[Federal Register Volume 61, Number 201 (Wednesday, October 16, 1996)]
[Notices]
[Pages 53925-53929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26051]


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GENERAL SERVICES ADMINISTRATION
[GSA Bulletin FPMR D-240]


Federal Real Property Asset Management Principles

AGENCY: Office of Governmentwide Policy, GSA.

ACTION: Notice of bulletin.

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SUMMARY: The attached bulletin announces the issuance of the Federal 
real property asset management principles to the head of all Federal 
landholding agencies.

FOR FURTHER INFORMATION CONTACT:
Stanley C. Langfeld, Director, Real Property Policy Division, MPR, 
Washington, DC 20405, telephone 202-501-1737.

SUPPLEMENTARY INFORMATION:

Public Buildings and Space

To: Heads of Federal Agencies
Subject: Federal Real Property Asset Management Principles
    1. Purpose. This bulletin announces the issuance of the Federal 
real property asset management principles to the heads of all Federal 
landholding agencies.
    2. Expiration date. This bulletin contains information of a 
continuing nature and will remain in effect until canceled.
    3. Background. a. In 1993, the National Performance Review (NPR) 
recommended that the Administrator of General Services develop asset 
management principles to guide the Federal Government's real property 
ownership enterprise.
    b. In response to the recommendation of the NPR, in 1994, the 
Federal Asset Management Planning Group met to developed a set of goals 
and principles for management of the Federal real property portfolio. 
This group consisted of representatives from the General Services 
Administration (GSA), other Government agencies and interested parties 
from the private sector, and issued an initial set of real property 
asset management principles.
    c. In accordance with the NPR, the work of the Federal Asset 
Management Planning Group, as well as in collaboration with the Federal 
Government's real property holding agencies, the Office of Real 
Property has continued to develop a set of comprehensive real property 
asset management principles.
    d. The work of revising the initial set of asset management 
principles has been completed. The results of this effort are the real 
property asset management principles attached to this bulletin. They 
are in two formats: the first is a shorter, more concise version 
(Attachment 1); the second is an expanded version which provides a 
general discussion of the concept of the principles, as well as 
providing definitions and examples of each (Attachment 2).
    4. Action. Federal agencies should use these principles as guides 
to assist them in managing their portfolio of real property assets. 
They should also be used as a frame of reference in making sound real 
property asset management decisions, to help reduce costs associated 
with managing real property assets, to provide incentives to improve 
real property asset management, and to increase the efficiency and 
maximize the performance of the portfolio of Federal real property 
assets that they manage.
    The principles should be applied by all Federal real property asset 
managers throughout the life cycle of a real property asset. They 
should be used as a ``baseline'' whereby all Federal landholding 
agencies are working in the same, or similar manner. They should also 
encourage better communication among such agencies to enhance the 
overall asset management functions of the Federal Government's real 
property activities.

    Dated: October 2, 1996.
G. Martin Wagner,
Associate Administrator for Governmentwide Policy.
Attachments

Attachment 1.--Governmentwide Federal Real Property Asset Management 
Principles

Introduction

    Asset management is the general term used to define the 
relationship between a real property holding entity and the real 
property that such an entity holds an interest in. This relationship 
includes, but is not limited to, the financial management of such 
assets, the day-to-day management of the real property itself, and 
maintaining the satisfaction of the tenants that occupy the space that 
defines the real property asset. This relationship covers the life 
cycle of a real property asset--its acquisition, utilization and 
disposal. Asset management succeeds when such organizations adopt 
effective asset management principles and use strategic planning as the 
framework for making real property asset management decisions. The 
Governmentwide Federal real property asset management principles are 
attached.

Governmentwide Federal Real Property Asset Management Principles

    1. Use What You Have First. Real property assets under the custody 
and control of the Federal Government should be considered first when 
accommodating Federal agency mission requirements.
    2. Buy Only What You Need. The amount of interest in Federal real 
property assets should be the minimum necessary to effectively support 
a Federal agency's mission.

[[Page 53926]]

    3. Use Industry-Like Instruments of Agreement. Real property assets 
of the Federal Government should be utilized among agencies with the 
use of instruments of agreement that follow the best practices of the 
industry.
    4. Reinvestment is Essential. Reinvestment in a real property asset 
is essential to maintain its fair market value, its ability to benefit 
from advancements in business practices and technologies, and to 
support the Federal mission and enhance employee productivity.
    5. Income/Expenses Comparable to the Market. Any income realized by 
a real property asset during its useful life should approximate that 
generated by a comparable commercial property; while any expense by 
such an asset during its life cycle should approximate that incurred by 
a comparable commercial property.
    6. Maximize Use Among Agencies. The maximum utility of a real 
property asset can be realized if it is continuously transferred among 
agencies having mission needs while it is under the control of the 
Federal Government.
    7. Timely Disposal. A Federal real property asset that has no 
further mission support use by the Federal Government should be 
disposed of timely and in a manner that best serves the public 
interest.
    8. Retain Proceeds From Disposal and Outleasing. The proceeds 
gained from the disposal of a Federal real property asset, or from 
outleasing, should be available for use by the agency having custody, 
control and use of the asset.
    9. Professional Training. Federal employees should be given the 
training needed to perform their jobs at the highest level of 
professionalism, and in order to utilize models and other analytical 
tools for optimizing their real property asset management decisions.

Attachment 2.--Governmentwide Federal Real Property Asset Management 
Principles

Introduction

    Asset management is the general term used to define the 
relationship between a real property holding entity and the real 
property that such an entity holds an interest in. This relationship 
includes, but is not limited to, the financial management of such 
assets, the day-to-day management of the real property itself, and 
maintaining the satisfaction of the tenants that occupy the space that 
defines the real property asset. This relationship covers the life 
cycle of a real property asset--its acquisition, utilization and 
disposal.
    Examples of entities that hold real property assets, and are 
therefore involved in the management of them, include corporations that 
own or lease commercial properties, pension funds that own real 
property on behalf of fund members for purposes of enhancing fund 
wealth, and the United States Government which owns and leases real 
property in order to perform services on behalf of the citizens of the 
United States. Asset management succeeds when such organizations adopt 
effective asset management principles and use strategic planning as the 
framework for making real property asset management decisions.
    The following asset management principles are intended to help all 
agencies Governmentwide with real property asset management 
responsibility. They should be used as guides to assist real property 
asset managers in making sound asset management decisions, to help 
reduce costs associates with managing real property assets, to provide 
incentives to improve real property asset management, and to increase 
the efficiency and maximize the performance of the portfolio of Federal 
real property assets that they manage.
    These asset management principles should be applied to all phases 
of the life cycle of a real property asset in order to provide a 
``baseline'' whereby all Federal landholding agencies are working in 
the same, or similar manner, and to encourage better communication 
among such agencies to enhance the overall asset management functions 
of Federal Government's real property activities.

Principle #1.--Use What You Have First

    Real property assets under the custody and control of the Federal 
Government should be considered first when accommodating Federal agency 
mission requirements.

Definition

    Federal agency program missions generally require real property 
assets to support them. This can be reflected in the need for office, 
warehouse, laboratory or other improved or unimproved real property. To 
meet these mission needs Federal agencies should first review their 
current real property inventories to determine whether they have the 
space on hand to satisfy new mission requirements. If there is 
insufficient space to satisfy a new program need, agencies should then 
look to the inventory of other Federal agencies to determine if they 
have either unneeded or underutilized space. In this way the entire 
inventory of Federally-controlled space can be screened first before 
looking outside the Government to satisfy agency space needs.

Example

    Agencies often have new requirements for space based on a variety 
of needs, such as expanded agency program missions or the consolidation 
of staff from other locations. Whenever this occurs, agencies should 
first review their current inventory of real property assets to 
determine if they have space on hand that can meet the need. Such an 
exercise is practical for a variety of reasons--the time needed to find 
new space is cut dramatically, current space will usually be less 
expensive than newly acquired space, currently held space can often be 
found near the location of the new requirement which can cut overhead 
and, most important, it is best to use space that is on hand rather 
than acquire new space while leaving empty or underutilized space as 
is.
    To assist Federal agencies in satisfying these space requirements, 
GSA has established and implemented a Real Property Information 
Clearinghouse. The clearinghouse is an electronically connected network 
of building and facility information and data, organizational 
structures, policies and procedures that is shared by and benefits real 
property professionals. The clearinghouse routes users to this 
information and data, which is made available by Federal Government 
agencies and commercial realty firms. The clearinghouse allows users to 
perform queries, print information and download files.

Principle #2.--Buy Only What You Need

    The amount of interest in Federal real property assets should be 
the minimum necessary to effectively support a Federal agency's 
mission.

Definition

    The interest that is acquired in Federal real property assets 
should be no more than the minimum needed to accommodate a Federal 
agency's program mission requirements today and in the foreseeable 
future. To go beyond these minimum requirements would be inappropriate, 
as taxpayer dollars will have been spent without the appropriate 
justification, and the mission requirement may have terminated while 
the useful life of the interest invested in the real property may have 
years remaining, resulting in the loss of millions of dollars.
    Interest in Federal real property can have various meanings such as 
the type of ownership interest (leased or owned),

[[Page 53927]]

the term of the interest if leased, the interest in terms of the 
capital improvements to the real property, or the amount of space, to 
name a few. The interest in the asset equates to the amount of time the 
space is leased, the amount of money expended to build or modernize the 
property, or the amount of space that the Government has acquired--the 
more of any of these, the more interest the Government has in the real 
property asset.

Example

    Federal agencies require real property to accomplish their program 
missions. Since agency programs are the driving force behind the need 
for real property assets, it follows that the mission need will also 
drive the amount of interest that the Government invests in the asset 
as well.
    If an agency has a requirement to conduct a study that will last a 
limited period of time, such as a few years, the space requirement will 
likely be for leased space, as the purchase and/or construction of a 
new facility would go far beyond the mission requirement of the agency. 
However, if an agency's headquarters occupies a Federal building that 
has outlived its useful economic life, and the need for a consolidated 
headquarters still exists, then the construction of a new building may 
be called for. The difference between these two cases in an example of 
the different space needs that exist for agencies today based on 
program missions, and the range between the degrees of interest in the 
real property that must satisfy them. Real property asset managers 
should be cognizant of these requirements, the importance of not 
exceeding them, and the need to match mission needs with the most 
appropriate real property interest so that taxpayer dollars are spent 
in the most economical and cost-effective manner.

Principle #3.--Use Industry-Like Instruments of Agreement

    Real property assets of the Federal Government should be utilized 
among agencies with the use of instruments of agreement that follow the 
best practices of the industry.

Definition

    In order to best utilize the Federal Govenment's real property 
assets, the agencies that use them must work together toward a common 
purpose to ensure that the assets are utilized to the maximum limit of 
their useful economic life while still satisfying the mission 
requirement of the occupying agency. In order to do this, agencies must 
work together by comparing space needs, sharing information on space 
that others may use, and being willing to release space when it is no 
longer needed, rather than holding onto it for a need that is likely 
never to materialize. To assist in this effort, agencies need to use 
instruments of agreement that follow the best practices of industry.

Example

    A common example of an instrument of agreement that is used between 
real estate entities is an occupancy agreement, which is an agreement 
defining the relationship between a landlord and tenant. An occupancy 
agreement will define the terms and conditions set forth between the 
parties, and will describe their duties and responsibilities. Such 
agreements are useful because they are written documents that reflect 
the understanding of each of the parties, and hold them together for a 
joint purpose and for a specific period to time.
    Since an occupancy agreement may not be a legally binding contract, 
both parties to the agreement are exposed to risk. However, there must 
be a responsibility on all parties to adhere to the terms of the 
agreement, thus achieving more businesslike practices and higher levels 
of performance among agencies.

Principle #4.--Reinvestment is Essential

    Reinvestment in a real property asset is essential to maintain its 
fair market value, its ability to benefit from advancements in business 
practices and technologies, and to support the Federal mission and 
enhance employee productivity.

Definition

    Regardless of whether the real property asset is owned or leased by 
the Government, if it is determined that the asset's continued use is 
needed, reinvestment in it may be necessary. If the asset is owned by 
the Government, reinvestment may be required to maintain the asset's 
fair market value, not to mention maintaining its condition to benefit 
from advances in business practices and technologies, and to enhance 
employee morale and productivity. Reinvestment in a leased asset is the 
responsibility of the property owner. It is needed in order for the 
property to be acceptable to the Government's requirements of realizing 
the benefits from advances in business practices and technologies, and 
to enhance employee morale and productivity as well.

Example

    If it is determined that the continued use of a real property asset 
is needed, the task of the asset manager begins with assessing the 
physical status of the real property, whether owned or leased. 
Engineering reports determine what the condition of a property is and 
what improvements, either capital or otherwise, must be made to bring 
the property up to industry standards. Technological innovations may 
have been developed that could bring employee productivity and morale 
to a higher level as well.
    An engineering report can be used to assess the physical status of 
either a Federally-owned building or one that is leased. In the case of 
Federal ownership, a capital improvement will usually be managed by the 
GSA Property Development Division, or a similar activity in support of 
an agency with real property controlling authority, such as the U.S. 
Army Corps of Engineers. In leased space, the lessor is responsible for 
these improvements as a condition of the lease.
    Besides assessing the physical status of the property, the real 
property asset manager must also determine when reinvestment should 
occur. Determining the cost of funds is harder when the asset is 
Federal real property, as these costs are more difficult to define than 
in private industry where the manager goes to his/her lender and gets 
the best rate he/she can obtain. The cost of funds, as well as the 
timing of their disbursement, must be calculated by the asset manager 
in order to obtain the lowest cost for capital improvements.

Principle #5.--Income/Expense Comparable to the Market

    Any income realized by a real property asset during its useful life 
should approximate that generated by a comparable commercial property; 
while any expense by such an asset during its life cycle should 
approximate that incurred by a comparable commercial property.

Definition

    All income and expenses associated with a Federal real property 
asset should be approximate to current fair market value. The income 
generated by such an asset should approximate the income that a similar 
commercial real property asset would generate. Likewise, the expenses 
of leasing space or of maintaining a Federal real property asset should 
approximate the expenses of a comparable commercial property.
    Income associated with real property assets includes the income 
that an asset

[[Page 53928]]

derives in the form of Rent paid to the Government by an occupying 
agency or an outlease tenant, as well as income generated by the 
disposal of the real property asset. Expenses associated with real 
property include the rent for the space if leased by the Government, as 
well as the cost of materials, goods and services associated with an 
asset's utilization.

Example

    Income derived from real property assets is realized through the 
rent stream that the occupants pay to the owner, or through the 
disposal of the asset through sale or other means. Rental income 
generated by Federal real property assets applies when rent is paid by 
a tenant to GSA or the agency that is the Federal custodian of the real 
property asset, and should approximate the rent paid by tenants in the 
commercial market. When a Federally-owned real property asset is 
disposed of, the income generated should approximate that associated 
with the disposal of a similar commercial real property asset.
    When the Government leases space in the market it incurs rental 
expenses that should approximate the rent for similar commercial space. 
For example, when GSA leases space to house a Federal tenant, the rent 
it pays should be at a commercial market rates. Similarly, when GSA 
houses either a Federal or an outlease tenant, the rental expense to 
GSA that the tenant incurs should approximate what it would pay to a 
private landlord in the commercial market. The expenses associated with 
the utilization of real property should also be approximate to the 
commercial market. The Government should pay commercial rates for 
services and supplies required for the day-to-day operation and 
maintenance of real property assets.

Principle #6.--Maximize Use Among Agencies

    The maximum utility of a real property asset can be realized if it 
is continuously transferred among agencies having mission needs while 
it is under the control of the Federal Government.

Definition

    Real property assets include buildings that can often be used by 
any number of different Federal agencies. This holds true for Federal 
buildings that were originally constructed to house the headquarters of 
an agency, and for leased space that has been acquired for long term 
use. Regardless of the type of space, the location, the amount of space 
or what the original tenant was, real property by its nature is 
something that can be used by any tenant if it can satisfy its space 
and mission needs.
    The policy of the Federal Government is to use real property to its 
maximum benefit. This includes making every effort to find agencies 
that can use the property if it is planned to be declared excess. 
Optimally, a real property asset should be promptly transferred from 
one agency to another as one agency's need expires and another's 
begins. This transfer of real property among agencies is a critical 
measure toward achieving this goal, and its success is based on 
adequate communication among all Federal agencies, to include GSA as 
well as all agencies with their own real property authority.

Example

    The GSA is a large holder of Federal Government real property. 
Whenever GSA has property that has been declared excess by one of its 
customer agencies, it screens it and makes every attempt to backfill 
the space with another agency before finding it surplus to the needs of 
the Government. Depending on the needs of GSA's customer agencies, if a 
property is suitable it will be utilized as quickly as possible.
    Federal property that is under the custody and control of other 
agencies should be dealt with in the same manner. The only way that 
this can occur, however, is to have communication that will link 
agencies to one another, as well as establishing an atmosphere of 
collaborating among the family of Governmentwide agencies that have 
their own real property authority. At the present time, GSA's Office of 
Real Property is establishing a real property information clearinghouse 
which will include excess property for use by all Federal agencies. It 
is hoped that this database will assist agencies in achieving the 
maximum utilization of their real property assets, especially in these 
times of diminished resources.

Principle #7.--Timely Disposal

    A Federal real property asset that has no further mission support 
use by the Federal Government should be disposed of timely and in a 
manner that best serves the public interest.

Definition

    Assuming that a property under the control of the Federal 
Government has no agency that can use it for any mission support 
related purpose, and the attempts to find another agency to utilize it 
have not yielded a user, the real property should be disposed of 
timely, efficiently, and in a manner that best serves the public 
interest. The disposal of Federal real property is a very involved and 
complex task. If properly done, the disposal can result in a smooth 
transition of ownership and can often produce a return to the 
Government that is in the best interest of the taxpayer, whether 
donated at no cost or sold at the highest price the market will bear.

Example

    A real property asset that has no mission support potential for use 
by any agency of the Government should not be held for any appreciable 
period of time. Assuming there is no future mission related need, the 
asset should be disposed of as quickly and as expeditiously as 
possible, and in a manner that best serves the public interest.
    Real property disposal is explained in detail in many different 
public laws, Executive Orders, Congressional mandates and agency 
policies. Regardless of the authority that the real property disposal 
falls under, however, the asset should be disposed of in the most 
efficient way possible. Under certain cases Federally-owned real 
property can be conveyed to state and local governmental units and non-
profit institutions free of cost, and for a variety of public uses such 
as education, health, park and recreation, and historic monuments. An 
example of an educational usage would be the conveyance of a former 
Federal property to a local municipality for the establishment of a 
high school facility. Although no moneys are generated by such a public 
benefit transfer, the public interest is served by the means of such a 
conveyance.
    If a property is not being donated through public benefit 
conveyance, a public sale can be conducted and the property sold to the 
highest bidder or offeror. As a last resort, if the property is unable 
to be sold or donated due to age, disrepair or extensive damage, it 
should be demolished and the land used for another Federal purpose, or 
disposed of in its own right, while serving the best public interest as 
well.

Principle #8.--Retain Proceeds From Disposal and Outleasing

    The proceeds gained from the disposal of a Federal real property 
asset, or from outleasing, should be available for use by the agency 
having custody, control and use of the asset.

Definition

    Proceeds that are generated by the disposal of a Federal real 
property asset,

[[Page 53929]]

or from outleasing of space, should be available for use by the agency 
having custody, control and use of it. Financial incentives should be 
put in place in order to encourage real property disposal and the 
outleasing of unused space. In the case of agencies covered under the 
Federal Property and Administrative Services Act of 1949, as amended 
(the ``1949 Act''), there is no incentive to dispose or outlease real 
property when the proceeds go into another fund out of the agencies' 
control. Likewise, in the case of some landholding agencies that have 
their own disposal or outleasing authority, there could be increased 
incentives put into place as well. (There are individual agency 
exceptions to where proceeds are deposited).

Example

    Before real property under the custody, control and use of agencies 
covered under the 1949 Act can be disposed of, it must first be 
declared excess by GSA. If an agency has a property that is no longer 
needed, it is declared excess and screened by GSA in order to find an 
agency that has a need for it. The property is then transferred to that 
agency and, if monetary proceeds are generated, they are deposited into 
the General Fund of the Treasury. Only after it is found that the 
property has no Federal use is it declared surplus to the needs of the 
Government and then disposed of by GSA. Pursuant to the Federal 
Property Management Regulations, if monetary proceeds are generated 
from the disposal of surplus property, they are deposited into the Land 
and Water Conservation Fund of the Treasury.
    In the case of real property not under the custody, control and use 
of agencies covered under the 1949 Act, the proceeds from disposal do 
not necessarily go into the Land and Water Conservation Fund or into 
the Treasury General Fund. In some cases these agencies have the 
statutory authority to retain some, if not or all, of the net proceeds 
from the disposal of their real property assets.
    In most cases where agencies have the authority to outlease real 
property under their custody, control and use, they are not authorized 
to retain the proceeds.
    There is an overwhelming need to increase the incentives to dispose 
of real property above what is currently in place, even at the 
potential cost of impacting the Land and Water Conservation Fund. 
Likewise, there can be uses for real property outside of the Government 
whereby a controlling agency could outlease space to a private sector 
tenant for a limited period of time. Federal agencies will be more 
willing to dispose of real property assets, or outlease them, if they 
know that the proceeds will be retained, rather than placed in a fund 
that is beyond their control. This is critical in today's changing 
environment and in times of increasingly short supply of resources.

Principle #9.--Professional Training

    Federal employees should be given the training needed to perform 
their jobs at the highest level of professionalism, and in order to 
utilize models and other analytical tools for optimizing their real 
property asset management decisions.

Definition

    The tasks associated with real property asset management are many 
and varied. Not only does asset management include the day-to-day 
management of the physical property representing the asset, it also 
involves the management of the cash flow generated by the asset, the 
long term strategic planning for capital improvements that the asset 
may require, and the arranging for continued use and occupancy of the 
asset. In the case of Federally-controlled real property assets, this 
includes finding the appropriate Government agency for buildings and 
space that are underutilized or in the vacant space inventory.
    Training is a means to achieve expertise, and so is job rotation 
and on-the-job learning. Federal personnel involved in real property 
asset management should be highly trained in a variety of areas. These 
areas of expertise are taught in recognized industry courses that 
specialize in all aspects of real property asset management, such as 
the courses offered by the Building Owners and Managers Association and 
other appropriate organizations.
    With the proper training and guidance, the agencies of the Federal 
Government will have employees who are current and competent experts in 
the real property asset management field, who can discuss real property 
asset management related issues with anyone, and who can deal with the 
long range planning and evaluation of assets for the maximum use and 
benefit to the public.

Example

    Employees of any Federal Government agency directly involved with 
real property asset management can take a variety of courses that are 
available to professionals in the industry. These courses specialize in 
all of the different areas of real property asset management. Combined 
with hands-on experience, the Government's real property asset managers 
can and should be on a level with any asset manager in private 
industry. This is even more important in these times of increasing 
responsibilities of asset managers, as well as with the personnel and 
resource reductions that are taking place in Government.

[FR Doc. 96-26051 Filed 10-15-96; 8:45 am]
BILLING CODE 6820-23-M