    [House Hearing, 106 Congress]
    [From the U.S. Government Publishing Office]

     FEDERAL REAL PROPERTY MANAGEMENT: OBSTACLES AND INNOVATIVE APPROACHES
                        TO EFFECTIVE PROPERTY MANAGEMENT

    =======================================================================

                                 JOINT HEARING

                                   before the

                     SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                          INFORMATION, AND TECHNOLOGY

                                     of the

                         COMMITTEE ON GOVERNMENT REFORM

                                    and the

                    SUBCOMMITTEE ON SUBCOMMITTEE ON ECONOMIC
                    DEVELOPMENT, PUBLIC BUILDINGS, HAZARDOUS
                     MATERIALS AND PIPELINE TRANSPORTATION

                                     of the

                 COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED SIXTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 APRIL 29, 1999

                                   __________

                         Committee on Government Reform

                               Serial No. 106-86

                 Committee on Transportation and Infrastructure

                               Serial No. 106-61

                                   __________

       Printed for the use of the Committee on Government Reform and the
                 Committee on Transportation and Infrastructure

      Available via the World Wide Web: http://www.gpo.gov/congress/house
                          http://www.house.gov/reform

                                     ______

                        U.S. GOVERNMENT PRINTING OFFICE
    62-621 CC                   WASHINGTON : 2000

                         COMMITTEE ON GOVERNMENT REFORM

                         DAN BURTON, Indiana, Chairman
    BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
    CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
    CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
    ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
    JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
    STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
    JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
    THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
    DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington,
    MARK E. SOUDER, Indiana                  DC
    JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
    STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
    MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
        Carolina                         ROD R. BLAGOJEVICH, Illinois
    BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
    DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
    ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
    LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
    JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
    GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
    DOUG OSE, California                             ------
    PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont
    JOHN T. DOOLITTLE, California            (Independent)
    HELEN CHENOWETH, Idaho

                          Kevin Binger, Staff Director
                     Daniel R. Moll, Deputy Staff Director
               David A. Kass, Deputy Counsel and Parliamentarian
                          Carla J. Martin, Chief Clerk
                     Phil Schiliro, Minority Staff Director
                                     ------

       Subcommittee on Government Management, Information, and Technology

                       STEPHEN HORN, California, Chairman
    JUDY BIGGERT, Illinois               JIM TURNER, Texas
    THOMAS M. DAVIS, Virginia            PAUL E. KANJORSKI, Pennsylvania
    GREG WALDEN, Oregon                  MAJOR R. OWENS, New York
    DOUG OSE, California                 PATSY T. MINK, Hawaii
    PAUL RYAN, Wisconsin                 CAROLYN B. MALONEY, New York

                                   Ex Officio

    DAN BURTON, Indiana                  HENRY A. WAXMAN, California
              J. Russell George, Staff Director and Chief Counsel
                    Randy Kaplan, Professional Staff Member
                              Mason Alinger, Clerk
                         John Bouker, Minority Counsel

                 COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                      BUD SHUSTER, Pennsylvania, Chairman
    DON YOUNG, Alaska                    JAMES L. OBERSTAR, Minnesota
    THOMAS E. PETRI, Wisconsin           NICK J. RAHALL II, West Virginia
    SHERWOOD L. BOEHLERT, New York       ROBERT A. BORSKI, Pennsylvania
    HERBERT H. BATEMAN, Virginia         WILLIAM O. LIPINSKI, Illinois
    HOWARD COBLE, North Carolina         ROBERT E. WISE, Jr., West Virginia
    JOHN J. DUNCAN, Jr., Tennessee       JAMES A. TRAFICANT, Jr., Ohio
    THOMAS W. EWING, Illinois            PETER A. DeFAZIO, Oregon
    WAYNE T. GILCHREST, Maryland         BOB CLEMENT, Tennessee
    STEPHEN HORN, California             JERRY F. COSTELLO, Illinois
    BOB FRANKS, New Jersey               ELEANOR HOLMES NORTON, District of
    JOHN L. MICA, Florida                    Columbia
    JACK QUINN, New York                 JERROLD NADLER, New York
    TILLIE K. FOWLER, Florida            PAT DANNER, Missouri
    VERNON J. EHLERS, Michigan           ROBERT MENENDEZ, New Jersey
    SPENCER BACHUS, Alabama              CORRINE BROWN, Florida
    STEVEN C. LaTOURETTE, Ohio           JAMES A. BARCIA, Michigan
    SUE W. KELLY, New York               BOB FILNER, California
    RAY LaHOOD, Illinois                 EDDIE BERNICE JOHNSON, Texas
    RICHARD H. BAKER, Louisiana          FRANK MASCARA, Pennsylvania
    CHARLES F. BASS, New Hampshire       GENE TAYLOR, Mississippi
    ROBERT W. NEY, Ohio                  JUANITA MILLENDER-McDONALD,
    JACK METCALF, Washington                 California
    EDWARD A. PEASE, Indiana             ELIJAH E. CUMMINGS, Maryland
    ASA HUTCHINSON, Arkansas             EARL BLUMENAUER, Oregon
    MERRILL COOK, Utah                   MAX SANDLIN, Texas
    JOHN COOKSEY, Lousiana               ELLEN O. TAUSCHER, California
    JOHN R. THUNE, South Dakota          BILL PASCRELL, Jr., New Jersey
    FRANK A. LoBIONDO, New Jersey        LEONARD L. BOSWELL, Iowa
    JERRY MORAN, Kansas                  JAMES P. McGOVERN, Massachusetts
    JOHN T. DOOLITTLE, California        TIM HOLDEN, Pennsylvania
    LEE TERRY, Nebraska                  NICK LAMPSON, Texas
    DON SHERWOOD, Pennsylvania           JOHN ELIAS BALDACCI, Maine
    GARY G. MILLER, California           MARION BERRY, Arkansas
    JOHN E. SWEENEY, New York            RONNIE SHOWS, Mississippi
    JIM DeMINT, South Carolina           BRIAN BAIRD, Washington
    DOUG BEREUTER, Nebraska              SHELLEY BERKLEY, Nevada
    STEVEN T. KUYKENDALL, California
    MICHAEL K. SIMPSON, Idaho
    JOHNNY ISAKSON, Georgia
    DAVID VITTER, Louisiana
                                     ------

       Subcommittee on Economic Development, Public Buildings, Hazardous
                     Materials and Pipeline Transportation

                        BOB FRANKS, New Jersey, Chairman
    JOHN COOKSEY, Louisiana, Vice        ROBERT E. WISE, Jr., West Virginia
        Chairman                         ELEANOR HOLMES NORTON, District of
    TOM EWING, Illinois                      Columbia
    STEVEN C. LaTOURETTE, Ohio           RONNIE SHOWS, Mississippi
    BUD SHUSTER, Pennsylvania            JAMES L. OBERSTAR, Minnesota
      (Ex Officio)                         (Ex Officio)

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on April 29, 1999...................................     1
    Statement of:
        Gregory, William, member, Committee to Assess Techniques for
          Developing Maintenance and Repair Budgets for Federal
          Facilities National Research Council; and J. Christopher
          Mihm, Associate Director, Federal Management and Workforce
          Issues, General Accounting Office..........................    19
        Wagner, G. Martin, Associate Administrator, Office of
          Governmentwide Policy, General Services Administration,
          accompanied by Robert Peck, Commissioner, Public Buildings
          Service; and David Bibb, Deputy Associate Administrator,
          Office of Governmentwide Policy............................   110
        Yim, Randall, Acting Deputy Under Secretary of Defense for
          Installations, Department of Defense; Denis Galvin, Deputy
          Director, National Park Service, Department of the
          Interior; Thomas Garthwaite, Deputy Under Secretary for
          Health, Department of Veterans Affairs, accompanied by
          Charles Yarbrough, Chief Facilities Management Officer, and
          D. Mark Catlett, Deputy Under Secretary for Budget; and
          Rudolph Umscheid, vice president, facilities, U.S. Postal
          Service....................................................    52
    Letters, statements, et cetera, submitted for the record by:
        Franks, Hon. Bob, a Representative in Congress from the State
          of New Jersey, prepared statement of.......................     7
        Galvin, Denis, Deputy Director, National Park Service,
          Department of the Interior, prepared statement of..........    79
        Garthwaite, Thomas, Deputy Under Secretary for Health,
          Department of Veterans Affairs, prepared statement of......    67
        Gregory, William, member, Committee to Assess Techniques for
          Developing Maintenance and Repair Budgets for Federal
          Facilities National Research Council, prepared statement of    23
        Horn, Hon. Stephen, a Representative in Congress from the
          State of California, prepared statement of.................     4
        Mihm, J. Christopher, Associate Director, Federal Management
          and Workforce Issues, General Accounting Office, prepared
          statement of...............................................    35
        Turner, Hon. Jim, a Representative in Congress from the State
          of Texas, prepared statement of............................    12
        Umscheid, Rudolph, vice president, facilities, U.S. Postal
          Service, prepared statement of.............................    94
        Wagner, G. Martin, Associate Administrator, Office of
          Governmentwide Policy, General Services Administration,
          prepared statement of......................................   113
        Wise, Hon. Robert E., a Representative in Congress from the
          State of West Virginia, prepared statement of..............    15
        Yim, Randall, Acting Deputy Under Secretary of Defense for
          Installations, Department of Defense:
            Information concerning land transactions.................   107
            Prepared statement of....................................    55

     FEDERAL REAL PROPERTY MANAGEMENT: OBSTACLES AND INNOVATIVE APPROACHES
                        TO EFFECTIVE PROPERTY MANAGEMENT

                                  ----------

                            THURSDAY, APRIL 29, 1999

            House of Representatives, Subcommittee on
                Government Management, Information, and
                Technology, Committee on Government Reform,
                joint with the Subcommittee on Economic
                Development, Public Buildings, Hazardous
                Materials and Pipeline Transportation,
                Committee on Transportation and Infrastructure,
                                                        Washington, DC.
        The subcommittees met, pursuant to notice, at 10 a.m., in
    room 2167, Rayburn House Office Building, Hon. Stephen Horn
    (chairman of the subcommittee on Government Management,
    Information, and Technology) presiding.
        Present for the Subcommittee on Government Management,
    Information, and Technology: Representatives Horn, Biggert, and
    Ose.
        Present for the Subcommittee on Economic Development,
    Public Buildings, Hazardous Materials and Pipeline
    Transportation: Representatives Franks, Norton, and Shows.
        Staff present for the Subcommittee on Government
    Management, Information, and Technology: J. Russell George,
    staff director and chief counsel; Bonnie Heald, director of
    communications, professional staff member; Randy Kaplan,
    professional staff member; Mason Alinger, clerk; Jon Bouker and
    Faith Weiss, minority counsels; and Earley Green, minority
    staff assistant.
        Staff present for the Subcommittee on Economic Development,
    Public Buildings, Hazardous Materials and Pipeline
    Transportation: Rick Barnett, professional staff member; and
    Susan Brita, minority professional staff member.
        Mr. Horn. A quorum being present, the joint hearing of the
    House Subcommittee on Government Management, Information, and
    Technology and the Subcommittee on Economic Development, Public
    Buildings, Hazardous Materials and Pipeline Transportation will
    come to order.
        The Federal Government is one of the world's largest owners
    of real estate. Its vast portfolio consists of more than
    500,000 buildings located on more than 560 million acres of
    land. These holdings are under the custody and control of more
    than 30 Federal departments and agencies. They represent a
    taxpayer investment of more than $300 billion.
        We are here today to examine the ways to improve the
    management of these assets. Overall, the Federal Government has
    not been a good steward. There is mounting evidence that the
    physical condition of Federal buildings has been allowed to
    deteriorate. Roughly half of these buildings are more than 50
    years old.
        Last year, a National Research Council Committee
    independently studied the status of many of these Federal
    facilities. The committee found that maintenance and repair
    programs have persistently been underfunded. As a result, many
    buildings have deteriorated to a point that they now require
    major repairs to bring them up to an acceptable health and
    safety standard.
        Federal facilities program managers are being encouraged to
    be more businesslike and innovative. However, the committee
    found that current management and financial processes create
    disincentives and, in some cases, barriers to cost effective
    property management and maintenance.
        For example, Ellis Island in New York Harbor--and this
    committee has walked that ground--is a highly visible example
    of this neglect. For nearly 100 years, the buildings and
    structures on Ellis Island housed and received 12 million
    immigrants, including my own father in 1903. Among its 36
    historic buildings, 32 have been so neglected that two-thirds
    of this national treasure could soon be lost to catastrophic
    structural failure.
        And if we could turn these pages, we will find out what
    great mystery is next.
        At the same time, millions of dollars are being spent on
    buildings that no longer serve their intended purpose.
    Downsizing of the Federal work force and changing agency
    missions have resulted in an excess of Federal buildings and
    work space that are costly and an inefficient use of the
    taxpayers' money.
        However, in many cases, the laws and regulations governing
    the disposition of these excess facilities create disincentives
    that, in fact, make the process expensive, time consuming and
    difficult.
        On March 10 of this year, for example, the General
    Accounting Office testified before the House Subcommittee on
    Health that the Department of Veterans Affairs could spend
    billions of dollars over the next 5 years operating hundreds of
    unneeded buildings. The General Accounting Office concluded
    that the Department of Veterans Affairs could greatly enhance
    veterans' health care simply by reducing the resources it
    spends on underused buildings.
        We cannot continue to ignore the consequences of not
    maintaining our public buildings. The investment made in these
    assets warrants sustained, appropriately timed, and targeted
    maintenance. The Federal Government needs to develop a strategy
    for facility management, maintenance, and accountability for
    stewardship that will optimize limited resources while
    protecting the value and functionality of the Nation's public
    buildings and facilities.
        Today, we are going to look at how the Federal Government
    manages its vast portfolio of real property. There are
    currently a variety of laws governing the acquisition,
    maintenance, and disposal of these assets. We will examine
    whether these laws help agencies effectively and efficiently
    manage this property and whether the agencies have some
    suggestions of what else needs to be amended in the laws to
    make their life a little easier and more effective.
        We have before us many knowledgeable witnesses to discuss
    the problems, policies, and procedures surrounding the
    management disposal of Federal real estate. Among our panelists
    are representatives from five of the largest land-holding
    agencies. This important issue affects hundreds of communities
    across our Nation. We welcome them. And we look forward to
    their testimony.
        I now yield to Chairman Franks, whose committee is meeting
    with us in this joint session for his opening statement.
        [The prepared statement of Hon. Stephen Horn follows:]
        [GRAPHIC] [TIFF OMITTED] T2621.001

        [GRAPHIC] [TIFF OMITTED] T2621.002

        Mr. Horn. Mr. Franks.
        Mr. Franks. Thank you, Chairman Horn. It is a delightful
    opportunity to share jurisdiction of this hearing with you. I
    would like to not only recognize but thank you and commend you
    for your extraordinary leadership you have displayed in so many
    areas of government management and particularly in the area of
    Y2K compliance, forcing the government to look at itself in the
    mirror and make certain that we were leading the way in terms
    of being prepared for the turn of the new millenium. I want to
    thank you on behalf of all Americans.
        I will keep my opening statement brief. Before I begin,
    though, I would like to ask unanimous consent that my colleague
    from the Transportation Committee, Mr. Blumenauer, be able to
    submit a statement for the record.
        Mr. Horn. Without objection, so ordered.
        Mr. Franks. I would like to welcome the Members and our
    witnesses to this hearing today. I would also like to thank
    Chairman Horn for working closely with the subcommittee which I
    chair in planning and developing this hearing on alternatives
    for funding Federal capital investment projects with public
    pride and partnerships.
        We welcome new ideas to better manage our Federal assets.
    Managing our Federal assets is something that needs to be done
    with the assistance and cooperation of the private sector. I am
    sure some of our witnesses here today will agree with that.
        One facility management component that is often overlooked
    is the role the facility places in promoting an agency's
    mission. As the mission changes, so does the agency's
    facility's needs. These needs have to be accounted for in the
    context of the Federal budgetary constraints. This is in the
    form of repair and alteration projects, new Federal
    construction projects, or in the case of downsizing, disposing
    of underutilized facilities.
        I am well aware in the case of the General Services
    Administration that short-term expensive operating leases are
    increasingly used instead of long-term capital improvement
    projects to meet space needs. Short-term leases reduce the
    overall government budget at the present time only because
    these expenditures are counted as annual costs.
        The overall impact of this decision places an ever-
    increasing burden on GSA's buildings' budget. This year, GSA
    will devote 50 percent of its budget for lease payments. Each
    year, GSA has less to spend on the important areas of repairs,
    innovations, and new construction.
        The current budget process also emphasizes design and
    construction cost of a new facility. When these costs account
    for 5 to 10 percent of the total life cost of the building,
    operations and maintenance account for 60 to 85 percent of the
    total cost of ownership. Public-private partnerships could be
    in the government's best economic interest in meeting the long-
    term needs of a facility.
        With that, Mr. Chairman, I would like to join you in
    welcoming our witnesses and look forward to the creative ideas
    that they will share with us today.
        Mr. Horn. I thank the gentleman.
        [The prepared statement of Hon. Bob Franks follows:]
        [GRAPHIC] [TIFF OMITTED] T2621.003

        [GRAPHIC] [TIFF OMITTED] T2621.004

        [GRAPHIC] [TIFF OMITTED] T2621.005

        Mr. Horn. The ranking member on the Subcommittee on
    Government Management, Information, and Technology is Mr.
    Turner. The gentleman from Texas and your opening statement
    would be welcome.
        Mr. Turner. Thank you, Mr. Chairman. We are here today to
    exercise the responsibility of the Congress to oversee the
    management of Federal property. As we know, the Federal
    Government's real estate portfolio is vast and diverse, and one
    size clearly does not fit all.
        As we move into the next millenium, and the government
    hopefully continues to operate more like a business, Federal
    property management must also become more flexible and more
    innovative.
        Today, we will hear about recent efforts to engage in
    alternative and innovative management practices at the Federal
    level. We will also hear about unique Federal partnerships with
    other public, nonprofit, and for profit entities.
        For the past 50 years, Federal property has been purchased,
    managed, and disposed of under the authority of the Federal
    Property and Administrative Services Act of 1949. The
    principles established by this law have worked extremely well
    over the years, assuring the American people the value of
    Federal property will be maximized.
        While discussing this issue today, I think it's appropriate
    to recognize the invaluable contribution and achievements of a
    former Government Reform Committee staff member, Mr. Miles
    Romney, who devoted his career to public service and devoted
    his attention to Federal property management issues. He
    recently succumbed to cancer.
        Mr. Romney left an indelible mark on Federal property
    management and the Government Reform Committee, serving on this
    committee staff continuously from 1956 to 1997. As we look to
    new approaches, we would do well to remember Mr. Romeny, who
    was guided by the belief that Federal property was a sacred
    trust held by the government for the American people.
        It is my belief that it is the government's responsibility
    to use Federal property wisely and efficiently; and when it is
    no longer needed, the government must assure that its disposal
    occurs without prejudice or favor.
        While the policies and principles of the 1949 Property Act
    have served us well, it may be time to consider modifying
    particular aspects of the law to encourage more innovative and
    modern approaches to management and disposal.
        For example, certain types of public-private partnerships
    have proven to be very successful, and we will hear about the
    characteristics of their success today. In addition, Congress
    could consider increasing incentives for agencies to dispose of
    property that they no longer need by allowing them to retain a
    portion of the revenue generated by the sale. These are just a
    few ideas that we should explore vigorously.
        I look forward to the testimony from all of the witnesses
    today
    and thank Chairman Horn and Chairman Franks for holding this
    hearing today.
        Thank you, Mr. Chairman.
        Mr. Horn. I thank the gentleman.
        [The prepared statement of Hon. Jim Turner follows:]
        [GRAPHIC] [TIFF OMITTED] T2621.006

        [GRAPHIC] [TIFF OMITTED] T2621.007

        Mr. Horn. And now the ranking member for Mr. Franks'
    subcommittee, the Subcommittee on Economic Development, Public
    Buildings, Hazardous Materials and Pipeline Transportation of
    the full Committee on Transportation and Infrastructure, Ms.
    Norton, the Delegate from the District of Columbia.
        Ms. Norton. Thank you, Mr. Chairman.
        I ask unanimous consent to incorporate the statement of the
    ranking member, Mr. Wise, who is unable to be here this morning
    before I make my own statement.
        Mr. Horn. Without objection.
        [The prepared statement of Hon. Robert E. Wise follows:]
        [GRAPHIC] [TIFF OMITTED] T2621.008

        [GRAPHIC] [TIFF OMITTED] T2621.009

        Ms. Norton. I appreciate your leadership, Mr. Chairman, and
    that of my own chairman, Mr. Franks, in organizing this
    important hearing about a subject badly in need of oversight,
    the oversight of real property management of the Federal
    Government.
        I have two concerns that I would like to discuss in opening
    this hearing. The first is my long-time interest in the effect
    of the scoring rules, which have essentially destroyed any
    National Building Program of the United States of America.
        Originally proposed as a way to control the budget, these
    rules have had an unintended effect that we have not been able
    to overcome. They have wreaked havoc on GSA's ability to house
    the Federal work force. And they cost us billions of dollars in
    rent because we are unable to build on Federal land often in
    order to house Federal facilities.
        This matter is of such urgency that I went and testified
    last year before the President's Commission on Capital
    Budgeting. I myself favor a capital budget for the Federal
    Government and believe it is only out of a long tradition that
    we don't have a capital budget.
        States, localities, and cities have learned how to work
    capital budgets so that they don't get out of hand and so that
    they do control expenditures and so that you do spend capital
    funds for capital budgeting and operational funds for
    operational matters. It is time that the Federal Government
    learns that, and we will not be able to effectively manage our
    real property for the Federal Government unless we come into
    the 20th century when it comes to capital budgeting.
        I have a special interest as well, Mr. Chairman, in the
    discussion that we will take here today about public-private
    partnerships. Among the ways in which this will be discussed
    undoubtedly will be the report of the GAO entitled, ``Public-
    Private Partnerships Key Elements of Federal Building and
    Facility Partnerships.''
        I note that the report focuses on a number of elements that
    all of these effective partnerships had. One of those elements
    was specific legislation. And among the six projects that is
    studied as an effective public-private partnership is the
    Presidio.
        I note, for the record, that in the Nation's Capital, there
    is an enormous tract of land owned by the Federal Government,
    57 acres 55 acres at the Southeast Federal Center. If this land
    were in the hands of private developers, its worth would be off
    the charts. The Federal Government has let this land, within 5
    minutes of the Capitol, lie fallow.
        The Defense Department understood what to do when Crystal
    City, a naval operation closed in Arlington. They moved to
    renovate the Navy Yard in the District of Columbia, which is
    right next to the Southeast Federal Center. And, of course, it
    is now well along the way of being rehabilitated.
        They are anxious that the Federal Government take this
    strip of land and do something with it. If you don't do
    something with it, we are going to sell it to somebody who will
    because it is one of the most expensive pieces of land on the
    East Coast, given its location and its proximity.
        The major difficulty has been that Federal agencies want to
    be on Constitution Avenue or K Street. And somehow or the
    other, OMB and GAO, despite the billions it costs us now to
    rent for space for Federal agencies that don't have the
    wherewithal to, in fact, get agencies to come to this location
    so close to the Capitol.
        One way to utilize this land might be to form some form of
    Federal public-private partnership like the ones that the GAO
    has studied. I welcome the opportunity to hear more about how
    this has been done in other jurisdictions.
        And I particularly commend your leadership and that of Mr.
    Franks for the hearing that you called today.
        Thank you, Mr. Chairman.
        Mr. Horn. Thank you.
        The gentlewoman from the District of Columbia makes a
    number of very important points, especially with regard to the
    capital budget. Mr. Clinger, when he a chaired the Committee on
    then Government Operations, now Government Reform, he was very
    interested that we have held hearings on it. We haven't
    forgotten it. This is a case of getting some people to wind
    down and others to wind up. I think some of the testimony this
    morning will be immensely helpful.
        Let me just give you the procedural way this hearing will
    be conducted. Since we are an investigating Committee of
    Government Reform, all witnesses will be sworn in. And the
    first two panels I will preside over. The third panel, the
    tough one, Mr. Franks will preside over. That's the General
    Services Administration, our good friends. They have testified
    before us many times, and Mr. Franks knows more about them than
    I do. So he will preside over the third panel.
        Also, we would like you to summarize your statements as
    best you can. We have your statements. We have read your
    statements. If you could do it in 5 or 8 minutes, that would be
    fine, but that would leave us more time for a dialog with you.
    And that is what we like is to, having read your statement,
    having heard your summary, we can get down to some questions.
    Your full statement is automatically put in the minute we call
    on you. So we don't need a lot of ``without objection, we will
    do this and that.'' It is in the record.
        We will ask the first panel that is here, we have Mr.
    William Gregory, member, Committee to Assess Techniques for
    Developing Maintenance and Repair Budgets for Federal
    Facilities of the National Research Council. It sort of sounds
    like a doctoral dissertation. Usually, there is something and a
    colon that goes on for three sentences in science. But we are
    deeply grateful for the work the Research Council has done.
        And a long time friend of both our subcommittees, Mr.
    Christopher Mihm, the Associate Director of Federal Management
    and Workforce Issues, General Government Division, General
    Accounting Office, part of the legislative branch, does a
    splendid job. We always use the GAO to be the principal
    nonpartisan above-the-battle type of witness to pull all the
    pieces together. We might well ask the GAO and others to sit
    with the third panel. We always ask them if they have any
    comments after their formal statements after they have listened
    to the testimony.
        I think let's just start with panel one. And you have some
    assistants with you. Let's swear them all in at once so that we
    don't if there are others that are going to speak behind you, I
    am used to the Pentagon and bringing a squad or company or
    maybe a battalion of aides, and I just like to have a mass
    baptism of swearing in, and then we get down to business.
        So if you will stand and raise your right hands.
        [Witnesses sworn.]
        Mr. Horn. I note seven members standing, and the clerk will
    note that for the record.
        We will now begin with Mr. Gregory, the member of the
    National Research Council committee that has taken a real look
    at these questions on maintenance and repairing of bridges for
    Federal facilities. So please proceed, Mr. Gregory.

      STATEMENTS OF WILLIAM GREGORY, MEMBER, COMMITTEE TO ASSESS
     TECHNIQUES FOR DEVELOPING MAINTENANCE AND REPAIR BUDGETS FOR
         FEDERAL FACILITIES NATIONAL RESEARCH COUNCIL; AND J.
     CHRISTOPHER MIHM, ASSOCIATE DIRECTOR, FEDERAL MANAGEMENT AND
              WORKFORCE ISSUES, GENERAL ACCOUNTING OFFICE

        Mr. Gregory. Good morning, Chairman Horn and Chairman
    Franks and members of the Subcommittee on Government
    Management, Information, and Technology and the Subcommittee on
    Economic Development, Public Building, Hazardous Materials and
    Pipeline Transportation.
        My name is William L. Gregory. I am manager of
    environmental and facilities management at Kennametal, a global
    provider of industrial tooling systems with annual revenues of
    nearly $2 billion per year and 13,000 employees.
        At Kennametal, I am responsible for environmental health
    and safety, real estate, corporate building operations,
    strategic facility planning, and construction management for
    all major facility projects on a global basis. I am also past
    international president of the International Facility
    Management Association in which capacity I oversaw IFMA's
    operations consisting of 13,000 members and 130 chapters as
    well as international development and formation of public
    alliances.
        I am testifying here today in my capacity as a member of
    the National Research Council appointed committee that produced
    the report ``Stewardship of Federal Facilities: A Proactive
    Strategy for Managing the Nation's Public Assets.'' The
    National Research Council is the operating agency of the
    National Academy of Sciences and the National Academy of
    Engineering.
        Jack E. Buffington, the chairman of the NRC committee sends
    his regrets that he is not able to be here today. Ms. Lynda
    Stanley of the National Research Council who provided staff
    support to our committee is here.
        The ``Stewardship of Federal Facilities'' report addresses
    a wide range of management and budgeting issues related to the
    maintenance and repair of the 500,000 buildings and facilities
    owned by the Federal Government worldwide. They represent an
    investment of more than $300 billion taxpayer dollars. Upwards
    of $20 billion per year is spent to acquire new facilities or
    substantially renovate existing ones. Yet, it is difficult, if
    not impossible, to determine how much money the Federal
    Government spends for the maintenance and repair of these
    facilities once they are acquired.
        Over the course of the study, our committee came to two
    overriding conclusions. No. 1, the Federal Government should
    plan strategically for the maintenance and repair of its
    facilities in order to optimize available resources, to
    maintain the functionality and quality of Federal facilities,
    and to protect the public's investment.
        No. 2, greater accountability for the stewardship or
    responsible care of facilities is needed at all levels of the
    Federal Government. Accountability includes responsibility for
    the condition of facilities and for the allocation, tracking,
    and effective use of maintenance and repair funds.
        The committee's specific findings relating to Federal
    facilities-maintenance budget and management issues are
    extensive. I will highlight the 7 key findings related to the
    current state of Federal facilities and their management to
    provide the context for the committee's recommendations.
        No. 1, evidence is mounting that the physical condition,
    functionality, and quality of Federal facilities continues to
    deteriorate. Many Federal buildings require substantial repairs
    to bring them up to acceptable standards of health, safety, and
    quality.
        No. 2, inadequate funding for facilities maintenance and
    repair programs is a persistent, long-standing and well-
    documented problem.
        No. 3, some agencies own and are responsible for more
    facilities than they need to support their missions or that
    they can maintain with current or projected budgets.
        No. 4, the relationship of facilities to agency missions is
    not recognized adequately in Federal strategic planning and
    budgeting processes.
        No. 5, there are few rewards or incentives for Federal
    facilities program managers to act in a cost-effective fiscally
    responsible manner to be innovative or to take risks that might
    result in better management practice. In fact, current
    management, budgeting, and financial processes have
    disincentives and institutional barriers to cost-effective
    facilities management and maintenance practices.
        No. 6, agencies have not been able to make effective use of
    the data they gather through condition assessments for timely
    budget development or for ongoing management of facilities.
        And last, No. 7, the type of information that
    decisionmakers find compelling to support maintenance and
    repair budget requests is not available.
        Public officials and decisionmakers want to know how much
    money will be saved in the future by spending money today on
    maintenance and repair. That information is not available
    because only a limited amount of research has been done to
    identify effective facility management strategies for achieving
    cost savings, identifying cost avoidances, and providing safe,
    healthy productive work environments.
        To address these findings systematically, our committee
    developed a strategic framework of methods, practices, and
    strategies that can lead to a better maintained and better
    managed inventory of Federal facilities.
        To plan strategically for maintenance and repair and to
    create greater accountability for the stewardship of Federal
    facilities, the committee made the following 11
    recommendations.
        No. 1, facility investment and management should be
    directly linked to agency mission. A facility element should be
    incorporated into each agency's strategic plan to link
    facilities to agency mission and establish a basis and
    rationale for maintenance and repair budget requests.
        No. 2, long-term requirements for maintenance and repair
    expenditures should be reduced by reducing the size of the
    Federal facilities portfolio. New construction should be
    limited. Existing buildings should be adapted to new uses. And
    the ownership of unneeded buildings should be transferred to
    other public and private organizations. Facilities that are
    functionally obsolete, are not needed to support an agency's
    mission, are not historically significant, and are not suitable
    for transfer or adaptive reuse should be demolished when it is
    cost effective to do so.
        No. 3, the condition assessment programs should be
    restructured to focus first on facilities that are critical to
    an agency's mission on life, health, and safety issues, and on
    building systems that are most critical to a facility's
    performance. This restructuring is needed to optimize available
    resources, provide timely and accurate data for formulating
    maintenance and repair budgets, and provide critical
    information for the ongoing management of facilities.
        No. 4, the government and private industry should work
    together to further develop and integrate technologies for
    performing automated facility condition assessments and
    eliminate barriers to their deployment.
        No. 5, the government should support research to develop
    quantitative data that can be used for planning and
    implementing cost effective maintenance and repair programs and
    strategies. Research data are also needed to better understand
    the programmatic impacts of maintenance on mission delivery and
    on building users' health, safety, and productivity.
        No. 6, the government should encourage accountability for
    the stewardship of Federal facilities at all levels. Within
    Federal agencies, facilities program managers should justify,
    identify the resources necessary to maintain facilities
    effectively and should be held accountable for the use of these
    resources.
        No. 7, at the executive level, an advisory group of senior
    level Federal managers and other public sector managers,
    nonprofit and private sector representatives, should be
    established to develop policies and strategies to foster
    accountability for the stewardship of facilities and to
    allocate resources strategically for their maintenance and
    repair.
        The committee believes such a group is needed to give
    greater visibility to the issue of Federal facilities
    maintenance, management, and plan more strategically. A senior
    level advisory group could focus on a wide range of facility
    management related topics, some of which are suggested on pages
    73 and 74 of this report.
        No. 8, the government should adopt more standardized cost
    accounting techniques and processes to allow for more accurate
    tracking of maintenance and repair funding requests,
    allocations, and expenditures, and reflect the total cost of
    facilities ownership. The committee developed an illustrative
    budget template that differs from current practices because of
    it accounts for the full range of facility management costs in
    one place.
        No. 9, governmentwide performance measures should be
    established to evaluate the effectiveness of facilities
    maintenance and repair programs and expenditures.
        No. 10, facility program managers should be empowered to
    operate in a more businesslike manner. By removing
    institutional barriers and providing incentives for the cost-
    effective use of maintenance and repair funds. The carryover of
    unobligated funds and the establishment of revolving funds for
    nonrecurring maintenance needs should be allowed if they are
    justified.
        And No. 11, and last, the government should provide
    appropriate and continuous training for a staff performing
    condition assessments and/or developing and reviewing
    maintenance and repair budgets to foster an informed
    decisionmaking process.
        In summary, the Federal Government has a significant
    opportunity to strategically redirect Federal facilities
    management and maintenance practices for the 21st century. This
    will require long-term vision, commitment, leadership, and
    stewardship by decisionmakers and agency managers. The results
    will be a significant improvement in the quality and
    performance of Federal facilities, lower overall maintenance
    costs, and protection of the public's investment.
        Thank you for the opportunity to review the findings and
    recommendations of the ``Stewardship of Federal Facilities''
    report. I will try and answer any questions you may have.
        Mr. Horn. Thank you very much.
        [Note.--The GAO publication, ``Public-Private Partnerships,
    Terms Related to Building and Facilities Partnerships,'' may be
    found in subcommittee files.]
        [The prepared statement of Mr. Gregory follows:]
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        Mr. Horn. We now move to Mr. Mihm. And after he finishes,
    we will have questions of panel one.
        Mr. Mihm, as I noted earlier, is the Associate Director of
    Federal Management Workforce Issues, General Government
    Division of the General Accounting Office.
        Mr. Mihm.
        Mr. Mihm. Thank you, Mr. Horn, Mr. Franks, and members of
    the subcommittees. It is a pleasure and an honor to be here
    today to discuss the findings of our recent report on public-
    private partnerships. We did this report at the request of
    Chairman Horn.
        I am fortunate today to be joined by Don Bumgardner, who is
    the project manager for our work on partnerships, and in
    addition, our colleague, Peter Del Toro, was also instrumental
    to our work on this partnership report.
        I am also pleased to provide the subcommittee with a
    Glossary of Terms, Practices and Techniques related to
    Buildings and Facility Partnerships that was released earlier
    this week. We did this, of course, at the request of you Mr.
    Horn and Mr. Franks as well.
        In the interest of brevity and getting to the discussion as
    you requested, I will just hit a couple of high points this
    morning. First, I would like to note some of the long-standing
    management weaknesses that are leading agencies to think more
    strategically when managing buildings and facilities.
        Second, I will discuss one response to those challenges,
    the public-private partnerships and highlight the common
    elements of the six Federal partnerships we examined for our
    report.
        In terms of my first point, the need to think strategically
    about the Federal Government's assets, as you noted in your
    opening statement, Mr. Horn, the Federal Government is one of
    the world's largest property owners. Our work and that of
    others, certainly of our colleagues here today, over the last
    several years has identified several important weaknesses in
    Federal agencies management and maintenance of facilities and
    real property.
        At the most fundamental level, as Mr. Horn and Mr. Franks
    have noted in their opening statements, is a need to think
    strategically about the use of Federal assets, Mr. Gregory
    covered many of these issues very well, so I won't reiterate
    them here.
        But just to underscore the point, over half of the
    government's office buildings are roughly 50 years old and were
    designed and located to meet the needs of an earlier era.
    Clearly we need to think more strategically as we approach the
    21st century on how we are going to use public assets. To make
    better use of their buildings and facilities, Federal agencies
    are responding by increasingly striving to manage them in a
    more businesslike manner.
        I want to now discuss with you my second point by
    describing our recent work on partnerships between the Federal
    Government and the private, not for profits and other public
    entities through contracts or agreements. These arrangements
    are vehicles that agencies have used to better manage their
    assets.
        Partnerships typically involve a government agency
    contracting with the partner to renovate, construct, operate,
    maintain, and/or manage a facility that provides a public
    service. As you know from our report, we reviewed six
    partnerships and found five common elements that appeared to
    play key rolls in the effective implementation of those
    partnerships. These elements are shown on the figure on page 4
    of my written statement and are discussed in detail in our
    report. I will touch on each of these.
        First, a catalyst for change was needed. Fiscal and
    community pressures were among the factors that lead agencies
    to seek better ways of managing their properties, including
    considering the use of partnerships.
        For example, these pressures were the catalyst at the two
    Park Service projects that we reviewed, including the Presidio,
    in which the Park Service entered into partnerships to help
    finance needed preservation efforts.
        Second, Congress had to provide statutory authority for the
    partnership to move forward, including allowing the agency to
    keep the revenues it received. The legislation was either
    project specific, as was the case for the Park Service
    projects, or broader in scope, as was the 1991 law that
    authorized the Department of Veterans Affairs to lease its
    properties and retain the resulting revenues.
        According to building and facility managers and all of the
    agencies we reviewed, a primary reason for an agency to enter
    into the partnerships is the authority to keep for its own use
    the revenue that it would receive from the partnership. In
    short, Federal managers told us they needed to have incentives
    before they were willing to undertake the risks.
        A third common element is that agencies established
    organizational units and acquired the necessary expertise to
    work effectively with the private sector. For example, the
    Department of Veterans Affairs established an Office of Asset
    and Enterprise Development to promote the partnership concept
    within VA, to design and implement public-private partnership
    projects, and to be a single point of contact with VA's private
    sector partners. The office was staffed with professions
    experienced in portfolio management, architecture, civil
    engineering, and contracting.
        The fourth common element is that agencies used business
    plans or similar documents to make informed decisions and to
    protect the government's interests. According to Postal Service
    officials, the development and execution of business plan,
    which included information about the division of risks and
    responsibilities between the Postal Service and its private
    sector partner, was critical to the success of implementing its
    large-scale development projects.
        For each of the projects we reviewed, business plans were
    drafted jointly between the public and private sector entities
    to help ensure the close involvement of both parties in the
    design and implementation of the project. I would just add that
    this close involvement in designing these business plans
    underscores the importance of the point that I was making
    earlier of making sure that agencies have the human capital and
    the knowledge base so that they can deal effectively with the
    private sector.
        Finally, a fifth common element was that support for
    project stakeholders was an important element in developing the
    partnerships. In all of the projects we reviewed, agencies had
    to obtain the support of the local community and other
    stakeholders to create the partnership.
        For example, in both of the Park Service projects we
    reviewed, community leaders who were worried about preserving
    historic structures without overcommercializing them, became
    important and active stakeholders for those projects.
        In conclusion, Congress and the Federal agencies need to
    continue to work together to find approaches that will
    encourage prudent management of Federal buildings and
    facilities. When accompanied by sound financial management and
    appropriate congressional oversight, public-private
    partnerships are one approach to facilitate effective building
    and facility management.
        The set of common elements that we identified appear to be
    key to the implementation of the six partnerships we examined.
    Of particular importance to us is the critical roll that
    Congress played in providing the authority for--and continuing
    its oversight of--these projects.
        This concludes my statement, and I would be happy to answer
    any questions that the subcommittee may have.
        Mr. Horn. I thank the gentleman.
        [The prepared statement of Mr. Mihm follows:]
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        Mr. Horn. Now we will have 5 minutes per person alternating
    between parties, and we will stick to that very strictly. If
    you can get the question in before the red light goes on, the
    answer can take longer. But we will make a second round if we
    need to. So don't feel you are being rushed, but this gives
    everybody a chance to participate.
        We will start with Mr. Franks' 5 minutes for questioning
    the witnesses.
        Mr. Franks. Thank you, Mr. Chairman.
        Mr. Gregory, how would you impress upon building managers
    the importance of not deferring scheduled maintenance.
        Mr. Gregory. Not deferring scheduled maintenance? The
    deferring of scheduled maintenance catches up with you. It ends
    up being a very large issue that soon becomes insurmountable.
    That is what we heard many times from the people that were
    testifying before our committee. They had a large backlog that
    seemed to be insurmountable. To encourage someone not to do
    that suggests it becomes too expensive to attack all at once.
    It grows to something that eventually starts eating away at the
    facility. There are no positive benefits to allow that to
    happen.
        Mr. Franks. I think you're absolutely right. But I guess
    I'm looking for what kind of motivation can you inject into
    building managers to convince them of the needs that you just
    very confidently spoke to.
        Mr. Gregory. The issues that we talked about in our
    committee were some of the disincentives. These are the things
    that are common at the Federal facilities management level. As
    they look at some of their issues, they have little incentive
    to improve because of the way the budget dollars are
    determined.
        Mr. Franks. I don't mean to interrupt again, but how can we
    provide them the incentive that you say is----
        Mr. Gregory. To give them incentives in the budget, give
    them more freedom in the budget to allow their budget dollars
    to be used more effectively. For an example, savings end up
    being a negative. Savings are subdivisions from the budget in
    the next year. They need more ability to handle those kinds of
    issues.
        Mr. Franks. What kind of information do decisionmakers find
    compelling as it relates to increased building maintenance and
    repair budgets?
        Mr. Gregory. The facility is a if you look at facilities as
    a holistic approach, facilities in fact the real definition of
    facility management is integration of people, process, and
    place. The process is the business that happens there.
        When you look at it from a holistic point, there are huge
    savings to a quality facility management program impacting the
    people. The people in that work environment are subjected by
    the work environment that they are in, either positively or
    negatively. The real savings in all of this are productivity
    savings by the work force and the health benefits that accrue
    by working in a healthy environment. These are very significant
    issues that can make the facility work better.
        Those, to me, are the more compelling reasons that a senior
    level agency manager should be focused on facility and facility
    issues. It is not necessarily what is happening in the basement
    of the building, it is what more is happening in the overall
    facility that impacts productivity. The people cost on a life-
    cycle basis is almost 80 percent of the cost of running a
    building.
        Mr. Franks. Thank you, Mr. Chairman.
        Mr. Horn. I thank the chairman. I now call on Mr. Turner,
    the gentleman from Texas, and the ranking member on the
    Subcommittee on Government Management, Information, and
    Technology for 5 minutes of questioning.
        Mr. Turner. Thank you, Mr. Chairman.
        I would like to ask each of you to comment on and share
    with us some examples where Federal agencies have utilized
    public-private partnerships successfully to give us some feel
    for, you know, where we are, seeing some progress, and perhaps
    even highlight the agencies that have done the best job in
    utilizing some of the tools that the Congress has given them,
    and then beyond that offer your suggestions for what new
    legislation we might need to give flexibility to agencies to be
    able to move forward with some of these new innovative
    approaches.
        Mr. Gregory. I would like to defer to Mr. Mihm. Our report
    dealt with the public-private partnerships as a tool, and we
    didn't get into the specifics. But I think you can address
    that.
        Mr. Mihm. Yes, sir. I guess a good starting point would be
    to look at the success stories experienced by the six
    partnerships that we profiled. We profiled two from the
    National Park Service, two from Department of Veterans Affairs,
    and two from the Postal Service, including one from Veterans
    Affairs outside Houston, which I understand is near and dear to
    your heart, sir.
        The focus was not to audit the results of these cases but
    to try and learn from their successes. We spoke with numerous
    agency officials and private-sector partners, to seek whether
    or not there were any negative feedback from the public on
    these projects. We found that, universally, there were positive
    responses.
        And in some cases, this has been fairly well documented. In
    the cases, for example, of the Park Service partnerships, those
    out at the Presidio and Fort Mason, one of the major advantages
    that they got out of that was that the restoration and
    preservation of some historically very important property. The
    valuable property near Golden Gate Bridge could easily imagine
    could have gone a different route if it had been just
    exclusively developed for commercial purposes. So, the
    prevention of historic property was certainly one major
    advantage to these partnership arrangements.
        In terms of the Postal Service, they currently recover
    about $16.5 million a year from the two partnerships we
    received. This revenue is returned to their general operating
    fund.
        In terms of the VA partnerships, the money is earmarked to
    serve veterans. So it goes into mission-related efforts that
    assist the veterans.
        In all of the partnerships that we looked at, there seem to
    be these common elements that were keys to their success of
    these partnerships as well as some advantages from both the
    Federal and the partnership standpoint and the public and the
    private partners standpoint that these partnerships gave.
        Now in terms of the second half of your question, dealing
    with some of the statutory authorities on this, there are a
    number of things that clearly can be done; first, we have found
    in each of the partnerships there is a need to give incentives
    to the agencies to participate in the partnership.
        The single most overriding incentive that we heard from all
    the asset managers that we talked to was to allow them to keep
    the proceeds from the partnership or at least a portion of
    those proceeds. In specific cases that can be earmarked for
    certain projects within the agency. But if they have to return
    all revenues earned to the Treasury, there is very little
    incentive for them to enter into these ventures.
        I think, taking a look more broadly at the enabling
    legislation for the Veterans Affairs, which was the Enhanced
    Use Leases is what the partnership approach at Veterans Affairs
    is called, and which Congress laid out expectations for
    consultation with stakeholders and expectations for
    congressional review of the projects before they received final
    approval. I think that law and the incentives together provide
    good framework for where to go in terms of statutory changes.
        Mr. Turner. Give me a good example of let's take maybe the
    example of the VA. Tell us about the legal relationship between
    the government and the private partner and how that is
    established.
        Mr. Mihm. My colleague Don Bumgardner did most of the work
    at the VA, and I am going to ask him to speak to that.
        Mr. Bumgardner. In terms of the VA specifically, the key
    part of allowing them to enter into partnership arrangements
    was the 1991 enhanced-use leasing law. Without that type of
    enabling law, there is no incentive for any asset manager in
    any Federal agency to take on the risk of a public-private
    partnership.
        The legal relationship is outlined pretty much in our
    report and, as Chris stated, the partnership has to have the
    approval of the Secretary, the Congress. A large part of the
    legal relationship revolves around the detailed business plans
    that layout both the public and private sector's
    responsibilities, and assure that the public's interests are
    protected. But, really, the overarching thing here is the law
    itself.
        Mr. Turner. Thank you, Mr. Chairman.
        Mr. Gregory. I would like to add a couple of comments.
        Mr. Horn. Please. Go ahead.
        Mr. Gregory. One of the things we talked about in our
    committee was the problem of confusing expense budgets with
    capital budgets. We talked about a separation of the two items
    that more clearly defines and helps to identify the cost of
    running a facility by removing the capital portion.
        The other concern that we talked about is that partnerships
    are very good. We hear a lot today about business like. That is
    very good. The proceeds that go back into the agency budget, is
    a concern that maybe they support the program and still don't
    get to the facilities' people that need those dollars. That is
    a cautionary note.
        Mr. Horn. Let me pursue what Mr. Frank started here, and
    what some of you have responded to. I would sort of just like
    in one place Mr. Mihm, if you could sum up how the executive
    branch of the Federal Government funds the long-term
    maintenance for particular buildings that it operates. And is
    this mostly administered by the General Services
    Administration? What does OMB do when they're looking at
    budgets of a particular agency? Do they just leave it for a
    reprogramming purpose, or how does this thing work across the
    board in general?
        Mr. Mihm. The short answer, sir, is poorly.
        Mr. Horn. What's the process right now?
        Mr. Mihm. The process is it comes in as part of the
    standard budget process through that agencies would submit
    through OMB. And then subsequent appropriations up here on the
    Hill. There is not a separate or necessarily focused attention
    to capital issues. In fact, the budget process has been seen
    pretty widely as creating a bias against these long-term
    spending issues. So, they have a tendency to fall out or not
    get the full weight because long-term benefits are not
    considered with short-term costs.
        Mr. Horn. Is there a percentage that they use as a rule of
    thumb as to the amount of money that is available for deferred
    maintenance and all of that?
        Mr. Mihm. If there is, I am not aware of it. I have heard
    numbers of 2 to 4 percent.
        Mr. Gregory. The earlier report that was done, the cost of
    ownership----
        Mr. Horn. Do you want to put the microphone up to you.
        Mr. Gregory. The earlier report that was done prior to our
    report dealt with the cost of ownership and strongly
    recommended a 2 to 4 percent of replacement cost for buildings.
    All of the testimony or presentations that we heard in our
    committee, everyone was under 2 percent. No one was in the 2 to
    4 percent range. They were not able to get there.
        Mr. Horn. What would the private sector or the nonprofit
    sector, if its universities with vast buildings and so forth,
    put aside for maintenance?
        Mr. Gregory. That is a difficult question to answer,
    because of the the different ways that people look at
    facilities. The earlier report looked at the government
    facilities in terms of replacement cost in arriving at what is
    a nominal number. When trying to compare that with business or
    private industry, numbers were sometimes in excess of 4
    percent. But, clearly, they were upwards of the 4 percent
    range.
        Mr. Horn. Is there any role the executive branch has
    pursued to identify certain structures by some coding that
    where more maintenance would be required in terms of a long-
    term basis, because we know a lot of schlock buildings have
    been built in this city, among others, because for the last 30
    years, you could go down and get an agency to say, yeah, we
    will move into your building. And they then go to the bank and
    get a mortgage and up goes this thing, which probably is
    depreciated over 20 years or so, and they might well stay there
    for 80 years.
        Now what do we know about how you evaluate that if you are
    trying to put a budget together and you have got maybe 150
    buildings or facilities of one sort or the other? I mean, is
    there any part of OMB's, and this I am asking both of you here,
    is does OMB have any formulas in this area? Are there any
    common sense rule of thumb.
        Mr. Gregory. We were very impressed at the committee level
    with the capital planning guide as part of the OMB. It talked
    about a very good process. It was a draft at the time. I don't
    know that it's even been finalized.
        Mr. Mihm. It is out.
        Mr. Gregory. It talked very specifically about planning,
    budgeting procurement, management, use, and ultimately
    disposal. It's the total life cycle consideration. As you
    connect mission and facilities, decisions start to be made
    easily as you better understand the agency's mission.
    Facilities programs that wrap around the business part enable a
    proper facility for the business and the mission.
        Mr. Horn. Mr. Mihm, I have got 23 seconds to go here. Is
    there an identification on that OMB document you are saying now
    that is policy?
        Mr. Mihm. There is a capital programming guide that is out
    from OMB. It was based on some of the work that we did looking
    at capital planning and best practices.
        Mr. Horn. How thick is the guide?
        Mr. Mihm. Not an inch.
        Mr. Horn. About 100 pages, 200?
        Mr. Mihm. Yes, 100 pages.
        Mr. Horn. Without objection, we will put as much of it as
    we can in the record.
        Mr. Mihm. We will get you that as well as our best practice
    guide.
        Mr. Horn. Please. That would be very helpful. Well, my time
    is up. Let me now go to Mrs. Norton for 5 minutes of
    questioning.
        Ms. Norton. Thank you, Mr. Chairman.
        I have a question about how to encourage essentially more
    public-private partnerships, how we get there from here. First
    let me ask you whether or not how important you think the
    statutory basis you describe as one of the key elements in all
    of these projects has been for the development of these
    projects?
        Mr. Mihm. It was Ms. Norton, it was absolutely critical.
    None of the projects could proceed without a statutory basis.
    Now, some of this was project specific. In other cases, for
    example, the VA, and even more broadly with the Postal Service
    and the creation of the Postal Service, it was more general
    enabling legislation that allowed them to do it. But in all
    cases, they had to have a statutory basis in order to move
    forward with the partnership.
        In terms more broadly, though, the question that you are
    asking about, the incentives, there are actually two areas that
    I think that we can really put some effort into and incentivize
    agencies to start thinking strategically.
        First is continuing congressional oversight. In very
    pointed questions from the Congress to the agency that has
    jurisdiction over the property or buildings that you're
    interested in is, how are you thinking about this
    strategically? How does this fit or not fit in with what you
    are trying to achieve. Could it fit in with what you're trying
    to achieve?
        I think the case study of the Park Service and the growing
    attention that the Park Service is giving to the issue of
    deferred maintenance, certainly indicate that they care very
    deeply about it. But I think Congress, and the persistent
    questioning that Park Service officials they have gotten from
    Congress in recent years, and I know we have done quite a bit
    of work on that, has helped to bring that even closer to the
    front of their minds.
        I think the second thing that needs to be done is to create
    incentive. This is something that Congress has already done by
    passing the Government Performance and Results Act requires
    agencies to, in their annual performance plans, think about all
    the various resources which includes their physical assets and
    how the assets are being used to achieve their goals.
        So it requires some very reasonable questioning on the part
    of Congress. When we're assessing those plans on the behalf of
    Congress, we will ask how agencies are using their assets and
    help determine if they are using them strategically.
        So those two areas, questions from Congress, and certainly
    our continuing work I think will help to elevate this in a
    general sense on the agenda for agencies.
        Ms. Norton. I note that there are some agencies that have
    authority to enter into partnerships to do innovative leasing
    arrangements. The DOD has it, VA has it, Park Service has it.
    Now I can only what I can charitably call on anomaly, however,
    in the Federal structure because there is one agency that has
    real estate responsibility, that is GSA, doesn't have it.
        So here you have Defense, VA, Park Service, you have other
    missions who can enter into partnerships and proceed some of
    the way, even before one even gets to the statutory point, and
    may not need the statutory point in some instances, and the
    GSA, which has control of the most Federal land, most Federal
    buildings, is left there without any authority to do any of
    this. I think that's part of responsibility for the horrible
    waste we see down in Southeast Federal Centers.
        They actually had a plan, had a very good plan, that there
    would have been a mall there that would have encouraged Federal
    employees to come there, and that hadn't done it, and that
    hasn't brought agencies there. I wonder if you think the GSA
    ought to have some of the authority that DOD, VA and Park
    Service already have?
        Mr. Mihm. We haven't looked at that directly, so I am going
    to have to give you an, admittedly, a bit of a roundabout
    answer on this, and that is that I note there's a lot of effort
    that's going on in GSA now. And I think the statement for the
    record from OMB alluded to some of the legislative package
    that's being put together that would amend statutory
    requirements for this disposal of property and liberalize the
    authority to engage into partnerships.
        I think one of the problems encountered government-wide,
    and certainly this is shared at GSA, is the culture which in
    the past has not viewed Federal property as an asset. They have
    viewed them basically as sunken costs. For example, we may view
    an office building simply as the building we work in but not
    something that can be used to further the mission of the
    organization.
        And so this is why, when I mentioned one of the common
    elements, is that, each of the partnerships we looked at, the
    Federal agency found it necessary to establish a new
    organizational unit and bring in new expertise that was used to
    and comfortable in thinking strategically about how do we use
    this, how do we use assets. And that's something that capacity
    is needed at GSA and elsewhere on that.
        Ms. Norton. Imagine GSA not even having the authority to
    help agencies use assets, which is part of their bottom-line
    responsibility in very many ways. So you'd think the GSA should
    have some authority of the kind DOD and VA and Park Service
    have now.
        Mr. Mihm. Well, we haven't looked at it directly, but it's
    something that I know that they are working on. If Congress
    views it as making sense for others, it's certainly worthy to
    explore for GSA, the government's largest landlord.
        Ms. Norton. Thank you. Thank you, Mr. Chairman.
        Mr. Horn. I thank you.
        Let me just round out some of this testimony on the budget
    process and the training process for property managers, if any,
    and I'd be curious what both of your studies tell us in terms
    of the degree to which we have a program somewhere in the
    executive branch that we can upgrade the understanding and
    provide the skills, if property managers don't have those
    skills.
        What did you find as you looked at this question? I mean,
    are there certain essential skills that are needed in a
    property manager to do the kind of things you are recommending
    be done and you have already seen done in some areas?
        So, Mr. Mihm who'd like to jump at this?
        Mr. Gregory. What we experienced at the committee level is
    the facilities people know the job. They know what they need to
    do. They are good, well-intentioned people. They find their
    hands tied when they come up with suggestions for savings or
    implement programs that reduce their costs. It's not friendly
    to the budgeting process. That's the one issue.
        Mr. Horn. Well, is that a matter of they're afraid to make
    the money or they feel they have to turn it back or what is it?
        Mr. Gregory. My understanding, sir, is they are driven by
    the budget process, that they have to turn it back, spend it or
    lose it, and that maybe gets into an issue of not spending it
    as well as you would like to. If you could pool money, if you
    had a revolving account where funds could be pooled and used
    for some of these nonroutine maintenance things that happen,
    that would really allow them to manage their facilities better.
        The overall thought was that the facilities maintenance
    backlog and facilities issues in general could be much better
    handled if there was relief in the budget area of how budgets
    and dollars are allocated.
        Mr. Horn. What you are talking about? Can they carry it
    forward into a new fiscal year?
        Mr. Gregory. Right. That's one of the issues that we talked
    about.
        Mr. Horn. And you would favor that, obviously, because it
    gives flexibility?
        Mr. Gregory. Some type of flexibility, but there is a
    caveat to that, in not being able to carry funds forward or use
    funds differently. But, more importantly, we identified the
    ability to have a cost system that better identifies the true
    cost of facility management, and that's one of the things
    that's very obscure in a number of presentations that we heard.
        Mr. Horn. Mr. Mihm.
        Mr. Mihm. We found in a couple of various Mr. Chairman,
    first, is that there was a need for real leadership. I know
    it's easy to say that, but in the projects that we reviewed,
    often they didn't get going or weren't even conceived until a
    new woman or man came in and said, look, you know, we are going
    to do things differently here. The old ways of doing business
    just aren't going to work anymore.
        The Postal Service, for example, had the authority to enter
    into partnerships for a number of years until they got some new
    leadership, not at the very top but in terms of managing their
    assets. This manager began to think differently about how we
    can do that. So leadership is key.
        Second, there is clearly the need for skills and basic
    business management, as opposed to traditional property
    management. This includes skills like how to negotiate with the
    private sector, draw up a business plan, and monitor the
    execution of the business plan.
        I mentioned in my opening statement about the importance of
    how in the partnerships that we reviewed it wasn't the normal
    contracting procedures where the government figures out
    everything that it wants, sends out a request for proposals,
    and then accepts the lowest bid. This was something where the
    public and private sectors engage in a partnership. In this
    partnership there's an awful lot of give and take that goes on.
    These business plans are jointly developed, and that's a
    different set of skills than you routinely find in Federal
    asset management offices.
        Mr. Horn. Well, on this point and the management of assets,
    to what could be done on, one, the strategic plan that we now
    require and, two, just in the general framework of the
    Government Performance and Results Act, and what is your
    understanding if, let's say the next round we got this pretty
    pitiful last round from most agencies, hardly any that were
    worth reading should that be worked in as part of it? Does it
    need a change in the law to assure that it's worked in or is it
    simply a matter of getting OMB to provide guidelines or
    Congress in some way to provide guidelines? What's your
    reaction on that?
        Mr. Mihm. I think this is an area where we have the
    statutory basis. The law is pretty clear about what Congress
    was expecting in terms of the level of detail in the annual
    performance plans versus the strategic plans. And OMB has
    recently, with the capital programming guide and the revisions
    to A-11, which is the circular that governs the preparation of
    the President's budget, given agencies adequate guidance.
        Nevertheless, when we reviewed both the fiscal year 1999
    plans and the 2000 plans, the ones that came up here to
    Congress in February, one of the consistent failures that we
    saw in the plans was a lack of attention to how resources in
    general, whether it be information technology, budgeting, or
    assets, will be used to achieve the goals of the organization.
    This is just a consistent theme that we have seen.
        Even when we knew it was separate budget documents, that an
    organization was going to be undertaking a large capital
    project, you wouldn't see it reflected in the annual
    performance plan.
        At GAO one way that we're trying to contribute, is by
    consistently sending these messages back to the agencies, in
    both our audit reports and in the guidance that we issue. I
    know in the evaluations that congressional staff was looking at
    of the annual performance plans this year, that was one of the
    factors that they were looking at as well.
        I think it's just a matter more and more of agencies kind
    of getting the message and that the fiscal pressures, the
    pressures that are coming from Congress, the pressures that are
    coming from OMB, I think we will see more progress over time on
    this.
        Mr. Horn. Mr. Turner, do you have some more questions you'd
    like to ask? How about Ms. Norton? Chairman Franks, any more?
    Well, anything else you'd like to add?
        We're going to round out panel one, and if there is
    something we have missed that you'd like to make an extra
    comment on, feel free.
        Mr. Gregory. Just in conclusion, that the title of our
    report, the ``Stewardship of Federal Facilities,'' applies to
    all levels. There has to be a better understanding of what
    facilities means to the mission of the agency. We believe that
    if our report is embraced with the key items and serving as a
    guidance document will be a great first step.
        Mr. Horn. Now, have you and the OMB sat down to discuss
    that report?
        Ms. Stanley. No, we haven't. I mean, OMB briefed the
    committee during their deliberations, but there hasn't been
    followup action.
        Mr. Horn. Is there going to be followup with them?
        Ms. Stanley. There's nothing planned. We'd be very glad to
    do that.
        Mr. Horn. Well, I was going to say, we ought to get a
    letter one way or the other out of us and suggesting they sit
    down and get the ideas in their bloodstream, as well as your
    bloodstream and ours and GAO's. So, well, we will work that out
    with staff and your own staff.
        Well, we thank you both for very worthwhile studies and for
    giving us that in-depth and overall view that is always needed
    if something good is going to happen. So, thank you very much
    for the work, and thank you very much for coming, presenting
    this to us. We appreciate it.
        The next panel is panel two, Mr. Randall Yim, the Deputy
    Under Secretary of Defense for Installations of the Department
    of Defense; Mr. Thomas Garthwaite, Deputy Under Secretary for
    Health of the Department of Veterans Affairs, and Mr.
    Garthwaite will be accompanied by Charles Yarbrough, the Chief
    Facilities Management Officer, Mr. D. Mark Catlett, the Deputy
    Under Secretary for Budget; and the next witness will be Mr.
    Denis Galvin, Deputy Director of National Parks Service; and
    Mr. Rudolph Umscheid, vice president, facilities, U.S. Postal
    Service.
        OK. Gentlemen, I think you were in the room, and your
    testimony will automatically go in once we call on you, and we
    need to swear you in. So if you'd stand, raise your right
    hands, and those behind you that are perhaps going to testify,
    please get all of them up. We have seven possible witnesses.
        [Witnesses affirmed.]
        Mr. Horn. OK. The clerk will note that all seven witnesses
    took the oath and affirmed it.
        We will now start with Mr. Randall Yim, Deputy Under
    Secretary of Defense for Installations.
        You got the, I think, the approach earlier. Your statements
    were all fine. We have all read them; staff read them. We would
    now like a summary, if possible, in 5 minutes. If you need to
    go to 6 or 8, I'm not going to be offended, especially if you
    spent a lot of work on it. But, basically, I go by the rule
    that if they can't explain something in two pages, they don't
    understand it. So I think you can do that.
        But go ahead, Mr. Yim.

      STATEMENTS OF RANDALL YIM, ACTING DEPUTY UNDER SECRETARY OF
    DEFENSE FOR INSTALLATIONS, DEPARTMENT OF DEFENSE; DENIS GALVIN,
       DEPUTY DIRECTOR, NATIONAL PARK SERVICE, DEPARTMENT OF THE
    INTERIOR; THOMAS GARTHWAITE, DEPUTY UNDER SECRETARY FOR HEALTH,
        DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY CHARLES
      YARBROUGH, CHIEF FACILITIES MANAGEMENT OFFICER, AND D. MARK
        CATLETT, DEPUTY UNDER SECRETARY FOR BUDGET; AND RUDOLPH
       UMSCHEID, VICE PRESIDENT, FACILITIES, U.S. POSTAL SERVICE

        Mr. Yim. Thank you, Chairman Horn and Chairman Franks and
    distinguished members of these two subcommittees. I am very
    pleased to be here today to discuss the Department of Defense
    initiatives for reshaping our installation infrastructure to
    support our changing military needs.
        Secretary Cohen recently testified before the House Armed
    Services Committee about the important role that our
    installations play in our defense missions. Installations are
    platforms from which diverse strategies and missions are
    executed. They contain facilities and equipment for training
    and mobilizing our forces and their communities where our
    people live and work. Our installation programs must enhance
    our readiness, our mission accomplishment and maintain a high
    quality of life.
        As most of you know, our military mission needs have
    changed. We must be vigilant to assure that our installation
    structure similarly changes to match these new mission
    requirements. To this end, we are embarking on a series of
    interrelated initiatives to reshape our installation
    infrastructure. These include privatization of housing and
    utilities, enhanced outleasing of underutilized real property
    and facilities, competitive sourcing of noninherently
    governmental functions, certain aspects of base operations, for
    example, demolition of excess facilities, and construction
    supporting improved standards and conditions for critical
    facilities such as our barracks and dormitories. And let me
    emphasize this, and, most importantly, authorization for two
    additional rounds for base closure and realignment.
        We need legislative authority for additional rounds of BRAC
    now. Additional BRAC has proven to be the only fair, open and
    realistic way that the Department of Defense can align its base
    structure to support the military's changing mission
    requirements and support operations.
        We are actively seeking from Congress two additional BRAC
    rounds in 2001 and 2005 to reduce what we estimate to be a 23
    percent excess in our infrastructure requirements. We estimate,
    and the GAO agrees, that we may save approximately $3.6 billion
    per year through additional BRAC, and we sorely need to use
    these funds on our enduring facilities to support high-priority
    programs such as readiness and modernization, quality of life,
    and all of the above.
        BRAC, however, is only one initiative in a multipart
    strategy to reshape the DOD base structure. I spoke earlier
    about some. Let me highlight a few of these.
        First, on quality of life and housing in particular. When
    we embark on our various initiatives to reshape our
    installation's infrastructure, we are not only interested in
    saving costs but we are dedicated to maintaining mission
    readiness and protection of the people that have served our
    country. So quality of life and housing is a very important
    program.
        Last year, we established clear goals for improving the
    quality of our housing. We directed the services to program
    resources to eliminate the worst of the barrack conditions our
    single service members endure, that's permanent party, gang
    latrine barracks, no later than fiscal year 2008 and directed
    the services to continue to implement the one plus one building
    construction standard.
        Based on established goals the service have also developed
    plans to eliminate our inventory of inadequate family housing
    by 2010.
        Our housing privatization initiatives have progressed over
    the last years. We've devolved more execution authority to the
    services, while maintaining oversight within the Department. I
    am committed to making this program work and to move the
    projects to completion. They provide very sorely needed housing
    for our service members and our families.
        Next, is leasing of our facilities. The Department is
    considering how to better use our fallow assets, both land and
    buildings. Our challenge is to determine if we can realize the
    unused economic value of a property at a given installation to
    fund facility maintenance and revitalization. We are
    recommending changes to our current leasing authority, Section
    2667, Title 10, of the United States Code, that we believe
    could result in better economic use of our assets, additional
    revenues, as well as cost avoidance scenarios such as military
    construction.
        This initiative could result in upwards of $100-$150
    million of annual revenue by the end of fiscal year 2005, but
    this is very important. We are going to pursue this, but let me
    again emphasize that $150 million compared to $3.6 billion of
    savings from BRAC is no substitute for BRAC.
        Before closing, let me address briefly two other areas.
        The first is real property maintenance. For fiscal year
    2000, we are requesting $5.2 billion for real property
    maintenance, which is a 7 percent increase over last year's
    program. Keeping our facilities in operational and safe
    condition is an absolute high priority for the Department. As
    you know, lack of proper maintenance, as other witnesses have
    testified previously, and timely repairs leads to facilities'
    failure that will jeopardize our missions and our readiness.
    And we have also emphasized disposing or demolishing facilities
    that we no longer can afford to maintain, that are excess to
    our needs. And, again, closing bases will free up additional
    real property and maintenance funds.
        Second, let me voice my support for OMB's comments that our
    proposed legislative changes on leasing, coupled with those
    proposed by GSA and VA, will enhance the Federal assets across
    the Federal Government. This is clearly a move in the right
    direction.
        As your subcommittees consider these changes, let me add,
    however, one note of caution. The Department of Defense
    currently has authority to implement enhanced outleasing that
    is in part broader than that being considered by GSA and OMB,
    and I would not want DOD to take a step backward as the rest of
    the Federal Government moves forward in this important area.
        Chairman Horn, Chairman Franks, thank you and committee
    members, thank you for this opportunity to present the
    Department's programs, and I'll be pleased to answer any
    questions.
        Mr. Horn. Thank you.
        [The prepared statement of Mr. Yim follows:]
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        Mr. Horn. The next witness is Dr. Thomas Garthwaite, the
    Deputy Under Secretary for Health, Department of Veterans
    Affairs.
        Dr. Garthwaite. Mr. Chairman and members of the
    subcommittees, the Department of Veterans Affairs is the second
    largest of the 14 cabinet departments and operates nationwide
    programs of health care, assistance services and cemeteries for
    veterans.
        The Department's capital portfolio currently consists of
    over 22,000 acres of land, 5,300 buildings, to the total of 140
    million square feet of owned and leased space. This inventory
    is spread over nearly 1,200 locations in all 50 States, the
    District of Columbia, Puerto Rico, Guam, and Samoa. A large
    percentage of the Department's capital assets are devoted to
    providing health care to the Nation's veterans. In this
    portfolio we have 1,700 historic buildings which require
    special consideration and treatment.
        A significant discordance between our actual capital assets
    and our capital asset needs has developed in large part due to
    the ongoing massive transformation of VA health care that began
    in 1995. As part of this transformation, we have closed more
    than 52 percent of our hospital beds. We've integrated the
    management and services of 48 facilities into 23 systems of
    care and have opened or are in the process of opening 272 new
    community-based outpatient clinics, some built, many leased.
        At least three factors contribute to the discordance
    between our current asset array and our needs. First, the rapid
    changes in the delivery of health care which require radically
    different physical structures and significantly less space. The
    rate of change in medical practice is far faster than the
    capital asset cycle.
        Second, the location of facilities is often outside the
    veteran population centers which leads to inconvenience for
    access for many veterans.
        And third, the age of many of our facilities requires
    constant investment to maintain function and is associated with
    intrinsic barriers to efficiency.
        To align our physical infrastructure to more effectively
    support our current needs, we are in the process of
    implementing a new strategic planning process beginning at the
    local level. Each of our 22 geographic service areas will
    establish a government community committee, including
    membership representing veterans, the State, our academic and
    business affiliates and our local leaders. The committee will
    develop plans aimed at realigning any imbalance between VA
    capital assets and veteran needs.
        The process will emphasize the use of data as the basis of
    recommendations and will encourage the suggestion of
    alternative ways to deliver service, enhance access and improve
    the quality of care.
        Following such strategic review, any proposal for capital
    investments are documented in a capital asset plan for which we
    currently follow the principles of the OMB Capital Programming
    Guide. Proposed investments are reviewed by the VA Capital
    Investment Board in Washington to assess their linkage to
    strategic planning budget and performance goals. The board then
    provides an analysis to the Secretary about each proposal's
    viability for inclusion in our VA capital plan and our request
    of the VA budget to OMB.
        While the Department uses all of the traditional legal
    authorities available to Federal agencies for managing and
    disposing of its assets, two unique efforts may be of interest
    to the committees. The first has already been described in some
    detail by the first panel, and that is our enhanced use leasing
    program. It is unique among Federal agencies and has recently
    been recognized by the GAO as an example of a key element in an
    efficient and effective property management program.
        The Department has used this authority to consolidate
    operations and dispose of unneeded facilities, to co-locate
    Veterans Administration office space with VA medical center
    space, to obtain child care services for employees, to expand
    parking facilities for veterans and for employees, and to
    redirect operational funds from managing golf courses into
    direct medical care. In doing so, these leases have achieved
    significant cost savings, have enhanced employee recruitment,
    have added substantial private investment to the Department's
    capital assets, have provided new long-term sources of revenue
    and have created jobs and tax revenues for local economies. My
    full statement provides examples of our use of this authority.
        Finally, the Department is also proposing a pilot program
    to encourage and streamline the conversion of the value in the
    properties we no longer need into service for veterans. This
    proposal would allow the VA to dispose of unneeded properties,
    including land structures or equipment associated with those
    properties by sale, transfer or exchange, and to reinvest the
    bulk of the proceeds to support its health care program. The
    pilot would be restricted to 30 dispositions over its 5-year
    life.
        Mr. Chairman, the turmoil on health care you read about
    daily is all about a quest to define and provide value.
    Similarly, our capital asset program seeks value for veterans
    and for taxpayers. We believe we are making progress, but would
    welcome creative new options and incentives. We'd be pleased to
    answer any questions you and the committee may have.
        Mr. Horn. Thank you very much for being so punctual. You
    have 2 seconds left.
        [The prepared statement of Dr. Garthwaite follows:]
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        Mr. Horn. Mr. Denis Galvin, the Deputy Director of National
    Park Service, Department of the Interior.
        Mr. Galvin. Thank you, Mr. Chairman. Since its
    establishment in 1916, the National Park System has grown to 80
    million acres of land and 378 national parks. There are 16,000
    structures in those parks. Some have none, and some have
    thousands. We have building capacity frequently that exceeds
    the requirement for park operations. These are frequently
    historic buildings. We have an obligation to try and preserve
    them.
        We have a certain amount of authority to enter into
    agreements with private or other government entities to help
    pay for rehabilitation, maintenance and operation of structures
    through leasing, cooperative agreements and partnerships. The
    GAO report previously cited mentions our experience in San
    Francisco at Fort Mason and the Presidio.
        There, a good real estate market has allowed us to enter
    into some successful partnerships with nonprofits and for-
    profits to both rehabilitate and operate rather extensive
    structures that result in a savings to the government. Fort
    Mason was part of the Presidio turned over to the Park Service
    immediately upon the creation of Golden Gate. That was in the
    early 1970's. In an effort to reduce the rather significant
    operating costs associated with the major pier structures on
    San Francisco Harbor, the then superintendent made approaches
    to nonprofit groups to provide cultural educational and
    recreational activities to the park. Ultimately, that became
    the Fort Mason Foundation which represents a number of
    nonprofit groups that lease space at the site.
        Since 1972, the National Park Service has spent about $3.5
    million dollars on the rehabilitation while the Fort Mason
    Foundation has spent $13 million. Operating expenses for the
    Park Service are about $250,000 a year; for the foundation,
    about $2.3 million. A more recent example cited in the GAO
    report was the leasing of the old Letterman Hospital, again at
    the Presidio within Golden Gate National Recreation Area. That
    complex was transferred to us in 1994.
        Legislation enacted in 1993 by the Congress, specifically
    aimed at the Presidio, allowed us to lease the Letterman
    Complex. Through a competitive procedure, we selected the
    Thoreau Center Partners, a for-profit real estate partnership,
    to lease and rehabilitate the building. That has been
    successful. The partnership generates $170,000 thousand
    annually in rents and fees, and is able to pay off a commercial
    loan through subtenant rents.
        There are other examples throughout the system where we
    have avoided costs, at least, in terms of managing properties
    within the national park system. The Boston National Historical
    Park was created to allow cooperative agreements with a series
    of owners of undeniably nationally significant historic
    buildings. Faneuil Hall, which is owned by the city of Boston,
    still maintains a commercial operation on the first floor, but
    through a cooperative agreement we interpret it to the public.
        Similarly, a series of missions at San Antonio remain part
    of the Archdiocese of San Antonio, but through agreements with
    the archdiocese we spend money on preservation techniques there
    and also interpret them to the public.
        Some of our attempts to do this have not been successful.
    You mentioned the south side of Ellis Island where we've three
    times tried to find private interests to occupy and
    rehabilitate those buildings. Thus far we have been
    unsuccessful. We are trying a fourth time.
        Also, at Sandy Hook, which is part of Gateway National
    Recreation Area, we have tried a number of times to find
    tenants for a series of historic buildings there. We currently
    have a contract for a new market analysis and seem to be
    generating considerable interest in a mixed-use approach to
    that complex.
        We have a number of authorities that allow us to do this,
    and I just jotted them down here. Some of them are specific to
    parks and some of them are general. We have a general authority
    to accept donations. We have general authority to enter into
    cooperative agreements and some specific ones. Concessions
    contracts are important. In many instances, the concessions
    that provide public services in parks, restaurants, lodging,
    are in government buildings but under contract to the
    government.
        We have authority to lease historic buildings under the
    National Historic Preservation Act. We have some general
    leasing authority, just passed by Congress, that liberalizes
    our ability to lease nonhistoric buildings, and then as I
    mentioned there are specific provisions in individual park
    legislation.
        Another interaction we have with Federal property laws is
    the Federal Lands to Parks program which allows localities to
    accept Federal surplus property to turn into parks and open
    space in perpetuity. Since 1949 the National Park Service has
    deeded more than 1,300 properties totaling approximately
    144,000 acres to State and local governments.
        That concludes my summary, Mr. Chairman.
        [The prepared statement of Mr. Galvin follows:]
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        Mr. Horn. Thank you very much. The last witness on this
    panel is Mr. Rudolph Umscheid, vice president of facilities,
    U.S. Postal Service. Welcome.
        Mr. Umscheid. Good morning, Mr. Chairman and members of the
    subcommittee. I'm Rudy Umscheid, and I'm responsible for
    managing the design and construction and all real estate
    activities of the U.S. Postal Service. Joining me today is Mr.
    David Eales who is the manager of Realty Asset Management
    Division of our facilities organization; more simply put, he is
    responsible for promoting the public-private partnership
    endeavors for the disposition of underutilized or excess postal
    properties.
        The U.S. Postal Service owns and leases more than 37,500
    buildings to provide universal mail service. Our building
    inventory is in as good a shape as ever. However, it is a
    constant challenge to keep our real estate assets up to date.
    Continued population growth and increasing mail volume create
    the need for additional space. In addition, many of our older
    buildings are not suitable for today's mail processing methods.
        We also must keep our facilities in good repair and manage
    our leases to ensure continued occupancy of the facilities we
    rent. In these efforts, we involve the local community in
    decisions regarding the location of any new facilities. With
    more than 700 new or replacement facilities occupied each year,
    we have a good track record in this area, but it can be
    difficult to get consensus on some locations, and for our
    processing facilities we have problems finding sites which are
    suitable for our operation requirements and acceptable to local
    residents.
        Last year we spent $2 billion on new facilities in upgrades
    to existing facilities and paid over $660 million in rent. To
    accomplish our primary mission, Facilities has a nationwide
    staff of only 500, supplemented by employees at the local level
    who administer some of our smaller repairs. We also have a
    staff of 30 that's devoted exclusively to the disposition of
    our excess assets.
        With such an active program to obtain additional space
    needed to serve our customers, we find ourselves with former
    postal facilities, and sites which are underutilized and excess
    to our needs. The Postal Service has a statutory authority to
    maximize its excess real estate and to reinvest its proceeds in
    postal operations.
        When we have vacant space in our buildings, we often are
    able to lease this space to other organizations. We work
    closely with the General Services Administration to identify
    space in our facilities suitable for other government agencies.
    In fact, we currently receive some $38 million in rent from our
    public and private tenants.
        When properties are excess to our needs, in most instances
    we simply sell the property. Some assets, however, lend
    themselves to development because of the unique aspects of a
    property or their location in commercial districts. Since we
    lack the expertise to develop and manage these properties, we
    have entered into a number of innovative and effective
    partnerships with the private sector. In these situations, we
    work closely with local public officials and historic
    preservation groups to make sure the project meets their needs
    as well. Two of these projects, the Grand Central Station
    postal unit in New York City and the Rincon postal facility in
    San Francisco were highlighted in the February 1999 report of
    the General Accounting Office. In my prepared testimony, I have
    listed a number of other examples.
        Effective use of surplus postal real estate generates
    revenue which helps keep postage rates low. Such use also
    benefits the community because it contributes to a reuse of
    former facilities, many of which are historic buildings in
    downtown locations. The Postal Service is proud to be a leader
    in the management of real estate within the Federal Government.
        Mr. Chairman, that concludes my testimony. I'd be glad to
    answer any questions you or your subcommittee members might
    have. Thank you very much.
        [The prepared statement of Mr. Umscheid follows:]
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        Mr. Horn. I thank you very much. Chairman Franks, any
    questions?
        Mr. Franks. Mr. Umscheid, when you enter into these
    development proposals, what is the Postal Service's target
    return strategies, if any?
        Mr. Umscheid. We evaluate each opportunity on its
    individual merits. We balance risk and reward. Our mandate from
    the Board of Governors is that we are not in the development
    business. We are not in a position to take high risks. So, our
    returns tend to be more modest, but have an internal rate of
    return of 10 to 12 percent depending on the particular project
    or opportunity.
        Mr. Franks. Could you elaborate on some of the proposals
    regarding the GSA?
        Mr. Umscheid. Well, I think if I understand clearly, I
    think we are looking to partner whenever possible.
        Mr. Franks. I'm sorry; particularly as it relates to how
    scoring might make those kinds of arrangements more difficult?
        Mr. Umscheid. We are looking for opportunities to partner
    with the GSA and, in fact, have a very good working
    relationship with them. In many instances, we have facilities
    that are suitably located where we have excess space, and they
    may have the tenancy of another agency who might occupy that
    space, and so we would like to find creative ways where we
    might partner; we have the building, they bring the tenant, and
    we see if we can find an opportunity through the private sector
    investment, particularly in the area of financing. We don't
    want to invest postal dollars in a real estate opportunity.
        The scoring impacts them and us ultimately in that we have
    financeable leases and tenants have to be prepared to make
    long-term commitments, 15-20 years or more to justify the
    investment. Scoring, which in effect, looks at leases above a
    certain size, and takes them on a net present value basis,
    restricts their ability to make those investments.
        Mr. Franks. Thank you, Mr. Chairman.
        Mr. Horn. Gentleman from Texas, Mr. Turner, 5 minutes.
        Mr. Turner. The occasions I have had to have contact with
    the Postal Service have convinced me that you do have a very
    good real estate property management operation in the Postal
    Service, and I might ask, I mean, is it correct that you have
    the legal authority to do more things than most Federal
    agencies have? I mean, it seems like you have a great deal of
    flexibility that you are able to use. Are there some
    characteristics about your authority that make your real
    property management options more available than perhaps the
    rest of the agencies of the Federal Government?
        Mr. Umscheid. I don't know whether we have more. I think we
    possibly have more flexibility and leeway because we are a
    revenue-producing entity. So, clearly, having money, it's a lot
    easier to be a player when you have money to move forward on
    opportunities, and I think that's where we are continuing to
    try and move toward the private sector model of creative
    structures with business to recycle our buildings. Having
    personally come from the private sector, I find that there are
    no restrictions.
        One other area that comes to mind is that there are
    limitations in our borrowing capability. We have to do it
    either internally or to borrow through the Treasury. Had we
    more flexibility to look at other financial markets,
    particularly at a time when interest rates are low, possibly
    that would enhance our opportunities.
        Mr. Turner. Well, as I say, it does impress me, the speed
    with which you seem to be able to move with a project when the
    decision is made to do so. It seems to show a great deal of
    innovation that has come to the Postal Service that perhaps has
    not been able to be felt by the other agencies as well.
        I have one question for Mr. Garthwaite about the operations
    of the VA. It seems that you have been able to use these
    enhanced-use leases very effectively, but you also mention that
    you wanted to do a pilot asset disposal program, and I guess
    what I'd like for you to tell us is what kind of assets do you
    have on hand that you need greater flexibility to dispose of?
    Give us some examples.
        Mr. Garthwaite. Sir, we have, we have 172 hospitals,
    approximately, that are often sited on large campuses that
    include a lot of different outbuildings, many of which were
    part of a previous era of health care delivery and different
    functions for the Department of Veterans Affairs. Some of our
    facilities are located on Old Soldiers' Home, dating back to
    the Civil War, and we have accumulated over time a myriad of
    different kinds of buildings, a lot of them support buildings,
    which serve a variety of purposes.
        We now have moved into a dramatically different way of
    delivering health care, which is more outpatient with less time
    spent in hospitals waiting for diagnostic tests, more done by
    minimally invasive surgery and other procedures. These changes
    have left us with hospital and other buildings on campuses that
    just simply are not needed. These things do require enough
    maintenance to keep them either operational or keep them from
    falling down.
        Mr. Turner. You proposed to be able to dispose of 30
    properties over a 5-year period, and you need congressional
    authority, you need a law passed to do this. Is the major
    element of the statutory change you need to allow you to then
    keep the proceeds of what you generate from the disposed
    properties?
        Mr. Garthwaite. Right. It's a tremendous undertaking to do
    the administrative details to allow disposition of property to
    occur, including the selling of the plan in the local
    community. And the costs of entering into a project are largely
    personnel related; i.e., it's an extra job for which you would
    see no appreciable benefit, unless we give them that local
    incentive. The previous panel spoke to that well.
        Mr. Turner. Thank you very much.
        Mr. Horn. I thank the gentleman. I now yield my time of 5
    minutes to the gentleman from California who will also have his
    5 minutes following that if he wishes, Mr. Ose.
        Mr. Ose. I thank the chairman. With great respect, I would
    like to converse with Mr. Yim about a particular project in our
    area related to a BRAC. It's nice to see you.
        Mr. Yim. Nice to see you, sir.
        Mr. Ose. Mr. Yim used to work in Sacramento, and much as
    when Custer was called to the VIA, he was called to Washington.
    Expecting to return, we will deal with that tomorrow. That was
    7 years ago and McClellan has suffered since your departure
    from what I would call a less degree of attention. You were
    very good. Not much has happened since you left.
        I am very concerned about the manner in which we are
    proceeding with the reuse of McClellan. I know the local
    authorities have now selected a master development partner as
    of Tuesday evening, and they're going to work forward on a plan
    for the reuse of the base, hopefully by August.
        My question really delves down to how do we facilitate the
    transfer of properties on McClellan in a timely fashion?
    There's over 1,000 different structures there scattered about
    the base, as you know. Right now, the transfer process takes
    about 120 days for any single building. How do we change that?
    Are there requirements that we in Congress can give to you and
    the administration to facilitate the transfer? There's 26,000
    transactions that have to occur at McClellan between now and
    July 13, 2001. How do we get that done?
        Mr. Yim. I will be meeting with the delegation from
    Sacramento on Monday to discuss some of these issues with
    Secretary Dishner of the Air Force, Deputy Assistant Secretary
    Dishner of the Air Force.
        I believe that we've set a good framework at McClellan for
    rapid transfer by completion of some of the prerequisites to
    property disposal, the compliance with the National
    Environmental Policy Act and the California counterpart, CEPA.
    One of the concerns we have here is the environmental condition
    of many of our military bases, and McClellan in particular as a
    Superfund site, will limit the ability to transfer title under
    the Federal Superfund statutes until clean-up progresses to a
    certain area. I think we need to be vigilant to assure that the
    clean-up schedules are adhered to, that those milestones are
    met so that those prerequisites to transfer are completed in a
    timely manner and do not delay concrete reuse projects.
        Mr. Ose. Let me ask a question. I want to make sure I
    understand. Federal law right now says that in a BRAC, if we're
    going to transfer possession or occupancy, then the property
    prior to transfer has to absolutely comply with the not being a
    part of Superfund?
        Mr. Yim. No. It actually breaks down to two issues, a
    transfer of title versus a transfer of possession. Transfer of
    fee title to the property could not occur until the clean-up
    has progressed, in the words of the statute, until, ``all
    remedial action has been taken.'' That has not been interpreted
    to be when the last ounce of contaminant has been removed from
    the soil but rather when the remedy is in place and
    demonstrated to be operating correctly.
        If I recall, because of the significant groundwater
    contamination, we expected it would take a year, something on
    that order of magnitude, for that trigger to be reached at
    McClellan so that title to property could be conveyed. However,
    in the interim there can be leasing of the property with
    appropriate restrictions to protect human health and the
    environment. What I would be very interested in, is to be sure
    that both the Department of Defense and the Air Force are
    leaning forward correctly to accelerate interim leasing of the
    property where appropriate, even though title may not be able
    to be transferred.
        Mr. Ose. The transfers or the leases, whether it be fee
    simple or occupancy, how long is that taking in a typical BRAC
    situation?
        Mr. Yim. Well, again, transfer of title is dependent upon
    clean-up actions. So one of the things we are doing here at the
    Department since I have been here, is to raise the level of
    priority that other members of the Federal family give to base
    reuse as we ask the Department and the services to provide.
        So, for example, for the regulatory agencies such as the
    U.S. Environmental Protection Agency or State counterpart
    agencies, we are working with them really to raise the level of
    visibility and emphasize the importance reuse has in job
    regeneration and job replacement.
        Typically, it could take on the order of 2 years to proceed
    through all of the wickets to allow interim leasing decisions.
    I think we are able to shorten that substantially at McClellan
    and other Department of Defense facilities by being more
    aggressive on that, sir.
        Mr. Ose. How many transactions per day, if you will, are we
    currently completing at McClellan in terms of the 26,000 that's
    been identified, whether they be paperwork transfers between
    agencies and what have you? Of those transactions that the Air
    Force has identified as being necessary to complete the
    closure, how many of those per day are being done?
        Mr. Yim. In all honesty, I'm not familiar with the 26,000
    item transactions that you have raised, but I'd be happy to
    take that for the record, sir, and try to get back to you. I'm
    just not familiar with that particular metric.
        Mr. Ose. The source of my information is General Weidemer,
    who is commanding officer out there. So it may be paperwork
    transfers, transactions and what have you, but again, if we're
    going to do 26,000 of them, we got a little over 800 days,
    that's 30 a day, in addition to everything else you're doing.
        Mr. Yim. Again, I will be happy to look into that, sir, and
    provide you an answer for the record.
        [The information referred to follows:]
        [GRAPHIC] [TIFF OMITTED] T2621.069

        Mr. Ose. All right. Do you have any information relative to
    other bases that are being closed as to how long it has been
    taking to transfer a structure within the base?
        Mr. Yim. Typically, it's on the order of about 12 to 18
    months, and I agree with you that that is too long. We need to
    be able to be smarter in how we transfer property. I believe
    firmly, and I believe the services now with their experience
    believe that the key is rapid and smooth transition of the
    property. This is not a real estate transaction in the sense
    that we're trying to maximize money from the disposal of the
    property. When we focused on that in 1988, then the delays were
    really enormous at that time.
        Since 1993 as we began to emphasize smooth transition,
    keeping the property in productive use, getting it back onto
    the civilian property tax rolls, as opposed to negotiating for
    every last dollar from the local community, I think we have
    seen a great speeding up of the process. You may know, sir,
    that we are proposing legislation to Congress to accelerate
    that by seeking no-cost conveyances of properties for future
    rounds if the property is to be used for job generation
    purposes.
        Mr. Ose. On a relative scale, has McClellan been a success
    story in the manner in which it has proceeded toward closure?
        Mr. Yim. I think that many of the processes that we have
    employed at McClellan are models for the Department of Defense.
    We greatly shortened processing time by combining the NEPA, the
    Federal environmental requirements, planning requirements, with
    CEPA, the California counterparts, and we arrived at a NEPA
    document in approximately 12 months when those typically take
    about 2 years. I think that was dramatic improvement. We're
    able to reach agreement on economic development conveyance in
    that same 12-month timeframe when typically it takes 2 years,
    2\1/2\ years, to do those negotiations.
        There is a master caretaking cooperative agreement there in
    which we were working toward a concept of a hot turnover of the
    assets, so that as the military draws down capabilities, rather
    than to have the asset go dead, there is a concurrent turnover
    of base operation supports so that the local community is
    familiar with how to run the facilities, the quirks of the
    facilities, gets other tenants and private sector entities in.
    So I think those are innovations.
        In terms of reuse, Sacramento, as we both know, was very
    hard hit with three major closures since 1988. So in terms of
    recovery, I think that Sacramento has had a harder road than
    some other communities where they don't have cumulative
    economic impact.
        Mr. Ose. Is the methodology that's being employed at
    McClellan the model that you're expecting to use on these
    future rounds?
        Mr. Yim. Well, since I was involved in some of that
    methodology, I would have to say yes, because I believe that it
    worked properly, and I would like to try to infuse similar
    techniques into future rounds.
        Mr. Ose. That brings me to my basic question, and I'm
    familiar with the proposal on the economic development
    conveyances for some transfers at zero cost. In a situation
    where a community such as Sacramento has been hit as hard as it
    has been hit, and where we have bent over backward trying to
    create an innovative process which you've recognized as being
    better than the norm, why would we not reward that community
    with, for instance, the pilot project of the zero cost
    conveyance?
        Mr. Yim. We actually have a different legal structure where
    we're dealing with pending or anticipated economic development
    conveyances and where the economic development conveyance has
    already been executed, as in the case of McClellan. So the
    Department of Justice and our counsel indicate that to change
    or renegotiate already executed transactions, we would have to
    either have replacement or additional consideration or maintain
    the same present value.
        I will say that we have supported and we are going to be
    proposing that the services be afforded greater flexibility for
    already executed economic development conveyances, provided
    again the results are consistent with the new legislation, and
    that the revenues would be used for job creation, reinvestment,
    either in the installation or in the surrounding community.
        So, yes, I am as part of the legislative packet, seeking
    some sort of equitable relief for those communities that were
    aggressive and stepped forward in partnership with the
    Department and the services to proceed down the path before
    this new announcement for a change in the legislation.
        Mr. Ose. Mr. Chairman, Mr. Franks, am I on my first 5 or
    second 5 minutes or have I used it all up? I will be back.
        Mr. Franks [presiding]. Would the gentleman like another 2
    minutes to ask----
        Mr. Ose. Go around again? No, I can't, but I would like
    more time, but 2 minutes is not sufficient, so let's go on.
        Mr. Franks. The panel, I know, will be willing to respond
    in a timely fashion to any further inquiries pertaining to this
    matter from the gentleman from California.
        Mr. Yim. Yes, sir, certainly.
        Mr. Horn. If I may say, in terms of just general policy, we
    will submit written questions perhaps to all of you on each
    panel. Just remember you are under oath in making answers to
    that, so we will send the questions over.
        Mr. Ose. I will take I appreciate the chairmen's total
    courtesy to a freshman. I have one other question, if I may?
        Mr. Franks. Please followup.
        Mr. Ose. At McClellan there are certain pockets of the base
    that are very similar in characteristics, like the residential
    here and the recreational there and the industrial over there
    and the microelectronics down here and blah, blah, blah. One of
    the difficulties that I have been able to pick up is that the
    manner in which the individual structures within each of those
    pockets is transferred is unique, that being that this
    building, which might be right next door to a very similar
    building, has its own 120-day requirement.
        I would like to see us bundle similar buildings so that
    rather than have 1,000 transactions of four different types of
    buildings, we have four transactions of 250 buildings each. I
    think that would certainly expedite what we're trying to do
    here, which is get these things back on the private roll,
    available for private use.
        Has the Department given any thought or explored this
    particular aspect?
        Mr. Yim. I would hope that the policy is already being
    implemented. The purpose of our specialized services teams is
    to typically identify what the problem is that each structure
    has to be screened for any environmental hazards, and a finding
    of suitability to transfer a lease which is dependent upon any
    site-specific characteristics has to be performed. If everybody
    starts from scratch without establishing a baseline in advance
    it can be very time consuming.
        I will continue to encourage the services to create some
    baselines. Essentially 80 percent of the work is common
    throughout a particular area. That can be done, and then any
    particular characteristics of a building could then be assessed
    relatively quickly, and I will encourage the services to do
    that.
        Mr. Ose. Is the baseline being established at McClellan?
        Mr. Yim. Yes, I believe it has already been established at
    McClellan.
        Mr. Ose. For the various environmental challenges in any
    particular structure?
        Mr. Yim. I cannot say that universally, but I believe for
    the main it has already been established.
        Mr. Ose. We will followup with a written question.
        Thank you, Mr. Chairman.
        Mr. Franks. I'd like to thank the members of the panel for
    coming today and being so helpful to us during the course of
    the hearing.
        I'd like to now call the third panel up to the witness
    table. We now have Mr. G. Martin Wagner, the Associate
    Administrator of the Office of Governmentwide Policy, General
    Services Administration, who will be accompanied by Mr. Robert
    Peck, Commissioner of the Public Buildings Service and Mr.
    David Bibb, the Deputy Associate Administrator for the Office
    of Governmentwide Policy. Consistent with the rules governing
    this particular subcommittee joint subcommittee hearing, it is
    Chairman Horn who is empowered to swear in the witnesses. So he
    is going to undertake that function at this point.
        Mr. Horn. These gentlemen know the routine. Raise your
    right hands.
        [Witnesses affirmed.]
        Mr. Horn. The clerk will note that all four witnesses have
    affirmed the oath.
        Mr. Franks. Gentlemen, we welcome you. Mr. Wagner, please
    begin.

    STATEMENT OF G. MARTIN WAGNER, ASSOCIATE ADMINISTRATOR, OFFICE
      OF GOVERNMENTWIDE POLICY, GENERAL SERVICES ADMINISTRATION,
      ACCOMPANIED BY ROBERT PECK, COMMISSIONER, PUBLIC BUILDINGS
    SERVICE; AND DAVID BIBB, DEPUTY ASSOCIATE ADMINISTRATOR, OFFICE
                        OF GOVERNMENTWIDE POLICY

        Mr. Wagner. Good morning, Chairman Franks and Chairman Horn
    and distinguished members. Thank you very much for inviting us.
    I am Marty Wagner, Associate Administrator for Governmentwide
    Policy at GSA. I'm accompanied by Robert Peck, the Commissioner
    of the Public Buildings Service, and David Bibb, who works as
    my Deputy Associate Administrator for Real Property Policy.
        Our mandate in governmentwide policy is to focus on working
    out ways that the government does a better job of managing
    itself, and that certainly includes real property, and I would
    like to emphasize that's real property in all Federal agencies,
    not GSA's Public Building Service. It's also increasingly clear
    that real property is an extremely important strategic asset
    for effective government management. It's also one where we
    need to do a lot of additional work.
        I noted that some of the earlier figures given in the
    hearing, we seem to have radically different numbers about how
    many dollars we have invested in real property. Part of that is
    issues of methodology, but I think part of what is also
    indicative in that spread is we need to be thinking more
    systematically about this as an economic asset.
        In our 3 years of existence in governmentwide policies, I
    would like to mention that we have had some significant
    accomplishments in real property management. We have
    demonstrated that a collaborative policy development model
    involving all stakeholders is a good way to develop policy.
        We have promulgated a set of asset management principles as
    an attempt to get this more strategic look at this as a
    strategic asset. We have developed performance measures in
    working with the private sector for real estate management. We
    have proven that, if you go into the regions, leave Washington,
    DC, and go out into the real country and get with government
    agencies, that if you find opportunity to put agencies together
    on real property, there are opportunities for agencies to
    become more effective and to save money for the taxpayers.
        And, finally, we have to manage an information technology
    system that is used by many agencies for real property
    management. Its use is growing. And that is also an effective
    strategic tool.
        Nonetheless, I have to agree with the panelists earlier
    that we have many problems. We lack a strategic focus in real
    property management in many areas. Too much of the Federal
    inventory is deteriorating or underutilized. Management
    incentives are often at odds with good property management. The
    focus of the law is at the end of the useful life of real
    property assets when the government no longer needs the asset
    rather than when we do need the asset. This is also actually an
    issue in personal property as well.
        Agencies have responded to this in many cases with work-
    arounds to deal with those problems, but those are, at best,
    piecemeal solutions. And we think a more global approach to the
    government as a whole is warranted.
        We expect to be proposing very soon legislation to address
    these problems. We will focus strategically and on assets
    during their useful live. We want to bring in more flexible
    tools such as have been mentioned today, out-leasing, use of
    public-private partnerships, and I would like to also mention
    that in our discussions with many of the players, including the
    Office of Management and Budget, our approach to this has not
    been an approach to repealing the scoring rules, but to do this
    within the scoring rules. Those discussions continue. We would
    also like to improve incentives on individual managers with and
    agencies by using retention of proceeds.
        And, finally, on issues like the McKinney Act, we feel that
    a better way to deal with the goals of the McKinney Act would
    not deal with properties on a transaction-by-transaction basis
    but through a share of the overall proceeds from property
    disposal program.
        These proposals that we will be making are consistent with
    the recommendations of the General Accounting Office and the
    National Research Council. We expect them to lead to more
    effective real property management, lower cost to the taxpayer,
    as well as an increase in the number of properties available
    for disposal.
        Mr. Chairman, I would be happy to answer any questions you
    might have.
        [The prepared statement of Mr. Wagner follows:]
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        Mr. Franks. Mr. Wagner, thank you very much. We are going
    to be brief because we have just been summoned to the floor for
    a vote.
        But I would like to ask, what do you mean in your testimony
    by judiciously selected cases for the application of long-term
    outleases for public-private partnership.
        Mr. Wagner. Fundamentally, we would see this as one tool in
    the real property toolbox, so it won't apply to all properties.
    The properties where we think they would make the most sense or
    that they do make sense is one where there is a continuing
    government need for the property if the government doesn't need
    the property anymore, then we should simply dispose of it one
    in which there is value to the private sector, a continuing
    need where we can work out a deal that benefits both the
    private sector as well as enables the government to continue to
    do its job more effectively.
        Mr. Franks. My colleague, Mr. Horn, any questions for Mr.
    Wagner?
        Mr. Horn. Just one question, and that is the McKinney
    Homeless Assistance Act. It requires that the surplus property
    be screened for use for the homeless prior to the disposal.
    Since fiscal year 1990, I am told only 39 cites have been
    transferred for use by the homeless under this authority. Do
    you think this act is achieving its intended purpose?
        Mr. Wagner. I would I think the reason we are proposing, or
    we will be proposing a change to the legislation is that we
    think a better way to do this is not to put McKinney Act
    processes in the middle of every single individual transaction,
    which tends to be slower, and, in fact, create incentives to
    have more properties disposed of in the first place; and then
    take some fraction of those proceeds and apply those to
    benefiting the homeless.
        Mr. Horn. The witness from the Department of Veterans
    Affairs suggested an approach requiring that 10 percent of the
    proceeds from Federal property disposal always be transferred
    to the Department of Housing and Urban Development for the use
    of the homeless assistance groups. What do you think of that
    approach?
        Mr. Wagner. I would hesitate to go with any specific
    percentage. So I really I don't have a good feel. Perhaps----
        Mr. Bibb. Well, Mr. Chairman, we are discussing with OMB
    what that percentage ought to be. It certainly should be a fair
    amount. I don't think we would want to see a shortchanging. But
    at the same time, we are trying to balance what we are doing to
    protect the incentives to the Federal agencies. So as Mr.
    Wagner says, the exact percentage hasn't been determined.
    Somewhere in the 5 to 10 percent range, I think we are talking
    around those numbers. And that will be something we will be
    pursuing.
        Mr. Horn. Well, that approach makes sense to me for this
    reason. I think you all know we get tied up in knots, taking
    month after month after month. Many of these groups have never
    run a housing project before. They overestimate. They are
    wonderful people with, I'm sure, pure motive. But the fact is
    they can't run it, and they often fail. They would be better
    off if HUD had a pot of money where they could deal with
    housing in some innovative way and mainstream the people rather
    than have this is the homeless project. It hasn't worked. But
    it takes lawsuits, it takes all the rest of this nonsense to go
    on. I think we would be doing more for the homeless if we took
    the VA approach to this. That is my only view on this, Mr.
    Chairman.
        Mr. Franks. I concur. Mr. Peck, if I might real briefly,
    what is the current status of the redevelopment of the Boston
    City Plaza?
        Mr. Peck. That is a very good question. And I am not sure
    that anybody in Boston knows the answer. The John F. Kennedy
    Federal Building is on the Boston City Hall Plaza and is there
    pursuant to an urban renewal scheme which was executed some
    time in the mid to late 1960's. The city has proposed doing
    something to make the plaza more lively. We have been trying to
    cooperate.
        I will tell you in short, we took a look at a public-
    private partnership proposal to redevelop the low-rise portion
    of the JFK building, in part because where our building was
    situated and where the city wanted to build things, it didn't
    quite work, and we thought that maybe realigning those
    boundaries and moving our space differently around in the plaza
    might work to the benefit of both parties.
        The bottom line that is interesting is that the numbers
    just don't work. We recently invested in the low-rise and the
    high-rise building there. To make the numbers work would
    require significant expansion of space on our site to the point
    that I think it would make the cite more dense than the city
    planners in Boston would be prepared to see.
        So the bottom line is we are talking about less extensive
    options on redeveloping the City Hall Plaza. But I have to say
    it is a good example of where having the authority to do some
    kind of public-private partnership, at least in theory, could
    have helped both of us satisfy our own objectives, ours of
    keeping 300,000 square feet of usable space on that low-rise
    site and the city's of redeveloping it for commercial and other
    uses.
        Mr. Franks. I thank you for that brief update. We will
    probably be making a further inquiry about the status of that
    project.
        I would like to thank the members of the third panel. Mr.
    Wagner, thank you for visiting and offering your testimony. On
    that note, seeing no further questions, the meeting is
    adjourned.
        [Whereupon, at 12:07 p.m., the subcommittee was adjourned.]
        [Additional information submitted for the hearing record
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