    Federal Real Property: Excess and Underutilized Property Is an
    Ongoing Problem (06-FEB-06, GAO-06-248T).

    At the start of each new Congress since 1999, we have issued a
    special series of reports entitled the Performance and
    Accountability Series: Major Management Challenges andProgram
    Rsks. In January 2003, GAO designated federal real property a
    high-risk area and issued an update in January 2005 on this area.
    GAO identified excess and underutilized property as one of the
    major reasons for the high-risk designation. This testimony
    discusses GAO's designation of federal real property as a
    high-risk area, focusing on excess and underutilized property and
    describes various efforts to address the problem and what more
    needs to be done.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-06-248T
        ACCNO:   A46383
      TITLE:     Federal Real Property: Excess and Underutilized Property
    Is an Ongoing Problem
         DATE:   02/06/2006
      SUBJECT:   Federal property
    	     Federal property management
    	     Real property
    	     Strategic planning
    	     Surplus federal property

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    GAO-06-248T

         * The Federal Government Has Many Real Property Assets It Does
         * Various Efforts Initiated, but a Transformation Strategy Is
         * GAO's Mission
         * Obtaining Copies of GAO Reports and Testimony
              * Order by Mail or Phone
         * To Report Fraud, Waste, and Abuse in Federal Programs
         * Congressional Relations
         * Public Affairs
         * d06248Tnew.pdf
              * Scope and Methodology
              * Contacts and Acknowledgments

    Testimony

    Before the Subcommittee on Federal Financial Management, Government
    Information, and International Security, Senate Committee on Homeland
    Security and Governmental Affairs

    United States Government Accountability Office

    GAO

    For Release on Delivery

    Expected at 10:00 a.m. CST Monday, February 6, 2006

    FEDERAL REAL PROPERTY

    Excess and Underutilized Property Is an Ongoing Problem

    Statement of Mark L. Goldstein, Director Physical Infrastructure Issues

    GAO-06-248T

    Mr. Chairman and Members of the Subcommittee:

    Thank you for the opportunity to testify today on our work related to
    federal real property and, in particular, the problem with excess and
    underutilized property. As you know, at the start of each new Congress
    since 1999, we have issued a special series of reports entitled the
    Performance and Accountability Series: Major Management Challenges and
    Program Risks. In January 2003, we designated federal real property a
    high-risk area as part of this series, and we issued an update on this
    area in January 2005.1 We identified excess and underutilized property as
    one of the major reasons for the high-risk designation. Other reasons
    included deteriorated property, unreliable real property data,
    over-reliance on costly leasing, and the challenges associated with
    protecting these assets from terrorism. My testimony today will (1)
    discuss our designation of federal real property as a high-risk area,
    focusing on excess and underutilized property; and (2) describe various
    efforts to address the problem and what more needs to be done. My
    testimony today will highlight the following points:

               o  The conditions that led to our January 2003 high-risk
               designation still exist. Many of the assets in the government's
               vast and diverse portfolio of real property are not effectively
               aligned with, or responsive to, agencies' changing missions and
               are therefore no longer needed. Furthermore, many assets are in an
               alarming state of deterioration; agencies have estimated
               restoration and repair needs to be in the tens of billions of
               dollars. Additionally, a heavy reliance on costly leasing, instead
               of ownership, to meet new needs is a pervasive and ongoing
               problem. These problems have been exacerbated by underlying
               obstacles that include competing stakeholder interests in real
               property decisions, various legal and budget-related disincentives
               to businesslike outcomes, and the need for better capital planning
               by real property-holding agencies.

               o  The administration has acknowledged the problems in this area;
               in February 2004, the President added the Federal Asset Management
               Initiative to the President's Management Agenda and signed an
               executive order on real property management reform.2 These and
               other efforts at the agency level are positive steps. However, the
               breadth and complexity of the issues involved and the
               long-standing nature of the problems and their underlying causes
               will likely continue to hamper agencies' efforts to realign their
               real property assets to their missions. As a result, we continue
               to believe that a comprehensive and integrated transformation
               strategy is needed to address the aforementioned underlying
               obstacles. As an example, the Office of Management and Budget
               (OMB) and other stakeholders could look to the U.S. Postal Service
               (USPS) Transformation Plan and related progress reports, which GAO
               has supported for guiding postal reform.

               Over 30 federal agencies control hundreds of thousands of real
               property assets-including both facilities and land-in the United
               States and abroad. According to available data, the government
               owns or leases about 3.3 billion square feet of building floor
               area worldwide in roughly a half-million buildings. About 380
               million square feet of this space is leased. These assets are
               worth hundreds of billions of dollars. However, much of this vast
               and valuable asset portfolio presents significant management
               challenges and reflects an infrastructure based on the business
               model and technological environment of the 1950s. Many assets are
               no longer effectively aligned with, or responsive to, agencies'
               changing missions and are therefore no longer needed. Our
               high-risk reports, updated most recently in January 2005,
               highlighted problems with excess and underutilized property at
               several agencies, including the Departments of Defense (DOD),
               Veterans Affairs (VA), Energy, and State; USPS; and the General
               Services Administration (GSA). Furthermore, many assets are in an
               alarming state of deterioration; agencies have estimated
               restoration, repair, and maintenance needs to be in the tens of
               billions of dollars. Compounding these problems are the lack of
               reliable governmentwide data for strategic asset management, a
               heavy reliance on costly leasing instead of ownership to meet new
               space needs, and the cost and challenge of protecting these assets
               against potential terrorism. Regarding the federal government's
               reliance on costly leasing, we testified on this issue before this
               Subcommittee in October 2005.3 Building ownership options through
               construction or purchase and lease-purchase are generally less
               costly than using operating leases to meet long-term space needs.
               However, as GAO reported over the last decade, GSA relies heavily
               on operating leases to meet new long-term space needs because it
               lacks funds to pursue ownership.

               The excess and underutilized property problem was, and continues
               to be, a major reason the real property area remains high risk. In
               the last decade alone, the federal government has reduced its
               workforce by several hundred thousand personnel, and several
               federal agencies have had major mission changes. With these
               personnel reductions and mission changes, the need for existing
               space, including general-purpose office space, has declined
               overall and necessitated the need for different kinds of space. At
               the same time, technological advances have changed workplace
               needs, and many of the older buildings are not configured to
               accommodate new technologies. The advent of electronic government
               is starting to change how the public interacts with the federal
               government. These changes will have significant implications for
               the type and location of property needed in the 21st century.
               Furthermore, changes in the overall domestic security environment
               have presented an additional range of challenges to real property
               management that must be addressed. For example, agencies are
               employing such measures as searching vehicles that enter federal
               facilities, restricting parking, and installing concrete barriers.

               The experiences of several of the major real property-holding
               agencies illustrate how mission changes have affected agencies'
               real property needs. For example, after the Cold War, DOD reduced
               its force structure by 36 percent. Despite several rounds of base
               closures, DOD projected that it still had considerably more
               property than it needed. The National Defense Authorization Act
               for Fiscal Year 2002 gave DOD the authority for another round of
               base realignments and military installation closures in 2005. The
               results of the 2005 BRAC process, which will be discussed in more
               detail later, became final in November 2005. For USPS, various
               factors may significantly reduce its need for some of the real
               property it holds. These factors include new technologies,
               additional delivery options, and the opportunity for greater use
               of partnerships and retail co-location arrangements. A July 2003
               Presidential Commission report on USPS stated, among other things,
               that USPS had vacant and underutilized facilities that added
               little, if any, value to the modern-day delivery of the nation's
               mail.4 In April 2005, we reported that USPS faces future financial
               challenges due to its declining First-Class Mail business and has
               excess capacity in its current infrastructure that impedes
               efficiency gains.5 USPS has stated that one way to increase
               efficiency is to realign its processing and distribution
               infrastructure.

               The former main post office building in Chicago, near the Sears
               Tower, is an example of a vacant USPS-owned property (see fig.1).
               USPS is currently incurring about $2 million in annual holding
               costs for this property, which was replaced by a new facility and
               vacated in 1997. Redevelopment of this property has taken several
               years because, according to USPS, the real estate market was weak
               and the City of Chicago and the developer have been unable to
               agree on terms. According to USPS, the property buyer is currently
               in negotiations with the City of Chicago regarding the property's
               redevelopment and the granting of certain tax exemptions from the
               City.

    1GAO, Hgh-Risk Series: Federal Real Propery, GAO-03-122 (Washington, D.C.:
    Jan. 2003); GAO, High-Risk Series: An Update, GAO-05-207 (Washington,
    D.C.: Jan. 2005).

    2Presidential Executive Order 13327, Feb. 4, 2004.

         The Federal Government Has Many Real Property Assets It Does Not Need

    3GAO, Federal Real Property: Reiance on Costly Leasing to Meet New Space
    Needs Is anOngoing Problem, GAO-06-136T, (Washington, D.C.: October 6,
    2005).

    4President's Commission on the United States Postal Service, Embracing the
    Future: Making the Tough Choices to Preserve Universal Mal Service
    (Washington, D.C.: July 31, 2003).

    5GAO, U.S. Postal Servce: Despe Recent Progress, Posal Reform Legisaton Is
    St Needed GAO-05-453T , (Washington, D.C.: April 14, 2005).

    Figure 1: Example of Vacant USPS-Owned Property-the Former Main Post
    Office in downtown Chicago, Illinois

    In the mid-1990s, VA began shifting its role from being a traditional
    hospital-based provider of medical services to an integrated delivery
    system that emphasizes a full continuum of care with a significant shift
    from inpatient to outpatient services. Subsequently, VA has struggled to
    reduce its large inventory of buildings, many of which are underutilized
    or vacant. In August 2003, we reported that VA had 577 vacant and
    underutilized properties. Figure 2 shows an example of a vacant VA-owned
    property in Milwaukee, Wisconsin.

    Figure 2: Example of Vacant VA-Owned Property-The Former Main Hospital
    Building on the Milwaukee, Wisconsin, Health Facility Campus

    The L. Mendel Rivers Federal Building in Charleston, South Carolina is an
    example of a vacant, highly visible federal building owned by GSA (see
    fig. 3). This property, which is contaminated with asbestos, has been
    unoccupied since it sustained damage from Hurricane Floyd in 1999. In the
    last 10 years, GSA has unsuccessfully explored various options for
    disposal or reuse. Currently, GSA is planning, under existing authority,
    to exchange this building with a property owned by the City that would
    suit the federal government's needs.

    Figure 3: Example of Vacant GSA-Owned Property-The L. Mendel Rivers
    Federal Building in Charleston, South Carolina

    The magnitude of the problem with underutilized or excess federal property
    puts the government at significant risk for wasting taxpayers' money and
    missing opportunities to benefit taxpayers. First, underutilized or excess
    property is costly to maintain. In our 2003 high-risk report, we reported
    that DOD estimated that it was spending $3 billion to $4 billion each year
    maintaining facilities that were not needed. It is likely that other
    agencies that continue to hold excess or underutilized property are also
    incurring significant costs for staff time spent managing the properties
    and on maintenance, utilities, security, and other building needs. Second,
    in addition to day-to-day operational costs, holding these properties is
    costly for the government, because these buildings and land could be put
    to more cost-beneficial uses, exchanged for other needed property, or sold
    to generate revenue for the government. Continuing to hold property that
    is unneeded does not present a positive image of the federal government in
    local communities. Instead, it presents an image of waste and inefficiency
    that erodes taxpayers' confidence in government. Finally, it also can have
    a negative impact on local economies if the property is occupying a
    valuable location and is not used for other purposes, sold, or used in a
    public-private partnership.

    The excess and underutilized property problem, as well as the other
    problems that led to our high-risk designation, has been exacerbated by a
    number of factors that inhibit the government's ability to efficiently
    dispose of or reuse excess and underutilized property. These include
    competing stakeholder interests in real property decisions, various legal
    and budget-related disincentives to businesslike outcomes, and the need
    for better capital planning by real property-holding agencies. More
    specifically:

               o  Competing Stakeholder Interess - In addition to Congress, OMB,
               and the real property-holding agencies themselves, several other
               stakeholders have an interest in how the federal government
               carries out its real property acquisition, management, and
               disposal practices. These include foreign and local governments;
               business interests in the communities where the assets are
               located; private sector construction and leasing firms; historic
               preservation organizations; various advocacy groups; and the
               public in general, which often views the facilities as the
               physical face of the federal government in local communities. As a
               result of competing stakeholder interests, decisions about real
               property often do not reflect the most cost-effective or efficient
               alternative that is in the interests of the agency or the
               government as a whole, but instead reflect other priorities.

               o  Legal and Budgetary Disincentives -The complex legal and
               budgetary environment in which real property managers operate has
               a significant impact on real property decisionmaking and often
               does not lead to economically rational and businesslike outcomes.
               For example, GSA does not have the authority to enter into
               public-private partnerships to redevelop property. We have
               reported that public-private partnerships might be a viable option
               for redeveloping obsolete federal property when they provide the
               best economic value for the government, compared with other
               options, such as federal financing through appropriations or sale
               of the property. Furthermore, resource limitations, in general,
               often prevent agencies from addressing real property needs from a
               strategic perspective. When available funds for capital investment
               are limited, Congress must weigh the need for new, modern
               facilities with the need for renovation, maintenance, and disposal
               of existing facilities, the latter of which often gets deferred.
               In disposing of excess property, agencies also need to consider a
               range of laws intended to address other objectives-such as
               historic preservation and environmental remediation.

               o  Need for Improved Capal Plannng - Over the years, we have
               reported that prudent capital planning can help agencies to make
               the most of limited resources, and failure to make timely and
               effective capital acquisitions can result in increased long-term
               costs. GAO, Congress, and OMB have identified the need to improve
               federal decisionmaking regarding capital investment. Our Executive
               Guide,6 OMB's Capital Programming Guide, and OMB's revisions to
               Circular A-117 have attempted to provide guidance to agencies for
               making capital investment decisions. However, agencies are not
               required to use the guidance. Furthermore, agencies have not
               always developed overall goals and strategies for implementing
               capital investment decisions, nor has the federal government
               generally planned or budgeted for capital assets over the long
               term.

               Since our designation of the federal real property area as
               high-risk in January 2003, the administration and executive
               agencies have initiated some important efforts to address these
               problems, including the addition of the Federal Asset Management
               Initiative to the President's Management Agenda and an executive
               order on real property management reform which led to the
               development of guiding principles for real property asset
               management. The executive order requires the establishment of
               senior real property officers at specified executive branch
               departments and agencies who, among other things, prioritize
               actions needed to improve the operational and financial management
               of the agency's real property inventory.8 The order also
               established a Federal Real Property Council, with representation
               from major real property-holding agencies. The council has
               developed guiding principles for real property asset management,
               and is also developing performance measures, a real property
               inventory database, and an agency asset management planning
               process. Related to the excess and underutilized property problem,
               the administration has set a goal of reducing the value of the
               federally owned property inventory by 5 percent, or $15 billion,
               by 2009. The executive order and related initiatives are clearly
               positive steps. However, they have not been fully implemented and
               further actions-which will be discussed later-are necessary to
               address the underlying obstacles to reform.

               In addition to the administration's efforts, the Consolidated
               Appropriations Act for Fiscal Year 2005, Public Law 108-447, gave
               GSA the authority to retain the net proceeds from the disposal of
               federal property for fiscal year 2005 and to use such proceeds for
               GSA's real property capital needs. However, this provision was not
               included in the GSA appropriation act for Fiscal Year 2006.9 Also,
               the Veterans Health Programs Improvement Act of 2004, Public Law
               108-422, established a capital asset fund and gave VA the
               authority to retain the proceeds from the disposal of its real
               property for the use of certain capital asset needs such as
               demolition, environmental clean-up, and major repairs. Overall,
               agencies such as DOD, VA, and GSA have made progress in addressing
               long-standing federal real property problems. For example:

               o  VA has established a process called Capital Asset Realignment
               for Enhanced Services (CARES) to address its aging and obsolete
               portfolio of health care facilities. In March 2005, we reported
               that through CARES, VA identified 136 locations for evaluation of
               alternative ways to align inpatient services-99 facilities had
               potential duplication of services with another nearby facility or
               low acute patient workload. VA made decisions to realign inpatient
               health care services at 30 of these locations. For example, it
               will close all inpatient services at 5 facilities. VA's decisions
               on inpatient alignment and plans for further study of its capital
               asset needs are tangible steps in improving management of its
               capital assets and enhancing health care. Accomplishing its goals,
               however, will depend on VA's success in completing its evaluations
               and implementing its CARES decisions to ensure that resources now
               spent on unneeded capital assets are redirected to health care.

               o  In DOD's support infrastructure management area, which we
               identified as high-risk in 1997, DOD has made progress and expects
               to continue making improvements. In May 2005, we testified that
               DOD implemented the recommendations from the previous four Base
               Realignment and Closure (BRAC) 10 rounds within the 6-year period
               mandated by law and work on a 5th, 2005 BRAC, was underway.11 DOD
               estimated that it had reduced its domestic infrastructure by about
               20 percent from the four prior rounds, as measured by the
               estimated cost to replace the property; about 90 percent of
               unneeded BRAC property is now available for reuse. DOD has
               realized substantial net savings from those four rounds over time.
               Recommendations approved by the 2005 BRAC round are expected to
               further reduce DOD's infrastructure but by a much smaller margin
               than initially expected, although it expects to make a significant
               reduction in leased space in implementing the BRAC
               recommendations. DOD also expects to use BRAC to further
               transformation and related efforts, such as restationing troops
               from overseas as well as joint basing among the military services.
               The President concurred with and sent the 2005 BRAC report to
               Congress in September 2005, and absent congressional action to
               reject the recommendations within the 45 days provided by law,
               they became final in November 2005. Planning is now underway to
               implement those recommendations.

               o  GSA has recognized in recent years that it has many buildings
               that are not financially self-sustaining and/or for which there is
               not a substantial long-term federal purpose. To address this
               problem, GSA began its Portfolio Restructuring in 2001. This
               effort seeks to eliminate non-performing or obsolete properties
               from the GSA inventory. In January 2006, GSA told us that since
               fiscal year 2002, it had identified 204 buildings as excess and
               demolished 50 others. We have not evaluated this initiative.

               Despite the progress that has been made, we still believe that
               current structures and processes may not be adequate to fully
               address the federal real property problems. The breadth and
               complexity of the issues involved and the long-standing nature of
               the problems and their underlying causes will likely continue to
               hamper agencies' efforts to realign their real property assets to
               their missions. This is of particular concern for civilian
               agencies that do not have an independent decision-making apparatus
               like BRAC. Given this, we concluded in our high-risk report and in
               our update in January 2005, and still believe, that a
               comprehensive and integrated transformation strategy for federal
               real property is needed. Such a strategy could build upon the
               executive order by providing decisionmakers with a road map of
               actions for addressing the underlying obstacles, assessing
               progress governmentwide, and enhancing accountability for related
               actions. Using input from agencies, the private sector, and other
               interested groups, the strategy could comprehensively address
               these long-standing problems with specific proposals on how best
               to

               o  realign the federal infrastructure and dispose of unneeded
               property, taking into account mission requirements, changes in
               technology, security needs, costs, and how the government conducts
               business in the 21st century;

               o  address the significant repair and restoration needs of the
               federal portfolio;

               o  ensure that reliable governmentwide and agency-specific real
               property data-both financial and program related-are available for
               informed decisionmaking;

               o  resolve the problem of heavy reliance on costly leasing; and

               o  consider the impact that the threat of terrorism will have on
               real property needs and challenges, including how to balance
               public access with safety.

               To be effective in addressing these problems, it would be
               important for the strategy to focus on the underlying obstacles by

               o  minimizing the negative effects associated with competing
               stakeholder interests in real property decisionmaking;

               o  providing agencies with appropriate tools and incentives that
               will facilitate businesslike decisions-for example, consideration
               should be given to what financing options should be available; how
               disposal proceeds should be handled; what process would permit
               comparisons between rehabilitation/renovation and replacement and
               among construction, purchase, lease-purchase, and operating lease;
               and how public-private partnerships should be evaluated;

               o  addressing federal human capital issues related to real
               property by recognizing that real property conditions affect the
               productivity and morale of employees and the federal government's
               ability to attract and retain high-performing individuals;

               o  improving real property capital planning in the federal
               government by helping agencies to better integrate agency mission
               considerations into the capital decision-making process, make
               businesslike decisions when evaluating and selecting capital
               assets, evaluate and select capital assets by using an investment
               approach, evaluate results on an ongoing basis, and develop
               long-term capital plans; and

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        Various Efforts Initiated, but a Transformation Strategy Is Still Needed

    6GAO, Executive Guide: Leading Pracices in Capital Decison-making,
    GAO/AIMD-99-32 (Washington, D.C.: Dec. 1998).

    7OMB, Circular No. A-11, Appendix B.

    8See 31 USC S:901 (b)(1) and (b)(2) for a list of executive branch
    departments and agencies that are required to establish a senior real
    property officer.

    9Transportation, Treasury, Housing and Urban Development, the Judiciary,
    District of Columbia and Independent Agencies Appropriations Act, 2006,
    Pub. L. 109-115, 119 Stat. 2396 (2005).

    10BRAC is the process DOD has previously used to reorganize its
    installation infrastructure to more efficiently and effectively support
    its forces and increase operational readiness.

    11GAO, Military Base Closures: Observations on Prior and Current BRAC
    Rounds, GAO-05-614 (Washington, D.C.: May 3, 2005).

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    Highlights of GAO-06-248T , a testimony for the Subcommittee on Federal
    Financial Management, Government Information, and International Security,
    Committee on Homeland Security and Governmental Affairs, U.S. Senate

    February 2006

    FEDERAL REAL PROPERTY

    Excess and Underutilized Property Is an Ongoing Problem

    At the start of each new Congress since 1999, we have issued a special
    series of reports entitled the Performance and Accountability Series:
    Major Management Challenges andProgram Rsks. In January 2003, GAO
    designated federal real property a high-risk area and issued an update in
    January 2005 on this area. GAO identified excess and underutilized
    property as one of the major reasons for the high-risk designation.

    This testimony discusses GAO's designation of federal real property as a
    high-risk area, focusing on excess and underutilized property and
    describes various efforts to address the problem and what more needs to be
    done.

    What GAO Recommends

    GAO is not making any new recommendations in this testimony. However, GAO
    continues to believe, as stated in the high-risk series reports, that the
    overall risk to the government and taxpayers could be substantially
    reduced if an effective transformation strategy is developed and
    successfully implemented and real property-holding agencies effectively
    implement current and planned initiatives. Solving the problems in this
    area will require a reconsideration of funding priorities at a time when
    budget constraints will be pervasive.

    The conditions that led to GAO's January 2003 high-risk designation still
    exist. The government's vast and diverse portfolio of real property
    reflects an infrastructure based on the business model and technological
    environment of the 1950s. Many assets are no longer effectively aligned
    with, or responsive to, agencies' changing missions and are therefore no
    longer needed. GAO's high-risk reports, updated most recently in January
    2005, highlighted problems with excess and underutilized property at
    several agencies, including the Departments of Defense and Veterans
    Affairs, the U.S. Postal Service, and the General Services Administration.
    Furthermore, many assets are in an alarming state of deterioration;
    agencies have estimated restoration and repair needs to be in the tens of
    billions of dollars. These problems have been exacerbated by underlying
    obstacles that include competing stakeholder interests in real property
    decisions, various legal and budget-related disincentives to businesslike
    outcomes, and the need for better capital planning by agencies.

    The administration has acknowledged the problems in this area; in February
    2004, the President added the Federal Asset Management Initiative to the
    President's Management Agenda and signed an executive order on real
    property reform. These and other efforts at the agency level are positive
    steps. However, despite the progress that has been made, GAO still
    believes that current structures and processes may not be adequate to
    fully address the problems. The breadth and complexity of the issues
    involved and the long-standing nature of the problems and their underlying
    causes will likely continue to hamper agencies' efforts to realign their
    real property assets to their missions.

    Example of Vacant Federal Property: The Former Main Post Office in Chicago

               o  ensuring credible, rational, long-term budget planning for
               facility sustainment, modernization, or recapitalization.

               As an example, OMB and other stakeholders could look to the USPS
               Strategic Transformation Plan and related progress reports, which
               GAO has supported for guiding postal reform.12 Also, the
               transformation strategy should reflect the lessons learned and
               leading practices of organizations in the public and private
               sectors that have attempted to reform their real property
               practices. Over the past decade, leading organizations in both the
               public and private sectors have been recognizing the impact that
               real property decisions have on their overall success. Better
               management of real property assets in the current environment
               calls for a significant departure from the traditional way of
               doing business. Solutions should not only correct the
               long-standing problems we have identified but also respond to and
               support agencies' changing missions, security concerns, and
               technological needs in the 21st century. If actions resulting from
               the transformation strategy comprehensively address the problems
               and are effectively implemented, agencies will be better
               positioned to recover asset values, reduce operating costs,
               improve facility conditions, enhance safety and security, recruit
               and retain employees, and achieve mission effectiveness.

               Solving the problems in this area will undeniably require a
               reconsideration of funding priorities at a time when budget
               constraints will be pervasive. Without effective incentives and
               tools; top management accountability, leadership, and commitment;
               adequate funding; full transparency with regard to the
               government's real property activities; and an effective system to
               measure results, long-standing real property problems will
               continue and likely worsen. However, the overall risk to the
               government and taxpayers could be substantially reduced if an
               effective transformation strategy is developed and successfully
               implemented, reforms are made, and property-holding agencies
               effectively implement current and planned initiatives. OMB has
               informed us that it has taken additional steps to address the
               federal government's problems in the real property area.
               Specifically, it has developed an action plan for addressing these
               long-standing issues in relation to the President's Management
               Agenda and the executive order. To assist OMB with its efforts, we
               have agreed to meet regularly to discuss progress and have
               provided OMB with specific suggestions on the types of actions and
               results that could be helpful in justifying the removal of real
               property from the high-risk list.

               Mr. Chairman, this concludes my prepared statement. I would be
               happy to respond to any questions you or other Members of the
               Committee may have at this time.

               We conducted our work for this testimony from October 2005 to
               January 2006 in accordance with generally accepted government
               auditing standards. The work is based on our past reports on
               federal real property and, specifically, excess and underutilized
               property issues.

               For further information on this testimony, please contact Mark L.
               Goldstein on (202) 512-2834 or at GoldsteinM@gao.gov. Key
               contributions to this testimony were made by Kieran McCarthy,
               Susan Michal-Smith, and David Sausville.

    12U.S. Postal Service, Strategic Transformation Plan (Washington, D.C.:
    Sept. 2005); U.S. Postal Service, Progress Report (Washington, D.C.: Nov.
    2004).

                                 Scope and Methodology

                              Contacts and Acknowledgments

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