[Senate Hearing 112-319]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-319
 
                        FEDERAL LEASED PROPERTY:

                ARE FEDERAL AGENCIES GETTING A BAD DEAL?

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


                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT

                   INFORMATION, FEDERAL SERVICES, AND

                  INTERNATIONAL SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON

               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE


                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             AUGUST 4, 2011

                               __________

         Available via the World Wide Web: http://www.fdsys.gov

                       Printed for the use of the

        Committee on Homeland Security and Governmental Affairs



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  JERRY MORAN, Kansas

                  Michael L. Alexander, Staff Director
               Nicholas A. Rossi, Minority Staff Director
                  Trina Driessnack Tyrer, Chief Clerk
            Joyce Ward, Publications Clerk and GPO Detailee
                                 ------                                

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

                  THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan                 SCOTT P. BROWN, Massachusetts
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
CLAIRE McCASKILL, Missouri           RON JOHNSON, Wisconsin
MARK BEGICH, Alaska                  ROB PORTMAN, Ohio

                    John Kilvington, Staff Director
                William Wright, Minority Staff Director
                  Deirdre G. Armstrong, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator Brown................................................     5
Prepared statements:
    Senator Carper...............................................    39
    Senator Brown................................................    41

                               WITNESSES
                        THURSDAY, AUGUST 4, 2011

David Foley, Deputy Commissioner, Public Buildings Service, U.S. 
  General Services Administration................................     7
James M. Sullivan, Director, Office of Asset Enterprise 
  Management, U.S. Office of Veterans' Affairs...................     9
Hon. David Kotz, Inspector General, U.S. Securities and Exchange 
  Commission.....................................................    11
Jeff Heslop, Chief Operating Officer, U.S. Securities and 
  Exchange Commission............................................    13
David J. Wise, Director, Physical Infrastructure Issues, U.S. 
  Government Accountability Office...............................    14

                     Alphabetical List of Witnesses

Foley, David:
    Testimony....................................................     7
    Prepared statement...........................................    43
Heslop, Jeff:
    Testimony....................................................    13
    Prepared statement...........................................    79
Kotz, Hon. David:
    Testimony....................................................    11
    Prepared statement...........................................    55
Sullivan, James M.:
    Testimony....................................................     9
    Prepared statement...........................................    50
Wise, David J.:
    Testimony....................................................    14
    Prepared statement...........................................    87

                                APPENDIX

Appendix 1 referenced by Mr. Wise................................    97

  FEDERAL LEASED PROPERTY: ARE FEDERAL AGENCIES GETTING A BAD DEAL?

                              ----------                              


                        THURSDAY, AUGUST 4, 2011

                                 U.S. Senate,      
        Subcommittee on Federal Financial Management,      
              Government Information, Federal Services,    
                              and International Security,  
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:30 p.m., in 
room 342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Subcommittee, presiding.
    Present: Senators Carper and Brown

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Good afternoon everyone. On behalf of 
Senator Brown and myself, welcome to today's hearing. I was 
just saying to Senator Brown that we may be the only hearing in 
the Senate today. I do not know, but the others are dropping 
like flies.
    But if you see the two of us, you know we are serious about 
saving some money and we are for our country. We are glad that 
our witnesses can be here today and our guests as well. Today 
we are going to examine the challenges that our Federal 
Government faces managing its real property and in particular, 
its reliance on spaces leased from the private sector to 
satisfy long-term real estate needs.
    I just addressed a group over in the House side a little 
while ago, Scott, and they come from the accounting industry, 
auditing industry, and actually do a whole lot of work as a 
firm to support the Government Accountability Office's (GAO's) 
efforts with respect high-risk list, high risk for using a lot 
of money, taxpayer money. But we have had a number of hearings 
here in the past about real estate, high risk, and we have 
literally thousands of pieces of property sitting around us. 
There are a thousand pieces of property that the Federal 
Government owns and we pay utilities for, maintenance for, 
security for that we are going to get rid of. We do not use 
them.
    And we also find out that there is something else that we 
are spending a lot of money for and that is--GAO has been 
riding us for a couple of years, and that is we have a lot of 
agencies that lease space for years, in some cases for decades, 
and we save a lot of money. They save a lot of money if instead 
of leasing we actually buy this stuff.
    And there are still a lot of instances where it actually 
makes a lot of sense to lease, like the Department of Census 
Office. Every 10 years you do a census. It does not make sense 
to buy all those pieces of property they are going to use once 
every 10 years.
    But that is a little bit of background here. There is a 
general consensus that our Federal Government has to get smart 
about the ways we manage our buildings and land. Presidents in 
both parties now have made doing so a top management priority 
and with concerns over the implication of our deficit and 
national debt mounting, eliminating waste, achieving cost 
savings in this area remains a top priority for us and I hope 
for the rest of our colleagues in the House and the Senate and 
the Administration.
    Between 2001 and 2009, we ran up as much debt as we did in 
the first 208 years of our Nation's history. Last year we ran 
up what may be the largest budget deficit in our Nation's 
history. Most of us here in Washington are united in our desire 
to find a solution to our Nation's fiscal problems. We are 
still facing an ocean of red ink as far as the eye can see, 
even after enactment earlier this week of the spending cuts 
included in the legislation to raise our country's debt 
ceiling.
    A wide variety of ideas have been put forward on how to 
reduce our budget deficit and begin whittling down our debt. 
Last fall, the majority of the bipartisan deficit commission 
appointed by President Obama, co-chaired by Alan Simpson, 
former Republican Senator from Wyoming, and by Erskine Bowles, 
former chief of staff to then President Bill Clinton, they 
provided us, along with their colleagues on the Deficit 
Commission, a roadmap to reduce cumulative Federal deficits 
over the next decade by some $4 trillion, and at the same time 
getting a reform of our title programs, tax reform. Pretty 
comprehensive, bipartisan comprehensive and would actually not 
be just a deal. It would actually have been a solution to the 
challenges that we face.
    Their work is reinforced by the Gang of Six, three 
Democrats, three Republicans, and unfortunately, in my view the 
President initially followed their lead too late, as it turned 
out, and the leaders of the House and Senate, Democrat and 
Republican, did not follow it at all and that is a sad thing, I 
think, for this country.
    As a result, we settled this week for a bill that reins in 
discretionary spending, but does little to tackle our long-term 
financial challenges. In short, it was a deal, not a solution, 
and not a very good deal as far as I am concerned. It only 
addresses the symptoms of our Nation's fiscal ailments, 
specifically the debt ceiling, but failed to cure our serious 
disease of debt and deficits. And unfortunately, we largely put 
off until tomorrow what we ought have been doing right now.
    And as Senator Brown has heard me say probably more times 
than he wants to remember now, but I said a lot, and my staff 
certainly feels that way, but I am going to keep saying it for 
as long as I am around here, a lot of Americans believe that 
those of us here in Washington are not capable of making or 
taking the difficult steps that are necessary to put our 
country back on the right fiscal track. And given what has 
happened in recent weeks, it is easy to see why they feel that 
way.
    They do not think we can do the hard work that we are hired 
to do, that is, to effectively manage the tax dollars that they 
entrust us with. They look at the spending, the tax decisions 
we have made in recent years and also the poor management 
across government and question whether the culture here is 
broken. They question whether we are capable of making the kind 
of tough decisions that American families make with their own 
budgets.
    And I do not blame folks for being skeptical, especially in 
light of the debate we have seen in recent months and the deal 
that we arrived at in recent days. Now more than ever we need 
to establish a different kind of culture here in Washington.
    When it comes to spending we need to move from what I have 
described here many times as the culture of spendthrift to a 
culture of thrift. This shift must involve looking in every 
nook and cranny of the Federal Government and asking this 
question about all kinds of programs, domestic programs, 
discretionary programs, entitlement programs, how do we get a 
better result for less money, or how do we get a better result 
for the same amount of money?
    When it comes to property management, it is clear to me and 
others that we can get better results and we can save money. 
Federal property management has been on the Government 
Accountability Office's high-risk list since January 2003, in 
part due to significant amounts of underutilized and excess 
property. This problem is coupled with the fact that Federal 
agencies depend on costly--too often depend on costly leased 
space to meet new space requirements, although building 
ownership has proven to be more cost effective over time, not 
always, but often times.
    The most recent comprehensive data available shows that 
Federal agencies apparently possess more than 45,000 
underutilized buildings, totaling more than 340 million square 
feet in space. These buildings cost nearly $1.7 billion 
annually to secure and to maintain. Fixing that problem does 
not balance the budget, but it is a great step in the right 
direction.
    But in addition to the past 20 years, GAO has been telling 
us that we have been too reliant on leasing. Since 2008, the 
General Services Administration (GSA) has leased more property 
than it owns. In fiscal years (FY) 2011, the agency will spend 
over $5 billion to house Federal employees in 184 million 
square feet of private office space. In addition, while GSA 
serves as the central leasing agent for the Federal Government 
and is responsible for managing and obtaining space for 
agencies, many agencies have obtained their own leasing 
authority and in doing so, have chosen not to take advantage of 
GSA's expertise in Federal real estate.
    Given that many of these agencies lack experience in 
performing lease procurements, they often bind the government 
into costly, long-term lease obligations that result in 
millions of dollars in additional cost to the Federal 
Government, actually tens of millions and maybe even hundreds 
of millions of extra dollars in cost.
    For example, the U.S. Securities and Exchange Commission 
(SEC) is--we know this one all too well--but is an agency that 
has been granted independent leasing authority, along with some 
other agencies. In July 2010, the Commission entered into a 
sole source lease for 900,000 square feet of space at a 
privately owned building called Constitution Center in 
Washington. That lease would have cost taxpayers some $556 
million over 10 years.
    Although the SEC has held independent leasing authority for 
more than 20 years, the Commission's inspector general has 
found that the agency still lacks adequate policies and 
procedures for managing its leasing actions. The fact, this was 
the second time within the past 5 years in which the SEC was 
involved in an unnecessarily expensive leasing arrangement.
    Unfortunately, this is not the only agency that operates 
this way. Similarly, in 2006, the Federal Bureau of 
Investigation (FBI) executed a 30-year operating lease to house 
employees in its Chicago field office that cost an estimated 
$40 million more than construction over a 30-year period.
    Fortunately, both Congress and the Obama Administration are 
united in their commitment to address these issues. The 
President's latest budget included a recommendation to form a 
Civilian Property Realignment Board (CPRA) to review the 
government's property portfolio and dispose of those deemed 
excess in an expedited manner.
    I think, if I am not mistaken, Senator Brown may have 
actually introduced legislation to codify that proposal. This 
is a proposal that my colleagues and I on the Homeland Security 
and Government Affairs Committee (HSGAC) had an opportunity to 
examine on our June 9th real property hearing. And while the 
proposal, folks, is primarily on assisting agencies in the 
disposal of excess and underutilized buildings, it does provide 
for opportunities to consolidate or co-locate operations, which 
could ultimately help to reduce the government's leasing 
portfolio.
    I have concerns about the cost and effectiveness of the 
President's approach, but I look forward to taking what works 
in his proposal and Senator Brown's legislation, along with 
other ideas, and introducing a bill in the fall that will help 
right-size the government's portfolio in a way that is 
advantageous for Federal agencies, for community stakeholders 
and the clientele served by those agencies.
    Clearly, the momentum is building to address a widely 
recognized problem, yet in all of our zeal to save, we must be 
intelligent in our approach. Rome, I am told, was not built in 
a day. The Federal Government's bloated property portfolio 
cannot be un-built in a day. We have an opportunity though to 
do this right and change the way the Federal Government manages 
its hundreds of billions of dollars worth of assets.
    That said, the agency should not be waiting for a civilian 
Base Realignment and Closure (BRAC) to solve their problems, or 
at least begin to solve their property management problems now. 
In an era of shrinking budgets and scare resources, it is 
critical that agencies come up with an innovative property 
management tool that will identify opportunities to right-size 
our real estate portfolio to reduce costs and achieve savings 
by eliminating unneeded assets and expensive long-term space.
    Before I turn it over to Senator Brown, let me just say, 
every now and then, and I am sure Scott has noticed this as 
well, we misalign incentives. We misalign incentives in the 
Federal Government. We incentivize the wrong kind of behavior 
and then we get the wrong kind of results. And what we do 
within the Federal Government, we incentivize a lot of Federal 
agencies to lease. The incentives are to lease.
    With the way that we call, if you ever really want to buy a 
building or something like that upfront, even if that makes 
sense long term, we incentivize them with the way that we score 
that expenditure in the first year, as opposed to leasing, 
which could be scored for 10, 20, 30 years or even more.
    And one of the things I hope comes out of this hearing 
today are some good discussion on how we change those 
incentives, get them properly aligned so that we not only meet 
the space needs of our agencies, but we meet the fiscal 
constraints of our country.
    So I look forward to this hearing, from our witnesses--we 
both do--as you share with us your thoughts on how to transform 
our asset portfolio in a way that generates significant and 
lasting savings to the public. And with that, I am happy to 
turn it over to Senator Scott Brown of Massachusetts.

                   STATEMENT OF SENATOR BROWN

    Senator Brown. Thank you, Mr. Chairman. Thank you to our 
witnesses. I would venture to guess we are the only hearing in 
D.C. right now. It is interesting listening to you, Mr. 
Chairman, I want to thank you for holding this important 
hearing. Through a lot of our efforts, your efforts, we have 
been able to help put the spotlight on some of the programs 
that just are not doing it right.
    It is funny. Half a billion dollars for leased office 
space, it just blows my mind how we get in these situations. 
People wonder where the money is going. Well, it is very clear 
where it is going. It is going some places very poorly chosen, 
whether it is leased spaces, programs, whether it be military 
programs that are not working, are obsolete. We are just 
wasting money all over the place, and in the middle of a 
financial emergency, I find that very, very disturbing.
    That is why I was proud to put party politics aside and 
work with the President and Congressman Denham on the Civilian 
Property Realignment Act (CPRA). The bipartisan legislation 
that you referenced will bring private sector discipline to the 
management of Federal real estate. It will empower an 
independent commission to break through the longstanding 
barriers created by red tape and politics to facilitate the 
efficient disposal and realignment of unneeded Federal 
property.
    This bipartisan approach will address a problem GAO has 
designated as a high-risk area and would achieve savings of 
approximately $15 billion, and that is real money when we are 
trying to make some very real and tough decisions in the next 
couple of years.
    It is funny, time and time again, government agencies have 
proven they cannot properly manage their own real estate and 
today, as we already referenced, both of us, that half a 
billion dollars in leased space really will never be used 
efficiently or properly. And not only did they enter into this 
wasteful lease, but they--the SEC, as was referenced--but they 
did so they could spend their workdays, quite frankly, in a 
lavish building, complete with panoramic views of the city, 
limestone floors, marble walls and a landscape courtyard that 
was transformed into a one-acre private garden. I guess it is 
nice if you can get it, especially when it is at the taxpayers' 
expense.
    That being said, I came to Washington to look at the way we 
spend our dollars and to be a fiscal watchdog, Senator, to 
address our fiscal challenges so we do not have to leave young 
Americans with a tab that they just cannot afford anymore, Mr. 
Chairman.
    I am looking forward, as you are, to making those tough 
decisions. We started already. We will continue to work in that 
vein and hopefully gain the confidence of the American people 
once again. I look forward to hearing from our witnesses.
    Senator Carper. Thanks very much for that statement. Let me 
just take a moment to introduce each of our witnesses, a Hokie 
from Virginia Tech here to lead off. David Foley, appointed 
Deputy Commissioner of the Public Building Services and U.S. 
General Services Administration in 2010. He is responsible for 
the real estate acquisition operations of the agency, 
previously served as the Deputy Assistant Commissioner for 
portfolio management at GSA and worked in a number of 
leadership roles within GSA in offices in, get this, Dallas, 
Kansas City and Atlanta.
    Mr. Foley is a graduate of Missouri State University, has a 
master's in business administration from the home of the 
Hokies, Virginia Tech.
    Mr. Jim Sullivan, also known as James, is the Director of 
the Office of Asset Enterprise Management at the U.S. 
Department of Veterans' Affairs (VA). It seems like we pick on 
the VA a lot and we actually use them a lot of times as an 
example of an agency that does things well.
    Sometimes folks in these hearings, they like to conduct 
these like gotcha hearings. What we like to do is when folks 
are behaving in inappropriate ways, managing in inappropriate 
ways, we like to put a spotlight on that. When agencies are 
actually managing and behaving in more appropriate ways and 
actually serve an example, we like to put a spotlight on them 
and any number of times we have done that with the VA.
    But Mr. Sullivan assumed this new leadership role in 2009, 
after serving as a Deputy Director since 2000--I guess since 
May 2002, something like that. But you are now the Director of 
the Office of Asset Enterprise Management at VA. And Mr. 
Sullivan has over 25 years of experience in capital budgeting 
and planning and asset management. He plays a pivotal role in 
managing one of the largest portfolios of property in the 
Federal Government, including in Delaware.
    The Honorable David Kotz has served as the Inspector 
General for the U.S. Securities and Exchange Commission since 
December 2007. Prior to joining the SEC, Mr. Kotz served as the 
Inspector General for the Peace Corps and practiced Federal 
administrative law for a decade in the private sector. 
Inspector General Kotz is a graduate of the University of 
Maryland, which makes him a Terrapin, and the Cornell Law 
School.
    Jeff Heslop was named the U.S. Securities and Exchange 
Commission's first ever Chief Operating Officer (COO) in May 
2010. He is responsible for the agency's information 
technology, financial reporting and record management duties.
    Prior to joining the SEC, Mr. Heslop was managing Vice 
President at Capital One, which has just acted to acquire ING 
Direct in Wilmington, Delaware, right in my hometown. And 
there, at Capital One, Mr. Heslop was responsible for the 
company's information and risk management operations.
    He received his bachelor of arts degree from Davidson 
College. When did you graduate?
    Mr. Heslop. Seventy-six.
    Senator Carper. Seventy-six. John Spratt, Congressman John 
Spratt, who is one of your bachelorettes as well. Do you know 
who the president is there, now?
    Mr. Heslop. Carol Quillen.
    Senator Carper. She is from Delaware. Delaware. Yes, she 
just became your president the 1st of this month, and I think 
the first woman in the history of the college.
    You have your master's in business administration from 
College of William and Mary, where our youngest son has started 
his senior year this fall. Great school.
    David Wise is Director for Fiscal Infrastructure Issues at 
the U.S. Government Accountability Office, affectionately known 
as GAO. He specializes in transportation and communication and 
Federal real property issues.
    His career at GAO dates back to 1981. Mr. Wise has a 
bachelor of arts in political science from the University of 
Pittsburgh and a master's in public administration's degree 
from Pitts Graduate School of Public and International Affairs. 
And now that the National Football Leagure (NFL) strike has 
been averted, or lockout has been averted, I was going to ask 
my first question of you.
    What NFL football team will you be rooting for this fall 
with that kind of bio?
    Mr. Wise. Patriots.
    Senator Carper. All right. Welcome one and all. Your entire 
statement will be made part of the record. If you like to 
summarize, that would be great. We are asking you keep remarks 
to roughly 5 minutes. If you go a little beyond that, that is 
OK. If you go way beyond that, that is not OK. Just go ahead 
and once you all are finished, Senator Brown and I will take 
turns just asking questions of you.
    Mr. Foley, please proceed. Thank you all for coming.

   STATEMENT OF DAVID FOLEY,\1\ DEPUTY COMMISSIONER, PUBLIC 
    BUILDINGS SERVICE, U.S. GENERAL SERVICES ADMINISTRATION

    Mr. Foley. Thank you. Good afternoon, Chairman Carper, 
Ranking Member Brown. I appreciate being invited here today to 
discuss GSA's efforts to reduce our reliance on leased space, 
our approach to lease acquisition, and how we manage 
delegations of authority.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Foley appears in the appendix on 
page 43.
---------------------------------------------------------------------------
    GSA searches for the most cost-effective ways to provide 
space for Federal agencies to help them achieve their missions. 
Our first priority is to use existing government-owned space 
and then lease space already under contract to the government. 
When existing space is not available, GSA determines the best 
method to acquire new space, whether through leasing or new 
construction.
    We consider the size, duration, cost and complexity of the 
requirement. For most long-term needs, especially those with 
unique requirements, like courthouses or land ports of entry, 
it is more cost-effective for the government to build and own 
these facilities. For small short-term general office 
requirements, leasing from the private sector is typically more 
economical.
    GSA currently manages an inventory of over 370 million 
square feet of space, of which roughly 191 million is leased 
from the private sector. Approximately 80 percent of our 9,000-
plus leases are for the smaller short-term needs that are less 
than 20,000 square feet. Our lease acquisition process entails 
carefully sequenced steps to ensure adequate competition and a 
fair rental rate for taxpayers, which are outlined in my 
written statement.
    GSA has multiple internal controls in place for our largest 
leases with annual rental payments that exceed $2.8 million. 
These leases require additional reviews within the GSA and the 
Office of Management and Budget (OMB), along with prospectus 
approval by GSA's congressional authorizing committees. This 
process ensures any growth and cost from staffing or space 
increases are supported in the President's budget and are 
transparent to Congress and the public.
    Since real property was identified as a high-risk area by 
GAO in 2003, GSA has worked closely with Federal agencies to 
maximize the utilization of leased space. At the end of fiscal 
year 2010, the vacancy rate in GSA's leased inventory was less 
than 1 percent.
    GSA and the Administration have also made it a priority to 
reduce the cost of leasing by minimizing the need for build-to-
suit projects, adjusting requirements to maximize competition 
for existing space, purchasing leased assets to create Federal 
ownership, and converting costly lease proposals into Federal 
building renovations or new construction projects.
    For instance, in 2010, GSA exercised a purchase option for 
Columbia Plaza, a long-term lease here in Washington, DC. The 
fiscal year 2010 budget also provided funding for the FBI field 
office in Miami. This project had previously been authorized as 
a lease proposal.
    In fiscal year 2012, GSA's budget request contained funding 
that would retrofit the Phillip Burton Federal Building in San 
Francisco, California. This would satisfy an FBI requirement 
and avoid a costly lease proposal, saving taxpayers almost $100 
million over the next 30 years. Congressional cuts to the 
President's budget threaten this progress. In fiscal year 2011 
alone, several key projects in the President's budget were not 
funded, including the next phase of the Department of Homeland 
Security (DHS) consolidation at St. Elizabeth's and a purchase 
option for an Internal Revenue Service (IRS) lease in 
Martinsburg, West Virginia. Failing to move forward with these 
projects will result in the government's continued leasing of 
space, costing taxpayers millions more in the long run.
    Additional cuts in fiscal year 2012 would only make the 
situation worse. GSA has been aggressive with another 
opportunity for savings by improving the efficiency of the 
Federal inventory to facilitate consolidation of leases into 
government-owned space. Our GSA headquarters is a good example. 
By renovating the building and opening up the floor plan, we 
can increase the number of occupants from approximately 2,500 
to 6,000 people. This will allow us to eliminate multiple 
leases, saving taxpayers millions of dollars annually.
    GSA, as you mentioned, is not the only agency that leases 
on behalf of the Federal Government. More than 25 agencies and 
commissions, like the VA and SEC, have their own statutory 
authority to hold land and acquire leasehold interest. GSA is 
not usually involved in these transactions.
    Some agencies also lease space under a delegation of 
authority from GSA. Agencies using this delegation must abide 
by the same laws and controls that govern GSA and certify that 
they have a properly warranted lease contracting officer to 
conduct the procurement and execute the lease. We are involved 
in these transactions to provide the appropriate levels of 
oversight.
    In conclusion, GSA strives to maximize space utilization 
and minimize the cost associated with leasing. We are 
continually looking for ways to streamline, standardize and 
simplify our leasing process with the appropriate controls to 
maximize competition and find the optimal solution for 
taxpayers, while helping agencies achieve their missions 
effectively.
    Thank you for inviting me to appear before you today. I 
appreciate the opportunity to discuss GSA's leasing practices 
and expertise and I welcome your questions.
    Senator Carper. Thanks so much for your testimony. Mr. 
Sullivan, please proceed. Thank you.

 STATEMENT OF JAMES M. SULLIVAN,\1\ DIRECTOR, OFFICE OF ASSET 
    ENTERPRISE MANAGEMENT, U.S. OFFICE OF VETERANS' AFFAIRS

    Mr. Sullivan. Thank you, Chairman Carper and Ranking Member 
Brown. Thank you for the opportunity to appear today to discuss 
the Department of Veterans' Affairs' management of its capital 
asset portfolio, and more specifically its leased property 
portfolio.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Sullivan appears in the appendix 
on page 50.
---------------------------------------------------------------------------
    At the outset, let me say, VA evaluates all of its capital 
decisions, including leasing, based on three following critical 
principles. First, does it directly benefit veterans and their 
families? Second, does it improve the operations of the VA? And 
third and last, does it allow us to be a good member of the 
local community?
    VA is the operator of one of the largest healthcare real 
estate portfolios in the country. VA also maintains facilities 
for the Veterans Benefits Administration (VBA), and the 
National Cemetery Administration (NCA) as well. Leasing has 
been and continues to be an essential part of VA's capital 
portfolio management practice.
    VA is authorized to acquire facilities, including leased 
facilities, for medical and non-medical purposes, which include 
hospitals, community based clinics, cemeteries, medical 
research space, and other medical related functions. VA enters 
into leases to meet veteran needs across the Nation. One of 
VA's primary goals is to provide services to veterans and their 
families where they live, not where old hospitals are, but 
where veterans need the care.
    In many cases, leasing provides more flexibility in lieu of 
construction to meet demographic shifts, changing service 
demands, technology improvements in terms of medical care and 
benefit care delivery to our Nation's veterans. The need for 
space is supported by VA's mission as identified through the 
Strategic Capital Investment Planning (SCIP) process at VA.
    Through SCIP, VA systematically evaluates all proposed 
capital investments based on how well they address identified 
performance gaps. These gaps identify infrastructure or 
services needed to enhance or to meet needs of current and more 
importantly, future veterans. Only investments that have scored 
well against these performance gaps are presented to Congress 
for funding and authorization.
    VA considers the size and mission criticality when deciding 
between building and leasing. New construction of large 
inpatient and specialty care facilities that we will be in for 
many years, in most cases will be the most cost-effective 
solution to our need. Smaller facilities, such as outpatient or 
ambulatory care centers, can generally be acquired for more 
efficiently using leasing, as they provide more flexibility to 
meet changing demands in technology.
    VA does follow GSA regulation and complies with all 
competition and contracting act requirements and the Federal 
Acquisition Regulation (FAR) in conducting its lease 
procurements. VA's real property service has years of 
experience in managing the department's robust leasing program, 
employing skilled workers comprised of highly trained realty 
specialists and certified contracting officers.
    Oversight of VA's leasing program is provided internally 
through an extensive series of checks and balances in VA. 
Externally, all leases in excess of $1 million require 
congressional notification and more importantly, authorization. 
Congress also is notified of any significant change in the cost 
or scope of any authorized lease, or for that matter, 
authorized construction projects.
    In addition, VA has been granted by Congress enhanced-use 
leasing (EUL) authority. This tool provides VA with an 
innovative process to partner with public and private sector 
entities for up to 75 years. In return, VA receives negotiated 
monetary or in-kind consideration. The leased property is then 
developed, used and maintained for uses that support VA's 
mission.
    Enhanced-use leases allow VA to reuse properties to meet 
mission-related needs such as veterans' homeless housing. EUL 
program results have included significant cost savings and 
substantial private investment in the department's capital 
infrastructure. In the last 6 years, VA has received in 
consideration more than $216 million from this program.
    VA's authority to enter into this program will expire on 
December 31 of this year. Without reinstatement, VA will lose a 
well-needed tool to help us manage our property more 
effectively.
    Mr. Chairman, the department understands the importance of 
a balanced real estate portfolio to address its needs. VA has a 
rigorous capital planning process that takes into account 
current and future needs of America's veterans. VA strives to 
maintain the optimal mix of investments, both owned and leased 
assets, to achieve its strategic goals and to assure the 
highest level of performance of our assets.
    I thank you and the Subcommittee for the opportunity to be 
here today and will be happy to answer any questions. Thank 
you.
    Senator Carper. The pleasure is ours. Thanks so much. Mr. 
Kotz, please proceed.

   STATEMENT OF HON. DAVID KOTZ,\1\ INSPECTOR GENERAL, U.S. 
               SECURITIES AND EXCHANGE COMMISSION

    Mr. Kotz. Thank you for the opportunity to testify before 
this Subcommittee. I appreciate the interest of the Chairman, 
the Ranking Member, the SEC, and the Office of Inspector 
General (OIG).
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Kotz appears in the appendix on 
page 55.
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    On November 16, 2010, we opened an investigation as a 
result of receiving numerous written complaints concerning the 
SEC's decisions and actions relating to the leasing of space at 
the Constitution Center office building in Washington, DC. As 
part of our investigative efforts, we analyzed thousands of 
pages of documents and interviewed 29 witnesses with knowledge 
of facts or circumstances surrounding the SEC's leasing of the 
space.
    We also searched over 1.5 million e-mails from various time 
periods pertinent to the investigation. On May 16, 2011, we 
issued a comprehensive report of our investigation containing 
over 90 pages of analysis and 150 exhibits. Our investigation 
concluded that based upon estimates of increased funding and 
staffing, primarily to meet the requirements of the Dodd-Frank 
Act, between June and July 2010, the SEC's Office of 
Administrative Services (OAS), conducted a deeply flawed and 
unsound analysis to justify the need for the SEC to lease 
900,000 square feet of space at the Constitution Center 
facility.
    We found that OAS grossly overestimated the amount of space 
needed for the SEC's expansion by more than 300 percent and 
used these groundless and unsupportable figures to justify the 
SEC committing to an expenditure of over $557 million over 10 
years. We found that OAS used a standard of 400 square feet per 
person to calculate how much space would be needed for the 
additional positions it believed it was gaining.
    This standard was an all-inclusive number that included 
common space and amenities and an additional 10 percent for 
contractors, 10 percent for interns and temporary staff, and 5 
percent of future growth. We found that the 400 square feet per 
person standard was described as a back-of-an-envelope 
calculation. Moreover, notwithstanding this all-inclusive 
number, when OAS later did its calculations to justify the 
lease, it added even more unnecessary space by double counting 
for contractors, interns and temporary staff.
    We also found that each one of these estimates was widely 
inflated and unsupported by the data being used by OAS. After 
the SEC committed itself to the 10-year lease term at a cost of 
over $556 million, it entered into a justification and approval 
for other than full and open competition, a document required 
by the Federal Acquisition Regulation.
    The FAR permits other than full and open competition when 
the agency's need is of such an unusual and compelling urgency 
that the agency would be seriously injured unless the agency is 
permitted to limit the number of sources from which it solicits 
bids. We found the justification and approval to lease space at 
Constitution Center without competition was inadequate, not 
properly reviewed and backdated.
    The OAS official who signed the justification and approval 
as the SEC's competition advocate, acknowledged in testimony 
that the SEC would in fact not be seriously injured if it lost 
the opportunity to rent the Constitution Center space. She 
further admitted that she took no substantive steps to verify 
that the information in the justification and approval was 
accurate and that when she signed the document she was unaware 
that the funding had not been appropriated and that she did not 
have an understanding of when the projected personnel were 
expected to be hired.
    The FAR also requires that the justification and approval 
be posted publicly within 30 days after contract award. As the 
letter contract for Constitution Center was signed on July 28, 
the deadline for publication of the justification and approval 
was August 27. However, the SEC did not post the justification 
and approval until September 3, although the document was 
signed by four individuals as dated August 2.
    The investigation found that the justification and approval 
was in fact not finalized until September 2, 2010, and 
substantial revisions were being made up to that date. We found 
that three of the four signatories executed the signature page 
on August 2, 2010, before a draft even remotely close to the 
final version existed.
    We found that the SEC's competition advocate executed the 
signature page on August 31, initially backdated her signature 
to August 27. She then subsequently whited out the 7 to make it 
appear that she had signed the document on August 2. The 
actions of the signatories for justification and approval gave 
the public a false impression that the document was finalized a 
few days after the letter contract was signed.
    In light of our findings, we recommended that the SEC's 
chief operating officer conduct a thorough and comprehensive 
review and assessment of all matters currently under the 
purview of OAS. We further recommended that the chief operating 
officer determine the appropriate disciplinary actions to be 
taken.
    We specified that such disciplinary actions should include, 
at a minimum, action up and to and including dismissal against 
two senior individuals and disciplinary action against a third 
individual. Finally, we recommended that the SEC request a 
formal opinion from the comptroller general as to whether the 
commission violated the Anti-Deficiency Act by failing to 
obligate funds for the Constitution Center lease.
    Subsequent to the issuance of our report of investigation, 
we received a corrective action plan with regard to the 
substantive recommendations we made for improvements. We will 
monitor the planned activities carefully to ensure that the 
necessary improvements are made and to ensure that the 
individuals who we identified as being responsible for the 
failures and improprieties in our report are held accountable 
for their actions.
    Thank you, and I would be happy to answer any questions.
    Senator Carper. Just add a comment. I leaned over to 
Senator Brown when you were going through that litany and I 
said to him, what were they thinking about? My Lord.
    Mr. Heslop, please proceed.

  STATEMENT OF JEFF HESLOP,\1\ CHIEF OPERATING OFFICER, U.S. 
               SECURITIES AND EXCHANGE COMMISSION

    Mr. Heslop. Thank you for the opportunity to testify today 
on behalf of the Chairman of the SEC regarding the lease of 
office space at Constitution Center and the steps we are taking 
going forward.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Heslop appears in the appendix on 
page 79.
---------------------------------------------------------------------------
    The report by the Commission's Office of Inspector General 
concerning Constitution Center identified a number of 
significant flaws in the SEC's leasing process. We are 
extremely disappointed by the failures that have been 
identified and regret that they have taken us all away from our 
primary mission of protecting investors, facilitating capital 
formation, and ensuring stability in the financial markets.
    The fact that the SEC has not paid any rent to date for 
this property and that the bulk of the space has been leased to 
other tenants does not adequately address a situation that 
should never have occurred. The only appropriate response by 
the SEC is to resolve the remaining space issues, to correct 
the deficiencies in our leasing process by working with GSA and 
OMB with respect to future space needs, and to ensure 
accountability for the events surrounding this lease.
    By way of background, in the spring of 2010, the SEC 
correctly anticipated that it would receive significant new 
responsibilities under the Dodd-Frank Act for derivatives, 
hedge fund advisors, credit rating agencies and much more. This 
was, of course, on top of our longstanding core 
responsibilities. As a result, we believed--and continue to 
believe--that the SEC needed additional staff to fulfill its 
mission and help further restore investor confidence in our 
markets.
    At the time the agency was considering the leasing 
decisions, Chairman Schapiro indicated her preference for 
hiring new staff in the regions rather than in the 
headquarters, and she indicated to staff her preference that 
any new space in Washington be within walking distance of the 
Commission's Station Place building to eliminate the need for 
expensive shuttle services.
    In July 2010, the then executive director, who was 
responsible for the agency's leasing activities, informed the 
chairman that all of our leasing options no longer existed, 
that the space at Constitution Center was our only option given 
our space needs, that the pricing was advantageous, and that we 
had to move quickly as there was competition for the space.
    Given the previous discussions with the staff, the chairman 
assumed the proposal was consistent with both our budget 
projections, future employee growth, and her preference for the 
staff to be housed, where possible, in the regions. When it 
subsequently became clear that the SEC would not receive the 
funding necessary to implement its new responsibilities, we 
took immediate steps to release the space to others and to 
reduce the SEC's exposure.
    My written testimony details what we have learned from the 
flaws in our recent process and how we intend to address them. 
I would like to emphasize a few of these. First, we are 
promptly implementing the IG's recommendations and have already 
submitted, as he indicated, a written corrective action plan to 
him.
    Second, in light of the failure identified, the SEC 
recognizes the benefits of having GSA manage the Commission's 
future lease acquisitions. Leasing is not part of the 
Commission's core mission and as an agency we cannot allow it 
to impede that mission. GSA, by contrast, has long experience 
in leasing.
    In a recent meeting at GSA, Chairman Schapiro and I 
discussed with the GSA Administrator ways in which GSA could 
assist the Commission on our leasing efforts going forward. GSA 
indicated that it was open to playing a significant role in 
these efforts, and following that meeting, Commission staff has 
had further multiple discussions with the GSA staff. Earlier 
this week, the SEC and the GSA entered into a Memorandum of 
Understanding (MOU) that contemplates an immediate role for the 
GSA in managing upcoming SEC leasing activities, as well as all 
other future leasing needs as they arrive.
    Third, the OIG report recommended that the SEC initiate 
disciplinary proceedings for three individuals involved in the 
Constitution Center leasing process, and we have begun that 
process. Chairman Schapiro has expressed a desire for this 
process to move forward as quickly as the laws and regulations 
permit, consistent with fundamental fairness, to assess and 
implement remedial measures and discipline as appropriate.
    In the meantime, the individuals for whom the OIG report 
recommend a disciplinary review have been reassigned. Their 
current duties do not involve any leasing or any other 
authority that could bind the Commission, nor do they involve 
activities that relate to the expenditure of appropriated 
funds.
    As our chairman indicated, the true test of an organization 
is not whether things go wrong, but how an organization 
responds to problems and whether its leaders take such 
opportunities to make necessary improvements. We are committed 
to doing that.
    I would be happy to answer your questions.
    Senator Carper. Thanks, Mr. Heslop. Mr. Wise, you want to 
wrap it up and then we will go to Q and A's?

       STATEMENT OF DAVID J. WISE,\1\ DIRECTOR, PHYSICAL 
  INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Wise. Chairman Carper, Ranking Member Brown and Members 
of the Subcommittee, thank you for the opportunity to testify 
today on our work related to real property leasing among 
civilian Federal agencies. The Federal real property portfolio 
is vast and diverse, totaling over 900,000 buildings and 
structures worth billions.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Wise appears in the appendix on 
page 87.
---------------------------------------------------------------------------
    My testimony today will address three topics. First, the 
factors that contribute to the government's reliance on costly 
leasing; second, how the Administration's proposed Civilian 
Property Realignment Act may provide an opportunity to reduce 
reliance on leasing; and third, Federal agencies' independent 
leasing authorities and GSA delegations of those authorities.
    One of the primary reasons we designated Federal real 
property management as high risk was the Federal Government's 
overreliance on costly leased space to meet new space needs. 
Our work over the years has shown that operating leases often 
cost more than ownership, especially for long-term needs.
    Increasing ownership, when appropriate, could save millions 
of dollars over the long term. Federal agencies rely 
extensively on leasing and leased buildings. At the end of 
fiscal year 2010, for example, GSA's leased square footage 
exceeded owned footage 191 million to 179 million. GSA has 
relied heavily on operating leases to meet new long-term needs 
because it lacks funds to pursue ownership.
    The decision to lease rather than own space for Federal 
operations is often influenced by factors other than cost-
effectiveness, including budget issues and operational 
requirements. The Budget Enforcement Act of 1990 directs that 
the budget authority to meet the government's real property 
needs is to be scored, meaning, recorded in the budget in an 
amount equal to the government's total legal commitment.
    If GSA buys or constructs a building, the budget authority 
for the full cost must be recorded upfront to reflect the 
government's financial commitment. However, for operating 
leases, GSA is only required to record the government's 
commitment for an annual lease payment and any potential fees 
for canceling the lease.
    This reduces the upfront funding commitment, but generally 
costs the Federal Government more over time. We have raised the 
scorekeeping issue as a challenge that needs to be addressed in 
several reports and testimonies in the past. We believe that if 
the issue is not addressed, the reliance on leasing will likely 
persist.
    Accordingly, in 2007 and 2008, we recommended that OMB 
develop a strategy to reduce agencies' reliance on costly 
leasing where ownership could result in long-term savings. OMB 
agreed that a strategy was needed, but has not yet implemented 
one.
    Agency operational requirements are among the reasons why 
leasing is often preferred by agencies. For example, officials 
said that more than 200 GSA-owned and leased buildings were 
damaged by Hurricane Katrina, necessitating the relocation of 
2,600 Federal employees from 28 Federal agencies, many of which 
were GSA tenant agencies. To meet this emergency need, GSA 
expanded its use of leases to house agencies in temporary space 
to fulfill a short-term need.
    In May 2011, the Administration proposed CPRA, which may 
have provided an opportunity to reduce overreliance on leasing. 
While CPRA does not explicitly address this issue, one of 
CPRA's purposes, to realign civilian real property by 
consolidating, co-locating and reconfiguring space to increase 
efficiency, could help to reduce the government's reliance on 
leasing.
    CPRA also provides for the potential co-location of Federal 
civilian offices and postal properties, many of which are 
already owned. We are currently examining the potential for 
consolidating leased facilities into federally owned sites for 
this Subcommittee.
    Congress has authorized many agencies independent statutory 
leasing authority, allowing them to acquire leased space. The 
authority may be for a particular type of space or for general 
leasing authority. Agencies with such authority and their 
respective authority types are listed in Appendix 1\1\ of my 
written statement.
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    \1\ The Appendix referenced by Mr. Wise appears in the appendix on 
page 97.
---------------------------------------------------------------------------
    GSA may also delegate leasing authority to agencies. For 
example, all Federal agencies may acquire a specific type of 
space, such as antennas, depots, piers and greenhouses. 
Thirteen Federal agencies are authorized to lease their own 
special purpose space, subject to limitations. For example, the 
Commerce Department has delegated authority to lease space to 
conduct the decennial census.
    In November 2007, GSA amended its delegation of leasing 
authority to increase oversight after audits found instances in 
which agencies failed to meet the conditions of their leasing 
delegation. Although GSA's goal is to cover the administrative 
cost of private sector leases with fees it charges the tenant 
agencies, it has been unable to do so in recent years, losing 
more than $100 million in fiscal year 2009, raising concerns 
about the agency's management of its leased properties. We have 
an ongoing engagement examining this issue, among others, for 
your Subcommittee.
    Mr. Chairman, this concludes my statement. I will be 
pleased to answer questions from you and other Members of the 
Subcommittee. Thank you.
    Senator Carper. Yes, thanks, Mr. Wise, and I have asked 
Senator Brown if he would like to lead off and he has agreed to 
do so.
    Senator Brown. Thank you, Mr. Chairman. So Mr. Kotz, I 
appreciate your initial opening. During the time period where 
you made the recommendations of disciplining three people, what 
in fact has been done at this point; do you know?
    Mr. Kotz. I have been told that there is a process in 
place, but I do not believe anybody has been disciplined as of 
yet or any proposal for discipline has been made.
    Senator Brown. So it has been over a year now since they 
entered into this lease arrangement, and I guess my question 
is, what does it take to get fired or disciplined at an agency 
when you enter into a lease that is basically a half a billion, 
no half--yes, billion we are talking about, a billion dollars?
    And I guess I should ask you, Mr. Heslop, what does it take 
to get disciplined and fired at your agency when something like 
this happens?
    Mr. Heslop. Sir, the disciplinary process, essentially our 
IG's report was issued I believe on May 17 of this year and 
since that time, we have followed Mr. Kotz's guidance. We have 
reviewed that report. Our general counsel has analyzed it in 
great detail.
    We have conducted supplementary investigations and 
supplementary interviews. There was a slight hold when we--
basically when Mr. Kotz referred to the Department of Justice 
(DOJ) the individuals mentioned in the report. As a matter of 
practice, we do not complete investigations or interview the 
individuals named until the Department of Justice comes back to 
us and gives us their OK that we can, so that it does not 
interfere with their investigation. We received that OK. The 
investigation then began to proceed.
    As the investigation unfolded, it became apparent that in 
the interest of objectivity and fairness, it would be in our 
best interest to hire an external party to help us conduct that 
investigation, and we are in the process right now of employing 
that external party.
    Senator Brown. So what about fairness to the taxpayers? It 
is like fairness for the individual. What about fairness to the 
taxpayers in getting the best bang for our dollar? You were in 
that--you were with the SEC back then when this all happened, 
right?
    Mr. Heslop. I was hired in the SEC on May 17, 2010.
    Senator Brown. OK. So you had no knowledge of any of this 
stuff?
    Mr. Heslop. No, and this was not under my purview.
    Senator Brown. Mr. Kotz, based on these types of failures, 
and we seem to hear it over and over, I mean, let's just talk 
about the SEC, for example. Do you think that Congress should 
simply revoke their independent leasing authority?
    Mr. Kotz. I think that certainly Congress should give very 
serious consideration to that. I mean, I have thought 
previously that perhaps if the SEC completely revamped its 
leasing area it might be given another opportunity. But I do 
understand now that Chairman Schapiro and Mr. Heslop have said 
that they intend to get out of the leasing business, that they 
do not feel that there is enough competence at the SEC to 
handle that.
    So I do think at this point it would be prudent to take 
away the independent leasing authority, yes.
    Senator Brown. Thank you. Mr. Wise, thank you for your 
testimony as well, your introduction. As you know, I am filing 
and have filed a bill that basically mirrors the President's 
idea on how to address these issues when it comes to leasing 
and buying and the like.
    I was wondering if you could describe how one of the CPRA's 
purposes, which is realignment of civilian real property by 
consolidating, co-locating and reconfiguring space to increase 
efficiency, do you think that could help reduce the 
government's overreliance on leasing? I think you kind of 
hinted on it in your initial opening.
    Mr. Wise. Senator Brown, thank you for your question. And 
actually, to be perfectly honest with you, the CPRA does not 
explicitly discuss leasing, but as I think we point out in our 
testimony, it certainly has a provision in it that we think 
could be very useful to help alleviate some of the reliance on 
leasing that the government has, especially with the discussion 
about consolidation, co-location and realignment of the Federal 
footprint.
    So we think, as we go forward, if CPRA does become 
codified, that there is a very good possibility that it could 
be a contributing factor toward helping to reduce the 
government's reliance on costly leases.
    Senator Brown. I remember your testimony when you said it 
takes about $1.66 billion annually to operate and basically 
keep open some of the underutilized buildings. I found that 
really fascinating. I went back to the office. We talked about 
it. As a result, we are trying to come up with ways to address 
it and get those properties out the door and get them back on 
the tax rolls and the like.
    One of my goals in my legislation is to address these. How 
do you think we could unlock these savings for the taxpayers?
    Mr. Wise. Well, I think the--as you allude to it in your 
statement, the key thing for the Federal Government is to get 
out from under costly leases that are not really very useful 
for the government. Because, as you noted, the operations and 
maintenance costs are costs that keep recurring year after year 
after year. So, as we move forward and the CPRA does become a 
law, hopefully this will lead toward the government's ability 
to get out from under leases that are not useful and be able to 
shed property that is not being utilized in various ways.
    Senator Brown. I know in Massachusetts when we were having 
some financial difficulty, a lot of the registries and motor 
vehicles were actually closed and a lot of the leases were 
canceled at the government's convenience and we were able to 
find spaces that were already owned by the Commonwealth of 
Massachusetts to put them in, whether it would be at a city 
hall or a State-owned building or work out an arrangement with 
the Federal Government. So I would hope that we could do the 
same thing. There is plenty of Federal buildings around where 
we could co-locate and combine.
    And Mr. Foley, how would the GSA leverage its expertise in 
asset management to support the CPRA process and specifically 
lease consolidation, do you think?
    Mr. Foley. Sure, Senator Brown. Thank you for the question. 
GSA is a leader in asset management for the Federal Government, 
and as I outlined, we have a strong leasing process. I think we 
are already working with client agencies as a part of helping 
them shape----
    Senator Brown. Can I just interrupt for one second?
    Mr. Foley. Sure.
    Senator Brown. So if you have such a strong leasing 
process, I do not understand how we get into these messes with 
the SEC and others. Where is the breakdown, if you could, and 
please finish your statement.
    Mr. Foley. Sure.
    Senator Brown. And then if you could say like where is the 
breakdown? Why are we even here? Why are we even having this 
hearing today? Because if you have such a great process, how 
come we are not doing it right?
    Mr. Foley. Let me finish.
    Senator Brown. Yes.
    Mr. Foley. And then I will come back and address that.
    Senator Brown. Yes.
    Mr. Foley. I think one of the key things is working with 
agencies upfront to make sure that we appropriately shape the 
requirement so that we know how many people--we ensure that we 
are getting the most utilization out of it and that we can make 
sure that we can fit it into existing Federal space wherever 
possible, or minimize the amount of space that we have to lease 
from the private sector.
    So we are working with agencies on that. I thank you for 
your support of the CPRA bill and we look forward to working 
with you on that. I think that will do several key things that 
can really help us with consolidation. One, it incentivizes 
agencies to get rid of property, and two, probably more 
critically, it provides a source of funding to deal with some 
of the upfront costs.
    And I know a lot of people think that is toward getting a 
property ready for sale, but one of the intents is also to help 
with existing Federal property, to let us retrofit those, make 
them more efficient and allow us to consolidate out of leases, 
or perhaps build or buy a new facility to consolidate and 
shrink the Federal footprint. So I think we have a real 
opportunity under the CPRA legislation and we look forward to 
working with you on that.
    As far as your question of if we have a solid process in 
place, how do we end up in these situations, as I mentioned in 
my testimony, there are multiple agencies with multiple 
different authorities. The SEC lease was done outside of GSA's 
authority under their own independent authority, and so we were 
not involved in that transaction. We are working closely with 
them moving forward and willing to lend our expertise.
    And as Mr. Heslop indicated, we signed an MOU with them 
earlier this week where we will then be doing their leasing 
action for them moving forward and following the transparent 
process that we currently use at GSA.
    Senator Brown. Great. Thank you, Mr. Chairman.
    Senator Carper. Thank you for those questions. Thanks for 
the responses as well.
    I spent a little bit of time this week talking, in light of 
the deal to avoid default on the Nation's debt, I spent a fair 
amount of time talking with my colleagues and to the American 
people and the people of Delaware through the press, about how 
we have a tendency around here to focus on addressing symptoms 
rather than addressing underlying, if you would, using a health 
analogy, underlying cause of disease.
    In a situation where the Federal Government, the symptom is 
the debt crisis, debt ceiling crisis, the cause, and that is 
the sick patient. The cause of the illness, the sickness is the 
fact that we do not spend money wisely, we do not collect, 
frankly, all the money that is owed, and so what we ended up 
doing is not addressing the underlying cause, unfortunately. 
But we addressed the symptom by raising the debt ceiling and 
leave to another day addressing the real underlying cause.
    In reading through the testimony, especially GAO's 
testimony, I came back to the question--let me just back up. 
One of the things that when we look at Federal agencies, some 
of whom do a pretty good job at disposing of surplus 
properties, unneeded properties, I think VA does an especially 
good job, but there are others as well. One of the reasons why 
some agencies do a better job than others is because we 
actually incentivize them not to keep underutilized, unused 
property around.
    We actually allow them to sell them, keep some of the 
proceeds to actually fund their operation. Here we have, 
looking now at the situation with lease versus purchase, if you 
look at the way the Congressional Budget Office (CBO), scores a 
lease versus a purchase, we incentivize agencies to lease even 
when they ought to be purchased. You only know they are going 
to save money.
    And I would ask you, Mr. Wise, I am going to ask you to 
walk us through why we have this incentive, I think a 
misincentive, disincentive? Why do we have the wrong incentive? 
How do we actually fix it? What would it take to fix it? Does 
it take CBO changing their scoring approach? Is it something 
that we need to do legislatively to empower, direct CBO to 
change the way that they score lease versus purchase? Please.
    Mr. Wise. Senator, thanks for the question. You bring up a 
really important point and we have recommended a couple 
different times and we have also discussed in other testimonies 
the really important--OMB is really a key player here because 
they are kind of the orchestrator of the whole Federal property 
environment and we have recommended that they really need to 
work within the Federal Real Property Council to come up with a 
strategy to take a look at how the entire Federal property 
portfolio is managed.
    While they have agreed that is a good idea that needs to be 
done to kind of rationalize the entire process, they have yet 
to implement such a strategy because as you mentioned in your 
opening remarks and subsequent remarks--the issue having to do 
with the scoring is a major issue for agencies to be able to 
come up with the needed capital in order to take a look at a 
rational process.
    Another really important point is the necessary analyses 
that need to be done in order to make sure that you are making 
the right kind of decision. While, as you mentioned earlier, 
generally building is a less expensive option in the long run 
than is leasing, it is not always the case. But you need to do 
the economic analyses in order to do that.
    And so it is important to do the 30-year net present value 
analysis so you see how things will play out over time, and the 
scoring, and do the comparisons so that we can make the right 
decisions. You look at the commercial real estate market. It 
maybe makes sense to lease something where the real estate 
market is say relatively soft compared to a Boston or a New 
York or a Chicago versus a Dallas or Atlanta perhaps.
    So it is a pretty complex formula that goes into making 
these kinds of decisions, but in order to come up with the 
right decision, you really need to approach it in a multi-
faceted way so that at the end of the day you are making the 
best call for the taxpayer.
    Senator Carper. Let me just ask you to cut through all 
that. I appreciate what you said. What do we need to do? What 
needs to be done so that CBO in the future will not say almost 
routinely that even when it makes economic sense to purchase, 
we are not going to score it that way, instead, we are going to 
score it in a way that almost mandates that agencies lease? How 
do we change that?
    Mr. Wise. Well, it gets into a policy area that is really 
not so much our purview, but as we have discussed, or as we 
noted, we make recommendations to OMB that they need to come up 
with a strategy in order to rationalize this process and so 
agencies can make the right kind of decision of whether to 
lease or to build. And we really believe that OMB is the key 
player that needs to address this scorekeeping issue, 
otherwise, the reliance on leasing, as we noted in our 
testimony, is likely to persist.
    Senator Carper. All right, let me turn to others on the 
panel. Same question. What I would like for you to do is give 
Senator Brown and me and others on our Subcommittee, our 
colleagues in the Senate, give us a to-do list. Put something 
on our to-do list. Is there something we ought to be doing to 
change this? It is really to change the culture. We are always 
looking for a culture. Anybody have a good idea?
    Mr. Sullivan. Mr. Chairman.
    Senator Carper. Go ahead, Mr. Sullivan.
    Mr. Sullivan. Mr. Chairman, I will maybe swim a little up 
river here. VA's position is a little bit different, I think, 
than other Federal agencies. Part of our portfolio, only about 
11 percent is leasing, so out of 165 million square feet, we 
lease about 12 million square feet. Three of it GSA does for 
it. The rest we do it ourselves.
    Our real problem is our existing infrastructure, not 
leases. What do we do to consolidate? What do we do to get rid 
of the old infrastructure that cannot be fixed easily? In some 
places we do not need it.
    Right now we have an estimate to fix our current portfolio 
based upon the needs projected for veterans in 2020. We will 
need $60 billion to invest in our infrastructure. Clearly, that 
is not going to be able to be provided for in direct 
appropriation. I think the key to unlock that problem is to be 
able to tap private sector financing in working with public/
private ventures or joint ventures or with localities or other 
non-profits to be able to find uses for the repurposing for 
Federal property, to get it off the Federal rolls, to put it 
potentially back on the tax rolls and to relieve agencies of 
the large operation and maintenance (O&M) costs.
    The biggest drag for VA is, and I imagine for some other 
agencies, is the O&M costs that we have to maintain facilities 
that could be made more efficient, and/or consolidate. So I 
think it is a little bit different and the big issue about 
third-party financing or private sector money is the other side 
of the score.
    CBO's scoring treatment of the use of third-party funds, 
even if it is for non-profits or for non-government entities, 
they scored as if it was direct Federal spending, which 
basically turns off the third-party spigot of trying to utilize 
them to unload unneeded inventory.
    Senator Carper. All right, I am going to go back to Senator 
Brown. Before I do, one of the things that I may ask this in 
our next round of questions, but I spoke earlier of a need for 
a comprehensive bipartisan approach on deficit reduction along 
the lines of that recommended by the Deficit Commission co-
chaired by Erskine Bowles and Alan Simpson.
    My sense in listening to your testimony and earlier 
hearings that we have had is that we also need a comprehensive 
approach with respect to real property management, not just to 
deal with the lease versus purchase issue, but to deal with all 
this underutilized or unutilized Federal properties that we do 
have.
    One of the things that I want to do maybe at this hearing, 
if not we will certainly do a followup in writing, is get your 
input on what should be the components of that comprehensive 
approach. And to the extent that we can craft a comprehensive 
approach where we harness market values, we change incentives 
which I think are misaligned toward more appropriate alignment. 
I would appreciate your input on that. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman. Mr. Sullivan, just 
to followup, I remember your hearing--actually, as a result of 
your testimony telling about some of the challenges with some 
of the prime VA properties that potentially could be sold and 
taken off your rolls and put you back having more money for the 
veterans that need our help, instead of using it to keep 
buildings open and the like, you testified as to how CPRA was a 
welcome addition to the toolkit that you would need in reducing 
unneeded assets.
    Could you just elaborate on that, as to how that will 
compliment your existing tools? And also, what role does 
politics, do politicians have in interfering with you doing 
your job? I mean, if you have some assets and you want to sell 
them, how often does State or local--State or Federal 
Government come up and kind of put a monkey wrench in the plan?
    Mr. Sullivan. Senator, I will try and answer that in a 
couple of different ways. The first way would be our toolkit 
right now is to use our enhanced lease authority and in those 
cases where we can develop, if you will, a win-win strategy 
with the local community, the veterans, the veteran service 
organizations and the private interest in that area we can 
forge outlease with a public/private venture under that 
authority.
    We have done that in many places and it works where we can 
reach consensus. Where we cannot reach consensus at the local 
level with all the interested parties, especially local 
communities, the CPRA process would be a welcomed addition to 
be able to deal with those hard-to-do properties around the 
country.
    So I think we should use both of these approaches where we 
have something that works and can continue to flourish and 
shrink our footprint and deal with our underutilized properties 
we want to maintain, that authority but there are some places 
that CPRA would assist us in addressing those issues.
    There are a lot of stakeholders involved in real property 
in VA. As other agency and GSA has experienced, stakeholders 
have different interests and when we cannot align those 
interests, that is when things stop. So those are constant 
challenges in dealing with them and we face it every day. And 
as we move down this track, there needs to be a way to deal 
with those interests.
    Senator Brown. So getting back to my final question, I 
think you kind of answered it without wanting to really say it, 
but what role does State or Federal politicians and politics 
affect it? Do they specifically call and/or stop your efforts 
when you are trying to do some things for the benefit of the 
VA?
    Mr. Sullivan. In some cases, yes. When we cannot get 
alignment of interests, we have local interests that may not 
have the same interests that VA has, and in cases that happens 
and things come to a grinding halt.
    Senator Brown. Very smooth. It was a good answer. Very, 
very nice. And that is unfortunate, because Chairman Carper 
just asked for recommendations. I mean, I would think one of 
the recommendations is to let--you leave the politics out of it 
and let us do our jobs based on fact and based on the necessity 
to deal with these issues without any type of outside 
influence. And I would hope if you make that recommendation you 
would include that, very frankly, so we do not really beat 
around the bush in that regard.
    Mr. Wise, generally in larger prospectus level projects 
over 2.7 million and lasting over 10 years, the net present 
value analysis indicates it is more advantageous to purchase 
rather than lease. So I was wondering in the CPRA legislation 
that I am filing, it requires a net present value analysis of 
the cost of the lease compared to the cost of constructing new 
space.
    How important is it to provide this information to 
Congress, do you think?
    Mr. Wise. I think it is very important, Senator, because 
through using analyses like net present value and scoring, you 
can then be comparing basically apples to apples, because this 
is something that GSA had done previously and it then enables 
you to--it enables the agency or enables the decisionmakers to 
be able to come up with a decision based on where the dollar 
value is today versus what it will be 30 years onwards, 
including any potential inflation returns and other factors 
that get put into the mix.
    So we believe that a net present value analysis is 
certainly a key aspect of the entire economic analysis picture 
in order to make these kinds of decisions.
    Senator Brown. Thank you. Mr. Foley, what steps does GSA 
take to ensure that the leases contracted on behalf of the 
Federal clients achieve the best value for the taxpayer while 
also supporting the mission critical requirements?
    Mr. Foley. Sure. We do a couple of things and we do perform 
a net present value analysis, so we compare the cost of 
building a new Federal facility, renovating an existing 
facility and the cost of leasing, so we do the 30-year net 
present value analysis to evaluate the financial aspects.
    Again, as I mentioned earlier, one of the key things is 
making sure that we have a firm understanding of the 
requirements and we work with the agencies to understand how 
they may be able to adjust their requirements slightly to get a 
better deal for the taxpayer. So for instance, instead of 
having to be in one building of a particular size, might drive 
construction of a new building or limit competition to one or 
two buildings that have a certain amount of space available. If 
they can be in two proximate buildings within a block of each 
other or right next door or perhaps on the same campus, that 
opens up the competition and drives down the cost of leasing.
    So there are a lot of simple things that we can do working 
with client agencies to make sure that we can still find a way 
to meet their mission requirement, but leverage our expertise 
in the real estate market to make sure we get the best value 
for the taxpayer.
    Senator Brown. In previous testimony, I note you said that 
you are continually assessing your performance against other 
rental rates in same or similar markets to a lease cost 
relative to market measure. So how is the GSA doing in 
comparison to the commercial market in various sectors?
    Mr. Foley. We continue to lease at a cost below the market. 
I believe at the end of last year it was somewhere around 10 
percent below the private sector benchmarks we were using.
    Senator Brown. And is that geographically driven? Is this 
just overall?
    Mr. Foley. Yes, we do it based upon a geographic market and 
a submarket. So we look at where we are leasing and then we 
find comparable rental rates from the private sector in that 
particular market.
    Senator Brown. I will just defer to you, Mr. Chairman.
    Senator Carper. OK, we will have a third round, so feel 
free.
    I have been jotting down some questions as you all 
testified and responded to questions from Senator Brown and 
myself. I just want to kind of walk through this list briefly 
if I could. One of the areas of jurisdiction that we also have 
is the U.S. Postal Service. We face a situation with the Postal 
Service literally running out of money, running out of cash 
later this year, if not later this year, then next year. It 
will be unable to make payroll. It will create a huge mess, 
economic mess in our country. I think about eight million jobs 
that depend on the mailing industry.
    So we are looking hard for ways to help the Postal Service 
right itself in a twitter, e-mail, Facebook age, to be able to 
meet our needs, mailing needs, but do so in a way that they 
cover their costs. There has been some discussion here today 
about consolidation, consolidating property and consolidating 
activities in ways that make sense. We do that through the Base 
Realignment and Closure Commissions and Department of Defense 
(DOD) about every half dozen years.
    Think out loud for me. Think out loud for us, about how the 
U.S. Postal Service might play a role here that would enable us 
to kill two birds with one stone. One is to meet the property 
needs of a number of Federal agencies that have nothing to do 
with the Postal Service, and yet, help the Postal Service 
with--to better meet its revenue obligations in order to free 
themselves of support from the Federal Government, Federal 
taxpayers.
    OK, whoever wants to take a first shot at that, go right 
ahead, please. Mr. Foley.
    Mr. Foley. I will start first. GSA, we worked with the 
Postal Service for a number of years. They are a tenant in many 
of our Federal buildings and we also lease space from the 
Postal Service. So we have many Federal agencies that are 
located in Postal Service Buildings.
    We have worked with them closely as they have been 
disposing of properties to identify where it makes sense for us 
to acquire those where we have existing Federal needs, as well 
as we worked with them to figure out where we are disposing of 
properties or where we have available underutilized properties 
where they might be able to utilize that.
    Several years ago, going back as far as 1985, we set up an 
MOU at the Postal Service that allowed for an exchange of 
properties and basically a netting of the fair market value of 
that. And it has been very effective, I think, for both 
agencies.
    Another area where we have been able to partner with them, 
Mr. Sullivan mentioned sort of the enhanced use leasing 
authorities. They have some authorities that we do not at GSA 
and so we have been able to lease from them and develop 
properties too specific for the IRS for service centers in 
Philadelphia and Kansas City, where we have been able to use a 
former Postal Service facility, renovate that and use their 
authority to create modern, efficient space for the IRS and 
help find a good value for the taxpayer.
    Senator Carper. Well, that is very encouraging. Anyone else 
on this? That is good stuff. Thank you. Anybody else?
    Mr. Sullivan. I am sure Senator, if the Post Office had 
sites that become available due to a downsizing and they were 
available and for us what would be key, would they be located 
in the place where we need space? That would be the critical 
point, of how close they would be to where veterans' needs are. 
And if they could be easily adapted to deliver healthcare, I am 
sure we would look at those and see if there was a match and 
take advantage of any economies that were there.
    Senator Carper. Oh, good. Thanks. I will just ask our 
staffs, both Democratic and Republican staff, to please note 
that. I think this is a scenario where we could help the Postal 
Service help themselves and if we are smart about it, could 
help the Federal agencies get better value for their space 
needs.
    Anybody else have a comment before I ask another question? 
OK. We have had some discussion, delegation of lease authority, 
some instances where it is done well and some instances, most 
certainly SEC, was not done well.
    Let me just ask Mr. Heslop, you used to work at Capital 
One, correct?
    Mr. Heslop. That is correct.
    Senator Carper. If you had employees at Capital One who 
were, I will use the term ``guilty'' for the kind of gross bad 
judgment in terms of preparing the SEC for meeting its space 
needs going forward, how would those employees be dealt with; 
what kind of accountability would have been brought to them?
    Mr. Heslop. I think in a relatively similar manner. 
Obviously, there are not the same level of rules and 
regulations that the Federal Government has as it relates to 
their employment practices, but there definitely are rules and 
procedures that apply.
    And so employees in a situation like that would be--they 
would have some availability of due process and it would not be 
an arbitrary summarial dismissal, if you will. But there would 
be an investigation and upon the conclusion of that 
investigation, appropriate disciplinary action would be taken.
    Senator Carper. I would hope at the end of the day 
appropriate disciplinary action--I think I speak for both of 
us--that appropriate disciplinary action be taken. One of the 
things that really frosts citizens of this country, taxpayers, 
and those of us who are privileged to represent them, is when 
we have bad behavior, grossly bad behavior, on the part of 
Federal employees or others who are using Federal--contractors, 
and there is just little, if any, accountability. And that is 
not right. I would just ask you keep that in mind.
    We want to be fair, but we also want--it is tough love. It 
is like a tough love situation. I think we need to be tough. We 
need to provide the example.
    At the beginning, I think, of your testimony, Mr. Sullivan, 
I think you may have asked, there were three questions that the 
VA asked. Would you just say those questions again for us, 
please? I looked through your testimony to see if I could find 
them. I did not see them.
    Mr. Sullivan. Sure. When we make capital decisions, real 
property decisions whether to keep something, to renovate it, 
to sell it, to do whatever, our primary priority is how will 
that impact that decision to affect veterans and veteran 
families, first, and we will not be doing anything that will 
negatively impact them.
    Our second priority is to make sure that decision improves 
the operational efficiency and cost-effectiveness of VA 
operations, whether it is consolidating, whether it is building 
a new building or whether it is buying a piece of property.
    The third one is we want to be a good neighbor. We are 
located in 165 communities around this country with major 
presence and sometimes we are the largest presence in that 
community and we do to the extent possible want to be a good 
neighbor to the community and reach a decision that helps us, 
but helps the local community.
    We take them in that priority, first for veterans and 
families, efficiency and then to try and be a good neighbor.
    Senator Carper. All right. Let me just ask your other 
panelists, are those three pretty good questions that we could 
use, not just in the VA, but with a little bit of modification, 
use outside of the VA?
    Mr. Foley. It is very similar to the process GSA uses and 
we have a broad range. But first we consider is there--what is 
the requirement? Is there a Federal need for the asset? And so 
if it is the VA, it is looking at how does it serve the VA and 
their customers? If it is the IRS, how does it serve the IRS 
and their customers or Social Security?
    And so the first consideration is the operational piece. 
The second piece that we look at is again the efficiency, the 
cost-effectiveness, as Mr. Sullivan said. And then the third, 
we do look at being a good neighbor in the community. We are in 
over 2,000 communities in all 50 States and 6 U.S. territories 
with government-owned or leased facilities and so we have a 
critical role across the country that we play, and particularly 
are focused on transit-oriented development and sustainability 
as well.
    Senator Carper. OK. Any other thoughts? Please. OK. I want 
to go back to the issue of delegation of lease authority, some 
instances where it is done well, some instances where it is 
done badly.
    As I understand it, correct me if I am wrong, but in your 
testimony, have you asserted that we actually lease more--
through GSA we actually lease more space than we own; is that 
correct?
    Mr. Foley. Yes, that is correct.
    Senator Carper. And has that always been the case or is 
that something that has happened in recent years?
    Mr. Foley. It is relatively recent. I believe 2008 was the 
first year where we crossed over to having more leased space 
than government-owned.
    Senator Carper. Why do you think that changed?
    Mr. Foley. I think a couple of things. Some of it is just 
purely shifting demographics and where we had Federal 
buildings, populations have shifted. Agency missions and needs 
to serve the public have moved and for a lot of the smaller 
locations, leasing has become the default mechanism to meet 
those requirements, because you would not build a 5,000-square 
foot building in a small community with Federal construction 
dollars.
    We put our focus toward building land ports of entry, 
courthouses, the major headquarters agencies and 
consolidations, like the Food and Drug Administration (FDA) at 
White Oak, the St. Elizabeth's for the Department of Homeland 
Security here in Washington, DC.
    And so it is about prioritizing the limited dollars and 
then for the more generic requirements that are basic vanilla 
office space, they often do end up in leased space instead of 
Federal buildings.
    Senator Carper. All right, thanks. Thanks very much. 
Senator Brown.
    Senator Brown. Thanks Chairman. Just a couple more. So Mr. 
Heslop, can you explain--I am still having trouble wrapping my 
arms around the whole concept of having the SEC in kind of a--I 
mean, here the SEC is being used to regulate Wall Street, and 
in fact it looks like Wall Street with the lavish surroundings, 
the fact that they would even take up in an area like this.
    Gosh, I would think they would want to go to a blighted 
area in Washington and bring some economic development, get a 
good value for the taxpayers and kind of it is a win-win-win 
all around. So I guess I know you were not there per se, but I 
mean, you are still there now, right?
    Mr. Heslop. I am there now, yes, sir.
    Senator Brown. I mean, how do you explain those kind of 
lavish surroundings when we are in a period of austerity?
    Mr. Heslop. It is my understanding that the situation that 
occurred was this. I do not believe that the lavish 
surroundings was as much of a motivator as a very flawed 
process to develop a space estimate and then a very flawed 
process to get the decision made to take the building.
    You have to remember that at the time, Dodd-Frank had just 
passed. The SEC was given a significant amount of new 
responsibilities, derivatives oversight of a trillion dollar 
industry, registration of hedge funds, as I mentioned in my 
testimony, a number of new responsibilities. It was going to 
drive the hiring of a significant number of new employees, and 
those new employees needed space to be housed.
    There is a housing versus hiring mismatch. We typically can 
bring employees on in about 90 days. As you know, it takes 
significantly longer to house them and so I think, it is my 
understanding, but I believe the people at the time felt very 
much under the gun to try to obtain space sufficient for the 
resources we were bringing in.
    Because they used a flawed space estimate, we were 
originally looking at four properties in the D.C. area, oh by 
the way, against the chairman's guidance. She wanted them to 
look in the regions for housing for our enforcement----
    Senator Brown. What chairman?
    Mr. Heslop. Chairman Schapiro. She wanted them to look in 
the regions for both our enforcement and our examination staff, 
because that is where a lot of the activity occurs. For 
whatever reason in this broken process, the staff and the 
facilities group disregarded that directive and then tried to 
look for space and when they went through the estimate process 
that Mr. Kotz has described and it was grossly inflated, they 
arrived at a number of 900,000 square feet.
    Once they hit that number and landed on that, the other 
three properties that were being considered were suddenly out 
of the equation. And so they believed they were left with one 
and only one property. It was an emergency situation and they 
felt at the time, I think, that they were getting a good deal 
because the rental rate received was below the market rate at 
the time. And so that is the way it was presented.
    Senator Brown. OK. I am just wondering if that type of 
office space is appropriate for a Federal agency, quite 
honestly. That is top-of-the-line space and I guess I am 
wondering, I think it would be probably Mr. Foley then, what is 
the square footage rent for the clients that I guess are now 
subletting? Are we subletting with clients in there now? How 
does it work, because they are in the space, but they are not 
obviously, occupying it? So you have other Federal agencies in 
that space, right?
    Mr. Foley. We are working with the SEC to take that on, but 
we have not come to agreement on a lease and a term with them. 
We are still trying to figure out which agencies we might 
align.
    I understand that they have subleased some space directly 
with other agencies, but we were not a party to that.
    Senator Brown. Other Federal agencies. What are you getting 
for rent on those?
    Mr. Heslop. I do not know what they are getting. I do know 
it is at a higher rent than we had originally been on the hook 
for.
    Senator Brown. So another Federal agency is paying a higher 
rent?
    Mr. Heslop. Yes. It is not a sublease. Yes, another Federal 
agency, as I understand it, is paying a higher rate.
    Senator Brown. So you guys are paying basically a half a 
billion dollars and then you are subletting it.
    Mr. Heslop. We are not subletting it, sir. We have been 
completely released from two-thirds of the space.
    Senator Brown. OK, so that entity is now paying the 
landlord a higher rent, has nothing to do with you. Another 
Federal agency is now paying a higher rent that you are 
ultimately paying; is that right?
    Mr. Heslop. That is my understanding, yes, sir.
    Senator Brown. So how does that happen? Have you been 
working with those other agencies if it is a higher rent?
    Mr. Foley. We have not. As I mentioned, for large leases, 
we have a number of controls in place and particularly for the 
District of Columbia and the National Capital Region, we 
actually have prospectus rent caps that we put in place for all 
of our leasing actions to ensure that we get a good deal and we 
stay at or below the market.
    Senator Brown. Right. So let me just make sure I understand 
this. So you entered into a lease. I understand all the 
background. You have been released from two-thirds and now that 
two-thirds is now being rented to another Federal agency, at 
now a higher amount than the half a billion dollars that you 
ultimately were paying.
    Are we just repeating what we just went through with other 
agencies? Do we need to find out who those are? I mean, this is 
like Groundhog Day, you guys. I mean, really, thank you for 
laughing, because I do not even know how to respond. I did not 
even realize that in my line of questioning, but I guess if you 
keep digging like we are doing, we find more and more and more.
    I would like to find out, Mr. Chairman, whether we do it--I 
do not know who to ask here. Like who is the new entity? Did 
they go through the process that we have been talking about 
here? Are we doing the same exact thing that the SEC did? I 
mean, I would love to have those answers, because it is just 
not passing the smell test today. Maybe because we are the only 
hearing here today that we are on top of this, because I think 
that is so critical.
    If you are developing and you have in place appropriate 
leasing guidelines based on all the formulas and everything and 
you are entered into an MOU with the SEC, correct?
    Mr. Foley. The MOU is for all leasing actions going 
forward.
    Senator Brown. Right, going forward on other things that 
they may want to lease?
    Mr. Foley. Yes.
    Senator Brown. So basically I understand that.
    Mr. Foley. Yes.
    Senator Brown. How about the entities that are now taking 
over; you do not even know who they are, right?
    Mr. Foley. That was done under their own independent 
authorities, I believe.
    Mr. Heslop. Senator Brown, if I might. The Federal Housing 
Finance Agency (FHFA) and the Comptroller of the Currency 
(OCC), both self-funded agencies, are in that property now.
    Senator Brown. Oh.
    Mr. Foley. So we are working with them to take, I believe, 
it is 350,000 square feet and we are working through our 
typical process to find a tenant and make sure that the rent is 
appropriate.
    Senator Brown. Great. Well, listen, thank you, Mr. 
Chairman, for holding this. Again, it is another area--I mean, 
every time you hold a hearing, I learn more and more about 
where we are wasting money and I am hopeful that the President 
and both houses are listening to what we are doing, because we 
have given them great, great things to just go and fix. 
Executive Order (EO) No. 1, fix it.
    Senator Carper. As I have said before, GAO gives us a to-do 
list and you do it through your high-risk list and it is not 
just a high risk for this Subcommittee or for the Senate or the 
House. It is a high risk for all of us, including OMB, 
including the President, his folks, Federal agencies and 
certainly all of us.
    I want to just followup on Senator Brown's line of 
questioning and just ask, for the space that I guess the SEC is 
now occupying or about to occupy at Constitution Center, it 
sounds like they are going to be occupying about one-third as 
much space as was originally thought; is that correct?
    Mr. Heslop. Senator, we are on the hook for one-third of 
the space. We have no intent to occupy that space.
    Senator Carper. At all?
    Mr. Heslop. At all.
    Senator Carper. If you look at the----
    Mr. Heslop. Rent will be due in January 2013, and we firmly 
believe and are very optimistic in terms of our partnership 
with GSA that we will be able to find a tenant between now and 
January 2013.
    Senator Carper. That is good. Give us some idea what the 
cost per square foot of that space would be if the SEC were 
occupying the space on January 1, 2013; what would we be 
talking about?
    Mr. Foley. At the time we were talking about cost per 
square foot of $44, which would have jumped to $47 per square 
foot 6 years later.
    Senator Carper. Somebody here at the table has better 
than--I know what $44 and $47 per square foot, how that would 
be regarded in Wilmington, Delaware. It would be pretty steep, 
maybe not so much here.
    But give us some idea how does that number jive with the 
rest of the real estate industry around here, real estate, the 
market, particularly in this area, this area of----
    Mr. Foley. I mean, all real estate is local and there are a 
number of submarkets in the Washington, DC. area and so rent is 
fairly extreme. But our rent cap for the District of Columbia 
is $49 a square foot, so $44 is below the prevailing market 
rates.
    That said, there are some submarkets and locations within 
the District where you can get rents below that.
    Senator Carper. So for the other agencies, which OCC, what 
was the other one?
    Mr. Heslop. FHFA.
    Senator Carper. OK--that are going to come in and lease 
space at Constitution Center, if they come in at the same rate, 
$44 or $47, are you saying they would be under the overall rate 
for this kind of office space in D.C.?
    Mr. Foley. For the governmentwide prospectus rent cap yes. 
Now, we have seen deals that are below that, as I said, in some 
locations, north of Massachusetts Avenue and some of the 
developing areas we have received better rates than that. But 
for that part of town, it is----
    Senator Carper. All right, a different question and one 
that deals with the corrective activities.
    Mr. Heslop you outlined for us on the corrective activities 
that have taken place at the SEC in light of this, what I would 
say is scandalous behavior on the part of some employees there. 
But what, if any, is the applicability of the corrective action 
the SEC has taken; how does that apply potentially to other 
Federal agencies. Mr. Foley.
    Mr. Foley. I mean, I think it is an example of how 
important it is to get the checks and balances correct. One of 
the advantages we have at GSA is we work with the Office of 
Management and Budget and so I think one of the big issues that 
SEC had in hearing their testimony and working with them was in 
developing that upfront requirement, figuring out how many 
people they had, what the right utilization rate for the space 
should be and were they going to be fully funded for all of 
that.
    And so for all of our leasing actions, we not only work 
with the agency to make sure we understand that, but we also 
work with our budget examiner and their budget examiner, as I 
mentioned in my opening testimony, to make sure that the 
staffing levels are supported and the rental payment will be 
supported in the President's budget so we know that the people 
are going to materialize and the funding will be there to pay 
for it before we proceed on a acquisition like this.
    Senator Carper. Thank you. Mr. Heslop, the SEC was granted, 
I believe, independent leasing authority in 1990. However, as 
the IG has pointed out, it took the SEC 19 years to establish a 
centralized asset management office to handle its leasing 
activities; is that correct?
    Mr. Heslop. That is my understanding, yes, sir.
    Senator Carper. The SEC established a leasing branch within 
its Office of Administrative Service in, I believe, April 2009 
and did not put into place leasing policies and procedures 
until August 2010.
    Let me just ask you, if I could, sir, how many leases do 
you think might have been awarded over that 19-year period of 
time? You can do this with 20/20 hindsight, be a Monday morning 
quarterback, but why did it take the SEC so long to put a 
system in place that would allow the organization to 
effectively manage its leasing activity?
    Mr. Heslop. Yes, sir. To the first question, it is my 
understanding that we have entered into 32 total leases over 
the course of the last 20 years. I really cannot speculate as 
to why they would not put one in place. I suppose because 32 
leases in 20 years might cause some to say ``do you need a 
full-time leasing staff, a dedicated leasing staff? ''
    But again, I cannot really speculate. What I can say, sir, 
it is very apparent to us that this is not a core competency 
that the SEC needs to be engaged in, and that is exactly why we 
are moving into a partnership with GSA. I would say to my----
    Senator Carper. You are the master of understatement. That 
sure is not the----
    Mr. Heslop. The GSA, by the way, sir, has just been 
terrific in terms of partnering with us and helping us out of 
the situation, so I would like to thank them for that.
    Senator Carper. Good. That is good to hear. Mr. Heslop, do 
you have any idea how many leases the SEC currently manages?
    Mr. Heslop. We currently have 15 in the portfolio. We have 
11 regional offices. We have the Constitution Center space 
that, as we know, we are still on the hook for. And we have the 
Station Place facility, which is where our headquarters is. We 
have an operation center in Northern Virginia, and then we 
share space with other Federal agencies in a very small COOP 
site. It is in Southern Virginia.
    Senator Carper. How long did you work at Capital One?
    Mr. Heslop. I worked at Capital One for approximately 12 
years.
    Senator Carper. Taking your private sector experience at 
Capital One and then putting it sort of side by side with 
your--what are you in about a year or so now with the SEC?
    Mr. Heslop. It is about 14 months.
    Senator Carper. It probably seems longer. But what kind of 
lessons learned would you like to impart to the rest of our 
Federal Government given what you have seen at the SEC in terms 
of real property management?
    Mr. Heslop. In terms of real property management, I would 
say the lesson learned, I think, for small agencies, especially 
like ours--we are a very small agency, 3,900 people and on any 
given day 700 contractors in a very limited real estate 
footprint. But I would say it is about determining what your 
core competencies are and what they are not and divesting 
yourself of those that are not.
    I was hired to be a change agent, similar to your remarks 
earlier today. I am a taxpayer at heart and I was brought in to 
try to create change and move the SEC to a more well-managed 
environment, and one of the things that I have tried to do is 
move us out of those areas that are not our core competencies 
and giving those to agencies that can do them better.
    We are doing the same thing with our financial management 
reporting system, moving them to the Department of 
Transportation (DOT) as a Federal shared service provider, and 
I would say going in directions like that for small agencies, 
at least, I think is good advice.
    Senator Carper. Thanks for those comments. Given the size 
of the Constitution Center lease, both in terms of square 
footage and funding, why didn't the SEC seek assistance from 
GSA before entering into the lease? You mention they have a 
pretty good partnership now with GSA. Why do you suppose they 
did not seek the consultation or assistance from GSA in the 
first place?
    Mr. Heslop. Sir, I wish I could answer that. I really 
cannot Monday morning quarterback that one.
    Senator Carper. Mr. Wise, in your testimony, I think you 
indicated the roughly 36 agencies that have independent leasing 
authority. Generally do some of these other agencies with 
independent leasing authority have adequate expertise and 
internal controls to ensure that they are not--that they are 
getting the best possible terms for themselves and for their 
clients who they serve and for taxpayers?
    Mr. Wise. Senator, we do not have a large body of work 
looking at exactly that question, but we did have a look at 
where the National Transportation Safety Board (NTSB), had some 
issues with a lease for its training facility out in Dulles 
where they mischaracterized or misconstrued a lease as an 
operating lease when it should have been a capital lease, which 
resulted in an anti-deficiency issue and caused some real 
issues with the agency in terms of its accounting and getting 
its fiscal house in order.
    That leads to the larger point that Mr. Heslop has talked 
about, as well as what you mention in your opening remarks, is 
that for smaller agencies, especially that are not heavily 
engaged in real estate activities, as you know better than 
anyone, I guess, it is a very complicated environment to deal 
with leases and construction and if it is not a core mission or 
it is not even a significant one for a small agency, I think it 
is logical that they need to tread very carefully in this area 
because it is easy to fall into problems when you have capacity 
issues or it is a challenge for the administrative side of an 
agency to deal with these things.
    Senator Carper. On the one hand, agencies can purchase 
space. On the other hand, they can get this designation, 
independent designation that some have and then they can lease 
or they can go through GSA and lease. How prevalent is the 
notion of lease purchase and is that something that agencies do 
from time to time? Is it rare? Is it more common? Is it a 
smarter approach in certain instances? Anyone?
    Mr. Foley. I will jump in with that. Lease purchase is 
something that GSA has done in the past, but that was prior to 
the Budget Enforcement Act. It is one of those things that 
triggers capital lease treatment if you have a bargain purchase 
option. So in essence, leasing to own is prohibited because all 
the funds get scored upfront.
    That said, some of our leases done prior to 1990, like the 
Columbia Plaza example that I mentioned, we were able to 
acquire that. We had a purchase option in the lease for $100 
million. As it turned out at the time we exercised it, the 
building was worth about $200 million and we are saving rent of 
somewhere in the ballpark of $45 to $50 a square foot that we 
are no longer going to have to pay once we take ownership of 
the building.
    So there are a lot of advantages to being able to do 
something like that, but it is an area where similar to what 
Mr. Sullivan said, that the Budget Enforcement Act and the 
budget scorekeeping rules limit some of the flexibility that we 
have had in the past.
    Senator Carper. That is good to know. Not actually good 
that it exists, but it is good to know. That is helpful.
    Couple more. Senator Brown, do you want to jump in here? I 
think you said you only had those others.
    Senator Brown. Just one more. Mr. Heslop, I do not want to 
beat a dead horse, but I just want to understand. So when you 
say we are on the hook for this space, but we are not using it, 
so you are not physically in the space, right?
    Mr. Heslop. That is correct; we are not in the space.
    Senator Brown. When you say we are on the hook, you mean 
the taxpayers are on the hook?
    Mr. Heslop. The SEC is funded by fees. However, we get our 
appropriation from Congress and basically there is a mixed 
tradeoff. So it is not direct taxpayer dollars, but----
    Senator Brown. Someone is paying.
    Mr. Heslop. There is an obligation that will come due in 
January 2013 if we are unable to find a tenant. However, I 
think our conversation with GSA is they are very optimistic 
that between now and then we will----
    Senator Brown. So you are not in that space, but you are 
already in another space which you are paying for right now, a 
couple of spaces you indicated, throughout the region; is that 
right?
    Mr. Heslop. Right. We have 11 regional offices, our 
headquarters.
    Senator Brown. I just want to make sure I understand that. 
OK, that is it, Mr. Chairman. Thank you.
    Senator Carper. Mr. Kotz, in your May 2011 report you 
indicated the SEC grossly overestimated the amount of office 
space it needed. It might have violated Federal law when it 
signed a $556.8 million 10-year lease last year at Constitution 
Center.
    Based on your findings, what internal controls did the SEC 
have in place to ensure that it was leasing the appropriate 
amount of space in the most advantageous location and at the 
best rate?
    Mr. Kotz. Yes, I do not think they had any significant 
internal controls. I think that was part of the problem. I know 
that they are making efforts to put controls in now.
    Senator Carper. Let me just ask, what were they thinking?
    Mr. Kotz. I do not know. I do not know exactly what they 
were thinking, but----
    Senator Carper. Did you ever ask? Did you ever ask----
    Mr. Kotz. Yes.
    Senator Carper [continuing]. What are you guys thinking?
    Mr. Kotz. No, we did and I think what it came down to was 
they had a misunderstanding of whether they needed this space. 
I think some folks did fall in love with the space and decided 
that was where they wanted to be. They wanted to make sure that 
they could all be in one building and they wanted to have as 
much of the building as possible.
    It was a process that moved forward in relatively quick 
time without a lot of thorough review or analysis. It ended up 
with a very flawed process.
    Senator Carper. Let me followup to that if I could. As part 
of the authorization process for new leasing proposals, 
agencies are required to receive congressional approval for 
releases, I think, valued at about $2.8 million or more.
    How is the SEC able to enter into the Constitution lease 
without Congress being aware of the potential problems 
associated with the lease of this magnitude and did the SEC's 
independent leasing authority preclude them from having to 
receive congressional approval prior to executing the lease?
    Mr. Kotz. Yes, I believe that there were a couple reasons. 
One is the independent leasing authority. I think the other 
issue is the one that you have mentioned several times, the so-
called scoring issue. So when you have a lease, you can sort of 
allocate a certain amount for each year. If you allocate a 
certain amount for the first year, you do not get over a 
particular threshold, while if you purchase, you allocate the 
whole thing in one year and you get over thresholds.
    So by using a lease, you cannot be subject to certain 
notifications and I think in this case, that was a very big 
negative factor because had there been notifications to OMB, 
Congress, there have been communications with GSA, I think 
somebody would have looked at this more carefully and come to a 
different conclusion.
    Senator Carper. And two more questions, Mr. Kotz, if I 
could, of you. What would be the consequences if the SEC were 
required to go through GSA for all future lease acquisitions?
    Mr. Kotz. I think there would be someone looking at the 
leases who was competent, ensured that the taxpayer got the 
most value, I think would be a very good thing.
    Senator Carper. OK. And was the Constitution Center lease 
an anomaly or does the SEC lack the necessary expertise and 
internal controls to ensure they are getting the best possible 
term when it leases space? I think I know the answer to the 
question. You do not have to answer it.
    Mr. Kotz. OK.
    Senator Carper. Mr. Foley, when GSA acquires a leased space 
for many Federal agencies, as you have testified, has delegated 
that authority to many others, how many agencies do you think 
have delegated authority to enter into lease agreements, any 
idea?
    Mr. Foley. Delegated from GSA?
    Senator Carper. Hmm-hmm.
    Mr. Foley. I have that list here. Just a second. It looks 
like it is probably 15. The largest user is USDA and they have 
probably two-thirds of the lease delegations from GSA. Many of 
the others are much smaller in terms of one or two specific 
transactions.
    Senator Carper. All right. What criteria does GSA use to 
determine whether an agency should have delegated authority?
    Mr. Foley. Sure. We have a number of different criteria. 
The first is we look at the size of the requirement and for the 
most part, we do not delegate anything over 20,000 square feet 
that comes into our agency. For the smaller requirements, we 
look at their management plan. We make sure that they have a 
warranted contracting officer, as I mentioned, who can execute 
the lease in the procurement. We make sure that they have a 
plan to follow all the appropriate procurement rules and 
regulations that would be under GSA's, and then we provide 
oversight to make sure that they are following through with 
that.
    Senator Carper. What type of oversight does GSA perform 
after agencies with delegated authority enter into lease 
contracts and that said, how does GSA verify that an agency did 
not lease more space than it needed?
    Mr. Foley. That is an issue for us and so we do work with 
the agencies post-award and we look at the lease contract to 
make sure that it is in line with what we delegated.
    Senator Carper. One of the things I like to do when we come 
to the end of a hearing, sometimes and I am going to do it 
today--I do not always do this, but today I would like to do 
it--is just to ask--you have all had the opportunity to prepare 
for today, had the opportunity to present your testimony, to 
respond to our questions, to hear what your fellow panelists 
have to say.
    Let me just ask you to take maybe a minute a piece and just 
give us any concluding remarks. We always ask you to do opening 
remarks. Sometimes I find the most valuable input that we 
receive is actually sort of the retrospect and concluding 
remarks. Let's see, if you do not mind doing this, we will just 
start with Mr. Wise, please.
    Mr. Wise. Senator, thank you.
    Senator Carper. What I focus on around here is how do we 
build, how do we develop consensus? How do we develop consensus 
within the Executive, Legislative Branch, bipartisan, how do we 
do that in order to get better results for less money?
    I am just interested in getting things done. I think you 
are as well. But keep that in mind. That is what my goal is, 
consensus, how do we get things done? How do we do it in a way 
that gets better results for less money? Please.
    Mr. Wise. Senator, I would conclude with two points. One, 
when you talk about building consensus and bipartisanship, I 
think CPRA is a promising start in that direction that will 
hopefully lead to some efficiencies and some cost savings for 
the taxpayers.
    So I think that is a good start moving, or a good thought 
process to be developing as this moves toward--the legislation 
moves forward and the differences are reconciled between the 
sort of three different versions.
    And the second point is that we think it is very important 
that in terms of looking at the whole issue of leasing, 
purchasing and score keeping that OMB continues to work toward 
developing and implementing the strategy that will help 
rationalize this process.
    Senator Carper. OK, thanks. Mr. Heslop.
    Mr. Heslop. Thank you, Senator, for the opportunity. I 
would say two things. One, as a taxpayer, I would certainly be 
supportive of the CPRA type approach as well. As a previous 
former Army officer, I can tell you, I have seen BRAC work its 
way through and seen the benefit that has added. I also would 
come back to the comments I made earlier, at least for small 
agencies, determining what your core competencies are and what 
they are not and finding a home for those things that are not 
and hopefully that would hit your agenda about savings tax 
dollars.
    Senator Carper. Good. What did you do in the Army?
    Mr. Heslop. I had a variety of assignments. I had an 
eclectic career as an Army officer. It ranged from a troop 
leader through an operations research analyst through working 
as the chief of staff to the chief of staff for the Army at one 
time, so I had a wide variety.
    Senator Carper. How long did you serve?
    Mr. Heslop. Twenty-two years.
    Senator Carper. Twenty-two. Thanks for that service as 
well. Mr. Kotz.
    Mr. Kotz. Yes, I think the one thing that struck me was 
what you, Mr. Chairman, were saying about disincentives in the 
beginning of the hearing. There should not be an incentive in 
place to lease versus purchasing. The incentives should be with 
respect to maximizing value for the taxpayer. I mean, that is 
where the incentive needs to be, whether it is purchasing or 
leasing, and perhaps we have gone away from that by focusing on 
one particular type of effort.
    So if something was done to put the appropriate incentives 
in place, I think we would all be in better shape.
    Senator Carper. Good. There might be an exception when 
leasing actually does make more sense. And a classic example 
Census need a lot of space every 10 years, but not before 10 
years.
    Mr. Kotz. Right. So if the incentive was to maximum value, 
the incentive in that case would be to lease. In other cases it 
would be to buy.
    Senator Carper. All right, thanks. Mr. Sullivan, please.
    Mr. Sullivan. Sure. A couple items, Mr. Chairman. No. 1, I 
think we heard today is the critical nature, having good 
internal controls on a professionally groomed, if you will, 
contracting and project management staff. VA is spending 
significant amount of effort, time and resources to make sure 
our leasing staff is fully trained, meets all the requirements 
and also has strict internal controls.
    Every lease at VA more than 10,000 square feet is reviewed 
by numerous offices, including our general counsel, including 
our secretary personally signs them all. I can assure you that 
if anything, at VA most of the folks think there is too much 
review. I do not agree with that, but that is the groundswell. 
We have strict internal controls.
    The other item is in terms of leasing for providing medical 
services, is very different from providing office space. 
Medical leases really work well because No. 1, the population 
may shift of who we provide services to. And No. 2, which has 
become more apparent over time is the technology of providing 
medical services changes.
    So if we do a 10-year lease, the way we provided magnetic 
resonance imaging (MRIs) 10 years ago, radiology, oncology 
treatment, all of those things have changed. The building needs 
to be updated for the latest medical technology and radiology 
and other telemedicine, teleradiology as well. Leasing works 
well for that.
    And No. 3, I think is the key to this in the end is to find 
some way to incentivize the scoring process to be more rational 
on leases, but also to help us disinvest where we need to 
disinvest.
    Senator Carper. OK, thanks. Mr. Foley, you get the last 
word, well the next to last.
    Mr. Foley. Thank you, Senator. I appreciate your comments 
about consensus. And like the VA, GSA has a well-trained 
professional staff of leasing folks across the country.
    I think the area where everyone seems to be in agreement, 
there is a little--varying approaches on how to deal with this, 
but it is clear there needs to be some reform in terms of real 
property. I think we need to give agencies the tools to manage 
their property effectively. The Administration's proposal for 
CPRA, we estimate as much as $15 billion in potential savings 
that could be achieved.
    So by giving agencies an incentive to get rid of property 
they do not need by finding a way to help them fund some of 
those upfront costs to better utilize existing space or dispose 
of property they do not need, and by creating an independent 
panel that sort of offsets some of those competing stakeholder 
interests that you yourself mentioned and that we spoke about 
here in the hearing today, I think there are ways to streamline 
the process and make it much more effective for the taxpayers 
and help save those billions of dollars.
    Senator Carper. All right, thanks. Let me ask a question of 
our staff over here. How long do Members have to submit 
questions for our witnesses? Two weeks, all right. And what 
period of time is there for submitting additional like 
statements or materials for the record? All right, maybe 2 
weeks. We will double check that.
    All right, let me say to our Republican staff, anything 
else you guys have for our witnesses? How did they do? Pretty 
good, huh? These guys grade on a curve; so do we. Anything else 
here?
    All right, well, on behalf of Senator Brown and myself and 
those who have fled our Nation's Capital and did not join us 
today, were unable to, we appreciate your testimony.
    I was talking with our staff yesterday about this hearing. 
We actually were talking on Tuesday about whether actually to 
go forward with the hearing since a lot of Members, House 
Members, Senators had left. I think the House left us on 
Monday. Some Senators are still around, but a lot are gone.
    But the questions, this is not the sexiest topic to be 
holding a hearing on. We are delighted to have the kind of 
media coverage that is demonstrated here today, appreciate 
that. We are talking about a lot of money here. We are talking 
about a lot of money that is not being spent wisely.
    And going forward, we are going to have to--and almost 
everything we do in this government of ours, we got to find 
ways to get better results for less money. And whether in this 
case the leases are paid for by user fees or whether they are 
paid by appropriated dollars, we just got to find ways to do 
almost everything, whether it is defense or non-defense, 
discretionary, entitles, all that stuff, got to find ways to 
get better results for less money.
    And this is an area that has cried out to be addressed for 
years. And for one reason or the other, we have not risen to 
the occasion and addressed it. Maybe we talk about being on 
watch and I am on watch here for at least until the end of next 
year as the Chairman of this Subcommittee that a number of 
colleagues serve on.
    But on my watch, we are going to fix this. We are going to 
fix this problem. We are going to put in place a comprehensive 
solution to fixing this problem. And we appreciate your help 
today toward maybe getting us heading in the right direction. 
We appreciate your willingness to help us going forward to make 
sure we get to the destination the taxpayers would have us 
arrive at.
    And with that having been said, thank you all for joining 
us today, for your testimony, for your preparation, for your 
responses and for your willingness to help make sure we get 
that ship headed to the right port. And that is what we are 
going to do. Thanks so much.
    [Whereupon, at 4:24 p.m., the Subcommittee was adjourned.]


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