[Senate Hearing 110-418]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-418
 
        FEDERAL REAL PROPERTY: REAL WASTE IN NEED OF REAL REFORM

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


                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
                   INFORMATION, FEDERAL SERVICES, AND
                  INTERNATIONAL SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 24, 2007

                               __________

        Available via http://www.access.gpo.gov/congress/senate

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs




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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas              NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES, 
                AND INTERNATIONAL SECURITY SUBCOMMITTEE

                  THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
BARACK OBAMA, Illinois               GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri           PETE V. DOMENICI, New Mexico
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                    John Kilvington, Staff Director
                  Katy French, Minority Staff Director
                       Liz Scranton, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator Coburn...............................................     4

                               WITNESSES
                         Thursday, May 24, 2007

Clay Johnson III, Deputy Director for Management, Office of 
  Management and Budget..........................................     5
Mark L. Goldstein, Director, Physical Infrastructure Issues, U.S. 
  Government Accountability Office...............................     6
Boyd K. Rutherford, Assistant Secretary for Administration, U.S. 
  Department of Agriculture......................................    20
Robert J. Henke, Assistant Secretary for Management, U.S. 
  Department of Veterans Affairs.................................    21
Philip W. Grone, Deputy Under Secretary of Defense, Installations 
  and Environment, U.S. Department of Defense....................    23
David Winstead, Commissioner of Public Buildings Service, U.S. 
  General Services Administration................................    24

                     Alphabetical List of Witnesses

Goldstein, Mark L.:
    Testimony....................................................     6
    Prepared statement...........................................    43
Grone, Philip W.:
    Testimony....................................................    23
    Prepared statement...........................................    87
Henke, Robert J.:
    Testimony....................................................    21
    Prepared statement...........................................    75
Johnson, Clay, III:
    Testimony....................................................     5
    Prepared statement with an attachment........................    39
Rutherford, Boyd K.:
    Testimony....................................................    20
    Prepared statement...........................................    68
Winstead, David:
    Testimony....................................................    24
    Prepared statement...........................................    95

                                APPENDIX

Chart entitled ``Excess/Underutilized Property At the Department 
  of Energy''....................................................   105
Chart entitled ``Construction vs. Operating Leases''.............   106
Copy of the ``State of the Portfolio, fy 2007'' submitted by Mr. 
  Winstead.......................................................   107


        FEDERAL REAL PROPERTY: REAL WASTE IN NEED OF REAL REFORM

                              ----------                              


                         THURSDAY, MAY 24, 2007

                                   U.S. Senate,    
          Subcommittee on Federal Financial Management,    
                Government Information, Federal Services,  
                                and International Security,
                            of the Committee on Homeland Security  
                                          and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:02 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Subcommittee, presiding.
    Present: Senators Carper and Coburn.

              OPENING STATEMENT OF CHAIRMAN CARPER

    Chairman Carper. The hearing will come to order. Welcome, 
Dr. Coburn. To our first panel, to Clay Johnson, to Mark 
Goldstein, thank you for joining us today.
    I just got some good news. The good news is that it looks 
like our first vote may not be until a little bit after noon, 
so we may be able to finish this hearing without interruption, 
which would be very nice.
    We appreciate our witnesses taking the time to participate 
in the hearing. I think this is the third in a series of 
hearings on property management and what needs to be done and 
what is being done and what further action is required by the 
Administration and by us in the Legislative Bbranch.
    This hearing will examine the findings and conclusions in 
GAO's most recent update of the high-risk report on Federal 
property management. Federal property management has been on 
GAO's high-risk list, I believe, since 2003, and as many of 
those watching and listening to this hearing will know the 
high-risk list details the most serious management issues that 
the Federal Government faces. It is not a good list to be on, 
but it is an important list to keep, and it is an important 
list for us to hold oversight over in many instances.
    But just casual reading of the testimony we have before us 
today should tell most of us why the way in which agencies are 
handling their property is problematic and why the Financial 
Management Subcommittee that we serve on will continue to 
exercise oversight in this area.
    Many Federal agencies have a presence, sometimes a major 
presence, not just here in Washington but in communities large 
and small across our country. That is not the problem. The 
problem is that too many of the properties that agencies make 
use of to serve the American people appear to be managed in 
ways that are likely wasting billions of dollars that taxpayers 
are paying each year.
    The Administration, as they have in several other key 
management areas, has begun to address this problem, and some 
initial progress is being made toward improving Federal 
property management, and we will hear about that today, as well 
as a to-do list of what lies ahead. The President has responded 
to GAO's high-risk designation for property management by 
setting up for the first time a team of qualified senior 
leaders at key agencies whose sole job is to better manage 
agencies' property assets and to align their physical 
infrastructure with their agencies' missions. The President 
also set up a Federal Real Property Council, which is working 
to develop a reliable inventory of all Federal property and to 
set property management standards and to put systems in place 
for measuring agency performance.
    Agencies are now graded on their adherence to sound 
property management principles through the President's 
Management Agenda, and we applaud that. As GAO has pointed out, 
however, there are still a number of very costly challenges 
that remain. Chief among the management deficiencies that we 
will hear discussed today is the fact that many agencies hold 
onto, year in and year out, thousands of pieces of property 
that are unneeded, underutilized, or, as Senator Coburn and I 
found out during a field hearing in Chicago, just completely 
vacant, and I think Mr. Goldstein was there with us at that 
time.
    When an agency maintains possession of a property it does 
not need to carry out its mission, taxpayers must shell out 
large sums to pay for unnecessary security, to pay for 
maintenance, and to pay utility costs. It is apparently a major 
problem at several agencies, among them NASA and the 
Departments of Energy and Homeland Security. At those agencies, 
GAO has reported that more than 10 percent of agency assets are 
sitting idle and could be taken off the books.
    Dr. Coburn and I hope to address this problem later this 
year with legislation we are currently working on, legislation 
that the President has recommended in his budget, that would 
streamline the property disposal process and give agencies the 
financial incentive to get rid of what they no longer need. 
Agencies such as the VA that have the ability to retain some of 
the proceeds when they dispose of properties they own carry 
very few unneeded assets, and we will hear about that later. We 
should take what works at those agencies, like the VA, and use 
it to help make other more sensible management decisions.
    Another expensive property management problem that has been 
highlighted by GAO is the overreliance that some agencies place 
on leases to meet their space needs, even when purchases or new 
construction may be the most cost-effective way to meet these 
needs over the long run. This is another issue that Senator 
Coburn and I plan to spend some time working on. GAO, at this 
Subcommittee's request, is currently examining the cost 
differences between leases and other available options so that 
we can get a better sense of how much these lease agreements 
that agencies are entering into with increasing regularity are 
costing us. The costs, I suspect, are likely to be quite 
significant.
    GAO has testified, for example, that the true costs of the 
lease the Patent and Trademark Office entered into for their 
new headquarters building in Alexandria, Virginia, several 
years ago will cost taxpayers $38 million more than a lease-
purchase agreement would have cost. And it will cost us $48 
million more than it would have cost us to construct a new 
building from scratch. And that is just unacceptable, and I 
fear that may be only the tip of the iceberg.
    Our witness from GSA will testify today that, by the end of 
this year, his agency will reach the point for the first time 
where the majority of GSA's portfolio will consist of leased 
buildings.
    Now, do not get me wrong. Leases make sense in some cases, 
but they do not make sense in others, and what we have got to 
do is make certain that agencies are doing their due diligence 
at the outset in making sure to the best of their abilities 
that they are going about meeting their space needs in the most 
cost-effective manner. We will also need, in all likelihood, to 
revisit the arcane budget rules that encourage agencies to go 
with leases when it does not make sense in the long run for 
them to do so.
    These two problems are just the most costly of those 
highlighted by GAO and others. Maintenance backlogs are 
another. When an agency, either due to incompetent management 
or lack of resources, ignores a routine maintenance problem 
until it becomes a catastrophic one, taxpayers are at risk of 
spending significant amounts of money to repair or restore 
something which could have been addressed early on for 
significantly less money. According to GAO, just seven agencies 
they contacted reported more than $77 billion in maintenance 
backlogs, and the Department of Defense alone reported $57 
billion in maintenance backlogs.
    And, finally, there is the fact that at least some of the 
data agencies have on their property inventory is just flat out 
unreliable. For fiscal year 2006, as it has been for, I guess, 
the last 9 years, GAO reported that the Federal Government 
could not satisfactorily determine that information on Federal 
property was properly reported in its annual financial 
statement. Without reliable information in this area, agencies 
do not fully know the assets they own and do not know the 
location and condition of that property. They also cannot 
effectively manage their assets to achieve their mission in the 
most efficient way possible.
    Well, there is a road map out there for us to follow. That 
is the good news. We have made a start, and that is good news 
as well. We look forward to working with our witnesses today, 
the agencies that they represent and others that are not at the 
table, to working with my colleague Senator Coburn and others 
on this Subcommittee to provide the oversight and give agencies 
the tools and maybe sometimes the push that they need to give 
taxpayers the kind of property management system that they 
expect and they deserve.
    Dr. Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Well, thank you, Senator Carper, and 
welcome to our witnesses. This is a sleepy, little, non-
invigorating area of the Federal Government that is costing the 
American taxpayers billions every year because we are not doing 
the appropriate thing.
    A chart was just put up that shows the Department of 
Energy's unneeded space--20 million square feet.\1\ To get a 
handle on what that means, that is 19 times the size of this 
building, this entire office building, or 3 times the size of 
the largest office building in the world, the Pentagon. And 
that is just in the Department of Energy, space that we do not 
need, that we have not sold, that we have not turned over, that 
we are continuing to spend money on.
---------------------------------------------------------------------------
    \1\ The chart entitled ``Excess/Underutilized Property At the 
Department of Energy'' appears in the Appendix on page 105.
---------------------------------------------------------------------------
    The Administration is to be congratulated as it works 
towards getting a handle on the real property. I know Clay 
Johnson is involved in that as well. But it is difficult for us 
to have any credibility, and this really is not a problem with 
you all as much as it is with Congress. We have set so many 
road blocks up so that you cannot get rid of buildings. The 
difficulty in terms of meeting the requirements to ever put a 
building up for sale is almost impossible. The requirements 
associated with that in terms of what happens and the 
requirements that it goes through; it can be used for an 
airport, prison, education, public health, homelessness, the 
whole works. These are the things that, in fact, are mandated 
and must be used for before it can be sold. Some of those 
things are realistic, and some are not.
    What is probably more important is to really identify the 
problem, which is part of what this hearing is. We need to try 
to effect a legislative solution so that we can handle real 
property in a way that makes sense and that does not cause us 
to continue to spend tremendous amounts of money maintaining 
buildings that we do not need.
    Finally, Senator Carper mentioned leases.\2\ That is our 
problem, too. Because of the way the budget rules are set up, 
we actually force agencies because we expense a lease-purchase 
agreement all in the year in which it is made. That is crazy. 
Nobody else does that in the world. That is not even a 
generally accepted accounting standard. So the fact is that we 
need to be changing that, and we need to give the agencies the 
ability to do lease-purchase and then accurately reflect the 
cost of that in the budget year on an annual basis over the 
life of that lease-purchase.
---------------------------------------------------------------------------
    \2\ The chart entitled ``Construction vs. Operating Leases'' 
appears in the Appendix on page 106.
---------------------------------------------------------------------------
    So I am thankful that we are going to have this hearing. My 
hope is that as we raise awareness, Senator Carper on his side 
of the aisle and I on my side of the aisle can build a 
consensus, can alleviate the fears that we might leave somebody 
out who might have some need in this country and do the common-
sense thing of handling real property in a way that gives 
taxpayers value, and also making sure--I am not sure I agree 
with Senator Carper that there is ever a time that the Federal 
Government should be leasing space. If we fix it to where it is 
easily turned, then there is no reason that we should not 
purchase it and then turn it rather than lease it. Leasing is 
basically the least valuable way to hold a property in terms of 
return for the taxpayers.
    But I thank you again, Senator Carper, for holding this 
hearing. My hope is that this year we can start down the road 
and probably have something the President can sign that will 
change this archaic system into something that is smart, 
flexible, meets the needs of the agencies, and also is good 
financial management.
    Thank you.
    Chairman Carper. Thank you, Dr. Coburn.
    We have two panels before us today, and our lead-off 
witness is Clay Johnson, and we welcome you today. Your full 
statement and that of your counterpart here, Mark Goldstein, 
are going to be made part of the record, so I am not going to 
go into any elaborate introductions. I think Mr. Johnson comes 
by about every other month, and so we are always happy to see 
him and both of our witnesses.
    I am going to ask you to use maybe roughly 5 minutes. If 
you go a little bit over that, that is OK, but go ahead and get 
started. If you get too far into it, if it gets past lunch, I 
will rein you in and we will go to questions.
    Senator Coburn. Can I interrupt for just a second? I have a 
Judiciary hearing that I may have to leave for, so it will not 
be anything you said. It will be because I am getting a page 
that I need to be there.
    Chairman Carper. Fair enough.
    Alright. Mr. Johnson, why don't you lead us off? Thank you.

     TESTIMONY OF CLAY JOHNSON III,\1\ DEPUTY DIRECTOR FOR 
          MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Johnson. Thank you, sir. Senators, thank you very much. 
I just have a few very general comments before getting to your 
questions.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Johnson with an attachment 
appears in the Appendix on page 39.
---------------------------------------------------------------------------
    One, we really applaud your interest in this subject. You 
both are very well known for asking the question at every one 
of your hearings: What can we do to help? We have some answers 
to that, and I think your support, to work with us, to figure 
out how to structure this pilot program, to figure out how to 
dispose of these properties more readily, more effectively, and 
in a more businesslike fashion, I am confident working together 
we can figure out how to do that and do that this year and get 
on about it.
    Chairman Carper. Sometimes we ask that question--What can 
we do to help?--and we do not get much back. But in this case--
--
    Mr. Johnson. Well, we have some proposals.
    Chairman Carper [continuing]. It looks like there is plenty 
we can do.
    Mr. Johnson. And I know how genuine and deep your interest 
is in this subject, and so we welcome that and applaud that.
    I was reading all the testimony from the other panelists 
the last couple days, and I was thinking that 3 or 4 years ago, 
you could not even have had this panel discussion. We would not 
have been able to answer any of the questions that you want to 
ask today. We just did not have the information.
    What we have today that we did not have until a couple 
years ago, starting a couple years ago, is that there is 
leadership in every agency, there is information, a whole lot 
of information, about real property, and we have asset 
management tools that we have never had before. And so we have 
the ability now to tackle these issues that we have never had 
before. The 100 largest, most unnecessary real property assets, 
that would have been a laughable question 4 or 5 years ago. We 
can answer that question now, and we have been challenged to 
answer that in this report that is due to Congress on June 15, 
identifying all the unnecessary property, and particularly the 
100 largest and most unnecessary.
    But, anyway, we are prepared, and as GAO has pointed out in 
the report, we have made a great start, but now it is time to 
start using all these tools to start delivering and start 
disposing of properties and start managing things more 
effectively. And agencies are really excited about doing this. 
They are real proud of what they have accomplished so far, and 
we are real proud of them. And we look forward to working with 
you in the months and years ahead to actually deliver on the 
promise of all these new-found capabilities. Thank you.
    Chairman Carper. Fair enough. Thank you for that statement, 
and your full statement will be made a part of the record.
    Mr. Goldstein, why don't you share with us your thoughts?

     TESTIMONY OF MARK L. GOLDSTEIN,\1\ DIRECTOR, PHYSICAL 
  INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Goldstein. Sure. Good morning, Mr. Chairman.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Goldstein appears in the Appendix 
on page 43.
---------------------------------------------------------------------------
    Chairman Carper. Good morning. By the way, thanks very much 
for the most recent report, which we have had a chance to read 
and to try to digest. A lot of good substance here. Thank you.
    Mr. Goldstein. Thank you very much. Our team did a very 
great job, and we appreciate the Subcommittee's----
    Chairman Carper. Are any of them here today?
    Mr. Goldstein. The team is, in fact, right behind me.
    Chairman Carper. Will the team members raise their hands? 
Good. Thanks very much. Front-row seat.
    Mr. Goldstein. Exactly. That is not always a good thing, 
but we will do our best.
    Thank you for the opportunity to testify today on the 
progress and the challenges that the Federal Government has 
made in managing its real property. At the start of each 
Congress since 1999, GAO has issued its ``Performance and 
Accountability Series: Major Management Challenges and Program 
Risks.'' In January 2003, we designated Federal real property 
as a high-risk area as part of this series, and we issued 
updates on this area in January 2005 and January 2007. My 
testimony is based largely on a recent report on Federal real 
property that you just mentioned, and as well as other GAO 
reports on real property issues that we have talked about over 
the years. My testimony focuses on the progress made by the 
Administration and the major real property-holding agencies to 
strategically manage real property and address longstanding 
issues, and what problems and obstacles, if any, remain today 
to be addressed still.
    The major points of my testimony are as follows:
    First, the Administration and major real property-holding 
agencies have made progress toward strategically managing 
Federal real property and addressing some longstanding 
problems. In response to the President's Management Agenda and 
related Executive order, relevant agencies have, among other 
things, designated senior real property officers, established 
asset management plans, standardized real property data 
reporting, and adopted various performance measures to track 
progress. The Administration has also established a Federal 
Real Property Council to help support real property 
improvements. Additional initiatives seek to provide agencies 
with other management tools to more effectively manage real 
property, such as broader authority for enhanced-use leases.
    Second, although progress toward strategically managing 
real property and addressing some longstanding problems has 
been made, many problems have not been fixed, and several 
underlying obstacles that hinder progress remain unresolved. 
For example, Energy, DHS, and NASA reported that over 10 
percent of their facilities are excess or underutilized. In 
addition, Energy, NASA, GSA, Interior, State, and VA reported 
repair and maintenance backlogs that total over $16 billion. 
DOD reported a backlog of more than $57 billion, which includes 
the cost of restoring and modernizing obsolete buildings. 
Furthermore, Energy, Interior, GSA, State, and VA reported an 
increased reliance on operating leases--an approach which we 
have reported is often more costly for long-term space needs. 
While agencies had made progress in collecting and reporting 
standardized real property data, data reliability is still a 
challenge in some agencies, and agencies lack a standard 
framework for data validation. Finally, all the major real 
property-holding agencies reported using risk-based approaches 
to prioritize security needs, as we have suggested, but cited a 
lack of resources for security enhancements as an ongoing 
problem.
    In our past high-risk reports, we called for a 
transformation strategy to address the longstanding problems in 
this area. The Administration's approach is generally 
consistent with what we have envisioned, but certain areas 
warrant further attention. More specifically, underlying 
obstacles such as competing stakeholder interests, legal and 
budgetary limitations, and a need for improved capital planning 
persist. For example, some agencies cited local interest as 
barriers to disposing of excess property. Furthermore, 
agencies' limited ability to pursue ownership often leads them 
to lease property that may be more cost effective over time for 
them to own. And, finally, long-term capital planning efforts 
to improve the efficiency of government operations continues to 
be a challenge, and these efforts are not clearly linked with 
the real property initiative.
    The Federal Government has generally not planned or 
budgeted for capital assets such as real property over the long 
term. In our April 2007 report on real property, we made 
recommendations in three areas: One, to ensure the validity of 
agency data; two, to focus reform efforts to better address the 
leasing problems and security challenges; and, three, 
addressing obstacles that included competing stakeholder 
interests and the need for improved capital planning.
    Mr. Chairman, this concludes my opening statement. I would 
be happy to answer any questions that the Subcommittee has.
    Chairman Carper. Good. Thanks very, very much.
    Let me just start off, if I can, and we will maybe do 7-
minute segments here, but not that I will stick to that too 
closely. Let me just start off by asking you, Mr. Goldstein, 
when you looked at the work that the Administration has done in 
response, I guess, to the news in 2002 and 2003 that real 
property management was on the high-risk list, when you look at 
what has been done to date, what do you especially admire? And 
where do you find that there is still more that they can do 
without our help? And I am going to get into what we can do as 
well. What are the things especially meritorious and what are 
some areas where you think they are still falling a bit short?
    Mr. Goldstein. Sure. I think that----
    Mr. Johnson. Should I step out of the room? [Laughter.]
    Chairman Carper. You have got to stay for this part.
    Mr. Johnson. OK.
    Mr. Goldstein. No. Actually, I was about to compliment Mr. 
Johnson. I think the Administration has done a very good job 
and a lot of progress has been made. His comment that we could 
not hold this kind of a hearing 4 or 5 years ago I think is 
absolutely true. When GAO put real property on its high-risk 
list in 2003, we did so for five reasons: Issues with data 
reliability, excess property, backlogs, leasing, and security. 
And I think you would find today that there has been progress 
made in all five of those areas.
    At the same time, as I have mentioned--and I suspect Mr. 
Johnson would agree--we have still got a long way to go. These 
problems are not fixed, and some of the underlying obstacles 
that I have talked about--some of the legal and budgetary 
disincentives, the competing stakeholder interests, and the 
like--could hamper progress in the future if we do not continue 
to address these issues. But there has been considerable 
progress made.
    Chairman Carper. When you look at the areas where the 
Administration without our help could do more, or agencies 
could do more, what are some that come to mind?
    Mr. Goldstein. Clearly, in the area of data validation, I 
do not think they need the help of the Congress.
    Chairman Carper. Talk a little bit more about that point, 
please.
    Mr. Goldstein. Sure. Within the Federal Real Property 
Council, the database that has been established by the 
Administration and the agencies, collecting Federal real 
property data, over the years that data has been quite sketchy. 
The effort underway now is to try to improve that by 
standardizing the kind of data elements that are used and the 
definitions that are used to collect data. But there are still 
some holes in the collecting of the data, and there are still 
some discrepancies and differences of how agencies are actually 
defining that information and, therefore, reporting it. So that 
it is not uniform at this point in time, and there has not been 
any validation, certainly that I am aware of, at the 
Administration level to determine that what is being reported 
is completely accurate and complete. And so agencies need to 
get, I think, more involved in having accountability and 
control mechanisms in place that will assure both the 
Administration as well as Congress that the information that is 
being reported in the database is accurate and complete and so 
that the government does know what it owns, where it is, and 
what its disposition status is.
    Chairman Carper. Mr. Johnson, do you want to respond to 
that at all?
    Mr. Johnson. Just a comment on the data validity. All the 
agencies have been charged to come back to us, I think by the 
end of the third quarter, with their plan--or fourth quarter of 
this year--with their plan, what they are going to do to 
validate this data. I do not know whether that is a sampling or 
they are getting the Inspectors General involved or announce 
that they need to confirm the validity of the information.
    A couple of examples of indications that the data may not 
all be 100 percent accurate is a building would be reported on 
their inventory as being in good condition and go in as such on 
the inventory, and 2 months later it is condemned for asbestos 
problems or something. Well, that suggests that the original 
designation was not accurate. Or an agency, unnamed, would 
submit information and maybe there are 50,000 more assets than 
last year. Well, we did not acquire 50,000, so that number is 
wrong--this year or last year?
    So it is those kinds of things that says, Oh, maybe this is 
not all 100 percent accurate, and maybe agencies need to be 
doing something every year to look at the accuracy of the 
condition information or the number information or the 
replacement value information to ensure that we have the most 
valid data that we can possibly get.
    Chairman Carper. OK, good.
    Mr. Goldstein, anything else that comes to mind in terms of 
a to-do list for the Administration without our help?
    Mr. Goldstein. Well, I think they will need your help, 
obviously, on excess property. On backlogs, I think the 
agencies can do a fair amount themselves by getting a better 
handle on what their backlog requirements are, which some of 
them are starting to do, but trying to understand at a more 
detailed level what the funding requirements to deal with 
repair and maintenance backlogs are going to be and perhaps 
approaching it in a smarter way. They need to make better cases 
to agency management that these funds are needed up front, not 
later, because obviously, as you mentioned, the longer you wait 
to do these kinds of repairs, the worst shape you are going to 
be. Not one of your agencies here today, but to me one of the 
most glaring examples of this problem sits on the National 
Mall. It is the Arts and Industries Building of the 
Smithsonian, which for years has had an increasingly growing 
problem, and now the entire building, of course, is closed 
because the roof could cave in at any point. It is now going to 
cost hundreds of millions of dollars to repair an American 
treasure sitting in the middle of the National Mall. It could 
have been repaired at a much earlier date for a lot less money.
    Chairman Carper. Yes. Mr. Johnson, would you make a comment 
or two in response to what Mr. Goldstein just said?
    Mr. Goldstein. Well, is that all the suggestions that you 
are talking about Congress could do or not, or just----
    Mr. Goldstein. These are ones that agencies and the 
Administration----
    Chairman Carper. That agencies might be able to do on their 
own.
    Mr. Goldstein. Not all, but some of them.
    Mr. Johnson. The costs of disposing of properties that are 
a real issue, particularly in an area of tight budgets, which 
is what we are in now. And so changing this pilot program 
proposal where agencies are allowed to keep for a period of 
time 20 percent----
    Chairman Carper. No. I think the point he was talking about 
was getting--and the Smithsonian is just one example where 
agencies are not asking--are not getting the money. I do not 
know if they are asking in their budget request that they are 
sending to the folks who run the agencies or to OMB, but 
apparently there is a concern are they getting the money that 
they need to maintain the----
    Mr. Johnson. So it is the deferred maintenance question.
    Chairman Carper. Yes.
    Mr. Johnson. OK. In tight budgets, you look at the things 
you absolutely have to have, and deferred maintenance is 
usually one of the first things that you could go without for 
one more year, and then it is the same answer the next year, 
and pretty soon you have a whole bunch of accumulated years of 
deferred maintenance that is not funded.
    The one thing that we are doing in this initiative is 
causing agencies to prioritize, understand here is all your 
deferred maintenance needs, here is how much money you might be 
able to get, what are your highest priorities, and make sure 
that they are not--that their highest priority deferred 
maintenance issues are being addressed. That is the one thing 
that we can do now with existing resources, and being smart 
about what is deferred maintenance and if they can get rid of 
properties versus continue to maintain them or upgrade them or 
really do not need them, that kind of thing.
    The issue of available resources, spending more money on 
it, is a budget issue and a deficit issue, and all of a sudden 
politics gets into it, and how big do we want the deficit to be 
and what do we want the top line to be and so forth. So it is a 
much bigger issue.
    Chairman Carper. Alright. As I prepare to turn this over to 
Dr. Coburn for questioning, one thought that comes to mind--I 
have not asked yet what could we do, and we are getting there. 
Dr. Coburn will probably get into that, and I will as well. But 
to the extent that we allow some agencies--VA comes to mind--to 
retain a portion of the value of the assets that they dispose 
of, the excess property that they dispose of, to the extent 
that they can use that for deferred maintenance, that would 
seem to make a whole lot of sense. It would provide a good 
incentive for agencies to get rid of some excess property 
knowing that they could keep the portion of that and use it for 
something that is hard to get through--dollars that are hard to 
get through the budgetary process. We can explore that later. I 
am sure we will.
    Alright. Dr. Coburn.
    Senator Coburn. Do we know how much excess Federal property 
we have?
    Mr. Johnson. We are supposed to produce a report for 
Congress June 15. The preliminary information is that it is 
approximately 21,000 distinct assets with a replacement value 
of about $17 billion.
    Senator Coburn. Seventeen billion dollars for 21,000? There 
was an estimate put out by Vista that has tons of management 
contracts with the Federal Government. It estimated that 
approximately one-third of all Federal property or 1.2 billion 
square feet is considered excess. Do you have any comments on 
that?
    Mr. Johnson. It sounds high to me.
    Senator Coburn. It sounds high? OK.
    Do we have any idea what the cost is to us as a Nation for 
maintaining that excess property?
    Mr. Johnson. No, we do not. But we have the information to 
get in the ballpark of what that is. We just do not have that 
now. But let us pick a date, and we will get back to you by 
that date with that estimate.
    Senator Coburn. OK. I think the testimony was from the 
Department of Defense in Chicago--and, Senator Coburn, you 
might correct me on this, but I think they spend about $3 
billion a year maintaining properties they do not want. Just 
think about what that would do for us, and that is the 
Department of Defense, and I know that is one of the larger 
ones.
    Let us talk about this pilot project and what the President 
has requested. A couple of things. If an agency did not have to 
go through--put that list of steps you have to go up through--
the list of steps that are required, and let me more accurately 
describe this. This is from 2002 to 2006. In 2006 alone, there 
were over 1,000 properties disposed of, and if you just 
extrapolate that back over 5 years, that means you have 5,000 
properties. So you have less than 4 percent of the properties 
that actually went. But every one of those properties had to go 
through every one of those steps to do it. Do you believe that 
agencies would be more effective if we could limit the number 
of steps or maybe even eliminate the steps and say if we have a 
need over here, we will buy a property and we will not connect 
it to the disposal of present property?
    Mr. Johnson. Yes. These rules were established for, I am 
sure, good reasons at the time. A lot of these rules, I think a 
number of them, a majority of them, were established in 1949. I 
am thinking maybe the needs have changed. The world has 
certainly changed. They need to be rethought. And the McKinney 
Act, the homeless provision, also is a very sensitive issue. A 
lot of advocates of making all the properties possible to be 
available for the homeless, the fact of the matter is in the 
last 30 years, less than 1 percent of all the properties we 
have disposed of have ended up going for the use by the 
homeless.
    So we have to go through a very protracted--we have to go 
over some hurdles to end up with less than 1 percent of the 
properties end up being conveyed to the homeless.
    Senator Coburn. Has anybody gone back to look at the 
properties that were available to the homeless to see if they 
are still being used for the homeless?
    Mr. Johnson. I do not know.
    Mr. Goldstein. Dr. Coburn, may I?
    Senator Coburn. Yes, please.
    Mr. Goldstein. Maybe I can answer your question a little 
bit. GAO did a report several years ago on public benefit 
conveyances, and we found out a number of things that I think 
are pertinent. One is--and the Chairman asked this question a 
little while ago--about what more could agencies do on their 
own. One of the things we found in that report was that many of 
the properties that were up to be conveyed through the public 
conveyance process had not been communicated in any way to the 
public that was successful. There were many properties out 
there, and people tended to find out about them in an ad hoc 
basis. In other words, GSA could better--we recommended could 
better use its website and other public communications vehicles 
to try and get those properties out there so that the public 
could deal with them and know that they were available.
    In terms of taking a look at whether anyone has gone back, 
when we did our report, I think 2 or 3 years ago now, we went 
and looked at some 40 properties that had been conveyed to 
ensure that they were still being used for the purposes that 
they were supposed to be used and the like. And we found in 
almost all cases that they were still being used properly, 
whether they were for the homeless or for other reasons.
    Senator Coburn. OK.
    Mr. Johnson. On the subject of those conveyance rules, 
homeless provisions, nobody is proposing that we completely 
eliminate those and we let the agencies do as they please, 
although the thought has entered some of our minds. But I think 
we need to use the pilot project and sit down with you and 
other interested parties and figure out how we can test doing 
this differently, determining what resources are potentially of 
interest to the homeless, have an expanded set of criteria 
beyond the ones now that agencies--that we look at in the first 
review of properties, and just be able to do it faster. This 
whole process can take up to a year for just a review of the 
McKinney process.
    Senator Coburn. Which is one step.
    Mr. Johnson. Which is one of the steps, right. And it was 
concurrent with other things, so it is not additive. But, 
still, it is a year. And that and the cost of disposition of 
properties is a major obstacle to agencies to dispose of 
properties. Most of the properties that are disposed of are 
destroyed. They are not sold. The vast majority are destroyed.
    Senator Coburn. You mean razed?
    Mr. Johnson. Razed, right. And that costs money, and that 
is usually money that agencies do not have. And so you add a 
lot of time to it and you add a lot of cost to it, and those 
are two pretty big hurdles for paying attention to other things 
on your to-do list.
    Senator Coburn. OK. Let me get you to repeat. I think your 
testimony was 21,000 properties, $17 billion.
    Mr. Johnson. That is our estimate now, but we will come 
forward----
    Senator Coburn. That cannot be right because that makes the 
average property worth $1,235. Would you check that number?
    Mr. Johnson. OK.
    Senator Coburn. If you take $17 billion divided by 21,000, 
there is something wrong with that number. If you would check 
that for me.
    Do earmarks play a role at all in how properties are either 
acquired or disposed of?
    Mr. Johnson. I do not know, but I remember when Rob Portman 
came into the Director's job at OMB, we were talking about what 
goes on in the management world, and I was telling him about 
real property, and he was smiling sheepishly. I said, ``What 
are you smiling for?'' And he said, ``I used to love to get 
Federal properties and make them available for the city of 
Cincinnati.'' I said, ``Well, you are on the other side of that 
effort now.''
    So I do not know to what extent earmark mechanisms play a 
role in that or not, but, of course, every elected official 
representing their State or district would love to get Federal 
properties made available for their local municipalities.
    Senator Coburn. Let me go back again. Real numbers, deficit 
added to the debt last year, excess of $300 billion. All the 
States are running a surplus. When we are running a deficit, 
why would we be giving excess property to the States or the 
municipalities?
    Mr. Johnson. You would have to ask them that, but I think 
the answer to that is because they can.
    Senator Coburn. But does anybody agree that is smart? I 
mean, when we are running a deficit and they are running 
surpluses and all what we are, in fact, doing is enhancing our 
deficit?
    If we get this pilot program going, what do you hope to 
achieve? At the end of 5 years, what is the goal?
    Mr. Johnson. The goal is--not necessarily in any particular 
order--to demonstrate that when agencies are allowed to keep a 
portion of the proceeds--and we are recommending they keep 20 
percent of the net, so there is some cost of disposition offset 
there--that it shows how much of a--there is a huge increase in 
the activity so that it is scored as a plus for the Federal 
Government. Right now, if you went in and said let the agencies 
keep 20 percent, it is scored as a cost to the Federal 
Government because less goes to the Treasury than would 
otherwise go to the Treasury. So we want to demonstrate the 
impact that this has on the level of disposition activity.
    We also want to, in a controlled environment with a 5-year 
time frame set on it, engage you all and think through these 
public conveyance provisions, McKinney Act provisions and so 
forth, and see if we cannot agree on a more sensible, current 
view of the world approach to this so we can still address all 
the issues that need to be addressed, but in a more expeditious 
fashion.
    Those are the two primary benefits of conducting this 
pilot.
    Chairman Carper. Just talk to us, if you will, with some 
specificity, Mr. Johnson, about what we can do to get this 
moving.
    Mr. Johnson. This bill on the pilot almost made it to 
voting status last year, and the thing that held it up, as I 
understand it, was concerns about McKinney, and what we were 
proposing ostensibly was that all be put on the sideline for 5 
years and not be a factor.
    What we would like to do is, knowing now that there is 
real, honest to goodness seriousness here about moving forward 
on this, let us sit down and agree on some language--we do not 
have anything to propose to you today, but develop some 
language that we think addresses these public conveyance issues 
and McKinney issues that we think will be satisfactory on a 
trial basis for this pilot, and then figure out how we can help 
you build a consensus around this on both sides of the aisle to 
get it done.
    Chairman Carper. Mr. Goldstein, you are sitting over there 
sort of outside of the legislative process. Any advice as an 
objective observer on how you think we ought to get this thing 
moving?
    Mr. Goldstein. I think, Mr. Chairman, that Mr. Johnson is 
right in that there are definitely some--and as you point out, 
too, there is clearly flexibility and incentives that can be 
put into this process, and they do seem to need to come out of 
the legislative framework because the authorities are not 
present for most agencies today. And so it will take input from 
the Congress to make that work. But, clearly, greater incentive 
and greater flexibility would, I think, help agencies deal with 
some of the problems in an environmental remediation in having 
money if demolition is the appropriate response and in dealing 
with other kinds of factors that they would have to do to 
prepare properties for sale or for surplusing in some other 
fashion. So I think it would be beneficial. We have long been 
in favor of that.
    Chairman Carper. Just kind of thinking out loud, if you are 
a Federal agency and you do not have money in your budget to 
pay for demolition, a pretty good disincentive to demolish and 
get rid of a property, if you know that even if you had 
something--land, if you will--to sell, at the end of the day 
you knew you were not going to get any of that money back to 
help pay for the demolition costs, that is a pretty good 
incentive not to do anything.
    On the other hand, if it is a property that needs to be 
heated, cooled, whatever, maintained, that is a drain on the 
Treasury. There has got to be a good, common-sense way here to 
change the way we operate. What are some agencies that have 
already been a pilot, if you will--I always like to talk about 
the States being laboratories of democracy, 50 of them, and we 
learn from what they do well or not so well. But give us some 
examples of some Federal agencies that already has served as a 
pilot, and we have had a chance to watch what they do and to 
learn from them. The idea of waiting a number of years for us 
to be able to make real progress here is not appetizing.
    Mr. Johnson. Well, there are agencies, a number of agencies 
have the flexibilities--and correct me if I am wrong, but DOD 
has retention flexibilities, GSA, VA, USDA, State Department. 
State Department international facilities, I think. So they are 
allowed to keep, I think, all of the proceeds for use on real 
property, maintenance, investment, whatever. And I do not know 
if they could demonstrate that before they had those 
flexibilities, here was the situation, and once they got the 
flexibilities, here is what happened to the activity. But they 
have those flexibilities now and are glad they have them. Those 
are our largest real property agencies, so it is a good thing. 
So we are talking about similar flexibility, but they retain 
only 20 percent for the other agencies.
    Chairman Carper. Given the fact that we have so much 
experience, obviously years of experience with some of these 
other agencies that have a lot of property, how long is this 
pilot program going to run?
    Mr. Johnson. We are proposing 5 years--which is a long 
time.
    Chairman Carper. Yes. Do we really need 5 years?
    Mr. Johnson. I do not think so. The question that is going 
to be raised, as I understand it, by elected officials is these 
public conveyance issues and homeless issues, because some of 
those are very sensitive issues. But I do not think we are 
saying let us take those out of the consideration; let us do it 
in a much more businesslike--that is a bad term--a much more 
effective, efficient, expeditious fashion.
    Chairman Carper. OK. Dr. Coburn, I know you have a couple 
more questions. You go ahead, and I might ask one more.
    Senator Coburn. Our numbers were wrong. Yours were right on 
the previous comment.
    Mr. Johnson. Well, we will be glad to say that we were 
wrong, if that helps.
    Senator Coburn. No. [Laughter.]
    Mr. Johnson. Always trying to help out, sir.
    Senator Coburn. It is not often people on this side of the 
table are saying we are wrong, so you ought to take that and 
run with it.
    Mr. Goldstein, as far as this proposal, this pilot, is it 
the GAO's position that this is an effective method of looking 
at another way of disposing that might be more expeditious? Do 
they have a position on what we are trying to do or what we are 
suggesting?
    Mr. Goldstein. Yes, Senator. GAO has been in favor of 
providing increased flexibility and giving agencies more of an 
incentive, and part of the way to do that is to have them 
retain some of the proceeds that they can then put to 
offsetting costs in future excess property activities and the 
like. So we have been in favor of this for a number of years. 
We typically believe that demonstrations of this kind can 
certainly help the government better understand what works and 
what does not work and to be able to make changes certainly at 
the margins and then transfer those positive benefits, if there 
are some, to other activities, to other agencies of the 
government. So we are in favor of it. We were in favor of that 
legislation when it was before the House last year.
    Senator Coburn. I am just sitting here thinking about the 
average American homeowner, and if they had a lot next door and 
a building on it, and the freedom that they have to say, ``The 
cost of maintaining this lot and paying the taxes on it for me, 
I think I will get rid of this lot. I am tired of mowing the 
grass. I am tired of the city code saying I have to keep it up. 
It is not economically feasible for me to use anymore. I think 
I will sell it.'' And yet that common-sense approach based on 
economics and the situation they find themselves in is not 
available to us in the Federal Government. You just have to ask 
yourself the question. Is it not because we want to do good 
things for other things?
    I would venture to say that we could develop a homeless 
program for a whole lot less than the costs of doing the 
homeless survey for every piece of Federal property that we 
want. We could just take a chunk of that money from properties 
and say we are going to put this over here for homeless, and we 
would be far better off than what we are doing, well intended 
but very costly and not efficient.
    Go ahead and comment.
    Mr. Johnson. My understanding is that when thinking has 
been thrown out on the table in the past, the representatives 
of the homeless, whoever that is, have said they do not want 
the money. Why, I do not know. But I think that what I suggest 
we do is we pick a date here, not too far down the road--this 
summer, perhaps before the August recess--and all these hurdles 
we have to go over, public benefit conveyances and so forth, 
homeless, whatever, let us try to rethink what--fresh thinking, 
what they ought to be for a pilot over some period of time, how 
they would be implemented, who would have to sign off on them 
and so forth, and try, at least amongst ourselves, to figure 
out what that would be, get the appropriate people to look at 
it, GAO, whomever to look at it, and then start working that 
with the appropriate people that have expressed concerns about 
we might change this or change the homeless----
    Senator Coburn. Well, the other way to go is to have the 
GAO say go in and look at, under the methods we have today, 
what are we spending to try to be able to get property 
available to finally be sold. You know, that is the other 
thing. And how much money are we spending just on this process 
that we have set up, and could we spend that money in a way 
that achieves the goal? I mean, if we are really talking about 
4 percent of the properties----
    Mr. Johnson. Less than 1 percent.
    Senator Coburn. Less than 1 percent being conveyed.
    Mr. Johnson. To the homeless, anyway.
    Senator Coburn. No, I am talking about total. All 
conveyances. We are talking about less than 4 percent of the--
so that means 96 percent is not going that way, yet we are 
going through these steps, these 17 steps, on every piece of 
property. That has to cost a fortune. So maybe we could look at 
what are we spending now as we go through all these steps on 
all the pieces of property and look at that and say wouldn't it 
be advantageous to try to create something to serve these needs 
outside of the property and not tie it to it, so we can make 
good economic decisions about properties.
    Mr. Goldstein, would you have any thoughts on that?
    Mr. Goldstein. That is something we could certainly look 
at, sir. We would be happy to work with the Subcommittee to 
develop that, if that is the direction they wish to go in, 
sure.
    Mr. Johnson. Why don't we get back to you with a date by 
which we will come back to you and say here is the approach we 
suggest taking to look at this particular impediment. It is not 
20 percent, 30 percent, that is the retention percentage. It is 
the impediment, and what analyses, what discussions, what 
ruminations, whatever we want to engage in to come back before 
we start trying to convince other Senators and Congressmen that 
this is the way to go.
    Senator Coburn. The other thing I am thinking is how many 
agencies never put a property that truly is excess up because 
they do not want to have to go through this bureaucratic 
nightmare, to go through all the steps and spend the money. 
They are just saying that the cost of maintaining this building 
is less than the cost of getting it ready to be disposed of. Do 
you have any idea on that?
    Mr. Johnson. I do not, but I hear agencies talk about that, 
because they are going to eat their maintenance costs this 
year, they are going to each the destruction costs, the razing 
costs this year, and this year's budget is real. And then on 
top of that, they have a lot of bureaucratic hurdles they have 
to go through, so, ``Tell me why I am doing this.''
    Senator Coburn. And don't we have an agency for housing and 
urban development? Why are we tying up this whole idea of real 
property management for a function that we already have an 
agency that sat there and designed to address?
    Mr. Johnson. Right.
    Senator Coburn. I do not have any other questions.
    Chairman Carper. Let me go back, if I can, to this issue of 
leases versus buy or build. There has been some discussion in 
recent years, I believe regarding the Patent and Trademark 
headquarters, I think, in Alexandria. It is apparently costing 
the Trademark Office, I am told, tens of millions dollars more 
to lease its facility than it would to buy it or even to build 
something similar from the ground up. And I suspect there are 
similar examples out there, especially now that agencies' 
reliance on leases continues to increase. And I think we said 
earlier that we expect sometime this year or next that more 
properties will be leased than actually bought or built.
    Is there anything that the Administration is doing to 
encourage agencies to rely less on leases?
    Mr. Johnson. The things that we are doing to question the 
level of leases, the number of leases, there are several 
things. One, agencies in their plans are asked to look at 
opportunities to combine leased spaces to see if they can 
consolidate them in fewer locations and have less separate 
facilities. The Department of Labor has done a really good job 
of this. There is more information now about, in a particular 
neighborhood, all the different Federal entities that have 
space, so there is more information that an agency--the 
Agriculture Department could look at and say, ``I need some 
space. What other Federal agencies might have space in this 
geographical area that I might be able to utilize,'' instead of 
lease something new. So there is information available now that 
was not available before that allows us to potentially avoid 
leases.
    Then when an agency in their budget wants to propose 
creating a new structure or a new physical asset, they have to 
propose a purchase or a lease arrangement in that, and OMB then 
agrees to that or does not agree with that. In some cases, the 
things that drive leasing--and Dave McCormack can talk more 
professionally and intelligently about this than I; he is going 
to be on the next panel--is that sometimes we need space for a 
very short period of time and it is a very small amount of 
space. And so leasing is the way to get into it the fastest and 
also be able to get out of it when we no longer need it.
    But the other thing, quite frankly, is money. And maybe a 
less expensive thing to do, all things considered, is to buy. 
That is true for you and me and so forth, but sometimes we just 
cannot afford to pay cash for things, and so we lease it. That 
is the same thing for the Federal Government.
    Chairman Carper. Alright. One more question, if I could, 
for Mr. Goldstein. I am sure you know that Federal property 
management is now part of the President's Management Agenda, 
and agencies are scored based on their success in meeting 
property management goals that are set by OMB, and I assume by 
the Federal Real Property Council. There is some discussion in 
your testimony on how agencies are scored and which ones 
received green, yellow, or red scores.
    In your view, is it clear that why some agencies receive 
the scores that they do receive, is it clear to you what an 
agency has to do to receive a higher score, and what some 
agencies, like the Departments of Agriculture, Labor, or 
Defense, for example, have done in the past to see their scores 
drop?
    Mr. Goldstein. Our April report, Mr. Chairman, on real 
property examined pretty much at a high level by surveying 
agencies the kind of progress they were facing. And so we did 
not specifically look at the scores that the agencies were 
getting in the scorecard. However, because we wanted to 
understand generally the process that the Administration was 
going through and working with the agencies, we did ask OMB 
about the process and about how agencies were scoring so we 
could understand it.
    Unfortunately, OMB's response to us was that the kind of 
information was pre-decisional to the Executive Branch, and so 
consequence we do not have access to that information, so I 
cannot answer that question for you, unfortunately, at this 
point in time. It is something, I think, that would be 
important to know so that we could have a better understanding 
and be able to assure Congress so that the process itself is 
working as it should and that agencies do have a very clear 
understanding of how they can get from red to yellow to green.
    There is guidance out there--it is on OMB's website--about 
how they can do that. It seems to be relatively clear when we 
read it. Also, we found when we did our survey of the major 
property-holding agencies and we asked them to describe that 
process, then most of them seemed, at least in their written 
responses to us, to have a pretty good understanding. But, 
nevertheless, I cannot directly answer your question.
    Chairman Carper. Alright. Well, we are probably going to 
have some more questions we would like to send you to respond 
to for the record. Before we send you on your way, I do not 
know, Mr. Goldstein, if you might be able to stick around for 
the second panel, but if you could, that would be much 
appreciated.
    Mr. Goldstein. I would be happy to, sir.
    Chairman Carper. Thank you. Senator Coburn and I talked a 
good deal about the size of the budget deficit and what we can 
do to rein it in. There is a lot that we can do. We can collect 
some of the taxes that are owed but that are not being 
collected. We can reduce improper payments. There are all sorts 
of things that we can do to right our fiscal ship.
    We can also do a better job of managing our properties. We 
could eliminate all the missteps that we take with respect to 
managing our properties, and we would still have a budget 
deficit, but it would be a smaller one. And I think the 
taxpayers of this country would probably appreciate any 
progress that we might continue to make.
    I applaud the fact that we have gotten started. I applaud 
GAO for raising the flag, the danger signal, several years ago, 
4 or 5 years ago, along with the Adminidstration for responding 
to that. And we have an opportunity here to build on the steps 
that have already been taken. And what I want us to do is just 
to pick up the pace.
    My father used to say to me when I was a kid growing up, he 
would say to my sister and me--we would do some boneheaded 
stunt, and he would say, ``Just use some common sense.'' He 
said it a lot. We must not have had much. And by the time we 
finished up and we went on our way in the world, my sister and 
I spent a lot of time in our lives, professionally and 
otherwise, saying, ``Well, if we used some common sense, what 
would we do?''
    This is a real good one to apply some common sense on. It 
is a real good issue. Obviously, there are some things that the 
Administration can and cannot do on their own, and it is pretty 
clear as the noses on our face that if you say to an agency, 
``We are going to put you through the hassle of trying to 
figure out how to get rid of a property, we are going to make 
you pay for it, and we are not going to reimburse you for that, 
then if there is anything left, any money left over from the 
sale and disposal of the building or the ground, you do not get 
any of it,'' we should not be surprised if we got a lot of 
excess properties and they are costing us money. And whether it 
is a couple million dollars in property or a couple of billion 
dollars, that is real money. And we can do better on this, and 
we want to.
    I am going to talk with Senator Coburn. I am sure he is as 
interested in this issue as I am, and we will find ways to work 
with one another and with others on this Subcommittee, but 
especially with the Administration and with GAO. We are sort of 
in this one together, and we are making some progress, but we 
can make a whole lot more progress if we figure out 
collectively what our next steps could be.
    Dr. Coburn, do you want to add anything else?
    Senator Coburn. No. Nothing.
    Chairman Carper. Alright. Gentlemen, thanks very much, and 
it was good to see you both. And, Mr. Goldstein, I especially 
appreciate you sticking around.
    Thank you.
    With that, I am going to ask our second panel to come 
forward. Gentlemen, welcome. I had a chance to shake all your 
hands a little bit earlier, and we are glad that you stuck 
around through the first panel, and we look forward to your 
testimony.
    I am just going to ask, Mr. Rutherford, if you would like 
to lead us off, and we will ask you to keep your comments to 
about 5 minutes. If you run a little over, we will not throw 
you out, but when you have all finished, we will be asking some 
questions. Welcome. We are glad you are here. Your full 
statement will be made a part of the record. If you would like 
to summarize, feel free.

  TESTIMONY OF BOYD K. RUTHERFORD,\1\ ASSISTANT SECRETARY FOR 
         ADMINISTRATION, U.S. DEPARTMENT OF AGRICULTURE

    Mr. Rutherford. Thank you. Good morning.
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    \1\ The prepared statement of Mr. Rutherford appears in the 
Appendix on page 68.
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    Chairman Carper. Good morning.
    Mr. Rutherford. Chairman Carper, thank you for the 
opportunity to come before you today to discuss real property 
asset management at the U.S. Department of Agriculture. I would 
like to begin by providing a brief overview of USDA's real 
property profile. USDA is a leader in America's food and 
agricultural systems, helping the farm and food sectors operate 
in a highly competitive marketplace to respond to changing 
consumer demand for high-quality, nutritious, and convenient 
food and agricultural products. USDA also carries out a wide 
variety of services and activities related to the management, 
research, and conservation of the Nation's agricultural 
resources. As a result of such a huge mission, USDA manages an 
extensive asset portfolio. Land, facilities, and other real 
property held by USDA are an integral support component to its 
mission.
    As the second largest landholder in the Federal Government, 
USDA occupies approximately 89 million square feet of owned, 
commercially leased, and General Services Administration-
assigned space. USDA also manages 193 million acres of land, of 
which 99 percent is National Forest land, and a Roads Program 
totaling 383,900 miles. USDA operates in 23,400 buildings and 
31,000 structures having a replacement value of approximately 
$46 billion.
    With such a large footprint, USDA has made rightsizing the 
Department's asset portfolio a priority. Executive Order 13327 
has provided a framework for addressing the many areas of real 
property asset management. Since the implementation of the 
Executive order, USDA has taken the following actions:
    In May 2004, USDA established the Corporate Property 
Automated Information System (CPAIS)--I think that is 
``Inventory System,'' excuse me. CPAIS is a system of record 
for all real property assets controlled by the Department.
    USDA developed a comprehensive asset management plan which 
guides managers' activities to ensure that assets are in the 
right place, at the right price, and in the right condition to 
support mission requirements.
    USDA established asset management performance measures, 
consistent with those published by the Federal Real Property 
Council.
    USDA has developed a Capital Programming and Investment 
Process that will formalize project management for capital 
improvement projects. And, locally, USDA is currently 
undertaking a project to consolidate staff from seven different 
leased locations within the National Capital Region into a 
single lease, which will result in an 18-percent improvement in 
space efficiency and potentially $24.3 million in cost 
avoidance over the term of the lease.
    Whereas USDA was not subject to the GAO study, the 
Department is working to address the longstanding problems 
mentioned in the study through implementation of the USDA's 
asset management plan. USDA agencies are evaluating program 
requirements, asset performance, and facility conditions to 
determine whether an asset fits within the long-term mission of 
the Department. The recent GAO study highlights the Federal 
Government-wide problem with holding excess assets. A number of 
factors must be considered when deciding between disposal 
through sale or transfer and demolition and the time frames for 
carrying out the decision.
    As was pointed out by the GAO, remediation of hazardous 
materials must be performed prior to disposal or demolition. 
Delays in carrying out a decision often occur, as remediation 
projects are subject to the availability of funds. USDA 
understands the importance of maintaining its real property 
portfolio. Unfortunately, as with most Federal agencies and 
State governments, USDA has a significant backlog of 
maintenance and repair projects. Using guidance provided by the 
Executive order and the Office of Management and Budget, the 
Department is developing a strategy to address the asset 
backlog.
    USDA generally agrees with the GAO's assessment of the 
challenges to improving Federal real property management. Some 
challenges can be overcome through enhanced real property 
authority. The ability to retain all or a portion of the 
proceeds from the disposal of excess property provides a real 
incentive for agency heads to thoroughly analyze their facility 
requirements. In addition, authority to enter into enhanced-use 
leases provides a means for making meaningful upgrades to 
facilities while adding to their overall mission.
    In conclusion, USDA is committed to ensuring that effective 
management of real property assets is ingrained in the culture 
and business processes of the Department. I would like to thank 
you again for this opportunity to discuss USDA's successes in 
managing its real property assets, and I am ready to answer any 
questions you have.
    Chairman Carper. Thank you, Mr. Rutherford.
    Mr. Henke, do you pronounce your name ``Henke''?
    Mr. Henke. Yes, sir. That is correct.
    Chairman Carper. That is the way I will pronounce it. Thank 
you. Welcome.

   TESTIMONY OF ROBERT J. HENKE,\1\ ASSISTANT SECRETARY FOR 
        MANAGEMENT, U.S. DEPARTMENT OF VETERANS AFFAIRS

    Mr. Henke. Yes, sir. Mr. Chairman, I am pleased to be here 
today on behalf of Secretary Nicholson to talk to you and the 
Subcommittee about the VA, how about how we manage our real 
property portfolio, and some of the many initiatives we have in 
place to sustain real reform in Federal real property.
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    \1\ The prepared statement of Mr. Henke appears in the Appendix on 
page 75.
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    Our priority, of course, and our dominant value is our 
commitment to meet the needs of America's veterans in providing 
them with world-class health care, benefits, and memorials. 
Just to give you some perspective on how busy the VA is lately, 
in health care this year we will treat 5.7 million unique 
patients, an increase of 34 percent over 2001. This year, we 
will have about 65 million outpatient visits, an increase of 47 
percent since 2001. Our Benefits Administration last year 
processed its 18 millionth home loan, and we processed almost 
800,000 claims for disability benefits.
    All this is to put into context our real property program, 
the main components of which are: One, to have a strategic 
plan; two, manage what we have most effectively; three, make 
prudent investments in what we need for tomorrow; four, measure 
our performance; and, five, dispose of assets we do not need, 
which brings revenue for health care and other services that we 
can reinvest directly to provide benefits for veterans.
    In many ways, VA is ahead of the power curve. We have had a 
Capital Asset Realignment for Enhanced Services (CARES) process 
underway now for a number of years. This document was approved 
in May 2004, and it is our blueprint for meeting the current 
and future health care needs of our veterans in modern, 
efficient health care facilities, and it is updated regularly.
    Based on the capital investment process for CARES, VA has 
plans to develop and build four new medical centers and also to 
consolidate existing campuses--for example, the Cleveland 
campus from two campuses to one, and the Pittsburgh campus from 
three to two. At the same time, we are putting facilities where 
veterans live and where the demographics required them, for 
example, in Las Vegas, Nevada, and Orlando, Florida.
    VA uses performance metrics to evaluate and analyze how 
well our assets are performing, and these measurements are 
aligned with the Federal Real Property Council, and they have 
the performance measures of cost, condition, utilization, and 
mission dependency.
    VA uses every means available to dispose of unneeded 
assets. We have disposed of 156 buildings since 2004, and we 
have plans to dispose of 146 more, and 2.7 million gross square 
feet, this year and next year.
    While we have many challenges, we are using innovative ways 
to deal with the situation in today's real estate market, and 
the way to succeed, we believe, is to find a win-win-win for 
the local community, for the Federal Government, and, most 
importantly, for veterans. The reuse of Federal buildings 
through, for example, VA's enhanced-use lease authority, allows 
for us to transfer buildings and real estate from the Federal 
to the non-Federal sector without adversely affecting the local 
community, VA facilities, or, most importantly, veterans.
    Our great enhanced-use lease program provides a proven 
method of leveraging our real estate portfolio, and it has 
brought significant cost savings, realignment of 
underperforming assets, and also produces the ``highest and 
best use return'' for veterans and taxpayers.
    We have processes in place to ensure that dollars spent on 
capital assets make business sense and meet the goals of the 
Department and align with the goals of the FRPC and the 
President's Executive order. We have processes in place also to 
evaluate leasing and major equipment purchases, and we are 
always striving to link our real property initiatives with our 
capital planning process.
    Of course, throughout this process, we have worked with OMB 
and the Congress and will continue to do so.
    So, Mr. Chairman, thank you for the opportunity to be here 
today to tell you about some of the progress we have made and 
the efforts we have underway, and I am happy to answer your 
questions.
    Chairman Carper. Mr. Henke, that is a pretty good story, 
and we look forward to coming back and asking some questions 
about it.
    Mr. Grone, welcome. Your full statement will be entered 
into the record, and we are anxious to hear what you have to 
say. Thank you.

  TESTIMONY OF PHILIP W. GRONE,\1\ DEPUTY UNDER SECRETARY OF 
  DEFENSE, INSTALLATIONS AND ENVIRONMENT, U.S. DEPARTMENT OF 
                            DEFENSE

    Mr. Grone. Mr. Chairman, I appreciate the opportunity to 
appear before the Subcommittee today on the management of 
Federal real property and to provide some insight to the 
progress being made within the Department of Defense.
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    \1\ The prepared statement of Mr. Grone appears in the Appendix on 
page 87.
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    Federal real property was first designated in January 2003 
as a high-risk area by the Government Accountability Office 
because of issues concerning inaccurate inventory reporting, 
deteriorating facilities, unidentified underutilized 
facilities, and the challenge of protecting facilities from 
future terrorist attacks.
    Realizing that the Department of Defense has challenges 
with properly managing and maintaining its assets, DOD has 
undertaken an aggressive, comprehensive program to transform 
business processes with the end goal of having complete 
integrated lifecycle asset management--from planning through 
disposal.
    Management of the Department of Defense portfolio, which 
currently comprises over 533,000 buildings and structures, over 
51,000 square miles of real estate, and a plant replacement 
value in excess of $710 billion, is founded on a multitiered 
strategy that is designed to prevent deterioration, counter 
obsolescence, enhance the military readiness and capability of 
real property assets, and eliminate excess capacity.
    To support this strategy, the Department's business 
practices on real property inventory controls are being 
fundamentally transformed through the Business Management 
Modernization Program. DOD has established standardized 
business processes, business rules, and data elements for real 
property assets to drive accurate, authoritative, 
comprehensive, secure, and timely enterprise property 
information. In support of these requirements, the systems of 
the military departments and the components and their processes 
are currently being modified, and all of this is scheduled to 
be completed in fiscal year 2009. A real property registry is 
being established in this calendar year, which will assign 
unique identifiers to all DOD real property to enable 
consistent management of real property across the Department.
    The Department's efforts to reshape and reposition 
installation assets through base realignment and closure and 
the Global Posture Review are also significant. BRAC 2005 
affects over 800 locations across the Nation--which, I may add, 
is 2\1/2\ times the size of all prior rounds of BRAC combined--
through 24 major closures, 24 major realignments, and 765 
lesser actions. In the end, State facilities amounting to a net 
of roughly $20 billion of plant replacement value will come off 
the Federal books through BRAC, and an equivalent number will 
come off through our overseas Global Posture Realignment.
    The elimination of excess and obsolete facilities in the 
inventory, an effort separate and distinct from the BRAC 
process, continues to be another key element of the 
Department's asset management plan. Efforts are underway to 
refine the manner in which disposals are forecast and to 
reflect them more accurately in the real property inventory. 
The Department is also in the midst of a second demolition 
initiative, separate from BRAC, which targets 50 million square 
feet of facilities and additional excess infrastructure by the 
year 2013. This follows our successful completion in 2003 of 
the demolition of 86 million square feet.
    The Department continues to refine our modeling for 
recapitalization, facilities sustainment, installation support, 
and real property services, all of which are benchmarked to 
best practices in the public and private sector and each of 
which is designed to guide investment choice and to enhance our 
understanding of lifecycle asset management cost.
    Mr. Chairman, the Department recognizes the need to ensure 
improved real property asset management practices and 
accountability. I sincerely thank you and this Subcommittee for 
the opportunity to highlight the Department's success as well 
as our challenges in the management of DOD's real property 
portfolio and to outline our plans for continued improvement in 
the future.
    I appreciate your continued support, and we look forward to 
working with you as we continue to transform and move these 
plans to action. Thank you, Mr. Chairman.
    Chairman Carper. Mr. Grone, thank you so much.
    Mr. Goldstein, I will not put you through this one more 
time, but we will skip over you. Thanks for staying around.
    Mr. Winstead, welcome.

    TESTIMONY OF DAVID WINSTEAD,\1\ COMMISSIONER OF PUBLIC 
    BUILDINGS SERVICE, U.S. GENERAL SERVICES ADMINISTRATION

    Mr. Winstead. Thank you. Chairman Carper, thank you so 
much. I am David Winstead. I am the Commissioner of Public 
Buildings at the GSA. I am pleased to be here to address this 
important issue of Federal property asset management as well as 
disposal. And as you know, we are the primary landlord to most 
civilian agencies, and our real estate portfolio is driven very 
much by our customer agencies' missions and needs while our 
performance of our portfolio is driven really by a strategic 
approach to asset management, much as some of the other 
panelists have talked about.
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    \1\ The prepared statement of Mr. Winstead appears in the Appendix 
on page 95.
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    GSA, like many landholding agencies, has made significant 
progress in addressing the issues outlined in the GAO high-risk 
series. Today, I would like to address GSA's asset management 
strategy and our progress towards reducing vacant and 
underutilized space, our data reporting efforts, and our 
participation on the Federal Real Property Council, which Clay 
Johnson is a key part of.
    I would like to also discuss two related issues: The issue 
of current reinvestment challenges in terms of reinvestment of 
our own portfolio, as well as increased reliance on operating 
leases.
    In terms of asset management and property utilization, as 
highlighted in today's first panel, GAO described the 
continuing challenge of managing Federal real property and 
identifying several agencies with over 10 percent of their 
property inventory as vacant or underutilized. GSA has two very 
vigorous efforts underway to reduce the amount of vacant space 
and underutilized property, as well as government-wide, our 
Office of Real Property Disposal assists other landholding 
Federal agencies in terms of their disposal of underutilized 
assets.
    Internally, GSA has made significant progress, we think, 
over the last 4 years or so in reducing the amount of vacant 
and underutilized property in our owned inventory. In fiscal 
year 2003, we initiated a strategy to restructure our portfolio 
of owned assets. We have made, I think, credible progress 
nationwide, and since the end of fiscal year 2006, we have 
reduced the percentage of under- or non-performing assets from 
45 percent to 30 percent. We have reduced vacant space from 9.2 
percent to 7 percent, which is significantly below, by the way, 
the private sector average of 11.6-percent vacancy in the 
commercial market. We have reported as excess 258 assets, 
disposing of 52 buildings totaling 15 million square feet, and 
this has avoided carrying costs of about $588 million in terms 
of capital reinvestment needs.
    As a result of this restructuring initiative, by the end of 
fiscal year 2006 less than 3 percent of our nearly 9,000 owned 
and leased properties met the FRPC's definition of vacant or 
underutilized. The 251 assets identified as vacant or 
underutilized included 149 government-owned and 102 leased 
properties. Of these assets considered vacant or underutilized, 
84, or 56 percent, have already been reported excess to the 
needs of the agency and are in the disposal process; 4 
additional assets are planned for disposal; 22, or 15 percent, 
are mission-critical facilities such as courthouses; and 13, or 
9 percent of inventory, are vacant due to a major modernization 
and will be fully occupied once those modernizations are 
completed.
    Senator, I would mention, because it was commented on 
earlier in questions, about the speed which we are now doing 
this. I would like to mention that under our disposal process, 
we are taking about 240 days average in terms of disposal 
through utilization and also donation, and only about 170 days 
if we are going to public sale or negotiated sale. So we really 
have addressed the issue of timing and getting these excess 
properties out of our inventory.
    Under the real property inventory data issue--and I know 
GAO addressed that, and Federal real property--and Mr. Grone 
actually chairs the Subcommittee on this--a key element of 
GSA's process is managing our portfolio is the ability to 
capture data, to look at performance and analysis of our real 
estate assets, and strategically move forward on decisions we 
are making about retaining that asset or disposing of that 
asset or reinvesting in it.
    Under the Federal property government-wide standards, GSA's 
inventory consists of almost 8,900 total assets, about 380 
million gross square feet. When these assets are separated 
between leased and owned--your comments earlier about the fact 
we are now just surpassing our owned inventory in terms of 
leased inventory--but we still have 1,788 owned assets totaling 
about 219 million gross square feet and another 7,100 leased 
assets. The annual operating costs for fiscal year 2006 were 
$4.8 billion, $850 million for government-owned, and $3.9 
billion for leased portfolio.
    I think that Mr. Johnson and others have testified about 
the Federal Real Property Council activities. I am pleased to 
not only advance their objectives and the President's 
management objectives, but I am also pleased to chair the Asset 
Management Subcommittee, and I think that we are very proud at 
GSA for being the first agency to be recognized as ``Green'' 
status under the Federal Real Property Standards. We did that 
by improving by 3.2 percent over the last 5 years. We did that 
by looking at reducing operating costs to about 4.2 percent 
below market, and also reporting the assets, as I mentioned 
earlier.
    Just to conclude, I would mention, because I know my time 
is up, on the reinvestment side, we do have enormous needs in 
reinvesting in our buildings. The Federal Triangle, our 
landmark, Cabinet agency headquarters, do require a lot of 
investment now in terms of their age. We are looking very 
carefully, about $6.6 billion in terms of reinvestment needs 
that we have, and we are moving aggressively as we can to do 
that. I will tell you, though, with cases like the Department 
of Interior, we do have to have phased modernization. The EOB 
is now in a three-phase modernization of the White House's 
Executive Office Building. But we are, I think, doing 
aggressive reinvestment of the proceeds from the sale of 
assets, and I think we are also applying the almost $8 billion 
coming to us through Federal property and the Federal building 
fund to reinvest in these inventories.
    I would mention just in closing that our reliance 
increasingly on lease is accurate. We have, in fact--and OMB's 
overview of us for almost two decades has said focus on 
uniquely government-owned buildings and utilize the 
efficiencies in the private sector to provide general office 
space. And that is what we are seeing, and now we have a little 
bit over 50 percent leased space to the government-owned space.
    I would like to put my statement in the record, Senator, 
for the Subcommittee. I would also like to give to all the 
Subcommittee Members--every year we produce a State of the 
Portfolio.\1\ This is our fiscal year 2007 document. I would 
also like to enter this into the record of the hearing.
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    \1\ Copy of the ``State of the Portfolio, fy 2007'' submitted by 
Mr. Winstead appears in the Appendix on page 107.
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    Chairman Carper. Without objection, that will be part of 
the record.
    Mr. Winstead. We also are trying on our own in terms of 
utilizing our buildings and leased space, helping Federal 
agencies to do a better job in the workplace environment 
design. We just came out with a new program we are calling 
``Workplace Matters,'' which is now being implemented through 
our realty specialists around the country, and I have also 
provided a document of that, as to how we can get better value 
out of both our own space as well as our leased inventory. And 
I will tell you with great pride, and I think this 
Subcommittee, in looking at the whole issue of real estate, 
Federal real estate, should recognize that for almost 17 years 
now, GSA has administered the Design Excellence Program. The 
Prettyman Courthouse across the street and the new ATF building 
over on New York Avenue are examples of our effort and success 
in drawing in the best architectural minds in the world to 
build these new Federal landmarks. And just recently I presided 
over the award of our GSA Design Awards given to some of the 
winners. Thank you.
    Senator Carper. Let me again thank you for what you all 
have brought to the table and to us today. And I want to go 
back to a question I asked of the first panel, and that is, 
what do we need to do on the legislative side in order to save 
some money here and to really use common sense and enable our 
agencies to use common sense, to incentivize them to do the 
kinds of things that Mr. Henke talked about.
    Mr. Rutherford, let me just start with you. What do we need 
to do on the legislative side here?
    Mr. Rutherford. Well, I mentioned in terms of some of the 
enhanced authority with----
    Chairman Carper. Go through that again, please.
    Mr. Rutherford. Well, I mentioned in my testimony with 
regard to having the authority to retain a portion of the 
proceeds, if not the total proceeds. The Forest Service, which 
is part of USDA, has that authority through--I believe it is 
calendar year 2008. They have been able to utilize that to take 
money that they can then apply to the maintenance of existing 
facilities, critical facilities.
    Chairman Carper. Let me just interrupt you. Mr. Winstead, 
why is it that we have some agencies that have authority and in 
the case of USDA one portion of a larger agency has authority? 
And it sounds like it expires in a year or so. How does that 
happen? It sounds like a bit of a mish-mash here.
    Mr. Winstead. Right. Senator, it is, and we have those 
three agencies with enhanced-use leasing authority. We did not 
have it until our retention efforts in the fiscal year 2006 
appropriations act--2005, rather. We actually got now retention 
of proceeds for the first time. Although we do not have 
enhanced-use leasing, we do have under disposal authority of 
Section 412 that we are now looking at that gives us some of 
the same options that we have under enhanced-use leasing.
    I think Congress has continually looked at this issue with 
the purview and, basically the blinders on, of the scoring 
roles in the Budget Act of 1988, and that has been driving much 
of this in terms of where can an agency look at special purpose 
authority such as VA and get that from Congress to deal with 
certain real estate assets or through BRAC and other means. We 
do not have it yet, still, and yet we do feel optimistic that 
under new authority under Section 412 we can do some of the 
things that are being done under enhanced-use leasing.
    I will tell you, though, as all of us on this panel would 
admit, we do not have the authorities and the tools that the 
private sector has to look at lease-to-own options, to look at 
bargain purchase options. Federal Building Bank actually gave 
us financing authority on several buildings, the last one of 
which is opening in July, the San Francisco Federal Building. 
But it has been a disjointed approach, and there have been 
separate authorities gotten for a specific purpose. So that is 
really the record to date.
    Mr. Rutherford. If I can add?
    Chairman Carper. Please.
    Mr. Rutherford. Specific to Agriculture, we have split 
authority when it comes to Congress. The Forest Service 
jurisdiction is--the oversight jurisdiction has to do with the 
same as Interior, whereas the rest of us are under the 
Agriculture Committee. So whereas those who are looking at the 
Forest Service--which is our largest landholding agency. They 
were given specific authority, but it did not necessarily 
transcend into some of the other areas.
    Chairman Carper. Alright. Mr. Henke, I was impressed by all 
that you have done at the VA, and as a veteran myself, I 
applaud a lot of what you are doing outside of real property 
management. But in terms of what we can do, not necessarily 
just to help VA, but maybe some of the other agencies that even 
are not represented here, Mr. Henke, your advice and counsel 
would be appreciated. We are talking about doing a 5-year 
pilot, which may or may not make sense. It seems like a long 
time to wait to get where we need to go. But I think you and 
some other agencies, forestry and others, have been the pilot, 
and what we need to do is learn from you and shorten that 5-
year time frame to something a lot less.
    Mr. Henke. Sir, I would think that any proposal that allows 
quicker disposal for agencies, that allows a more streamlined 
process, and that allows, most importantly, the agency to 
retain the proceeds of it to carry out its mission would be----
    Chairman Carper. All the proceeds? A portion of the 
proceeds?
    Mr. Henke. Sir, in the case of VA, we have a particularly 
wonderful authority in Title 38 to retain the proceeds from our 
enhanced-use leases to provide better services for veterans. 
And if I could give you two examples of that, I would 
appreciate it----
    Chairman Carper. How did you happen to get that? Do you 
know the genesis of that?
    Mr. Henke. Sir, I believe it was authorized in the 1992 or 
1993 time frame. I am not sure of the origin, but a recognition 
that VA's capital infrastructure was very wide and divergent, 
and that the best use of those assets was, if not for direct 
care for veterans by VA, then to retain the resources for VA. 
But I am not sure about the exact legislative history.
    Chairman Carper. Alright. Thank you.
    Mr. Henke. One example of our enhanced-use lease authority 
that is really fantastic, in the fall of 2002, as part of our 
CARES process, we decided to realign medical care in the 
Baltimore area. We moved some facilities, some care from Fort 
Howard, into the Baltimore downtown area. And what we have 
done, as recently as last fall we signed a lease. I remember it 
was September 28 last year. It is not every day that I get to 
sign a 75-year document that takes us into 2081, so I remember 
that. But we have a lease with a private sector entity to 
finance, design, and build what we call a ``life care 
community,'' which provides a veteran-focused retirement 
community with over 1,300 units.
    As part of the package there for VA, the developer is going 
to build a brand-new outpatient clinic (OPC), 10,000 square 
feet, that will provide medical care for the residents there 
and for other veterans in the area. So that is really a great 
win for vets and VA, and that is what we try to do, is to set 
up an arrangement where the local community wins, the VA 
manages its portfolio better, and veterans receive the care 
they need in the setting that they deserve.
    The other example, if I may, sir, we have authority under 
our enhanced-use lease provisions actually to dispose of 
assets, and we have used that provision in Chicago. I think 4 
or 5 years ago, we enhanced-use-leased what we call our 
Lakeside facility, and then sometime later, we determined that 
the facility was no longer required for VA, and we would 
consolidate those to another campus in Chicago. VA received $22 
million for the lease and--on the sale of the property, $28 
million on disposal, so $50 million retained by VA to enhance 
services, and in that local area, in Chicago, in that network. 
So our enhanced-use lease authority is fantastic.
    One thing we would ask for support for is that the 
authority expires in 2011, and we will need to have that 
authority reauthorized so we can continue to make progress.
    Chairman Carper. Mr. Grone, what can we do to help what you 
have begun with BRAC?
    Mr. Grone. Well, Mr. Chairman, following in--I do not want 
to repeat a good deal of what has already been said. I think 
Mr. Johnson and my colleagues have spent a good deal of time 
emphasizing, I think, what is the central point, which is 
something--a framework that is more flexible and more aligned 
with private sector practice. Not that we will always behave as 
we are the private sector, because we do have public sector 
responsibilities. But something that is more flexible and 
respective of the market dynamics in which particularly my 
colleagues who do not sit behind large installation complexes 
have to deal with or they are in the market, but not always 
able to behave in the market.
    And while we at Defense have certain authorities--enhanced-
use leasing has been mentioned--we also have authorities for 
real property exchange, which the Army in particular is using 
to exchange reserve centers in exchange for real property and 
other construction considerations. We also have some fairly 
powerful authorities in BRAC. To the extent that we are able to 
retain dollars, they stay, not for the deferred maintenance 
question, but they are retained within the program to be used 
for other BRAC purposes, which could be used to offset our 
construction requirements, and in the out-years, after 
implementation, to mitigate any additional environmental costs 
that the Department may incur.
    But the reason why we have some of the budget restrictions 
that we have goes back to the whole question in the early 1990s 
about the liabilities incurred by government-sponsored 
enterprises, and a lot of the provisions that were in the 
Budget Enforcement Act of 1990 were designed to get at the 
question of appropriate visibility of liability to the taxpayer 
for long lead costs, whether it was for GSA or leasing or 
whatever it might be.
    So the question that I believe Senator Coburn raised 
earlier about accounting standards, if we can find a way to 
combine flexibility with transparency and visibility in 
budgetary terms, that should provide the surety that we need. 
But what is also critical is that we standardize some of the 
tools between and among the agencies, because as the inventory 
chairman of the FRPC, what we are trying to do is standardize 
data between and among the agencies, which, yes, will provide 
better reliability for congressional and other oversight, but 
from a management perspective, if we are all proceeding from a 
common framework of data, it then allows for the interagency 
collaboration that Mr. Johnson suggested was necessary so we 
would make better investment choices. And if we have the data 
standard but our tool sets are not aligned, that is not as 
optimal.
    So I think it is critically important that whatever we do, 
that it be a set of authorities that can apply to all agencies, 
while recognizing that we each have some unique missions that 
need to be carried out.
    Chairman Carper. Alright. Thanks. Mr. Winstead, do you want 
to add your comments to my question?
    Mr. Winstead. Yes. I think that Mr. Grone addressed it 
quite well in terms of the uniformity and through the Federal 
Real Property Council, looking at our relative authorities and 
see how they can be more effective and more uniform. Obviously, 
from a legislative standpoint, the proposal that you all are 
considering about for other agencies, the retention of 20 
percent is a good incentive to get, define, analyze excess 
properties, get them in the marketplace, or get them to public 
use. Obviously, as mentioned before, more flexibility in terms 
of the budget rules and looking at transparency as well. 
Additional authorities that are commonplace in the private 
sector are obviously those that we always sort of strive for, 
but we do feel that under this Section 412 we are beginning to 
get some of those tools to allow us to lease, ground lease or 
lease back facilities for renovation, but still maintain 
Federal ownership, which would be good. And also allowing the 
concept that we see, is the value of approaching. In several 
cases, we have been very effective, the consolidation of 
properties for Federal construction use, which, as mentioned 
before, under a 30-year analysis is always cheaper. And two of 
those instances over the last number of years, which I think 
are very effective and demonstrating the value, is our proposal 
for St. Elizabeth's campus for the Department of Homeland 
Security, which is well underway and a master planning process, 
has got historic property issues and others. And the other one, 
I was just with the Commissioner of FDA last night, the Food 
and Drug Administration new headquarters in White Oak, 
Maryland, where we have $1.4 billion. Again, we are taking, in 
the case of White Oak, a lot of private sector leases that are 
in the Rockville area in private buildings and bringing them 
onto a piece of ground we acquired 5 years ago and building a 
very efficient headquarters for the FDA in government-owned 
space. That is also a cure for a lot of this.
    Chairman Carper. Thank you. I know that some of the 
agencies, at least those that are represented on this panel 
today, have the authority to retain a portion of the proceeds 
from the disposal of properties. We have been talking about 
that. And as I understand things, this gives our agencies the 
incentives, as we have been talking about, to dispose of 
properties and the proceeds going to the Treasury.
    Let me just ask, this authority gives those who have it a 
little more flexibility to make good use of a piece of property 
that otherwise would be sitting idle. And the question that I 
have--and the responses to the questions you have given me, I 
think you have pretty much answered this question, so I am 
going to skip over that one and go to the next one.
    Mr. Winstead has testified today that GSA is about to reach 
the point at which the majority of its portfolio will consist 
of leased facilities. And Mr. Goldstein has testified that 
agencies are increasing their reliance on leases, sometimes 
even when other more cost-effective options are available. And 
I have got a couple of questions about this phenomenon.
    My first is: How did we get to this point? I think I have 
an idea how we got to this point, but I would like to ask it 
anyway. What is in current law and agencies' property 
management processes that encourages leases when leases may not 
make sense? And then in what circumstance do you think leases 
are appropriate and when are they not appropriate? Senator 
Coburn said earlier that they are almost never appropriate, but 
I can envision sometimes when they would be appropriate. But in 
what circumstances do you think leases are appropriate and when 
are they not appropriate? Have any of your agencies ever 
decided to go with a lease knowing that it was not the most 
cost-effective option? I would especially like you to focus on 
those last two questions. In what circumstances do you think 
leases are appropriate or maybe not appropriate? And, finally, 
have any of your agencies ever decided to go with a lease 
knowing that it is not the most cost-effective option?
    Mr. Winstead. Senator, GSA has a very aggressive analysis, 
a 30-year lifecycle cost analysis, looking at net present value 
of the options that we bring up here to Congress. You all 
authorize everything we do, both owned, built, as well as 
leased actions. And we are always looking at the owned solution 
versus the leased solution versus the lease-construction 
solution to meet our clients' needs. And I will tell you that 
the overview both from the budgetary standpoint has been for a 
couple of decades--I have only been with the agency since 
October 2005, but the philosophy has been use the 
competitiveness and the economies in the private sector office 
market, general use market, to tap good leases, good actions to 
get space solutions for Federal agencies.
    When I say that--and 70 percent of our leases for our 60-
some agency clients are less than 10,000 square feet. So what 
generally is a policy----
    Chairman Carper. Say that number again?
    Mr. Winstead. About 70 percent are less than 10,000 square 
feet, so they are small leases, the majority of them are. So 
what we tend to do and find is that when you are in the market 
for a small space, a lot of times the efficiency of the private 
sector, where you do not have--our first rule is always go to a 
GSA federally owned building to meet that need. Where we do not 
have that, we do find with the shorter-term leases and the 
small-space leases, the efficiencies in the private lease 
market and our ability to tap, competitive lease rates, we are 
actually achieving about 8 to 9 percent below the market rates 
that most private sector tenants are getting and, in fact, 
through this national brokerage contract over the last couple 
of years, we are seeing we are even getting in some cases 13 
percent what the private sector rate is. So we are getting 
economies.
    With that said, this analysis that we perform, our 
portfolio management people right behind me, a very capable 
group, when they do a 30-year pro forma on our options, space 
options, it is almost in every case that government-owned is 
the best solution from a cost standpoint.
    Senator Coburn mentioned--and you did as well--the Patent 
and Trademark Office. I was not around when that was negotiated 
by the National Capital Region, but you are correct. Under the 
30-year analysis, basically the operating lease was $48 million 
more expensive than a government solution.
    The reality in that instance--and I think also in the 
Department of Transportation's new headquarters--is the ability 
to address a one-point-some-billion-dollar headquarters with 
the constraints of an $8 billion annual budget for GSA in the 
Federal building resources. We could not get to the 
construction solution. We could not deliver the needs with the 
expiring lease DOT had and their need for new headquarters 
without going a private sector route or lease.
    Our preference is--and the economics in most deals--these 
new FBI field offices, if you look at the 36 field offices we 
are building for the FBI since September 11, 2001, their new 
requirements and their new mission, we are seeing if we were to 
build those 36 field offices, it would be a $1.7 billion cost 
to the Federal Government. Some of the lease-constructs we are 
entering now, the aggregate costs for those lease-constructs 
will be about $160 million. So we are able actually coming here 
with these perspectives to analyze that and obviously get your 
approval. But in every instance, we do try to find federally 
owned property and provide that space. But what I am suggesting 
is increasingly, now about 50-50, we are finding the solution 
in the private sector lease market.
    Chairman Carper. Alright. Let me go back to the question I 
asked. Have any of your agencies ever decided to go with a 
lease knowing that it was not the most cost-effective option? I 
would be surprised if the answer were no.
    Mr. Henke. Mr. Chairman, I would have a couple of 
observations on that.
    In the case of VA, leasing gives us the opportunity to 
respond more quickly to the health care dynamics in the 
marketplace, and particularly with regard to demographics of 
where veterans are and where they need access points to care, 
and also the delivery methodology of care, the modality. In 
other words, a more outpatient-focused basis than an inpatient 
basis.
    The example of the post-Hurricane Katrina situation in New 
Orleans, the VA Medical Center in downtown New Orleans was 
destroyed, and we were able to very quickly establish on the 
outer perimeter of Greater New Orleans three outpatient 
clinics, community-based outpatient clinics (CBOCs), and we 
have about 880 of those across the country, typically in leased 
space, typically not large structures and not medical-unique 
space. But in the case of Katrina, we were able to establish 
clinics in Hammond, LaPlace, and Slidell, Louisiana, to re-
establish care in that area. So in that situation, leasing was 
flexible and made a lot of sense, and the cost considerations 
were certainly secondary to providing access to care for vets 
in that area.
    Chairman Carper. Alright.
    Mr. Rutherford. Can I add a little bit?
    Chairman Carper. Please.
    Mr. Rutherford. With regard to the Department of 
Agriculture, whereas GSA's average lease is about 10,000 square 
feet, our average lease is about 3,000 square feet. In our 
agencies which we consider our customer service agencies, which 
is the Farm Service, Rural Development, Natural Resource 
Conservation, the key there is often being close to the 
customers that they serve. And in many cases, we do a cost/
benefit analysis, but in many cases our best approach is to 
either house in a GSA facility or we will share in many cases 
with a county or State office, which also requires a lease, but 
usually at very favorable rates. So often ours is 
geographically dictated.
    Chairman Carper. Alright. Thanks.
    Mr. Henke, in our State, in Delaware, we only have three 
counties. In our southernmost county, Sussex County, we have 
two community-based outpatient clinics for our veterans. We 
have a large veterans population in southern Delaware, large 
and growing. The VA in our State wants to consolidate those two 
from one in the western side of Sussex County, the other in the 
eastern side, and consolidate them in Georgetown into a single 
space. We talked it through with the veterans organizations in 
our State, and they believe they will get better care, more 
comprehensive care at that one central location in Sussex 
County.
    At the same time, VA has been working to find a site for a 
community-based outpatient clinic in Kent County in the 
southern part of our State in the Dover area, and I think what 
they are doing there is they found land, will knock down a 
structure, and they are going to bring in, I think, about a 
6,000-foot modular unit to put it to use and be able to stand 
it up within just literally days--a couple of weeks.
    Mr. Henke. Yes, sir. The decision package for the next 
round of community-based clinics is with the Secretary now, and 
he is about to make a decision and move forward with 30 or more 
additional CBOCs across the country, and I would expect that 
decision and announcement to be made very imminently. But we 
recognize there are situations where there is a great demand 
and a need to put a clinic in that community, and we will work 
very aggressively to do that.
    Chairman Carper. Good. Maybe one or two more questions, and 
then we will call it a morning. GAO has presented us with some 
startling figures on maintenance backlogs, and apparently the 
seven agencies they contacted in putting together the high-risk 
report that inspired this hearing reported more than $77 
billion in maintenance backlog. I think I mentioned that number 
earlier. About $57 billion of that amount is attributable to 
the Department of Defense alone.
    Mr. Grone, I will ask you a question separately about why 
Defense's backlog is so significant, but to the rest of you, 
what is it that makes up these backlogs? What kind of problems 
do they present to you operationally? Is there something that 
needs to be done, such as a change in management practice or an 
increase in resources, to help address this problem? If the 
others want to respond first, and then I will go back to Mr. 
Grone.
    Mr. Winstead. Sure. Senator, I will be happy to respond. In 
the 2008 prospectus program that is up here, we have about $6.6 
billion in the repair and alteration portion of our budget, and 
the Federal Triangle is an example. They have aged inventory 
that does require modernization--substantial in the case of the 
Executive Office Building, a couple hundred million dollars.
    But what we are seeing is that it is forcing us to have to 
manage this renovation in a much more innovative way and phased 
approach. With that $6.6 billion, we would need on average 
about $1 billion a year to address it, and we are now getting 
about $700 million a year. So there is a gap there that we are 
very concerned about it, and it would take 8 years to 
essentially resolve that backlog of renovation needs. So we do 
have about an 8-year backlog that we need to address.
    But I would stress to the Subcommittee that what you have 
heard today is a sort of consistent approach of the Federal 
Real Property Council on how to manage our assets, and we are 
exchanging best practices, and what we are--you have had 
evidence today is that we are all approaching this from the 
standpoint of let's retain those assets that are most mission 
critical, that we, for example, have full tenant, we only have 
4-percent vacancy in our own spaced inventory, that we are 
really utilizing them to the highest level of efficiency, and 
that is our tier one assets, and then maintaining those that 
still have a lifecycle value for a period of years, and then 
disposing of them, the third tier, disposing of them, getting 
them out.
    What that will allow us to do as we continue on this path 
that was started in fiscal year 2002 is the more we get out of 
underperforming and underutilized and excess properties, the 
more from the rent revenues coming to the Federal building fund 
we can put back into repair and alteration and modernization 
projects.
    So exactly what we are trying to do here and what this bill 
that would incentivize retention from disposal will do is to 
help refocus this Federal building--from our perspective--fund 
resources into modernization and repair work. So I think what 
we have gotten started here very aggressively will help.
    Chairman Carper. Before I call on Mr. Grone, anyone else on 
the maintenance backlogs?
    [No response.]
    Chairman Carper. Mr. Grone.
    Mr. Grone. How much time do we have, Mr. Chairman? 
[Laughter.]
    Chairman Carper. Ten minutes. I will ask you to use half of 
that.
    Mr. Grone. Well, I joke, but the answer has a great deal of 
lineage to it.
    Chairman Carper. Feel free to respond more fully for the 
record.
    Mr. Grone. I understand, sir. Mr. Johnson talked about the 
phenomenon in the context of deferred maintenance of the 
ability to wait one more year, and a lot of this, quite 
frankly, with an inventory the size of the Department, you can 
get to large numbers rather quickly. So when we have a plant 
value of over $710 billion with a legacy of many decades and 
years of that deferral issue, waiting one more year, how were 
we in that position because we really could not truly define 
the requirement.
    One of my predecessors many times removed, when he began 
what became then known as the Excellent Installations program, 
had a target established of 2 percent of plant replacement 
value to be plowed back into maintenance on an annual basis, 
which was also, frankly, the state of industry thinking at the 
time. But there was no real way to calibrate what was a true 
requirement.
    That thinking later evolved to 3 percent of plant, but in 
the last 5, 6 years, we have actually begun to deploy, which 
GAO has had ready access to throughout the process, our 
modeling techniques for how do we think about the sustainment 
and maintenance of an asset, how do we think about how to 
recapitalize it and think about those in portfolio terms so we 
can think about the investment choice we need to make.
    Those models are being benchmarked to both the best 
practices in the public and the private sector, so the 
leadership can now see what the requirement is and that it has 
some foundation in fact other than a calculation, which is 3 
percent of some number.
    We will work through a good deal of that backlog, 
particularly through BRAC, as we undertake a fairly significant 
and sizable recapitalization of the plant as we move and 
reposition missions. But the critical piece here is that a lot 
of that backlog is associated with some of the more mundane 
aspects of the inventory. Over a fifth of our plant is 
associated with utilities and improvements, like roads, 
curbing, parking lots, and the like. That is a fifth of the 
inventory. When we talk about repair and maintenance backlog, 
we are also talking about repair and maintenance backlog in 
relation to those types of assets.
    So the $57 billion is not, strictly speaking, just the 
built environment above the ground. It is also is the wires and 
pipes, the roads, the sidewalks that are associated with those 
assets, and those are equally important, and we will continue 
to work through that.
    I am less, frankly, focused on backlog of maintenance 
repairs and management construct because that then becomes part 
of our recapitalization target. Do we have the business 
processes in place and the decision tools in place based on 
real data to understand what we own, where it is, what is its 
condition, what does it cost us to operate it, and what is its 
operational availability and capability?
    Everything we are doing is built on answering or trying to 
answer those five questions about any asset with data that is 
standardized, and then rolling those into our predictive 
modeling to get a sense of cost. If we are able to do that 
effectively, I think over time we will have that number, and we 
will always have a backlog of maintenance and repair of some 
number. But in the future, I would expect that it would be far 
less significant than the $57 billion number. But how we got 
here is simply because in many ways we did not have the tools 
to do anything else. And what we have said about doing in the 
last 5, 6, 7 years is building the tool set that allows the 
leadership, not just of our Department but of any Department, 
because Department of Energy and others and NASA have looked at 
the way in which we think about recapitalizing assets and 
sustainment, and are incorporating some of the things that we 
have learned into their management models as well.
    So there is a lot of sharing, and I want to be very 
optimistic about chewing our way through that number. But a lot 
of it, frankly, was because we did not have the know-how and we 
did not have the tools. And now we have them. The question is 
understanding the requirement, making risk-based trades against 
everything else, the other investments we need to make, and for 
this Department it is a Nation at war, reinvesting in not just 
our fixed assets but the military hardware that is necessary to 
transport the force, our people and their costs, some of which 
we share with my friend to my right, in terms of the things 
that we need to be concerned about.
    So, I think we are on the path, but I do think that number 
is sort of a significant target of what it is, a constant 
reminder of the legacy of poor management practice. And that is 
what we have to work through to make sure that we do not leave 
that as a legacy for my successors down the road.
    Chairman Carper. Well said.
    Mr. Goldstein, you have been good to stay here with us to 
the bitter end, and for your trouble, I am going to ask you not 
to give the benediction. I will give that. But I would like to 
ask you just to sort of reflect on what we discussed with you 
and Mr. Johnson in the first panel and just reflect on the 
comments that we have heard here with the second panel, their 
statements and responses to questions, and just give me what 
you think should be some of our most important takeaways for 
the Members of this Subcommittee and our staff.
    Mr. Goldstein. Sure. Thank you, Mr. Chairman, and I 
appreciate not giving a benediction.
    I think a couple things are important. One, I just want to 
mention that some of the things you have asked today, GAO is 
continuing to look at. In part for this Subcommittee, we are 
looking at the whole issue of leasing--some of the things you 
have asked today you will be seeing in the study that you have 
requested from us in the near future.
    We are also going to shortly begin studies that the 
Congress has asked us to prepare looking at the backlog as well 
as looking the whole issue of retained earnings. So many of the 
things that we have talked about today, we will be able to help 
shed some light on in the coming months. So I wanted to mention 
that to you.
    I think one of the biggest takeaways that the Subcommittee 
should have here is that a lot of progress has been made in the 
last couple years, and you had asked at the beginning if there 
are things that the Congress might consider doing, and we have 
talked about some of those in terms of additional authorities. 
But one thing that you have not mentioned this morning is the 
whole structure that is in place. At the moment much of the 
progress that has occurred through the President's Management 
Agenda and the Executive order has occurred because of the work 
that this Administration has done and the seriousness with 
which they have taken the high-risk issue that we presented a 
number of years ago. But this Administration will not be here 
forever, and the focus that they place on this issue may not be 
here forever, either. And so Congress may want to consider 
whether or not they ought to codify the Executive order or some 
of the other things that are part of the structure so that the 
kind of emphasis that has been placed on real property can 
continue to be placed on it in the future. Because, obviously, 
initiatives come and go as Administrations come and go, so I 
think that may be an important aspect of this whole puzzle to 
ensure success in the future.
    Chairman Carper. Anyone else have anything you want to get 
off your mind that pertains to this subject before we wrap it 
up?
    [No response.]
    Alright. I want to thank each of you for coming, for 
preparing for the hearing. I want to just express my 
appreciation for the work that has been done by GAO over the 
last 5 or so years on this subject and more recently by the 
Administration in response to GAO's findings and the placement 
of property management on the high-risk list.
    There is obviously a role for the Administration to do 
more. There is a role for the GAO to be our watchdog. And there 
is an opportunity for us to conduct oversight, but not just 
conduct oversight. This is, I think, our third hearing on this 
subject, and I do not know about the rest of my colleagues, but 
I am ready to get going with respect to legislation that might 
be helpful to incentivize the agencies to really--maybe not 
just incentivize them, but to help unleash them, unleash some 
energy and incentivize them to use common sense. They all have 
it. We want to make sure what we have is not precluding their 
use of that common sense.
    As I said before, when you say to an agency that you have 
this surplus property and you are not using it, we are not 
going to reimburse you to destroy it or to sell it, if you sell 
it, you do not get to keep the proceeds, not even the value of 
the land, you cannot use the proceeds to help work down your 
unfunded maintenance costs that are out there standing out 
there by the billions of dollars, that does not make much 
sense. And we ought to be smarter than that, and we have to 
find a way to address that and to do so not 5 years from now 
but more recently. And the idea that we have all these agencies 
that are leasing space--and it sounds like more all the time--
in some cases that makes sense. These VA clinics that we are 
talking about that Mr. Henke--it might make perfect sense to do 
that. There are a lot of instances where it does not. But we 
have a situation where our budget scoring rules say that if you 
go out and build a property and it maybe takes $10 million, but 
you decide instead because you can do a long-term lease at a 
fraction of that cost for 1 year, and because of the way we 
score that, we incentivize people to make what is over the 
lifetime of the property the wrong decision, the wrong 
decisions for the taxpayers. We ought to be smarter than that. 
And my hope is that by working together we will be smarter than 
that.
    We have made a good start. I am anxious to pick up the 
pace. I suspect some of you and some of the other agencies that 
are not here today would like to pick up the pace as well. And 
the folks that will benefit will be the people that you serve, 
the people who work with you, and your employees, and the 
taxpayers who pay the freight for all of us. That is a good 
agenda to work on, and we look forward to working on it with 
you.
    With that having been said, this hearing is adjourned. 
Thanks very much.
    [Whereupon, at 12:01 p.m., the Subcommittee was adjourned.]


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