measures the importance of each building system to support the post's mission. In particular, both indexes assess whether (1) there is an adverse impact on the mission if the building's or system's functions were interrupted and (2) the mission could be not continued using another building or system or setting up temporary facilities. OBO incorporated both BDI and SPI as criteria in its framework for prioritizing maintenance and repair requirements. By incorporating these indexes in its prioritization framework, State is better positioned to allocate limited maintenance and repair resources to those assets State has identified as critical to carrying out its mission.
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| Department of State | The Secretary of State should ensure that the Director of OBO monitors posts' completion of annual condition assessments that use a standardized inspection methodology, so that State has complete and consistent data to address its deferred maintenance and repair backlog. (Recommendation 3) |
State concurred with this recommendation. Beginning in fiscal year 2023, OBO has tracked posts' completion of annual condition assessments through its annual Facility Management Performance Program. State officials said OBO assigned the responsibility for monitoring posts' completion of annual condition assessments to its overseas regional support centers and plans to document this responsibility in an update to the Foreign Affairs Manual, as of April 2024. In addition, State's Management Controls Checklist for fiscal years 2023 and 2024 has included completing the annual condition assessments. OBO has provided instructions to facility managers on conducting annual conditions assessments for fiscal years 2022 and 2023. As of April 2024, State officials said they plan to issue these instructions for fiscal year 2024 and annually thereafter. State officials said OBO's annual instructions and 2016 facility condition index rating guide constitute a standardized inspection methodology. We will continue to monitor State's progress on implementing this recommendation.
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| Department of State |
Priority Rec.
The Secretary of State should ensure that the Director of OBO develops a plan to address State's deferred maintenance and repair backlog, and specifically identifies the funding and time frames needed to reduce it in congressional budget requests, related reports to decision makers, or both. (Recommendation 4) |
State concurred with this recommendation. OBO continues to address State's deferred maintenance and repair backlog through its Sustainment, Restoration, and Modernization framework, according to State. State officials said OBO's plan to address the backlog relies on a two-pronged approach related to (1) replacing and renovating facilities and (2) executing routine maintenance and repair projects and disposing of underutilized assets. However, State has not provided us with OBO's plan as of March 2024. In August 2023, State officials said current funding levels are addressing the backlog. State noted in its FY 2024 and FY 2025 Congressional Budget Justifications that the funding requested for the Maintenance Cost Sharing and Minor Construction and Improvement Programs, respectively, will help address the backlog. However, it did not specify the amount of funding or timeframes needed to reduce the backlog or provide evidence that it shared such information with decision-makers. We will continue to monitor State's progress on implementing this recommendation.
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| Department of State | The Secretary of State should ensure that the Director of OBO employs models for predicting the outcome of investments, analyzing tradeoffs, and optimizing among competing investments. (Recommendation 5) |
State concurred with this recommendation. As of March 2024, State officials said OBO reevaluated the feasibility of implementing a Sustainment Management System that uses predictive lifecycle modelling after completing a pilot for seven facilities. OBO decided to improve its annual facility condition assessment to record more nuanced data, which will enable the bureau to better identify, predict, and execute annual and five-year planning efforts, according to State officials. In February 2023, State officials also said OBO incorporated the lifecycle asset management approach into existing policies and procedures and has started to calculate the total cost of facility ownership through analysis at key lifecycle milestones, including design, construction, operations, and maintenance. We will continue to monitor State's progress on implementing this recommendation.
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