[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]




 WASTED SPACE, WASTED DOLLARS: REFORMING FEDERAL REAL PROPERTY TO MEET 
                           21ST CENTURY NEEDS

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

                                HEARING

                               before the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 5, 2003

                               __________

                           Serial No. 108-35

                               __________

       Printed for the use of the Committee on Government Reform


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


                                 ______

88-504              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana                  HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   DIANE E. WATSON, California
ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER, 
NATHAN DEAL, Georgia                     Maryland
CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of 
TIM MURPHY, Pennsylvania                 Columbia
MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
JOHN R. CARTER, Texas                CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota                 ------
MARSHA BLACKBURN, Tennessee          BERNARD SANDERS, Vermont 
                                         (Independent)

                       Peter Sirh, Staff Director
                 Melissa Wojciak, Deputy Staff Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
              Philip M. Schiliro, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 5, 2003.....................................     1
Statement of:
    Perry, Stephen, Administrator, General Services 
      Administration; Linda Springer, Controller, Office of 
      Federal Financial Management, Office of Management and 
      Budget; Bernard Ungar, Director, Physical Infrastructure 
      Issues, General Accounting Office; Mark Catlett, Principal 
      Deputy Assistant Secretary for Management, Department of 
      Veterans Affairs; Major General Charles Williams, Director, 
      Overseas Buildings Operations, Department of State; and 
      Brent Bitz, executive vice president, Charles E. Smith 
      Commercial Realty, on behalf of the Building Owners and 
      Managers Association.......................................    18
Letters, statements, etc., submitted for the record by:
    Bitz, Brent, executive vice president, Charles E. Smith 
      Commercial Realty, on behalf of the Building Owners and 
      Managers Association, prepared statement of................   107
    Catlett, Mark, Principal Deputy Assistant Secretary for 
      Management, Department of Veterans Affairs, prepared 
      statement of...............................................    86
    Davis, Chairman Tom, a Representative in Congress from the 
      State of Virginia, prepared statement of...................     4
    LaTourette, Hon. Steven C., a Representative in Congress from 
      the State of Ohio, prepared statement of...................     9
    Perry, Stephen, Administrator, General Services 
      Administration, prepared statement of......................    21
    Springer, Linda, Controller, Office of Federal Financial 
      Management, Office of Management and Budget, prepared 
      statement of...............................................    45
    Ungar, Bernard, Director, Physical Infrastructure Issues, 
      General Accounting Office, prepared statement of...........    53
    Waxman, Hon. Henry A., a Representative in Congress from the 
      State of California, prepared statement of.................    14
    Williams, Major General Charles, Director, Overseas Buildings 
      Operations, Department of State, prepared statement of.....    90

 
 WASTED SPACE, WASTED DOLLARS: REFORMING FEDERAL REAL PROPERTY TO MEET 
                           21ST CENTURY NEEDS

                              ----------                              


                         THURSDAY, JUNE 5, 2003

                          House of Representatives,
                            Committee on Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:06 a.m., in 
room 2154, Rayburn House Office Building, Hon. Tom Davis of 
Virginia (chairman of the committee) presiding.
    Present: Representatives Tom Davis of Virginia, Ose, 
LaTourette, Souder, Shays, Janklow, Duncan, Schrock, Mrs. Davis 
of Virginia, Deal, Ms. Miller, Turner, Mrs. Blackburn, Waxman, 
Owens, Cummings, Kucinich, Tierney, Clay, Ruppersberger, 
Norton, and Cooper.
    Staff present: Peter Sirh, staff director; Melissa Wojciak, 
deputy staff director; Ellen Brown, legislative director and 
senior policy counsel; Robert Borden, counsel/parliamentarian; 
David Marin, director of communications; Scott Kopple, deputy 
director of communications; Drew Crockett, professional staff 
member; Teresa Austin, chief clerk; Joshua E. Gillespie, deputy 
clerk; Robin Butler, financial administrator; Michael Layman, 
Susie Schulte, and Jason Chung, legislative assistants; Brien 
Beattie, staff assistant; Phil Schiliro, minority staff 
director; Phil Barnett, minority chief counsel; Michelle Ash 
and Tony Haywood, minority counsels; Tania Shand, minority 
professional staff member; Earley Green, minority chief clerk; 
Jean Gosa, minority assistant clerk; Cecelia Morton, minority 
office manager; and Christopher Davis, minority staff 
assistant.
    Chairman Tom Davis. A quorum being present, the Committee 
on Government Reform will come to order.
    I want to welcome everyone to today's hearing on the 
current conditions of the Federal Government's real property 
holdings and the reforms that could be implemented to 
revitalize these extensive assets.
    The Federal Government is one of the world's largest real 
propertyholders. Its real estate portfolio has over 3.2 billion 
square feet and nearly 525,000 buildings valued at over $328 
billion. Literally hundreds of millions of taxpayer dollars are 
spent each year just to maintain these extensive properties.
    Many Federal properties are in disrepair, lack up to date 
technological infrastructure, are ill equipped for adequate 
security protection and pose health and safety threats to 
workers and visitors alike. Others are no longer suitable to 
meet the Federal Government's changing mission. For instance, 
of the 8,000 buildings managed by GSA, more than half are over 
50 years old and are in deteriorating conditions that require 
an estimated $5.7 billion in repairs.
    The State Department alone faces an estimated $736 million 
in repairs for deteriorating buildings. The situation has led 
the GAO to include vacant, underutilized and deteriorating 
Federal real property to its high risk list. GAO finds that the 
magnitude of this problem puts the Government at significant 
risk for lost revenues and opportunities. Specifically, GAO 
points to the fact that under-utilized or excess property is 
costly to maintain. The Department of Defense spends between 
$3-$4 billion annually just for maintenance of unneeded 
facilities. Also, GAO finds that excess government buildings 
and land can be put to more effective uses, exchanged for more 
useful property, or even sold. Clearly, these findings should 
concern every American taxpayer. Every Member of Congress can 
likely identify at least one Federal property site in his or 
her district that is either vacant or deteriorating and in need 
of revitalization.
    The adverse effects to the agency, the workers of that 
agency and the local community are apparent. Reuse would result 
in enormous benefits. One such example can be found right here 
in the District of Columbia. The old General Post Office 
occupying the entire block bordered by E, F, 7th and 8th 
Streets, NW, near MCI Center was built in the 1830's and has 
fallen into disrepair. In fact, by the 1990's this national 
landmark had become a crack house. Then, through congressional 
authority granted to GSA, the site was leased to a private 
entity and transformed into the Hotel Monaco.
    As I believe you will see in the GSA Administrator's 
testimony later this morning, its architectural significance 
has been preserved and restored, the waste of taxpayer dollars 
in maintenance has been stopped, and the local community is 
benefiting from this revitalized area.
    We are clearly facing a critical situation in Federal real 
property management. We must take action to stem this tide of 
deterioration to Federal buildings and subsequent waste of 
taxpayer dollars. We can't just throw more money at the 
problem. Fiscal responsibility requires that we also grant 
agencies alternative property management authority. We must 
expand the agency incentives to dispose of unneeded properties 
and extend their authority to enter into partnerships with the 
private sector.
    Federal agencies are subject to several laws that limit 
their authority to acquire, manage and dispose of real 
property. GSA has broad responsibility over Federal real 
property but its freedom to effectively manage holdings is 
severely restricted by law. Other agencies, such as State, VA, 
Defense, have separate authority that gives them limited 
flexibility to outlease or dispose of their property under 
specific conditions.
    GSA and other agencies need broader management authority in 
order to efficiently and cost effectively manage their 
properties. The first step in solving this problem is to 
require an accurate and updated inventory of all Federal real 
property and to establish a real property officer in each 
agency. Improving asset management is consistent with the 
President's management agenda.
    Next, agencies must be given expanded authority to exchange 
or transfer property with other Federal agencies. Subleased, 
unexpired portions of leased property now lease under utilized 
property. In addition, agencies should be permitted in 
appropriate circumstances to retain the proceeds from 
disposition of excess real property to meet the agency's 
capital asset needs.
    In the last Congress, I co-sponsored with Representative 
Pete Sessions, H.R. 3947, ``The Federal Property Asset 
Management Reform Act of 2002.'' That contained these reforms 
and provided for adequate congressional oversight. That bill 
had bipartisan support in the last Congress and it passed out 
of this committee. We have to continue to pursue solutions to 
the crisis in Federal property management disposal.
    We had hoped to have the Honorable Pete Sessions as our 
first witness. He has been an outspoken advocate for providing 
authority to agencies to enter into public/private partnerships 
but responsibilities on the House floor this morning prevent 
him from being here. If he can break away during this hearing, 
we will give him the opportunity to testify at that point.
    Our panel today is a distinguished panel and includes 
witnesses from government agencies having responsibility for 
property management as well as from the private sector. We are 
going to hear from the Honorable Stephen Perry, Administrator 
of the General Services Administration; Linda Springer, the 
Controller of the Office of Federal Financial Management of 
OMB; Bernard Ungar, Director, Physical Infrastructure Issues, 
GAO; Mark Catlett, Principal Deputy Assistant Secretary for 
Management, Department of Veterans Affairs; Major General 
Williams is not here but on his way and Brent Bitz representing 
the Building Owners and Managers Association and executive vice 
president, Charles E. Smith Commercial Realty.
    I want to thank all our witnesses for appearing before the 
committee and look forward to their testimony.
    Do any other Members wish to make an opening statement? The 
gentleman from Ohio, Mr. LaTourette.
    [The prepared statement of Chairman Tom Davis follows:]

    [GRAPHIC] [TIFF OMITTED] T8504.001
    
    [GRAPHIC] [TIFF OMITTED] T8504.002
    
    [GRAPHIC] [TIFF OMITTED] T8504.003
    
    Mr. LaTourette. Thank you very much, Mr. Chairman, and 
thank you for having this important hearing today. You have 
assembled a distinguished panel.
    The issue of underutilized property is one that has vexed 
us for quite some time. I don't believe there is an easy answer 
to the question of how we maintain our Federal building 
inventory to continually meet the needs of the myriad of 
agencies and departments of the Federal Government in an age of 
ever declining appropriations to the GSA.
    As we proceed in our discussions of this issue, it is vital 
that we keep in mind that all real property is not the same. 
The Federal inventory ranges from parklands as small as the 
grounds of the White House to the Yellowstone in Montana, 
office buildings in cities as large as New York City and as 
small as Asheville, NC and landmarks like the Statute of 
Liberty. While I use those examples as hyperbole, I don't think 
we should kid ourselves as to what we are really talking about, 
and that is the enormous inventory of Federal office buildings.
    I am pleased Administrator Perry is with us today, As the 
head of the GSA, he runs the Federal agency that controls the 
majority of the general purpose office space in the Federal 
inventory. GSA acts as the government's landlord, controlling 
approximately 1,900 Federal buildings with 184 million square 
feet of space and leases approximately 6,400 facilities with 
153 million square feet of space. GSA's total inventory of 337 
million square feet represents about 10 percent of the total 
governmentwide inventory but again, that is the vast majority 
of the Governments general purpose office space.
    In addition to its role as the Government's landlord, GSA 
acts as a central management agency for governmentwide real 
property. It provides policy guidance to agencies concerning 
real property matters and disposes of surplus property. GSA 
also is charged with the construction, alteration and 
acquisition of general purpose office space for Federal 
agencies without landholding authority.
    It is important to note that a few agencies do have 
independent landholding authority apart from GSA. They do so 
only for a limited purpose and limited scope and the types of 
properties that authority extends to. The Department of 
Defense, the Veterans Administration and Park Service, for 
example, do not have the authority to acquire and construct 
general purpose office space. This authority has rested with 
the GSA since its creation. At that time, the Congress 
recognized the need to centralize these functions to reduce 
waste and ensure that the real property policy proceeded in a 
coordinated manner.
    While I support giving the executive branch enhanced tools 
to manage its real property inventory, I believe this authority 
should be limited to those agencies already with similar 
authorities and in terms of general purpose office space solely 
within the GSA. The diminution of this authority to every 
agency that occupies space threatens the ability of the 
Congress to oversee the use of Federal property and exposes the 
Government to waste, fraud and abuse and risks the loss of 
valuable Federal assets.
    I agree with my colleagues that each agency has a role to 
play in the process of determining the best use of the property 
they occupy and as such, I support many of the changes that 
have been recommended. The requirement of an accurate and up to 
date inventory of real property and the establishment of a real 
property officer in each agency to coordinate with GSA on the 
use of each agency's facilities would go a long way to ensure 
we are maximizing our resources.
    I also support the use of public/private partnerships. In 
the 106th Congress we authorized legislation that would 
revitalize the Southeast Federal Center and the response to 
that initiative has so far been very positive.
    With ever decreasing appropriations for the repair, 
alteration and renovation of Federal real property, we must 
continually be looking for new and innovative ways to pay for 
this work. However, new authorities to conduct this work should 
be limited to those agencies with the expertise to use them 
efficiently and effectively. I believe that only the GSA has 
that expertise.
    I look forward to hearing from the witnesses today. I thank 
you for having this hearing and I thank you, Mr. Chairman, for 
your intense interest in this subject. I also want to commend 
Mr. Sessions for his work not only in the last Congress but in 
this Congress as well.
    [The prepared statement of Hon. Steven C. LaTourette 
follows:]

[GRAPHIC] [TIFF OMITTED] T8504.004

[GRAPHIC] [TIFF OMITTED] T8504.005

[GRAPHIC] [TIFF OMITTED] T8504.006

    Chairman Tom Davis. I thank my friend from Ohio who has 
also taken a leadership role in this on the other committee 
that has jurisdiction on these issues and look forward to 
continuing to work with you to resolve this issue as 
expeditiously as possible.
    I will now recognize our ranking member, the gentleman from 
California, Mr. Waxman.
    Mr. Waxman. Thank you very much, Mr. Chairman.
    We are here today to examine the very genuine, costly and 
pressing problems the Federal Government has managing its real 
property, its public buildings and lands. As GAO has indicated 
by placing this issue on its high risk list, problems abound. 
Unneeded and under-used buildings are in the Federal inventory. 
Some buildings are literally falling apart. Accurate data on 
Federal real property is hard to obtain from agencies and 
costly leasing of office space is too often the quick answer.
    These are far from trivial problems. In fact, they are 
costing the Federal Government and the American taxpayers 
billions of dollars. We are spending $3-$4 billion a year on 
buildings we don't need. In addition, the amount of money 
required to bring needed Federal facilities up to minimally 
acceptable standards is truly staggering, $63 billion at the 
Department of Defense, $11 billion at Interior, close to $6 
billion at GSA facilities. We probably can't get reliable data 
but we could be looking at $100 billion in needed repairs.
    One approach to specifically addressing the problem of the 
maintenance of Federal buildings is to provide agencies the 
ability to engage in public/private partnerships on specific 
properties. The basic idea is that the Government provides the 
property, the private sector provides capital for improvements 
and the property is then managed for the benefit of both 
parties.
    I know that Chairman Davis supports this approach and 
therefore, in the last Congress I worked with him to develop a 
bipartisan bill on property reform that built on this concept 
and gave agencies new tools to modernize Federal property 
management. The bill gave agencies the authority to sublease or 
outlease vacant space or land use and to use the proceeds to 
make other capital asset improvements. In addition, it 
contained important safeguards to ensure local community input 
is given appropriate consideration.
    Last year, the bill was never considered by the full House. 
It was referred to the Transportation and Infrastructure 
Committee. While that committee seems to agree in principle 
with many of the approaches the bill took, it had 
jurisdictional concerns with the way it was drafted and never 
reported out the measure. Continuing staff discussions on the 
issue in this Congress have so far failed to resolve these 
jurisdictional concerns which seemed to boil down to whether we 
amend the Federal Property Administrative Services Act of 1949 
over which we have jurisdiction or the Public Buildings Act of 
1959 over which the Transportation Committee has jurisdiction.
    I hope we can surmount these procedural and jurisdictional 
issues. I hope we can work together to make appropriate 
revisions to the substance of the legislation to address issues 
raised by the Congressional Budget Office and others.
    Mr. Chairman, we have a widely recognized and quite serious 
problem with the management of Federal real property. I am 
ready to work with you, with Representatives Norton and 
LaTourette, the Chair and ranking members of the Public 
Buildings Subcommittee of the Transportation and Infrastructure 
Committee to find a solution to this impasse.
    [The prepared statement of Hon. Henry A. Waxman follows:]

    [GRAPHIC] [TIFF OMITTED] T8504.007
    
    [GRAPHIC] [TIFF OMITTED] T8504.008
    
    Chairman Tom Davis. I thank my friend for his statement. I 
will be introducing some legislation shortly on that and again, 
will work with you to bring to our committee quickly. We have 
to resolve these jurisdictional disputes between the committee 
because of this issue every day millions of taxpayer dollars 
are being used to keep up buildings we can't use. It is a waste 
and we are going to move quickly on that. I appreciate my 
friend's pledge to work with us.
    Any other opening statements at this point? The gentleman 
from Ohio.
    Mr. Turner. This certainly is a wonderful initiative that 
is going to result in significant savings to the Federal 
Government and sounds as if it will constitute responsible 
management of Federal property.
    One of the concerns I have concerning this proposal, and 
some of the examples we have received, is the impact it might 
have on urban cores. As we look to buildings that are 
dilapidated and need to either be renovated or abandoned we 
must not have a migration of Federal jobs to the suburbs. Some 
of the examples we have here include a statement of a suburban 
location that would be more desirable for prospective Federal 
tenants and probably cheaper. We all know that suburban 
locations are going to be cheaper but there are also Federal 
interests in making certain we maintain our urban core.
    Being a former mayor, we know that through Federal mandated 
programs, cities are significantly burdened with issues of 
schools, Brownfields, social services, special needs 
populations, public housing, environmental mandates and 
infrastructure burdens that support an entire urban area. I am 
interested as to how the process of relocation might also 
include some interest in looking to supporting the urban core.
    Chairman Tom Davis. Thank you very much.
    Any other opening statements? The gentleman from Maryland.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    The Federal Government is one of the world's largest 
propertyowners with more than 400,000 buildings and 500 million 
acres of land. In fiscal year 2001, the Federal Government's 
real property assets were valued at $328 billion, with the 
Government spending billions annually to maintain its 
properties. More than 30 agencies control the real property 
assets.
    In January 2003, the Government Accounting Office 
designated Federal real property as new, high risk area in its 
report ``High Risk Series, Federal Real Property.'' The GAO 
found that many assets are in an alarming state of 
deterioration with an estimated restoration and repair cost to 
be in the tens of billions of dollars. The property is managed 
with outdated technology and business models dating back to the 
1950's. GAO further found that compounding these problems are 
the lack of reliable, governmentwide data for strategic asset 
management and the costs and challenges of protecting these 
assets against potential terrorism.
    The General Services Administration has broad 
responsibility over Federal property including the sale of 
surplus Federal property to State and local governments, non-
profit organizations, private individuals and companies. This 
authority is given to GSA through the Federal Property and 
Administrative Services Act. During the 107th Congress, the 
Federal Property and Asset Management Reform Act passed out of 
this committee by voice vote. That bill would have given 
agencies the authority to sublease vacant space or land and use 
the proceeds to offset the cost of holding such property and to 
make other capital asset improvements.
    Given the rise of the Federal deficit and the numerous 
unfounded mandates from Congress like the No Child Left Behind 
Act, I hope that similar legislation can be introduced to 
enhance Federal asset management. The Government should not be 
wasting billions of dollars. Federal managers of these 
properties confront a multitude of challenges securing the 
property due to the threat of terrorism and problems managing 
deteriorating facilities.
    I look forward to hearing from our colleague, Pete 
Sessions, today and all of our witnesses as we explore the best 
ways to ensure the effective and economical use of Federal and 
real property. I have said many times there is one that 
Republicans and Democrats agree on and that is that peoples' 
tax dollars should be spent effectively and efficiently.
    I thank you for this hearing.
    Chairman Tom Davis. Any other statements? Mr. Janklow.
    Mr. Janklow. Thank you very much, Mr. Chairman. I am going 
to be extremely brief.
    Looking at the two page precis that preceded this hearing, 
you have one paragraph that says it all. Federal agencies are 
subject to several laws that limit their authority to acquire, 
manage and dispose of real property. The GSA has broad 
responsibility over Federal real property but its freedom to 
effectively manage buildings is severely restricted. Other 
agencies such as DOD, the Department of State, the Veterans 
Administration have separate authority that gives them limited 
flexibility to outlease or dispose of their property under 
specific conditions.
    The problem we have is everybody in the Congress wants to 
run the executive branch. Everybody wants to micromanage, 
everybody wants to tell everybody how to do everything. No one 
has the freedom to run this like a $3 billion real estate 
enterprise ought to be run. The net result is what we have 
today. We can entitle any bill we want with all the grand 
titles about reform, reform, reform, but the reality is unless 
we are really willing to reform something, unless we are 
willing to turn loose people to make independent, sensible, 
discretionary decisions, unless we turn them loose to make them 
property asset managers, we are going to continue to have the 
mess we have and for the next 50 years, they will be holding 
hearings discussing things and what we ought to do to fix the 
Federal property.
    Thank you for having this hearing today, Mr. Chairman.
    Chairman Tom Davis. Thank you. I am glad we have a former 
Governor on the committee because I think you bring that 
executive perspective to this.
    The gentleman from Ohio.
    Mr. LaTourette. I was out of the room when Mr. Waxman spoke 
and I listened to Mr. Cummings as well. I want to make one 
comment so the record is clear. H.R. 3947 passed by a voice 
vote out of this committee during the last Congress but it was 
never reported by the Government Reform Committee because of 
some scoring questions, so there was not a delay in the 
Transportation and Infrastructure Committee because it wasn't 
actually reported out of this committee. I just want that to be 
clear.
    Chairman Tom Davis. Again, we look forward to working with 
you. You hold a critical subcommittee chairmanship over there 
and time is important. I think the testimony today is going to 
show us that everyday that goes by, we are wasting millions of 
dollars. We have a unique opportunity in this Congress to give 
our agencies the appropriate flexibility to dispose of these in 
some innovative ways. There are literally billions of savings 
over the years that we can make.
    Any other opening statements? If not, let us move to our 
distinguished panel. Mr. Perry, thank you so much for being 
with us. You have been very innovative, very proactive in this, 
you have some great ideas. Your entire testimony is a part of 
the record, as are all the others. I would like you to try to 
limit your testimony to 5 minutes. It looks like we are not 
going to have that early vote, so we may be able to move 
straight through and then do questions. Your light after 4 
minutes will turn yellow and that gives you 1 minute to sum up 
and when it is red, your time is up.
    I have to swear you in because that is the way the 
committee works.
    [Witnesses sworn.]
    Chairman Tom Davis. Thanks for being with us, Commissioner 
Perry.

 STATEMENTS OF STEPHEN PERRY, ADMINISTRATOR, GENERAL SERVICES 
 ADMINISTRATION; LINDA SPRINGER, CONTROLLER, OFFICE OF FEDERAL 
FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET; BERNARD 
   UNGAR, DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, GENERAL 
  ACCOUNTING OFFICE; MARK CATLETT, PRINCIPAL DEPUTY ASSISTANT 
SECRETARY FOR MANAGEMENT, DEPARTMENT OF VETERANS AFFAIRS; MAJOR 
    GENERAL CHARLES WILLIAMS, DIRECTOR, OVERSEAS BUILDINGS 
OPERATIONS, DEPARTMENT OF STATE; AND BRENT BITZ, EXECUTIVE VICE 
PRESIDENT, CHARLES E. SMITH COMMERCIAL REALTY, ON BEHALF OF THE 
            BUILDING OWNERS AND MANAGERS ASSOCIATION

    Mr. Perry. I also want to thank you for holding this 
hearing to bring more focus to what obviously is an urgent need 
for Congress to pass legislation which will enable the 
Government to use authorities which will enable us to be more 
effective in the management of real property assets. It is the 
only way in which those of us who have that responsibility at 
least from the agency point of view can effectively carry out 
our stewardship of this Nation's vast inventory of real 
property assets, most of which are used to provide work space 
for Federal workers.
    Since 1999, GSA has strongly supported congressional 
proposals for legislative reform to authorize effective real 
property management practices. We believe this is the most 
viable option at our disposal to address the longstanding and 
extraordinary and perhaps emerging crisis we are facing. It was 
clear from opening comments made by members of this committee a 
moment ago that this is well understood. The issue is where do 
we go from here, how do we address this longstanding, 
extraordinary problem we have.
    The problem manifests itself in the form of a huge and 
growing multibillion dollar backlog of deferred maintenance 
which is resulting in significant deterioration, under 
utilization and vacancy of many Federal buildings. If we 
continue to let this problem fester and grow, it will surely 
have an unacceptable, adverse impact on our Government's 
ability to function efficiently and effectively.
    GSA which manages only about 10 percent of the Government's 
total space has a backlog of deferred maintenance of $5.7 
billion. Looking at the Federal Government as a whole, this 
figure is estimated to be well over $100 billion.
    In addition to GSA's support of legislative action, the 
Department of Defense, Department of Veterans Affairs, 
Department of State, NASA and many other Federal agencies have 
strongly advocated for congressional passage of real property 
reform legislation. Also, as we know, the General Accounting 
Office issued and conducted studies which concluded that this 
extraordinary problem is not being addressed adequately. This 
is due in large part to the lack of authority in agencies to 
use effective real property management practices. My written 
statement for the record gives the details and rationale that 
we have for the kinds of property management practices we 
believe this Congress should enact and I will just mention them 
and talk about one in particular.
    They include the use of public/private partnerships to 
enable private sector funds to be used to help address the 
backlog of deferred maintenance; they include out leasing so 
that the Government could lease to private organizations vacant 
space not needed for Federal purposes, subleasing and exchange 
and sale of real property and financial incentives to assist 
agencies in the disposal of real property that they no longer 
need for agency purposes.
    For purposes of this testimony, I will just focus on 
public/private partnerships. This would be modeled on the 
common practice in the commercial sector where an owner of 
property leverages their equity in the property to secure 
funding from private sources to help cover the cost of 
renovating a deteriorated building. The GAO report in 2001 
recommended that a pilot project be authorized where this 
approach could be tested further. While Congress did not 
authorize that pilot project, certainly we have lots of 
evidence that public/private partnership in the Federal 
Government can work. It is being done at DOD, at VA, State, 
soon at NASA and there will be many examples we could cite and 
some are cited in my testimony regarding that.
    GSA has even used public/private partnerships successfully. 
You may know that under Section 111 of the National Historic 
Preservation Act we have limited authority to use this approach 
as it would relate to a historical building and a historical 
building which has been determined to have no further Federal 
need. In those very limited situations, we have used this 
authority successfully. One example of it is shown in the 
exhibits we have over there, the top tier of building show the 
old Tariff Building when it was mothballed, when were spending 
millions of dollars to keep it in that moth-balled condition. 
We used the authority for public/private partnership to convert 
that with the private sector partner into the facility you see 
on the right. Other examples abound. My point is this is not a 
new process that isn't tried and true. We know we can do it.
    Another example at GSA is the case of the Southeast Federal 
Center along the Anacostia River. There was special legislation 
provided that enabled us to use public/private partnership to 
develop that site and that project is proceeding.
    The bottom tier of slides is another facility which happens 
to be near Seattle, WA which is an example of another site. The 
left slide shows a deteriorated Federal facility we now have 
which could be renovated into something you see on the right.
    In conclusion, I will agree with the sentiment of the 
comments made in the opening remarks, that we do have a very 
extraordinary problem, as I said, perhaps an emerging crisis. 
It will only be addressed successfully with an extraordinary 
solution. This means Congress and the administration will have 
to be aggressive and creative and focused on results to 
overcome the many obstacles that to this point have impeded our 
progress in addressing this problem.
    We look forward to working with you and the members of the 
committee in addressing them.
    [The prepared statement of Mr. Perry follows:]

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    Chairman Tom Davis. Thank you very much.
    Ms. Springer, thanks for being with us.
    Ms. Springer. Thank you, Mr. Chairman, for asking me to 
testify today.
    The administration's Asset Management Initiative is 
critical to meeting our stewardship responsibilities in 
improving the overall management of the Federal Government. I 
would like to share with you the following excerpt on asset 
management.
    ``There is substantial evidence of weakness in the Federal 
Government's management of assets including acquiring and 
retaining unneeded and poorly performing assets, excess holding 
costs and ineffective asset disposal. Agencies are hampered in 
their efforts to identify and correct these problems by lack of 
strategies, procedures, and incentives to manage a wide range 
of assets.''
    This could very easily have been taken from the GAO report 
in the high risk series but in fact it was included in the 2002 
Federal Financial Management Report published by the Office of 
Management and Budget. Accordingly, we agree wholeheartedly 
with GAO's addition in their January 2003 Real Property 
Management addition to the High Risk list update. This is a 
confirmation of the administration's efforts beginning in 2001 
to address this issue.
    Much of the Government's real property no longer serves the 
needs for which it was acquired in the first place. The current 
laws and regulations make it difficult if not impossible for 
agencies to maximize the use of its real property investments. 
For these reasons, the administration has taken several 
important steps to improve the Government's asset management. 
We are making improved asset management a part of the 
President's management agenda. We expect the results of this 
new focus to include expanded asset portfolio tracking and 
analysis capabilities, comprehensive asset management 
strategies, increased sales of underperforming assets and 
reduced maintenance and operating costs.
    GAO recently credited the administration for proposing 
several reform efforts and other initiatives to address asset 
management challenges. The administration proposed in the last 
Congress, as part of the Managerial Flexibility Act, 
legislation to establish these practices and provide the 
incentives and tools necessary to bring about sound asset 
management.
    Our proposal reforms the Federal Property Administration 
Services Act of 1949 by addressing all phases of an asset's 
life cycle and would support an integrated portfoliowide 
approach for overall property management decisionmaking. This 
proposal would not alter existing authorities for properties 
under the current Property Act structure, nor would it alter 
authorities that were granted under other statutes. Rather, it 
would provide incentives and flexibility in addition to those 
authorities and grant agencies the necessary tools to manage 
their assets more effectively and efficiently. Absent these 
authorities, we will be unable to improve sufficiently the 
asset management practices currently in place throughout the 
Government. Even if we improve the data we have and condition 
of our assets, we will not have a sufficient range of options 
with which to execute the best asset management solutions for 
specific situations.
    In the spirit of the administration's initiative, some 
agencies have moved aggressively to collect data about their 
asset management practices even now but better information is 
just the first step. We are asking agencies in the upcoming 
budget process to provide us with concrete examples of what 
they might do to maximize the use of their property with these 
new authorities.
    One of the hurdles to enactment of the administration's 
proposal is the high cost attributed to it by the Congressional 
Budget Office. We believe that CBO's scoring of the property 
sales provision ignores the near certainty that agencies would 
sell almost no excess property without the incentive provided 
by the administration's proposal. Therefore, the additional 
spending scored by CBO should be offset by the additional 
property sales receipts that would be generated by the 
incentives provided in the administration's proposal.
    In any event, we believe that the issues raised by CBO can 
be addressed by making proceeds from any property sale or from 
the exercise of new public/private partnership authorities 
granted under the proposal subject to appropriations.
    Mr. Chairman and members of the committee, I ask for your 
support for this common sense proposal. If we look to the 
examples set for us recently in the area of erroneous payments, 
we can see that the combined work of the executive and 
legislative branches can enhance our management improvement 
efforts considerably.
    The administration launched an initiative to reduce 
erroneous payments but it was only able to reach its full 
impact when this committee crafted and shepherded through the 
legislative process legislation that would require erroneous 
payment reduction efforts of all programs and activities 
administered by the Federal Government. This is the kind of 
partnership that I hope we can have in the area of asset 
management.
    The administration has an initiative to improve our 
stewardship over the Government's holdings. With your help, we 
can provide Federal agencies with the tools they need to meet 
their asset management responsibilities.
    This concludes my statement. I look forward to answering 
your questions and working with the committee.
    [The prepared statement of Ms. Springer follows:]

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    Chairman Tom Davis. Excellent. Finished right on time. 
Great debut before the committee.
    Mr. Ungar, see if you can follow Ms. Springer's lead.
    Mr. Ungar. Mr. Chairman, this is going to be a hard act to 
follow.
    We are pleased to be here to assist the committee as well 
as Mr. LaTourette's subcommittee which we have worked with 
before, to address this very important problem of Federal real 
property. For the reasons that have been cited this morning, 
the amount of property that the Federal Government owns and the 
dollar values associated with that property, this is clearly a 
very, very important problem.
    As mentioned, in January of this year we did add the issue 
of Federal real property to our high risk list. We did that for 
a number of reasons, primarily because Federal real property 
has been experiencing some very significant, complex and 
longstanding problems. The Federal Government has not been 
postured very well to address those problems from either the 
legislative authorization standpoint or the management of the 
issue from the administration standpoint for a variety of 
reasons.
    One of the major issues that has been discussed and 
specifically the leading reason why we did put the issue on the 
high risk list was the subject of excess property, under used 
or under utilized property. The Federal Government owns a 
substantial amount of this property. Just for three agencies 
alone, the Postal Service, the VA and GSA, we have identified 
over 900 properties as of the beginning of this fiscal year, 
that were vacant or under utilized.
    There are a number of these properties in a variety of 
agencies. Just a couple of examples, one that we see over here 
is the Charleston Federal Building which has been vacant since 
1999 due to hurricane damage; it has asbestos; it has been 
condemned. It is a very nice piece of property in a very 
desirable area in Charleston. Unfortunately, it was a candidate 
for public/private partnership but GSA lacks the authority to 
enter such an agreement or arrangement for this type of 
property and it is currently negotiating with the city of 
Charleston for an exchange of property.
    Another example is the St. Elizabeth's Hospital here in 
Washington, DC, a very large piece of property that has not 
been used as a Federal hospital for many years. It has been a 
long time in coming but finally in the last couple of years, 
HHS has been working with GSA to address the problems of the 
property. A number of problems are associated with those that 
are typical of Federal properties. It has deteriorated, it has 
environmental issues and it is historic. So there are a number 
of challenges there.
    Finally, I would like to point out a third example which is 
the old Chicago Post Office, a very large facility which has 
been vacant for several years when it was replaced by a new 
facility. This property costs the Postal Service over $2 
million a year to hold. A sale has been agreed to but there 
have been complications that have arisen for a variety of 
reasons. So it is still vacant and still costing the Postal 
Service money. There are many other examples but I won't go 
into those.
    There are other reasons that we put this issue on the high 
risk list. There are many buildings that are deteriorated. The 
Government relies too often on leasing rather than ownership. 
One example of that is the Patent and Trademark Office complex 
currently being constructed in Alexandria. It has been 
estimated that is going to cost the Government almost $50 
million to lease as opposed to own. There are other examples. 
Finally, the Government faces many challenges these days as a 
result of the events of September 11 in securing its property. 
Of course, to the extent the Government has to secure property 
it doesn't really need, those funds could be used for other 
purposes.
    As I indicated, we don't see that the Federal Government is 
in a good position to address these issues. One, there has been 
no central focus on this because over 30 agencies have 
responsibility and jurisdiction to own property. Agencies lack, 
as indicated, the authority to do many of the things that need 
to be done. In our view agencies need to have appropriate tools 
and authority to deal with this problem and the executive 
branch needs to pull together its efforts and basically provide 
leadership, oversight and a comprehensive transformation plan 
that would lay out what needs to be done. We are very pleased 
that OMB has taken the initiative. We all came to the same 
conclusion I think pretty much at the same time and we are very 
pleased to be able to work with OMB, GSA, your committee and 
Mr. LaTourette's subcommittee to address these problems in the 
future.
    [The prepared statement of Mr. Ungar follows:]

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    Chairman Tom Davis. Thank you very much.
    Mr. Catlett.
    Mr. Catlett. Thank you, Mr. Chairman and members of the 
committee for asking me to testify today regarding new 
legislation for Federal agencies to enter into public/private 
partnerships, arrangements and Federal real property 
management.
    At the VA, our public/private partnership is known as 
enhanced use leasing authority. It authorizes the department to 
lease its property or facilities for up to 75 years. VA has 12 
years of experience with this program which is an integral part 
of our asset management program. In return for allowing VA 
property to be used for VA or non-VA mission compatible uses, 
VA can require rent in the form of reduction in the cost of 
free use of facilities or services for VA programs, monetary 
payments or other in-kind considerations which in the opinion 
of the Secretary enhances a particular VA activity mission.
    Since its inception, VA has studied over 100 enhanced use 
leasing initiatives, we have awarded 27 projects, and we are 
actively developing 29 new initiatives. This program allows VA 
to maximize return from underutilized properties while 
protecting flexibility to retain, reuse or to dispose as 
dictated by future needs. It utilizes private resources instead 
of appropriation and creates a win-win situation for VA and the 
local communities by encouraging economic development of 
otherwise underutilized lands.
    VA has been able to acquire office buildings, transitional 
housing, energy facilities, garages, lodging facilities, 
research and medical facilities, hospice care and adult and 
child care centers through this program.
    As stated earlier, the enhanced use lease program is just 
one aspect of VA's overall asset management program. VA has 
been developing a capital asset portfolio that consists of six 
asset classes which are owned and leased real property, land, 
information technology, equipment and agreements. Business 
processes and decision frameworks covering long term management 
of VA's assets are being developed for each of these asset 
classes.
    VA is also striving to move beyond asset management to 
portfolio management which involves leveraging and investment 
or combination of investments in order to minimize risk and 
maximize cost effectiveness and performance of assets.
    VA has seven approved portfolio goals and is working to 
define the metrics for these goals.
    Again, it is a pleasure to be here to discuss with you this 
important issue.
    [The prepared statement of Mr. Catlett follows:]

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    Chairman Tom Davis. Thank you.
    Major General Williams.
    General Williams. Thank you, Mr. Chairman and members of 
the committee, for the opportunity to discuss the work of the 
Overseas Buildings Operations in the Department of State and 
managing our real properties overseas. It is a very delicate 
and complex set of responsibilities involving property valued 
at over $12 billion. I have submitted a full statement for the 
record which outlines this and I will briefly summarize some 
points.
    Our mission was reshaped after the 1998 bombings in East 
Africa and was reinforced after September 11 and required the 
State Department to accelerate the construction of new 
facilities and use, quite frankly, new and improved best 
practices and different concepts.
    GAO reported in January 2000 that the need to adequately 
protect our people overseas from threatened terrorist attacks 
well may be the single most important management issue facing 
the Department of State and OBO. The Overseas Buildings 
Operations and the Department have put in place a number of new 
reforms starting with the creation of a long range capital 
strategic plan which outlines how we would deal with both 
construction and disposal of properties.
    Second, the Department put in place a more systematic way 
of gathering information to make certain that we build at the 
right size and obviously eliminate excess properties.
    Third, the Department introduced a standard embassy design 
concept which allows us to achieve the objective.
    Moving to management of overseas real estate, needless to 
say the backlog of unmet needs is really substantial. To the 
extent that we must maintain underutilized or unneeded 
facilities we are creating an even larger financial burden. The 
State Department is vigorously pursuing the disposal of excess 
and underutilized and overstandard properties. The significant 
changes in our security standards over the last few years have 
made this more of a challenge.
    As stewards of the Department of State's real estate 
investments and representatives of the taxpaying public, we 
recognize our obligation. The authority to use the proceeds of 
sales, and I might add we are on a glad path this year for 
producing some $90 million through sales of underutilized 
properties and to use these proceeds of sales to replace and 
rehabilitate our existing facilities, is a further incentive to 
pursue the prompt and economically sound sale of these 
properties.
    We might point out as well that there are some foreign 
policy considerations that we have that make us unique from the 
rest of the colleagues here. There are a number of reasons why 
we cannot connect as well as we would like the public/private 
dimension. However, we are using very effectively the build to 
lease concept where we do leverage the private sector in order 
to help us in many areas on certain types of facilities.
    We have a reciprocity issue as well which is connected to 
international law which disallows us again to deal with some of 
the matters as related to public/private partnerships.
    Unique expertise obviously is a requirement in the State 
Department in as much as we have to deal with the laws and 
rules of 260 locations around the world, that is where we have 
diplomatic facilities today. We have been very aggressive on 
this matter, we think we have a concept and program in place 
which allows us to effectively manage the assets.
    GAO has made several recent inquiries into this matter and 
we have made presentations before Mr. Shays' subcommittee as 
well on this same matter.
    I appreciate the opportunity on behalf of the State 
Department to participate today and look forward to answering 
your questions.
    [The prepared statement of Major General Williams follows:]

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    Chairman Tom Davis. Thank you very much.
    Mr. Bitz.
    Mr. Bitz. Good morning, Chairman Davis and members of the 
committee.
    My name is Brent Bitz. I am executive vice president of 
Charles E. Smith Commercial Realty, a division of Vornado 
Realty Trust. I am here today representing the Building Owners 
and Managers Association International, the largest and oldest 
trade association representing the commercial real estate 
industry.
    BOMA greatly appreciates the opportunity to appear before 
the committee to discuss how GSA and other Federal agencies can 
more effectively manage the Government's aging and 
underutilized properties. BOMA International supported H.R. 
2710 and H.R. 3947 during the 107th Congress and looks forward 
to once again showing its support for similar legislation in 
the 108th Congress.
    We are here today because BOMA's membership, owners, 
managers and investors in commercial office real estate are 
ideally suited and are eagerly awaiting the opportunity to 
enter the type of public/private partnerships envisioned by the 
GSA and the committee.
    For private sector investors to participate in a public/
private partnership, Congress must carefully balance the need 
for oversight with flexibility and the opportunity for a sound 
return on investment. Deals will not be done if they take too 
long and if unnecessary regulatory burdens diminish any returns 
the investor could hope to make.
    Several different types of deals have the potential to 
appeal to private sector companies and provide clear benefits 
to the Federal Government. Outright sales of Federal buildings 
or land that is underutilized or obsolete could generate income 
for the Federal Government to purchase or lease space more 
suitable to its specific needs.
    A long term ground lease could be an effective tool for 
office or warehouse space that may be in need of repair but is 
in a marketable location. The private sector company partnering 
with the Government would invest in the repairs, lease the 
space to private sector companies and make a profit through 
tenant rents. After the expiration of the ground lease, the 
building would revert to the Government who would inherit the 
improved property. The length of lease terms would need to tie 
into the underlying debt and equity financing of the project. 
Lease terms in excess of 50 years would be expected for major 
projects.
    Subleases should also be considered where a Federal agency 
owns a property but is not occupying the entire building. GSA 
or the Federal agency should be allowed to rent the vacant 
portion of the building to private sector tenants. However, the 
Government does need to understand that restrictive operating 
practices such as the new high levels of security may seriously 
diminish the economic attractiveness of such subleases.
    In a lease-back arrangement, the Government would have a 
private sector entity take economic control of a building and 
renovate it. The Government would have a first right of refusal 
option to lease the building back for a rent that would include 
a return on the building improvements. Unless the Government 
would guarantee to lease back the building, there would have to 
be strong private sector demand for the space based on either 
location or physical attributes for this arrangement to work. 
The private developer would need a reasonable expectation that 
the building could be leased at a rate that would allow for 
investments to be recouped.
    Transfers or exchanges of properties could help the 
Government dispose of underutilized or obsolete buildings in 
exchange for properties that more closely serve their needs. 
All of these should be allowed in cases where it makes sound 
business sense and results in the agency or GSA receiving fair 
market value. This would allow the GSA to look at each need 
within the context of their entire portfolio.
    Chairman Davis, you and Mr. Perry of GSA mentioned the 
Hotel Monaco here in Washington as an existing successful 
example that we all could see. This is a very good prototype 
for consideration.
    In summation, BOMA International supports congressional 
action on this issue. However, we must once again caution that 
GSA and the private sector will need flexibility in crafting 
these types of arrangements. Every building is different, every 
real estate market is different and every real estate 
transaction is different. The GSA and private sector partners 
must have the ability to enter into arrangements that are 
mutually beneficial. Otherwise, nothing will be accomplished.
    Thank you for the opportunity to appear before you today. 
BOMA International welcomes the opportunity to work with the 
committee and provide additional expertise on these issues in 
the future.
    Thank you.
    [The prepared statement of Mr. Bitz follows:]

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    Chairman Tom Davis. Thank you very much. Let me start the 
questioning.
    Ms. Springer, what we are trying to do is give the Federal 
Government ability to lease, joint partner, selling, that 
clearly from the testimony of everybody here saves the 
Government money and allows us to do innovative things with 
property that right now is deteriorating, that we have carrying 
costs on, and yet we get back scoring from the Congressional 
Budget Office that is a net decrease to taxpayers. I don't 
understand it. We have been dealing with them. How do we get 
around that? Any thoughts?
    Ms. Springer. There are a couple of thoughts I would have. 
First, as I mentioned in my testimony, we believe these sales 
of excess properties would not occur absent the flexibilities 
in the legislation. To the extent there are outlays with 
respect to purchases off those sales, we believe the proceeds 
of the sales should also be accounted for in any scoring. In 
the scoring from last May they were not recognized. That is one 
point.
    Chairman Tom Davis. Let me ask you this. Could we draw a 
criteria in the legislation that would ensure that?
    Ms. Springer. What we have suggested is exactly along that 
line which would be, speaking for the administration and not 
just OMB, not only utilization of the proceeds but also any new 
private/public partnership transaction should be made subject 
to appropriation. We believe that addresses that issue.
    Chairman Tom Davis. Commissioner Perry, would that still 
give us the flexibility you need to carry this out?
    Mr. Perry. Yes, I think it would, and you hit on obviously 
one of the real sticking points in this and that is the budget 
scoring process. In addition to the points Linda made, I think 
the legislation includes a lot of things that accommodate what 
some people would be concerned about in that area. For example, 
the Government would have limited liability, that there would 
be no guarantee as to the fact that a Federal tenant would move 
into a building, we would not guarantee the loans or financing 
of the private sector partner in the case of these items. So 
when we went through that discussion last time, we did talk 
about a lot of things we would do in administering public/
private partnerships that are in fact to some extent limiting 
but in fact address some of the concerns the scoring people had 
raised. I think those are addressed.
    Chairman Tom Davis. This is so common sense. I think 
everybody has spelled out here, the representative from the 
private sector, Governor Janklow in his earlier testimony, you 
want to give your executive branch the tools they need to do 
common sense things to protect a real estate portfolio of $328 
billion. It is not your fault the law is written in such a way 
now that your hands are tied but getting it through here has 
two major problems. One is the scoring issue, getting it 
through the Congressional Budget Office where they are looking 
at only one side of the equation. We have to satisfy that, I 
think.
    Second is the jurisdictional fight between the 1949 Act and 
the 1959 Act that go between the Transportation Committee and 
this committee. We may just have to escalate this. Mr. 
LaTourette and I are working on it. We have staffs that are 
conscious of committee jurisdiction but this is something we 
are going to have to try to write the law and share 
jurisdiction, whatever, as we move through but those are the 
two things we need to focus on, it seems to me.
    The rest of this is pretty common sense. Mr. Waxman and I 
last year negotiated some language and we have some differences 
over how to best do it and how much authority you give your 
different agencies, the GSA and checks and balances, but those 
can be worked through as well.
    As I said, we have a $328 billion portfolio. We are 
spending billions on maintenance and upkeep of excess or under 
utilized property that wastes literally billions of dollars 
over time. Commissioner Perry starting with you, I would like 
to hear what tools you would really like to have in an ideal 
world that would give you the flexibility to run this as 
professionally and in the taxpayers' interest as you could?
    Mr. Perry. I think among the various challenges we face, 
the biggest one or certainly one of the bigger ones is this 
issue of addressing the large and growing backlog of 
deteriorated and vacant space. We find that it is sort of a 
death spiral. First of all, as we have this deteriorated space, 
we either have to have Federal workers working in substandard 
space, which we do in some instances, or also the agency will 
move to other space, oftentimes to leased space. We might think 
we are solving the problem but we are continuing to incur the 
expense and we are adding expense on top of that when agencies 
move to leased space.
    The public/private partnership portion of this would enable 
us to begin to address some of that $5.7 billion backlog as it 
relates to GSA and a larger number in other agencies, if you 
add all the other agencies together. So that management 
practice would be very helpful to us.
    I would just mention that on previous occasions when it 
appeared that management flexibility was going to be granted to 
us, we began to move in anticipation and getting our people 
ready with the training they need to move ahead identifying 
specific projects that we would work on. Everyone at GSA was 
ready to go.
    I will tell you that when we weren't able to get it across 
the finish line, that was a significant setback in terms of our 
peoples' thoughts but we are very, very hopeful that as we gear 
up this time around that we will be able to put this in place.
    Chairman Tom Davis. Let me make this pledge to you and I 
think Mr. LaTourette will also, we are going to get something 
done this time and we have some difficult issues to work 
through, both jurisdictionally and scoring and the like but we 
know how important this is. The importance of taxpayers trumps 
any other issues that may arise in my opinion. I know Mr. 
Waxman and Ms. Norton would agree with that. So we are going to 
work together as quickly as we can to try to work through these 
issues at least on the House side. I will let you handle the 
Senate side. We don't handle the other body and make no 
promises on what happens there but we need to initiate it and 
get this through here.
    As I said, it wasn't the Transportation Committee that held 
it up last year, it was a scoring issue we had with CBO and 
coming back with some additional language may be able to solve 
that.
    Mr. Perry. I agree with you and my understanding is those 
three things. One, as you point out, the question of scoring 
and that can be dealt with, I am sure it must be dealt with. 
The other you have also talked about is the issue of 
jurisdiction and I think we are going to have to find a way to 
move beyond that because as I say, Rome is burning, we are 
still having problems. The third one that has come up is the 
question of the retention of proceeds and whether or not that 
can be done in such a way that the congressional committees 
will still have oversight of how those proceeds are used and 
whether or not this is in any way a violation of the 
appropriations process. Here again, we have incorporated ways 
in which to deal with that so that the committees are made 
aware of what is being done and have an opportunity to 
authorize it.
    Chairman Tom Davis. Great. Thank you very much.
    Who should I recognize on this side. Mr. Ruppersberger was 
here first, Ms. Norton is ranking on the Transportation 
Committee. Who would like to go first?
    The gentleman from Maryland is recognized for 5 minutes.
    Mr. Ruppersberger. This issue is really relevant to us as 
far as the cost point of view, the performance point of view 
and we are probably talking about hundreds of billions of 
dollars. Would you agree with that? I see everyone shaking 
their heads yes.
    I think before we really decide what we are going to do we 
have to set a strategy. That strategy, I think the first thing 
is to get the inventory, the information. My first question is 
basically we need to get a comprehensive inventory. I don't 
know whether we have the expertise in-house or not to not only 
identify all the properties we have, the type of properties, 
whether they are deteriorating, are there asbestos issues 
involved, as far as the heating, is the building or the 
property really worth keeping or should we get rid of it 
because every property you keep is going to cost you money, 
especially the ones you are not using.
    My notes here say because of the budget and the tax cut 
this year, we have had to cut Veterans' spending and I have 
information here that the Department of Veterans Affairs spends 
$235 million annually to maintain vacant properties. That money 
could be used to help veterans when we need money.
    My question is, first, do we have the comprehensive data 
base and information that we need to start to implement a 
program to deal with this massive issue. Do we have that type 
of data base, that information?
    Mr. Perry. If I may venture and answer first, I will answer 
that the answer is yes, we have enough information to proceed 
with this right away and then I will qualify my answer a bit 
and say we don't have a comprehensive, accurate and reliable 
data base of all the Federal Government asset information. We 
will continue to work to put that together.
    GSA, for example, in our portfolio management process, 
identifies every asset under our management, we do know with 
some specificity where the vacancies are, where the under 
utilization is, where the deteriorated buildings are. We have 
more than enough information to keep ourselves busy in the 
office space type arena which is where this problem is the 
greatest, I believe for a very long period of time based on the 
information we have.
    As we step out and begin the process, we can work with the 
other agencies to refine the governmentwide data but we have 
the GSA portion of that which is a sizable part.
    Mr. Ruppersberger. GSA is really the agency dealing with 
most the agencies on that, correct?
    Mr. Perry. No, we have 10 percent of the Federal 
Government's total, most of the office type.
    Mr. Ruppersberger. What do you need from a resource point 
of view to be more aggressive to make sure this happens?
    Mr. Perry. The major thing we need is the authorization to 
use these management practices which we do not have today.
    Mr. Ruppersberger. I think of the management practices Mr. 
Bitz brought up. One of the things is a government lease is 
probably one of the best leases you can take to get financing 
or whatever. Would you agree, Mr. Bitz? We have a great 
leverage with respect to that lease but we have to deal with 
today's world and today's business environment and work with 
the business community. I heard testimony today we feel 
purchasing is probably the best way to go but if you don't have 
the money you might have to have a long term lease with an 
option to come back. That is the issue.
    I would like someone else to address the issue because if 
we want to get anything out of this hearing, we are talking 
about where we need to go and do you need Congress to act on 
this. The chairman has said he wants to move forward.
    Mr. Ungar. I would like to add we would agree that at least 
some of the agencies now have enough information to get started 
but as he indicated, the inventory of information GSA has is 
not as comprehensive or complete as it needs to be for a couple 
of reasons. One, GSA depends upon over 30 agencies to provide 
the information it needs and some of those agencies do a better 
job than others in providing complete, current and accurate 
information.
    One of the pieces of the previous perform proposal was to 
mandate that an inventory be kept and give GSA additional 
leverage and the individual independent agencies like 
Agriculture and Energy leverage for securing resources for 
providing accurate information.
    Another area where some agencies have better information 
than others is identifying vacant and underutilized properties. 
Some of the agencies we have contacted do not have this kind of 
information centrally. GSA does have a regulation that requires 
agencies to annually identify this kind of information but 
unfortunately the regulation does not require the agencies to 
pull it together centrally within that agency or to report it 
to any central location within the Federal Government. That is 
a gap that probably needs to be addressed.
    Mr. Ruppersberger. My time is up. The other issue I would 
like to address if I had the time is maintenance which if you 
spend $1,000 it might save you $1 million down the road.
    Mr. Shays [presiding]. We will definitely cover that 
territory.
    Mr. LaTourette.
    Mr. LaTourette. Mr. Ungar, Administrator Perry talked about 
the death spiral and the $5.7 billion of unmet requirements to 
rehabilitate buildings. Is it your experience and observation 
that this condition exists because of a lack of willingness on 
the part of the GSA or lack of resources, or both to address 
that problem?
    Mr. Ungar. I think it is primarily a lack of resources. We 
have looked at this issue at GSA and other agencies. At GSA, 
there were some management issues that we suggested GSA could 
improve in terms of getting better information and perhaps 
improved planning but the real issue was resources and tools 
that have been talked about to deal with this problem.
    Mr. LaTourette. I think most people who have looked at it 
have looked favorably at these public/private partnerships. 
Does GAO have an opinion as to who would be best able to manage 
these public/private partnerships for the disposition of 
Federal properties?
    Mr. Ungar. We haven't looked at all the agencies. We 
certainly think that, whoever is going to do this on behalf of 
the Federal Government needs to have appropriate expertise. We 
know that all 30 agencies would not have the kind of expertise 
needed to deal with these complex arrangements. For example, 
recently the Department of Defense which obviously has a lot of 
property was given enhanced use lease authority or expanded 
authority to do leasing and in effect, engage in public/private 
partnerships. We looked at this within the last year or so and 
found it has only implemented that authority in a very limited 
way. One of the reasons is because it didn't have appropriate 
expertise.
    If this authority were granted governmentwide, there would 
probably need to be some control in place to go through an 
organization like GSA or a comparable organization to make sure 
the Government is doing the appropriate thing.
    Mr. LaTourette. The other issue, Ms. Springer, CBO was 
mentioned but OMB also engages in scoring as well. I would ask 
if the goal is to maximize the Federal dollar? Is the OMB 
considering changing its scoring rules to allow leases of 
longer than 10 years?
    Ms. Springer. OMB is currently looking at leasing scoring 
and I think that is an issue they are going to be looking at as 
part of that effort. That has arisen as a result of the 
anticipation of this legislation and what is going on in 
agencies like VA that have current opportunities today. I would 
expect that would be a part of it.
    We would also look forward to working with the committee 
and the committee staff and CBO as we go forward.
    Mr. LaTourette. Your testimony and your comments in 
response to the chairman's question of do you support the 
notion, as does everybody that I think has looked at this issue 
of public/private partnerships, but been made aware that OMB 
has not released a prospectus that would allow the outlease of 
the old Post Office Pavilion. Are you able to give us an update 
on where that stands at the OMB today?
    Ms. Springer. I do not have that with me today but I could 
get back to you with that.
    Mr. LaTourette. If you could maybe send the committee 
something in writing, I would appreciate that.
    Mr. Perry, first of all, let me publicly commend you for 
the work you are doing on behalf of the administration and the 
country. I think folks are going to be more than impressed with 
the legislation Ms. Norton wrote allowing the public/private 
partnership at the Southeast Federal Center. I think that is 
going to be something we are all going to be very proud of.
    As all committees talk about the idea of these public/
private partnerships, do you foresee any difficulties if the 
GSA was tasked with the administration of those public/private 
partnerships? I guess specifically I am asking whether or not 
GSA is in a position to handle the additional workload that 
might be occasioned as a result of that change in policy?
    Mr. Perry. Given our mission to be the stewards of the real 
properties that have been entrusted to us, we will handle that 
as a priority. We have already identified it as a priority and 
we will rise to the occasion of getting it done.
    Will that be a challenge for us? Of course it will but my 
answer to your question is yes, we are fully prepared to take 
on this responsibility. We are advocating for it, we have the 
people who have the expertise, we have processes we are using 
to identify how to make this work and we know we can do it.
    I would add to that given the degree to which this backlog 
has grown, now that it is $5.7 billion, this is something that 
will have to be taken on over a period of time. We obviously 
will not complete it in a year or two but we will begin the 
journey, we will stay the course and using appropriated funds 
as well as the moneys that might be available to us through 
these other techniques, we will make a significant improvement 
in the near term.
    Mr. LaTourette. Thank you.
    Mr. Shays. We will go to Ms. Norton.
    Ms. Norton. Thank you, Mr. Chairman.
    No one perhaps has been more frustrated with Federal 
property policies than this member in large part because this 
is the Nation's Capital with a fair amount of unused Federal 
property.
    My good friend, Chairman Davis, made a very important point 
that I really think as we look at cause and effect, needs to be 
put on the table. Read my lips, scoring and scoring has not 
always been done for Federal property the way it has been done 
for the last decade. Indeed, the way we score the management of 
Federal assets is unique. We who give lip service to the 
private sector don't have a capital budget or even a Federal 
version of a capital budget. We manage assets through scoring 
rules that have no application to the private sector, would be 
considered abundantly wasteful, nobody in his right mind in the 
private sector would use them, the way we score leases, for 
example.
    Therefore, this hearing is important but it is important to 
put on the record that this is not a hearing about why GSA has 
just allowed a backlog of properties to develop when all it had 
to do was go out and do something with them. The scoring rules 
of the United States of America obviously made that impossible. 
So do the priorities of our country as to how we should spend 
money. That is why the notion of public/private partnerships 
are indeed the only way to go.
    Mr. Perry, my bill on the Southeast Federal Center was done 
by the time you came to GSA but I take it you are aware of the 
Southeast Federal Center?
    Mr. Perry. Yes, ma'am, and I specifically mentioned that as 
an example or model in my opening remarks.
    Ms. Norton. Is this a model that GSA would be prepared to 
replicate throughout the country, the use of Federal land, the 
Federal Government retains the land but allows the private 
sector to build on it, to use it with the returns coming to the 
Federal Government?
    Mr. Perry. Yes. I believe there are a number of examples of 
other properties that we manage where that could apply. We 
talked earlier about a property in Seattle, our Federal Center 
there which is along the waterway as was the case with the 
Southeast Federal Center, very desirable location, happens to 
exist in a market where the market conditions would be 
conducive to this type of public/private investment.
    There is a continuing Federal need but that could be mixed 
or associated with some private sector or mixed use needs. This 
property happens to be 37 acres which is of sufficient size to 
do something like that. So there are those examples.
    Then there are some individual buildings where the same 
process could work. I believe there is more than we could 
handle in terms of identifying how this authority could be 
applied.
    Ms. Norton. In the case of the Southeast Federal Center, to 
get around any possible scoring problem, we simply did the 
natural thing, we left open the private sector to come back to 
us to tell us what to do with the property which is the way it 
ought to happen anyway if you are in partnership with the 
private sector. What does the market want to do and therefore 
this obviously is not a Federal scoring problem.
    I note that the homeland security bill gave to the new 
department the right to acquire its own headquarters. My 
understanding is that the Department turned around and asked 
the GSA what to do, correct?
    Mr. Perry. That is correct. We are working with the new 
Department of Homeland Security in that area.
    Ms. Norton. I just mention this because it points up the 
need for expertise when you are dealing in property. I am a 
lawyer, I wouldn't begin to deal with property, even my house, 
without talking to a real estate lawyer.
    Mr. Shays. The gentlelady's time has expired. If we could 
get to the other Members, I thank her for that.
    Mr. Schrock.
    Mr. Schrock. You can see from where I sit, I haven't been 
here many years and a couple of years ago I might have believed 
that when we said something was going to come out of committee 
and we would get it to the floor and provide relief for you, I 
might have bought it. I don't buy it anymore. We are the ones 
who should be down there testifying, you should be up here 
asking us why we haven't done what we are supposed to do. I 
think the monkey is on our back to get this done.
    As my friend, Governor Janklow said, for God's sake, let us 
get it done. How many more hearings do we have to have to get 
this done? There are a lot of agencies out there, especially 
the Department of Defense, that are hurting because of all this 
excess property. That is why they are going to go through a 
BRAC here to get rid of some of that. We are tying your hands 
in the process.
    Mr. Perry, you talked about PPVs. The military, as you 
know, is going to do that with regards to housing. The military 
shouldn't be the Charles E. Smith's of the world, they should 
be fighting wars and let Charles E. Smith, and I am not 
promoting your company because I live in Hampton Roads and you 
are not down there, but PPVs I think are very important and can 
save our government a lot of money so we don't have to be in 
this maintenance crunch. You agree with that obviously?
    Mr. Perry. Yes, I certainly do agree with it and I agree 
with your earlier sentiment that we must really make a 
proactive step. We can't afford to continue to let this fester.
    Mr. Schrock. If agencies had senior real property officers 
with experience in place to manage the portfolio, why wouldn't 
they be in a position to use management tools we have discussed 
today, namely to do PPVs?
    Mr. Perry. Well, they wouldn't be able to use the public/
private partnership because it wouldn't be authorized. The 
statute would prevent that but they certainly could use other 
good management practices for life cycle management of assets 
including better planning, thoughts about maintenance and 
disposal but would still be limited to not use public/private 
partnerships under current law.
    Mr. Schrock. Why can't we change that?
    Mr. Perry. That is what we are here to ask.
    Mr. Schrock. You should be asking that question. I 
understand.
    The CBO scoring kind of bothers me too, Ms. Springer. Maybe 
there is a problem with the scoring. I agree with Chairman 
Davis that when you score something and getting rid of excess 
property is going to cost more money, something is wrong there. 
I don't quite understand that. Is the scoring the problem? Is 
that voodoo economics as I have heard people say from time to 
time?
    Ms. Springer. One of the first things I looked at when I 
came here last fall was scoring for this particular piece of 
legislation and I had the same reaction you just did. Certainly 
with respect to use of proceeds when there is no recognition of 
the proceeds themselves and it is viewed solely as an outlay, I 
think that needs to be addressed.
    Either way, we believe at OMB and I know I speak for Mr. 
Perry, that we can work with the committee to resolve that 
issue. That is an obstacle we need to take out of the way. Let 
me say without a bill, we won't even be getting to the scoring. 
It is important for us to get the bill. Whichever version it 
turns out to be, we need to get the bill. That is what we are 
here to say.
    Mr. Schrock. This excess property didn't create any 
revenue. This is the same issue revisited and is creating 
revenue. We need to get some of this stuff off the rolls.
    Mr. Ungar, I think you wanted to say something?
    Mr. Ungar. I just wanted to add that I wouldn't 
underestimate the difficulty and complexity that will be 
associated with dealing with the scoring issue. One of the main 
obstacles--one of the issues that CBO raised is--that it would 
basically account for or score these partnerships as a lease-
purchase arrangement which is another issue aside from 
retaining funds.
    Scoring is a double edged sword. There certainly is a very 
good reason for the scoring process. On the other hand, it 
unfortunately results in some adverse consequences. One thing 
the committee might want to think about is perhaps forming, 
getting, or prompting some sort of a working group with members 
of the committee staff, OMB, CBO and maybe relevant committees 
and agencies like VA and DOD to really tackle the scoring 
issue.
    Mr. Schrock. I agree. Mr. Chairman, that is something we 
need to get our hands around because it sounds like that is one 
of the main flies in the ointment. If we could get that 
resolved, then we could go forward on this a lot quicker than 
we are.
    Mr. Ungar, the vacant St. Elizabeth's Hospital building is 
historical, which means you can't knock it down, which means 
you have to protect it. What are you going to do with that 
building?
    Mr. Ungar. That is a tough issue. HHS and GSA are wrestling 
with that now. Because it is historic, they have to work within 
some constraints and work with the folks who administer the 
provisions of that act. I don't know that it is impossible to 
knock it down. VA I think and maybe other agencies have had 
some experience with this and have been able to work with the 
Historic Preservation people, but it does make it much more 
complicated and takes much more time.
    Mr. Schrock. If you want to know how to knock down a 
building like that, come see me. We did it with 11 buildings at 
the Naval Base in Norfolk that were historic. We said baloney, 
we won and tore them down and new buildings are there now. So 
it can be done.
    Mr. Shays. The gentleman's time has expired.
    We have a committee meeting after and we can allow for a 
second round if there a few folks that need to ask some 
questions.
    Mr. Cooper, you have the floor.
    Mr. Cooper. I thank the gentleman from Connecticut.
    As I understand it, the rationale for treating public/
private partnerships like operating leases or direct 
appropriations, forcing an up-front score from CBO is something 
OMB doesn't agree with but has OMB been working with CBO to 
resolve this internally? I realize the gentleman from 
Virginia's request for a working group on this committee but 
the new head of the CBO came from the White House. I would have 
expected some sort of coordination on this issue. Is that 
right?
    Ms. Springer. OMB is taking a fresh look at scoring of 
these leases as the proposal is seriously being revisited, so 
we contemplate working with CBO.
    Mr. Cooper. Has CBO put up fixed resistance? Are they 
battling this to the end or they just haven't had meetings on 
it yet?
    Ms. Springer. We are at the beginning stages of essentially 
restarting this discussion with them on it.
    Mr. Cooper. Another question would be the issues addressed 
by CBO can be addressed by making the proceeds from any 
property sales from the exercise of new private/public 
partnership authorities granted under the proposal subject to 
appropriations. I don't understand that. How exactly does 
making the exercise a public/private authority subject to 
appropriations address CBO's concerns?
    Ms. Springer. What we had in mind would be as each 
opportunity arose for entering into a public/private 
partnership or using the proceeds of a sale for a new purchase, 
that opportunity would be evaluated and scored on its own 
merits and according to whatever type of lease it was, whether 
operating, capital or what have you and would be subject to the 
full review with Congress from an appropriations standpoint, 
rather than anticipation up front that wouldn't recognize 
specifically all the merits of each one, so it would be subject 
to an appropriation rather than just scoring of an 
anticipation.
    Mr. Cooper. I am still not sure I understand that but I 
yield the balance of my time.
    Mr. Shays. The gentleman yields. We are going to Mr. 
Turner.
    Mr. Turner. Thank you.
    As I stated in my opening comments, one of the things I am 
very concerned about is the issue of a policy of abandonment of 
cities. One of the examples we have in front of us says, ``GSA 
also owns a courthouse in downtown Jacksonville, FL but we 
vacated in less than a year. Although there are Federal 
agencies in the Jacksonville area that need space, the agencies 
would prefer to locate in suburban locations because of access 
and parking constraints downtown. The city of Jacksonville has 
expressed interest in acquiring this building. The freedom to 
manage the proposal would give GSA the authority to sell the 
building to the city, use the proceeds to build in a suburban 
location that would be more desirable for prospective Federal 
tenants and probably cheaper.''
    First, I want to say that in looking at the proposals for 
increased flexibility, I think the flexibilities themselves are 
very important but the outcome is what I am concerned about 
because basically what we are talking about doing to host 
communities is we are saying because we have deferred 
maintenance in these buildings, we have created something that 
is a blighting influence and we are going to leave, you are 
going to have the responsibility. I am certain the city of 
Jacksonville is not acquiring this property because it is a 
gold mine. They are acquiring it most likely because it doesn't 
have any other marketable use. It will probably require 
significant subsidy by the local community to bring it up to 
something that is viable.
    Then we are going to take the Federal jobs, move them out 
to the suburbs because our rules are going to provide a 
preference for suburban locations instead of cities, so all the 
people who would eat lunch, all the people who would shop, all 
the people who would pay payroll taxes in the Federal jobs that 
would help support the community that is now subsidizing 
blighted influence we are leaving behind are going to be gone 
off to the suburbs.
    As a former mayor of a city I have dealt with this issue of 
looking at Federal rules as to where jobs locate. Working with 
the Postal Service, we were told in an initial attempt to get 
Federal jobs located in our downtown area that because of the 
rules, we would be virtually unable to compete.
    Ultimately we were able to win, but we were often told that 
the constraints of issues of convenience and parking, all of 
the definitions that we would give to a normal, downtown, urban 
area were actually used against us as opposed to in favor of an 
urban core.
    We all know there are Federal mandates that burden our 
urban cores, Brownfields, social services, special needs 
populations, public housing, environmental mandates without 
compensation, infrastructure burdens for supporting the entire 
metropolitan urban area.
    I am very concerned we are getting a Federal policy that is 
almost anti-cities. As I look at this, it goes on to say ``you 
may provide a lease back option to the Federal Government to 
occupy space in any facility, require construction, repair or 
renovation by the non-governmental entity provided that the 
agreement does not guarantee government occupancy in any 
subsequent agreements. To lease back in such facilities must be 
in accordance with the competition requirements of Title III.''
    I would like you to speak on the issue of why our Federal 
rules, as the process goes, if we are going to go to leasing, 
don't have a preference for us to support and maintain our 
Federal jobs in our urban core with the tax bases necessary and 
where the synergies of workers are necessary in order for us to 
maintain our cities which, as you know, are the jewels of this 
country?
    Mr. Perry. Thank you for that question. That is a very 
important point with two parts to it. One has to do with the 
exchange of property. If my facts are right, that is something 
that we would be doing under our present authority which does 
not enable us to enter into public/private partnerships. 
Rather, if we have a situation like the one you describe, the 
only tool available to us today is to do a like kind exchange 
where the city would grant us something and we would grant them 
something so that we could provide an appropriate workspace for 
Federal workers and the city would do the best it could do to 
protect the development in the urban core.
    If we had the authority we are talking about today, that 
would have enabled us to do the development of the downtown 
facility. In fact, the list we prepared entitled our ``100 Most 
Egregious Cases,'' many were in fact Federal buildings in the 
urban core that had we had this authority or as we get this 
authority, they would be candidates for development in the 
downtown as opposed to our having to go to a second option 
which is to exchange property which is the only authority we 
would have had today.
    Mr. Turner. My time is almost up so let me just add to 
that. It seemed to me in reading it that you are subject to the 
same rules in determining what would be the competition 
property, the one that you are disposing. Those rules might 
cause it to have a suburban preference. Is that not accurate?
    Mr. Perry. I can't read that into that. If I understand the 
issue, if there is a building and we had the ability either 
through appropriation or through public/private partnership 
bring that building up to standard, we would do it at that 
location. We wouldn't get into the swap.
    You could assume possibly the agency had a mission related 
reason why it wanted to move but lacking that, our approach, 
our policy would be to opt for the urban core location.
    Mr. Turner. That is great to hear.
    Chairman Tom Davis [presiding]. The gentleman's time has 
expired.
    Mr. Janklow.
    Mr. Janklow. Thank you.
    I would like to apologize for my preliminary remarks made 
when I came in here. I had read some of this testimony as I had 
indicated. I thought we were discussing a country where the 
authority to acquire, manage and dispose of property was 
limited, freedom to effectively manage holdings was severely 
restricted, separate authority to give people flexibility to 
out lease and dispose of property under specific conditions 
wasn't allowed, I thought we were talking about a country where 
the National Park Service will think it is really a great 
management technique in fiscal year 2003 to develop a facility 
inventory to see what buildings it maintains and perform asset 
assessments to determine the condition of these assets and 
establish a baseline facility condition index and that would be 
an accomplishment where we spend $50 million more in acquiring 
a patent office than we need for the taxpayers while everybody 
sits around talking about the difficulty to fund things like 
education in this country and medical issues and the other 
kinds of issues that we deal with, that environmental laws 
stifle what it is we are trying to do with property and we have 
inventory and historical problems. Frankly, I thought I walked 
into a meeting on how the old Soviet Union operated. I had no 
idea we were discussing the United States of America until I 
heard you people testify. I would have never made those 
comments had I known it was my country. I thought we were 
talking about the Peoples Republic of China or the old Soviet 
Union.
    Given the fact we are talking about the United States of 
America, how do we fix this? This is insane. This is absolutely 
insane. Everybody in Congress knows it and we sit around 
talking about our specific projects. We don't want to give you 
any authority to do this for all of America, so every one of us 
can find a project or two in our State or city that we want to 
make a pilot project.
    I don't care what party you are in, Presidents of recent 
vintage don't have any trouble hiring top, competent talent to 
come into the government to work. Are you folks really too dumb 
to do this? Are you crooked? Are you on the take? Do you want 
to be on the take? What is it that prevents us from giving you 
the authority? In your perspective, what is it that prevents us 
from giving you the authority to do it or are we too stupid or 
on the take? [Laughter.]
    Chairman Tom Davis. Let us see if there is a volunteer to 
take the question.
    Mr. Ungar. I can't answer your last question but in terms 
of why this problem has gone on so long and why it hasn't been 
solved, I can address these.
    Chairman Tom Davis. Mr. Ungar, you are fully vested in your 
retirement?
    Mr. Ungar. Yes, absolutely and I will say that I can leave 
at any time.
    Mr. Janklow. I used to be able to pardon people but I can't 
anymore.
    Mr. Ungar. Maybe you can put in a good word with the 
President or the Comptroller General depending on what happens.
    Mr. Janklow. I will do that. We will score you OK.
    Mr. Ungar. It is a very, very complex problem and there are 
many factors to it. One is leadership and a plan.
    Mr. Janklow. Go to No. 2.
    Mr. Ungar. No. 2 is legislative action.
    Mr. Janklow. Go to three.
    Mr. Ungar. Three would be individual actions by Federal 
agencies to basically do the right thing once they have the 
tools to do that.
    Mr. Janklow. What is four?
    Mr. Ungar. Four would be to make more resources available. 
Five would be maybe even higher up in your order, addressing 
the scorekeeping rules so they make sense from both a budget 
standpoint and a real property management standpoint.
    Mr. Janklow. Nothing you described is complicated. It is 
simple. It takes leadership and it takes the courage to move 
forward. It takes people that have the intelligence level to 
know the difference between right and wrong and when someone is 
getting ripped off and $2 million to maintain a post office 
every year, I come from a small State and you could buy a 
reading book for every first grade child in my State for $2 
million. For what the post office is wasting every year to 
maintain a building in Chicago, you could buy a reading book 
for every first grader and an advanced reading course for the 
whole State of South Dakota. That is how ludicrous this all is.
    Thank you, Mr. Chairman. I don't have any other questions. 
This is crazy and everyone knows it.
    Chairman Tom Davis. Let me make one comment. We are going 
to be introducing legislation in the next week or so. There 
have been basically two problems legislatively. One has been 
the scoring issues which are arcane, which we are trying to 
work around with the Congressional Budget Office but the fact 
is you bring this bill forward at this time, you have to show 
offsets or it goes nowhere and significant offsets. We are 
looking at wording that will get around that.
    Second are jurisdictional issues between what is called the 
1949 Act and the 1959 Act that puts it before different 
committees. Mr. LaTourette, who is on both committees, has 
pledged to work with us. This is a priority for our leadership.
    The third problem is going to be the Senate but let us take 
care of the House. We can do what we can do and I will tell you 
that we will have a bill out of here this year that meets your 
needs.
    I want to commend Commissioner Perry. From the minute he 
stepped in, he headed GSA in Ohio.
    Mr. Janklow. These are all competent people. Listen to 
them, they know what they are talking about.
    Chairman Tom Davis. Exactly but he has taken the lead, made 
it a priority and we did get it through the committee last year 
before we ran into problems at CBO.
    Mr. Waxman worked closely with us to make it a bipartisan 
but let us just make it a priority and move it.
    Mr. Janklow. Thank you, Mr. Chairman. I bet these folks 
drive home every night from work and say I can't believe these 
idiots I have to deal with.
    Chairman Tom Davis. They are under oath and I am not going 
to ask them.
    Ms. Blackburn.
    Ms. Blackburn. Thank you. It is always hard to follow the 
good Governor because he brings so much common sense to the 
table for all of us.
    Mr. Ungar, I think you probably are sitting there looking 
at us and agreeing with everything Governor Janklow has said.
    Mr. Ungar. Yes, ma'am.
    Ms. Blackburn. Being one from the private sector, I felt 
that probably was the thought running through your mind. Ms. 
Springer, is always a delight to have you come before us. I 
know being the lowly freshman, I am hard to see down here on 
the end.
    A couple of thoughts. Looking at the stewardship assets, 
when you think about we are the steward of 28 percent of the 
Nation's land mass. Going to that as we talk about having a law 
and you all being able to do a bit more with your management 
and public/private partnerships, has there been any movement or 
do you have a process in place for evaluation of the 
stewardship assets which are not included in the consolidated 
financial statements? If you don't have a process in place, how 
long do you think that is going to take?
    Ms. Springer. That is a good question and I want to thank 
you for it because it does recognize that OMB does more than 
just deal with scoring. On the management side as part of the 
President's management agenda in anticipation of this 
legislation, we are asking agencies in this 2005 cycle to pick 
some very specific properties, including not only the ones 
reported in the financial balance statements but also the 
stewardship assets so that would cover things like the parks 
and other types of assets reported there, to actually pick a 
sampling of those and report on the values, the maintenance 
condition, what opportunities and things they could do. So we 
want some very concrete examples in anticipation of opening 
that once we have the authorities under the legislation.
    Ms. Blackburn. Do you anticipate that being done through 
the rulemaking process or do you feel our bill should include a 
structure for that?
    Ms. Springer. We can take a first step in the A-11 guidance 
that we issue and we are working up that right now to come out 
for the beginning of the 2005 budget cycle. That will only go 
so far, it will be a first step, a good first step but it will 
be done with the expectation that we would have the broader 
legislation to really open it up.
    Ms. Blackburn. Mr. Chairman, I would like for the record 
and for our process to recommend that we give some special 
thought to the stewardship assets as we look at the totality of 
the bill and then make provisions for addressing that.
    One other thing, either you or Mr. Ungar, as we are looking 
at asset management and the President's management agenda, 
knowing this is kind of a weak link as we look at our entire 
budgeting process, developing a financial statement for the 
Federal Government, do you have a corporate model that you are 
working from with your asset management and the real property 
and also the stewardship assets or are you kind of taking the 
lessons learned and trying to develop a template we will work 
from?
    Ms. Springer. We will be moving from that latter view of 
lessons learned and kind of reactive to a more proactive 
formulation of structure for how we would like some standard 
metrics, some standard reporting mechanisms. Clearly the 
financial statements, an important point to take note of, the 
FSAV which covers the financial reporting of the assets that 
are in the balance sheet has some very strict rules on 
reporting that we think covers comprehensively these types of 
transactions that are envisioned in the legislation.
    The financial statements themselves are pretty well 
governed. Beyond that, we think there is a certain aspect of 
performance we need to capture more fully and we will be 
looking to provide direction on that.
    Ms. Blackburn. Thank you.
    Chairman Tom Davis. Mr. Duncan.
    Mr. Duncan. Thank you.
    This is something I have been very interested in because I 
spent 10 years on the Public Buildings Subcommittee and first 
of all, I want to say to my colleague, Mr. Turner, he is 
exactly right. I agree with everything he said in his 
statement. This business of moving to a suburban location in 
Jacksonville, oftentimes we have found it is just some high 
level official in that particular building who wants to get a 
new office or wants to get an office closer to home and they 
cook the figures so they can so in a convoluted way that some 
money is going to be saved.
    If people look at these moves closely it would save much 
more money to stay in the building where they are. In fact, we 
have found also that some of these people complain about the 
buildings they are in when they are Federal buildings and they 
are buildings that were built in the 1960's and 1970's, not old 
buildings at all. We are working in a building that opened in 
1800, the Capitol. It is just ridiculous as Governor Janklow 
said, what is going on here.
    We dealt I guess most often with Federal courthouses and 
what we found was State governments were building beautiful 
Supreme Court buildings and courthouses for $125 and $150 a 
square foot and the Federal Government was building courthouses 
for $265 and $285 a square foot because nobody would say to the 
Federal judges you can't just have all the gold and high 
furnishings that you want. It has gotten totally out of hand. 
The National Security Administration building in Virginia cost 
$320 a square foot. Somebody has got to get on top of this 
thing and say no.
    I noticed in the report that the Department of Defense has 
so many unneeded buildings that it is costing $3-$4 billion a 
year the GAO report says just to maintain those buildings. Mr. 
Ungar, are they making any progress, really doing a lot to get 
rid of these buildings or sell these properties?
    Mr. Ungar. Some progress is being made. Each agency is 
grappling with this problem but unfortunately the problem is so 
big that without a much more aggressive effort, probably what 
is going to happen is the properties that become unneeded or 
underutilized or in serious disrepair are going to overtake the 
ones getting off that list.
    Without a more intensive effort, the problem will probably 
get worse.
    Mr. Duncan. In the report on the Mendell Rivers building in 
South Carolina, that looks like a fairly new building, it 
doesn't look like an old building but apparently they moved out 
because of the asbestos. The report says there is very little 
Federal demand there and yet they are trying to get the city to 
take the building and build them a 27,000 square food building. 
It is crazy as Mr. Schrock just said. Why don't they just go in 
and remove the asbestos because if it is good enough to turn 
over to the city, it should be good enough for the Federal 
Government to clean up and keep working in there.
    Mr. Ungar. That is a very good question. There are a couple 
issues. One, the building was actually damaged by the 
hurricane. It could have been repaired conceptually but the 
asbestos really made it a big problem. There is a funding issue 
to get the money to repair it.
    The reason our report said there wasn't strong demand was 
that at the time we looked at this property a couple of years 
ago, the Federal agencies that were there were moved out into 
leased space for the most part and they had leases of several 
years. It wasn't that the property was not a good candidate, it 
was at that particular time, those agencies couldn't move back 
in right away.
    On the other hand, it is a very desirable location and I 
don't know that the exchange is really the optimal solution but 
right now it is probably the only solution that GSA has unless 
it has additional authority.
    Mr. Duncan. Let me say this. These prices are getting 
ridiculous and somebody, the GSA, the OMB, needs to start 
putting more pressure to hold down the cost of these Federal 
buildings and not just go so lavishly overboard.
    I will tell you one quick story. The Secret Service a few 
years ago, we found they were paying $7,723,000 for a 1.3 acre 
piece of property in downtown Washington for a new 
headquarters. We ran a computer search and found nine other 
parcels of property all costing between $10-$30 million that 
were within the parameters. We fussed about that.
    The head of the Secret Service came to see me and four of 
their heads and said, will you stop fussing about this if we 
agree to knock $50 million off the price of the building. I 
said yes, because I thought at least we are saving $50 million.
    Mr. Shays [presiding]. Would the gentleman suspend? We have 
an option of possibly clearing this panel, the red light is on. 
I haven't asked questions.
    Mr. Duncan. I will stop, Mr. Chairman.
    Mr. Shays. Finish your sentence if you want but I just need 
to move on here.
    Mr. Duncan. All I was saying was they instantly agreed to 
knock off $50 million of the price of the building just because 
we raised some questions at a hearing. That shows you how much 
fluff and surplus is in these buildings and it is getting 
ridiculous. It is not fair to the taxpayers.
    Mr. Shays. Mr. Souder.
    Mr. Souder. I have two brief comments and I have two 
questions. One is that we have been hearing all morning about 
the basic problem of why the Federal Government is different 
than the private sector cash-flow annual budgeting or biannual 
budgeting which simply does not work when your cash-flow 
expenses are coming that year and your income is a later year. 
We have all kinds of scoring problems and this whole thing of 
trying to separate assets from income and how we score that 
leads us to do really dumb things, en bloc, good things. We 
have to address some fundamental process questions of how we 
account income and assets because it leads to other short term 
decisions that aren't wise long term decisions. Anybody who has 
been in business can see this every time we deal with our 
annual statements.
    I also want to resist the temptation to ask Mr. Bitz about 
why it takes so long to get the air conditioning in the spring. 
I am a constituent.
    Mr. Bitz. I will look into that, sir.
    Mr. Souder. No, I think it is a standard procedure.
    It is a Charles Smith Co. operated building that I stay in 
when I am here in Washington.
    I had a question for Mr. Catlett. In your testimony, you 
referred to the VA and how you have been able to do a number of 
things in local communities with flexibility. Do you involve 
the local communities in the enhanced use leasing projects and 
what is the review process you have in those local communities?
    Mr. Catlett. Yes, sir. There is a public hearing for each 
of these proposals we put forward to get comments both from the 
private sector as well as other government officials. There is 
a public hearing at the location for each of these projects.
    Mr. Souder. That is well publicized and groups come in. 
Have you had the experience of people coming in and 
participating in that process?
    Mr. Catlett. Yes, sir, very much so.
    Mr. Souder. Can you give an example of one where you saw 
such participation and how that might have affected the 
project?
    Mr. Catlett. The one that would come to mind now would be 
just north of Baltimore at a facility we call Fort Howard. We 
had a public hearing there about a month or 6 weeks ago in 
which about 40 participants came in. Again, we don't need the 
property, we are looking for a use there for a long term care 
type of community, not just a facility for institutional care. 
Obviously the neighborhood is very much interested, the 
developers were interested, so we had over 45 participants 
there representing what we feel was the most interest in that 
community or affected by that proposal.
    Mr. Souder. General Williams, I also had a question for 
you. Can you give us some examples of how revenues from sales 
and leases of Department of State property have been used to 
improve other Department of State properties?
    General Williams. I would be happy to. We are able to take 
the proceeds and identify, we have a long range strategic plan 
that is in place with the next most urgent project, so once the 
proceeds are identified and we make the necessary reporting to 
our oversight apparatus, then we are able to proceed ahead very 
expeditiously with projects. For example, we have built 
embassies out of proceeds of sales.
    Mr. Souder. Does it have to stay in the same region?
    General Williams. No, it does not.
    Mr. Souder. Could you give an example of an embassy where 
that might have occurred?
    General Williams. Regarding the use of proceeds of sale, 
for example, we are in the process now of gathering the funds 
for our Berlin Embassy. The proceeds of sales came from other 
regions other than Europe, they go to a central pot. The next 
most urgent requirement we have in State is if the option is to 
fund from the proceeds of sales, it comes out. So Berlin would 
be an example. Uganda and Angola would be other examples.
    Mr. Souder. Thank you very much.
    Mr. Shays. I thank the gentleman.
    Let me say I do have questions but time is running out and 
I don't want you to have to wait for us to get back. I think 
most has been covered. I do take a little bit of pride in the 
oversight of our committee with VA and State. I think you all 
have tried to move forward and use the instruments you have 
available to be a bit more efficient here.
    I do appreciate the testimony of all our witnesses. Is 
there anything we need to put on the record that you might have 
thought about last night that you wanted to make sure was part 
of the record before we adjourn this hearing?
    Thank you all for your participation. This is a noble cause 
and I think we are going to see action and don't underestimate 
the power of our chairman to get this through even the Senate.
    With that, before adjourning, I will announce we have a 
committee business meeting that will begin promptly at 1:30 
p.m.
    The record will remain for 2 weeks on this hearing for 
anyone who wants to submit information.
    Thank you all for participating and this hearing is 
adjourned.
    [Whereupon, at 11:36 a.m., the committee was adjourned, to 
reconvene at the call of the Chair.]
    [Additional information submitted for the hearing record 
follows:]

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