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 [email protected]. 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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