While public-private partnerships (PPPs) have long been used to manage real property, congressional interest in PPPs has recently increased due to the large number of underutilized and excess buildings owned by federal agencies, as well as sequestration and other spending constraints. There is no single, accepted definition of public-private partnership , and PPPs can be structured in many ways. However, for purposes of this report, a PPP is an agreement whereby a nonfederal entity acquires the right to use real property owned or controlled by a federal agency—typically through a long-term lease—in exchange for redeveloping or renovating that property (or other property). In many cases, the agency and the nonfederal entity share the net cash flow or savings that result from the agreement. The term real property is defined by the Federal Management Regulation as any interest in land, together with any fixtures thereon, under the control of a federal agency except: (1) the public domain; (2) lands reserved or dedicated for national forest or park purposes; (3) minerals in lands withdrawn or reserved from the public domain that are suitable for disposition under the public land mining and mineral leasing laws; (4) certain other lands withdrawn or reserved from the public domain; and (5) any crops designated for disposition by severance and removal from the land. It concludes with considerations for Congress, such as agencies' capabilities to enter into and oversee performance of these arguably complicated arrangements. Key Elements of a PPP

The process of forming a PPP typically begins when an agency identifies a property that could provide greater benefits to the government if redeveloped or renovated. The agency then works with a nonfederal partner to determine whether a redevelopment strategy would provide the agency with the benefits it seeks, and the nonfederal partner with financial returns sufficient to cover the risk of investing in the property. The redevelopment strategy and the method of financing are closely linked. The former refers specifically to the work that the nonfederal partner agrees to undertake, while the latter is a combination of the revenue generated from the improved space and, in some cases, savings realized by reduced operating costs. Financial benefits to the government may also include a division of property cash flows. However, several common redevelopment and financing structures can be identified. The agency enters a PPP under which a developer leases the property and constructs a new office building on the unused portion of the land. A developer builds the annex in exchange for several acres of excess property. This is largely because federal law is generally silent as to PPPs, per se , particularly PPPs for purposes of improving or disposing of federal real property. Instead, those agencies that have, to date, entered agreements that could be characterized as PPPs have done so under their authority (1) to lease, otherwise convey, or permit the use of federal real property; and (2) to enter procurement contracts. Few of these statutes apply government-wide, and those that do often apply only to specific properties, or for specific purposes. Considerations for Congress

In considering whether to expand federal agencies' ability to enter PPPs, or overseeing the use of existing PPP authorities, Congress may want to pay particular attention to certain topics, such as (1) the limited information currently available regarding agencies' PPP authorities and their use thereof; (2) the degree to which legal uncertainties may deter agency use, or public acceptance, of PPPs; (3) agencies' capabilities to enter and perform PPPs; (4) whether agencies should be required to develop business plans for their partnership activities; (5) whether agencies should be required to notify Congress, or obtain its approval, when entering into PPPs; (6) agencies' ability to retain and use net proceeds from PPP agreements; and (7) the interplay between PPPs and the current disposal process. However, because individual agencies have different authority to lease real property or take other actions in forming PPPs, there is often considerable variability in the types of PPPs they may enter.
While public-private partnerships (PPPs) have long been used to manage real property, congressional interest in PPPs has recently increased due to the large number of underutilized and excess buildings owned by federal agencies, as well as sequestration and other spending constraints. There is no single, accepted definition of public-private partnership, and PPPs can be structured in many ways. However, for purposes of this report, a PPP is an agreement whereby a nonfederal entity acquires the right to use a real property owned or controlled by a federal agency—typically through a long-term lease—in exchange for redeveloping or renovating that property (or other property). In many cases, the agency and the nonfederal entity share the net cash flow or savings that result from the agreement. The term real property is defined by the Federal Management Regulation as any interest in land under the control of a federal agency except the public domain; lands reserved or dedicated for national forest or park purposes; minerals in lands withdrawn or reserved from the public domain; other lands withdrawn or reserved from the public domain; and crops separated from the land.
The process of forming a PPP typically begins when a federal agency identifies real property that could provide greater benefits to the government if it were redeveloped or renovated. The agency then works with nonfederal partners to see if a redevelopment strategy could be devised that provides the agency with the benefits it seeks, and the nonfederal partner with financial returns sufficient to cover the risk of investing in the property. The redevelopment strategy and method of financing are closely linked. The former refers specifically to the work that the nonfederal partner agrees to undertake, while the latter is a combination of the revenue generated from the improved space and, in some cases, savings realized by reduced operating costs. Financial benefits to the government may also include a division of property cash flows. Two common redevelopment and financing structures entail (1) leasing property to a developer, which then constructs a new facility on the land and subleases the facility; and (2) giving a developer excess real property in exchange for the developer building a facility for the agency on other land that the agency owns.
Federal law is generally silent as to PPPs, per se, particularly PPPs for purposes of improving or disposing of federal real property. A number of states have laws that define public-private partnership, and expressly authorize one or more state agencies (often, the Department of Transportation) to enter PPPs in general or for specific purposes (e.g., toll roads). With certain narrow exceptions (e.g., P.L. 106-407), federal law has no comparable provisions. Instead, those agencies which have, to date, entered agreements that could be characterized as PPPs have typically done so under their authority (1) to lease, otherwise convey, or permit the use of federal real property; or (2) to enter procurement contracts, particularly energy savings performance contracts (ESPCs). While the authorities as to procurement contracts often apply to all executive branch agencies, those as to leases generally apply only to specific agencies and properties, and sometimes only to agreements entered into for specific purposes. Thus, there is considerable variability in the types of PPPs that agencies may enter, and some uncertainties as to the legal requirements to which such partnerships are subject.
When contemplating expanded use of PPPs, Congress may wish to consider the limited information available about existing authorities that may permit landholding agencies to enter PPPs, and whether and how these authorities are currently being utilized. Congress may also wish to consider agencies' capabilities to enter into and oversee performance of these arguably complicated arrangements; agencies' authority to retain and use any net proceeds from PPPs; and the interplay between PPPs and current processes for disposing of excess property.