Budget Issues: Agency Implementation of Capital Planning Principles Is Mixed

Budget Issues: Agency Implementation of Capital Planning
Principles Is Mixed (16-JAN-04, GAO-04-138).

In fiscal year 2002, the federal government spent nearly $100
billion on capital investments intended to yield long-term
benefits for its own operations. Interested in ensuring that good
investment decisions are made, the Chairman and Ranking Minority
Member, Subcommittee on Government Efficiency and Financial
Management, House Committee on Government Reform, asked GAO to
evaluate agency experiences with the capital planning principles
embodied in the Office of Management and Budget's (OMB) Capital
Programming Guide and GAO's Executive Guide on leading state,
local, and private sector capital investment practices. This
report examines selected agencies' implementation of this
guidance and OMB's use of long-term capital planning data.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-138
ACCNO: A09121
TITLE: Budget Issues: Agency Implementation of Capital Planning
Principles Is Mixed
DATE: 01/16/2004
SUBJECT: Budget obligations
Capital
Decision making
Financial management
Inventories
Investment planning
Planning programming budgeting
Procurement planning
Strategic planning
Assessments
Capital investment planning
GAO Executive Guide
OMB Capital Programming Guide

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GAO-04-138

United States General Accounting Office

GAO Report to the Subcommittee on Government Efficiency and Financial

Management, Committee on Government Reform, House of Representatives

January 2004

BUDGET ISSUES

Agency Implementation of Capital Planning Principles Is Mixed

GAO-04-138

Highlights of GAO-04-138, a report to the Subcommittee on Government
Efficiency and Financial Management, Committee on Government Reform, House
of Representatives

GAO recommends that OMB (1) require that agencies comply with the
principles and practices of its Capital Programming Guide and (2) require
that long-term capital plans be submitted to OMB and provided to
congressional decision makers. GAO also recommends various specific
improvements that could help the Department of Veterans Affairs (VA), the
National Park Service (Park Service), the Bureau of Prisons (BOP) and the
National Oceanic and Atmospheric Administration (NOAA) in fully
implementing the capital planning principles.

www.gao.gov/cgi-bin/getrpt?GAO-04-138.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Susan J. Irving at (202)
512-9142 or [email protected].

January 2004

BUDGET ISSUES

Agency Implementation of Capital Planning Principles Is Mixed

VA, the Park Service, BOP, and NOAA have had mixed success with
implementing the planning phase principles found in OMB's Capital
Programming Guide and GAO's Executive Guide. The agencies' capital
planning processes generally link to their strategic goals and objectives,
and they all consider a range of alternatives to bridge an identified
performance gap-including nonownership options where appropriate. Most
have established processes to review and select from competing project
proposals-including the use of senior-level review boards and established
criteria to rank project proposals-strongly emphasizing linkage to
strategic goals. However, case study agencies have had limited success
with using agencywide asset inventory systems and data on asset condition
to identify performance gaps. Also, none of them prepares an agencywide
long-term capital investment plan. Some have long-term capital planning
documents that could serve as a base for development of a comprehensive
agencywide plan. While two case study agencies indicated plans to develop
agencywide asset inventories and condition data-one of these making
substantial progress-only one plans to develop a comprehensive agencywide
long-term capital plan.

OMB resource management office (RMO) staff varied in their expectations
about agency use of OMB's Capital Programming Guide. The RMO staff for the
four case study agencies consider numerous factors in reviewing agency
requests for capital funding, including strategic plans, obligation rates,
and the overall budget request. OMB does not require long-term capital
plans from agencies, but RMOs receive various documents for individual
capital projects.

Case Study Agencies Conformance with Capital Planning Guidance

Contents

Letter 1

Executive Summary 2

Purpose 2
Background 3
Results in Brief 4
Principal Findings 6
Recommendations for Executive Action 13
Agency Comments 13

Chapter 1 15

Importance of Governmentwide Capital Investment Spending 16

Capital Planning Is the Background 21
Core of the Capital Case Study Agencies 38

DecisionMaking Framework

Chapter 2 43

Capital Investments Link to Strategic Plans 43
Agency Capital Agency Guidance Requires That Capital Investment Proposals
Link
Planning Processes to Strategic Goals and Objectives 46
Link to Strategic Goals Agency Criteria Used to Rank and Select Capital
Investments

Include Strategic Linkage 48
and Objectives Conclusion 49

Chapter 3
Agency Processes for
Assessing Capital
Needs Reflect OMB
and GAO Guidance to
Varying Degrees

VA Has a Formal Process for Assessing Its Needs, but Lacks Agencywide
Asset Condition Data and an Inventory of Capital Assets 51

The National Park Service Has a Formal Process for Assessing Its Needs,
but Lacks Agencywide Comprehensive Information on Asset Condition 55

NOAA Has a Process for Assessing Its Needs and Maintains an
Agencywide Asset Inventory, but Lacks Current Information on
Asset Condition 59

BOP Maintains an Inventory of Capital Assets and Information on
Asset Condition; However, the Basis for Its Longterm
Performance Gap Is Unclear 62

Agency Use of Integrated Project Teams 66

Contents

Conclusion 66 Recommendations for Executive Action 67 Agency Comments 68

Chapter 4
Agencies Consider
Alternatives but
Processes to Rank and
Select Investments and
Produce Longterm
Capital Plans Need
Attention

Agencies Have Processes to Consider Various Options for Addressing Their
Performance Gaps-Generally a Range of Alternatives, Including Noncapital
Options 69

Case Study Agency Processes for Ranking and Selecting Proposed Capital
Investments Vary, but Most Have a Formal Review and Approval Framework 78

Case Study Agencies Did Not Prepare Longterm Capital Plans, but

Two Had Various Longterm Planning Documents 91 Conclusion 96
Recommendations for Executive Action 97 Agency Comments 97

Chapter 5
Agencies and Budget
Decision Makers Agree
That Capital Planning
Is Useful, but
Implementation
Challenges Exist

99 Agencies Have Mixed Opinions about Usefulness of OMB Capital Guidance
99 Agencies Identified Challenges in Implementing the Principles of OMB's
Capital Programming Guide 101 OMB and Congressional Perspectives
onLongterm Capital Planning

Information and Views on Agency Processes 102 Conclusion 105
Recommendations for Executive Action 106 Agency Comments 106

Appendixes

Appendix I:

Appendix II:

Appendix III:

Objectives, Scope, and Methodology 108

Department of Veterans Affairs 112 Background/ Organizational Structure
112 Types of Assets 112 Capital Spending 113 Capital Planning Process 113
Challenges 116 Prior GAO Work at VA 116 The Future of VA 117 Some Related
GAO Reports 117

National Park Service 119

Contents

Background/ Organizational Structure 119
Types of Assets 119
Capital Spending 119
Capital Planning Process 120
Challenges 124
Prior GAO Work at Park Service 125
The Future of the Park Service 126
Some Related GAO Reports 126

Appendix IV: National Oceanic and Atmospheric Administration 128
Background/ Organizational Structure 128
Types of Assets 128
Capital Spending 128
Capital Planning Process 129
Challenges 133
Prior GAO Work at NOAA 133
The Future of NOAA 134
Some Related GAO Reports 135

Appendix V: Bureau of Prisons 136
Background/ Organizational Structure 136
Types of Assets 136
Capital Spending 136
Capital Planning Process 137
Challenges 140
Prior GAO Work at BOP 141
The Future of BOP 142
Some Related GAO Reports 142

Appendix VI: OMB Guidance 143

Appendix VII: Comments from the Department of Veterans Affairs 144

Appendix VIII: Comments from the Bureau of Prisons 148

Appendix IX: Comments from the National Oceanic and Atmospheric
Administration 151

Appendix X: GAO Contact and Staff Acknowledgments 153
GAO Contact 153
Acknowledgments 153

Related GAO Products 154

Contents

Figures Figure 1:

Figure 2:

Figure 3:

Figure 4:

Figure 5:

Figure 6: Figure 7:

Figure 8:

Figure 9:

Case Study Agencies' Conformance with Capital Planning
Guidance
Governmentwide Major Public Physical Capital
Investment Outlays
Governmentwide Major Public Physical Capital
Investment Outlays as a Percentage of Total Outlays
Governmentwide Major Public Physical Capital
Investment Outlays as a Percentage of GDP
Case Study Agencies Major Public Physical Capital
Investment Outlays
OMB Capital Programming Cycle
Capital DecisionMaking Framework, Principles and
Practices
OMB Decision Tree for Analyzing Agency Programs and
Investments
Example of Agency Process Illustrating Elements of
Planning Phase Guidance

20 24

37 71 76 80 81 82

113

120

129

137 Figure 10: VA EnhancedUse Authority Figure 11: Value Analysis Use at
the Park Service Figure 12: VA Use of the Analytical Hierarchy Process
Figure 13: AHP Criteria Weights Figure 14: VA's Review and Selection
Process Figure 15: Park Service Capital Investment Review and Selection

Process Figure 16: VA Capital Outlays for Fiscal Years 1993 through 2002
Figure 17: Park Service Capital Outlays for Fiscal Years 1993 through 2002
Figure 18: NOAA Capital Outlays for Fiscal Years 1993 through 2002 Figure
19: BOP Capital Outlays for Fiscal Years 1993 through 2002

Abbreviations

ACP Agency Capital Plan
AHP Analytical Hierarchy Process
ASC Administrative Support Centers
BOP Bureau of Prisons
CAMS Capital Asset Management System

Contents

CARES Capital Asset Realignment for Enhanced Services
CBA Choosing By Advantage
CIP Capital Investment Panel
CMMS Computerized Maintenance Management System
CPM Construction Program Management Office
DAB Development Advisory Board
DOD Department of Defense
DOI Department of the Interior
DOJ Department of Justice
EIS environmental impact statement
FASA Federal Acquisition Streamlining Act of 1994
FIRB Finance and Investment Review Board
FMSS Facilities Management Software System
GDP gross domestic product
GSA General Services Administration
GMP general management plan
GPRA Government Performance and Results Act of 1993
ICE Bureau of Immigration and Customs Enforcement
INS Immigration and Naturalization Service
IPT integrated project teams
IT information technology
LROBP LongRange Overseas Buildings Plan
M&R modernization and repair
MSN memorial service network
NAPA National Academy for Public Administration
NASA National Aeronautics and Space Administration
NCA National Cemetery Administration
NEPA National Environmental Policy Act
NESDIS National Environmental Satellite, Data, and Information Service
NLC National Leadership Council
NMFS National Marine Fisheries Service
NOAA National Oceanic and Atmospheric Administration
NOS National Ocean Service
NPOESS National PolarOrbiting Operational Environmental Satellite

System NWS National Weather Service OAEM Office of Asset Enterprise
Management OAR Office of Oceanic and Atmospheric Research OFA Office of
Finance and Administration OIG Office of Inspector General OMAO Office of
Marine and Aviation Operations OMB Office of Management and Budget

Contents

PAC procurement, acquisition, and construction
PMIS Project Management Information System
POES PolarOrbiting Operational Environmental Satellite
RMO resource management office
SMC Strategic Management Council
TRSO Technical Resource Support Office
TVA Tennessee Valley Authority
UNOLS UniversityNational Oceanographic Laboratory System
USMS United States Marshals Service
VA Department of Veterans Affairs
VBA Veterans Benefits Administration
VHA Veterans Health Administration
VISN Veterans Integrated Service Network

This is a work of the U.S. government and is not subject to copyright
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separately.

United States General Accounting Office

Washington, D.C. 20548

January 16, 2004

The Honorable Todd R. Platts
Chairman
The Honorable Edolphus Towns
Ranking Minority Member
Subcommittee on Government Efficiency and Financial Management
Committee on Government Reform
House of Representatives

This report responds to your request that we evaluate agency experiences
with implementing the capital planning principles embodied in the Office
of
Management and Budget's (OMB) Capital Programming Guide and GAO's
Executive Guide: Leading Practices in Capital Decision-Making. As
requested, we (1) determined the extent to which selected agencies have
implemented the planning phase principles and concepts described in the
capital guidance, (2) identified problems selected agencies have
encountered in implementing the guidance principles and concepts, and
(3) determined the extent to which OMB uses longterm capital planning
information in reviewing agency budget requests and supporting budget
justifications to the Congress. We are making recommendations to the
Director of the Office of Management and Budget and selected federal
agency heads directed at improving agency conformance to OMB and GAO
capital planning guidance.

We are sending copies of this report to the Director of the Office of
Management and Budget, the Secretary of Veterans Affairs, the Director of
the National Park Service, the Under Secretary of Commerce for Oceans
and Atmosphere, the Director of the Federal Bureau of Prisons, and
selected federal agencies. We will also make copies available to others
upon request. This report will also be available at no charge on the GAO
Web site at http://www.gao.gov. Major contributors to this report are
listed
in appendix X. If you have any questions concerning this report, please
call
me on (202) 5129142.

Susan J. Irving
Director, Federal Budget Analysis

Executive Summary

Purpose In fiscal year 2002, the federal government spent nearly $100
billion on capital investments intended to yield longterm benefits for its
own operations. During 2002, the National Oceanic and Atmospheric
Administration spent $787 million on such investments-a 15fold increase in
real terms from the $51 million it spent in 1993. The Department of
Veterans Affairs spent $2.1 billion in 2002-a substantial increase from
the $1.4 billion in real terms it spent in 1993. Both because large sums
of taxpayer funds are spent on capital assets and because their
performance affects how well agencies are able to achieve their missions,
goals, and objectives and provide service to the public, effective
planning for capital investments is a very important task. The Congress,
the Office of Management and Budget (OMB), and GAO all have identified the
need for effective capital planning. In addition, budgetary pressures and
demands to improve performance in all areas put pressure on agencies to
make sound capital acquisition choices. Recently, GAO added federal real
property management to its list of highrisk areas. Prior GAO studies found
that many federal assets are not effectively aligned with agencies'
changing missions and the problems are compounded by the lack of reliable
governmentwide data for strategic asset management. In the overall capital
programming process, planning is the first phase-and arguably the most
important-since it drives the remaining phases of budgeting, procurement,
and management.

The Chairman and Ranking Minority Member, Subcommittee on Government
Efficiency and Financial Management, House Committee on Government Reform,
asked GAO to evaluate agency experiences with OMB's and GAO's capital
investment guidance. This report specifically addresses the extent to
which selected agencies have implemented the planning phase principles of
the OMB Capital Programming Guide and the practices described in the GAO
Executive Guide: Leading Practices in Capital Decision-Making. The report
identifies challenges agencies have faced with implementing the principles
and practices and describes the extent to which OMB uses longterm capital
planning information in reviewing agency budget requests and supporting
justifications to the Congress. Using a case study approach, GAO evaluated
the experiences of the Department of Veterans Affairs (VA), the National
Park Service (Park Service), the Bureau of Prisons (BOP), and the National
Oceanic and Atmospheric Administration (NOAA). GAO also surveyed officials
in eight additional agencies with significant capital investment spending
to obtain their views on the usefulness of OMB's Capital Programming
Guide.

Executive Summary

Background Federal government spending on capital investments can be
divided into two categories: that which provides longterm benefits to the
nation as a whole-increasing the nation's overall capital stock for
economic growth- and that which improves the efficiency of internal
federal agency operations-capital investment for the government as an
operating entity. This report, like OMB's Capital Programming Guide,
focuses on the latter-those assets the government acquires for its own
use. They are defined as land, structures, equipment, and intellectual
property (including software) that have an estimated useful life of 2
years or more. Examples are office buildings, hospitals, prisons, ships,
satellites, motor vehicles, information technology, and parklands.

During the 1990s, the Congress enacted legislation to help move agencies
toward improving their capital planning processes. The Congress enacted
the Federal Acquisition Streamlining Act of 1994 to improve the federal
acquisition process and the ClingerCohen Act in 1996 to improve the
implementation and management of information technology investments. OMB
has issued various guidance and requirements for agencies to follow and
use in developing disciplined capital programming processes, including the
1997 Capital Programming Guide, to provide agencies a basic reference for
establishing an effective process for making investment decisions. The
Capital Programming Guide integrates executive office and statutory asset
management initiatives into a single, integrated process to ensure that
capital investments contribute to the achievement of agency goals and
objectives. While agencies are provided flexibility in how they implement
the guidance principles and practices, they are expected to comply with
existing statutes for planning and funding new capital asset acquisitions.
In 1998, GAO issued its Executive Guide based on a study of leading state
and local government and private sector capital investment practices. The
GAO Guide summarizes 12 fundamental practices (shown in ch. 1, fig. 7)
that have been successfully implemented by organizations that are
recognized for their outstanding capital decisionmaking practices and
provides examples of leading practices from which the federal government
may draw lessons and ideas.

This report focuses on the principles and practices that underlie the
planning phases of both OMB's Capital Programming Guide and GAO's
Executive Guide. They start with linking the capital planning process to
the organization's mission, goals, and objectives and culminate with the
development of a longterm capital investment plan and are described in
this report as strategic linkage, needs assessment and gap identification,

Executive Summary

alternatives evaluation, establishment of a review and approval framework
(using established criteria to rank and select proposed projects), and
development of a longterm capital plan.

Results in Brief Case study agencies have experienced mixed success with
implementing the planning phase principles and practices described in
OMB's Capital Programming Guide and GAO's Executive Guide. GAO found that
agency capital planning processes generally link to the agencies'
strategic goals and objectives and consider a range of alternatives to
bridge any identified performance gaps. GAO also found that most case
study agencies have formal processes for ranking and selecting proposed
capital investments. However, not all agencies have been successful in
developing and using agencywide asset inventories and asset condition data
to assess capital needs and identify performance gaps. Also, none of the
case study agencies has developed a comprehensive, agencywide, longterm
capital investment plan. Some agencies have longterm planning documents,
but none has a comprehensive plan that defines its longterm investment
decisions. Figure 1 shows the case study agencies' varying degrees of
implementation of the planning phase guidance. GAO makes recommendations
in this report directed at improving agency conformance to OMB and GAO
capital planning guidance.

Executive Summary

Figure 1: Case Study Agencies' Conformance with Capital Planning Guidance

Planning guidance VA BOP Park Service NOAA
Strategic linkage Link capital investment
planning to agency mission, strategic
goals, and objectives (See ch. 2)
Needs assessment and gap identification
Conduct comprehensive assessment of needs
to achieve results-evaluating the capacity
of existing assets and determining the
performance gap between current and needed
capabilities (See ch. 3)
Alternatives evaluation Identify and
evaluate multiple alternatives to bridge
the performance gap, including noncapital
options (See ch. 4)
Review and approval framework with
established criteria for selecting capital
investments Establish a review and approval
framework to oversee the process of ranking
and selecting capital investments using
established selection criteria (See ch. 4)
Long-term capital plan Develop a
comprehensive long-term capital investment
plan that defines agencywide capital
investment decisions (See ch. 4)

Agency practices conform to guidance

Agency practices partially conform to guidance

Agency practices do not conform to guidance

Source: GAO analysis of agency data.

Some of the capital guidance also has presented a challenge for the eight
additional agencies GAO surveyed, and the degree to which the surveyed
agencies and GAO's case study agencies follow the capital guidance varies.
As mentioned, some of the GAO case study agencies have successfully
implemented many of the principles and practices described in both OMB's
and GAO's guidance but have not been successful in implementing others.
The survey agencies have been challenged by some of the guidance
principles and practices-specifically, those agencies whose activities

Executive Summary

involve research and development or scientific pursuits. Despite the
challenges experienced, agencies generally agree that the guidance is
helpful for developing an effective capital decisionmaking process.

OMB's reliance on longterm capital planning information for budget review
and its expectations for agency use of its capital guidance varied by OMB
resource management office (RMO) staff. OMB RMO staff for GAO's four case
study agencies consider a number of factors-but not longterm capital
plans-when reviewing agency budget requests for capital projects. However,
based on GAO's work at leading private and state and local entities,
longterm capital plans, as well as all the other leading practices, result
in better capital decisions. Since these practices embedded in the OMB
Guide have demonstrated benefits to leading organizations, GAO makes
recommendations in this report directed at requiring agency use of OMB's
Capital Programming Guide.

Principal Findings

Case Study Agencies Have Successfully Implemented Some of the Capital
Guidance Principles and Practices

Both OMB and GAO guidance stress the importance of linking capital asset
investments to an organization's overall mission and longterm strategic
goals. The guidance also strongly emphasizes evaluating a full range of
alternatives to bridge any identified performance gap. Further, the
guidance calls for a comprehensive decisionmaking framework to review,
rank, and select from among competing project proposals. Such a framework
should include appropriate levels of management review and selections
should be based on the use of established criteria.

Case study agency capital planning processes do consider strategic goals
as decisions are made about capital investments. Current presidential
administration and departmental priorities are communicated throughout the
planning processes. In some cases, the strategic linkage is demonstrated
by specific projects that implement longterm agency goals. In other cases,
the linkage is evident in agency guidance for developing capital project
proposals and the criteria used to rank and select among competing project
proposals.

When a performance gap-a gap between resources needed and the capacity of
existing resources to achieve goals and objectives-is identified, case
study agencies consider various alternatives for acquiring

Executive Summary

new capital assets and often choose such alternatives, including
nonownership options, where appropriate. This consideration of
alternatives is one of the practices in OMB's Capital Programming Guide.

VA departmental guidance requires that four alternative approaches be
considered to bridge any performance gap-leasing; status quo; new
construction; and rehabilitation, repair, or expansion of existing
facilities.

For BOP, one strategy to achieve its goals is to acquire needed prison
capacity through cooperative arrangements with state and local
governments, contracts with private providers of correctional services,
and alternatives to traditional confinement where appropriate.

The Park Service conducts extensive alternatives analysis at various
stages of a project proposal's development and review. Park Service
alternatives considered and used include renovating and rehabilitating
existing facilities and partnering with other governments for land
acquisitions and with the private sector and nonprofit entities.

NOAA has converted excess U.S. Navy vessels to its own use as an
alternative to new ship construction. Also, one of NOAA's strategic goals
is to pursue partnerships with entities in the public and private sectors.
To accomplish this, NOAA has partnered with universities for the use of
excess university vessels and shares a radar system with the Department of
Defense and the Federal Aviation Administration.

Most case study agencies have an established framework to review and
select from among competing capital investment proposals. These processes
are formal and include the use of seniorlevel review boards and committees
and established criteria for selecting proposed projects. VA has a
departmentlevel process that considers projects for all VA
administrations. It has various levels of review and uses established
criteria and groupenabled software to rank proposed investments. The
ranking and selection process is managed by a multidisciplinary assessment
team and uses evaluation factors applied to each proposed investment. The
Park Service also has a formal review and selection process that includes
both internal and external seniorlevel review boards. Like VA, the Park
Service ranking process is managed by a multidisciplinary assessment team
and uses evaluation factors applied to each proposed investment. NOAA's
review process uses multiple NOAAlevel review boards that are aligned with
NOAA's strategic goals. These boards each use a separate set of
established criteria to rank capital investment proposals-criteria aligned

Executive Summary

with specific strategic goals. While BOP's review and selection process
includes the use of seniorlevel committees, it is not formal, is not well
documented, and does not appear to use formal selection criteria.

Case Study Agencies Generally Assess Their Capital Needs and Identify
Performance Gaps, but Not All Agencies Have Asset Inventories and
Sufficient Information on Asset Condition

Both OMB and GAO guidance stress the importance of conducting a baseline
assessment of the resources needed and current capacity of existing
resources to achieve resultsoriented goals and objectives. This assessment
should include the use of an inventory of all existing assets and current
information on asset condition in order to identify any performance gaps.
Asset inventory and current condition data should be available to all
program managers and decision makers involved in the capital
decision-making process. One GAO case study agency, VA, has neither an
agencywide inventory of existing capital assets nor agencywide information
on the condition of those assets, although it is in the process of
creating a data management system to inventory capital assets and measure
their performance against VA portfolio goals. A second case study agency,
the Park Service, has just recently developed an asset inventory, and
while the agency has made some progress toward determining the condition
of its assets, comprehensive condition assessments will not be completed
for some time. A third case study agency, NOAA, has an agencywide
inventory of its assets but lacks current information on the condition of
those assets. The fourth GAO case study agency, BOP, maintains an asset
inventory and information on asset condition but lacks a clear basis for
its longterm performance gap.

VA's Veterans Health Administration (VHA) maintains information on the
type, number, and use of facilities and other assets at the network level,
but until March 2003, the data on facilities were not readily available to
other networks or headquarters personnel. Therefore, decision makers
cannot readily identify assets available for sharing across networks.
Similarly, although VHA facility employees have routinely conducted
condition assessments of the facilities under their control, the results
were maintained at each facility or, in some cases, at the health care
network level and were not available to other VHA networks or headquarters
decision makers. VA's National Cemetery Administration (NCA) maintains an
inventory system of its assets and facilities, including information on
condition, as well as a separate database of major asset items at each
cemetery. While these data are used as part of NCA's 5year planning
process and are used to identify program performance gaps and options for
addressing the gaps, the information is not readily available to VA
headquarters managers. Officials told GAO that VA is in the process of

Executive Summary

developing an agencywide inventory system and that inventory data will be
available to all VA managers at the department and bureau levels. VA
officials also told GAO that VHA has conducted a nationwide
buildingbybuilding survey of each facility in each VHA health care
network, and the survey data will be available to facility managers
VAwide.

Historically, the Park Service has maintained asset inventories at the
park level with varying levels of detailed information. Some national park
units have a limited inventory covering the assets under their control.
For example, the Grand Canyon National Park has an inventory of real
property assets and an inventory of what it calls "formal" property,
including assets with an acquisition value of $15,000 or more. Each
division within the park has an inventory of socalled "informal" property
valued below $15,000. Until just recently this individual park information
was not available servicewide. Since asset condition assessments were not
required in the past, condition information historically had not been
available servicewide to capital planners and decision makers. Asset
condition is monitored on a parkbypark basis at the park level, and
priority capital projects were determined based on the institutional
knowledge of park management and visual inspections of park assets.
However, these visual inspections were not based on any systematic
criteria and there was little documentation available.

Also, until just recently, for two decades the Park Service lacked the
benefit of a comprehensive asset inventory by age, type, size, and number
of assets. As a result, the physical condition, functionality,
suitability, and life expectancy of its facilities and the backlog of
deferred maintenance requirements were not adequately documented. The Park
Service is in the process of implementing an asset management process that
is designed to include a comprehensive inventory of park assets and
comprehensive data on the condition of those assets. This asset
information will be captured in a centralized database for the entire park
system. According to the Park Service, the agency recently completed the
asset inventory phase of the process and has completed visual inspections
on all but nine of the larger parks in the park system. The agency also is
concurrently performing the more detailed comprehensive condition
assessments, but these assessments will not be completed for some time.

Executive Summary

NOAA has separate asset inventories for its real and personal property1
but maintains no asset condition data. NOAA headquarters and the
Department of Commerce's administrative support centers maintain a single
inventory of real property assets, including data on leased properties.
The personal property inventory is centralized and maintained by NOAA's
finance and administration office. While information on asset type, size
and age of facility, and current physical location is available to
decision makers, NOAA currently maintains no comprehensive data on the
condition of its real or personal property assets. In past years, NOAA
regularly performed asset condition assessments for its real property
assets; however, those assessments have been suspended. Officials at NOAA
told GAO that a new process for conducting assessments of real property
assets is scheduled to begin in fiscal year 2003. However, NOAA has no
process for assessing the condition of its personal property assets. An
official told GAO that NOAA line and program offices do not perform
assessments of personal property assets because it is believed that if
regular asset maintenance is performed, condition assessments and
inspections are not necessary.

The BOP new construction program follows a centralized longterm capacity
planning process with the goal of ensuring sufficient institution capacity
while maintaining prison crowding at safe and secure targeted levels.
Along with data from BOP's asset inventory and maintenance systems, the
process uses the concept of rated capacity, which is a standard that
considers a stated level, or percentage, of double bunking (overcrowding)
in inmate living quarters to arrive at an institution's inmate capacity
level. However, BOP is unable to demonstrate the basis for what it
considers an acceptable level of systemwide overcrowding. Officials told
GAO that over the past two decades, the overcrowding goal has increased
from 10 to 15 percent and more recently to about 30 percent. They say the
increases are the result of what is believed to be acceptable percentages
of double bunking. BOP officials could not provide any studies or
documentation supporting what the agency considers an acceptable level of
double bunking or crowding above rated capacity levels. According to
officials, the change in targeted levels or increased goal levels appears
to have had no effect on managing the prison population.

1Real property assets consist of land; facilities; and anything
constructed on, growing on, or attached to land. Personal property is all
property other than real property. It includes items such as ships,
aircraft, satellites, and computers.

Executive Summary

None of the Case Study Agencies Have Developed Longterm Capital Investment
Plans

Both OMB and GAO guidance emphasize the importance of developing a
longterm capital investment plan. Similar to longterm strategic plans,
longterm capital plans covering 5 to 6 years guide the implementation of
organizational goals and objectives and help decision makers establish
priorities over time. The longterm plan is considered the ultimate product
of an organization's planning phase activities and should clearly describe
an entity's performance gap and the resources needed to bridge it. It also
should provide a clear justification for new acquisitions proposed for
funding-linking proposed investments to an organization's longterm
strategic goals. Although two of the four case study agencies have
long-term planning documents, none have single agencywide longterm capital
plans that define agency capital investment decisions.

VA has prepared 1year plans in the past that served as the department's
annual budget request for capital acquisitions. VA's NCA prepares a 5year
facilities plan that is driven by its strategic plan. Although NCA's
planning documents are available to VA decision makers, VA does not
produce a longterm plan that integrates all of the department's capital
needs. Officials told GAO that the department has begun a process to
develop a comprehensive longterm plan for all of VA. Like VA, NOAA lacks a
long-term capital plan that integrates the capital needs for its major
line and program offices although some offices have planning documents
that reflect OMB and GAO guidance to varying degrees. For example, NOAA's
Office of Marine and Aviation Operations officials told GAO that the
office prepares an unpublished plan that is a 10year chart of cost
estimates and dates for major repairs and replacements to its ships.
Officials at NOAA had no plans to develop an agencywide NOAA longterm
capital plan.

BOP prepares three longterm documents that viewed together, provide a
sense of how BOP plans to achieve its current overcrowding goal; however,
there is no single document that culminates its capital planning process.
The Park Service prepares a servicewide 5year construction plan that
results from its rigorous review and selection process; however, the plan
itself is merely a list of planned projects with estimated costs and
schedule data rather than a narrative justification supporting an
identified performance gap and linkage to organizational goals. In
addition, the Park Service construction plan does not include all of the
agency's construction needs or its major equipment and land acquisitions.

Executive Summary

Some Agencies Are Challenged by Aspects of OMB's Guide, and Agencies Vary
in the Extent to Which They Use It

The OMB Capital Programming Guide was intended to assist agencies with
developing a disciplined capital programming process. OMB strongly
encourages agencies to use its guidance but does not require it, and the
degree to which agencies use OMB's guidance varies. Some agencies have
found it difficult to implement some of the guidance principles. Surveyed
agencies, such as the Tennessee Valley Authority, find it challenging to
quantify benefits of capital projects over several years. Also, the
National Aeronautics and Space Administration (NASA) found the guidance
inconsistent with the research and development nature of its programs. As
mentioned, not all GAO case study agencies have successfully developed and
used asset inventories or developed agencywide longterm capital plans.
While some agencies have had difficulties, other survey and case study
agency officials told GAO they generally find the guidance helpful in
developing an effective process for capital decision making. Some have
successfully incorporated many of the guidance principles into their
processes. For example, the Indian Health Service told GAO that many of
the OMB guidance principles are included in its Health Care Facilities
Construction Priority System. While NASA found the guidance inconsistent
with its research and development activities, officials told GAO that the
agency has implemented the guidance principles for selected information
technology projects. NOAA' s National Weather Service officials cite the
establishment of its seniorlevel review board as stemming from the OMB
guidance.

Use of Longterm Capital Planning Information by Budget Decision Makers
Varies by Agency

When the OMB Capital Programming Guide was developed, a general
presumption was that OMB would only consider recommending for funding in
the President's Budget priority capital investments that comply with good
capital programming principles. However, expectations for agencies to use
OMB's Guide and reliance on longterm capital planning information varied
by OMB RMO staff. OMB does not require longterm capital plans from
agencies, but RMO staff solicit and receive various documents for
individual capital projects. OMB staff told GAO that they place more
emphasis on the required OMB Exhibit 300 (Capital Asset Plan and Business
Case for Major Acquisitions) when reviewing agency funding requests. OMB
requires Exhibit 300 for each requested asset as part of an agency's
budget submission. It is an individual asset plan for each major new and
ongoing project, system, or acquisition, but it is not a longterm capital
plan that defines the agency's longterm investment decisions. An agency
could have many Exhibits 300 but have no comprehensive capital plan to
pull them all together over the long term.

Executive Summary

VA's OMB RMO receives thorough business case packages for VA construction
projects, and BOP's RMO receives regular longterm planning information
from BOP and independently performs research to obtain more information.
OMB views its role as that of integrator of specific capital project
proposals into the larger budget process. All of the RMO staff told GAO
that they consider other factors, such as agency obligation rates, the
overall budget request, and agency strategic plans, when reviewing agency
budget requests for capital acquisitions.

While OMB RMOs receive some capital planning information for use during
budget review, staff told GAO that they are pushing agencies to consider
more alternatives as part their capital planning processes. The BOP RMO
staff person said she would like to see more consideration of state
facilities as an alternative to new prison construction and has urged BOP
to consider more contracting opportunities.

Since longterm capital plans have not been routinely provided to
congressional decision makers, GAO cannot assess their actual use.
However, congressional staff indicated that longterm capital planning
information could help them identify what the agencies viewed as
important. They also said that the planning process and analyses required
for developing a longterm plan can help ensure that agencies make
well-informed decisions.

The Department of State's 2003 LongRange Overseas Buildings Plan, which
provides a strategic road map for State's overseas buildings operations,
states that fiscal year 2003 budget decisions were based on the 2001
longrange plan.

Recommendations for GAO makes several recommendations to case study
agency management regarding increased emphasis and implementation of
specific practices

Executive Action from OMB's Capital Programming Guide. GAO also
recommends that the Director of OMB require that agencies comply with the
principles and practices of its guide, including development of longterm
agency capital plans.

Agency Comments OMB's Assistant General Counsel provided us with oral
comments on the draft report, saying that OMB agreed with our
recommendations. A few technical comments were also provided and have been
incorporated where

Executive Summary

appropriate. We received written comments from our four case study
agencies-VA, the Park Service, BOP, and NOAA. Our case study agencies
either agreed with our conclusions and recommendations or did not directly
address them. Most case study agencies indicated some actions planned or
taken to address our recommendations. Written comments provided from VA,
BOP, and NOAA are reprinted in appendixes VII, VIII, and IX, respectively.
A number of technical comments were also provided by our case study
agencies and have been incorporated in this report as appropriate.

Chapter 1

Capital Planning Is the Core of the Capital DecisionMaking Framework

Federal government spending on capital investments is spending that yields
longterm benefits. Its purpose may be to increase the nation's overall
capital stock for economic growth or to improve the efficiency of internal
federal agency operations-capital investment for the government as an
operating entity. This study focused on the capital assets the government
acquires for its own use. They are defined as land, structures, equipment,
and intellectual property (including software) with an estimated useful
life of 2 years or more. Examples include office buildings, hospitals,
prisons, ships, satellites, motor vehicles, information technology, and
parklands. Both because large sums of taxpayer funds are spent on capital
assets and because their performance affects how well agencies are able to
achieve their missions and goals and provide service to the public,
effective planning for the acquisition and management of federal capital
assets is an important task. In the overall capital programming process,
planning is the first step-and arguably the most important since it drives
the remaining phases of budgeting, procurement, and management.

The objectives of this study were to (1) determine the extent to which
selected agencies have implemented the Planning Phase principles of the
Office of Management and Budget's (OMB) Capital Programming Guide (OMB
Guide)1 and the leading practices in capital decision making described in
GAO's Executive Guide (GAO Guide);2 (2) identify what, if any, problems or
issues exist with implementing the principles and practices; and (3)
determine the extent to which OMB uses longterm capital planning
information in reviewing agency budget requests and supporting budget
justifications to the Congress. Using a case study approach, we evaluated
the experiences of the Department of Veterans Affairs (VA), the National
Park Service (Park Service), the Bureau of Prisons (BOP), and the National
Oceanic and Atmospheric Administration (NOAA).3 We also surveyed officials
in eight additional agencies with significant capital spending to obtain
their perceptions of OMB's Capital

1Office of Management and Budget, Capital Programming Guide, Version 1.0,
Supplement to Office of Management and Budget Circular A11, Part 3:
Planning, Budgeting, and Acquisition of Capital Assets, 1997. (Note: Since
its issuance, the guide is now found as a supplement to Circular A11, Part
7, Planning, Budgeting, Acquisition, and Management of Capital Assets).

2U.S. General Accounting Office, Executive Guide: Leading Practices in
Capital Decision-Making, GAO/AIMD9932 (Washington, D.C.: December 1998).

3In this report, we use the terms "agency" and "agencies" and the phrase
"case study agencies" to describe VA, Park Service, BOP, and NOAA.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

Guide. Appendix I contains a detailed discussion of our objectives, scope,
and methodology.

Separate chapters in this report address each principle as applied by the
case study agencies. Appendixes II through V each describe the case study
agency's processes in greater detail.

Importance of Governmentwide Capital Investment Spending

A review of recent historical trends can provide some perspective on the
magnitude and overall pattern of spending for federally owned capital
asset investments.4 For the 10year period 1993 through 2002, direct
governmentwide capital investment outlays as reported in the President's
Budget and adjusted for inflation by GAO were sizable, but as shown in
figure 2, show only a slight increase from $97.5 billion to $97.9 billion,
in real terms. Real defense capital outlays decreased from $77.3 billion
to about $68.3 billion, while real nondefense outlays increased from $19.8
billion to $29.5 billion over the 10year period.

4OMB requires agencies to code their net outlays each year according to
various investment categories or character classes. Investment outlays are
defined by OMB as spending that is intended primarily to yield benefits in
the future-whether to the nation as a whole or to the federal government.
Investments may be in the form of either direct federal spending or grants
to state and local governments, and may be for either tangible or
intangible assets. The investment categories that encompass capital assets
used by the federal government are those for direct spending on physical
assets. These categories are Construction and Rehabilitation (1312 and
1314), Major Equipment (1322 and 1324), and Purchases and Sales of Land
and Structures (1340). Major Equipment includes capital purchases of
information technology but excludes the support services related to
information technology purchases.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

Figure 2: Governmentwide Major Public Physical Capital Investment Outlays

120 Constant 2002 dollars in billions

100

0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Fiscal year

Total direct capital outlays Defense direct capital outlays Nondefense
direct capital outlays

Source: Fiscal Year 2004, Historical Tables, Budget of the United States
Government.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

However, as figure 3 shows, as a percentage of total federal outlays,
direct governmentwide capital investment outlays fell sharply from 6.8
percent to 4.9 percent. Most of this decline was in the defense portion of
governmentwide capital outlays, which fell from 5.4 percent to 3.4
percent. Although the nondefense portion fluctuated some, it was basically
unchanged at 1.4 percent in 1993 and 1.5 percent in 2002.

Figure 3: Governmentwide Major Public Physical Capital Investment Outlays
as a Percentage of Total Outlays

8 Percentage

0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Fiscal year

Total direct capital outlays as a percentage of total outlays

Defense direct capital outlays as a percentage of total outlays Nondefense
direct capital outlays as a percentage of total outlays

Source: Fiscal Year 2004, Historical Tables, Budget of the United States
Government.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

Finally as figure 4 shows, as a share of gross domestic product (GDP),
both governmentwide capital outlays and defense capital outlays fell by
0.6 percentage points during the 4year period 1993 through 1997 and then
remained basically unchanged through 2002. Nondefense capital outlays
fluctuated during the 10year period 1993 through 2002 but ended the period
at the same 0.3 percent of GDP. The stability of nondefense capital
outlays goes back further. As a percentage of total outlays and as a
percentage of GDP, nondefense capital outlays have not changed
considerably since we reported 30year spending trends in 1996.5

Figure 4: Governmentwide Major Public Physical Capital Investment Outlays
as a Percentage of GDP

1.6 Percentage

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Fiscal year

Total direct capital outlays as a percentage of GDP

Defense direct capital outlays as a percentage of GDP Nondefense direct
capital outlays as a percentage of GDP Source: Fiscal Year 2004,
Historical Tables, Budget of the United States Government.

Historical data for our four case study agencies show that capital outlays
fluctuated considerably in real terms over the 10year period 1993 through

5U.S. General Accounting Office, Budget Issues: Budgeting for Federal
Capital, GAO/AIMD-975 (Washington, D.C: Nov. 12, 1996).

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

2002.6 VA's capital outlays varied considerably throughout the 10year
period but showed an increase from $1.4 billion in 1993 to $2.1 billion in
2002. The Park Service's capital outlays fluctuated during the 10year
period and showed an increase from $395 million in 1993 to $496 million in
2002. BOP's capital outlays fluctuated from $399 million to $481 million
during the period 1993 through 2001, with a sharp drop to $34 million in
fiscal year 1998, and then a sharp increase to $795 million. NOAA's
capital outlays increased more than15fold over the 10year period, from $51
million to $787 million. This increase was primarily due to funding the
modernization of NOAA weather facilities and systems, satellite systems,
the first planned fisheries research vessel, and new laboratories and
science centers. Figure 5 shows these case study agency outlay trends.

Figure 5: Case Study Agencies Major Public Physical Capital Investment
Outlays

2500 Constant 2002 dollars in millions

2000

1500

1000

500

0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Fiscal year

VA BOP Park Service

NOAA Source: GAO Budget Database.

6Historical data were derived from GAO's Budget Database. The database
contains data taken from OMB's MAX System-the computerized system used to
collect and process information needed to prepare the President's Budget.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

Background Federal spending on capital assets can be divided into two
categories: that which provides benefits to the government's own
operations and that which provides longterm benefits to the nation as a
whole. This report, like OMB's Capital Programming Guide, focuses on the
former-those capital assets owned and used by the federal government
primarily to deliver federal services. These assets are those used by the
government as an operating entity.

The Congress, OMB, and GAO all have identified the need for effective
planning and management of capital asset investments. In addition,
increasing budget pressures and demands to improve performance in all
areas puts pressure on agencies to make the most effective capital
acquisition choices. OMB has issued various guidance and requirements for
agencies to follow and use in developing disciplined capital programming
processes. We conducted a study of leading state and local government and
private sector practices that can provide lessons for the federal
experience. More recently, we added federal real property to our list of
highrisk areas. In the highrisk report,7 we describe how many federal
assets are no longer effectively aligned with, or responsive to, agencies'
changing missions; how many assets are in an alarming state of
deterioration; and how the problems are compounded by the lack of reliable
governmentwide data for strategic asset management.

The Congress enacted legislation during the 1990s to help move agencies
toward improving their capital planning processes. The Congress enacted
the Federal Acquisition Streamlining Act of 1994 (FASA) to improve the
federal acquisition process. Title V of FASA was designed to foster the
development of (1) measurable cost, schedule, and performance goals and
(2) incentives for acquisition personnel to reach these goals. Civilian
agencies and Department of Defense agencies are required to report
annually on whether major and nonmajor programs are achieving 90 percent
of program goals and to identify suitable action if goals are not being
met. The Congress enacted the ClingerCohen Act in 1996 to improve the
implementation and management of information technology projects by
requiring that agencies engage in capital planning and performanceand
resultsbased management. The Government Performance and Results Act of
1993 (GPRA) requires agencies to develop mission statements, long-

7U.S. General Accounting Office, High-Risk Series: Federal Real Property,
GAO03122 (Washington, D.C.: January 2003).

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

range strategic goals and objectives, and annual performance plans. It
also emphasizes identifying and measuring outcomes, including benefits.

Effective capital programming requires longrange planning and a
disciplined decisionmaking process as the basis for managing a portfolio
of assets to achieve performance goals and objectives with minimal risk,
lowest lifecycle costs, and greatest benefits to the agency's business.
OMB has provided certain requirements and guidance to agencies regarding
capital programming in Circular A11 and its supplement. This circular and
an executive order on investments are described in appendix VI.

In July 1997, OMB issued the Capital Programming Guide to provide federal
agencies a basic reference for establishing an effective process for
making investment decisions. The guide stresses longterm capital planning
and the importance of having a formal capital asset infrastructure. It
suggests that like agency strategic plans, capital planning should span 5
years and the process should provide agency management with accurate
information on acquisition and lifecycle costs, schedules, and performance
of current and proposed capital assets. OMB's Guide also stresses that a
formal asset management infrastructure helps establish clear lines of
authority, responsibility, and accountability for the management of
capital assets. This infrastructure should include an executive review
committee that reviews the agency's entire capital portfolio periodically
and the use of an integrated project team.

The OMB Guide provides detailed guidance to federal agencies on planning,
budgeting, acquisition, and management of capital assets. The guide is
organized in four phases of capital programming-Planning, Budgeting,
Procurement, and ManagementInUse-and includes information from linking
capital decisions to strategic goals and objectives, to analyzing and
ranking potential investments, to making informed decisions based on the
full cost and risk of a project. Each of the four phases of the capital
programming process is composed of a number of steps. Planning Phase steps
range from strategic linkage to the development of a longterm agency
capital plan. The Budgeting Phase begins with the agency's budget
submission to OMB and ends with congressional approval and OMB
apportionment of funding. The Procurement Phase of the capital process
begins with acquisition planning, includes contract award and contract
management, and ends with testing and acceptance of the asset-ensuring
that the asset meets the requirements of the contract. The ManagementInUse
Phase begins with operational analysis and includes the execution of an
operation and

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

maintenance plan, a postimplementation review-to evaluate the overall
effectiveness of the agency's capital planning and acquisition process,
and the execution of an asset disposal plan.

The Capital Programming Guide integrates executive office and statutory
asset management initiatives, including GPRA, the ClingerCohen Act, and
FASA, into a single, integrated process to ensure that capital investments
contribute to the achievement of agency goals and objectives. The OMB
Guide supplements the requirements of OMB Circular A11, part 7, by
providing procedural and analytic guidelines. While agencies are provided
flexibility in how they implement the key principles and concepts of the
OMB Guide, they are expected to comply with existing statutes for planning
and funding new capital assets and achieving cost, schedule, and
performance goals.8 Figure 6 illustrates the four phases of capital
programming as presented in the OMB Guide.

8We participated in the development of OMB's Capital Programming Guide and
have provided OMB with examples of leading organization capital practices
for inclusion in a subsequent version of the guide.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

Figure 6: OMB Capital Programming Cycle

Source: Office of Management and Budget, Capital Programming Guide.

In December 1998, we issued an Executive Guide on capital decision making
based on extensive research to identify leading practices used by state
and local governments and private sector organizations. Our Executive
Guide summarizes 12 fundamental practices that have been successfully
implemented by organizations that were recognized for their outstanding
capital decisionmaking practices and provides examples of leading
practices from which the federal government may draw lessons and ideas. To
help consider the applicability to the federal government experience, our
Executive Guide includes information from one federal agency.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

Our Executive Guide presents an overall framework for effective capital
decision making and identifies organizational attributes that are
important to the decisionmaking process as a whole. Leading organizations
described vision and leadership, strategic planning, good information and
data systems, and clear communication as critical to the success of their
capital decisionmaking process. Our Guide is organized around five general
principles that leading organizations used to make capital investment
decisions: (1) integrate organizational goals into the capital
decisionmaking process, (2) evaluate and select capital assets using an
investment approach, (3) balance budgetary control and managerial
flexibility when funding capital projects, (4) use project management
techniques to optimize project success, and (5) evaluate results and
incorporate lessons learned into the decisionmaking process. To help
translate these principles into actions and to provide concrete examples
of how agencies and the Congress can apply these principles, we identify
practices used by the leading organizations that best demonstrate each
principle. Figure 7 illustrates the capital decisionmaking framework
principles and practices.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

Figure 7: Capital Decision-Making Framework, Principles and Practices
Principles Practices

4. Establish review and approval framework supported by analyses

5. Rank and select projects based on established criteria

6. Develop a long-term capital plan that defines capital asset decisions

1. Conduct comprehensive assessment of needs to meet results-oriented
goals and objectives

2. Identify current capabilities, including the use of an inventory of
assets and their condition, and determine if there is a gap between
current and needed capabilities

3. Decide how best to meet the gap by identifying and evaluating
alternative approaches (including noncapital approaches)

Source: GAO/AIMD-99-32.

Although our Guide focuses on fundamental practices rather than detailed
guidance, the practices represent actions and steps to be taken. In
addition, the examples presented in the guide illustrate and complement
many of the phases and specific steps contained in the OMB Capital
Programming Guide. There is a great deal of overlap between the OMB and
GAO guides since both suggest similar fundamental practices that are
essential to making effective capital investment decisions. Because of the
importance

7. Budget for projects in useful segments

8. Consider innovative approaches to full up-front funding

9. Monitor project performance and establish incentives for
accountability

10. Use cross-functional teams to plan for and manage projects

11. Evaluate results to determine if organizationwide goals have been met

12. Evaluate the decision-making process: reappraise and update to ensure
that goals are met

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

of planning, this study focuses on agencies' implementation of the
concepts that underlie the planning phase of OMB's Guide and support
principle I and principle II of our Executive Guide. The planning phase,
as the driver of the following phases, is key to making effective capital
investment decisions. The concepts start with linking the capital planning
process to the organization's overall mission, goals, and objectives and
culminate in the development of a longterm organization capital plan. They
are described in this report as

o strategic linkage,

o needs assessment and gap identification,

o alternatives evaluation,

o establishment of a review and approval framework,

o establishment and use of criteria to rank and select proposed projects,
and

o development of a longterm capital plan.

The planning phase is the crux of the capital decisionmaking process. The
products that result from this phase are used throughout the remaining
phases of the process, and failure during this stage may have
repercussions throughout.

Strategic Linkage Strategic planning can be defined as a structured
process through which an organization translates a vision and makes
fundamental decisions that shape and guide both what the organization is
and what it does. Both OMB and GAO guidance emphasize the importance of
linking capital asset investments, funding, and management to an
organization's overall mission and longterm strategic goals. OMB's Guide
describes capital planning as an integral part of an agency's strategic
planning process within the framework established by GPRA. It states that
capital assets should be planned for, acquired, and managed based on their
ability to contribute to accomplishing program outputs and outcomes as
described in an agency's strategic plan. It further states that an
effective strategic plan should identify major capital assets that are
critical to the plan's implementation and should define the outcomes that
the assets will help to realize. Our Guide describes how leading
organizations also view strategic planning as

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

the vehicle that guides decision making for all spending. These
organizations use their strategic planning processes to assess the needs
of clients and constituents and the political and economic environment in
which they are operating and to link the expected outcomes of projects,
including capital projects, to the organization's overall strategic goals
and objectives.

Needs Assessment and Performance Gap Identification

Conducting a comprehensive assessment of resources needed or an analysis
of program requirements is an important first step in an organization's
capital decisionmaking process. A comprehensive needs assessment
identifies the resources needed to fulfill both immediate requirements and
anticipated future needs based on the resultsoriented goals and objectives
that flow from the organization's mission. The needs assessment is results
oriented in that it determines what is needed to obtain specific outcomes
rather than what is needed to maintain or expand existing capital stock. A
comprehensive assessment of needs considers the capability of existing
resources and makes use of an accurate and uptodate inventory of capital
assets and facilities as well as current information on asset condition.
Using this information, an organization can properly determine any
performance gap between current and needed capabilities.

OMB's Capital Programming Guide describes the needs assessment and gap
identification process in terms of an assessment of the existing
performance baseline that covers both those capital assets currently in
use and those assets in the procurement process. It includes all assets
regardless of how they are being acquired-purchase, lease, or service
contract. OMB guidance suggests the criteria for the baseline assessment
include each asset's current or anticipated functionality, full lifecycle
costs,9 the affordability of full lifecycle costs, associated risks, and
the agency's capacity to manage the asset. OMB guidance further states
that a performance gap should be defined in terms of the functional
requirements to be achieved and that such functional requirements should
consider the

9OMB's Capital Programming Guide defines lifecycle costs of an asset as
all direct and indirect initial costs, including planning and other costs
of procurement; all periodic or continuing costs of operation and
maintenance; and costs of decommissioning and disposal.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

capabilities of other assets with which the function or proposed asset
must interact in order to achieve its goal, objective, or mission.10 Our
Guide describes how leading organizations conduct a comprehensive needs
assessment (variously referred to as needs determination, needs study, or
mission analysis). This is often the first step in an organization's
capital planning and budgeting process and includes an assessment of an
entity's internal and external environments and an examination of its
primary role and organizational structure.

Our Guide also describes how leading organizations track the use and
performance of existing assets and facilities to help assess current
capabilities and establish a baseline. These organizations maintain asset
inventory and tracking systems that not only identify the location and
status of assets and facilities but also track and report asset and
facility condition and deferred maintenance needs. Information about
existing assets is also used in determining what capital resources are
currently available and what resources are needed in order for the
organization to be able to meet its goals and objectives. The data and the
information provided by well planned information systems give
organizations the ability to build comprehensive measures, collect
relevant data, and perform analyses that can be used to support strategic
as well as operational budgeting decisions. Using a variety of automated
systems that are frequently updated, leading organizations provide
managers and decision makers with timely, current, and useful information
to assess the availability and condition of existing assets.

For example, one large state government we studied maintained three levels
of inventory systems to identify and control its capital assets and
facilities: a statewide inventory, individual agency inventories, and an
inventory of deferred maintenance. The state also required routine asset
and facility condition assessments. The statewide inventory was maintained
through the state's fixed asset accounting and control system and was
updated at least annually to reflect new assets acquired and old assets
disposed of. Reports generated by this inventory system identified assets
within a given agency that were available for use by other departments or
divisions and surplus assets within the state that may be

10For example, a requirement to meet a program's goal of providing a
warning about hurricanes within a certain number of hours may indicate a
new satellite with the latest technology as a solution. However, if the
program's ground stations use obsolete technology, merely improving the
satellite's functional capacity will not enable the program performance to
reach its full potential.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

available for any agency's use. Some agency inventory systems also
contained asset condition assessment data in addition to data on asset
existence. Agencies included asset condition assessment data when
submitting their capital project requests to the state's planning and
budgeting department. When requesting funding for new assets or
facilities, agency managers were required to fully describe the agency's
current assets and facilities, including information on the adequacy of
existing assets and facilities to meet current and future program demands.

Alternatives Evaluation When a performance gap between needed and current
capabilities has been identified, it is important that organizations
carefully consider how best to bridge the gap by identifying and
evaluating alternative approaches, including noncapital options. OMB's
Guide suggests that once detailed requirements are defined, management
should answer the "Three Pesky Questions" before planning to acquire
capital assets. These questions are as follows:

Does the investment in a major capital asset support core/priority mission
functions that need to be performed by the federal government?

Does the investment need to be undertaken by the requesting agency because
no alternative private sector or governmental source can better support
the function?

Does the investment support work processes that have been simplified or
otherwise redesigned to reduce costs, improve effectiveness, and make
maximum use of commercial-off-the-shelf technology?

If the answer to all three questions is yes, according to the OMB Guide,
management should still consider options other than acquiring new assets
to bridge the performance gap. The guide suggests that management also
consider meeting the objectives through regulation or user fees or by
using human capital instead of physical capital assets. OMB's Guide
encourages the use of benefitcost or costeffectiveness analysis to
determine if acquiring a new asset is the best way to reduce an identified
performance gap. In addition, the guide encourages agencies to consider
modifying existing assets or some other method. Figure 8 illustrates the
use of OMB's "Three Pesky Questions."

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

Figure 8: OMB Decision Tree for Analyzing Agency Programs and Investments

Source: Office of Management and Budget, Capital Programming Guide.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

Our Guide describes how leading organizations consider a wide range of
alternatives to bridge a performance gap, including noncapital
alternatives, before choosing to purchase or construct a capital asset or
facility. Managers carefully consider options such as contracting out and
privatizing the activity as well as nonownership options such as leasing.
Leading organizations also consider engaging in joint venture projects
with other organizations to minimize the amount invested and reduce the
organization's risk. If it is determined that a capital asset is needed to
bridge a performance gap, leading organizations first consider the use of
existing assets before choosing to purchase or construct new assets.
Information obtained from an organization's asset inventory system
facilitates considering the use of existing assets. One local government
we studied considered many alternatives, and renovating or expanding an
existing facility was the option used most frequently.

Establishment of a Review and Approval Framework

Establishing a decisionmaking framework (which encourages the appropriate
levels of management review and approval) is a critical factor in making
sound capital investment decisions. A framework supported by the proper
financial, technical, and risk analyses can mean capital investment
decisions are made more efficiently and supported by better information.
OMB's Capital Programming Guide suggests that each agency establish a
formal process for senior management review and approval of proposed
capital assets. The cost of a proposed asset and its importance to
achieving the agency mission should be considered when defining criteria
for executive review. Also, the number of times a project proposal is
reviewed should be based on the level of risk involved in the acquisition.

GAO's Executive Guide describes how leading organizations use
decisionmaking processes to help them assess where they should invest for
the greatest benefit. Some organizations have processes that determine the
level of review and analysis based on the size, complexity, and cost of a
proposed investment or its organizationwide impact. One multinational
company we studied had various levels of review based on the business and
economic significance of the proposed capital project. This company used
its corporate executive council for some project decisions while managers
within the company's business groups reviewed and approved other projects.
The company's chief executive officer was involved only when proposed
investments were of strategic significance to the company as a whole or
were very large and capital intensive. This company also categorized
proposed projects as "mandatory," "necessary," or "would like

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

to do." Projects required by law or regulation were considered mandatory
and were subject to less upfront analysis and management review. Projects
defined as necessary were usually more strategic in nature and involved
either benefits to the organization or cost savings. Depending on the
scope and risk involved, "necessary" projects required a greater level of
analysis or review. This was also true of "would like to do" projects,
which were projects that were desired but not critical to the
organization's goals.

As part of the capital investment review and approval process, leading
organizations develop a decision or investment package to justify capital
project requests. These packages-referred to as business cases or project
requests-generally include detailed economic and financial analyses and
other documents to support the proposed investment. The types of analysis
ranged from a complete costbenefit analysis-which included full lifecycle
costing-to an analysis that compared alternatives and recommended the most
costeffective option. Decision packages also show how a proposed
investment is linked to an organization's strategic goals.

Establishment and Use of Criteria to Rank and Select Projects

Capital investments should be compared to one another to create a
portfolio of major assets ranked in priority order. Much like individuals
selecting a diverse portfolio of investments, agencies invest in a diverse
portfolio of capital assets. While investor returns are measured in
dividends or capital gains, the costs and benefits of capital asset
investments should be quantified both in monetary terms as well as in
terms of outputs and outcomes. It is generally beneficial, if not
necessary, to rank proposed projects because the number of requested
projects often exceeds available funding. OMB's guidance suggests that
agencies choose portfolios of capital investments that maximize return to
the taxpayer and the government-at an acceptable level of risk. The guide
provides one approach to devising a ranked list of projects drawn from
multiple best practices organizations: the use of a scoring mechanism that
assigns a range of values based on project strengths and weaknesses.
Higher scores are given to projects that meet or exceed positive aspects
of the decision criteria. Such a ranking process might produce three
groups of projects- likely winners, likely dropouts, and projects that
warrant a closer look. Also, such a process may be used iteratively-in
multiple steps-to limit the number of projects to be considered by an
executive decisionmaking body.

GAO's Executive Guide describes processes used by leading organizations
for ranking and selecting proposed capital projects. These organizations

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

determined the appropriate mix of projects by viewing all proposed
investments and existing capital assets as a portfolio. They selected
projects based on preestablished criteria and a relative ranking of
investment proposals. The organizations used their overall missions and
strategic objectives as a basis for establishing decisionmaking criteria.
These criteria, such as increased cost savings, market growth, and link to
organizational strategies, were used to rank projects. Seniorlevel
managers were involved both in developing the criteria and communicating
the criteria throughout the organization. For example, a state government
we studied used a scoring process that ranked all projects across all
agencies. Using criteria based on the governor's strategic goals and
objectives, projects received scores ranging from 0 to 700 (in specified
increments). Critical projects, which addressed life safety emergencies
and legal obligations, typically received the maximum score. Noncritical
projects were assigned points based on factors such as the linkage to the
agency's mission, the priority assigned by the requesting agency, and
whether the project would result in operating savings or increased
efficiencies.

Development of a Longterm Capital Plan

The longterm capital asset plan is the final product resulting from the
various steps and stages of the planning phase of capital investment
decision making. The capital plan should be the result of an executive
review process that has determined the proper mix of existing assets and
new investments needed to fulfill the organization's mission, goals, and
objectives. Longterm capital plans, covering 5 to 6 years, guide the
implementation of organizational goals and objectives and help decision
makers establish priorities over time. While longterm plans must respond
to changing requirements and priorities, they are based on the
organization's longrange vision embodied in its strategic plan. Thus, any
yeartoyear changes should be driven by strategic decisions that are
consistent with the organization's longterm goals.

OMB's Capital Programming Guide encourages each agency to develop a
capital plan defining the agency's longterm capital needs consistent with
its strategic plan. The guide states that the plan should include an
analysis of the portfolio of assets-both those currently owned by the
agency and those in the procurement stage-and of any performance gap and
capability needed to bridge it. The plan should be the central document,
or group of documents, used by the agency for capital asset planning.
OMB's Guide further encourages agencies to use a summary of the capital
plan in their budget justifications to OMB, in their requests for
congressional authorizations of projects, and in their justifications of
estimates for

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

appropriations to the Congress. While there is no required format for the
capital plan, certain elements should be included, such as a statement of
agency mission, goals, and objectives; a description of the planning
phase; a baseline assessment and performance gap; and a project risk
mitigation plan.

The GAO Executive Guide describes how leading organizations stress the
importance of developing a longterm capital plan. These organizations
prepare longterm plans to document specific planned investments, plan for
resource use over the long term, and establish priorities for project
implementation. These capital plans typically cover a 5, 6, or 10year
period and are updated either annually or biennially. Most state
governments we studied required that all capital project requests be
included in an agency's longterm capital plan. In leading private sector
companies, planned capital expenditures are aligned with longrange
business plans. The business plans are usually based on a product's life
cycle, market conditions, or corporate goals and objectives.

One state government we studied prepared a 5year capital plan that assists
the government in refining the scope and cost estimate of individual
projects. Requested projects generally go into the plan in year 5, and
agencies are required to resubmit project applications and obtain approval
each year until the project reaches the first year of the capital plan,
which is the budget request for the upcoming year. Resubmission of
requests is the only way a project could move forward from year 5 to year
4, and from year 4 to year 3, and so forth. Only very small project
requests generally appeared for the first time in the budget year. The
annual review of capital project applications allowed the state budget
office to determine if a project request continued to meet the goals and
objectives outlined in the agencies' strategic plans. It also allowed a
project's scope and cost to be refined each year over a 5year period,
which kept project costs within specified resource limits. State officials
believed that the continual review was a key factor in why the state had
limited cost overruns and few surprises once project funding was approved.

Longterm planning requires that decision makers rank capital investment
needs and promotes the making of informed choices about managing the
organization's resources. It also requires the organization to weigh and
balance the need to maintain existing assets against the demand for new
ones. Some congressional staff indicated it could be useful to have
longterm capital planning information to see what an entity viewed as
important. Further, they said that the process and analyses involved in

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

developing a plan are effective in ensuring that wellinformed decisions
are made at the agency level. They believe that the lack of good
information sometimes leads to situations in which other considerations
drive decisions. Other congressional staff noted that comparisons of plans
over several years might provide a basis for questioning projects that
appear in budget requests without having been in the previous years'
longterm plans and that having more information, such as that contained in
a longterm capital plan, also would be useful in oversight. In addition to
providing their views on longterm capital plans, the staff commented that
improved asset inventory systems and condition assessments should be a
reasonable expectation of government agencies.

In summary, the planning phase of capital decision making should contain
certain elements to help ensure wellinformed decisions. Figure 9
illustrates a process that a geographically dispersed organization could
follow using the elements of OMB's and GAO's capital guidance.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

Figure 9: Example of Agency Process Illustrating Elements of Planning Phase
Guidance

Source: GAO.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

Case Study Agencies Our four case study agencies have varied missions and
program responsibilities that require the use of different types of
capital assets to fulfill their goals and objectives. These agencies
acquire land, buildings and other structures, ships, satellites, and major
equipment, including information technology (IT) assets. The following
provides a brief discussion of each agency's mission, organizational
structure, unique characteristics, recent capital spending in 2002
dollars, and any noteworthy changes to its capital decisionmaking process.

Department of Veterans Affairs

With a budget of over $50 billion, VA is one of the world's largest health
care, medical research, and insurance benefits organizations. VA is a
cabinetlevel department whose primary mission is to serve America's
veterans and their families, ensuring that they receive medical care,
benefits, social support, and lasting memorials. VA consists of three
separate administrations-the Veterans Health Administration, the Veterans
Benefits Administration, and the National Cemetery Administration-and the
staff offices of VA's central office.

VA capital assets vary by administration and consist of VAowned buildings
and real estate, VAleased buildings, enhanceduse and sharing agreements
pertaining to capital assets, major equipment, and IT infrastructure and
software. These include hospitals, clinics, cemeteries, office buildings,
fire departments, and medical equipment.

In recent years, a rapidly increasing patient base has challenged VA,
along with the aging of the veteran population and their changing health
care needs. Also, veterans are finding it increasingly difficult to obtain
VA care in selected geographic regions, challenging VA to maintain
services and facilities where they are most needed. VA's total capital
spending for fiscal years 2001 and 2002 was $1.4 billion and $2.1 billion,
respectively.

VA's capital planning process has evolved over the years, with management
making a concerted effort to ensure that VA's practices were in keeping
with industry best practices and OMB guidance. VA began a rigorous effort
to develop a model capital investment process shortly after the issuance
of OMB's Capital Programming Guide by contracting for a study of its
thencurrent process and implementing a number of the contractor's
recommendations. One of the key improvements to its process was the
creation of a centralized (department level) office to strengthen its
process and ensure coordination of planning and investment decisions. The
Office

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

of Asset Enterprise Management (OAEM) was created in July 2001 and is
responsible for developing capital asset policy, providing guidance and
oversight, and ensuring a consistent and cohesive agency approach to
capital asset acquisition, management, and disposal. Another key
improvement to the agency's process is the use of a decisionsupport
software program that evaluates and ranks projects based on agency goals
and financial measures-an improvement for which VA received a best
practices award from OMB.

More recently, OAEM has devised an approach to streamline the process for
developing capital investment proposals. This new process involves the
submission and review of investment proposal data in increasing levels of
detail. It is believed that this streamlined approach will reduce the
laborious data collection associated with developing proposals that are
not funded and allow proposal developers more time to provide senior
management with the most accurate cost and schedule data. VA's leadership
states that its process has evolved from a vertical stovepipe process with
minimal crosscutting proposals to one that is horizontally integrated
between the administrations and staff offices and encourages projects that
cut across departmental lines. See appendix II for additional detail on
VA's process.

National Park Service The Park Service, a bureau within the Department of
the Interior, exists to preserve the natural and cultural resources of the
nation's park system for the enjoyment, education, and inspiration of this
and future generations. The park system is organized into seven geographic
regions, contains 388 park units of widely varying size and nature, and
covers 80 million acres of land. Park Service assets include roads;
trails; campgrounds; park visitor centers; other buildings and employee
housing; utility systems; marine and dock structures; signs and
information structures; and special features assets, such as monuments,
statutes, memorials, and viewing structures. Park units vary considerably
and range from large landscapes such as the Grand Canyon and Yosemite
national parks, to historic structures such as Philadelphia's Independence
Hall, to the granite faces of Mount Rushmore. Visitation rates at national
parks have grown considerably over the past two decades-from about 220
million visitors in 1980 to close to 290 million today. This growth has
required expansion of Park Service facilities and presented a challenge to
many of the park's transportation infrastructures. The park system also
has been challenged by the need to preserve increasing numbers of historic
park properties and the expense to maintain

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

them. Park Service total capital spending for fiscal years 2001 and 2002
was $334 million and $496 million, respectively.

The Park Service's capital programming and asset management process is
evolving, and some current practices are largely the result of
implementing a number of recommendations from a 1998 National Academy for
Public Administration (NAPA) study. At the request of the Department of
the Interior, NAPA conducted a study of the Park Service's lineitem
construction program. The NAPA report made several recommendations focused
on the Denver Service Center, which has a primary role in implementing the
Park Service's construction program. One key recommendation was the
establishment of an external review group to assess lineitem construction
projects for suitability and costeffectiveness. This advisory group meets
concurrently with the Park Service's seniorlevel review board and reviews
every facility project with an estimated cost greater than $500,000. The
advisory group provides its findings directly to the Park Service
Director. Also in 1998, spurred by congressional concerns and new federal
accounting standards for plant, property, and equipment, the Park Service
initiated the design of a new asset management process. The new process is
intended to provide better overall management of the agency's asset
inventory. See appendix III for additional information on the Park
Service's process.

National Oceanic and Atmospheric Administration

NOAA describes and predicts changes in the Earth's environment and
conserves and manages the nation's coastal and marine resources. NOAA is a
bureau within the Department of Commerce and accomplishes its overall
mission through five major line offices with diverse missions and numerous
program offices. These line offices are the National Weather Service
(NWS); the National Environmental Satellite, Data, and Information Service
(NESDIS); the National Marine Fisheries Service; the National Ocean
Service; and the Office of Oceanic and Atmospheric Research. Key among the
NOAA program offices is the Office of Marine and Aviation Operations. Some
line offices are users of other NOAA lineoffice products (e.g., NESDIS
produces satellites for NWS's weather prediction). NOAA uses various types
of assets, including satellites, ground systems, aircraft, water vessels,
buildings, and vehicles. Many of NOAA's assets are specialized and unique
to NOAA's mission, making the consideration of alternatives to acquiring
some needed assets-such as ships and satellites-difficult to do. NOAA's
capital spending for fiscal years 2001 and 2002 was $602 million and $787
million, respectively.

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making Framework

Most of NOAA's capital planning occurs at the lineoffice level. The
various service lines and program offices have separate planning processes
that are consistent with both the goals of NOAA and of the Department of
Commerce. A recent improvement to the NWS process was the establishment of
an executive board-the Finance and Investment Review Board (FIRB) in
fiscal year 2000, which created a formal process for management review and
prioritization of capital investment proposals in support of NWS strategic
goals. FIRB reviews capital projects costing $1 million or more and
consists of five voting members and three nonvoting advisor members. The
board reviews and evaluates capital investment proposal justifications,
scores capital investments according to established criteria, and ranks
the approved investments. The FIRB charter cites OMB's Capital Programming
Guide as one of the reasons for its creation. NOAA's capital investments
are funded through a single budget account-the procurement, acquisition,
and construction (PAC) account. The PAC account was established 5 years
ago. See appendix IV for additional information on NOAA and its capital
planning process.

Bureau of Prisons BOP is an agency of the Department of Justice (DOJ)
responsible for providing for the safe, secure, and humane confinement of
persons in federal custody. The agency consists of six geographical
regions with 102 facilities, and its activities encompass two areas of
responsibility- detention and incarceration. While detention
responsibilities are shared with the U.S. Marshals Service and the Bureau
of Immigration and Customs Enforcement (formerly the Immigration and
Naturalization Service), incarceration is the sole responsibility of BOP.
In addition to housing the federal inmate population, BOP provides inmates
with basic services, such as food, clothing, and health care and an array
of educational, vocational, and other programs. The federal inmate
population has increased sixfold in the last two decades, from
approximately 25,000 inmates and 41 institutions in 1980 to more than
160,000 inmates and 102 institutions in 2002. Most of these inmates were
confined in BOPoperated facilities while more than 27,000 were assigned to
privately managed institutions, state and local facilities through
intergovernmental agreements, community corrections centers, or home
confinement. BOP's acquires capital assets such as facilities and other
buildings, major equipment, and vehicles.

BOP has limited control over the size of its inmate population as this is
influenced by other parts of the criminal justice system, including the
aggressiveness of law enforcement policies and the length of sentences
imposed. In 1997, BOP was required to absorb the District of Columbia

Chapter 1 Capital Planning Is the Core of the Capital Decision-Making
Framework

inmate population,11 which necessitated the construction of some
additional facilities. It is unclear what impact the September 11, 2001,
terrorist attacks may have on BOP facility needs.

BOP's capital spending for fiscal years 2001 and 2002 was $481 million and
$795 million, respectively. Funding for BOP capital projects competes with
other DOJ programs. DOJ has a Strategic Management Council (SMC) that is
chaired by the Attorney General. Its members are the directors of all of
the DOJ agencies. BOP's Director is the only careerservice member-the
others are political appointees. SMC meets to discuss the entire DOJ
budget request, and each director defends his or her agency's request. SMC
then makes recommendations to the Attorney General for the entire DOJ
budget submission to OMB. See appendix V for additional information on BOP
and its process.

11Title XI of the Balanced Budget Act of 1997, Pub. L. No. 10533, August
5, 1997.

Chapter 2

Agency Capital Planning Processes Link to Strategic Goals and Objectives

Both the Office of Management and Budget (OMB) and GAO guidance emphasize
the importance of linking capital asset investments to an organization's
overall mission and longterm strategic goals. Therefore, the capital
decisionmaking process must reflect both the results of an organization's
longterm strategic planning process and shortterm goals and objectives.
OMB's Capital Programming Guide suggests that an agency's capital planning
process be an integral part of the strategic planning process-stressing
that capital assets should be planned for and acquired in light of their
ability to contribute to the accomplishment of outcomes as described in an
agency's strategic plan. Our study found that leading organizations also
view strategic planning as the instrument that guides decision making for
all spending. Case study agencies' capital planning processes considered
strategic goals as decisions were made about capital investments, and
administration and departmental priorities were communicated throughout
the processes.

Capital Investments Link to Strategic Plans

Case study agencies engage in strategic planning, but strategic plans
vary. Some agencies prepare administrationor bureaulevel strategic plans
while others prepare strategic plans at various levels within the
administrations or bureaus. Although the Government Performance and
Results Act of 1993 (GPRA) only requires that agency heads prepare
strategic plans, bureaulevel planning at all of the case study agencies is
usually accomplished in support of departmental strategic plans. For
example, the Department of Veterans Affairs' (VA) National Cemetery
Administration (NCA) develops its own corporatelevel strategic plan. NCA
also engages in strategic and business planning at the memorial service
network (MSN) and cemetery levels, respectively. There are five MSNs and
each prepares a strategic plan that draws from and supports the NCA
strategic plan. Individual cemeteries then prepare business plans that
support the strategic plan for their MSNs and help to identify specific
capital asset requirements throughout NCA. These cemeteryand MSNlevel
plans support the NCA strategic plan that is ultimately linked to VA's
strategic plan.

One of the primary goals for NCA under the VA Strategic Framework is to
meet the burial needs of veterans and their eligible family members.
Strategies to achieve this include establishing additional national
cemeteries or expanding existing cemeteries in underserved areas-with the
longterm objective of providing a burial option within 75 miles of a
veteran's home to 90 percent of the veteran population. NCA prepares a
5year construction plan identifying its planned major and minor

Chapter 2 Agency Capital Planning Processes Link to Strategic Goals and
Objectives

construction projects, which are driven by the goals and objectives of the
NCA strategic plan.

Strategic planning for VA's Veterans Health Administration (VHA) is also
done at the network level. There are 21 Veterans Integrated Service
Networks and each prepares a VHA networklevel strategic plan. Like NCA,
these network plans are driven by and support the VA departmental
strategic plan. Among other things, the VHA networklevel plans address the
capital proposals and infrastructure needed to support the network goals
and objectives. VHA future capital needs are likely to be largely driven
by the results of the ongoing Capital Asset Realignment for Enhanced
Services studies being conducted in each network (discussed later in this
report).

While VA does not prepare an overarching departmentlevel longterm capital
plan (discussed in ch. 4), it does evaluate both individual cemetery
projects from the 5year NCA construction plan and VHA medical facility
projects for funding along with other VA project proposals. Those of
highest priority are ultimately included in the annual budget submission
to OMB and the Congress.

The National Park Service (Park Service) prepares a servicewide strategic
plan, and individual national parks prepare parklevel strategic plans that
cover a 5year time frame and discuss the capital facilities needed to
support individual park strategic goals. The strategic goals of the Park
Service are consistent with and contribute primarily to the Department of
the Interior's (DOI) goals to protect the environment and preserve our
nation's natural and cultural resources and to provide recreation for
America. The Park Service prepares a servicewide 5year lineitem
construction plan, which is a list of planned capital projects in priority
order and reflects the criteria used to rank and select the
projects-criteria based on the agency's strategic goals. According to
officials, each national park has specific goals pursuant to GPRA that
support the servicewide Park Service goals and each has parkspecific goals
to better align with its own mission. Individual park strategic plans,
such as the Cape Cod National Seashore's plan for fiscal years 2000
through 2005, list the capital facilities and infrastructure-such as
visitor centers, bathhouses, paved roads, and employee housing-needed to
accomplish the park's strategic goals of providing for the public use and
visitor enjoyment of parks and reducing the number of poor employee
housing units for that period. Officials also stated that each park
prepares a general management plan

Chapter 2 Agency Capital Planning Processes Link to Strategic Goals and
Objectives

that covers a 10to 20year period and contains elements of both a strategic
plan and a longterm capital plan.

At the National Oceanic and Atmospheric Administration (NOAA), both a
NOAAlevel strategic plan and individual line and program officelevel
strategic plans are prepared. All of them support the vision and longterm
goals of the Department of Commerce, as shown by clearly articulated
interrelationships between NOAA and Commerce goals. The strategy for
fulfilling NOAA's mission consists of seven interrelated goals. According
to NOAA's strategic plan for 1995 through 2005, each goal is a coherent
unit, but there also are crosscutting relationships that according to the
plan, enable the implementation of Commerce and NOAA objectives. The plan
describes its seven goals and the strategies to achieve them in general
terms. NOAA's line offices implement the strategies and conduct the work
to achieve these goals. The line and program office strategic plans
discuss the capital needed to support each office's goals and programs.

As an example, the National Weather Service (NWS) line office strategic
plan for weather, water, and climate services for fiscal years 2000
through 2005 supports one of two primary missions of NOAA-Environmental
Assessment and Prediction-and contains three of the seven NOAA goals and a
number of objectives to fulfill this mission. One of the NWS objectives
includes the planned deployment of the Advanced Hydrologic Prediction
System to 50 percent of river forecast sites by the year 2005. Another
includes expanding the number of International Emergency Weather Network
receiving stations by 50 percent by the year 2005.

In addition to its strategic plan, the National Environmental Satellite,
Data, and Information Service (NESDIS) line office prepares a 5year
capital plan to guide the acquisition of its satellite ground systems-a
primary responsibility of NESDIS. This capital plan outlines NESDIS
current operations and planned capital acquisitions-including 7year cost
estimates-to bridge its performance gap in support of the strategic goals
established in its strategic plan. The Office of Marine and Aviation
Operations (OMAO) program office, which is responsible for improving the
quality and efficiency of NOAA's ship and aircraft operations, prepares a
strategic plan that also addresses its capital issues. For instance, its
strategic plan for fiscal years 2000 through 2005 describes the need to
acquire three additional fisheries ships to meet program expectations over
the next decade. The plan also describes the impending critical need for
replacement aircraft capability.

Chapter 2 Agency Capital Planning Processes Link to Strategic Goals and
Objectives

The Bureau of Prison's (BOP) strategic planning documents describe the
capital projects planned and in progress to support its current goals and
objectives. The activities of the federal prison system support the
Department of Justice's (DOJ) strategic goal VI-protect American society
by providing for the safe, secure, and humane confinement of persons in
federal custody. This strategic goal is supported by four DOJ objectives
that drive the BOP strategic goals and objectives. The DOJ strategic plan
for fiscal years 2001 through 2006 contains strategies to achieve the
objectives of ensuring sufficient prison capacity and maintaining prison
operations. The strategies describe the activation of two recently
completed facilities, the ongoing construction of four additional
facilities with expected activation in fiscal years 2002 and 2003, and the
planned design and construction of seven new facilities expected to be
activated in fiscal year 2004. The DOJ plan also describes the use of
privately managed facilities and cooperative arrangements to maximize
prison capacity, which illustrates the consideration of alternatives to
new construction. In addition, the DOJ plan describes the strategies for
maintaining prison operations, which include an extensive modernization
and repair program. BOP's strategic planning documents provide additional
detail on the ongoing and planned new facilities-providing facility
location and the expected increase in rated prison capacity.

Agency Guidance Requires That Capital Investment Proposals Link to
Strategic Goals and Objectives

Agency spring budget calls (call memorandums) for proposed capital
investments contain clear guidance for proposal development that includes
toplevel guidance on adhering to agency goals, objectives, and
administration priorities. For example, VA's departmental requests for
capital investment proposals require that all VA administration and staff
office proposals be linked to the department's current strategic goals and
objectives. The guidance also illustrates current presidential and
departmental priorities. The capital investment request for proposals for
fiscal year 2004 required that any proposed capital projects support one
or more of the priorities of the VA Secretary or the President-priorities
that are aligned with VA's strategic goals and objectives. Attached
memorandum guidance described the President's management agenda and the VA
Secretary's priority areas and the performance measures associated with
both. The guidance also detailed the priority areas for all three VA
administrations and included the associated performance measures. For
proposed capital projects that were not related to priorities of the
Secretary or the President, staff were required to explain which of VA's
strategic goals the project would support and how. The guidance referred
staff to VA's current strategic plan for additional information.

Chapter 2 Agency Capital Planning Processes Link to Strategic Goals and
Objectives

At BOP, capital project requests also must include descriptions of how
strategic goals will be supported, and the guidance reinforces the
Attorney General's current priority objectives. The BOP Director's budget
call memorandum for fiscal year 2003 directed assistant and regional
directors to be mindful of the Attorney General's priority objectives when
developing proposed budget initiatives. The guidance also required that
proposals reference the BOP strategic planning goal that would be
supported and the current BOP objective. It further required the proposals
to estimate costs and identify performance indicators to measure if the
goals are achieved. The BOP Facilities Management Branch's memorandum for
fiscal year 2004 capital requests required that line item and major
project requests (projects with costs of $300,000 or more) be documented
in the requesting institution's strategic plan.

NOAA's capital investment proposals are developed within the strategic
themes that have been established to achieve NOAA's mission. Strategic
themes are a grouping of crosscutting multilineoffice programs that are
aligned with NOAA goals and priorities. The themes, representing major
areas of concentration, are organized around line offices. A working group
established for each theme and led by one of the line offices it supports
implements their objectives. These working groups function as internal
review boards, reviewing lineoffice proposals and preparing initiatives
for consideration by NOAA's budget office. All programs, including capital
investment proposals submitted to the themes' work group must be justified
in terms of how they support the theme.

At the Park Service, administration and departmental priorities influence
projects initiated at individual parks. The annual budget call memorandum
issued by the Park Service's Washington Office informs the park regions
and ultimately the individual parks of current priorities. For the past
several years, the administration's priority has been to reduce the
backlog of deferred maintenance projects. More recently, increased visitor
health and safety has become another priority after the September 2001
terrorist attacks.

Chapter 2 Agency Capital Planning Processes Link to Strategic Goals and
Objectives

Agency Criteria Used to Rank and Select Capital Investments Include
Strategic Linkage

Case study agency processes for ranking and selecting proposed capital
investments give great weight to strategic goals and objectives as well as
current administration and organizational priorities. As discussed further
in chapter 4, VA's process includes the use of a computerized decision
software package and established criteria to rank proposed capital
investments. This comprehensive process scores capital proposals based on
the assigned weights of a set of 9 core criteria and 19 subcriteria, 1 of
which is the proposal's alignment to the strategic plan's goals. The
established criteria used by the process are reviewed each year, updated,
and aligned with VA's mission and current administration and Secretary
priorities.

At the Park Service, proposed capital investments and projects intended to
enhance or maintain existing infrastructure are rated against their
support of Park Service and DOI strategic goals. Project data entered by
individual parks into the Park Service Project Management Information
System (discussed in ch. 3) include the proposed project's link to
specific longterm goals and the associated performance measures and
benefits based on outcomes. The regional and nationallevel project review
and ranking process uses a scoring system that considers evaluation
factors linked to the Park Service's mission and strategic goals. The
scores in the various evaluation categories allow the Park Service's
construction office to respond to the Park Service, DOI, and
administration priorities and strategic direction. A detailed discussion
of this review and selection process and the factors used is presented in
chapter 4.

Strategic linkage is also an important factor used by NOAA to rank and
select from its competing capital investment proposals. Chapter 4 presents
a detailed discussion of this process and its use of review boards that
implement the objectives of strategic themes, aligned with and established
to help ensure that NOAA's mission, longterm goals, and current priorities
are fulfilled. Project proposals submitted to each theme's review board
must be justified in terms of the specific goals the project will support.
For example, the Infrastructure, Maintenance, Safety and Human Capital
theme review board used a set of criteria to rank project proposals. The
criteria included, among others, contribution to agency mission,
productivity improvement, operational efficiency, and the likelihood of
the project's success. Similar criteria permeated the other NOAA themes'
processes, and although each theme's review board has a distinct process
for ranking proposals, the criteria include how well the proposal is
aligned with NOAA's mission.

Chapter 2 Agency Capital Planning Processes Link to Strategic Goals and
Objectives

Conclusion Although we did not evaluate agencies' actual practices or the
resulting decisions about capital acquisitions, the case study agencies'
capital planning processes appear to consider overall organizational goals
and current administration and departmental priorities when planning for
capital asset acquisitions and evaluating projects intended to improve,
enhance, or maintain existing asset infrastructure. In some cases, the
strategic linkage is demonstrated by specific projects that implement
longterm goals. In other cases, the linkage is apparent in agency guidance
for developing capital project proposals and the criteria used to rank and
select among competing proposed projects.

Chapter 3

Agency Processes for Assessing Capital Needs Reflect OMB and GAO Guidance
to Varying Degrees

Both the Office of Management and Budget (OMB) and GAO guidance emphasize
the importance of conducting a baseline assessment of the resources needed
and current capacity of existing resources to achieve resultsoriented
goals and objectives. This assessment should involve the use of an
inventory of existing assets and current information on asset condition in
order to identify any performance gap. A comprehensive inventory of assets
that includes current and accurate data on asset condition can provide
proposal developers with information to use in determining if an actual
performance gap exists. It also can help decision makers when they
consider options for addressing an identified performance gap. For
example, data on unused or underused facilities can prompt decision makers
to consider renovating or converting an existing facility to address the
new need. When a performance gap is identified, guidance also suggests
that detailed functional requirements be identified in order to adequately
evaluate options for reducing the gap. OMB guidance recommends the use of
integrated project teams to manage this and other aspects of the capital
programming process.

Agencies' processes for assessing needed resources and identifying a
performance gap reflect OMB and GAO guidance in some areas but not in
others. The Department of Veterans Affairs (VA) lacks agencywide asset
condition data and an inventory of assets, although it is in the process
of creating a data management system to inventory capital assets and
measure their performance against VA portfolio goals. The National Park
Service (Park Service) has just recently developed an inventory of its
assets, but lacks agencywide comprehensive information on the condition of
those assets. The National Oceanic and Atmospheric Administration (NOAA)
maintains an agencywide asset inventory but lacks complete information on
asset condition. Although the Bureau of Prisons (BOP) maintains both an
inventory of assets and information on facility condition, the basis for
determining its longterm performance gap is unclear.

Chapter 3
Agency Processes for Assessing Capital
Needs Reflect OMB and GAO Guidance to
Varying Degrees

VA Has a Formal Process for Assessing Its Needs, but Lacks Agencywide
Asset Condition Data and an Inventory of Capital Assets

VA's capital needs are generally identified at the Veterans Integrated
Service Network (VISN)1 level by network personnel. Major capital project
requests are developed in response to the departmental spring budget call
for project proposals. Minor project proposals (projects with estimated
costs under $4 million) are developed in response to a separate call for
proposals. Facility employees of the Veterans Health Administration (VHA)
have routinely conducted condition assessments of facilities under their
control, but until March 2003, the results were maintained at the
facilities, or in some cases at the VISN level, and were not available to
other VHA networks or headquarters decision makers. Similarly, data on the
type and number of other assets are maintained at the VISN level, and the
data are not readily available to other VISNs or headquarters personnel.
Therefore, decision makers cannot readily identify assets to share across
networks.

In response to a fundamental change in VA's mission from hospitalbased to
outpatientbased services, a GAO testimony2 on VHA's operations and
maintenance of its capital infrastructure and a congressional hearing,3
VHA established the Capital Asset Realignment for Enhanced Services
(CARES) process in October 2000. The CARES process is designed to assess
veterans' health care needs and identify planning initiatives to meet
those needs in the future. Under CARES, VA's Undersecretary for Health has
directed VISNs to develop assetrestructuring plans to guide any future
capital investment decisions that would involve constructing new
facilities or renovating or closing existing ones in order to deliver
health care more efficiently in existing locations or closer to where
veterans live. The CARES process-involving a study of each VHA
VISN-consists of nine steps, including defining market areas, analyzing
needs, developing market plans, implementing the plans, and integrating
the plans into the strategic planning cycle. Phase I of the program,
completed in August 2002, was a pilot test (study) of the Great Lakes
network. A recent GAO study of VA's management of vacant buildings in the
Great Lakes CARES pilot found that VA has developed or implemented
alternative use or disposal plans for 21

1VHA is geographically divided into 21 VISNs, and National Cemetery
Administration is divided into five memorial service networks.

2U.S. General Accounting Office, VA Health Care: Capital Asset Planning
and Budgeting Need Improvement, GAO/THEHS9983 (Washington, D.C.: Mar. 10,
1999).

3The hearing was held on July 22, 1999, by the Subcommittee on Oversight
and Investigations, Committee on Veterans' Affairs, House of
Representatives.

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Varying Degrees

of its 30 unneeded, vacant buildings in the Great Lakes VISN.4 Despite the
efforts of VISN officials, the lack of interest in the remaining 9 vacant
buildings has been an obstacle to finding alternate uses for these
properties. VISN officials believe that maintaining ownership of the
vacant buildings is the least expensive course of action, given the
relatively high demolition costs compared to annual maintenance costs and
considerable uncertainties about VA's potential costs to transfer the
properties to the General Services Administration (GSA). In August 2003,
we reported on how VA and two other federal agencies identify vacant and
underutilized properties and the numbers, types, and locations of these
properties.5 The report describes VA's efforts to address these properties
and presents an analysis of information on vacant and underutilized
properties at VHA. Among other actions being taken by VA, VHA future
capital needs and program resources are expected to be largely driven by
the results of the CARES studies. The remaining 20 VISN studies are
ongoing and the entire process is scheduled for completion in fiscal year
2003.

As part of CARES, VHA has conducted a functional space and use survey
through a nationwide buildingbybuilding survey of each facility in each
VHA network. According to officials, the surveys are intended to document
each facility's usable space (square footage and acreage), the programs it
supports, and the functional ability of the facilities to support those
programs. The results of these surveys were collected in a database at the
VHA level and were planned to include data on vacant properties, including
swingspace.6 Officials said the surveys were planned to consist of three
types of facility assessments: a technical assessment-assessing, for
example, whether a building has a sufficient number of windows and the
condition of its mechanical systems; a functional assessment-assessing,
for example, whether services provided at a building's location are
capable of handling a patient workload similar to a private sector
facility; and a space assessment covering things such as whether there is
sufficient space in the patient waiting rooms or whether the number and
location of patient exam rooms provide for adequate privacy. Standards for
these assessments are generally based on the standards for comparable
private sector

4U.S. General Accounting Office, VA Health Care: Improved Planning Needed
for Management of Excess Real Property, GAO03326 (Washington, D.C.: Jan.
29, 2003).

5U.S. General Accounting Office, Federal Real Property: Vacant and
Underutilized Properties at GSA, VA, and USPS, GAO03747 (Washington, D.C.:
Aug. 19, 2003).

6Swingspace is vacant space that is available temporarily.

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facilities. According to one official, the VHA functional space and use
surveys will provide a comprehensive inventory of all VHA assets, and data
on these assets will be available VHAwide. The official also stated that
while data on the National Cemetery Administration (NCA) and Veterans
Benefits Administration facilities and properties have been included in
the survey, a facility (buildingbybuilding) walkthrough has not been
performed and the programmatic use of the facilities has not been
documented. According to the official, the data from the survey database
helped VHA develop planning initiatives associated with the CARES program.
While the focus of the survey database was to complement the CARES program
today, capital planners in both the field and headquarters offices can use
it in the future.

This will be helpful since today facility managers within the various VHA
networks are knowledgeable about the assets and facilities under their
control, but have no process or system for knowing the availability and
condition of assets in other networks. A facility or network manager has
to call other network managers to inquire about available assets and
facilities. Likewise, the condition and functional use of any available
asset would have to be researched, as this information currently is not
readily available in any systematic way. A VHA official in VISN 7, a
regional area that has recently experienced substantial growth in veteran
population, said his network generally follows the headquarters capital
planning process but recently began its own 3year planning process to
assess its own infrastructure needs. As part of that process, facility
managers were required to think about their capital asset needs and the
current condition of existing facilities and start developing proposals
for 3 to 4 years into the future. As discussed below, other VA networks
are also in the process of identifying their assets and facilities and
collecting information on their condition, and a VAwide system is being
developed that will allow facility managers to obtain information on the
availability and condition of assets VAwide.

The lack of a comprehensive agencywide asset management system has been an
area of concern for VA headquarters managers. In a briefing on the
agency's process, they noted that VA lacks an adequate portfolio
management function, does not have good information on existing assets,
and lacks a system to manage its leases-one that allows for automatic
updates of new leases and rate changes. As a result, independent from the
CARES effort, in early 2002 VA's asset management office began the process
of developing a system that will allow VA to inventory, monitor, and
maximize the use of its capital assets. The office solicited a contract

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Needs Reflect OMB and GAO Guidance to
Varying Degrees

for a study that would provide VA with information on industry best
practices, strategies for developing and maintaining an optimal capital
asset portfolio, and strategies for developing an optimal longrange
capital asset plan. The office has since decided to develop the asset
portfolio using VA staff. The capital asset portfolio, the Capital Asset
Management System (CAMS), is being designed as a database umbrella that
will sit atop and interact with existing databases-allowing programmed
data to be drawn from them and new data to be entered directly into CAMS.
The database is to include all VAowned buildings and land, leased real
estate, information technology, capital equipment, and sharing agreements.
The system was to be developed in two phases, with the first phase
scheduled for activation at the end of January 2003 and the second phase
scheduled for activation at the end of February 2003. However, as of
September 2003, VA officials had not replied to our request for
information on whether and when CAMS had been activated. The survey
database being developed under the CARES effort will complement CAMS.

While VA currently lacks agencywide asset inventory and condition data,
NCA maintains an asset inventory and information on the condition of its
assets and facilities. Moreover, these data are used as part of its 5year
planning process. The NCA inventory of national cemeteries includes
information on current and future cemetery capacity. NCA also maintains a
computerized database of major asset items at each cemetery. This
information is available to NCA managers at the administration level and
is used to identify program performance gaps and options for addressing
the gaps. NCA facility managers and contractors routinely conduct asset
and facility condition assessments. Field staff in each cemetery in the
five memorial service networks perform the initial assessment of cemetery
buildings and grounds to determine the need for maintenance; renovation;
and if appropriate, replacement of cemetery structures. The assessment
results are forwarded to NCA headquarters for review. To supplement the
assessments routinely performed, NCA contracted early in 2001 for an
extensive condition assessment and needs determination at each cemetery.
The process involved both visual inspections and use of a standard
methodology to determine the costs for cemetery upgrades.

NCA's guidance for preparing its 5year facilities plan explicitly states
that construction planning should consider existing assets and their
condition. The guidance further stresses that routine assessments of
current assets, including equipment and buildings, should include a
determination of changes in mission needs, whether existing cemetery
features continue to

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Needs Reflect OMB and GAO Guidance to
Varying Degrees

fulfill current and expected mission needs, and whether the assets should
continue to be used in the same manner.

The National Park Service Has a Formal Process for Assessing Its Needs,
but Lacks Agencywide Comprehensive Information on Asset Condition

The Park Service's capital needs are identified at the park level-through
a process that produces a general management plan (GMP) for each park and
an ongoing process in which individual projects are input to a project
management database and extracted from the database in response to the
annual budget call for project proposals. Some capital projects are
initiated as a result of funding becoming available from specific project
funding sources; other projects are initiated in response to departmental
or administration priorities. While individual parks historically have
maintained asset inventories with varying levels of detail, the Park
Service has just recently completed the servicewide asset inventory phase
of its new asset management process. Also, the agency lacks servicewide
comprehensive data on the condition of its assets. While the new asset
management process is designed to include comprehensive asset inventory
and condition data as key components, only limited asset inspections have
been performed so far and the more detailed comprehensive assessments will
not be completed for some time.

GMPs are linked to Park Service strategic goals and define longterm park
direction. The plans provide a broad overview of park needs and identify
areas for major improvements and performance gaps in service. The planning
process also identifies maintenance deficiencies at the park level. GMPs
cover a 10to 20year period and usually are general in nature so they do
not become outdated before associated projects actually receive funding. A
plan typically begins with an overview discussion of the park's
mission-why the park exists-and then identifies park performance gaps and
the resources required to fill those gaps. Some older plans, such as the
August 1995 Grand Canyon GMP, are more detailed than plans developed in
recent years. For example, the Grand Canyon GMP not only describes
longterm objectives for the entire park area, but also identifies and
describes specific capital projects to achieve the objectives. Producing a
GMP can take 2 to 6 years and involves intense consultation and review by
the public and other agencies, regional office and headquarters program
staff, and Park Service and Department of the Interior managers and senior
executives. Only after all major issues are discussed and resolved, does a
park's regional director approve the GMP.

The capital needs identified at the park level are entered into the
servicewide Project Management Information System (PMIS)-an

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Agency Processes for Assessing Capital
Needs Reflect OMB and GAO Guidance to
Varying Degrees

automated tracking system containing thousands of proposed capital
projects. Projects are entered into the servicewide system throughout the
year and are extracted in response to budget calls for project proposals.
Projects also may be entered into PMIS for the first time in response to
budget calls for project proposals. According to Park Service officials,
PMIS is a list of identified needs containing a mix of projects that have
been initiated and those that have not. Using PMIS, decision makers are
able to access the specific project information, including justifications;
link to agency goals, and estimated costs; and begin the ranking and
selection phase of the capital decisionmaking process. PMIS is discussed
further in chapter 4.

Capital project proposals are generally developed independent of funding
sources and entered into the PMIS database as described above. However,
some annual budget call memorandums solicit capital projects tied to
specific funding sources such as funding provided through the recreational
fee demonstration (feedemo) program,7 lineitem construction and
maintenance program, and park concessions franchise fees. Each funding
source can fund specific types of projects. Annual budget calls may also
solicit project proposals for a specific type of project, such as road
repair and maintenance, even though parks may have needs that differ from
these sources and categories. According to Park Service officials, when
OMB sets the target amounts available from the various sources, that
determines the types of project proposals submitted by the Park Service
for that year. The parks, in conjunction with the regional offices,
determine which proposals to put forth based on the needs linked to
strategic goals that best fit within the criteria and funding limits
established in the call letter. Parks may have needs that differ from
those permitted to be funded by the specified funding source. For example,
officials say there is a severe need for employee housing at the Grand
Canyon National Park, but feedemo funding cannot be used for that purpose.
Also, departmental and administration priorities can influence projects
initiated at individual parks. For example, for the past several years the
administration's priority has been to reduce the backlog of deferred
maintenance. This continues to be a priority, while more recently the
current administration has made visitor security a priority after the
terrorist attacks of September 11, 2001.

7The feedemo program asks visitors to pay recreation user fees while in
some parks, in order to engage in certain activities requiring additional
services or facilities or to mitigate impacts. The types of fees range
from campground to boat launching fees.

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Needs Reflect OMB and GAO Guidance to
Varying Degrees

Until just recently, the Park Service did not have a servicewide inventory
of its capital assets and facilities. Prior to this, it has not had the
benefit of a comprehensive asset inventory of all its assets. As a result,
the physical condition, functionality, suitability, and life expectancy of
facilities and the backlog of deferred maintenance requirements were not
adequately documented. Some national park units maintained limited
inventories covering the assets under their control. For example, the
Grand Canyon National Park has an inventory of what it calls "formal"
property, including capitalized assets with an acquisition value of
$15,000 or more, and each division within the park has an inventory of
socalled "informal" property valued below $15,000 with an estimated useful
life of 2 years or more. This individual park information had not been
available servicewide. As part of its new asset management process
(discussed below), the Park Service says it recently completed its asset
inventory and trained its staff on the use of the required computer
software.

The Park Service also historically has not had servicewide asset condition
data or systematic criteria for individual park managers to use in making
assessments for their parks. According to Park Service officials,
condition assessments were not required in the past; as a result, asset
condition information historically has not been available to servicewide
capital planners and decision makers. Condition is monitored at the park
level. For example, the Grand Canyon National Park management team, which
includes the park superintendent and other managers, determines project
priorities for the park based on its knowledge of park facilities.
According to one park official, there is an extensive amount of
institutional memory within the management team and that institutional
knowledge of the park and its functions, along with visual inspections of
the condition of the park's assets, is used to make needs assessment
decisions. However, these visual inspections were not based on systematic
criteria and there was little documentation available. Making progress
toward implementing another component of the new asset management process,
the Park Service says it has completed visual inspections on all but nine
of the larger parks in the park system. However, the more detailed,
comprehensive condition assessments will not be completed until the end of
fiscal year 2006.

As planned, the Park Service's new asset management process will, for the
first time, provide the agency with a reliable inventory of its assets; a
process for reporting on the condition of those assets; and a consistent,
systemwide methodology for estimating deferred maintenance costs. The
cornerstone of the new asset management process is the Facility Management
Software System (FMSS)-a commercialofftheshelf

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Varying Degrees

integrated software system currently used by other federal agencies. FMSS
will allow Park Service managers to track cost and maintenance data for
each asset in the agency's inventory. The system requires each park to
enter all of its assets and information on their condition into a
centralized database for the entire park system. Parks also will be
required to conduct annual condition assessments of their assets and more
comprehensive condition assessments regularly. The annual condition
assessments- which are essentially "eyeball" inspections-are designed to
identify obvious and apparent asset deficiencies, while the comprehensive
condition assessments are more indepth inspections and designed to
identify hardtofind problems, such as hidden structural defects in
building foundations, roofs, or walls.

In April 2002 we reported8 that when fully developed and implemented as
planned, the new asset management process would enable the Park Service to
provide agency managers and the Congress with much more accurate and
reliable information on the amount of deferred maintenance throughout the
park system. In July 2003, we reported9 on the Park Service's progress
with implementing its new process. We found that the agency had completed,
or nearly completed, a number of substantial and important steps toward
implementing the new process. As mentioned, the Park Service says it has
completed an inventory of its assets and the annual condition assessments
(eyeball inspections) have been performed on all but nine of the larger
parks in the park system. The remaining annual assessments are under way
and planned for completion by the fall of 2003. While the Park Service
says it is concurrently performing the more comprehensive (detailed,
indepth) assessments, these comprehensive assessments will not be
completed until the end of fiscal year 2006. At that time, according to
the schedule, the entire process is to be fully implemented. However, the
capital asset plan and justification (OMB Exhibit 300)10 for this system
shows an estimated completion date of September 2007.

8U.S. General Accounting Office, National Park Service: Status of Efforts
to Develop Better Deferred Maintenance Data, GAO02568R (Washington, D.C.:
Apr. 12, 2002).

9U.S. General Accounting Office, National Park Service: Status of Agency
Efforts to Address Its Maintenance Backlog, GAO03992T (Washington, D.C.:
July 8, 2003).

10Exhibit 300 is required by OMB. Agencies must submit a capital asset
plan for each new and ongoing major project, system, acquisition, and
operational (steadystate) asset included in their capital asset
portfolios.

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Whether fully implemented in fiscal year 2006 or 2007, the new asset
management process using FMSS is expected to allow for improved
prioritization of capital projects by providing more centralized,
quantifiable data. According to Park Service officials, the backlog of
maintenance identified through this system will be imported into PMIS and
ranked for funding and accomplishment. The reports generated by the
system, including work order reports, requisition forms, and condition
assessment and asset management reports, would be available to capital
planners and decision makers servicewide.

This new process for managing the nation's historic treasures and other
assets sounds promising but will require years of sustained commitment by
the Park Service and other stakeholders. Comprehensive data on the
condition of assets in the Park Service portfolio is critical not only to
identifying deferred maintenance needs but also to determining an asset's
true functionality and ability to achieve longterm goals and objectives.

NOAA Has a Process for Assessing Its Needs and Maintains an Agencywide
Asset Inventory, but Lacks Current Information on Asset Condition

NOAA's capital needs are identified at the line office and major program
office levels and flow from the individual line and program offices'
strategic planning processes. As discussed in chapter 2, NOAA line and
major program offices prepare separate strategic plans in support of
NOAA's strategic goals and the longterm goals of the Department of
Commerce. Capital resources needed to support these goals are identified
in the individual offices' current strategic plans and operating plans.
For example, the current strategic plan for the Office of Marine and
Aviation Operations (OMAO) identifies its mission and longterm goals and
describes how investments in capital assets play a key role in addressing
these goals. The plan describes the operational requirements that must be
met, which could require major refurbishment of old platforms, converting
existing ones obtained from other government agencies, or building new
platforms to replace older ones. The plan further states that new
costefficient and more technically capable assets must be considered as
part of future capital plans, and the plan identifies important functional
requirements, such as the need for technically advanced platforms to meet
the growing public demand for services. Further, the strategic plan
describes OMAO's goal of expanding public and private partnerships to best
meet NOAA business objectives. This discussion of such alternatives is
continued in chapter 4.

In another example, the strategic plan for the National Environmental
Satellite, Data, and Information Service describes the replacement of
polarorbiting satellites needed to continue NOAA's tracking of global
variables

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that affect weather and climate. The planned new polarorbiting satellites
are being acquired through partnership with other federal agencies that
have the same needs-the Department of Defense (DOD) and the National
Aeronautics and Space Administration (NASA). Taking an integrated approach
to identifying and meeting the operational satellite needs for both the
civil and national security communities, the new system-the National
PolarOrbiting Operational Environmental Satellite System (NPOESS) will
replace polar systems currently operated by NOAA and DOD and is expected
to save the government an estimated $1.8 billion over the life of the
program. NOAA, DOD, and NASA established a joint Integrated Program Office
to develop, manage, acquire, and operate NPOESS. Each participating agency
is responsible for one of three primary functional areas. NOAA has overall
responsibility for the converged system and is also responsible for
satellite operation.

The other NOAA line offices have separate processes for identifying their
capital needs-each in accordance with its current strategic plan, which in
turn is linked to the NOAA strategic plan and longterm Commerce goals.
Also, individual line and program offices have ranking processes that
occur at the line and program office levels before proposed investments
are submitted to NOAA review boards and, ultimately, to NOAA headquarters
management for approval. These processes are discussed in chapter 4.

NOAA maintains separate inventories of real and personal property assets
but maintains no asset condition data on real or personal property.11 A
single inventory of real property assets is maintained by NOAA
headquarters and the four Commerce Administrative Support Centers (ASC).
Each regularly updates the inventory for the assets under its purview.
NOAA Headquarters and the ASCs receive input from internal realty
specialists on acquired and disposed properties and update the real
property inventory monthly. The inventory also contains information on
properties leased by NOAA and GSA. NOAA officials can generate reports
from the real property inventory, which show basic information such as
acquisition cost and the size and age of facilities. According to a NOAA
official, the real property inventory is difficult to use and decision
makers do not regularly consult it. NOAA's personal property inventory
also contains basic asset information. The inventory identifies each
personal

11Real property assets consist of land; facilities; and anything
constructed on, growing on, or attached to land. Personal property is all
property other than real property. It includes items such as ships,
aircraft, satellites, and computers.

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property asset by a unique identifier and briefly describes the asset;
provides its date of acquisition, acquisition cost, useful life, and
current physical location; and notes whether the asset is owned or leased.
This inventory is centralized and maintained by NOAA's Office of Finance
and Administration (OFA). NOAA's line and program offices provide OFA with
data on their respective assets and OFA enters the data into its database.
The personal property inventory includes both capitalized personal
property (assets costing $200,000 or more) and noncapitalized property
(assets costing less than $200,000). Noncapitalized property is mostly
computer equipment.

In the past, NOAA regularly performed asset condition assessments for its
real property assets; however, these assessments have been suspended for
several years while identified asset deficiencies are addressed. An
official said that previous condition assessments for real property assets
were very exhaustive and costly and the condition data aged very quickly.
A new process for assessing asset condition is scheduled to begin in
fiscal year 2003 and will involve a facility rating and prioritization
process performed by a contracted firm.

According to an OFA official, NOAA has no standard process for performing
condition assessments for personal property assets. OFA conducts what it
refers to as an annual assessment of property condition for capitalized
personal property only. However, this assessment merely consists of OFA
asking the line and program offices if there is any deferred maintenance
on their equipment and other assets. According to the official, the answer
is generally "no." The official further stated that the line and program
offices themselves do not perform condition assessments because it is
believed that if regular asset maintenance is performed, routine condition
assessments or inspections are not necessary.

In addition to the new process for assessing the condition of real
property assets, NOAA is implementing a new real property inventory
system. Commerce has purchased a system that is presently running parallel
to NOAA's present inventory. It contains the same information as the
present inventory, although according to an official, it is Web based and
will be easier to update than the present inventory. The new inventory
will not collect asset condition information but could be expanded to
include it in the future. At the time of our study, it was not fully
deployed but was scheduled to be fully operational by fiscal year 2003.
The current personal property inventory was implemented in the fall of
2002.

Chapter 3
Agency Processes for Assessing Capital
Needs Reflect OMB and GAO Guidance to
Varying Degrees

BOP Maintains an Inventory of Capital Assets and Information on Asset
Condition; However, the Basis for Its Longterm Performance Gap Is Unclear

BOP capital needs are determined through the use of a number of separate
parallel processes. Capital projects are identified in response to the BOP
Director's spring budget memorandum, through routine inspections of
facilities, and through a longterm capacity planning process.
Modernization and repair (M&R) projects are identified as a result of
routine physical inspections of correctional institutions or in response
to legal requirements, such as the need to provide access for the
physically challenged. M&R projects also are identified as a result of
contractor surveys of facilities that are more than 50 years old. These
surveys of older institutions determine the extent of renovation needed
and if replacement of the facility is more cost effective than renovation.
Projects that require construction of new institutions-which represent the
bulk of BOP's capital spending-are identified through a centralized
process that is driven by future inmate population projections with the
goal of keeping prison crowding at targeted manageable levels.

BOP maintains an automated inventory system to track, control, and
depreciate both real and personal property capital assets-its Real
Property Management System, which tracks all BOPowned land, buildings,
other structures, and related improvements, and a Personal Property
Management System which tracks and depreciates all BOPowned personal
property. BOP's capital asset inventory is a nationwide system run on a
mainframe computer, and its data are available nationally to all capital
planners and decision makers. Numerous reports are generated from this
system, including a list of operational correctional facilities at any
given point in time and individual asset records showing detailed asset
information such acquisition date, accumulated depreciation, and current
book value. According to capacity planning officials, the real property
inventory data are considered in the overall needs assessment process. For
example, when population increases occur, the existing inventory of
correctional facilities and their current populations are first considered
in determining how to maintain or achieve a targeted population level.

Likewise, capital asset condition data are available to regional and
headquarters capital planners and decision makers. BOP's policy is to
inspect its institutions either quarterly, semiannually, or annually
depending on the institution's age. Correctional institution staff
throughout each of the six regions perform the inspections, and the
results are compiled to form an institutionspecific list of infrastructure
maintenance needs. These institution lists are forwarded to each regional
office where they are consolidated for evaluation by regional staff. At
least annually

Chapter 3
Agency Processes for Assessing Capital
Needs Reflect OMB and GAO Guidance to
Varying Degrees

regional offices rank the needed projects and forward the ranked lists to
headquarters staff. BOP's Facilities Management Branch consolidates the
six regional project lists with additional requests received in response
to the Director's spring budget call. More extensive condition assessment
surveys are performed for facilities over 50 years old with the oldest
institutions and facilities that have not had major renovations in years
being surveyed first.

BOP also relies on its Computerized Maintenance Management System (CMMS)
to track preventive maintenance, equipment history, recommended
replacement schedules, and costs related to institution maintenance. In
addition to the project repair lists, facility condition survey reports,
and reports generated by CMMS, BOP units are required to provide current
asset condition data when responding to the Director's spring budget call.
For the fiscal year 2004 budget cycle, the Chief of Facilities Management
issued a memo, in addition to the BOP Director's memo, with instructions
for developing the buildings and facilities budget request. The memo
required that current asset condition be fully explained in all
requests-including the likely consequences of not receiving funding for
the requested project. While this requirement indicates that asset
condition could be seriously considered in the budget process, BOP
officials could not provide us with any completed requests containing this
information.

BOP also considers a program's functional requirements when determining
its performance gap. As suggested in OMB guidance, a performance gap
should be defined in terms of the functional requirements to be achieved.
An important requirement in BOP's program is a policy decision to house
prison inmates within 500 miles of their homes. Therefore, BOP planners
and decision makers consider how best to meet this requirement when
evaluating various alternatives to bridging an identified performance gap.

Although asset inventory and condition data are available for considering
the use of existing assets when identifying a performance gap and
determining how best to fill the gap, BOP is not able to support the basis
of its estimated overall longterm performance gap. While BOP considers a
number of factors, as described below, it lacks studies to support its
judgment about the acceptable level of overcrowding.

BOP's new construction program follows a centralized longterm capacity
planning process with the goal of ensuring sufficient institution capacity
while maintaining prison crowding at safe and secure targeted levels. The
agency's Office of Research and Evaluation generates projections of future

Chapter 3
Agency Processes for Assessing Capital
Needs Reflect OMB and GAO Guidance to
Varying Degrees

inmate population levels using a microsimulation computer program and data
from the Administrative Office of the U.S. Courts and the U.S. Sentencing
Commission. These projections are influenced by factors such as increased
resources for law enforcement and prosecutorial agencies and estimated
increases in the number of Immigration and Naturalization Service (INS)
detainees. The Office of Research and Evaluation continually monitors
population growth and the projections are updated regularly. The
population projections are subdivided by inmate security level-minimum,
medium, and maximum security-and geographic region. BOP's capacity
planning staff also monitors inmate population growth and current and
estimated prison capacity levels. Longterm rates of prison overcrowding
are regularly generated using a formula that considers an institution's
"rated capacity" and the expected prison population. This results in an
overcrowding percentage, which is the inmate population amount above the
institution's rated capacity.

The concept of rated capacity is a standard that uses a stated level or
percentage of double bunking (crowding) in inmate living quarters to
arrive at an institution's inmate capacity level. In recent years, BOP has
sought to operate at 25 percent double bunking for highsecuritylevel
inmates, 50 percent for mediumsecuritylevel inmates, and 100 percent for
lowsecuritylevel inmates.12 These percentages of double bunking are
multiplied by the number of inmates the institutions were designed to
accommodate to arrive at the institution's rated capacity. For example, a
highsecurity institution designed to accommodate 768 inmates (768 beds)
with 25 percent double bunking would have a rated capacity of 960 (768 x
1.25). A lowsecurity institution designed to accommodate 768 inmates with
100 percent double bunking would have a rated capacity of 1,536 (768 x
2.00). The rated capacity numbers are then compared to an institution's
projected population to arrive at the institution's percentage of
overcrowding. Therefore, a highsecurity institution with a population of
1,100 and a rated capacity of 960 would have an overcrowding rate of about
15 percent (1,100960/960=14.6).

12Twentyfive percent double bunking means 25 percent of inmate cells have
twice the number of inmates they were designed to accommodate. The
percentages of double bunking at the various security levels are based on
BOP's own judgment as to the appropriate mix of single versus doublebunked
cells. In the past, BOP, in determining rated capacity, had generally
followed a singlebunking standard advanced by the American Correctional
Association (ACA) but has transitioned to a doublebunking standard to
accommodate overcrowding. ACA considers single bunking a nonmandatory
standard and will accredit institutions that use double bunking as long as
its other mandatory standards are followed.

Chapter 3
Agency Processes for Assessing Capital
Needs Reflect OMB and GAO Guidance to
Varying Degrees

The institution numbers are aggregated to determine an overall systemwide
percentage of overcrowding in BOPoperated facilities. A longterm capacity
plan is regularly generated, which shows these overcrowding percentages by
security level and inmate gender over a 9year period. For example, the
capacity plan dated April 30, 2002, shows that mediumsecurity institutions
housing male prisoners are estimated to be overcrowded by 52 percent in
fiscal year 2003. The same capacity plan shows that systemwide BOP
overcrowding is expected to be around 30 percent through fiscal year 2009.

While BOP planning and budget documents suggest that record inmate
population increases over the past few years will likely continue, BOP is
unable to demonstrate the basis for what it considers an acceptable level
of systemwide overcrowding. Officials say that over the past two decades
the overcrowding goal has increased from 10 to 15 percent to an actual
goal of around 30 percent. They say this goal is a result of gradual
increases in what the previous administration believed were acceptable
percentages of double bunking. According to budget and capacity planning
staff, during the early 1980s a goal of 10 percent overcrowding was
established, but population growth never allowed them to maintain that
level. In the 199394 time frame, the goal was set at 15 percent, but the
funding needed to attain 15 percent was never provided. Also, the
absorption of felons sentenced in the District of Columbia and INS
longterm detainees made attaining this goal unlikely.

More recently, according to BOP officials, the Department of Justice (DOJ)
decided that BOP would, at least temporarily, try to manage the prison
population at 85 percent double bunking in penitentiary cells (maximum
security) and 95 percent in mediumsecurity facilities. These levels of
double bunking the forecasted prison population translate to a systemwide
overcrowding rate of around 30 percent through fiscal year 2009. DOJ's
fiscal year 2001 Performance Report,13 which includes the fiscal year 2003
performance targets, states that the BOP systemwide overcrowding goal is
37 percent for fiscal year 2003 and 31 percent for fiscal year 2006.

BOP officials could not provide any studies or documentation supporting
what the agency considers an acceptable level of double bunking or
crowding above rated capacity levels. As mentioned, the goal has changed

13U.S. Department of Justice, FY 2001 Performance Report and FY 2002
Revised Final, FY 2003 Performance Plan.

Chapter 3
Agency Processes for Assessing Capital
Needs Reflect OMB and GAO Guidance to
Varying Degrees

over the past two decades and, according to BOP officials, it appears that
the prison population has been adequately managed at the varying levels of
overcrowding. To justify the need to construct new facilities, expand
existing facilities, or even enter into additional contracts with
privately run facilities, it is reasonable to expect the longterm need to
be based on standard criteria, supported by studies or analyses that
discuss some correlation between levels of overcrowding and problems in
controlling and managing the prison population.

Agency Use of Integrated Project Teams

With the exception of NOAA and VA, the use of integrated project teams
(IPT), suggested by OMB guidance, was not generally evident in the
planning phase of case study agencies' processes. It is hard to judge the
impact of this since our study of the practices of leading organizations
found that often such teams were not used until later, while organizations
were managing the implementation of capital projects. NOAA's OMAO formed
an IPT to facilitate its ship replacement process-a team consisting of
mission, acquisition, and program managers. Stakeholders of the fisheries
vessels were also consulted in the process. The team operated under NOAA's
Administrative Order that prescribes general procedures for developing
requirements for major systems. The working group began with unconstrained
requirements discussions, but through the process of feasibility design
studies, the final ship design met the most critical requirements. This
IPT developed a set of requirements for the new vessels, and an
acquisition team began a pilot ship design.

VA's capital guidance strongly emphasizes the use of IPTs. Its fiscal year
2002 guide amended prior guidance to define the acronym, IPT, as the
"Investment Proposal Team," a multidisciplinary team that includes subject
matter experts on the investment being requested. Generally, the VA IPT is
composed of disciplines such as the local facility planner; facility
engineer; finance, budget, and information technology staff; and
representatives from clinical disciplines defined in the project scope.

Conclusion While case study agencies have successfully begun their capital
planning processes by recognizing their primary missions and longterm
goals and identifying resources needed to fulfill their goals, only BOP
has been successful at maintaining a current inventory of its assets and
information on asset condition. VA and the Park Service have struggled to
develop and maintain agencywide comprehensive inventories of capital
assets and

Chapter 3
Agency Processes for Assessing Capital
Needs Reflect OMB and GAO Guidance to
Varying Degrees

current data on asset condition; however, the Park Service says it has
recently completed an inventory of its assets and is making progress
toward assessing the condition of those assets. NOAA has not maintained
current information on the condition of assets under its control. This
lack of current information on asset availability and condition may have
hindered these agencies' ability to properly identify current capabilities
and the actual gaps between their current and needed capabilities. The
lack of accurate inventory and condition data also may have prevented a
thorough evaluation of available alternatives to bridging performance
gaps. Case study agencies recognize the value of maintaining uptodate and
comprehensive asset information and appear to have begun processes to
improve this deficiency. It is important that agency management diligently
proceed with the development and implementation of these needed asset
management systems.

Recommendations for Executive Action

We recommend that the Secretary of Veterans Affairs continue to emphasize
and support the timely development and implementation of CAMS currently
under way agencywide. Decision makers should use the asset inventory and
condition information as an integral part of VA's capital planning process
when both determining a need for a new capital asset and considering
options for filling a performance gap.

We recommend that the Director of the National Park Service ensure that
asset inventory and current asset condition data from FMSS are available
to assist capital planners and decision makers when determining future
capital needs and alternatives to bridging identified performance gaps.

We further recommend that the Director of the Bureau of Prisons require
that studies be undertaken to determine the relationship between different
levels of overcrowding and problems with managing prison populations, and
that such studies be used in determining needs.

Finally, we recommend that the Under Secretary for Oceans and Atmosphere,
Department of Commerce, (NOAA Administrator) resume regularly scheduled
asset condition assessments for real property assets and develop a
standard process for assessing the condition of personal property assets.

Chapter 3
Agency Processes for Assessing Capital
Needs Reflect OMB and GAO Guidance to
Varying Degrees

Agency Comments We provided a draft of this report to VA, the Park
Service, BOP, and NOAA. In its written comments, reprinted in appendix
VII, VA said it agreed with our conclusions and concurred with our
recommendation to continue the development of CAMS and incorporate
facility condition assessment information when making capital investment
decisions. VA also described the progress it has made thus far with
implementing a life cycle portfolio management approach and the
development of CAMS to facilitate this effort. In addition, VA provided a
number of technical comments, which have been incorporated in this report
as appropriate.

The Department of the Interior did not directly address our conclusion and
recommendation regarding the Park Service. It provided a number of
technical comments, which have been incorporated in this report as
appropriate.

In its written comments, reprinted in appendix VIII, BOP did not directly
address our conclusion or recommendation. It said that over the years, a
number of corrections authorities have undertaken studies on the issue of
overcrowding in prisons, and the analysis and findings from those studies
and its own operational experience are factored into its population and
capacity planning process.

In its written comments, reprinted in appendix IX, NOAA agreed with our
recommendation to resume regularly scheduled asset condition assessments
for real property assets and develop a standard process for assessing the
condition of personal property assets. NOAA stated that it implemented
real property asset condition assessment surveys in fiscal year 2003 and
has implemented a program requiring annual condition and maintenance
assessments for all capitalized personal property assets.

Chapter 4

Agencies Consider Alternatives but Processes to Rank and Select
Investments and Produce Longterm Capital Plans Need Attention

Both Office of Management and Budget (OMB) and GAO guidance stress that
when a performance gap between needed and current capabilities has been
identified, it is important that organizations carefully consider how best
to bridge the gap by identifying and evaluating a full range of
alternatives to constructing or purchasing a new capital asset. The
guidance also emphasizes the need to have a comprehensive decisionmaking
framework to review, rank, and select from among competing project
proposals. Such a framework should include appropriate levels of
management review and approval, and selections should be based on the use
of established criteria. Capital planning guidance also emphasizes the
importance of documenting the selected projects in a longterm capital
asset plan. The capital plan should define the organization's longterm
capital acquisitions needed to support its longterm goals and objectives.

Case study agencies have processes through which to consider various
alternatives to acquiring new capital assets and often choose such
alternatives, including nonownership options. Case study agencies have
various processes for the review and selection of proposed capital
investments, but most have established frameworks. The process used at the
Bureau of Prisons is less formal than other agencies' processes and is not
well documented. None of the case study agencies have developed longterm
capital plans that describe the goals and objectives to be achieved,
baseline assessment of the current conditions and performance gaps to be
filled, and justification for new acquisitions proposed for funding.

Agencies Have Processes to Consider Various Options for Addressing Their
Performance Gaps- Generally a Range of Alternatives, Including Noncapital
Options

While it is almost always possible to hypothesize more alternatives for
any given need than may have been seriously considered by agencies, all of
the case study agencies considered a reasonable number of alternatives to
address any identified performance gaps.

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

Department of Veterans Affairs

The Department of Veterans Affairs' (VA) departmental guidance requires
its facility staff to answer OMB's "Three Pesky Questions"1 when
developing capital investment project proposals. These questions seek to
ensure that the function to be supported by the investment is mission
critical, no other governmental or private entity can perform the function
better, and agency business processes have been reengineered to optimize
performance at the least cost. The Veterans Health Administration (VHA)
and the National Cemetery Administration (NCA) follow departmentlevel
guidance and consider a range of alternatives to address identified
performance gaps. There are four alternatives that must be considered-
leasing; status quo; new construction; and rehabilitation, repair, or
expansion of existing facilities. Enhanceduse leasing and contracting with
a university hospital to share assets are nonownership options considered
by VHA. NCA has the authority to partner with state governments through
the use of federal grants to establish, expand, or improve stateowned and
operated veterans' cemeteries. When researching alternatives, NCA also
considers the expansion of existing memorial sites through the purchase of
adjacent cemetery land.

VA was given the authority to enter into enhanceduse leasing2 arrangements
to address some of its facility needs. Under these arrangements,
originally authorized in 1991, VA leases its land to a private or public
developer. The developer constructs a facility on this VAowned land and
assumes ownership of the facility. The developer may lease the whole or
part of the facility back to VA at belowmarket rent and the facility owner
can solicit other tenants for space not used by VA. This arrangement can
be structured to require only a 2year financial commitment on behalf of
the government. VA has used enhanceduse leasing for clinics, regional
offices, research facilities, and office buildings, and VA is looking to
expand enhanceduse leasing into other areas, such as equipment
investments. Figure 10 describes VA's enhanceduse authority.

1See ch. 1.
238 U.S.C. S: 81618169.

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

Figure 10: VA Enhanced-Use Authority

Enhanced-use authority is derived from 38 U.S.C. S:8161-8169. Among the
other flexibilities, the enhanced-use authority allows VA to outlease its
property to private or other public entities for up to 75 years. The
leased property may be developed for VA and non-VA uses. Each enhanced-use
lease shall be for fair consideration, as determined by the Secretary, and
consideration may be provided in whole or in part through consideration
in-kind, including provision of goods or services of benefit to the
department, such as construction, repair, remodeling, or other physical
improvements of department facilities; maintenance of department
facilities; or provision of office, storage, or other usable space. VA
also has the option to use "minor" construction funds of up to $4 million
as a capital contribution in connection with an enhanced-use lease. In
return for the lease of its land, VA may purchase services, space, or
facilities in connection with the enhanced-use lease. If VA chooses to
lease space, the enhanced-use facilities can house tenants in addition to
VA. The funds received from the developer's lease payments, in excess of
VA's space lease expenses, are deposited into the Health Services
Improvement Fund for the benefit of the local medical center that
coordinates the enhanced-use lease. The authority also allows VA to deduct
expenses associated with establishing an enhanced-use lease from the
proceeds of the developer's lease payments. In this case, the local
medical center and Veterans Integrated Service Network deposit any
remaining funds into the Health Services Improvement Fund for use.

Unlike traditional federal leases in which lease payments are deposited
into the Department of the Treasury's general fund account, VA retains
enhanced-use payments. VA says the ability to receive in-kind benefits or
to keep excess funds from lease payments creates an economic incentive for
VA and its property managers to fully use existing capital assets and to
begin to view these assets as potential resources to fund needed programs
or facility requirements.

VA views enhanced-use leasing as useful for certain properties and has
used its enhanced-use authority for a variety of projects. For example, in
Indiana VA leased underutilized medical facility land to the state
government for its use to build a health care facility. In Houston, Texas,
VA leased underutilized land for a regional office, which reduces the
department's expenses for rental of office space it occupies, and provides
a revenue stream from the rental of space to non-VA users. In Washington,
D.C., VA leased land to a child care provider for the construction and
operation of a child development center, which provides services to VA
employees at a discount.

Source: VA.

While VHA considers alternatives within its general scope of delivering
services, it defines its range of alternatives within the rubric of
maintaining service to all future expected enrollees. It has given some
attention to alternatives, such as provision of services to veterans by
nonVA health care facilities. For example, some VA medical centers have
agreements with military treatment facilities to exchange patient care and
support services. Also, VA and the Department of Defense (DOD) have pooled
resources to construct a joint medical facility or to make use of an
existing facility.

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

Bureau of Prisons The Bureau of Prisons (BOP) considers a range of
alternatives to address the performance gap identified through its
capacity planning process. One of the Department of Justice's (DOJ)
strategic objectives is to ensure the existence of sufficient and
costeffective prison capacity. BOP's strategy to attain this objective
includes acquiring needed capacity through cooperative arrangements with
state and local governments, contracts with private providers of
correctional services, and alternatives to traditional confinement where
appropriate. BOP also considers the expansion of existing BOP facilities
and the acquisition and conversion of nonprison facilities to prison use.

Where the inmate security level is appropriate and for certain prison
populations, BOP contracts with private companies and state and local
governments to provide prison capacity as an alternative to new
construction. In 1996, BOP began using privately managed facilities in a
5year demonstration project to evaluate the potential effectiveness of
privatizing future BOP facilities. Under authority provided in DOJ's
fiscal year 1997 appropriations act, BOP contracted with a private firm to
operate a correctional institution for lowand mediumsecurity inmates in
Taft, California, to help reduce crowding in the facilities of BOP's
western region. In 1997, the Congress also required the use of private
contract facilities to house felons sentenced in the District of Columbia
who were transferred to BOP custody.3 As of April 30, 2002, 27,000 of the
approximately 162,000 inmates in federal custody were assigned to either
privately managed institutions, state or local facilities through
intergovernmental agreements, community corrections centers, or home
confinement. DOJ's fiscal year 2001 performance report4 includes reducing
overcrowding as one of BOP's fiscal year 2003 performance targets. The
stated strategy for attaining this goal includes the aggressive analysis
of existing private and other correctional facilities for sale, which may
offer a more timely and affordable alternative to new prison construction.

Alternatives to construction of new facilities also include the expansion
of existing correctional institutions. For example, BOP received
congressional approval in fiscal year 2001 to reprogram funds for the
initial design and then included in its fiscal year 2003 budget request
construction funding for three expansion projects. These projects are
expected to

3Title XI of the Balanced Budget Act of 1997, Pub. L. No. 10533, August 5,
1997. 4U.S. Department of Justice.

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

expand the existing bed space at institutions BOP currently operates.
Budget documents state that the agency also tries to accommodate its
prison population through acquiring military and other properties and
converting them to prison use. Officials stated that the agency has also
considered the use of former university campuses as alternatives to
construction of new prison facilities.

Although BOP has considered and used numerous alternatives to construction
of new prison facilities, new construction is still a key part of DOJ's
strategy for meeting its bed space needs for persons in federal custody.
The fiscal year 2003 budget request included a request to fund
construction of a 512bed secure unit for female inmates on land already
owned by BOP. The requested new facility is expected to provide housing
specifically designed for the special needs of women inmates, such as
special rooms for visiting children-something BOP sees as an important
functional program requirement. The budget justification says that planned
construction of this facility at an existing site is cost effective since
it will allow for shared services, such as administrative, utility, and
medical services. Additional new construction plans include awarding
contracts for the design and construction of 7 facilities for activation
in fiscal year 2004 (adding 8,192 beds) and beginning or continuing
environmental review, design, or designbuild activities for 13 new
facilities to add prison capacity of 14,720 beds in fiscal years 2004
through 2007.

National Park Service The National Park Service (Park Service) considers a
range of alternatives to address an identified performance gap-including
noncapital options as appropriate. It also conducts extensive alternatives
analysis at various stages of a project proposal's development and review.
The nature of the Park Service's activities, the type of capital project
being considered, and the strategic goal that is being accomplished drive
the consideration of alternatives and the level and type of alternatives
analysis performed. For some routine capital projects, such as life and
safety deferred maintenance, which has been an administration priority for
some time, limited alternatives are available. Although the Park Service
considers alternatives such as renovating and rehabilitating existing
facilities where possible, specific circumstances may limit the range of
alternatives. For example, renovating or rehabilitating a surplus or
underused facility at a remote location would not be considered an
alternative for a new visitor center that would use existing adjacent
trails, the current transportation system, and other adjacent structures.
Park facilities may also have specific functional requirements that limit
the types of buildings or locations

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

considered during the alternatives evaluation process. For example, the
new Grand Canyon National Park visitors center must serve visitors 24
hours a day in all weather conditions.

The Park Service considers partnering with other governments for land
acquisitions and has partnership programs with the private sector and
nonprofit entities to share the burden of funding costly projects. For
example, according to an official, the Park Service recently sought a
partner for the Mesa Verde National Park curatorial facility and visitors
center. Although the project is estimated to cost $40 to $60 million, the
Park Service wanted to limit its share of the funding to $5 to $15
million. A local foundation expressed interest in providing the remaining
funding for the project. The Park Service also tries to partner with other
federal agencies. In its August 1995 general management plan (GMP), the
Grand Canyon National Park said it was working closely with the Forest
Service concerning specifics of a land exchange environmental impact
statement (EIS). The GMP stated that the Park Service worked with the
Forest Service to (1) help ensure that the land exchange would not
adversely affect the national park and (2) determine if needed park
housing, community services, and possible gateway information,
staging/parking, and public transit facilities could be a part of the
development.

The Park Service may share equipment with other federal agencies and does
consider leasing some assets where appropriate. For example, the Grand
Canyon National Park shares some equipment with the Forest Service and
leases most of its vehicles through the General Services Administration.
Operating funds typically fund vehicle acquisitions.

The Park Service conducts alternatives analysis at three points in time:
(1) during the program formulation phase in which the Park Service uses
Department of the Interior (DOI) criteria in conjunction with the Choosing
By Advantages process (discussed later in this chapter) to rank projects
for inclusion in the servicewide 5year construction program; (2) as part
of a value analysis5 process during project predesign and design; and (3)
during

5Value analysis, also known as value engineering and value planning, is a
value management methodology that refers to a systematic and orderly
problemsolving approach that emphasizes improved value, quality, and
performance. It identifies essential functions necessary to accomplish an
activity, analyzes those functions, and generates alternatives to secure
them at their greatest worth, on a lifecycle benefittocost basis. (See
OMB's Capital Programming Guide.)

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

development of compliance documentation such as the EIS, environmental
assessment, and categorical exclusion.

Valuebased decision making or value analysis is an important component of
the Park Service's project planning process. It compares alternatives to
select the best value. Value analysis is being increasingly used during
general management planning, implementation planning, and project
formulation. A project's predesign team develops alternatives and uses
value analysis to select the best alternative during its predesign
activities. The Park Service's value analysis process allows proposal
alternatives to be compared to each other in terms of variations on space,
site location, and impact on resources and visitor experience. Value
analysis in the predesign stages does not always consider status quo as an
alternative because it is presumed that if the project advances to the
value analysis phase, there is a compelling reason to require action other
than the status quo. An example of a value analysis review of alternatives
would be choosing to construct an outdoor visitors center where the
exhibits are maintained outdoors and maintenance is cheaper compared to
constructing an indoor visitors center that requires heating, air
conditioning, and other maintenance.

The Park Service servicewide seniorlevel review board, the Development
Advisory Board (DAB), which evaluates project proposals prior to their
submission to OMB (discussed later in this chapter), will not review
proposals that lack value analysis studies. Completion of these studies is
mandatory for proposals above certain dollar thresholds, and the number of
value analysis studies has increased from 17 in fiscal year 1997 to 113 in
fiscal year 2001. DAB discusses the value analysis results for all
alternatives-both those recommended for selection and the other
alternatives that are analyzed. The proposal presentations include a
discussion of why the alternatives not recommended were not chosen and the
benefits of the recommended alternatives. Figure 11 further describes
value analysis use in the Park Service.

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

Figure 11: Value Analysis Use at the Park Service

OMB Circular No. A-131 states that value analysis is a technique directed
toward analyzing the functions of an item or process to determine "best
value," or the best relationship between worth and cost. "Best value" is
represented by an item or process that consistently performs the required
basic function and has the lowest total cost.

Value analysis use at the Park Service comes under the direction of the
Park Service Director's Order 90. That order states that all Park Service
programs, projects, and activities over $500,000 will use value analysis
as a management and decision-making tool in performing or contracting for
planning, design, construction, and repair and rehabilitation/renovation
of facilities. Recreational fee demonstration projects that exceed
$430,000 and administrative and management program projects exceeding $1
million are required to have value analysis studies as well.

The Park Service value analysis process has several elements. They include
consideration of a project's purpose, functional analysis, alternatives
analysis, structured evaluation factors that may include Choosing By
Advantage, initial cost and life-cycle cost analysis, benefit/cost
analysis, independent perspective, and documentation of the decision. The
predesign value analysis study is typically conducted using a qualified
value study leader and a team that typically consists of park staff, the
design team, and independent experts. The results of the value analysis
study are summarized with project-specific information in the DAB project
review report and are reviewed by DAB during national proposal review.

Source: GAO analysis of Park Service information.

The National Environmental Policy Act (NEPA)6 requires that each Park
Service project have appropriate compliance activities completed that must
include an alternatives analysis to determine the various impacts of a
considered option. Status quo is considered as an alternative as part of
the NEPA compliance process because the other alternatives will affect the
environment in different ways. The Park Service must also consult with the
U.S. Fish and Wildlife Service and other agencies during the review of
alternatives.

National Oceanic and The National Oceanic and Atmospheric Administration
(NOAA) considers

Atmospheric Administration many alternatives at its line and program
office levels and at the NOAA bureau level to address identified
performance gaps. Each line and program office has its own requirements
for considering alternatives to new acquisitions of proposed capital
investments. One of NOAA's program offices, the Office of Marine and
Aviation Operations (OMAO), considers

6National Environmental Policy Act of 1969 S: 102 (codified at 42 U.S.C.
4332).

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Attention

alternatives to purchasing new capital assets as one means of fulfilling
one of the goals in its strategic plan-the goal of pursuing partnerships
with the public and private sector. OMAO officials said that they partner
with universities in the UniversityNational Oceanographic Laboratory
System (UNOLS) for excess university vessels when this is the best
approach. OMAO may also contract for services with the private sector. In
fiscal year 2002, NOAA was expected to acquire approximately 3,800
operating days of ship support through outsourcing with the private sector
and UNOLS, while NOAA ships also would provide approximately 3,800
operating days of ship support. OMAO also has purchased excess Navy
vessels and converted them for its use. At the time of our study, OMAO had
converted two Navy TAGOS vessels for its use and was in the process of
converting two others. OMAO's strategic plan and interviews with officials
demonstrate its continued efforts to repair and maintain aging vessels.

The National Weather Service (NWS) shares some assets with other NOAA
entities. For example, many Weather Field Offices colocate with other NOAA
line offices as an alternative to acquiring or constructing new
facilities. Also, the NEXRAD (Next Generation Radar) system is shared with
both DOD and the Federal Aviation Administration. When projects are
proposed to the NWS Finance and Investment Review Board (FIRB), their
justifications must clearly articulate the alternatives considered to
address the identified performance gap, including the costs and benefits
of the proposed alternative. The "alternatives examined" is one criterion
in the highest weighted criteria group used by the review board. For each
alternative compared to the original investment considered, the proposal
must document how it is different from other alternatives. Each
alternative must consider different program scales, methods of provision,
and degrees of government involvement. Project proposals must also
describe selection of the best alternatives based on benefitcost analysis.
The analysis must be summarized in quantitative terms presenting the total
benefitcost advantages and disadvantages associated with each alternative.
In cases where benefits cannot be fully monetized, staff are instructed to
quantify the benefits in terms of physical measurements, for example,
flash flood warning leadtime improvement in minutes or percentage of the
U.S. population covered by national weather radio.

NOAA's line and program offices are required to document alternatives at
the administration level as well. Budget formulation guidance for project
proposals requires line offices to consider alternatives. The guidance
requires proposals to consider outsourcing (contracting) and partnerships

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Agencies Consider Alternatives but
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Attention

with other agencies or with other line offices before proposals are
reviewed by NOAAlevel review boards.

Case Study Agency Processes for Ranking and Selecting Proposed Capital
Investments Vary, but Most Have a Formal Review and Approval Framework

Department of Veterans Affairs

VA has an established framework to review and approve proposed capital
investments. VA's process is well documented and the roles of managers are
clearly defined. The review and approval framework is a departmentlevel
process that considers projects for all VA administrations. It consists of
various levels of review and uses established criteria, multiattribute
decision analyses, and groupenabled software to rank proposed investments.

VHA, which had the largest number of proposed capital investments in VA's
fiscal year 2003 budget request, has its own separate process for
reviewing project proposals before they are submitted to the
departmentlevel process. For the fiscal year 2003 budget request, VHA's
Office of Facilities Management, Technical Resource Support Office (TRSO)
issued a call letter to field offices (VA networks) for capital asset
proposals prior to issuance of VA departmental guidance. This was intended
to allow network staff advance time to develop project proposals. Also,
according to one VHA official, the early call and proposal guidance was
issued because the development of project proposals-a 3inch business case
package- requires considerable time and resources. Business cases
submitted by the field staff were subjected to an initial cursory review
by VHA officials. Feedback from this allowed network personnel to
incorporate additional data and resubmit the updated business cases.

After a more detailed review by the Capital Asset Management and Planning
Service (which assumed the major program from TRSO), VHA formed an
administrationlevel panel to review the capital project

Chapter 4
Agencies Consider Alternatives but
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and Produce Long-term Capital Plans Need
Attention

proposals. The panel used four criteria to rank proposals: (1) the extent
to which the project is consistent with and supports the intentions of the
Capital Asset Realignment for Enhanced Services (CARES) program (discussed
in ch. 3), (2) the extent to which the project involved a seismic
improvement (repair or prevention of earthquake damage), (3) the extent to
which the project fulfilled the criteria set forth in H.R. 811,7 and (4)
the general quality of the proposal. For this cycle, the panel cleared 25
proposals and forwarded them for departmentlevel review. The Veterans
Benefits Administration (VBA) and NCA also have structured processes to
generate capital project proposals for inclusion in VA's departmentlevel
review.

VA's Office of Asset Enterprise Management (OAEM) and the Capital
Investment Panel (CIP)8 conduct the initial VA departmentlevel review of
business cases submitted from the three VA administrations and VA's staff
offices. OAEM first ensures that proposal packages pass a validity
assessment-a quality index check that ensures the proposal is complete
with the required documents, that OMB's "Three Pesky Questions" are
answered, and that there is rationale for including it in the project
scoring process. OAEM may allow network staff an opportunity to improve
their business case packages if needed before further review. Proposals
that pass the validity assessment are then scored by CIP on each of the
subcriterion and main criterion in VA's Analytical Hierarchy Process (AHP)
before they are forwarded to VA's Strategic Management Council (SMC)9 for
validation. According to a VA official, this scoring is done to ensure
that all VA internal stakeholders have similar views on the merits of a
project proposal. After CIP project scores are complete, CIP prepares a
"Board

7H.R. 811 was introduced in the 107th Congress as the Veterans Hospital
Emergency Repair Act. If enacted, it would have authorized VA to update
its facilities through various construction projects. The bill included
specific criteria for such projects, and VA added the H.R. 811 criteria to
its factors for ranking and selecting proposed projects.

8CIP consists of six members, each from a major departmental unit, who are
either senior managers or executives.

9SMC is a deputy undersecretaryand assistant secretarylevel committee
chaired by VA's Deputy Secretary.

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Book"10 for use by SMC during its review and deliberation. CIP assigns the
weights of the subcriteria and SMC assigns the weights of the main
criteria using AHP. Figure 12 describes AHP.

Figure 12: VA Use of the Analytical Hierarchy Process

AHP is a type of decision analysis that considers nonmonetary quantitative
and qualitative attributes in addition to common economic evaluation
measures (e.g., life-cycle costing and net benefits) that VA uses for
capital investment prioritization. VA uses the structured analysis of AHP
to force proposal developers to assess their capital investment proposal's
strategic linkage to agency goals and to departmental priorities. AHP has
three significant strengths: it weights pair wise comparisons; it contains
hierarchical descriptions of attributes that restrain the number of pair
wise comparisons, thus keeping them manageable; and it allows computerized
software to facilitate its use.

AHP uses a hierarchical model consisting of a goal, criteria, subcriteria,
and alternative outcomes or conditions for each problem or decision. After
establishing a hierarchy of decision criteria based on strategic and
performance goals, alternatives, cost-effectiveness, risk, and other
specific criteria, VA decision makers then evaluate the proposed capital
investments and determine how these investments will enable the department
to meet the stated goals. AHP establishes priorities by requiring the
users (e.g., CIP) to make pair wise comparisons among different decision
criteria at each level in the hierarchy and rate the relative importance
of each decision criterion. By performing comparisons of the decision
criteria, it is possible for VA to derive quantitative weights for
criteria and alternatives and leave an audit trail of the decision
process. The standardized application of AHP creates a decision model that
drives decision making toward investments that optimize the opportunities
to achieve strategic goals. VA uses Expert Choice as the analytical tool
to accomplish AHP. Expert Choice is group-enabled computer software that
allows multiple decision makers a structured analysis of priorities,
making use of both quantitative and qualitative criteria.

Source: VA.

After subcriteria and main criteria weights are assigned, project proposal
scores are entered into a decision software package titled Expert Choice
that ranks the project proposals based on the assigned weights of the
suband main criteria. The proposals with the highest scores are listed
highest on VA priorities. The criteria used by AHP and Expert Choice are
reviewed each year, updated, and aligned with the VA's mission and current
administration and secretary's priorities. The criteria have evolved over
time and most recently have emphasized seismic (earthquakerelated)

10A "Board Book" is a synopsis of project proposals reviewed and scored by
CIP. It contains an executive summary of each proposed project with
information such as project scope, cost estimates (acquisition and
lifecycle costs), schedule, how the project scored on each criteria, and
panel recommendations, as well as technical and policy issues needing SMC
attention.

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Agencies Consider Alternatives but
Processes to Rank and Select Investments
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Attention

projects and other administration priorities; however, "OneVA customer
service"11 remains the most heavily weighted criterion. For fiscal year
2003, the total assessment process scored proposals against 9 main
criteria and 19 subcriteria. Figure 13 shows a comparison of weights of
different criteria used from fiscal year 2000 to fiscal year 2003.

Figure 13: AHP Criteria Weights
Criteria Weight .074
(subcriteria 2000 One-VA .173 .088 .065 Risk .087 Alternatives In Seismic/life .301 Special .212 Strategic .133 Other
not 2001 customer .555 .243 Return on .194 .063 .140 .089 analysis .061 .050 analysis .050 ROIa safety .274 emphasis .149 alignment .103 priorities .134
included) 2002 service .239 taxpayer .050 High-performing .078 .034 In .209 .153
2003 investment workforce ROIa

Source: GAO analysis of VA data.

a The weight for alternatives analysis is part of return on taxpayer
investment for this year.

The rank ordered list of project proposals resulting from AHP and Expert
Choice is then validated by SMC and forwarded to the VA Executive Board
for the next level of review. The Executive Board consists of the VA
Secretary (chair); Deputy Secretary; Chief of Staff; General Counsel; and
Under Secretaries for Health, Benefits, and Memorial Affairs. The board's
final selections are included in VA's budget request forwarded to OMB.
Figure 14 provides an overview of VA's review and selection process for
proposed capital investments.

11"OneVA customer service" refers to VA's goal of being more customer
focused and functioning as a seamless organization to deliver seamless
"one stop" service to its customers.

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Source: GAO analysis of VA data.

Officials reported to us VHA staff and managers' immense frustration over
the amount of resources spent to develop comprehensive project proposals
and the subsequent low levels of construction funding received. OAEM
developed a more streamlined process for fiscal year 2004 proposals. To
allow for better use of staff resources, a threestep process was
developed. First, an initial concept paper is prepared providing a
highlevel, conceptual description of a proposed project and broadly
identifying project goals, benefits, risks, estimated costs, and project
schedule. According to VA officials, the concept paper allows for early
project agreement with stakeholders and agency officials. It also serves
as the initial review step.

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Proposal concepts that survive this initial review are then expanded, and
staff will develop a more detailed proposal with refined cost and schedule
estimates, identified performance measures, limited risk and alternatives
analyses, and technical requirements. This "300 Planning" proposal would
be in a form similar to OMB's Exhibit 300, Capital Asset Plan and
Justification (discussed in ch. 3), that OMB requires for capital
investment proposals, but with less detail. If approved for use by OMB,
the 300 Planning proposal would be used for requesting design funding for
major construction proposals rather than the full Exhibit 300. According
to VA officials, the 300 Planning document allows decision makers to weed
out proposals that do not fit VA strategic objectives or are not viable to
proceed at this time.

For those that survive this level, the final step in the new process would
be the preparation of a comprehensive Exhibit 300, or a "300 Acquisition."
The 300 Acquisition is more detailed and provides insight based on
experiences with planning and piloting. The 300 Acquisition is a
comprehensive project proposal with a detailed project plan; indepth risk,
alternatives, costeffectiveness, and earnedvalue analysis; and primary
source documentation. It would be required after the design/concept
funding is provided in the President's Budget. A complete proposal or
business case would be required only for construction projects that are
likely to receive full funding. VA guidance allows for staff to bypass the
300 Planning and submit a 300 Acquisition after a concept paper has been
approved- resulting in an accelerated twostep process. This would serve as
the complete Exhibit 300 required by OMB Circular A11, Part 7. The 300
Planning and Acquisition applications, as well as electronic templates for
risk, alternatives, costeffectiveness, and earnedvalue analysis, are VA
Webbased documents and easily accessible by all VA staff.

This new threestep process allows for betterdeveloped proposals as well as
a reduced number of proposals subjected to the AHP scoring process because
proposals that are not viable can be removed earlier in the process. The
threestep process also advances efficient use of staff resources by
eliminating the development of full proposals for projects that are likely
to be rejected. The motivation behind this new process is to devote
resources to development of a capital plan with realistic proposals,
rather than simply a wish list.

Bureau of Prisons Although BOP has a process for the review, ranking, and
selection of proposed capital investments, the process is not formal, is
not well

Chapter 4
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Attention

documented, and does not appear to use formal selection criteria. It is
unclear what documents selection officials use to decide which capital
investment proposals are to be forwarded to OMB.

Leading organizations select projects based on preestablished criteria and
a relative ranking of investment proposals. OMB's Capital Programming
Guide provides one approach for devising a ranked listing of projects
using a scoring mechanism that assigns a range of values based on project
strengths and weaknesses. Project proposals that meet or exceed positive
aspects of the decision criteria are given higher scores. An outcome of
such a ranking process might produce multiple groups of projects, and such
a process may be used more than once-in multiple steps-to limit the number
of projects being considered by an executive review board.

BOP's Capacity Planning Committee is responsible for proposing new
construction projects and consists of seniorexecutivelevel staff from the
Administration; Correctional Programs; and Information, Policy, and Public
Affairs Divisions. Subject matter experts-chiefs of Capacity Planning,
Design and Construction, and Budget Development of the Administration
Division-also attend committee meetings. The agency also has a Longrange
Planning Committee that ranks new construction proposals and makes
specific project recommendations to the BOP Director for funding. With a
few exceptions, the same individuals are members of both committees.

BOP officials told us that proposed capital projects for its new
construction and modernization and repair (M&R) programs are separately
ranked and selected. For new construction projects, the Longrange Planning
Committee meets regularly and uses inmate capacity plans (resulting from
the capacity planning process discussed in ch. 3), site recommendations,
and construction progress on ongoing projects to determine which capital
projects to recommend for funding. According to officials, the committee
ranks new construction proposals based on need, funding, and the speed at
which facilities can be constructed. This information is used to develop
options to be considered by the BOP Director for the DOJ spring budget
call. For M&R projects, the Facilities Management Branch (Administration
Division) receives separate lists of proposed projects in response to the
Director's spring budget memorandum to all BOP units, an annual call to
regional offices from Facilities Management, and project initiatives
submitted by contractors as a result of surveys of older institutions
(discussed in ch. 3). These lists are reviewed and consolidated by the
facilities management staff and ranked according to need. According to

Chapter 4
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Attention

officials, this ranked list generally includes thousands of projects, and
the highest priority projects are those that are included in the multiyear
M&R plan. The criteria used to rank these projects assign life safety
projects the highest priority followed by accessibility projects; building
and institution infrastructure projects-roofs, utilities, and structural
repairs; projects for facilities over 50 years old; and general M&R. Once
the projects are ranked, the facilities management branch staff determine
a cutoff for the project list based on anticipated resources.

While officials state that formal weighted criteria are used to rank M&R
projects, the criteria used to rank new construction projects appear to be
very informal. In addition, neither the criteria for new construction nor
the criteria for M&R projects are applied systematically, nor are BOP
officials either willing or able to provide the results of any scoring
process using the criteria. Furthermore, neither of these processes is
well documented. BOP officials were unable or unwilling to provide a
summary report or documents otherwise showing the results of the ranking
and selection processes. Moreover, they could not provide any instructions
to guide deliberations or any standard agenda for the Longrange Planning
Committee's meetings. This is a concern because, at the time of our study,
BOP had 800 ongoing M&R projects, which officials said is rather typical,
and 28 major construction projects, which officials said is rather high.

This lack of a documented process makes it difficult to determine exactly
what documents are used by BOP decision makers to choose among numerous
potential capital investments. For example, the BOP Director's fiscal year
2003 spring budget call memorandum required BOP assistant directors and
regional directors to prepare a separate program request form for each
"initiative," including construction projects. The memo further required
that each form identify and explain the goals to be achieved, provide
estimated costs, justify the need, and identify performance indicators to
measure if the goals are achieved. The memo included a twopage attachment
with separate sections to provide this information and requested that the
forms be returned to the Budget Development Branch of the Administration
Division. After numerous requests, BOP officials were unable or unwilling
to provide an example of a completed budget request form for a fiscal year
2003 new construction project request. However, officials did provide a
copy of an M&R project request; it was a onepage memo listing three
projects with estimated costs totaling $11.3 million and no other support
or justification. Further, there appears to be no standardized form that
succinctly provides information needed by decision makers. Thus, BOP could
not show that capital project

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request packages were actually prepared for most capital projects or that
detailed information was provided to the Longrange Planning Committee for
its selection decisions.

National Park Service The Park Service has an established framework for
the review and selection of proposed capital investments. This framework
includes two seniorlevel review boards and a formal system to rank
projects using established criteria and to consider alternatives. It
allows for (1) initial review and winnowing out of projects at the park
and regional levels and (2) the use of an external advisory group that
reviews individual projects that have completed the predesign sequence and
reports directly to the Park Service Director.

As discussed in chapter 3, individual parks enter proposed capital
projects into the servicewide Project Management Information System
(PMIS). There were approximately 40,000 projects in PMIS in fiscal year
2002. PMIS data fields allow a park to provide project description,
justification of the expected improvements by the proposed projects tied
to specific Park Service mission and longterm goals, proposed performance
measures, a cost estimate, benefits based on outcomes, asset condition
information for existing assets, and other project data. PMIS is designed
to include all of the key project proposal information needed to make the
evaluation and ranking decisions. Capital project proposals developed by
the individual parks are submitted to the regional offices for initial
evaluation and ranking within their units. These proposals are subjected
to preliminary scoring on the regional level based on the same criteria
that are used for official scoring at the national level later in the
process. The regional offices develop a ranked list of project proposals
and forward their priority list to the Park Service Construction Program
Management Office (CPM) for evaluation and ranking in the servicewide
program. CPM reviews the submitted proposals for completeness and
compliance with the lineitem construction program eligibility criteria
before the proposals are submitted for further evaluation at the national
level. Regional managers and CPM managers can access PMIS for any needed
information on an individual proposed capital project.

Capital project proposals evaluated and ranked at the regional level and
conforming to the initial CPM review are then formally reviewed and
evaluated on a national level, systemwide, using the Choosing By

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Advantage (CBA)12 process. CBA uses specific evaluation factors to compare
proposed projects to one another. The five factors recently used in CBA
were (1) provide safe visits and working conditions; (2) protect cultural
and natural resources; (3) improve visitor enjoyment through better
services and educational and recreational opportunities; (4) improve
operational efficiency, reliability, and sustainability; and (5) provide
costeffective, environmentally responsible, and otherwise beneficial
development for the national park system. CBA involves a relative
comparison of every project proposal by each factor.

A multidisciplinary assessment team led by CPM is assembled to manage the
CBA process and apply the evaluation factors to each project, producing an
individual project ranking. The project with the best score on any
particular factor sets the scale for that factor, and the other projects
are scored relative to that best score. Each project's score is divided by
its cost to arrive at an advantagetocost ratio. That ratio (results of
costbenefit analysis) is a major determinant of the project's priority
ranking in the 5year construction program or plan and DOI and OMB policy
direction. At times, the call letter for a project proposal will specify a
certain project type (e.g., life and safety) for which funding is
specifically available. This restriction on the type of project likely to
be funded may narrow the list of projects for comparison.

Recently, as a result of negotiations between DOI and Park Service senior
executives, an additional step was added to the rating and ranking process
to place greater emphasis on DOI priority areas-a project rating method
based on a set of weightedfactor data that focuses on deferred maintenance
and public health and safety. The rating method requires that proposed
capital projects be grouped into bands as follows: (1) projects with a DOI
score from 1,000 to 800 points (to be funded first), (2) projects with a
DOI score from 799 to 500 points (to be funded second), and (3) projects
with scores from 499 to 100 points (to be funded last). Within the project
bands created by the DOI scores, projects are then ranked using the CBA
process and the advantagetocost ratio. According to the Park Service, this
approach is intended to result in early funding of projects that are of
high priority with the DOI Secretary and the President while preserving an
ability to address the full range of costeffective projects that address
the Park Service mission and goals.

12The CBA factors were developed by CPM and adopted by DAB, the National
Leadership Council, and the Park Service Director.

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The Park Service's DAB reviews proposed capital projects vetted and ranked
by the agency's CBA process. DAB is composed of four Park Service
associate directors, three regional directors, and two senior executive
service park superintendents. DAB has two responsibilities: (1) policy,
which involves reviewing the proposed 5year construction program and thus
recommending projects for inclusion in the construction program, and (2)
reviewing individual projects at the end of predesign development. With
some exceptions, DAB reviews every project with estimated costs greater
than $500,000 regardless of the funding source. Without DAB's approval,
project managers cannot proceed with design efforts or initiate
construction activities. DAB reviews approximately 120 projects per year
primarily focusing on the review of projects that have completed the
planning and predesign activities that are precursors to formal requests
to OMB for review and to the Congress for funding. However, DAB has
multiple opportunities to see project proposals at various levels of
development.

Once projects proposed for inclusion in the 5year plan clear DAB, they are
forwarded to the National Leadership Council (NLC). NLC is composed of the
Park Service Director, deputy directors, associate directors, and regional
directors, and it meets bimonthly to consult on major policy and program
issues confronting the Park Service. Projects proposed for inclusion in
the 5year plan are reviewed by NLC, and its members provide any comments
or concerns about the ranking and rating of projects directly to the Park
Service Director for consideration before final approval of the 5year
plan. Projects reviewed by DAB that have completed planning and predesign
activities are not forwarded to NLC; they are instead advanced directly to
the Park Service Director for approval.

The Park Service external advisory group was established to assess
lineitem construction projects for suitability and costeffectiveness. The
fivemember group is composed of private citizens appointed by the Park
Service Director. The group's members have experience in areas such as
engineering, architecture, historic preservation, and budgeting. They
provide an independent review of Park Service construction projects. The
advisory group meets concurrently with DAB to review projects that have
completed predesign and reviews every lineitem construction project with
an estimated cost greater than $500,000. This review is required before a
project can proceed with design efforts. The advisory group provides its
findings directly to the Park Service Director. Figure 15 shows the Park
Service review and selection process for proposed capital investments.

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Source: GAO analysis of Park Service data.

Page 89 GAO-04-138 Agency Capital Planning

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National Oceanic and Atmospheric Administration

NOAA also has an established framework to rank and select proposed capital
investments. NOAA's line and program offices individually initiate the
ranking processes before the administrationlevel review boards review
investment proposals. For example, one of NOAA's line offices, NWS, formed
a review board, FIRB, in fiscal year 2000 to establish a formal process
for management review and ranking of capital investment proposals in
support of strategic goals. FIRB reviews projects costing $1 million or
more. The FIRB charter cites OMB's Capital Programming Guide as one of the
reasons for its creation. FIRB consists of five voting members and three
nonvoting advisor members who review and evaluate capital investment
proposal justifications, score capital investments according to
established criteria, and rank the approved investments. NWS's budget
formulation and program analysis division, among its other roles, assists
the various units of NWS in developing project justification materials and
provides professional assessments on proposals to FIRB.

FIRB will, through quarterly or more frequent meetings, approve a
portfolio of investments ready for final approval in the budget process.
The criteria that FIRB uses to evaluate the proposals are publicized and
include alternatives considered, contribution to improved agency
performance, and contribution to NWS mission. Projects submitted to FIRB
must document alternatives and the cost and benefits of the best
alternative. If all the costs and benefits cannot be monetized, then
projects must be quantified in terms of other "physical measurements."
Approved projects are forwarded to the administration level for review.

NOAA's administrationlevel review boards-working groups established to
foster implementation of NOAA's strategic themes-are aligned with NOAA's
strategic goals and priorities as outlined in the fiscal year 2001
Department of Commerce Performance Report and fiscal year 2003 Annual
Performance Plan. These review boards receive proposals ranked by line and
program offices, such as NWS proposals ranked by its FIRB. The strategic
themes represent major areas of concentration and consist of
multilineoffice programs. NOAA line and program offices draft the guiding
principles for each strategic theme; however, NOAA management has the
final say on theme development. For the fiscal year 2004 budget, NOAA's
budget office met with NOAA management to finalize the themes. The themes
included in the fiscal year 2004 budget process were (1) Climate Change,
Research, Observations and Services; (2) Ecosystem Forecasting and
Management; (3) Environmental Monitoring and Prediction; (4) Energy and
Commerce; (5) Homeland Security; and (6) Infrastructure, Maintenance,
Safety and Human Capital. For fiscal year

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2005, a new NOAA strategic plan will become the underpinning of budget
formulation and budget requests.

The review boards representing the strategic themes rank proposed
investments for management review. A different NOAA line office is
designated as a lead for each theme's review board. The lead line office,
in conjunction with the other line offices represented, is required to
prepare program initiatives for review by NOAA's budget office and NOAA
management. Project proposals submitted to the themes' review boards must
be justified in terms of how they support the theme. The boards are to
review funding requests for both new and ongoing projects.

The strategic themes' review boards use established criteria to rank and
select proposed projects. According to a NOAA official, the
Infrastructure, Maintenance, Safety and Human Capital theme's board used
the following criteria to rank submitted project proposals: (1)
contribution to agency mission, (2) cost development of the proposal, (3)
productivity improvement, (4) operational efficiency, (5) improving
efficiency, and (6) the likelihood of success. Similar criteria permeated
the other themes' processes, although each theme's review board had a
distinct process for ranking proposals. According to a NOAA official, the
similar criteria included (1) the cost proposal is well developed, (2) the
proposal is aligned with NOAA's mission, and (3) the proposal increases
worker productivity. Once this internal review is complete, the review
boards recommend project proposals to NOAA's Budget Office and NOAA senior
management for inclusion in the budget.

Case Study Agencies Did Not Prepare Longterm Capital Plans, but Two Had
Various Longterm Planning Documents

Under OMB's Capital Programming Guide, the Agency Capital Plan (ACP) is
the ultimate product of the planning phase. The ACP should include an
analysis of the portfolio of assets already owned by the agency and those
in procurement, the agency's performance gap, and justification for new
acquisitions proposed for funding. Leading organizations develop longterm
capital plans to guide implementation of organizational goals and
objectives and help decision makers establish priorities over the long
term. Although the longterm capital plan is the culmination of the
planning phase guidance and is an industry best practice, none of the case
study agencies had a single longterm plan. However, two agencies-BOP and
the Park Service-developed longterm planning documents that contain
aspects of a longterm capital plan.

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

Seven of the eight additional agencies we surveyed reported that they had
some type of longterm planning information.13 However, with the exception
of a copy from the Department of State's Bureau of Overseas Buildings
Operations, we did not obtain copies of any capital planning documents and
therefore cannot comment on their content or extent to which they
constitute best practice documents. The National Aeronautics and Space
Administration said that its longterm capital plan takes the form of an
annual 5year budget submitted to OMB. The U.S. Coast Guard reported that
it prepares an ACP that includes appendixes, one of which is a Capital
Investment Plan. According to the Coast Guard, the Capital Investment Plan
has been provided to OMB and the Congress as required by the
Transportation and Related Agencies Appropriations Acts. Another appendix
is its Longrange Resource Allocation Plan to project needs beyond the
5year horizon. The Tennessee Valley Authority (TVA) reported that its
project justification process requires the development of a detailed 3year
capital plan and inclusion of a 5year plan within the annual performance
plans. Project details within these plans are submitted quarterly for
review and approval by the Project Review Committee. TVA said it also
projects 10 years of capital spending for planning purposes using
validated benchmarks and escalation factors.

We obtained a copy of the State's Bureau of Overseas Building Operations'
LongRange Overseas Buildings Plan (LROBP) for fiscal years 2003 through
2008. The plan is a comprehensive outline of the State's facilities
requirements-new construction, major renovations, and other programs-with
a focus on resources needed to support the department's priority
diplomatic readiness goal in the long term. In addition to providing a
narrative description of and rationale for each proposed capital project,
estimated total project costs, and expected fiscal year for requesting
project funding, the plan includes a description of the bureau's capital
planning process and its specific goals, strategies, and performance
measures. The LROBP document is updated annually and rolled forward each
year to include a new planning year.

13The agencies are the U.S. Coast Guard, the Department of State, the
General Services Administration, the Indian Health Service, the National
Aeronautics and Space Administration, the Tennessee Valley Authority, and
the Bureau of Reclamation.

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

Department of Veterans Affairs

VA does not have a longterm capital plan, but officials have recognized
that one is needed. The 1year plans VA completed in the past did not
contain information on longerterm needs to fill its performance gaps. In
2002, VA solicited a contract for a study of industry best practices in
the development of a longterm capital plan. However, the effort was
suspended as the agency focused on the VHA CARES implementation. As
described in chapter 3, the capital asset needs of VA's VHA (where the
bulk of VA's capital assets are acquired and used) are likely to be
largely driven by the results of the ongoing CARES process. A VA longterm
capital plan would have to consider the individual network asset
restructuring plans.

Although VA currently does not have an agencywide longterm capital plan,
one administration-NCA-prepares a 5year facilities plan that is driven by
its strategic plan. NCA's facilities plan contains longterm project cost
estimates for both major and minor projects that extend to fiscal year
2006. The major construction plan lists projects needing advance planning
funds, design funds, and construction funds. Both the major and minor
construction plans identify each project by location and its proposed
cost. Although NCA provides longterm planning documents to VA decision
makers, VA does not produce a longterm capital plan for the entire
department that integrates NCA, VHA, and VBA capital needs.

Bureau of Prisons BOP has three documents that it considers longterm
capital planning documents for major capital investments-the Capacity
Plan, the Buildings and Facilities Status of Construction report, and a
report of the rated capacity of facilities partially or fully funded by
anticipated fiscal year of activation.

The Capacity Plan provides inmate population projections and rates of
prison overcrowding typically for a 9year period. It is generated by a
system that also contains data for additional future years, but officials
caution that data reliability is low because the projections change
frequently. The Capacity Plan provides population and overcrowding
projections categorized by the institution security level, whether the
facilities are BOPoperated or contractor facilities, and whether the
inmates are male or female. The data contained in the Capacity Plan are
updated weekly, and reports can be generated at any time. OMB receives the
weekly update of this report, and a version is included in the budget
submission to the Congress.

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

The Buildings and Facilities Status of Construction report provides the
status of construction for major projects that have received some level of
funding, including both new construction and expansion of existing
facilities projects. The report also shows projects initiated to house
District of Columbia inmates and Immigration and Naturalization Service
longterm detainees. The May 2002 report showed 28 ongoing new construction
projects-which an official said is an atypically high number-and 7
existing facility expansion projects. The report provides amounts funded
by fiscal year, total project cost estimates, funding obligated to date,
estimated facility activation date, and a brief status of each project. It
is updated monthly and is provided to OMB and to the Congress as part of
the budget submission.

BOP's third longterm capital planning document-the report of rated
capacity of planned facilities that have received some level of funding-
shows facility capacity levels for planned projects for a 7year period,
including the budget year and 4 years beyond. The report shows the level
of capacity added for each fiscal year that a group of facilities are
activated and is also a part of the annual budget submission to the
Congress.

These documents, viewed together, provide a sense of how BOP plans to
achieve its current overcrowding goal. However, there is no single
document that culminates its capital planning process, pulls these three
documents together, and so defines its longterm capital investment
decisions.

National Park Service The Park Service has a servicewide 5year
construction plan (also referred to as the lineitem construction program),
a GMP at each national park, and park action plans. While it is not
publicly available, the Park Service 5year construction plan is reviewed
and approved by OMB. It is the only servicewide capital asset planning
document and provides a cost schedule and rating for each lineitem
construction project. It is the result of the CBA process discussed
earlier in this chapter. Projects included in the 5year construction plan
are at various phases of completion-planning, predesign, design, and
construction. The data needed to prepare a longterm capital plan with
detailed narrative are likely available since they are used in the ranking
and selection process; however, the current 5year construction plan is
solely a list of projects, estimated costs, and schedule data. After the
plan is completed at the Park Service, DOI and OMB review it, sometimes
reordering priorities and inserting programs. Approximately 3 months of
negotiations between the Park Service, DOI, and OMB center

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

on reordering project priorities for the final 5year plan. The plan is
dynamic because unexpected events, such as the terrorist attacks of
September 11, 2001, can affect the priority of projects. For example, in
fiscal year 2003 as a result of the terrorist attacks, several
securityrelated projects were moved up in priority, pushing some
nonsecurityrelated projects into fiscal year 2004 for initiation.

GMPs define the longterm direction at each individual park. The plans
provide a broad overview of individual park needs and identify areas for
major improvements and performance gaps in service. The planning process
also identifies maintenance deficiencies at the park level. GMPs cover
10to 20year periods and are general in nature. Some older GMPs (such as
the Grand Canyon National Park GMP) are relatively detailed as compared to
newer ones. A plan begins with an overview discussion of the park's
mission-why the park exists-and then identifies park performance gaps and
the resources required to fill those gaps. The GMP process results in new
concepts for capital projects rather than specific projects themselves.
The August 1995 Grand Canyon National Park GMP, for example, describes the
concept of developing two visitor orientation centers to help visitors
understand and appreciate the park's major interpretive themes and to plan
their visits. This effort addresses issues identified in the plan
regarding visitor difficulty in locating the existing center and that
center's inadequate orientation process.

While these plans together provide a general outlook of future Park
Service capital needs, there is no central document or group of documents
that describes the agency's existing baseline assessment, analyses
involved in developing the plan, and the performance gap being filled by
the planned capital projects. Specifically, while the 5year construction
plan is the culmination of a rigorous review and selection process, it
does not include all of the Park Service's needs identified in PMIS. Also
absent from the 5year plan are equipment investments and land
acquisitions. Equipment and about 28 other categories of projects, such as
rehabilitation, repairs, and cyclical maintenance, are funded through
allocations from the Special Emphasis Projects Allocation System. Land
acquisitions are made through a separate process that follows each park's
land protection plan.

National Oceanic and NOAA does not prepare a comprehensive longterm
capital plan defining its

Atmospheric Administration capital investment decisions. The budget office
does not require longterm plans from line and program offices, but it does
have information on

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

ongoing and proposed capital projects that were not funded within the past
2 years.

NOAA's line and program offices have planning documents that reflect
planning guidance to varying degrees. Although one of NOAA's line offices
has a longterm capital plan, none of the other line offices or NOAA
overall has a longterm capital plan that defines its capital investment
decisions. OMAO's program office completes an unpublished plan that is a
10year chart of tentative dates and cost estimates for major repairs and
replacements to NOAA's ships. OMAO officials said this information has
been useful for planning purposes, but would not provide a copy. OMAO
officials also said this unpublished plan is discussed with NOAA
management. At the request of NOAA's management, OMAO is currently
drafting a 10year plan for ships and aircraft.

The NWS line office's FIRB charter says that capital investment proposals
that are approved, vetted, and ranked in order of priority, in conjunction
with the NWS strategic plan and information technology target architecture
plan, will form NWS's capital asset plan. In practice, NWS said that its
capital plan is reflected in its fiscal year 2003 and fiscal year 2004 NWS
budget request, which is included in NOAA's Procurement, Acquisition and
Construction account. NWS said that it maintains budget information on the
capital investments but does not see the value of rewriting the
information in a separate Capital Asset Plan.

The National Environmental Satellite, Data, and Information Service
(NESDIS) line office prepares a satellite ground systems 5year plan. This
plan identifies the resources NESDIS requires to operate and maintain
satellite ground systems to monitor and control onorbit operational
satellites and to acquire, process, and distribute environmental data to
users. The plan outlines the useful life of components typically used in
ground system operations and maintenance activities. The plan also
outlines NESDIS current ground system capability by satellite and includes
the launch dates for planned satellites and what those satellites will
accomplish. In addition, this plan outlines the ground resources needed by
NESDIS to fulfill its performance gap. The NESDIS line office considers
its plan a longterm plan that reflects OMB guidance.

Conclusion Case study agencies present a mixed picture. Their capital
processes include consideration of numerous alternatives for addressing
performance gaps. Noncapital options are also considered and used, where

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

appropriate. Most agencies have review and approval frameworks that
include the establishment and use of formal review boards and committees
and established criteria for selecting proposed projects. However, none of
our case study agencies has developed a single document that can be
considered a longterm capital asset plan that defines its longterm capital
investment decisions, although some agencies have longterm planning
documents and longterm construction plans for approved projects. Only VA
informed us of plans to develop an agencywide longterm capital plan.

Recommendations for Executive Action

We recommend that the Secretary of Veterans Affairs continue to emphasize
the importance of efforts currently under way to develop a departmentwide
longterm agency capital plan that will reflect all VA longterm capital
investment decisions and results of the assetrestructuring plans developed
by VHA networks under the CARES process. The Secretary should make the
longterm plan available to OMB and congressional decision makers.

We recommend that the Director of the Bureau of Prisons require the
development of a longterm agency capital plan in the form of a single,
central document that defines longterm investment decisions of the bureau
and includes a clear discussion of the basis for any longterm performance
gap leading to proposals for the construction of new prison facilities.
The Director should make the longterm plan available to OMB and
congressional decision makers.

We recommend that the Director of the National Park Service require that
the 5year construction plan be expanded to include a narrative description
of the performance gap that a planned project would fulfill and the
analysis leading to its inclusion in the 5year plan. The Director should
make the longterm plan available to congressional decision makers.

Finally, we recommend that the Under Secretary for Oceans and Atmosphere,
Department of Commerce (NOAA Administrator), require the development of a
longterm agency capital plan that defines the capital investment decisions
for all of NOAA's line offices and program offices and make it available
to OMB and congressional decision makers.

Agency Comments In its written comments, reprinted in appendix VII, VA
agreed with our conclusions and concurred with our recommendation on the
need to

Chapter 4
Agencies Consider Alternatives but
Processes to Rank and Select Investments
and Produce Long-term Capital Plans Need
Attention

develop a longterm capital plan. VA further described its efforts under
way to develop a plan with a 5year strategy that will be submitted to the
Congress in the spring of 2004.

DOI did not directly address our conclusions and recommendations regarding
the Park Service. It provided a number of technical comments, which have
been incorporated in this report as appropriate. It also noted that the
5year construction plan includes project data sheets (usually a one page
narrative description of the project and its benefits) that accompany the
spreadsheet format when the plan is submitted to DOI, OMB, and the
Congress, although these documents were never provided to us.

In its written comments, reprinted in appendix VIII, BOP agreed with our
recommendation to develop a longterm agency capital plan in the form of a
single, central document that defines its longterm investment decisions.
BOP further stated that it recognizes the value of a single document and
will develop a consolidated document containing all of its current capital
planning documents.

In its written comments, reprinted in appendix IX, NOAA agreed with our
recommendation to develop a longterm agency capital plan that defines the
capital investment decisions for all of NOAA. It further stated that since
our study was conducted, NOAA has completed 10year ship and aircraft
platform requirements plans and has developed a Facilities Master Plan.

Chapter 5

Agencies and Budget Decision Makers Agree That Capital Planning Is Useful,
but Implementation Challenges Exist

Agencies have mixed perceptions of the usefulness of the Office of
Management and Budget (OMB) capital programming guidance, and the degree
to which it is used varies by agency. Some of our case study agencies have
successfully implemented many of the principles and practices described in
both OMB's Capital Programming Guide and our Executive Guide. While some
of the OMB guidance has presented a challenge for case study agencies and
the other agencies we surveyed, agencies generally agree that it is
helpful for developing an effective capital decisionmaking process. OMB's
expectations for agency use of its capital guidance and its reliance on
longterm capital planning information varied by the OMB resource
management office (RMO) staff person. The OMB RMO staff for our case study
agencies consider a number of factors-but not longterm capital plans-when
reviewing agency budget requests for capital projects. Congressional staff
indicated that longterm capital planning information could be useful for
reviewing budget requests and for oversight.

Agencies Have Mixed Opinions about Usefulness of OMB Capital Guidance

Agencies are aware of and use various aspects of OMB's Capital Programming
Guide. Although OMB strongly encourages but does not require agencies to
use the guide, its principles have been implemented in agency capital
planning programs. Many of the principles and practices described in GAO's
Executive Guide also have been successfully used by case study agencies.

Since the use of OMB's Capital Programming Guide is not required, the
degree to which agencies use it varies, but officials say they generally
find the guide helpful in developing a process for effective capital
decision making. For example, the National Oceanic and Atmospheric
Administration's (NOAA) National Weather Service (NWS) officials cite the
establishment of a seniorlevel review board as stemming from guidance in
the Capital Programming Guide. Also, NWS capital investment proposals must
answer OMB's "Three Pesky Questions" and must contain alternatives to
address the performance gap. NWS's written guidance says that projects
that its review board approves will culminate in or become part of its
agency capital plan,1 which mirrors the guide's planning phase steps.

1As discussed in ch. 4, NWS does not have a formal longterm capital plan.

Chapter 5
Agencies and Budget Decision Makers Agree
That Capital Planning Is Useful, but
Implementation Challenges Exist

The Department of Veterans Affairs (VA) formulated its current process
based on the principles and practices contained in the OMB guidance. Its
process includes multiple levels of review, including the use of an
executive review board, and generally mirrors the Capital Programming
Guide; however, VA has had limited success with developing an agencywide
longterm capital plan.

Bureau of Prisons (BOP) officials say they do not use the Capital
Programming Guide to assist their decisionmaking process. BOP officials
say the BOP process preceded the guide, but they believe the process is
consistent with OMB's guidance.

Aspects of the National Park Service's (Park Service) capital planning
process are based on recommendations from a 1998 National Academy of
Public Administration study rather than on the OMB Guide, but the process
is consistent with OMB's guidance. A key feature of the Park Service
process is the establishment of an external review group required to
review each lineitem construction project proposal with an estimated cost
greater than $500,000.

Eight other agencies2 with high levels of capital spending provided
information on their experiences with OMB's Capital Programming Guide.
These agencies indicated that they were aware of the guide and had
implemented some of its principles. Different portions of the guide were
cited as useful by different agencies. For example, the Indian Health
Service said that many of the planning phase principles in the guide are
included in its Health Care Facilities Construction Priority System. The
U.S. Coast Guard said that it found the planning phase guidance on
formulating a strong strategic system of evaluating and replacing capital
assets most useful. The State Department said that the guide's language
regarding alignment with the mission function of the federal government
was helpful. The National Aeronautics and Space Administration (NASA) said
it has implemented the guide's principles for selected information
technology projects.

2The agencies are the U.S. Coast Guard, the Department of State, the
General Services Administration, the Indian Health Service, the National
Aeronautics and Space Administration, the Tennessee Valley Authority, the
Army Corps of Engineers, and the Bureau of Reclamation.

Chapter 5
Agencies and Budget Decision Makers Agree
That Capital Planning Is Useful, but
Implementation Challenges Exist

Agencies Identified Challenges in Implementing the Principles of OMB's
Capital Programming Guide

Case study agencies have different views on how OMB's Capital Programming
Guide could be made more useful. While VA has modeled its process on OMB
guidance and industry best practices, including GAO's Executive Guide, a
VA National Cemetery Administration official commented that OMB's Guide
could be streamlined somewhat. He stated that the process of developing
extensive business cases VA uses during its ranking and selection process
is relatively burdensome. The difficulty and amount of time spent
preparing OMB's required Exhibit 300,3 Capital Asset Plan and Business
Case for major acquisitions, was also cited by some. The Park Service
officials would like the OMB Exhibit simplified. NOAA's NWS officials said
that although it spends considerable resources preparing Exhibits 300, the
process essentially mirrors the budget justification process. NWS also
said that the planning guidance is a challenge to implement because NOAA
is a scientific agency and it is sometimes difficult to quantify benefits
of certain projects.

The eight other agencies we surveyed also identified challenges to
implementing OMB's Capital Programming Guide principles. Like NOAA, NASA
said the guide did not seem to fit the research and development nature of
its programs because it seems more applicable to longerterm operational
acquisitions. Also like NOAA, the Tennessee Valley Authority (TVA) said it
has difficulty with quantifying benefits of capital projects. Current
processes require the project manager to estimate, based on failure
history or other means, the cost savings/benefits (prorated based on
probability) associated with a particular project. These savings/benefits
form the basis of cost/benefit analysis and prioritization of projects. In
addition, performance measures are established for all projects to
determine their level of success upon completion. TVA said that
identifying specific benefits to multiple projects over several years is
difficult, and it prefers to look at the overall performance improvement
due to all of the projects. Similarly, the Coast Guard said it has found
formulating meaningful strategic and performance goals that can stand the
test of time against changes in executive and legislative branch
priorities to be a challenge.

3Exhibit 300 is required by OMB. Agencies must submit a capital asset plan
for each major new and ongoing project, system, or acquisition and
operational (steadystate) asset included in an agency's capital asset
portfolio.

Chapter 5
Agencies and Budget Decision Makers Agree
That Capital Planning Is Useful, but
Implementation Challenges Exist

The challenges identified by the agencies stem from the variety of
missions and activities undertaken. A strong, analytical review process
that uses established criteria has allowed case study agencies to adjust
selected project proposals by changing the relative weights of criteria to
adjust for changing priorities. Such processes and weighted criteria may
help other agencies address the challenges in implementing the principles
of the guide that they identified. Linking capital planning to strategic
planning allows for a transparent and systematic process in which all
acquisitions support the vision and strategic direction of the agency. A
longterm capital plan is an important final step in the capital
programming process; however, as discussed in chapter 4, agencies have had
mixed success with developing plans. Although we were not able to validate
the contents of the longterm plans to which the survey respondents
referred, this longterm focus is encouraging.

OMB and Congressional Perspectives on Longterm Capital Planning
Information and Views on Agency Processes

OMB's Capital Programming Guide stresses the importance of linking
planning for capital asset investments with an agency's strategic plan.
The guide also says that planning for capital assets should take a
longterm view, possibly the same 5year horizon as the agency strategic
plan. Further, the guide states that agencies are encouraged to prepare
longterm agency capital plans that define longterm agency capital
investment decisions. As reported in our Executive Guide, leading
organizations develop longterm capital plans and use them to guide
implementation of their investment decisions.

OMB staff were universally familiar with the Capital Programming Guide,
yet their expectations for agency use of the guide and their reliance on
longterm capital planning information varied across OMB RMOs. OMB does not
require longterm capital plans from agencies, but RMO staff solicit and
receive various documents for individual capital projects. OMB staff said
they place more emphasis on the Capital Asset Plan and Business Case
(i.e., Exhibit 300) when agencies request funding for capital projects
than on longterm agency capital plans. For example, NOAA completes
Exhibits 300 for all of its major systems acquisitions. Similarly, the
Park Service completes Exhibits 300 for major projects over $10 million,
for multiyear projects, or when the OMB RMO staff requests them. BOP
completes Exhibits 300 only for information technology (IT) projects. VA
completes Exhibits 300 for both IT and nonIT projects and provides
comprehensive business case packages for construction projects. While
Exhibits 300 and VA's business cases contain multiyear cost estimates and
project schedule information for single major acquisitions, they are not

Chapter 5
Agencies and Budget Decision Makers Agree
That Capital Planning Is Useful, but
Implementation Challenges Exist

longterm planning documents and they do not place those acquisitions in
the context of an agency's longterm capital needs and investment
decisions.

Each OMB RMO works slightly differently with its agency. For example, VA's
RMO works closely with VA on capital investment issues because of recent
changes to VA's capital planning process and the Capital Asset Realignment
Enhanced Services (CARES) process discussed earlier. The results of the
CARES studies are expected to drive future VHA nonIT capital investments.
When completed, OMB envisions that VA will submit Exhibits 300 for nonIT
capital assets that will be used as a management tool and for longterm
planning.

The Park Service RMO staff has also worked closely with the Park Service
and has been instrumental in revamping its capital planning process. Until
recently, the Park Service did not have a system to rank projects or a
uniform system to assess asset condition at national parks.

BOP's RMO receives regular longterm planning information from BOP and
independently performs additional research to obtain more information. BOP
provides the RMO with weekly projections of inmate population changes and
current and future inmate capacity. BOP also provides the RMO with the
monthly status of construction reports and regular reports on unobligated
balances.

OMB RMO staff said they are pushing agencies to consider more alternatives
as part their capital planning processes. The BOP RMO staff person would
like to see more consideration of state facilities as an alternative to
new prison construction. She has urged BOP specifically to pursue more
contracting opportunities and the use of any available excess capacity in
state facilities. The Department of Justice's fiscal year 2003 performance
plan states that one of BOP's strategies to reduce prison crowding is to
aggressively analyze existing private and other correctional facilities
for sale, which may offer a more timely and affordable alternative to new
prison construction. This is important because our analysis of BOP's
capacity planning data showed that in fiscal year 2002 about 17 percent of
inmates were assigned to nonBOP facilities, and that percentage is
expected to drop to about 14.5 percent by 2009. NOAA's RMO staff person
said he wants NOAA to consider more alternatives rather than simply
replacing assets, such as vessels. VA's RMO staff person said that recent
funding has been minimal for new construction because VA is waiting until
the results of the CARES studies are implemented, which will

Chapter 5
Agencies and Budget Decision Makers Agree
That Capital Planning Is Useful, but
Implementation Challenges Exist

allow VA to consider, among other things, sharing resources with the
Department of Defense health system.

OMB's role in agencies' internal processes is limited, but OMB does have
strong views on the products of agencies' processes. OMB does not get
involved in initial processes, in which agencies develop ranking and
selection criteria. VA's RMO staff person said that some facilities'
managers add facility upgrades to highpriority seismic projects, but
rather than reject these projects outright, OMB tries to find a compromise
solution. The Park Service, for example, makes its tradeoffs between
visitor services and preservation of resources independent of input from
the OMB RMO, although OMB may inquire as to the weight given to specific
criteria in the selection process to ensure they align with those of the
administration. OMB staff are aware that many of the Capital Programming
Guide's planning principles have been implemented by the agencies.
However, one RMO staff person cautioned that many of the documents
agencies submit out of their processes are of variable quality and that a
distinction should be made between the process and the quality of those
documents.

OMB views its role as the integrator of specific capital project proposals
into the larger budget process. RMO staff said they consider a number of
other factors when recommending funding for agency capital projects,
including agency obligation rates, the overall agency budget request, and
agency strategic plans. They may also consider future events that will
affect capital needs, such as the completion of the CARES process in the
case of VA. OMB staff said they have an idea of the longterm needs of
agencies, but are reluctant to publish these needs because it could imply
a future financial commitment on the part of the administration.

Some congressional staff indicated that it could be useful to have
longterm capital planning information to see what an entity viewed as
important. Further, they said that the process and analyses involved in
developing a plan are an effective way to ensure that wellinformed
decisions are made at the agency level. They believe that sometimes the
lack of good information leads to situations in which other considerations
drive decisions. They agreed that comparisons of plans over several years
might provide a basis for questioning projects that appear in budget
requests without having been in the previous years' longterm plans, and
that having more information, such as that contained in a longterm capital
plan, also would be useful in oversight.

Chapter 5
Agencies and Budget Decision Makers Agree
That Capital Planning Is Useful, but
Implementation Challenges Exist

State's 2003 LongRange Overseas Buildings Plan (LROBP) states that fiscal
year 2003 budget decisions were based on the 2001 LROBP. The letter from
the Director of the Bureau of Overseas Buildings Operations that
accompanied the 2003 LROBP includes a statement that while the LROBP is
not a budget document, it is an important tool to inform the budget
decisionmaking process. The plan gives all stakeholders a road map of
where the department is headed.

Conclusion OMB's Capital Programming Guide is guidance and not a
requirement for federal agencies. However, agencies are aware of its
principles and practices, and some of the principles have been implemented
in agency capital decisionmaking processes. While the degree to which
agencies have used the guide varies and some agencies have had difficulty
implementing some principles, they generally find the guide useful. Some
agency difficulties stem from their varied missions and program
responsibilities.

OMB RMOs do not require agencies to submit longterm agency capital plans,
but instead rely on OMB Exhibit 300 submissions for individual capital
projects and other types of longterm planning documents. Some RMOs have
worked closely with their respective agencies on capital investment issues
and have been involved with recent changes to agency processes. OMB RMO
staff would like agencies to consider more alternatives to the acquisition
of new capital assets and would like to see improvements in some of the
documents submitted as a result of agency processes. Although OMB RMOs
receive some capital planning documents during budget review, our work at
leading private and state and local entities showed that longterm capital
plans, as well as all the other leading practices, result in better
capital decisions. Since these practices embedded in the OMB Capital
Programming Guide have demonstrated benefits to leading organizations,
they would prove beneficial to federal agencies as well.

Congressional decision makers could make use of longterm capital plans
when reviewing agency budget requests. The plans also can provide the
basis for questioning agencies about their real property management, an
area we recently identified as high risk.4

4U.S. General Accounting Office, High-Risk Series: Federal Real Property,
GAO03122 (Washington, D.C.: January 2003).

Chapter 5
Agencies and Budget Decision Makers Agree
That Capital Planning Is Useful, but
Implementation Challenges Exist

Recommendations for Executive Action

We recommend that the Director of the Office of Management and Budget
require that agencies comply with the principles and practices of its
Capital Programming Guide. The Director should further require that
longterm agency capital plans developed pursuant to the guide be submitted
to OMB and provided to congressional decision makers.

We further recommend that the Director of the Office of Management and
Budget work with agencies to update the Capital Programming Guide to
address agency implementation challenges and increase its usefulness by
streamlining some of the requirements so they are not so burdensome to
agencies.

Agency Comments We requested comments on a draft of this report from the
Director of OMB or his designated representative. The Assistant General
Counsel said that OMB agreed with our recommendations. A few technical
comments were also provided and have been incorporated where appropriate.

In addition to the case study agencies, we requested comments on a draft
of this report from the U.S. Coast Guard, the Department of State, the
General Services Administration, the Indian Health Service, the National
Aeronautics and Space Administration, the Tennessee Valley Authority, the
Army Corps of Engineers, and the Bureau of Reclamation.

The Coast Guard disagreed with our recommendation that OMB should require
that longterm agency capital plans be submitted to OMB and congressional
decision makers. The Coast Guard believes it has met the spirit of our
recommendation by providing OMB and the Congress a 5year Capital
Investment Plan. The Coast Guard also provided technical comments, which
have been incorporated where appropriate. TVA commented that it should not
be required to comply with OMB's Capital Programming Guide because all of
its capital requirements are funded from its operating income. TVA also
provided technical comments, which have been incorporated as appropriate.

The Department of State, the General Services Administration, the Army
Corps of Engineers, and the Department of Interior on behalf of the Bureau
of Reclamation, had no comments on the draft report. None of the other
agencies disagreed with our conclusions and recommendations related to
longterm agency capital plans. The Indian Health Service said the OMB
Guide is very helpful, but because federal capital assets have so many

Chapter 5
Agencies and Budget Decision Makers Agree
That Capital Planning Is Useful, but
Implementation Challenges Exist

different purposes, making the guide a requirement as written would change
the way agencies developed strategic objectives-which may be less driven
by mission and more by OMB requirements. The Indian Health Service also
said if the guide is made a requirement, it would be helpful to have an
extended implementation schedule in order to make changes to the longterm
planning process.

Appendix I

Objectives, Scope, and Methodology

The objectives of this study were to determine (1) the extent to which
selected agencies have implemented the capital programming principles and
concepts described in the planning phase of the Office of Management and
Budget's (OMB) Capital Programming Guide and have followed the planning
practices of leading organizations as described in our Executive Guide
when acquiring capital assets; (2) what, if any, problems or issues
selected agencies have encountered in implementing the principles and
concepts of these guides; and (3) the extent to which OMB uses longterm
capital planning information in reviewing agency budget requests and
supporting budget justifications to the Congress.

This study focused on major capital assets acquired by the federal
government primarily to benefit the government's own operations. They are
defined as land, structures, equipment, and intellectual property
(including software) that are used by the federal government and have an
estimated useful life of 2 years or more. Capital assets exclude items
acquired for resale in the ordinary course of operations or held for the
purpose of physical consumption, such as operating materials and supplies.
Specific capital assets acquired by the case study agencies in this study
include land, buildings and other structures, medical facilities and
equipment, satellites, ships, aircraft, prison facilities, and parklands.
We limited the general scope of our work to the planning processes used to
acquire and manage investments other than those in information technology,
so we did not identify the principles and practices specific to
information technology acquisitions. We looked only at the planning
processes used to acquire major capital assets as defined by the case
study agencies, including major modifications or enhancements to existing
structures.

To select our case study agencies, we used character class data from OMB's
MAX1 system to identify agencies with substantial capital expenditures
over a 10year period.

As described in chapter 1, agencies code their net outlays each year
according to various investment categories or character classes. The OMB

1MAX is the computer system used to collect and process information needed
to prepare the President's Budget.

Appendix I
Objectives, Scope, and Methodology

categories used to select our case study agencies are those for direct
spending on physical assets.2

We first sorted the agencies from highest to lowest level of capital
outlays for fiscal year 2000. We then excluded the Department of Defense
military outlays and extracted the top 23 agencies whose capital
expenditures represented 87 percent of total nondefense capital outlays
for fiscal year 2000. From this list of 23, we excluded certain
agencies-such as the Federal Bureau of Investigation and the Federal
Aviation Administration- that could pose access difficulties due to recent
national security concerns. We also excluded agencies such as the
Department of Energy and the Environmental Protection Agency because of
their heavy dependence on contractors to manage their capital. This
resulted in a list of 12 agencies whose capital outlays represented 54
percent of nondefense capital outlays for fiscal year 2000: the Department
of Veterans Affairs (VA), the National Aeronautics and Space
Administration, the Indian Health Service, the Bureau of Prisons (BOP),
the Bureau of Reclamation, the U.S. Coast Guard, the Tennessee Valley
Authority, the National Oceanic and Atmospheric Administration (NOAA), the
Army Corps of Engineers, the National Park Service (Park Service), the
General Services Administration, and the Department of State.

We examined the characteristics of the 12 agencies, including their
missions, the types of assets acquired, and recent related studies, and
again considered the timing of our study with respect to the ability to
gain access to agency information. We reviewed our past work and other
literature, organizational data available on the Internet, departmental
strategic and annual performance plans, and agency accountability reports.
We then selected four agencies for case studies: VA, BOP, the Park
Service, and NOAA. This final selection was based on the goal of having
diversity in agency missions, the types of assets acquired, and the volume
of capital spending.

To accomplish our objectives, we conducted extensive interviews with
officials at various levels of management, including planning, budget, and
facilities staff; construction, asset, and property management staff; and

2These categories are Construction and Rehabilitation (1312 and 1314),
Major Equipment (1322 and 1324), and Purchases and Sales of Land and
Structures (1340). Major Equipment includes capital purchases of
information technology but excludes the support services related to
information technology purchases.

Appendix I
Objectives, Scope, and Methodology

operations and maintenance personnel. We also obtained and reviewed
various forms of agency documentation, including asset planning, budget,
and program documents; strategic plans; annual performance plans; budget
requests; and capital project proposals. We made site visits to the Park
Service's Denver Service Center Construction Program Management Office,
Intermountain Region (also located in Denver, Colorado), and the Grand
Canyon National Park. Although the information we gathered and our work at
Grand Canyon National Park may not be representative of that of all Park
Service units, it provides insights into the capital planning processes of
the agency's large national parks.

Our work at VA focused primarily on the activities of the Veterans Health
Administration where the bulk of VA's capital assets are acquired and
used. However, we also reviewed documents and interviewed staff of the
National Cemetery Administration and Veterans Benefits Administration. In
addition, we interviewed and obtained documentation from VA departmental
office staff responsible for coordinating capital asset planning for the
entire department. Our work at NOAA focused on the service lines and
program offices that acquire and use the bulk of NOAA's major capital
assets-the National Weather Service, the National Environmental Satellite,
Data and Information Service, the Office of Marine and Aviation
Operations, and NOAA's facilities office.

The findings of our study and agency acquisition practices described in
this report are based on testimonial evidence and our review of
documentation provided by agency officials. We did not observe or evaluate
the processes in operation, nor did we evaluate the effectiveness of the
specific elements of agency processes or assess the outcomes or decisions
made as the result of agency planning efforts. Our work documented the
agency practices and whether they conformed to OMB guidance and the
practices of leading organizations. Governmentwide capital spending data
presented in chapter 1 were obtained from the historical tables of the
President's Budget for Fiscal Year 2004 and adjusted for inflation using
fiscal year 2002 as the base year and the composite outlay deflators for
direct capital. Capital spending data in appendixes II through V were
derived from OMB's MAX system and adjusted for inflation using fiscal year
2002 as the base year and the composite deflators for direct capital as
presented in the President's Budget for Fiscal Year 2004.

To add context to the information obtained from case study agencies, we
surveyed the remaining 8 agencies from our list of 12 to obtain their
views on the usefulness of OMB's capital guidance and to learn if they had

Appendix I
Objectives, Scope, and Methodology

developed longterm agency capital plans. We sent a survey with five
structured questions to each of the remaining 8 agencies and received
responses from all of them. We did not verify agency responses to the
survey nor did we request from them or receive documentation supporting
their responses. The 8 survey agencies were the U.S. Coast Guard, the
Department of State, the General Services Administration, the Indian
Health Service, the National Aeronautics and Space Administration, the
Tennessee Valley Authority, the Army Corps of Engineers, and the Bureau of
Reclamation.

We met with each of the OMB resource management officers responsible for
our case study agencies to determine what longterm capital planning data
OMB receives and how they are used in reviewing budget justifications. In
addition, we interviewed staff of the House and Senate Budget Committees
about their interest in having longterm capital planning data from
agencies.

We held an exit briefing with each of the case study agencies to convey
our findings and request comments on a draft of this report. Our work was
conducted from August 2001 through September 2002 in accordance with
generally accepted government auditing standards.

Appendix II

Department of Veterans Affairs

Background/ Organizational Structure

The mission of the Department of Veterans Affairs (VA) is to serve
America's veterans and their families with dignity and compassion and be
their principal advocate in ensuring that they receive medical care,
benefits, social support, and lasting memorials. VA is a cabinetlevel
agency with a budget of over $50 billion and is one of the world's largest
health care, medical research, and insurance benefits organizations. VA is
geographically dispersed and consists of four components: the Veterans
Health Administration (VHA), the Veterans Benefits Administration (VBA),
the National Cemetery Administration (NCA), and the staff offices of VA's
central office. VHA, VBA, and NCA are separate administrations within VA
and each operates as a distinct entity. VHA-the largest VA
administration-is divided into 21 Veterans Integrated Service Networks
(VISN), and NCA is divided into five memorial service networks. There are
more than 100 service markets including markets with multiple VA
facilities and markets with only one VA facility. The overall veteran
population is estimated to be about 25 million, and over 4 million of them
received VHA health care services in fiscal year 2002. VA's capital
programs include major construction (cost over $4 million), minor
construction, nonrecurring maintenance, medical equipment, enhanceduse
leasing, enhancedsharing (space and facilities), energy investments, and
information technology initiatives. VA activities and its capital spending
are influenced by numerous veterans advocacy groups and other stakeholder
groups, such as medical schools and unions.

Types of Assets VA acquires many different types of capital assets. Its
current portfolio consists of VAowned buildings and real estate, VAleased
buildings, enhanceduse leases and sharing agreements, major equipment, and
information technology infrastructure and software. The assets
specifically include hospitals, clinics, cemeteries, office buildings,
fire departments, computers, and medical equipment. VA owns 162 hospitals,
more than 130 nursing homes, over 650 outpatient clinics, about 4,900
buildings, and about 15,600 acres of land. VA also leases 500 additional
buildings.

VA construction is divided into major construction-for projects costing $4
million or more-and minor construction. VA's recent appropriations for
major capital investments were for seismic projects, which are required to
comply with industry building standards. Projects in VA's minor
construction program are ranked and selected based on the availability of
funds within the total appropriation for minor construction.

Appendix II Department of Veterans Affairs

Capital Spending VHA acquires the bulk of VA's capital assets. As
illustrated in figure 16, VA's capital outlays varied considerably
throughout the 10year period but showed an increase in real terms from
$1.4 billion in 1993 to $2.1 billion in 2002 (in 2002 dollars). The lowest
levels of outlays during this 10year period occurred in fiscal years 1994
and 1999 when capital outlays decreased in real terms to about $1 billion
but then rose dramatically in fiscal year 2000 to $1.8 billion.

Figure 16: VA Capital Outlays for Fiscal Years 1993 through 2002

2,500 Constant 2002 dollars in millions

VA's capital planning process is formal and contains considerable guidance
and documentation. VA has made commendable efforts to revise and improve
its capital planning process in recent years although VA does not have a
longterm capital plan. Efforts to improve its process include establishing
a new departmentlevel office to centralize the review of capital project
proposals and coordinate capital investments for the department. Also, in
recent years, VA has contracted for two studies of its process and
industry best practices; the current process is based on the results of
those studies and the guidance contained in our Executive Guide. In
addition, VA implemented most of the principles contained in the Office of
Management and Budget's (OMB) capital planning guidance when

2,000

1,500

1,000 500 0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Fiscal year

Source: GAO Budget Database.

Capital Planning Process

Appendix II Department of Veterans Affairs

it revamped its planning process. VA continues to refine its capital
planning efforts. Its process begins with and is directed by departmental
guidance and oversight-from the development of capital project proposals
to the ranking and selection of final projects. The process begins with a
call memorandum from VA headquarters to its administrations and culminates
with proposals scored based on their compliance with weighted criteria
developed by central VA decision makers.

VA requires that proposed capital projects clearly document the needed
investment, although the three administrations accomplish this in
different ways. NCA maintains an asset inventory and information on the
condition of its assets that assists its proposal developers in justifying
the performance gap. NCA also completes a 5year facilities plan with
project cost estimates for both major and minor projects. Conversely, VHA
facility and VISN employees do not have complete asset inventories or
readily available asset condition data that are available VHAwide. VHA
conducts condition assessments of facilities and maintains that
information at the facility and VISN level. As discussed in chapter 3, VHA
initiated the Capital Asset Realignment for Enhanced Services (CARES)
program in October 2000 to assess veterans' health care needs and identify
planning initiatives to meet those needs in the future. VHA future capital
needs and program resources are expected to be largely driven by the
results of the CARES studies being conducted for each VISN.

Capital project proposals must identify alternatives considered throughout
the planning process. The budget call memorandum issued by VA headquarters
requires proposal developers to first vet their proposals through internal
bureau processes-being mindful of administrationlevel and departmentlevel
strategic goals. Following departmental guidance, VHA, NCA, VBA, and staff
offices are required to consider a range of alternatives to address an
identified performance gap. At least four alternatives-leasing (and
enhanceduse leasing); status quo; new construction; and rehabilitation,
repair, or expansion of existing facilities must be considered. Once
proposals pass administrationlevel processes,

Appendix II Department of Veterans Affairs

VA departmental guidance requires its facility staff to answer OMB's
"Three Pesky Questions"1 when developing capital investment project
proposals.

VA's Analytical Hierarchy Process (AHP), discussed in chapter 4, forms the
foundation of its departmentlevel review. VA's Office of Asset Enterprise
Management and Capital Investment Panel (CIP) conduct the initial VA
departmentlevel review of capital project proposals (business cases)
submitted from the three primary administrations and the staff offices to
ensure that proposal packages pass a validity assessment-ensuring that
proposals are complete with the required documents, that OMB's "Three
Pesky Questions" are answered, and that there is rationale for including
it in the project scoring process. Project proposals that pass the
validity assessment are scored by CIP on each of the subcriterion and main
criterion in AHP before they are forwarded to VA's Strategic Management
Council (SMC) for validation. CIP prepares a "Board Book" (a synopsis of
proposals reviewed and scored) for SMC's use during its review and
deliberation.

Project proposal scores are then fed into a decision software package
called Expert Choice, which is based on AHP, that ranks the proposals
based on assigned weights of major criteria (established by SMC) and
subcriteria (established by CIP). The established criteria used by AHP and
Expert Choice are reviewed each year, updated, and realigned with VA's
mission and current administration's and Secretary's priorities. The
established criteria have evolved over time. According to a VA official,
the Return on Investment criterion was added at OMB's request and the
Special Emphasis criterion2 was congressionally mandated. The ranked list
of proposals generated by Expert Choice is validated by SMC and forwarded
to VA's Executive Board. The Executive Board reviews the ranked results of
AHP and determines which projects are forwarded to OMB for funding in the
President's Budget.

1The three questions are (1) Does the investment in a major capital asset
support core/priority mission functions that need to be performed by the
federal government? (2) Does the investment need to be undertaken by the
requesting agency because no alternative private sector or governmental
source can better support the function? and (3) Does the investment
support work processes that have been simplified or otherwise redesigned
to reduce costs, improve effectiveness, and make maximum use of
commercialofftheshelf technology?

2The Special Emphasis criterion is used to evaluate project proposals that
support special emphasis programs, such as spinal cord injury, chronic
mental illness, and posttraumatic stress disorder.

Appendix II Department of Veterans Affairs

Challenges VA is confronted with diverse challenges in planning for and
maintaining the infrastructure needed to support its programs and
activities. VA owns a large number of very old buildings, pieces of
equipment, and facilities. VA officials expressed frustration that in
recent years, after it expended considerable resources to develop the
business cases and other paperwork, many of its project proposals were not
funded. VA officials also stated that VA lacks sufficient staff to prepare
business cases within the given time frames and that some staff lack the
technical expertise to develop project proposals properly. In those cases,
VA has had to rely on contractors to develop major capital investment
proposals.

VA also faces challenges that are not within its control. The United
States has a growing, aging veteran population. Veterans' health care
needs have changed over the last several decades, and VA must now adjust
its services and supporting facilities where the age of the infrastructure
is more than 50 years to meet those changing needs. Female veterans are
increasing in number but most inpatient or outpatient facilities were not
designed to accommodate their needs. Additionally, VA is challenged by the
geographical movement of the nation's veteran population, resulting in
some service markets lacking sufficient facilities and others having
facilities that are underused.

Prior GAO Work at VA We have previously reported3 that VA needs to modify
its infrastructure to support its increased reliance on outpatient health
care services. In August 1999, we recommended that VA develop
assetrestructuring plans for its health care markets to guide its planning
and management of health care assets. In response, VA established the
CARES program. We also have reported4 that VA and the Department of
Defense (DOD) should increase their joint activities to maximize federal
health care resources. In an effort to save federal health care dollars,
VA and DOD have sought ways to work jointly to gain efficiencies. For
example, local VA medical centers and military treatment facilities have
entered into agreements to exchange inpatient, outpatient, and specialty
care services, as well as support

3U.S. General Accounting Office, VA Health Care: Capital Asset Planning
and Budgeting Need Improvement, GAO/THEHS9983 (Washington, D.C.: Mar. 10,
1999).

4U.S. General Accounting Office, Major Management Challenges and Program
Risks: Department of Veterans Affairs, GAO03110 (Washington, D.C.: January
2003).

Appendix II Department of Veterans Affairs

services. Some local VA and DOD facilities have entered into joint
ventures-pooling resources to build a joint medical facility or benefit
from an existing facility. Additional related GAO reports are listed at
the end of this appendix and at the end of this report.

The Future of VA VA has made considerable progress toward improving its
capital planning process and developing a process that conforms to OMB
guidance and implements GAO capital planning recommendations. VA officials
said they are dedicated to further improving their process and ensuring
conformance to industry best practices. OMB staff said they are actively
assisting VA in achieving this desired outcome. Future capital
acquisitions and overall plans would depend on the results of the CARES
studies.

Some Related GAO Reports

Federal Real Property: Vacant and Underutilized Properties at GSA, VA, and
USPS. GAO03747. Washington, D.C.: August 19, 2003.

Department of Veterans Affairs: Key Management Challenges in Health and
Disability Programs. GAO03756T. Washington, D.C.: May 8, 2003.

VA Health Care: Improved Planning Needed for Management of Excess Real
Property. GAO03326. Washington, D.C.: January 29, 2003.

Major Management Challenges and Program Risks: Department of Veterans
Affairs. GAO03110. Washington, D.C.: January 2003.

Managing for Results: Efforts to Strengthen the Link Between Resources and
Results at the Veterans Health Administration. GAO0310. Washington, D.C.:
December 10, 2002.

VA Health Care: Challenges Facing VA in Developing an Asset Realignment
Process. GAO/THEHS99173. Washington, D.C.: July 22, 1999.

Veterans' Affairs: Observations on Selected Features of the Proposed
Veterans' Millennium Health Care Act. GAO/THEHS99125. Washington, D.C.:
May 19, 1999.

VA Health Care: Capital Asset Planning and Budgeting Need Improvement.
GAO/THEHS9983. Washington, D.C.: March 10, 1999.

Appendix II Department of Veterans Affairs

Major Management Challenges and Program Risks: Departments of Defense,
State, and Veterans Affairs. GAO/TNSIAD/HEHS/AIMD99104. Washington, D.C.:
February 1999.

VA Health Care for Women: Progress Made in Providing Services to Women
Veterans. GAO/HEHS9938. Washington, D.C.: January 29, 1999.

Veterans' Health Care: Challenges Facing VA's Evolving Role in Serving
Veterans. GAO/THEHS98194. Washington, D.C.: June 17, 1998.

VA Hospitals: Issues and Challenges for the Future. GAO/HEHS9832.
Washington, D.C.: April 30, 1998.

VA Health Care: Closing a Chicago Hospital Would Save Millions and Enhance
Access to Services. GAO/HEHS9864. Washington, D.C.: April 16, 1998.

Appendix III

National Park Service

Background/ The mission of the National Park Service (Park Service) is to
preserve,

unimpaired, the natural and cultural resources and values of the
nationalOrganizational park system for the enjoyment, education, and
inspiration of this and future Structure generations. A bureau of the
Department of the Interior (DOI), the Park

Service is organized into seven geographic regions and 388 national park
units and covers 84 million acres of land. In 1995, the Park Service
regions were reorganized-making the Intermountain Region the largest
region covering eight states and 89 parks units.

Types of Assets Park Service assets include roads; trails; campgrounds;
park visitor centers; other buildings and houses; utility systems; marine
and dock structures; signs and information structures; and special
features assets, such as statues, memorials, and viewing structures. In
every category of these assets, there are both general and stewardship
facilities.1 These assets consist of over 18,000 permanent structures,
8,000 miles of roads, 1,800 bridges and tunnels, 4,400 housing units,
about 700 water and wastewater systems, 200 radio systems, more than 400
dams, and 200 solid waste operations and include numerous cultural and
historic buildings and structures. There is considerable diversity within
the park system, with assets ranging from large landscapes such as the
Grand Canyon and Yosemite national parks, to historic structures such as
Philadelphia's Independence Hall, to the granite faces of Mount Rushmore.

Grand Canyon National Park assets include visitor centers, maintenance
facilities, employee housing, roads and parking facilities, other
structures, and utility systems. The Grand Canyon Park is very much like a
small city, and is responsible for maintaining its own infrastructure,
utilities, employee housing, and services for residents and visitors.

Capital Spending The bulk of Park Service capital spending is for major
projects, including new construction, rehabilitation, and maintenance
projects, costing $500,000 or more. Some capital spending is accomplished
through funding provided by the Park Service fee demonstration program,
the franchise fee

1General facilities are general property, plant, and equipment (PP&E) used
in providing goods or services. Stewardship facilities include heritage
assets of historical, natural, cultural, educational, or artistic
significance and land other than that acquired for, or in connection with,
general PP&E.

Appendix III National Park Service

program, and the road improvement program-in addition to the lineitem
construction budget. Some national parks-generally the larger parks-are
given authority to collect fees from the public to finance various capital
projects. Such parks are referred to as 80 percent parks because they are
allowed to retain 80 percent of the fees collected. The remaining parks-
referred to as 20 percent parks-do not collect fees from the public but
can request part of the remaining 20 percent of fees collected by the
other parks for their capital projects. The Park Service fee demonstration
program began in 1997 and has grown to where it now provides the Park
Service approximately $100 million annually for new projects.

As illustrated in figure 17, the Park Service's capital outlays fluctuated
during the 10year period 1993 through 2002 but grew in real terms from
$395 million in 1993 to $496 million in 2002. The lowest level of capital
outlays-$184 million-occurred in fiscal year 1999.

Figure 17: Park Service Capital Outlays for Fiscal Years 1993 through 2002

600 Constant 2002 dollars in millions 500

400

300

200

100 0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Fiscal year

Source: GAO Budget Database.

Capital Planning The Park Service's capital planning and asset management
process is evolving. Some of its current practices-such as the
establishment of an

Process external advisory group-stem from recommendations of a 1998
National

Appendix III National Park Service

Academy for Public Administration (NAPA) study of the agency's lineitem
construction program. The NAPA report's recommendations focused on the
Park Service's Denver Service Center, which has a primary role in
implementing the service's construction program. The advisory group meets
concurrently with the Park Service's seniorlevel internal review board,
reports directly to the Park Service Director, and reviews every facility
project with an estimated cost greater than $500,000. Also in 1998,
spurred by congressional concerns and new federal accounting standards for
plant, property, and equipment, the Park Service initiated the design of a
new asset management process. The cornerstone of the process is a facility
management software system that is intended to help the Park Service
achieve better overall management of its portfolio of capital assets.

Park Service capital planning begins at the park level with individual
park general management plans that cover a 10to 20year period and contain
elements of both a strategic plan and longterm capital plan. Individual
parklevel strategic plans also are prepared that cover a 5year period and
discuss the capital facilities needed to support park strategic goals.
These individual parklevel strategic plans drive the servicewide Park
Service strategic plan. Current administration and departmental priorities
also influence capital projects initiated at individual national parks.
Current priorities are communicated to park regions and individual parks
via the annual budget call memorandum issued by the Park Service's
Washington Office. Examples of administration priorities are life and
safety and facility deferred maintenance (discussed later)-which have been
priorities for several years-and, more recently, increased visitor safety
after the terrorist attacks of September 11, 2001.

Capital needs identified at individual parks are entered into and tracked
within the Park Service's servicewide Project Management Information
System (PMIS). PMIS is an automated system containing thousands of
identified capital projects. According to Park Service officials, in
fiscal year 2002, there were approximately 40,000 projects in the PMIS
database. Identified needs are entered into the system throughout the year
and extracted in response to annual budget calls for capital project
proposals. Projects also may be entered into PMIS for the first time in
response to a budget call. According to Park Service officials, PMIS is a
list of identified needs containing a mix of capital projects-some that
have been initiated and others that have not. These projects are all
labeled as nonrecurring needs and are identified in the system by a unique
identification code. When parks such as the Grand Canyon National Park
respond to budget calls, the PMIS code is used to inform decision makers
of which projects

Appendix III National Park Service

the park is proposing to initiate. Using the PMIS code, decision makers
are then able to access the specific project information, including
project justifications, link to agency goals, and estimated costs, and
begin the ranking and selection phase of the capital decisionmaking
process. To assist with identifying and documenting capital needs, some
national parks have asset inventories with varying levels of detail, but
the Park Service has only recently developed a servicewide asset
inventory. Also, the Park Service has just recently completed visual
inspections of assets in a large number of its parks; however, it does not
have servicewide comprehensive information on the condition of its assets.

When capital needs are identified, the Park Service considers a range of
alternatives to address them. Extensive alternatives analyses are
conducted during the development of a capital project proposal. The type
of capital project being considered and strategic goal being accomplished
drives the level and type of alternatives analyses conducted. For capital
projects involving life and safety or facility deferred maintenance, there
are limited alternatives available. When appropriate, the Park Service
considers renovating and/or upgrading an existing facility or structure.
At times, a park facility's specific functional requirements may limit the
type of facility or location considered during the alternatives evaluation
process. For example, the Grand Canyon National Park's new visitor center
must be open 24 hours a day, 7 days per week, in all weather conditions.
Therefore, it required a design that would permit indoor and outdoor
access to visitor information, regardless of whether park personnel staff
the facility. Upgrading an existing facility would not fulfill this
requirement. The Park Service also considers partnering with other
governments for land acquisitions and has partnered with the private
sector and nonprofit entities to share the funding of costly projects. In
addition, the Park Service considers partnering with other federal
agencies, sharing equipment with the Forest Service, and leasing some
assets where appropriate.

Value analysis is an important component of the Park Service capital
planning and alternative evaluation processes. It is used to select the
best alternative during a project's initial planning and predesign stages.
Value analysis is completed for project proposals above the $500,000
threshold, and the Park Service seniorlevel review board will not review
projects that lack such studies. From fiscal years 1997 through 2001, the
number of value analysis studies increased from 17 to 113.

The Park Service's capital planning process includes an established
framework for ranking and selecting proposed capital investments-a

Appendix III National Park Service

framework that consists of two seniorlevel review boards, an external
advisory group, and a formal system to rank projects using established
criteria. Capital project needs extracted from the PMIS database are
forwarded to the regional offices for initial evaluation and ranking
within their regions. These project proposals are subjected to preliminary
scoring on the regional level based on the same criteria used for scoring
at the national level later in the process. The regional offices develop a
ranked listing of proposals and forward their priority lists to the Park
Service's Construction Program Management Office (CPM) for evaluation and
ranking in the servicewide program. CPM reviews the submitted proposals
for completeness and compliance with the lineitem construction program
eligibility criteria before the proposals are submitted for further
evaluation at the national level.

Capital project proposals evaluated and ranked at the regional level and
those conforming to the initial CPM review are then formally evaluated on
a national level, park systemwide, using DOI criteria and the Park Service
Choosing By Advantage (CBA) process. CBA uses a series of evaluation
factors to compare proposed projects to one another. The five factors
recently used in CBA were (1) provide safe visits and working conditions;
(2) protect cultural and natural resources; (3) improve visitor enjoyment
through better services and educational and recreational opportunities;
(4) improve operational efficiency, reliability, and sustainability; and
(5) provide costeffective, environmentally responsible, and otherwise
beneficial development for the national park system. CBA involves a
relative comparison of every project proposal by each factor and produces
an individual project ranking. The project with the best score on any
particular factor sets the scale for that factor, and the other projects
are scored relative to that best score. Each project's score is divided by
its cost to arrive at an advantagetocost ratio. A multidisciplinary
assessment team led by CPM is assembled to manage the CBA process and
apply the evaluation factors to each project.

Recently, an additional step was added to the Park Service process that
required proposed projects be grouped into three bands using DOI criteria
that emphasize the Secretary of the Interior's and the President's
priority areas. Within the project bands created by the DOI criteria,
projects were then ranked using the CBA process.

Capital projects receive a number of highlevel reviews as part of the
decisionmaking process. The seniorlevel Park Service Development Advisory
Board (DAB) reviews proposed capital projects vetted and

Appendix III National Park Service

ranked by the CBA process. DAB is composed of four Park Service associate
directors, three regional directors, and two senior executive service park
superintendents. It has two responsibilities: (1) policy, which involves
reviewing the proposed 5year construction program plan and thus
recommending projects for inclusion in the construction program, and (2)
reviewing individual projects at the end of predesign development. With
some exceptions, DAB reviews every project with estimated costs greater
than $500,000. Without the approval of DAB, project managers cannot
proceed with design efforts or initiate construction activities. DAB
reviews approximately 120 projects per year. Once projects proposed for
inclusion in the 5year plan clear DAB, they are forwarded to the National
Leadership Council (NLC). NLC is composed of the Park Service Director,
deputy directors, associate directors, and regional directors and meets
bimonthly to consult on major policy and program issues confronting the
Park Service. Projects proposed for inclusion in the 5year plan are
reviewed by NLC, and its members provide any comments or concerns about
the ranking and rating of projects directly to the Park Service Director
for consideration before final approval of the 5year plan. Projects
reviewed by DAB that have completed predesign activities are advanced
directly to the Park Service Director for approval.

In addition, the Park Service's external advisory group was established to
provide an independent review of Park Service construction projects-
assessing lineitem construction projects for suitability and
costeffectiveness. The fivemember group is composed of private citizens
appointed by the Park Service Director. Members of the group have
experience in areas such as engineering, architecture, historic
preservation, and budgeting. The group meets concurrently with DAB to
review projects that have completed predesign activities and provides its
findings directly to the Park Service Director.

Capital project proposals rated through CBA and approved at the national
level form the Park Service 5year construction plan. The 5year
construction plan is the only Park Servicewide capital asset planning
document. It provides a cost schedule and rating for each lineitem
construction project.

Challenges The Park Service is confronted with a number of challenges in
planning for and maintaining its assets and infrastructure. The Park
Service owns and is responsible for maintaining numerous prehistoric and
historic facilities and structures. Historic preservation is expensive,
and the number of

Appendix III National Park Service

properties designated as historic is increasing. Officials commented that
the cost to repair and renovate historic properties is usually greater
than the cost to tear down and rebuild them. As discussed below, the Park
Service deferred maintenance backlog has long been a challenge due to
inadequate data and a low priority for funding maintenance needs. The
maintenance backlog is expected to continue to challenge the agency.

The Park Service also faces challenges that are outside of its control.
Visitation rates at national parks have grown substantially over the past
20 years-from about 220 million visitors per year in 1980 to almost 290
million visitors in recent years. This growth has required the expansion
of Park Service facilities and presented a significant challenge to many
of the parks' transportations systems. Since September 2001, the Park
Service has given increased attention to park visitor safety and security,
which presents an additional challenge.

Prior GAO Work at Park Service

We have reported2 that the Park Service frequently did not have baseline
information about the condition of its natural and cultural resources,
including historic structures, making it difficult for park managers to
clearly ascertain the condition of resources and whether resources are
deteriorating, improving, or staying the same. At the same time, many park
resources face significant threats, including air pollution, vandalism,
and nearby land development. According to the Park Service, steps have
been taken to improve the situation. Specifically, the Congress is funding
the Park Service's Natural Resources Inventory and Monitoring Program to a
level sufficient to develop needed information on basic natural resource
inventories. Also, the Park Service has begun efforts to preserve many
prehistoric and historic sites.

We have also reported that the Park Service, along with other bureaus
within DOI, is challenged with maintaining its facilities and
infrastructure and is not meeting its safety responsibilities in many of
its structures. These assets include some deteriorating facilities for
which repair and maintenance have been a low priority for funding. These
unfunded repair and maintenance needs are referred to as the deferred
maintenance backlog. In February 2002, DOI estimated that the Park Service
deferred maintenance backlog was from $4.08 billion to $6.8 billion.
However, we

2U.S. General Accounting Office, Major Management Challenges and Program
Risks: Department of the Interior, GAO03104 (Washington, D.C.: January
2003).

Appendix III National Park Service

also reported that the Park Service has yet to assess or define the scope
of it maintenance needs accurately. Factors contributing to this situation
included the agency's lack of an accurate inventory of the assets that
need to be maintained and inaccurate data on the condition of these
assets. In May 2000, we reported that the structural fire safety efforts
in several national parks were not effective.3 The gaps in the Park
Service's efforts include inadequate employee training and fire
inspections and-for many buildings-inadequate or nonexistent fire
detection or suppression systems. Additional related GAO reports are
listed at the end of this appendix and at the end of this report.

The Future of the Park Service

As discussed earlier, the Park Service is in the process of implementing
an asset management process that is intended to enable the agency to have
a reliable inventory of its assets and a process for documenting and
reporting on the condition of each asset. The cornerstone of the new
process is the Facility Management Software System that also will provide
a systemwide methodology for estimating deferred maintenance costs. Like
most other federal agencies, the Park Service will be affected by
increased attention to homeland security. This may require Park Service
management to balance competing priorities while accomplishing its
strategic goals and, at the same time, providing increased park visitor
safety and security.

Some Related GAO Reports

National Park Service: Status of Agency Efforts to Address Maintenance
Backlog. GAO03992T. Washington, D.C.: July 8, 2003.

National Park Service: Status of Efforts to Develop Better Deferred
Maintenance Data. GAO02568R. Washington, D.C.: April 12, 2002.

Recreation Fees: Management Improvements Can Help the Demonstration
Program Enhance Visitor Services. GAO0210. Washington, D.C.: November 26,
2001.

Park Service: Visitor Center Project Costs, Size, and Functions Vary
Widely. GAO01781. Washington, D.C.: July 24, 2001.

3U.S. General Accounting Office, Park Service: Agency Is Not Meeting Its
Structural Fire Safety Responsibilities, GAO/RCED00154 (Washington, D.C.:
May 22, 2000).

Appendix III National Park Service

Park Service: Need to Address Management Problems That Plague the
Concessions Program. GAO/RCED0070. Washington, D.C.: March 31, 2000.

National Park Service: Efforts to Link Resources to Results Suggest
Insights for Other Agencies. GAO/AIMD98113. Washington, D.C.: April 10,
1998.

Park Service: Managing for Results Could Strengthen Accountability.

GAO/RCED97125. Washington, D.C.: April 10, 1997.

National Parks: Park Service Needs Better Information to Preserve and
Protect Resources. GAO/TRCED9776. Washington, D.C.: February 27, 1997.

Appendix IV

National Oceanic and Atmospheric Administration

Background/ Organizational Structure

The mission of the National Oceanic and Atmospheric Administration (NOAA)
is to describe and predict changes in the Earth's environment and to
conserve and wisely manage the nation's coastal and marine resources. NOAA
is a bureau within the Department of Commerce; it accomplishes its mission
through five major line offices and numerous program units. The five line
offices are the National Weather Service (NWS); the National Environmental
Satellite, Data and Information Service (NESDIS); the National Marine
Fisheries Service (NMFS); the National Ocean Service (NOS); and the Office
of Oceanic and Atmospheric Research (OAR). Key among the program units is
the Office of Marine and Aviation Operations (OMAO). Some line offices and
program units function as users of other NOAA lineoffice products (e.g.,
NESDIS produces satellites for NWS use in weather prediction).

NOAA's line and program offices have diverse missions and are
geographically diffuse. NWS provides weather, hydrologic, and climate
forecasts and warnings for the United States, its territories, adjacent
waters, and ocean areas and has 122 weather forecasting offices in six
regions, including Alaska and the Pacific Islands of Hawaii and Guam.
NESDIS acquires and manages the nation's operational environmental
satellites, operates the four national data centers, provides data and
information services, and conducts related research. NMFS scientists study
the life history, stock, size, and ecology of economically important
fisheries. NOS develops the national foundation for coastal and ocean
science, management, response, restoration, and navigation. NOAA's
research, conducted through OAR, is the driving force behind NOAA's
environmental products and services intended to protect life and property
and to promote sustainable economic growth. OMAO operates a wide variety
of specialized aircraft and ships used in NOAA's environmental and
scientific missions.

Types of Assets NOAA acquires and uses various types of assets to
accomplish its mission, including satellites, radars, ground systems,
aircraft, ships and other water vessels, computers, and facilities. Many
of NOAA's assets are specialized and unique to NOAA's mission.

Capital Spending NOAA's capital investments are funded through a single
budget account, the procurement, acquisition, and construction (PAC)
account. The PAC account was created 5 years ago with the goal of
smoothing the capital

Appendix IV
National Oceanic and Atmospheric
Administration

investment funding among the various line and program offices to avoid
large yeartoyear fluctuations in funding requests. As illustrated in
figure 18, NOAA's capital outlays grew dramatically in real terms over the
10year period 1993 through 2002, from $51 million in 1993 to $787 million
in 2002- a more than 15fold increase. While outlays fluctuated some over
the 1993 through 1996 period, capital spending grew substantially in the
following years and almost tripled from $213 million in 1997 to $617
million in 1999. This increase was primarily due to funding the
modernization of NOAA weather facilities and systems, satellite systems,
the first planned fisheries research vessel, and new laboratories and
science centers. While outlays dropped some in fiscal year 2000 to $536
million, they significantly increased in the last 2 years.

900 Constant 2002 dollars in millions 800

700

600

500

400

300

200

100 0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Fiscal year

Source: GAO Budget Database.

Capital Planning The capital planning processes within each of NOAA's line
and program offices are driven by their unique activities and specific
needs as outlined in

Process their current individual strategic plans. For example, NWS's
current focus is the continued routine maintenance of recently modernized
assets. In the 1980s, NWS began a nationwide modernization program to
upgrade weatherobserving systems, such as satellites and radars; to design
and develop advanced computer workstations for forecasters; and to

Appendix IV
National Oceanic and Atmospheric
Administration

reorganize its field office structure. Its current focus is to maintain
these upgrades. Other examples are OMAO's replacement of its aging fleet
of ships and NESDIS's planned procurement of satellites near the end of
this decade.

At NOAA, both a NOAAlevel and individual line and program office strategic
plans are prepared. All of them support the vision and longterm goals of
Commerce as shown by clearly articulated interrelationships between NOAA
and Commerce goals. NOAA's mission is supported by seven interrelated
goals-each goal is separate but the goals have crosscutting relationships
that enable NOAA and Commerce to accomplish their goals and objectives.
NOAA's line offices implement the strategies and conduct the work to
achieve these goals and objectives. The line and program office strategic
plans discuss the capital needed to support each office's program, goals,
and objectives. For example, NWS's strategic plan supports one of two
primary missions of NOAA and contains three of the seven NOAA goals.
Capital investments needed to achieve these goals include weather
prediction and receiving systems. NESDIS prepares a 5year capital plan to
guide the acquisition of its satellite ground systems-to bridge its
performance gap in support of the strategic goals established in its
strategic plan. OMAO's strategic plan describes its current vessels and
aircraft capabilities, and identifies the minimum number of these assets
needed for OMAO to operate safely.

The process for assessing NOAA's capital asset needs can also vary by line
and program office. For example, OMAO current capital needs are based on
its current strategic plan. The plan describes the need to acquire three
additional fisheries ships to meet program expectations over the next
decade and the impending critical need for replacement aircraft
capability. OMAO formed an integrated project team (IPT) consisting of
mission and program managers and directed the team to develop a ship
proposal that would satisfy most fisheries needs with one common design.
NESDIS also formed an IPT to develop its newest satellite
system-coordinating activities within NOAA and the other agencies
participating in its development.

To assist with identifying and assessing capital needs, NOAA maintains
separate inventories of its real and personal property. NOAA headquarters
and Commerce's administrative support centers maintain a single inventory
of real property assets, which includes improvements to land, buildings,
and building systems. NOAA officials can generate reports from the real
property inventory that show basic information such as acquisition cost

Appendix IV
National Oceanic and Atmospheric
Administration

and the size and age of facilities. The inventory also contains
information on NOAA leased and General Services Administration (GSA)
assigned property. NOAA does not maintain asset condition data in the real
property inventory or in any other location. Asset condition assessments
were conducted in the past, but have been suspended until the existing
identified asset deficiencies are addressed. NOAA's personal property
inventory contains all other capital assets, such as satellites, antennas,
and computers. NOAA has a formal process for keeping its personal property
inventory up to date.

Commerce and NOAA are in the process of deploying a Webbased facilities
management system that will track information similar to the present real
property inventory but is expected to be easier to use. According to a
NOAA official, the real property inventory is difficult to use and
decision makers do not regularly consult it.

NOAA considers many alternatives to address an identified performance
gap-both at the line and program office level and at the administration
level. For example, OMAO has purchased excess Navy ships and converted
them for its needs. OMAO also considers alternatives to purchasing new
capital assets as one means of fulfilling one of the goals in its
strategic plan-the goal of pursuing partnerships with the public and
private sectors. According to officials, in fiscal year 2002, NOAA
expected to acquire approximately 3,800 operating days of ship support
through outsourcing with the private sector and the UniversityNational
Oceanographic Laboratory System. NWS officials said that some of its
operations colocate or share resources with other federal agencies as an
alternative to acquiring or constructing new facilities. NWS requires that
project proposals forwarded to the Finance and Investment Review Board
(FIRB), its internal review board, document alternatives considered, the
cost and benefits of the best alternative, and how the various
alternatives differ. In order to receive the highest score in the FIRB
review, the proposal must include an explanation of alternatives
considered.

NOAA budget formulation guidance for project proposals requires line
offices to consider alternatives. The guidance requires proposals to
consider outsourcing (contracting) and partnerships with other agencies or
with other line offices before review by administrationlevel review
boards. The NOAA Facilities Office may also require construction proposals
to identify alternatives, although the Facilities Office's involvement is
not routine. If the Facilities Office does become involved, it is most
often during the initial phase of a proposal development. During this
review, the

Appendix IV
National Oceanic and Atmospheric
Administration

Facilities Office has a standard set of alternatives each proposal must
consider-purchasing existing assets, new construction, leasing, and the
use of university facilities.

NOAA's line and program offices have individual ranking processes that
precede the review by the administrationlevel review boards. For example,
NWS formed FIRB in fiscal year 2000 to establish a formal process for
management review and ranking of capital investment proposals in support
of strategic goals. The FIRB members review and evaluate capital
investment proposal justifications, score capital investments according to
established criteria, and rank the approved investments. The criteria used
include alternatives considered, contribution to improved agency
performance, and contribution to NWS mission. FIRB evaluates the approved
portfolio of capital investments for inclusion in the NWS budget
submission. NESDIS managers solicit project proposals based on NOAA's
annual goals. Brief conceptual proposals are initially reviewed and
ranked. Proposal developers then prepare more detailed proposals, and the
selected proposals are forwarded to the NOAA boards for review.

NOAA's six administrationlevel review boards-working groups representing
NOAA's strategic themes-consider administration priorities and goals when
reviewing proposals ranked by line and program offices. Each project
proposal submitted to the themes' review board must be justified in terms
of how it supports the theme. The review boards are confronted with
funding requests for both new and ongoing projects and conduct their own
internal reviews for ranking and selection prior to NOAA management
review. According to a NOAA official, the Infrastructure, Maintenance,
Safety and Human Capital theme used the following set of criteria to rank
submitted project proposals: (1) contribution to agency mission, (2) cost
development of the proposal, (3) productivity improvement, (4) operational
efficiency, (5) improving efficiency, and (6) the likelihood of success.
Similar criteria permeated the other themes' processes. Once this internal
review is complete, review boards recommend the highest ranked project
proposals to NOAA's senior management and the NOAA budget office for
inclusion in the Commerce budget submission to the Office of Management
and Budget (OMB).

NOAA does not prepare a longterm capital asset plan, but longterm planning
information exists at the lineoffice level. The budget office does not
require longterm plans from the line offices but says it has information
about ongoing projects and proposed projects that were not funded within
the past 2 years. Two line offices have longerrange documents-OMAO

Appendix IV
National Oceanic and Atmospheric
Administration

completes an "unofficial" (unpublished) longrange plan and NESDIS prepares
a 5year satellite ground systems plan. The OMAO plan is a 10year chart of
tentative dates and cost estimates of major repairs and replacements of
NOAA ships. The NESDIS plan identifies the resources it requires to
operate and maintain satellite ground systems to monitor and control
onorbit operational satellites, and to acquire, process, and distribute
environmental data to users. It outlines the ground resources NESDIS needs
to fulfill its gap and follows the principles of OMB's guidance. NWS
officials said that the NWS plan for capital investments was reflected in
its fiscal year 2003 and 2004 budget requests.

Challenges NOAA is tasked with serving the nation's continuing need for
weather and water information. On average, hurricanes, tornadoes, and
other severe weather events cause $11 billion in damages per year, and
early warning systems can reduce such damage. Weather is directly linked
to public safety, and about onethird of the U.S. economy (about $3
trillion) is weather sensitive. With so much at stake, NOAA's role in
observing, forecasting, and warning of environmental events is expanding,
and the agency is challenged by the need to increase its number of new
multiuse observation systems.

Also, safe and efficient transportation systems are crucial economic
lifelines for the nation. The Department of Transportation's U.S. Marine
Transportation System ships over 95 percent of the tonnage and more than
20 percent by value of the nation's foreign trade through America's ports.
Waterborne cargo contributes more than $740 billion to the U.S. gross
domestic product and creates employment for over 13 million citizens. As
U.S. dependence on surface and air transportation grows over the next 20
years and with the projected doubling of maritime trade, better navigation
and weather information will be critical to saving lives, cargo, and the
environment. NOAA's information products and services are essential to the
safe and efficient transport of goods and people at sea, in the air, and
on land.

Prior GAO Work at We have reported in the past on the difficulties NOAA's
NWS encountered with its modernization program to upgrade its weather
observing systems,

NOAA satellites, and radars. We made numerous recommendations, and NWS has
acted to implement them. For example, in response to our recommendations,
NWS established an overall systems architecture,

Appendix IV
National Oceanic and Atmospheric
Administration

improved the availability of its Next Generation Weather Radar, and
enhanced its Advanced Weather Interactive Processing System software
development process. Since 2001, NWS has made plans to further improve
weather forecasts and warnings through upgrades to its supercomputer and
future enhancements to weather satellites.1

Also, GAO has urged NOAA to aggressively pursue costeffective alternatives
to its inhouse fleet of ships. According to NOAA, it has taken steps to
improve the cost efficiency of its fleet, such as removing some ships from
service, bringing new and converted Navy ships into service, and
negotiating contracts outside NOAA to meet some of its needs.2 Additional
related GAO reports are listed at the end of this appendix and at the end
of this report.

The Future of NOAA As discussed earlier, NOAA is making improvements to
its ability to track and control its capital assets. Commerce is deploying
a Webbased inventory system that is currently operating parallel to NOAA's
present property inventory. The new system is expected to be easier to
update and use than the present inventory. It was scheduled to be fully
operational in fiscal year 2003. A new asset condition assessment process
was also scheduled to begin in fiscal year 2003. A NOAA working group is
currently reviewing the strategy to initiate a new round of condition
assessments. NOAA wants to improve its condition assessment process
because previous asset condition data aged very quickly and were of
limited use.

NOAA's draft strategic plan for fiscal years 2003 through 2008 states that
its core missions of environmental prediction and management are
manifested in more than 80 capabilities that support America's efforts to
prepare for and, if necessary, respond to terrorist attacks. Among the
best known are NOAA's hazardous materials spill response, rapid onsite
weather forecasts to support emergency operations, and civil emergency
alert relay through NOAA Weather Radio. NOAA is also prepared to provide
its other resources-ships, aircraft, global observation systems, and
professional law enforcement officers-to serve the nation when the need
arises.

1U.S. General Accounting Office, Major Management Challenges and Program
Risks: Department of Commerce, GAO0397 (Washington, D.C.: January 2003).

2U.S. General Accounting Office, Major Management Challenges and Program
Risks: Department of Commerce, GAO01243 (Washington, D.C.: January 2001).

Appendix IV
National Oceanic and Atmospheric
Administration

Through these core capabilities and strategic investments, NOAA plans to
expand its support for homeland security by coordinating delivery of its
products and services to federal, state, and local emergency managers and
responders, and strengthening its own infrastructure to protect agency
personnel, facilities, and information services.

Some Related GAO Reports

Polar-Orbiting Environmental Satellites: Status, Plans, and Future Data
Management Challenges. GAO02684T. Washington, D.C.: July 24, 2002.

Department of Commerce: Status of Achieving Key Outcomes and Addressing
Major Management Challenges. GAO01793. Washington, D.C.: June 15, 2001.

National Oceanic and Atmospheric Administration: National Weather Service
Modernization and Weather Satellite Program. GAO/TAIMD00

86. Washington, D.C.: March 29, 2000.

Appendix V

Bureau of Prisons

Background/ Organizational Structure

The mission of the Bureau of Prisons (BOP), an agency of the Department of
Justice (DOJ), is to protect society by confining persons convicted of
federal crimes and sentenced to incarceration in the controlled
environments of prisons and communitybased facilities that are safe,
humane, and appropriately secure. The agency consists of six geographical
regions with 102 facilities. In addition to housing the federal inmate
population, BOP provides inmates with basic services, such as food,
clothing, and health care and an array of educational, vocational, and
other programs. The agency fulfills its incarceration function using a
range of BOPoperated institutions with varying security levels as well as
privately managed institutions, state and local facilities, community
corrections centers, and home confinement. While BOP shares federal
detention responsibilities with the United States Marshals Service (USMS)
and the Bureau of Immigration and Customs Enforcement (ICE) (formerly the
Immigration and Naturalization Service (INS)), incarceration is the sole
responsibility of BOP. In 2002, BOP was responsible for more than 160,000
federal inmates-of which 27,000, or about 17 percent, were housed in
nonBOPoperated facilities.

Types of Assets BOP's capital assets consist of land, prison facilities,
other buildings and structures, major equipment, and motor vehicles.

Capital Spending While new construction represents the bulk of BOP's
capital outlays, modernization and repair of existing facilities are a
significant part of BOP's annual Building and Facilities appropriation.
New construction outlays include costs associated with the acquisition,
construction, and leasing of prison facilities. Modernization and repair
outlays include costs associated with rehabilitation and renovation of
buildings, necessary facility modifications to accommodate new
correctional programs, rehabilitation and replacement of utility systems,
and repair projects at existing facilities.

As illustrated in figure 19, BOP's capital outlays fluctuated from $400
million to $500 million in real terms from 1993 to 2001, with a sharp drop
to $34 million in fiscal year 1998 and then a sharp increase to $795
million in 2002. The sharp decrease in 1998 is somewhat misleading since
it reflects reimbursements from nonfederal sources that offset BOP's gross
capital outlays for that year.

Appendix V Bureau of Prisons

900 Constant 2002 dollars in millions

BOP's capital acquisitions support a DOJ strategic goal-to protect society
by providing for the safe, secure, and humane confinement of persons in
federal custody. This goal is supported by a number of objectives,
including ensuring sufficient prison capacity and maintaining prison
operations. BOP strategic planning documents provide details about the
ongoing projects and new facilities planned to achieve and maintain
sufficient prison capacity. BOP budget call guidance requires that capital
project proposals describe how each project will support the agency's
goals and objectives. The guidance also reinforces the Attorney General's
current priority objectives. For the fiscal year 2004 budget submission,
guidance from BOP's facilities management unit required that major project
requests- projects with estimated costs of $300,000 or more-be documented
in the requesting institution's strategic plan.

The BOP Director issues an annual spring budget request memorandum to all
BOP regional and assistant directors. The fiscal year 2003 memorandum
asked that units develop separate program funding requests for initiatives
to be included in the annual budget submission to DOJ. Individual units
were required to prepare a separate "program request form" for each
initiative, which identified and explained the goals to be achieved,

800

700

600

500

400

300

200

100 0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Fiscal year

Source: GAO Budget Database.

Capital Planning Process

Appendix V Bureau of Prisons

estimated costs, justified the need, and identified performance indicators
to measure whether the goals are achieved. The program request forms were
to be forwarded to the Budget Development Branch at BOP headquarters and
were to include funding requests for both capital projects and operational
expenses. Capital project responses are included in the Buildings and
Facilities budget request.

In addition to the annual budget call, capital project needs are
identified and requested through a longterm capacity planning process and
routine inspections of existing facilities. BOP's new construction program
follows a centralized longterm capacity planning process that uses
information from its Office of Research and its Capacity Planning staff.
Prison inmate population levels and institution capacity are tracked
daily, and reports are regularly generated by facility, geographic region,
and inmate security level. The research office also generates projections
and reports of future inmate population levels in the same categories
using a microsimulation computer program and data from the Administrative
Office of the U.S. Courts. These projections are continually monitored and
regularly updated, and weekly reports of institution overcrowding are
generated using a measure of rated capacity. New construction project
requests are forwarded to BOP's Design and Construction Branch for review.

Through regular inspections of existing facilities, BOP institutions
identify essential rehabilitation, renovation, and repair needs and
request modernization and repair (M&R) funding. Legal mandates, such as
the Architectural Barriers Act, which requires access for the physically
challenged, also can result in requests for M&R funding. Institution staff
develop lists of identified M&R capital projects and forward the lists to
their respective regional offices. More extensive M&R projects are
identified through contractor surveys of older BOP facilities.
Institutions over 50 years old are comprehensively surveyed for needed
renovations and to determine whether the cost to renovate exceeds the
replacement cost of such facilities. The six regional offices evaluate and
consolidate the project lists, including those identified by contractor
surveys, and forward them to BOP's Facility Management Branch for
consideration.

BOP capital planners and decision makers consider numerous alternatives to
address an identified performance gap. They use information from BOP's
nationwide inventory system to assist them in considering some options.
One DOJ objective is to ensure sufficient and costeffective prison
capacity, and BOP's strategy to accomplish this includes contracts with
private sector providers of correctional services, state and local
cooperative

Appendix V Bureau of Prisons

agreements, and alternatives to traditional inmate confinement where
appropriate. BOP also considers the expansion of existing facilities and
the acquisition and conversion of nonprison facilities to prison use.

Having an accurate and uptodate inventory of institutions and other assets
helps with evaluating the expanded use of existing correctional
facilities. BOP maintains both a Real Property Management System to track
all BOPowned land, buildings, other structures, and related improvements,
and a Personal Property Management System to track all BOPowned personal
property (e.g., vehicles, computers, and other equipment). The real
property inventory tracks all buildings, structures, and related
improvements with an acquisition value of $100,000 or more and tracks all
BOPowned land regardless of its value. Depreciation is calculated monthly
over a 30year period for buildings and a 20year period for structures.
BOPowned personal property depreciation is calculated monthly over a
10year period for assets with an acquisition value of $5,000 or more, with
the exception of vehicles, which are depreciated over a 6to10year period,
depending on the vehicle type.

BOP has two planning committees that are involved in the capital
decisionmaking process. The Capacity Planning Committee consists of
seniorexecutivelevel staff from the Administration; Correctional Programs;
and Information, Policy, and Public Affairs Divisions and subject matter
experts, such as chiefs of capacity planning, design and construction, and
budget development from the Administration Division. The Capacity Planning
Committee proposes new construction projects. The Longrange Planning
Committee consists of members from the Administration Division who are
senior executive staff, senior managers, and branch chiefs. The Longrange
Planning Committee ranks the new construction project proposals made by
the Capacity Planning Committee and makes specific funding recommendations
to the BOP Director. New construction proposals are ranked based on need,
funding, and the speed at which facilities can be constructed. The
criteria for ranking M&R project proposals assign life and safety the
highest priority followed by accessibility projects, building and
institution infrastructure projects, projects for facilities over 50 years
old, and general repair. The resulting new construction and M&R proposals
are combined to form the BOP annual Buildings and Facilities budget
request.

BOP has three longterm capital planning documents for major capital
investments: (1) the Capacity Plan, (2) the Building and Facilities Status
of Construction report, and (3) a report of the rated capacity of
facilities that

Appendix V Bureau of Prisons

have received some funding by anticipated year of activation. The Capacity
Plan provides inmate population projections and rates of prison
overcrowding, categorized by institution security level, whether the
facilities are BOPoperated or contractor facilities, and whether the
inmates are male or female, typically for a 9year period. The data
contained in the Capacity Plan are updated weekly and reports can be
generated from the system that produces them at any time. The Office of
Management and Budget (OMB) receives the weekly update of this report, and
a version is included in the annual budget submission to the Congress. The
Buildings and Facilities Status of Construction report provides the status
of construction for major projects that have received some level of
funding, including both new construction and institution expansion
projects. The report provides amounts funded by fiscal year, total project
cost estimates, funding obligated to date, estimated facility activation
date, and a brief status of the project. This report is updated monthly
and is provided to OMB and to the Congress as part of the annual budget
submission. The report of rated capacity of planned facilities that have
received some level of funding shows facility capacity levels for planned
projects for a 7year period. The report shows the level of capacity added
for each fiscal year a group of facilities are activated and is also a
part of the annual budget submission to the Congress.

Challenges BOP is confronted with a number of challenges in ensuring
sufficient and costeffective prison capacity and maintaining prison
operations. The major determinants of the need for prison capacity are
outside of BOP's control. The agency is required to continually monitor
not only its current and longterm projected inmate population, but the
composition of its population as well-the security level required and
inmate gender. The federal inmate population has increased sixfold over
the past 20 years, from approximately 25,000 inmates in 1980 to more than
160,000 inmates in 2002. Since BOP is required to provide the level of
secure inmate confinement consistent with the needs of the inmate
population, the number of correctional institutions has increased from 41
to 102.

BOP's inmate population is directly influenced by new laws, mandatory
sentencing guidelines, and increases in law enforcement efforts. The
agency must respond to quickly changing requirements and the need to
balance the protection of American society with providing for the safe and
humane confinement of persons in federal custody. For example, as of
December 2001, more than 8,000 felons sentenced in the District of

Appendix V Bureau of Prisons

Columbia were transferred to BOP custody. This required the rapid
construction of additional facilities to attain sufficient capacity.

While managing the unique problems that accompany the longterm custody and
care of federal inmates, BOP is also a major provider of detention bed
space and operates several metropolitan detention centers. Inmates
awaiting sentencing and persons charged with federal crimes awaiting trial
are primarily the responsibility of USMS; however, USMS does not operate
detention centers and obtains some of its needed bed space from BOP. Also,
while ICE (formerly INS) has its own detention centers, some of its
detainees are housed at BOP facilities.

Prior GAO Work at BOP

In 1995, we reported on challenges to the federal prison system.1 GAO
reported that new criminal justice policies and demographic changes in the
prison population have created challenges for BOP as well as state and
local correctional systems. These challenges were caused by increasing
numbers of prison inmates, inmates serving longer sentences, demands on
the health care systems from a more diverse population, and increased
financial burdens on government systems to pay for correctional costs. We
concluded that the principal barrier to BOP accomplishing its objective of
confining offenders in appropriate facilities and environments would be
the ability to afford to provide the level of service it intended.

In 1996, we reported on studies comparing the operational costs and/or
quality of service between public and private prisons.2 The report noted
that the comparisons of operational costs indicated little difference
and/or mixed results and the comparisons of quality were unclear. In
December 1999, we reported on issues important or unique to managing the
female inmate populations.3 The report noted that since 1980, the female
prison population had increased over 500 percent and that while some
progress had been made, the U.S. correctional systems continued to face
challenges

1U.S. General Accounting Office, Bureau of Prisons: Recent Concerns and
Challenges for the Future, GAO/TGGD95177 (Washington, D.C.: June 8, 1995).

2U.S. General Accounting Office, Private and Public Prisons: Studies
Comparing Operational Costs and/or Quality of Service, GAO/GGD96158
(Washington, D.C.: Aug. 16, 1996).

3U.S. General Accounting Office, Women in Prison: Issues and Challenges
Confronting U.S. Correctional Systems, GAO/GGD0022 (Washington, D.C.: Dec.
28, 1999).

Appendix V Bureau of Prisons

in addressing the unique needs of female inmates. Specific needs included
childrelated responsibilities and genderspecific health care. Additional
related reports are listed at the end of this appendix and at the end of
this report.

The Future of BOP While the terrorist attacks of September 11, 2001, have
redefined the mission of DOJ, it is unclear what direct impact the
nation's war on terrorism will have on the responsibilities and activities
of BOP. The DOJ Office of Inspector General (OIG) included Detention Space
and Infrastructure in its December 2001 list of top 10 management
challenges facing DOJ. This has been cited as a material weakness since
1989 because both USMS and ICE are experiencing a rapidly growing need for
detention space. The OIG also addressed the possibility that the DOJ role
in the war on terrorism will create an even greater need for detention
space.

Some Related GAO Reports

Bureau of Prisons: Recent Concerns and Challenges for the Future.

GAO/TGGD95177. Washington, D.C.: June 8, 1995.

Private and Public Prisons: Studies Comparing Operational Costs and/or
Quality of Service. GAO/GGD96158. Washington, D.C.: August 16, 1996.

Women in Prison: Issues and Challenges Confronting U.S. Correctional
Systems. GAO/GGD0022. Washington, D.C.: December 28, 1999.

Federal Prison Expansion: Overcrowding Reduced but Inmate Population
Growth May Raise Issue Again. GAO/GGD9448. Washington, D.C.: December 14,
1993.

Prison Costs: Opportunities Exist to Lower the Cost of Building Federal
Prisons. GAO/GGD923. Washington, D.C.: October 25, 1991.

Private Prisons: Cost Savings and BOP's Statutory Authority Need to Be
Resolved. GAO/GGD9121. Washington, D.C.: February 7, 1991.

Appendix VI

OMB Guidance

Office of Management and Budget (OMB) Circular A11, Parts 7 and 8,
outlines agency budget formulation and execution requirements for capital
asset investments. Part 7, titled Planning, Budgeting, Acquisition, and
Management of Capital Assets, requires agencies to establish and maintain
capital programming processes that link mission needs and capital assets
effectively and efficiently. To facilitate this process, Part 7 requires
that agencies submit capital asset plans and business cases, also known as
an OMB Exhibit 300, that are products of agency capital programming and
investment processes. Agencies must submit a capital asset plan for each
new and ongoing major project, system, or acquisition and operational
(steadystate) asset included in their capital asset portfolios. For major
information technology projects, agencies must also complete OMB Exhibit
53, pursuant to Circular A11, section 53.

OMB Circular A11, Part 8, Managing Federal Assets, is the first step in
the current administration's recent initiative to improve agency asset
management. Beginning with their fiscal year 2004 budget submissions,
agencies were to conduct selfassessments of their ability to manage their
physical and financial assets. To improve asset management, Part 8 states
that agencies should have physical asset management processes that (1)
adequately track real property assets through their respective life
cycles, (2) determine whether assets are being utilized properly and
identify assets suitable for disposal, and (3) provide accurate asset
valuation information for financial statement purposes.

Executive Order 12893, Principles for Federal Infrastructure Investments,
1 requires agencies to conduct systematic analyses of the expected
benefits and costs of infrastructure investments-including both
quantitative and qualitative measures, encourages agencies to conduct
periodic reviews of the operation and maintenance of existing facilities,
and requires agencies to seek private sector participation in
infrastructure investment and management.

1Exec. Order 12893, 59 Fed. Reg. 4233 (Jan. 26, 1994).

Appendix VII

Comments from the Department of Veterans Affairs

Appendix VII
Comments from the Department of Veterans
Affairs

Appendix VIII

Comments from the Bureau of Prisons

Appendix VIII
Comments from the Bureau of Prisons

Appendix IX

Comments from the National Oceanic and Atmospheric Administration

Appendix IX
Comments from the National Oceanic and
Atmospheric Administration

Appendix X

GAO Contact and Staff Acknowledgments

GAO Contact Christine Bonham, (202) 5129576

Acknowledgments In addition to the contact person named above, Trina Lewis
made significant contributions to this report. Brendan Culley and Brodi
Fontenot also made key contributions to this report.

Related GAO Products

High-Risk Series: An Update. GAO03119. Washington, D.C.: January 2003.

High-Risk Series: Federal Real Property. GAO03122. Washington, D.C.:
January 2003.

Budget Issues: Incremental Funding of Capital Asset Acquisitions.
GAO01432R. Washington, D.C.: February 26, 2001.

Executive Guide: Leading Practices in Capital Decision-Making.

GAO/AIMD9932. Washington, D.C.: December 1998.

Budget Issues: Budgeting for Capital. GAO/TAIMD9899. Washington, D.C.:
March 6, 1998.

Deferred Maintenance Reporting: Challenges to Implementation.
GAO/AIMD9842. Washington, D.C.: January 30, 1998.

Budget Issues: Budgeting for Federal Capital. GAO/AIMD975. Washington,
D.C.: November 12, 1996.

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