[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:]
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    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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