[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
                   HOW TO STOP SITTING ON OUR ASSETS:
                            A REVIEW OF THE
                   CIVILIAN PROPERTY REALIGNMENT ACT

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

                                (112-31)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
    ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 12, 2011

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure


         Available online at: http://www.gpo.gov/fdsys/browse/
        committee.action?chamber=house&committee=transportation



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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                    JOHN L. MICA, Florida, Chairman

DON YOUNG, Alaska                    NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
FRANK A. LoBIONDO, New Jersey        Columbia
GARY G. MILLER, California           JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois         CORRINE BROWN, Florida
SAM GRAVES, Missouri                 BOB FILNER, California
BILL SHUSTER, Pennsylvania           EDDIE BERNICE JOHNSON, Texas
SHELLEY MOORE CAPITO, West Virginia  ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio                   LEONARD L. BOSWELL, Iowa
CANDICE S. MILLER, Michigan          TIM HOLDEN, Pennsylvania
DUNCAN HUNTER, California            RICK LARSEN, Washington
ANDY HARRIS, Maryland                MICHAEL E. CAPUANO, Massachusetts
ERIC A. ``RICK'' CRAWFORD, Arkansas  TIMOTHY H. BISHOP, New York
JAIME HERRERA BEUTLER, Washington    MICHAEL H. MICHAUD, Maine
FRANK C. GUINTA, New Hampshire       RUSS CARNAHAN, Missouri
RANDY HULTGREN, Illinois             GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
CHIP CRAVAACK, Minnesota             MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas              JASON ALTMIRE, Pennsylvania
LARRY BUCSHON, Indiana               TIMOTHY J. WALZ, Minnesota
BILLY LONG, Missouri                 HEATH SHULER, North Carolina
BOB GIBBS, Ohio                      STEVE COHEN, Tennessee
PATRICK MEEHAN, Pennsylvania         LAURA RICHARDSON, California
RICHARD L. HANNA, New York           ALBIO SIRES, New Jersey
JEFFREY M. LANDRY, Louisiana         DONNA F. EDWARDS, Maryland
STEVE SOUTHERLAND II, Florida
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma
REID J. RIBBLE, Wisconsin
VACANCY

                                  (ii)

  
?

 Subcommittee on Economic Development, Public Buildings, and Emergency 
                               Management

                   JEFF DENHAM, California, Chairman

TIMOTHY V. JOHNSON, Illinois         ELEANOR HOLMES NORTON, District of 
ERIC A. ``RICK'' CRAWFORD,           Columbia
Arkansas,                            HEATH SHULER, North Carolina
  Vice Chair                         MICHAEL H. MICHAUD, Maine
RANDY HULTGREN, Illinois             RUSS CARNAHAN, Missouri
LOU BARLETTA, Pennsylvania           TIMOTHY J. WALZ, Minnesota
BOB GIBBS, Ohio                      DONNA F. EDWARDS, Maryland
PATRICK MEEHAN, Pennsylvania         BOB FILNER, California
RICHARD L. HANNA, New York           NICK J. RAHALL II, West Virginia
JOHN L. MICA, Florida (Ex Officio)     (Ex Officio)
VACANCY

                                 (iii)

                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    vi

                               TESTIMONY
                               Panel One

Kennedy, Hon. Patrick F., Under Secretary for Management, U.S. 
  Department of State............................................     3
Werfel, Hon. Daniel I., Controller, Office of Management and 
  Budget.........................................................     3

                               Panel Two

Glosserman, Michael, Managing Member, The JBG Companies..........    21
Principi, Hon. Anthony J., Former Secretary, U.S. Department of 
  Veterans Affairs, and Former Chairman, 2005 Base Realignment 
  and Closure Commission.........................................    21
Winstead, David L., Former Commissioner, Public Buildings 
  Service, U.S. General Services Administration..................    21

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Glosserman, Michael..............................................    35
Kennedy, Hon. Patrick F..........................................    38
Principi, Hon. Anthony J.........................................    46
Werfel, Hon. Daniel I............................................    52
Winstead, David L................................................    60

                       SUBMISSION FOR THE RECORD

Werfel, Hon. Daniel I., Controller, Office of Management and 
  Budget, responses to questions from Hon. Randy Hultgren, a 
  Representative in Congress from the State of Illinois..........    57

                         ADDITION TO THE RECORD

U.S. General Services Administration, statement for the record...    62

[GRAPHIC] [TIFF OMITTED] T6309.001

[GRAPHIC] [TIFF OMITTED] T6309.002

[GRAPHIC] [TIFF OMITTED] T6309.003

[GRAPHIC] [TIFF OMITTED] T6309.004



                       HOW TO STOP SITTING ON OUR
                    ASSETS: A REVIEW OF THE CIVILIAN
                        PROPERTY REALIGNMENT ACT

                              ----------                              


                         THURSDAY, MAY 12, 2011

                  House of Representatives,
       Subcommittee on Economic Development, Public
               Buildings, and Emergency Management,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:40 a.m., in 
Room 2167, Rayburn House Office Building, Hon. Jeff Denham 
(Chairman of the subcommittee) presiding.
    Mr. Denham. The subcommittee will come to order. First, let 
me welcome our distinguished witnesses, and thank them for 
their testimony today. I especially want to thank OMB 
controller Danny Werfel and Secretary Principi for a second 
round with our committee.
    Last week I introduced H.R. 1734, the Civilian Property 
Realignment Act, with--that would establish a civilian BRAC-
type commission to help shed waste in the management of Federal 
buildings and properties.
    I am also pleased the administration released its proposal 
last week, along with a list of 14,000 properties already in 
the disposal process. By OMB's estimates, our proposals could 
save the taxpayers more than $15 billion.
    But, as discussed in our April hearing, to achieve these 
savings, any solution must incorporate key principles: to 
consolidate the footprint of Federal real estate; house more 
Federal employees and less overall space; reduce our reliance 
on leased space for long-term requirements; sell or redevelop 
high-value assets that are underutilized or too valuable for 
housing Federal employees; and lastly, dispose of surplus 
property much, much quicker.
    I am glad both proposals adopt these principles, and 
appreciate the discussions we have had with OMB to ensure that 
we have the right solutions to generate real savings for the 
taxpayer.
    Today the purpose of the hearing is to discuss the 
specifics of the legislative proposals, and receiving 
meaningful input from the witnesses. It is important that we 
get this right, from the get-go. And receiving input from 
experts and key stakeholders will be critical. For example, the 
administration provides special consideration for overseas 
properties in its proposal, and I am pleased Under Secretary 
Kennedy is here today to provide input on those provisions.
    In addition, we know we must expedite the disposal of 
unneeded properties through streamlining the current process. 
But at the same time we need to carefully examine how we cut 
through the red tape to ensure there are no unintended 
consequences.
    I first proposed a civilian BRAC commission at our 
subcommittee's first hearing in February, and the President has 
now proposed a commission for the 2012 budget.
    It was clear then, as it is now, that just having a fire 
sale of surplus property in a bad real estate market is not 
going to generate significant savings for the taxpayer. 
Instead, redeveloping, consolidating, or selling certain high-
value assets can unleash huge cost savings for taxpayers.
    For example, it makes less sense for a few hundred Federal 
workers to be sitting on an underutilized asset that could 
generate hundreds of millions of dollars if redeveloped and 
sold. The big question is, will our proposals empower a 
commission to find these opportunities, and will it have the 
capability to carry them out?
    Unfortunately, I doubt most government agencies would 
recognize a good real estate opportunity if it stared them in 
the face. Somehow the commission will need to leverage the 
expertise and market knowledge of private sector on behalf of 
the taxpayer, if we are going to achieve real savings. I 
believe this is an important point, and I hope our witnesses 
can help us find a way to do it.
    We also must ensure this process incorporates the right 
incentives and tools to maximize the return to taxpayers, and 
require that agencies not conduct business as usual. That is 
why a process that includes an independent commission, similar 
to the BRAC Commission, is needed in this case. Real savings 
will require a commission to look across government and 
identify ways to unlock the value in our properties without 
turf battles and red tape stalling the process.
    I believe the potential to save billions of dollars is 
real. And our challenge is to create a system where that will 
be happening.
    Again, I thank the witnesses for being here today, and I 
look forward to your recommendations for improving our 
legislation. I would like to recognize Ranking Member Norton. 
When she gets here she will have an opening statement, as well. 
But she has been slightly delayed this morning.
    If there are no opening statements from Members this 
morning, then we will move right into our witnesses here today. 
Our first panel, the Honorable Daniel Werfel, controller of the 
Office of Management and Budget, and the Honorable Patrick F. 
Kennedy, Under Secretary for Management, U.S. Department of 
State.
    I would ask unanimous consent that our witnesses' full 
statements be included in the record.
    [No response.]
    Mr. Denham. Without objection, so ordered. Since your 
written testimony has been made part of the record, the 
subcommittee would request that you limit your oral testimony 
to 5 minutes. Gentlemen?

   TESTIMONY OF HON. DANIEL I. WERFEL, CONTROLLER, OFFICE OF 
   MANAGEMENT AND BUDGET; AND HON. PATRICK F. KENNEDY, UNDER 
       SECRETARY FOR MANAGEMENT, U.S. DEPARTMENT OF STATE

    Mr. Werfel. Thank you, Chairman Denham, Ranking Member 
Norton, and other members of the subcommittee, for the 
invitation to discuss how the government can improve its 
management of Federal real estate inventory by enacting the 
President's Civilian Property Realignment Act proposal.
    In this year's State of the Union Address, the President 
acknowledged that we cannot win the future with the government 
of the past. Stated differently, significant improvements in 
government performance will require significant changes in how 
we conduct our business.
    For too long, the American people's hard-earned tax dollars 
have been wasted on maintaining empty buildings, and holding on 
to valuable properties that the government no longer needs. For 
this reason, the President submitted a bold new proposal to 
Congress on May 4, 2011, to significantly reduce and realign 
the Federal real estate inventory by leveraging the model 
successfully used in the past for Defense properties.
    In addition, Chairman Denham introduced H.R. 1734, Civilian 
Property Realignment Act, which also acknowledges the need to 
make significant changes in how we do business and manage our 
inventory.
    Both bills would create an independent board that would 
make recommendations for congressional action to realize 
savings through reducing property holdings, expediting 
disposal, reducing operating costs, and assisting agencies in 
sustainability goals. They both propose using criteria for the 
best use of property, while considering such issues as 
homelessness, parks and recreation, historical preservation, 
and the environment. And they complement one another in the 
goal to convert unneeded real estate into reductions in the 
Federal deficit, and adapt the government's real property to 
21st-century realities.
    Both the President's proposal and Chairman Denham's build 
off the best practices of a proven approach: the Defense 
Department's base realignment and closure program to address 
and overcome recognized barriers of red tape, financial 
disincentives, and competing stakeholder interests. It is 
important to note proposals by the Federal Government to vacate 
or sell real estate will affect numerous stakeholder interests. 
These competing interests create a powerful disincentive 
against progress.
    Like BRAC, the CPRA board would overcome this challenge by 
bundling its recommendations as a package that succeed or fail 
together. Furthermore, like BRAC, Congress would have 45 days 
to consider the recommendations with no ability to line item 
veto or reject a property in the package. Instead, Congress' 
sole option would be either to endorse or reject the package as 
a whole. Unlike BRAC, the financial proceeds from the sale of 
properties would not only be used to offset future expenses, 
but could, in potentially large portions, be applied directly 
to Federal debt reduction.
    The President's 2012 budget includes the initial 
legislation for standing up this board, and our bill provides a 
more detailed legislative proposal that builds on the language 
we included in the budget.
    Chairman Denham's H.R. 1734 and the President's legislative 
proposal both hold the same core values. There are few areas 
the two bills differ, primarily in the methods of board member 
appointment, and the review process of the board 
recommendations. And these should be able to be worked out in a 
manner that best benefits the public.
    The bottom line is we recognize the status quo in our real 
estate inventory is particularly unacceptable today, when we 
have a pressing need to reign in our spending and reduce our 
deficits. We desire to answer the President's call for action, 
and we cannot achieve these important goals using the same 
techniques that have been failing us for decades. By using the 
best practices from the BRAC model to address the issue, we can 
leverage our portfolio to improve services to the taxpayer, 
reduce the government's energy footprint, and reduce the 
deficit.
    We look forward to working together to help pass this bill, 
and include agencies like the State Department and GSA to 
leverage best practices and bring about a transformation of our 
real property management. We believe the President's proposal 
and the recently introduced bill sponsored by Congressman 
Denham share common objectives and leverage similar tools in 
approaching significant savings and efficiencies in our real 
estate portfolio.
    We look forward to working with this subcommittee to 
finalize the legislation and begin our important work ahead. 
Thank you for inviting me to testify today. I look forward to 
answering your questions.
    Mr. Denham. Thank you, Mr. Werfel.
    At this time, Under Secretary Kennedy, you may proceed.
    Mr. Kennedy. Mr. Chairman, Ranking Member Norton, thank you 
very much for inviting me to discuss the State Department's 
overseas real estate program. As Under Secretary for 
Management, I oversee support for the United States worldwide 
diplomatic and consular presence, including the Bureau of 
Overseas Buildings Operations, which directs the worldwide real 
property program for all United States Government agencies 
overseas, under our ambassadors. It is our mission to provide 
secure, safe, functional, well-maintained and cost-efficient 
facilities to promote U.S. national interests, worldwide.
    State's real property portfolio includes nearly 18,000 
owned and leased properties in over 260 cities. With Congress, 
we set priorities for construction, acquisition, maintenance 
and sale of properties, and the use of sales proceeds.
    Since 1997, State has been reporting to Congress quarterly 
on our acquisitions and disposals. We provide facilities 
overseas for over 30 agencies, ranging from Defense and 
Commerce to Justice and Homeland Security. These agencies 
implement U.S. foreign policy, serve our national security, 
protect U.S. citizens abroad, secure our borders, advance U.S. 
trade, and combat terrorism.
    We operate under the Foreign Service Buildings Act of 1926. 
And since an amendment in 1945, State has been allowed to 
retain proceeds from property sales, and we have successfully 
been using these proceeds to buy properties to replace costly 
leases. Our ability to retain and reinvest our sales proceeds 
has been the consistent funding source for property management, 
and reducing the need for appropriated funds.
    In the last 10 years, our ongoing efforts have resulted in 
the sale of 195 properties. This authority makes us highly 
motivated to identify and dispose of properties. The proposed 
Civilian Property Realignment Act would codify many practices 
that State has been following for years.
    Mr. Chairman, on May 5th you outlined the CPRA's goals, and 
State is proud to note that we are already implementing them. I 
have provided written examples in my testimony, so I will 
simply summarize the highlights.
    Since our 2 African embassies were bombed in 1998, we 
replaced numerous unsecure diplomatic properties, completing 79 
new facilities with another 33 under design and construction. 
The Secure Embassy Construction and Counterterrorism Act 
requires that we move all U.S. Government staff at a new 
embassy into one compound. Thus we gain both safe and secure 
compounds and consolidate our footprint, often giving up five 
or six separate buildings.
    To maximize our building utilization, our space planners 
assist embassies to use every possible square foot. We 
consolidate server rooms and warehouses. We use floor plate 
designs to install smaller cubicles for surge capacity, rather 
than building larger facilities. Our owned and leased 
properties--almost 99 percent--are classified as either fully 
utilized or overutilized.
    State's unique ability to keep and utilize sales proceeds 
reduces our reliance on costly leased space, and we constantly 
seek favorable opportunities to reach our goal of owning 40 
percent of our housing. From 2004 through 2010, the State 
Department purchased, with proceeds of sale, 265 properties, 
and reduced our annual rental by at least $11.2 million.
    In essence, State manages 275 field offices around the 
world, and we strive to reduce overlap in costs. We continually 
seek to reduce operating and maintenance costs, and increase 
security through design excellence, value engineering, and 
green construction. Our value engineering program has a return 
of investment of over $47 for every $1 spent.
    In line with President Obama's June 2010 memorandum, State 
developed its real property cost savings and innovation plan, 
and State has already achieved nearly 30 percent of its overall 
goal for the end of 2012. To facilitate the disposal of 
unneeded properties, an ambassador must file an annual 
certification that the embassy's property inventory data is 
correct, to identify any potential excess space.
    Presently, we have 76 U.S. Government-owned properties 
considered for disposal. The administration draft proposal 
included a section on diplomatic properties that reflects the 
unique nature of overseas property management. Foreign 
governments have a right to approve or disapprove of the sale 
of diplomatic properties, a right we also invoke in the United 
States with foreign government properties here. It also allows 
the Secretary of State to remove any transaction from the 
board's recommendation that involves a civilian overseas real 
property owned or managed by State.
    The Department must have the maximum ability to negotiate 
with host governments to vacate properties where local 
conditions have changed, and to acquire new properties to carry 
out our national security interests. Overseeing the State 
Department's overseas properties in the same manner as domestic 
Federal properties is not possible, given the very different 
conditions that prevail overseas, and would hinder the 
reinvestment of proceeds at favorable rates.
    In conclusion, Mr. Chairman, I believe that State has 
effectively managed and implemented its overseas property 
activities for years. The retention of sales proceeds is key. 
Retaining 100 percent of sales proceeds allows us to purchase 
properties, to address pressing operational needs, and to 
reduce our reliance on costly leaseholds. It also allows us to 
reduce our request for appropriated funding.
    We are very conscious of the interest in effective property 
management by both the Congress and the administration, and we 
will strive to continue our efforts working with you to ensure 
effective and results-oriented asset management. Thank you very 
much, sir.
    Mr. Denham. Thank you, Mr. Kennedy. I would just like to 
remind our witnesses and Members, because of shortness of time 
today we will be going very, very quickly. We would ask you to 
keep your answers concise, so that we can stick to the 5-minute 
rule. We would like to get a couple rounds of questioning. We 
have certainly got a number of questions today.
    Before we open up the first round of questions, I would 
like to now recognize Ranking Member Norton from the District 
of Columbia for 5 minutes to make any opening statement she may 
have.
    Ms. Norton. Thank you very much, Mr. Chairman. I apologize 
that I have been in a hearing involving the District of 
Columbia, which accounts for my tardiness. And I want to thank 
you for today's hearing on two legislative proposals to create 
a civilian property realignment commission that would function 
like the Department of Defense base closure and realignment 
commission, or the BRAC.
    On May 4, 2011, both the administration and Chairman Denham 
released legislative proposals to apply a BRAC-like process to 
civilian properties. Both proposals, which share the title, The 
Civilian Property Alignment Act, would establish a framework 
through which a commission would independently review Federal 
properties and make recommendations for consolidation, 
collocations, redevelopment, disposal, or other actions, to 
minimize costs and produce savings for the taxpayer.
    We cannot know without a rigorous inventory and analysis, 
whether the Federal Government is really sitting on billions of 
dollars of underutilized properties for which there is a 
market. However, the independent commission, as proposed by 
both the President's bill and Chairman Denham's bill, tasked 
with gathering information about real estate holdings of the 
government, can provide the objective information necessary to 
make prudent recommendations, and to right-size the Federal 
real estate footprint.
    The strength of both legislative proposals is that they 
follow the successful BRAC model. However, unlike the 
chairman's bill, the administration's bill contains more 
environmental protections than found in BRAC by including a 
full environmental review for proposed actions, and has 
criteria for appropriate evaluation of properties to see 
whether a property is eligible or potentially eligible for a 
historic designation, and to determine remediation needs of the 
property.
    We are obligated to ensure that final legislation offers 
the proper protection for the stakeholders in the disposal of 
property, while expediting the process for its disposition. The 
stakeholders include homeless, housing providers, and 
municipalities eligible for public benefit conveyances, groups 
that are normally part of the Federal property disposal 
process.
    The chairman's bill, but not the administration's bill, has 
one of my priorities. For years, the Office of Management and 
Budget has held on to the General Services Administration's 
real estate because of the absence of OMB staff with practical 
and real estate expertise.
    The chairman's bill recognizes the accumulated experience 
and institutional knowledge of the GSA to make prudent real 
estate decisions, and gives GSA, in consultation with OMB, a 
significant role in ensuring that the data from all of the 23 
landholding agencies is available to the commission.
    I look forward to the testimony of today's witnesses to 
help evaluate some of the other key distinctions between the 
two proposals, including the inclusion of properties controlled 
by the U.S. Postal Service and State Department, Senate 
appointments for commission members, and the process for the 
consideration of public buildings for housing for the homeless 
and public conveyances.
    The Denham and Obama proposals offer a genuine opportunity 
for a bipartisan solution. Mindful that it is not enough to 
pass bills in the House, I want to work closely with the 
chairman on the final bill. I support the concepts contained in 
the administration's and Chairman Denham's proposals, and hope 
we can proceed quickly to get the bill passed and signed into 
law.
    And thank you for your indulgence, Mr. Chairman.
    Mr. Denham. Thank you, Ranking Member Norton. Let's start 
off the round of questioning.
    First, Mr. Werfel, at our April hearing we agreed that it 
is critical that key principles are followed to ensure the 
highest return to the taxpayer. Again, these principles are: 
consolidate the footprint of Federal real estate; house more 
Federal employees in less overall space; reduce our reliance on 
costly leased space; sell or redevelop high-value assets that 
are underutilized or too valuable for housing Federal 
employees; and dispose of surplus property quickly.
    We both had an agreement on that. As well, you suggested at 
the hearing adding achieving sustainable goals, which we have 
included in H.R. 1734. Do you believe that all of these 
principles are being addressed in the bill?
    Mr. Werfel. Yes, I do.
    Mr. Denham. Thank you. Last week, the administration 
released the list of 14,000 excess properties that are going 
through the disposal process. I think that is a fantastic first 
step. However, as you and I have discussed many times, and 
highlighted at our previous hearing, the major savings will 
come from not excess properties, but high-value properties 
through sales, consolidations, redevelopment, and cost 
avoidance, the real big ticket items.
    And I wanted you to just elaborate on OMB's opinion on 
where the most cost savings will be realized in the process.
    Mr. Werfel. Thank you, Chairman. Yes, the--we released the 
14,000 excess assets publicly and made them transparent for two 
reasons. One, we wanted to make sure that the public is holding 
us accountable for getting those assets off our inventory in 
good speed. Secondly, we wanted to make sure that the public 
can help us identify assets that are not on that list that 
should be.
    And, as you mentioned, we believe that the 14,000 assets 
represent progress, but incremental progress. And there are 
more transformational and larger opportunities for savings that 
exist beyond those 14,000 assets. But today's process, both 
legal and regulatory, financial and political, have not enabled 
us to tap into those higher value opportunities and get them on 
our excess list. Our bill is designed to do that.
    So, if we are successful, that list should grow. It might 
not grow exponentially. But in terms of value proposition, it 
should grow exponentially.
    Mr. Denham. Thank you. And, as private individuals or 
private companies start showing the different properties that 
are in their communities, we would work together to add those 
to the list and put those in front of the commission, as well?
    Mr. Werfel. Absolutely.
    Mr. Denham. As you know, bills are scored by OMB and CBO, 
and that can be a critical part of the process in moving 
legislation. How do you believe the proposal will be scored? 
And can you explain how you get to the conclusion on what the 
monetary value will be?
    Mr. Werfel. Thank you, Chairman. I do believe that CBO and 
OMB can come to an agreement and an aligned view on this 
scoring. There is some work to be done, and we have already 
started those discussions.
    The key is whether--as I understand the scoring rules and, 
in particular, CBO's perspective--the key is whether the bill 
is viewed as changing the trajectory of current behavior. If 
the belief is that the opportunities can be tapped or realized 
under existing authorities, then the bill is likely to be 
scored low, or have no effect. If the conclusion is reached 
that this new legal framework greatly expands the amount of 
opportunities that are now available and can be realized, then 
the bill would have more of a significant score.
    As part of my presentation to CBO, I would point to the 
BRAC process, and the experience with BRAC. There you have a 
clear historical evidence that a creation of an independent 
board or commission that can be empowered to bundle together 
different opportunities that have been held up by a variety of 
different barriers for years and put those together before 
Congress for up or down vote can dramatically change the 
trajectory of our real estate inventory, in terms of downsizing 
and in terms of savings.
    So, with that backdrop of BRAC as an experience, and the 
fact that we are adopting a similar framework of creating that 
independent commission, I think the environment is there for 
a--the score from CBO and OMB to be aligned.
    But again, we have work to do in order to demonstrate the 
list of properties, the opportunities that are there. We are 
going to start that work with CBO and already have, and I hope 
to be successful in reaching a joint conclusion on scoring.
    Mr. Denham. And a big part of CBO's scoring is not only how 
much you can sell, but how quickly you can sell it. And so, how 
long do you think it will take to implement the commission and 
really start selling a lot of these different properties?
    Mr. Werfel. It is a difficult question to answer, because 
embodied in our proposal is the board's independence in how 
they carry out those activities. But I will offer that I think 
we--the way the bill is structured, we have given the board the 
right set of tools, such that they can make suer that they are 
moving out on some quicker win opportunities in order to start 
to generate proceeds earlier.
    So, what I anticipate, and what we're working towards now, 
is making sure that when the board is created, that they can 
hit the ground running with a set of analytics and 
opportunities and suggestions that we can submit, both this 
committee and the administration. Of course, the board will 
have the independence to decide what it does with that set of 
recommendations.
    But I would hope that, within that suite of 
recommendations, they look for those early success points where 
there are high-value assets with minimal environmental issues 
today, and where the competing stakeholder interests--where 
there is a clear path for a decision that can be made that is 
optimal, and start this process so that savings start getting 
generated as early as possible.
    I think if they take it and say, ``All right, let's say we 
have 20 or 30 opportunities, let's go for them all at once,'' 
that could create a longer timeframe by which proceeds are 
generated.
    So, our recommendation to them--and again, it will have to 
defer and see how they want to approach it--is to take a risk 
management approach in a way that says, ``Where can we start 
with some quick wins, in order to start generating some 
momentum, some success, and some proceeds.''
    Mr. Denham. Thank you. And as we start our round of 
questioning, before we do, I would ask unanimous consent that 
Mr. Lankford of Oklahoma, who is a member of the Transportation 
and Infrastructure Committee, be permitted to participate in 
today's subcommittee hearing.
    [No response.]
    Mr. Denham. Without objection, so ordered. At this time the 
chair will recognize Ranking Member Norton for 5 minutes.
    Ms. Norton. I am--they do not seem to be--there does not 
seem to be a great deal of difference between the chairman's 
bill and the administration's bill, so I am trying to 
understand what those are. He says, you know, ``It is 
bipartisan.'' What should I expect, I guess, especially in this 
Congress.
    I noted that the administration's bill has the NEPA, the 
National Environmental Policy Act. And the chairman's bill 
contains a waiver of NEPA for the selection process only. I 
guess that is the first stage. So why is it that the 
administration believes that the commission or the Federal 
agency action stage should be exempt from environmental review?
    Mr. Werfel. I think the--what we did when we sat down to 
write our bill is we worked very closely with the 
administration's environmental experts, whether they be from 
the council of environmental quality, or the EPA, or the Energy 
Department, and we talked to those that have implemented BRAC 
over the years.
    And we determined that the key improvement that is 
necessary in order to drive a more facilitated and optimized 
process was some of the early transfer authorities that exist 
within the superfund legislation, that the NEPA reviews 
themselves and the superfund requirements would not--which 
serve enormously important environmental public policy 
objectives--can still do that without slowing our process down, 
as long as we can leverage effectively existing flexibilities 
in the law today to do so.
    So, when we sat down, my bottom line answer, Congresswoman, 
is we determined that the key was, can we do early transfers of 
properties to non-Federal entities while still meeting 
environmental requirements? The answer is that happens today 
under current law. It doesn't happen in every case, but it does 
happen today. And we wanted to make sure we could tap into 
that.
    All other issues we felt could be resolved within the 
current environmental rules and regulations, and so we adopted 
them. Because, again, we think they have enormously important 
public policy objectives.
    Ms. Norton. Thank you. Now, the long-term leases that the 
GSA uses now, as a requirement of this committee, both 
administrations have always had GSA pursue a purchase option in 
the lease. We don't use them often enough, there are scoring 
problems, but it is in there.
    Because of the terrific loss to the Federal building fund 
of continuing to lease at the level we do--and loss to the 
taxpayers, for that matter--do you think it would be prudent to 
use the revenue, or some of the revenue generated from this new 
board to exercise that purchase option, where we are renting 
space, for example, renting the headquarters of the Department 
of Transportation, which essentially, we built?
    And at the same time, of course, the funds that--or the 
rents that now go to the lessor would go to the Federal 
building fund, which is in dire need of funds. How would you 
answer that question?
    Mr. Werfel. I would answer it in the affirmative, 
Congresswoman. From my perspective, I want the board to 
maximize savings and efficiencies for the taxpayer. And if in 
their judgment, in their wisdom, they believe that an 
inefficiency can be avoided by using those funds to do a 
purchase to avoid a long-term lease arrangement, then they 
should be empowered to do so.
    The challenge will be that there is going to be a lot of 
opportunities to avoid efficiencies--to avoid inefficiencies. 
And they are going to have to sequence their efforts in a way 
that maximizes the return on investment. But if one presents 
itself that allows a purchase to avoid a costly lease, 
absolutely.
    Ms. Norton. Let me ask you a final question about the 
Postal Service. I am on another committee that has jurisdiction 
over that giant operation. And I am interested in the order of 
magnitude of postal properties that might be involved. This is 
the oldest--used to be--Federal agency. Of course it is not 
Federal any more. But we have those properties.
    What type of field offices, for example, would you envision 
being collocated? Another efficiency that might occur, as a 
result of this process. And would you need authority, new 
authority, in order to pursue this type of collocation, or, for 
that matter, to deal with Postal Service properties?
    Mr. Werfel. Well, I start with the premise, Congresswoman, 
that we have--separate from the post office, but in the Federal 
Government elsewhere--we have too many field offices. In 
multiple cases we have agencies that have an office in every 
county in America, which is reflective of the way in which 
benefits and services were delivered decades ago, or before the 
Internet era.
    And so, the question that we have had, and that we have 
been unable to do under the current legal, political, and 
financial situation, is to downsize that footprint.
    And so, in downsizing it, it seems very logical and 
intuitive that the presence of post offices in these same 
geographies can present a collocation opportunity. The way our 
bill and our proposal is structured is that the board would go 
at it from the perspective of looking at agencies, whether it 
is USDA or Social Security or EPA or law enforcement, looking 
at these field offices and saying, ``Are there collocation 
opportunities that can exist with the post office footprint 
that is there,'' and raising those as an issue.
    But I do not think it is a one-for-one situation. I do not 
think that, if we have approximately 3,100 counties in America, 
I don't anticipate that the board would say, ``OK, we need 
3,100 postal opportunities for collocation,'' because I believe 
first downsizing may be appropriate. Because I don't know that 
we need an office in every county in America, based on the way 
benefits are delivered.
    Once you downsize--let's say you downsize 5 percent. You 
might be able to downsize even further by collocating. So you 
downsize the actual presence by 5 percent, and you downsize an 
additional 5 percent by collocating into post offices.
    I think the board is going to have to determine what that 
stress point is. How much can we downsize without affecting the 
operations of these organizations, and how much can the postal 
service absorb? I am not sure I can give you a number right 
now, I just know that it is not every post office in America. 
It is something much smaller than that.
    Ms. Norton. Thank you, Mr. Chairman.
    Mr. Denham. Thank you. The chair now recognizes Mr. 
Hultgren for 5 minutes.
    Mr. Hultgren. Thank you so much, Mr. Chairman. Just a 
couple questions. Mr. Werfel, if I can address these to you, 
that would be wonderful.
    I know that it is an incredible challenge for GSA to bring 
everything together, just realizing that data is collected from 
over 30 different Federal agencies. Trying to coordinate all of 
that, bringing that together. But I also know that in the past 
GAO has been criticized for unreliable and limited usefulness 
of the data that they have.
    I just wanted to ask quickly of the current status of the 
official Federal real property inventory. And then, 
specifically to that, wondering if there is--with that 
inventory, if it is geo-referenced. In other words, does it 
have mapping or geospatial components to it?
    Mr. Werfel. On your first question, like any new start in 
the Federal Government to collect comprehensive information on 
something, we go through the growing pains of data quality, 
completeness, and reliability issues. And it is no different 
with the real property profile. We are taking measures to 
improve its reliability.
    And I will note that when this committee, this 
subcommittee, held a hearing in early April, GAO testified. And 
in their written testimony they pointed specifically to 
improvements in the reliability of the data in the real 
property profile. We are continuing to look at ways of 
improving that reliability, and to get into your second 
question, to enhance the granularity.
    The data that we have, we have several data elements 
associated with location, including longitude and latitude, and 
we have the ability, therefore, to enable--if the investment is 
made, and if there is a business need, to enable geospatial 
technologies that can support our inventory and review. But 
some of those investments haven't been made yet, but we are 
positioned well, because the data that we collect can enable 
that type of technology to take hold.
    Mr. Hultgren. As far as some of the mapping, then, is 
that--that will be part of this, as well, of mapping 
properties?
    Mr. Werfel. Absolutely. I mean I think one of the things 
that hasn't happened, as an example, that I think should--and I 
think the board can do it, and we are going to try to do some 
of this work preliminarily to get the board ready--is taking a 
city center, whether it be Dallas-Fort Worth or the Bay Area 
San Francisco-Oakland, or Miami-Dade County, looking at a city 
and saying, ``What is the Federal footprint in that city, 
across agencies, and what administrative buildings do we have, 
hospitals, warehouses, office buildings?''
    And when you start breaking down those agency-by-agency 
barriers, which I don't think we have done an effective job of, 
historically, more realignment and right-sizing opportunities 
are going to be at play. And I think mapping is going to be 
critical to enabling that type of analytics.
    Mr. Hultgren. Yes, I agree with that, and I do think, you 
know, the advancements that we have seen enable that to be done 
in a way that never could have been done in the past, really. 
So I hope that we do that.
    I do commend Chairman Denham, too, and his work, and the 
bill that is coming together, and just the cooperation that is 
coming with the administration, as well, so I am grateful for 
that.
    I do, as I look past--and being one of the new freshmen 
here--seeing so many inefficiencies of the past, and still some 
inefficiencies continuing. I was reminded of testimony back in 
2005 from Secretary Gale Norton--then Interior Secretary--
before the House Interior Appropriations Subcommittee. And 
Secretary Norton said, ``The Department currently uses 26 
different financial management systems and over 100 different 
property systems. Employees must enter procurement transactions 
multiple times in different systems, so that the data are 
captured in real property inventories, financial systems, and 
acquisition systems. This fractured approach is both costly and 
burdensome to manage.''
    I guess with that, the question is, you know, certainly you 
are aware of that. But steps that are being taken, you know, 
how many property inventories does the Federal Government 
currently have? What are some of the steps that are being done 
to coordinate this? I know this is the first step today, but 
just want to kind of get maybe more of a statement, but also 
ask you of--is there hope of where we are going, and 
coordinating this, bringing this somewhat together so that we 
don't have this redundancy and, really, inability to know even 
what is there?
    Mr. Werfel. You have raised, Congressman, a question that 
is certainly near and dear to my heart, and to some of the 
other related missions that OMB has around overseeing and 
ensuring agency investment in their system solution to support 
their mission operations, whether they be financial management 
or facilities management, that those investments are smart and 
at the right cost and at the right risk.
    And so, we have efforts underway that, I think, parallel 
these efforts to look for efficiencies in the way we invest in 
technologies. And I certainly can provide that information for 
you and give you an update in a separate setting. We are making 
progress, but it is another huge area of inefficiency, the way 
in which we invest in systems. But I am confident that some of 
the steps the administration is taking on that front are having 
an impact.
    Mr. Hultgren. Well, that would be great. I would be very 
interested in getting that information.
    And if it is all right with you, I have got a couple other 
questions. My time is limited, so if I can forward that to your 
office and any information you can get us would be wonderful. I 
do think it is so important for us to address this 
inefficiency. And especially with the technological 
advancements that are out there, where we really are capable, 
like we have never been capable, to coordinate this in a new 
way. So I look forward to working with you on that.
    And again, I thank the chairman for his work and this 
important first step that we are taking today and these next 
days. Thank you.
    Mr. Denham. Thank you, Mr. Hultgren. The chair now 
recognizes Ms. Edwards for 5 minutes.
    Ms. Edwards. Thank you, Mr. Chairman, and thank you, 
gentlemen, for your testimony. I am actually glad to see OMB 
here today, since I have been trying to meet with you all for 
months now. So it would be good to ask you a couple of 
questions.
    Mr. Werfel, I am a little curious. When I look, for 
example, there are 243 of the properties that you have actually 
already identified as excess and underutilized properties for 
consideration. And I am wondering how--if you have come up with 
a pre-identified list, I understand that you have already 
plotted about 7,000 or 14,000--how the BRAC process can operate 
independently to make a judgment about which of the 14,000 
properties really should fall under consideration, because it 
seems like you are kind of scripting what the end product would 
be.
    Mr. Werfel. That is a very good question, Congresswoman. 
The way I would offer to you to think about it is that on our 
current course and speed, the way we operate today under 
current legal and regulatory frameworks, we do have the ability 
to move assets off our books, to sell them, to dispose of them. 
And that process has been going on for decades. And the excess 
asset portfolio that we have today represents where we are in 
2011, in terms of our excess footprint.
    What we are recognizing here--and as we work with each 
agency to figure out, ``Is this all you have, is this--are 
there other excess assets that can be on the list that are 
not,'' what we realized is that there are more transformational 
opportunities within almost every agency's inventory that are 
not currently moving towards that transformation to achieve 
that savings.
    And there are reasons why. The most powerful of them are 
the competing stakeholder interests that prevent an agency from 
moving forward, because that asset, or that series of assets, 
would raise all types of issues, whether it be from a Member of 
Congress, whether it be from a higher-up within a given 
administration, whether it be a union issue, or otherwise.
    Ms. Edwards. I understand that, and thank you for the 
clarification, because I am just concerned, though, that if you 
have already got a list, then you run the risk that when a so-
called independent process is set up, that they begin with 
that, as opposed to looking at the entire--the list in its 
entirety. But I will leave that to you all to try to figure 
out.
    I have another question regarding how you make 
determinations about the relative value or not of a property. 
For example, how do you assess a property that might go to use 
as a homeless facility or some other public benefit facility, 
versus something else, and what the value is and jurisdiction?
    So, for example, if there is a warehouse in Prince George's 
County, how do you value the--a public benefit for that, versus 
a warehouse in the District of Columbia or Montgomery County or 
Northern Virginia? Because my experience--and you can correct 
me if I am wrong--is that, at least for the Washington 
metropolitan region, OMB has a history of valuing those 
jurisdictions very, very differently. And so it would be 
unfortunate if, yet again in this process, say a Prince 
George's County or Montgomery County were to fall to the same 
limitations that have befallen Maryland and those counties in 
the leasing process in which GSA leases properties in the 
metropolitan Washington area. Do you have a response to that?
    Mr. Werfel. I do. I have several. First, as a premise, I 
think one of the benefits of both the President's bill and 
Chairman Denham's bill is it brings more assets into the fray, 
in terms of potential availability for public benefit 
conveyance. On our current trajectory, we are not producing as 
many assets as we could that could potentially be used for the 
benefit of either the homeless or a local education institution 
or a local government. And so, goal one is increase the number 
of assets that are available.
    My second response is that today it is just an enormously 
complex environment, because you have, you know, approximately 
13 different vettings that these properties have to go through 
for a variety of different reasons. And it is not a very 
cohesive decisionmaking process that takes place over--when you 
start looking across the inventory. Why a certain asset didn't 
end up with this legitimate stakeholder interest versus that 
one can be difficult to kind of weave a common story through, 
because of how complex and case-by-case it is.
    What the proposal that we are--and, oh, by the way, that 
complexity lengthens the time that these back-and-forths go, 
and the assets sit on our books for longer and longer.
    The benefit of the BRAC model, I think, is that it drives a 
decision. It listens to all those stakeholder interests in a 
collective way, and it says, ``Based on a broader set of 
interests, including the community itself, the larger taxpayer, 
the deficit, the mission of the organization, here is the 
decision that we are coming to.'' And those decisions tend, in 
a BRAC environment, to be driven more quickly on a larger set 
of assets than they do when we do it asset by asset.
    Ms. Edwards. OK. My time has expired, and so I would just 
say, one, thank you, Mr. Chairman, for bringing this forward, 
following our meetings earlier in the year, but also just to 
caution OMB that there were problems that were--that resulted 
to local communities in terms of the costs that they had to 
incur when BRAC happened. And I hope that we are taking into 
consideration that we wouldn't be putting on more burden to 
local communities with the transfer of these assets.
    And that would be something that we would look for, having 
learned that lesson, particularly around transportation 
infrastructure, where the BRAC process was concerned with 
Defense facilities.
    And with that, Mr. Chairman, thank you very much.
    Mr. Denham. Thank you, Ms. Edwards. The chair now 
recognizes Mr. Barletta for 5 minutes.
    Mr. Barletta. Thank you. Mr. Werfel, I am encouraged that 
the administration and our subcommittee, through Chairman 
Denham, have made major strides towards achieving real savings 
for the American people.
    One difference in the proposal relates to when the 
commission terminates. Our legislation terminates the 
commission in 6 years, and the administration does so in 12. 
What are your thoughts about the termination date of the 
commission, and what would the benefit be of having a longer 
period of time?
    Mr. Werfel. You know, again, I think there are some 
elements of the bill where it is just different on the how and 
the means, but the ends are the same. And I think, as a general 
principle, we are open to any suggestion for the how. And so, 
if in Congress' wisdom a shorter-termed board is the way to go, 
I don't think we would have a major objection.
    What I would offer is that, if you look at the BRAC 
process, which has saved a lot of money--in fact, just looking 
at the numbers we have today it is expected to save $80 billion 
over the next 20 years, or about a $4 billion-a-year run, which 
is much higher than we see on the civilian side--it takes a 
long time. And, there has--you know, BRAC has been in place 
since around 1980, and there are still activities underway that 
have a positive return on investment, and still a need for that 
type of framework, to make sure that our opportunities don't 
get grinded by the current process that we are in.
    So, I would argue for a longer leash, in terms of allowing 
the board--I think they should be driven to start generating 
savings early and often, but I also think that, as we churn 
forward in our inventory, that additional opportunities are 
going to emerge, and I think we are going to find that this 
independent process is the real kind of turnkey towards getting 
past what we have been involved in.
    Of course, we could go with 6 years and then Congress can 
revisit whether to reauthorize, based on the performance of the 
board over the first 6 years. I think there is a lot of 
different models here, and we are open to discussing the best 
one.
    Mr. Barletta. Thank you. Ambassador Kennedy, thank you for 
sharing the State Department's successes abroad. Disposing of 
properties in foreign countries is likely to have some unique 
challenges. Can you give us examples of how the sale or 
disposal of overseas properties may be similar or different 
from domestic properties?
    Mr. Kennedy. Yes. Thank you very much, sir. The basic issue 
that we face has two components.
    The first is that in many countries in the world there is 
not a free market, as we have in the United States. One can buy 
property in the United States, essentially subject to only 
zoning regulations and the availability of funds. This is not 
the case overseas; many nations do not have a public sector, as 
we have. The only entity from whom you can buy or sell property 
is the national government, or parastatal elements thereof. And 
so, being forced to buy or sell to that entity carries with it 
a very great different number of burdens, and potentially some 
opportunities.
    The second is legal requirements in foreign countries. 
Foreign governments, as does the United States, under the 
Foreign Mission Act that the Congress helped the State 
Department enact, requires us to reach or achieve permissions 
from a foreign government to buy or sell a piece of property. 
So, those are basically the structural issues we face.
    Other issues that the State Department faces is that State 
Department properties overseas, as you can imagine, are very, 
very special properties, having physical security requirements, 
technical security requirements, communications security 
requirements. And all those have to be factored in.
    So, we fully support both the administration's proposal and 
the intent of the chairman's legislation. And these are 
practices that we have been engaged in for many years. We wish 
to continue, we want to be a full participant with OMB and the 
Congress in going forward.
    My major effort here today is to outline why the operations 
are slightly different, not in terms of the goals we wish to 
achieve, having the most cost-efficient property utilization in 
the world, but just that overseas conditions are radically 
different from domestic conditions in the United States, and we 
wish to achieve the goals in the right way.
    Mr. Barletta. Thank you. And I am happy to see the 
cooperation. Thank you, Mr. Chairman. I yield back.
    Mr. Denham. Thank you, Mr. Barletta. A lot has been talked 
about as we move forward on this bill. Obviously, new 
properties, new agencies, new opportunities are coming up. And 
one of those is the overseas properties.
    How much money do you think can be saved from the overseas 
properties, Mr. Kennedy? And you have touched on some of the 
challenges you think that we may have, but we are going to have 
challenges in every different agency. I mean there are some 
uniquenesses in other agencies. So I am mostly concerned about 
what type of savings you think we can see from the overseas 
properties.
    Mr. Kennedy. Well, Mr. Chairman, we have identified, as 
part of our ongoing efforts, we have identified over 76 
properties, and we are now looking at each one of those in 
terms of its marketability--can I achieve host government 
approval to sell it? What is the market in that country at this 
time? And, therefore, we will be--as I said--working those 
right now to achieve a complete list.
    I guess, as the benchmark, if I might, we have been able to 
sell properties over the last few years. And with those 
properties that we have sold, we have taken the proceeds, 
invested them in purchasing for the United States Government 
overseas 265 additional properties, replacement properties. And 
that has saved us annually over $11 million in rent.
    For a budget the size of the State Department's operating 
budget, that is a significant savings. And so, what we do every 
year, every day, is look at our property assets overseas, 
identify those that are underutilized, that are potentially, as 
you well outlined, the opportunity to sell a high-value 
property.
    One of the activities we are engaged in now is we have 
three aging properties in central London. It will take us 
hundreds of millions of dollars to upgrade those properties, 
because they are over 50 years old, to replace the heating, to 
replace the air conditioning, to replace the wiring, to make 
them fire safe. And even then, because of their locations, we 
are not going to have them secure, because of the proximity to 
the streets in central London.
    We are working through a process now in which we believe 
that we can sell those three properties in central London, and 
with those proceeds of sale build an entirely new embassy in 
London at no cost to the taxpayer. So that is another example 
of what we try to do.
    And going to one of the very good points you have made in 
your 5th of May statement is taking a high-value property, and 
see if we can get, literally, the highest and best use for it. 
And, in the case of London, it is to sell the property, and we 
get an entirely new embassy facility at, literally, no cost.
    Mr. Denham. Do you have concerns of being included into 
this bill?
    Mr. Kennedy. I believe, sir, that since we meet the 
conditions that you have already outlined, I have no problem 
being within the bill.
    But I believe that there has to be a legislative 
acknowledgment of the special needs and requirements that I was 
outlining to Mr. Barletta that we have to do, both in terms of 
what is the market and the legal structures overseas, and what 
are the national security implications of real estate overseas, 
which, as I noted in my statement--when you say ``the American 
Embassy,'' that is not just the home of the State Department, 
it is the home of every U.S. Government agency operating in a 
civilian way overseas, and that we are, in effect, the 
consolidated field offices that you referred to in your May 5th 
statement and Controller Werfel referred to in his.
    Mr. Denham. Thank you. And, Mr. Werfel, you know, one of 
the things that critics continue to talk about is this whole 
fire sale. We are going to go out there and do this fire sale 
on all these properties.
    And, first of all, I just don't think that that is a fair 
interpretation of what this bill's goals are, or what we plan 
on doing in the future. You know, we think that there are 
opportunities, again, to sell these high-dollar properties.
    But how do we ensure that Federal agencies evaluate all of 
the options when they are reviewing properties on, you know, 
some of the things that Mr. Kennedy is talking about, and 
making sure that we are still meeting the needs of the American 
people, at the same time being able to consolidate our 
footprint and sell off the things that we just don't need, or 
outlive their usefulness.
    Again, our goal that we have talked about is not selling 
properties on a down market, but actually selling the unique 
properties that we just shouldn't have in our inventory.
    Mr. Werfel. Yes, I think you have to be strategic. And 
there are--you know, the real estate market across the country 
is different in different locations. And some of the high-value 
assets that we believe we have are in areas of urban locations 
where the markets are still robust, and where a good deal can 
be made on behalf of the taxpayer. And you certainly don't want 
to leave those on the table.
    At the same time, you have to recognize that there may be 
better approaches to protect the taxpayer interest than just, 
you know, fire-sale'ing assets into a soft market. This is not 
easy stuff, and Federal Government is constantly looking for 
ways to kind of navigate this terrain. I think GSA, and the 
expertise they bring to the table, and the way in which they 
serve other agencies plays a critical role there.
    But I think I want to transition a bit into the board 
itself. The--what the board, I think, opens up is two things. 
First of all, it puts properties that--it tends to be that the 
higher valued properties in the more choice locations are the 
tougher ones to get through, politically. And so, the board 
enables us to tap into those opportunities.
    And the other key point is it is because we are tapping 
into those opportunities, you are freeing up resources that can 
be reinvested--some of it will go to deficit reduction, a 
majority--but can be reinvested. And those reinvestments can be 
used as incentives to agencies to get them more motivated and 
more thinking strategically about how to make the right 
decisions. We are just trying to find the right model, the 
right set of incentives. And right now we are falling short and 
we are underperforming.
    Mr. Denham. The chair now recognizes Ranking Member Norton 
for a second round of questioning.
    Ms. Norton. I only have another question or two. Mr. 
Werfel, you testified about--in answer to the chairman's last 
question about fire sales--that you had to be strategic. Well, 
I notice a difference in the timeline of the two bills. The 
President's bill would have the board operate for 12 years, the 
chairman's bill for 6 years. In light of his question on fire 
sales and--for example, you might not want to sell in the kind 
of market we are just coming out of--what difference would the 
timeline of the board make?
    Mr. Werfel. I think it would--it could allow the board to 
pace itself differently, knowing it has a longer life span.
    Again, I think the board's primary challenge--one of its 
primary challenges--is sequence. And what are the right 
opportunities to go for first, that are going to optimize the 
return for the taxpayer?
    And with the right set of expertise on the board, they are 
going to be able to factor in issues such as, well, this market 
has six or seven properties that would be in our sites for 
realignment, but why don't we hold back on those properties 
until the next round, because we believe that it's not the 
right time, but this market, we do think it is the right 
timing. And with a longer leash, in terms of the commission's 
life, I think that it releases some of the pressure on trying 
to push more in.
    At the same time--and these things always have these public 
policy tensions--I think you would want the board to be 
evaluated and feel some pressure that its life depends--its 
future life depends on generating meaningful savings for 
taxpayers, so they can't sit too long on some of these 
opportunities.
    The bottom line is, can we find that right equilibrium, or 
that right balance point? I think it is--I think we have 
probably hit it. It is probably somewhere between 6 and 12 
years, which is probably sufficient time to allow them to pace 
themselves, with also the accountability that, in that 
timeframe, we want to see, you know, savings in the billions of 
dollars that were envisioned by the bill.
    So, I think we have triangulated the right timeframe, we 
just have to settle in on what we decide.
    Ms. Norton. Yes, and this board is going to be subject to 
the same kind of public scrutiny that private sector owners 
are. If they sell and get underpriced relative to somebody else 
who looks smarter, then the committee is going to have to 
wonder, ``What were you thinking?'' Because that is what they 
are going to be--there is a comparison out there. It is known 
as the private sector, and who is getting what for what.
    And as you say, the expertise of the commission should 
allow for that. But we also know what the private sector does. 
The private sector, for example, in this city has been buying 
up property for a long time and waiting, waiting, for the time 
to sell.
    And when--to give you kind of a typical example, with the 
DHS going up in Ward 8, now that is a property that nobody 
would have thought of selling, or could have sold. But now that 
the Federal Government is bringing 14,000 employees to a 
property it owns, but was moribund, property values have begun 
to rise very substantially. And I can just see the commission 
being subject to great criticism if it did not show that kind 
of strategic sense of when to hold and when to sell.
    And I thank you very much.
    Mr. Denham. Just one final question before we go to the 
final panel. Selling off a number of these properties can 
generate millions of dollars, as we get these properties back 
on the tax rolls, generate millions of dollars for local 
government, too. The challenge is going to be finding a lot of 
these properties.
    The private sector expertise, and their proposals, can help 
us to generate a lot of those properties that aren't on the 
list today. How do we inject their expertise and proposals into 
this process?
    Mr. Werfel. I think the board itself, once it is created, 
like BRAC, will hold hearings and meetings and sessions on a 
whole--with a whole host of different interest areas.
    And I think the commercial real estate expertise, which I 
think will be embedded in the board itself, because I think you 
would pick members with commercial expertise, but they can 
reach out to broader expertise in commercial real estate.
    I mentioned doing regional reviews of things like Dallas-
Fort Worth or Miami-Dade or the Bay Area, whatever it happens 
to be. And in that regard, I would imagine that when they are 
sitting down, they are meeting with a whole host of 
stakeholders to understand how this real estate footprint plays 
out, and where the opportunities are, including commercial real 
estate experts with specific knowledge of that geography and 
those issues, as well as community organizers, community 
developers, the local educational institutions, the mayor. All 
of this brings together information that helps generate their 
ultimate recommendation.
    The point is none of this is happening in a concerted way 
today, and it should. And if it does, I think that is where the 
efficiencies and the savings will materialize.
    Mr. Denham. And, important from the commercial standpoint 
but also--you know, one of the things I saw on the State level, 
when we put this out for the entire public to see, you had some 
people that wanted to expand their backyard, but you know, the 
grass had grown up where the government was not taking care of 
its property, and didn't know that there was a sliver, or a 
small piece of property, or somebody wanted to expand their 
parking lot.
    I imagine there is also--as we dive into this across the 
entire Nation, we will find that the private individuals will 
find some of these properties for us. How would you also 
accommodate getting this out to every taxpayer, so that they 
can be aware of this opportunity as well?
    Mr. Werfel. Well, I think transparency is going to be a 
critical element. It is always a critical element of any 
management initiative and push. And the challenge with real 
estate transparency is the security issue. And we just have to 
make sure that we are cleansing our information that we make 
public from any kind of national security threat that can be 
had.
    But I think that when--and that is part of the challenge, 
but it is an overcomeable challenge. And so, when the 
commission or the board moves into an analytical phase of a 
given region or a given area, then as part of that they are 
going to have to make some of the footprint, that I described 
earlier in response to Congressman Hultgren's questions, 
available so people can see and understand it and weigh in.
    So, I don't know necessarily right now if I know exactly 
how I would articulate how transparency is going to play out, 
but I know that it is a critical objective and piece of this.
    Mr. Denham. Thank you. Thank you for testimony. Your 
comments have been very insightful in helping out today's 
discussion. I appreciate both of you coming in today.
    We will now call our second panel of witnesses, the 
Honorable Anthony Principi, former Secretary, U.S. Department 
of Veterans Affairs, and former chairman of the 2005 Defense 
Base Realignment and Closure Commission. Also, Mr. David 
Winstead, former commissioner, Public Buildings Service, U.S. 
General Services Administration, and Mr. Michael Glosserman, 
managing partner of The JBG Companies.
    I would ask unanimous consent that our witnesses' full 
statements be included in the record.
    [No response.]
    Mr. Denham. Without objection, so order.
    Since your testimony has been part of the record, the 
subcommittee would request that you limit your oral testimony 
to 5 minutes.
    Thank you. And, Mr. Principi, you may begin.

 TESTIMONY OF HON. ANTHONY J. PRINCIPI, FORMER SECRETARY, U.S. 
DEPARTMENT OF VETERANS AFFAIRS, AND FORMER CHAIRMAN, 2005 BASE 
 REALIGNMENT AND CLOSURE COMMISSION; DAVID L. WINSTEAD, FORMER 
 COMMISSIONER, PUBLIC BUILDINGS SERVICE, U.S. GENERAL SERVICES 
 ADMINISTRATION; AND MICHAEL GLOSSERMAN, MANAGING MEMBER, THE 
                         JBG COMPANIES

    Mr. Principi. Thank you, Mr. Chairman. Good morning, 
Chairman Denham, Ranking Member Holmes Norton, and members of 
the subcommittee. I welcome your invitation to comment on your 
introduced legislation, H.R. 1734, the Civilian Property 
Realignment Act. I commend the President and you, Mr. Chairman, 
for the introduction of this much-needed legislation, and I 
certainly commend Ranking Member Norton for her enormous 
contribution to this effort over the years.
    When I appeared before the committee on April 6th I 
recommended several changes to the administration's proposal to 
establish a civilian property realignment act. I am gratified 
to note that a number of those recommendations are included in 
the bill.
    For one, the legislation establishes a commission vice a 
board, expands the number of members on the commission to nine 
vice seven, and calls on the President to name individuals to 
the commission, in consultation with the leadership of the 
House and Senate, and requires Senate confirmation.
    Further, the legislation holds the President, and not the 
director of the Office of Management and Budget, rightfully 
accountable for the review and submission of commission 
recommendations. In my view, these steps will bring greater 
independence to the commission, and more transparency to the 
process.
    As I indicated at the April 6th hearing, independence and 
transparency are the sine qua non to the success of this 
process. This is especially critical in the independent 
analysis of all Federal properties, whether they are on the 
list for closure or not. And I say this from my experience as 
chairman of the 2005 BRAC commission. We considered properties 
that the Secretary of Defense did not have on the list. And 
certainly, as Secretary of Veterans Affairs, I was under 
enormous pressure not to close any facilities, whether they 
were antiquated or not, that I felt were diverting much-needed 
resources to 21st-century health care for our Nation's 
veterans.
    You have requested that I review your legislation and 
provide additional comments and recommendations. I have very 
few. Section 11 calls for the establishment of standards and 
criteria, and outlines 9 principles upon which to develop 
criteria. It is not clear to me if there is a difference 
between standards and criteria. And in the absence of term 
definitions, I would recommend that the term ``standards'' be 
defined or deleted.
    I applaud the nine principles, and would suggest that they 
be established in law as the criteria against which Federal 
agencies and the commission must evaluate each facility for 
disposition. I cannot overemphasize the importance of criteria, 
independently established and implemented.
    Section 12 outlines the duties of the commission. While the 
legislative language infers that the commission utilize 
criteria, it is not clear how the commission would utilize that 
criteria. In the Base Realignment and Closure Act, the BRAC 
Commission, in weighing each recommendation submitted by the 
Secretary of Defense, is required to explicitly state whether 
the Department significantly deviated from any of the eight 
criteria, and point out the criteria deviated before making a 
recommendation. I, therefore, propose that the language in 
section 12 be tightened to more clearly define the role of 
criteria in commission deliberations.
    Finally, I would suggest again the importance of the 
accounting of the real savings to taxpayers generated by the 
entire process. For the 2005 BRAC, the Department utilized an 
accounting system that estimated savings by realignments of 
nearly $48 billion over 20 years. According to the GAO, that 
saving estimate has now declined to less than $20 billion, 
primarily due to vastly under-estimated implementation costs. I 
would highlight that our BRAC was as much about transformation 
of our military force structure as it was about cost savings.
    I would urge that the GAO be required to track and report 
to the Congress periodically on civilian property realignment 
cost and savings.
    Finally, I note that section 51 provides that 
implementation of the commission's recommendations are to be 
undertaken pursuant to existing authorities available to GSA 
and the Federal agencies. While the legislation mandates that 
all recommended actions be completed no later than the end of a 
6-year period, the legislation leaves the ultimate action an 
open question.
    In order to ensure prompt implementation of the recommended 
actions and the disposal of such properties in a manner that 
will generate the most revenue to the government, and in order 
to avoid fire sale disposals, the legislation should 
specifically enable the disposing authorities with the ability 
to enter into ground leases, sale lease-backs, or other 
arrangements pending ultimate implementation of the 
commission's recommendation.
    As you know very well, the need for swift disposal of non-
performing assets was recognized and well-managed during the 
savings and loan crisis in the late 1980s and early 1990s, with 
the establishment of the Resolution Trust Corporation, which I 
believe could be used as a possible model for this commission 
to dispose of properties. Their sole purpose was to dispose of 
properties promptly at a maximum return to the taxpayer. It was 
a Federal agency that had that only purpose to fulfill.
    And finally, with respect to section 20, in order to avoid 
potential confusion with respect to leasing authorities that 
some Federal agencies currently possess, I recommend that 
subsection A be modified, so as to recognize those authorities 
as not being affected.
    And I might just add one point about overseas properties. 
Believe it or not, the VA owns a property in Paris. I recall, 
when I was deputy secretary of Veterans Affairs during Bush 41, 
I was asked by the Congress to take ownership of a building, a 
magnificent, valuable building in the golden area of Paris, 
France. It was a building that the American Legion inherited 
after World War I called the Pershing Hall, named after General 
Pershing. The government, U.S. Government, finally took 
possession of the building after bailing out the American 
Legion, but it fell into a state of disrepair. Monies were 
being stolen, artifacts were being stolen. And no one seemed to 
know what to do with this building.
    So, the Congress asked if I, the VA, would take possession 
of it. We did. We closed it down, we cleaned it up. We leased 
it to a major hotel. It is now Pershing Hall Hotel. All the 
artifacts are intact. It will always bear the name Pershing 
Hall, and the VA is receiving income on a long-term lease for 
that property.
    So, I think even overseas it can be done, and done in the 
right way. Thank you, Mr. Chairman. Thank you, Ranking Member 
Norton.
    Mr. Denham. Thank you, Secretary Principi.
    Mr. Winstead, you may proceed.
    Mr. Winstead. Mr. Chairman, Congresswoman Norton, it is 
great to be here. I am David Winstead. I am an attorney with 
Ballard Spahr here in Washington, DC, and I had the pleasure 
from 2005 through 2008 to be commissioner of public buildings 
at GSA. So I would like to provide some perspective to you of 
both that experience, the tools they have, as well as the 
private sector view, which I had prior to going to GSA, and 
clearly since.
    I would also mention that I chair a committee at the Urban 
Land Institute which is made up of the--of public sector real 
estate executives. And part of their objective is to show best 
case management of real estate, and what to do with surplus, as 
well as existing fully utilized real estate.
    I would like to comment on the bill specifically. I think 
the Civilian Property Realignment Act, the purpose under 
section two is very targeted. And I think you are looking at 
the right issues, in terms of occupancy of space, footprint of 
building, utilization, vacancy rates. Obviously, looking at 
underutilization and value of assets is key. And then, looking 
at redundancy. And obviously, in managing the portfolios of GSA 
for 3 years, there were cases of redundancy and efforts of the 
agency to move to limit that and--or to surplus those 
properties.
    I would also mention that during my tenure we did 
strengthen the disposal process at GSA and staffed up 
sufficiently to basically shorten the timeframe of being able 
to deal with surplus properties.
    So, I think the intent of this bill is focused on resources 
and, most importantly, I think giving an independent review of 
existing portfolio of owned properties, as well as leased 
actions. This committee knows well that GSA manages leased 
properties extremely well, in terms of limiting vacancies to 
less than 1 percent, and responsing to the market if you need 
to contract in space or expand in space. So, I think that 
those--you know, that they have done a very good job, in terms 
of the lease side.
    In terms of surplus properties, I do think an independent 
review of a group like this would be worthwhile. There are 
certainly assets that we struggled with, like the Old Post 
Office, that is very much underutilized and is now on the 
market to look at private sector options there.
    On March the 30th, Administrator Johnson did testify about 
the other things underway which are mentioned in this bill, and 
that is look at, actually, the workspace solutions for Federal 
agencies, and to look for the case of DHS consolidation in St. 
Elizabeths, but at the same time reducing the amount of leased 
space that they need. Same with the FDA in White Oak, Maryland.
    So, H.R. 1734 does, I feel, provide a very valuable public-
private partnership and an independent commission to take 
another very concerted view of these 14,000 assets that 
Controller Werfel talked about, and savings of $15 billion as 
an objective.
    I would say, though, that it would help this commission, I 
think the value it has to GSA and the Federal Government and 
all landowning agencies on the Federal level, is really 
managing that competing stakeholder process, which the 
controller talked about at great length.
    There are a couple distinctions I would like to make. One 
is that, unlike the Public Building Act did vest in GSA a very 
flexible building authority of a 20-year--up to 20-year ability 
to lease space. And now, over 50 percent of occupancy of the 
Federal Government is in leased space. And so, it does have the 
ability, through terms and contracts, to move space, to 
terminate space, to react to tenancy consolidation. And I think 
that does make it a bit unusual, compared to some of the BRAC 
experiences.
    Secondly, I think the Executive Order 13327, which is the--
which was established the Federal Real Property Council--I 
worked on the asset management subcommittee of that--has, in 
fact, put in place an awful lot of data, much like a private 
sector real estate REIT creates data on performance of 
individual assets achieving return on investments of 6 percent, 
in the case of GSA. That data does exist, and it has been about 
7 years now. So I think this commission can avail itself of 
very accurate current data on existing assets and their 
utilization.
    But looking at packaging a group of assets that would be 
essentially immune from the politics of local communities, when 
in fact those assets are underutilized and can return better 
value by being disposed, I think has a very worthwhile purpose.
    Last two things I would mention is that the private sector 
needs to be very, very involved in this process, not only in 
terms of the members on the commission, but I would say very 
much in the implementation of this. I think GSA has those 
resource, and is the landlord of the Federal Government. But I 
think the private sector needs to be involved in that 
disposition process.
    I would mention one case, just as an example of what can 
happen--or two, actually--one, a GSA case, very briefly. There 
was an asset we had in Baltimore County--this goes back to 
2006, 2007--that was valued at about $20 million. It was a part 
of--our asset managers and disposal people at GSA worked 
closely with the host county, Baltimore County, Maryland, who 
had just master-planned and rezoned that whole area around 
Martin State Airport, a general aviation airport, and increased 
because we partnered, because the government partnered in 
disposing that property with the host county under their zone 
authority to increase entitlements, increase value, GSA got 
about $15 million more in disposing of that property than if 
they had acted independently without engaging with the host 
jurisdiction.
    And lastly, very recently I was involved in a conveyance by 
the U.S. Postal Service of a surplus property. And they have a 
very innovative, very open--more so than even GSA--about 
ability to look at assets and capture value for, obviously, the 
post office, which is under operational constraints and fiscal 
pressures.
    And what they did in this regard is, looking at fair market 
value, three independent appraisers, but then they looked at 
entitlement value, and they actually had a negotiation session, 
where they look at both what could it be redeveloped as--a 
hotel, office building, multifamily residential--were they able 
to add a component on to fair market value to essentially have 
a part of the ride that would be created over a number of years 
in the redevelopment.
    So these are the kind of things that are, in fact, 
happening, and can happen. I think this commission can identify 
those assets as a group, move them through the process that you 
have--will establish on the bill.
    The last thing I would mention--and Ranking Member Norton 
has been very involved in this--I would really encourage 
Congress to look also at the tools that 412 authority gave GSA 
in the Appropriations Act of 2005, because it did authorize the 
agency to look at conveyance through sale, lease-back exchange, 
and other tools that, to this day, we are still constrained 
under interpretations of the scoring rules. And this might be 
an opportunity, with the support of OMB that we witnessed 
earlier--to look at how those tools can be applied to the 
objectives of this commission, and moving those assets.
    So, that would be my last comment, and I would be happy to 
answer any questions. Thank you.
    Mr. Denham. Thank you, Mr. Winstead.
    Mr. Glosserman, you may proceed.
    Mr. Glosserman. Good morning, Chairman Denham and Ranking 
Member Norton. The JBG Companies has been an active investor, 
developer, and manager of commercial real estate properties in 
and around the Washington, DC, metropolitan area for over 50 
years. We have developed, owned, and managed over 30 million 
square feet of office space, over 15,000 residential units, 
approximately 4,000 hotel rooms, and over 5.5 million square 
feet of retail space.
    Over the years we have worked extensively with GSA on a 
number of high-profile projects, including the development of 
the 1.4 million square-foot Department of Transportation 
headquarters, which we still own, and other large leases 
throughout the city. We are moving forward currently with 
projects for the National Cancer Institute and the Social 
Security Administration. We have enjoyed our close, cordial 
relationship with GSA over the years to create highly efficient 
projects and leases that meet its requirements for security, 
energy efficiency, and functionality.
    While our experience is predominantly with GSA and the 
Washington metropolitan area, we believe that the Civilian 
Property Realignment Act is an important step towards providing 
additional efficiency for all of the government's real estate 
portfolio, and will generate significant value for the Federal 
Government.
    Many of the properties in the government's real estate 
portfolio are in prominent locations on sites with significant 
excess density, and therefore, untapped value. This act would 
provide the government with the ability to capture that 
additional value and reduce costs for taxpayers through the 
sale, repositioning, or redevelopment of these assets.
    Many existing government buildings are highly energy 
inefficient and demand significant annual maintenance funding 
to continue their operations. Many of these buildings are in 
desperate need of capital reinvestment, yet the government 
lacks the funds to make the necessary capital improvements. The 
act would provide a path for the government to put its agencies 
into new or renovated buildings at little or no cost to the 
taxpayers, given that the government would be able to take 
advantage of the significant value that already exists in many 
of its sites.
    Put very simply, this act provides a win-win situation for 
the government and the private real estate investment 
community. Under the act, the government would be able to 
transition many of its agencies into new, more energy efficient 
facilities that require significantly less annual maintenance 
expenses. The private sector would be able to invest in 
prominent real estate sites that were previously unavailable.
    Depending on the government's need in a particular 
location, the government could sell or perhaps lease a portion 
of the existing site to a private investor or developer, and 
use those proceeds for a newly constructed building on the 
remaining portion of the site.
    The private sector portion of the site could be developed 
based on highest and best use, to create an improved mix of 
uses, including office, retail, residential, or hotel, that 
would support the area. As I noted previously, the untapped 
value in many of the existing government sites is large enough 
to cover the cost of constructing a new Federal facility 
without any net outlay by the government over the payment 
received for excess density from the private sector. In fact, I 
believe many of these sites will even produce excess capital 
that can be returned to the government and used towards debt 
reduction.
    Mr. Winstead mentioned the Old Post Office building. The 
Old Post Office building has been used in recent history as an 
office building. This wonderful building has been sitting, 
underutilized, for almost two decades. During this period, the 
government has spent more money to operate and bandage the 
building than it has received in rent from the current Federal 
occupants. I believe this has been previously reported of being 
in the range of a $5 million loss per year.
    Over this period, the building has also been allowed to 
slowly degrade through the government's inability to 
appropriate sufficient dollars to undertake the massive 
recapitalization that was required. Yet this building has 
significant value to the private sector. If this legislation 
had been available, this Federal building would have been a 
prime candidate, returning to the government much-needed funds 
to reduce the budget deficit or renovate other Federal assets. 
This bill will pave the way for these kinds of opportunities.
    I would like to also add a few suggestions for your 
consideration. I urge that the commission be empowered to 
identify opportunities that are outside the scope of what may 
be recommended by individual agencies. Many undervalued 
properties or sites with excess density or alternative value-
add opportunities are likely to be overlooked by government 
agencies, which do not possess real estate expertise. Some of 
these opportunities may, in fact, be identified by the private 
sector, and the commission should be permitted to work within a 
framework that encourages and invites the private sector 
participation.
    Second, agencies may need to be incentivized to find real 
estate opportunities. Consider providing funding resulting from 
the value created back to the agencies to pay for replacing 
antiquated facilities or renovating existing facilities.
    And last, timing of real estate transaction to maximize 
value is difficult, at best. The timeframes proposed appear to 
work for a majority of the transactions that are being 
considered, especially those involving outright sales. However, 
many transactions may require substantially longer periods to 
extract potential value and to maximize value. I would 
encourage you to consider imposing longer timeframes for 
certain categories of assets.
    Since my time has run out, I am just going to simply 
conclude by thanking you for inviting me today, and to say that 
I know that my colleagues in the real estate industry stand 
ready to assist the Federal Government in any way they can to 
further the goals of this bill. Thank you.
    Mr. Denham. Thank you, Mr. Glosserman, for your testimony. 
And certainly we would agree that we want to invite the private 
sector's participation.
    How do you think that we can identify--how do you think we 
can maximize the value of the properties, and what are your 
thoughts on how we get that input from the private sector, and 
actually invite them to be part of the process?
    Mr. Glosserman. I think if there was a framework that is in 
place that gives the private sector the confidence that there 
is a process that is dependable, timely, and that is going to 
work, what you will find is that the private sector will 
respond to that, and will come forward with ideas and 
opportunities that probably the government has not thought 
about, many of which the agencies or the commission itself 
simply doesn't know about, but that bubble up.
    And Mr. Werfel earlier in his testimony indicated that he 
thought that there were a number of high-value sites that could 
go forward, and there should be a strategic approach. I agree 
with that. I believe that once this process gets started, and 
the private sector sees credible evidence that, in fact, there 
is a process in place that is moving forward, and these 
transactions are available, and that this relationship is 
available with the Federal Government, you will see folks 
coming out of the woodwork to propose ideas.
    Mr. Denham. Thank you. And ideas not only on the sale, but 
also on the redevelopment and----
    Mr. Glosserman. Exactly, for----
    Mr. Denham [continuing]. Best use of the property?
    Mr. Glosserman. For density that could be transferred, 
density that could be used in a variety of ways, exactly.
    Mr. Denham. Thank you. Mr. Winstead?
    Mr. Winstead. Mr. Chairman, to that question, I think 
there--and to Michael's point--I think that a lot of these 
assets could be identified, and there are some--for example, 
obviously, the Denver Federal Center is one where you have a 
new transit service with surplus Federal property--it would 
kick-start, by being able to look at a development profile that 
a private developer might take through a master planning 
process.
    The incremental building or piece of ground owned by the 
Federal Government can have huge increase in value, as a result 
of a master plan approach. So I--and there is no question that 
this market, over the last 3 years, has seen an enormous 
increase in hunger by the real estate community, nationwide. I 
mean 2009 was a devastating year. There has been very little, 
until recently, financing and speculative real estate 
development.
    So I think the work of this commission would get a lot of 
focus. The government would get enormous input, in terms of 
ideas, about that asset, both in terms of the commission's view 
of it, through the commission members, as well as private 
sector involvement, in terms of the conclusion.
    So, I am very optimistic that this will really generate 
properties that are no longer needed and increase value 
enormously, even above fair market value.
    Mr. Denham. Thank you. And we want to make sure that, as we 
move forward, we are expediting the process as much as 
possible, and not seeing any roadblocks.
    And, Mr. Winstead, as you know, the Old Post Office 
building, which we have talked about a great deal in this 
committee--in fact, it was the first hearing that we had--I 
mean, that property sat underused for decades. And even after 
the passage of legislation 3 years ago by Ranking Member 
Norton, GSA only recently issued an RFP to redevelop the site.
    From your experience at GSA, how can we make sure that we 
are going to have the ability to effectively--that GSA is going 
to have the ability to effectively implement the 
recommendations of the commission, and not just go through more 
roadblocks and hold-ups?
    Mr. Winstead. Well, I think--my comment earlier about the 
need, with recommendations from the commission, to have private 
sector involvement, that delivery mechanism is key. I know 
GSA--both at NCR has disposal team at every region. They have 
four zones around the country of people that--all they do is 
focus on disposal. But they don't have the resources. They 
don't have the market intelligence to do this in an expeditious 
manner, to really capture market value that might be at hand in 
1 year versus a year later, when there could be another 
recession.
    So, I really think that the private sector resources are 
key to this. And, you know, GSA has been--over the years, is 
increasingly privatized. It used to be that we had realty 
specialists at every level. Now the agency has outsourced the 
brokerage function. So that would definitely be needed. The 
existing management of GSA and disposal would need to be 
augmented by private sector support.
    Mr. Denham. Well, and certainly we want private sector 
support, we want their involvement, want them to help us 
identify. My concern is with government itself. I mean here you 
have had an agency that has sat on a property for decades. You 
had Ranking Member Norton, that got to the point where she had 
to pass legislation to get them to actually move on it.
    How do we make sure that, you know, we get all of the 
information in the world, we are ready to go, the commission 
gives a recommendation, we have an up or down vote in Congress, 
we vote on it, how do we make sure that it absolutely gets 
moved quickly, and that we don't just end up with more red tape 
in the future?
    Mr. Winstead. Well, I think this committee certainly has 
strong oversight responsibilities to ensure that, you know, 
they are accountable in taking the recommendations and moving 
out with them quickly.
    Obviously, what we heard in the first panel was a 
commitment from the administration, the President, OMB, to 
support that. So I think it is benchmarking. I know that when I 
was there we shortened the disposal process by 100 days. Now 
you might say that 100 days is a long time, but we did improve 
it, and we staffed it up to do it quicker.
    With this kind of input from a commission, you will even 
need more support, I believe. The OPO had distinct issues 
around it. There were current tenancies. The historic advisory 
council and historic preservation loved the building. There 
were issues about current tenancy and other issues that kept it 
from moving as quickly as I would have liked, and others.
    Mr. Denham. The chair now recognizes Ranking Member Norton.
    Ms. Norton. Thank you very much, Mr. Chairman. I have been 
looking at both of these bills. And at the moment, I am closer 
to the chairman's bill, because I have been measuring the bills 
by how BRAC-like the bill is.
    Now, Mr. Principi knows this well. Let me indicate the 
BRACness notion. DOD has a really clean process. DOD, BRAC, 
President. That is pretty clear, without a whole lot of 
bureaucratic back-and-forth, shall we call it.
    Now, the chairman tries to bridge the gap by putting OMB 
and putting GSA in the process, because he recognizes the 
historic problems OMB has had with real estate matters being 
not a real estate agency, having little expertise of the kind 
that is necessary. He puts the OMB and the GSA together to 
compile the matter, the information. It goes to the board and 
then to the President.
    Now, the administration puts the OMB right in the middle of 
it. The board, those are the people with the expertise. Then it 
goes to the OMB. Those are the people who have shown 
historically they have almost no expertise. And then, of 
course, it comes to Congress.
    Now, I have got to ask you your view--particularly you, Mr. 
Principi--of these proposals and how we should view them.
    Mr. Principi. Well, I agree with you----
    Ms. Norton. Particularly with the involvement of OMB.
    Mr. Principi. Yes----
    Ms. Norton. After the board has committed its expertise to 
this process.
    Mr. Principi. Ranking Member Norton, I certainly agree with 
you about the BRAC process. It is straightforward, it is clean, 
it is to the point. There are strict timelines, and everyone's 
feet is held to the fire. And at the end of the day you don't 
have a postal annex type problem. It is going to be done by the 
end of that 5-year period. And I think perhaps the 
administration's proposal does involve OMB and others in this 
process that I think is going to delay it.
    I was impressed with the controller's testimony, Mr. 
Werfel's testimony this morning. The commitment of this 
administration to get this done is very, very impressive. And I 
think it is what is going to be needed to keep the agency's 
feet to the fire. But the less that you can have, an 
outsider's--you know, agency's coming into play here and 
stalling the process, I think you will be better off. That is 
why----
    Ms. Norton. Mr. Principi, because we have got to ask 
ourselves, what is the value added? You know, if there is going 
to be somebody else in the process, you've got to be able to 
say, ``Here is the value added, this is why you want that other 
agency in it.''
    Mr. Principi. Yes. Well, what I am concerned about is that, 
at the end of the 6-year period, if an agency says, you know, 
``We can't dispose of this property,'' for whatever reason, 
they report to OMB, but there is no concrete steps after that 
as to what happens. And that is where I think you are going to 
get into the same situation as you had with the postal annex.
    That is why I suggested the Resolution Trust Corporation 
model. I don't know if that's the perfect model, but it seems 
to me somebody has to be held accountable with the internal 
expertise, the dedicated consultants, and real estate matters 
in management that can get this property off of the Federal 
books and into the private sector.
    Ms. Norton. Well, again, the chairman does try to breach 
this understanding that the administration has of proposals, so 
I comment him on that.
    I am very interested, Mr. Glosserman, in your testimony, 
because, you see, I see this as an innovation-laden possibility 
for the government, which does so little in the way of 
innovations in anything it does. And, of course, real estate 
market provides numerous opportunities for deals and 
innovations. And you say, in your testimony, that there is a 
possibility of extracting value from what the government owns, 
and using that value to build new, energy-efficient buildings. 
Could you describe briefly what you think the mechanics of such 
a deal would be, how it would operate?
    Mr. Glosserman. Certainly. There is, in the Washington 
metropolitan area alone--and I suspect this is the case in 
other urban areas--there is a significant amount of density 
related to the sites that government buildings and assets 
currently occupy.
    That density is not going to be generally used, if nothing 
happens with the use of the asset, with the office building. So 
you have a variety of circumstances in which there may be an 
aged building on that land.
    So, one example would be a circumstance where the 
government would literally lease--in other words, monetize--the 
value of a very significant portion of that density. I will 
just give you an example.
    For instance, if you had a site that had, literally, 
500,000 or 1 million square feet of density, and that site were 
being occupied today by a 200,000 square-foot building that was 
old, or maybe the building didn't occupy 100 percent of the 
site, if there were a process in which the government could 
leverage that density, and monetize that density in return for 
creating funding--in which you demolish the building, build it 
on a different part of the site, move the use--there are a 
variety of ways to, if you will, free that density up, or 
simply move it to another site and to sell it into the private 
sector. I think Mr. Winstead was alluding to that kind of 
process.
    But those situations exist in numerous--I can give you 
probably numerous examples--just in Washington.
    Ms. Norton. Mr. Winstead?
    Mr. Winstead. Ms. Norton, again I think we have a model 
here. Mr. Principi talked about the RTC, but I do differ with 
this a little bit, because the RTC was in a savings and loan 
crisis with a huge amount of action, huge assets that needed to 
be moved very, very quickly. And, in reality, the Federal 
Government got a small percentage of value in those assets. 
There were huge fortunes made, as a result of the purchase in--
under a constrained time period of RTC assets.
    I think, as you all evaluate this bill and continue to 
deliberate, I think one of the things that you well know--
because I know you were chairing the committee when this came 
about--is that we really do have a precedent. I mean the 
brokerage community--across this country with four national 
contracts, when they have a space need they go through an 
allocation of an even and competitive commissions to try to 
find those solutions.
    That is what I think is needed here, as well. I think once 
the commission makes a recommendation, there is a way to deal 
with these assets in a very similar manner as they had with the 
brokerage contract and currently underway. I mean there is 
plenty of aggression, there is plenty of effort to get out in 
the community and find users and create higher value for the 
Federal Government through the broker contract.
    And they need a little bit different skills. I mean scoping 
of assets is talking, like Mike, about what are the other 
attendant values that are created in redevelopment. So it is 
not just a broker function. But I think that privatization 
approach to the recommendations, and ensuring it is done over a 
short period of time, it is very important.
    One last comment, and it has to do with the time period. I 
mean one bill has 6 and one has 12 years. And the controller 
talked between 6 and 12. I do think it is important, for the 
reason of the RTC experience, to give GSA, together with, you 
know, whoever supports them in this effort, to give them time 
to maximize those assets.
    I know right now, for example, WMATA has a very competent 
director of real estate, and he is holding back, because he 
knows that a lot of the WMATA assets are not of the value they 
should be, or could be, in 2 years. Now--and that is the same 
kind of judgment that the team that would be administering 
these recommendations needs to take.
    And yet I think there are huge opportunities and huge 
returns. And, as you know, GSA now--post the ARRA funding--is 
now very much in need of money to maintain existing buildings, 
and to service expanding needs. So I think it does have a 
revenue benefit.
    Mr. Denham. Thank you, Mr. Winstead. At this time the 
committee will have one more final round of questioning. The 
chair now recognizes Ranking Member Norton.
    Ms. Norton. Thank you, Mr. Chairman. I just have one more 
question. It really would be for all three of you, and it comes 
off of comments made with respect to the last question. For 
example, you, Mr. Winstead, mourned about the small value that 
the government reaped after the redevelopment--the RTC, as a 
result of the RTC.
    Now, I am trying to take the amount of money--I think the 
administration's goal is to sell $10 billion to $12 billion. I 
want to know whether you think--the three of you think--that is 
a realistic number. I think they think you can get that out of 
the first round.
    And I would be particularly interested in how a private 
sector, which had such assets--obviously, not as large--to 
liquidate, high-value assets, would go about doing so, 
particularly if it felt there was a time certain of some kind 
involved. How would that private sector, which has a bottom 
line, protect its interests in a situation like that? Or would 
the private sector simply never encase itself in a timeframe 
with respect to valuable assets?
    Mr. Glosserman. If I understand the question, as I 
indicated previously, if there is an uncertain timeframe that 
the private sector is forced to deal with, obviously, that will 
make it much more difficult to proceed in an efficient manner.
    I will say, on the other hand, that having the flexibility 
on the part of the commission--I was alluding to the timeframes 
involved here--the private sector, as long as it knows that 
there is a process, though it may be lengthy, is willing, I 
think, to pursue this value that it would see in these assets.
    I think the private sector wants to know that the process, 
though, is a certain one, despite the fact that it may take an 
extensive period of time----
    Ms. Norton. Well, I am interested in what the private 
sector would do if it held assets like----
    Mr. Glosserman. It----
    Ms. Norton. If the private sector held assets, high-value 
assets, it is in a down market, and it has got to protect 
itself, but it has got to get rid of this asset. And that is 
what the commission will find itself----
    Mr. Glosserman. This portfolio is overwhelmingly large. It 
is the largest real estate portfolio that one could imagine. So 
there will be assets that the commission, I would think, would 
want to sell right away, because--mainly, it is expensive. That 
is the way we would view it in the private sector. It just is 
not worth holding an enormous percentage of these assets, given 
the cost to the government of maintaining them.
    On the other hand, there are a number of assets that we 
would view as it is not the right time, but we have a framework 
within which we can take the time to go maximize value. And 
there are the tools that we have to work with. And perhaps not 
just sales. In public-private partnerships, where we have an 
opportunity to take advantage of an upside, so that we make a 
transaction today at a certain base, but we live for the 
upside, and for the improved markets.
    There are a variety of ways to address that, which is how 
we would do it, and how I would think the government would want 
to think about this.
    Ms. Norton. Mr. Winstead or Mr. Principi, did you have any 
comments on that?
    Mr. Principi. Well, I would add that I agree that 
maximizing revenue to the Federal Government is critically 
important. And in order to avoid these fire sales of 
properties, I think the disposing agency, whether it be the 
individual agencies or GSA, should have the authority to enter 
into arrangements such as leases or sale lease-backs, until the 
ultimately implementation of the commission recommendations can 
be done. Maybe in a down market, an economic recession, it 
might not be the right time to sell a property, but enter into 
some kind of arrangement until that implementation can happen.
    Mr. Winstead. Madam Chair, I think that Mr. Glosserman 
described this issue of maximizing a private-sector asset. And 
so, GSA, together with support team, you know, would be 
obviously needing to be charged to doing the exact same thing.
    And I think the reality is that, fortunately, the market 
seems to be moving up a bit from a 2-year. So we could have a 
situation where values are increasing. So, if this commission 
gets underway quickly with the passage of this legislation and 
gets staffed up, I think it is going to hit the market at the 
right time. And, obviously, that will go to future needs of 
leasing or Federal building.
    You and I do know a lot of the issues that, in certain 
sectors, where there is surplus capacity, and we dealt with 
that during your tenure. Thank you.
    Mr. Denham. Thank you. And just a final question. Mr. 
Principi, you suggested that the Resolution Trust Corporation 
used in the 1980s and 1990s could be used as a model. Can you 
just further elaborate on that?
    Mr. Principi. Again, I think that the Resolution Trust 
Corporation model worked reasonably well. Now, I--you know, I 
won't dispute Mr. Winstead's characterization, that a lot of 
people got rich and the Federal Government did not get an 
adequate return on their dollar. I really can't address that.
    But again, I just think that there has to be some 
independent agency--entity that has the taxpayers' interests at 
heart, that can focus singly on this issue of disposition, and 
with the in-house experts, the dedicated consultants that can 
do it. And I just pointed out the RTC as a possible model that 
might work in this case.
    Mr. Denham. Thank you. In the aspect of time, I would just 
say finally that we appreciate all of your testimony today, and 
we are looking for further input as this bill moves along. We 
would ask each of you to work with our staff in continuing to 
move this bill forward and amend it in the right way so that we 
can certainly include as much--and encourage as much--private 
involvement as possible.
    I will also add that we are putting together a working 
group to encourage those in the private industry to work with 
us to develop the right principles and the best practices so 
that we can have the best taxpayers' concerns at hand.
    With that, I would ask unanimous consent that the record of 
today's hearing remain open until such time as our witnesses 
have provided answers to any questions that may be submitted to 
them in writing, and unanimous consent that the record remain 
open for 15 days for any additional comments, and information 
submitted by Members or witnesses to be included in the record 
of today's hearing.
    [No response.]
    Mr. Denham. Without objection, so ordered. I would like to 
thank our witnesses again for their testimony today. And if no 
other Members have anything to add, this subcommittee stands 
adjourned. Thank you.
    [Whereupon, at 12:33 p.m., the subcommittee was adjourned.]
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