	The Federal Real Property Environment

The federal real property environment has many stakeholders and involves  a vast and diverse portfolio of assets that are used for a wide variety of  missions. The Department of Defense  (DOD), U.S. The state of  deterioration is alarming because of the magnitude of the repair backlog—  current estimates show that tens of billions of dollars will be needed to  restore these assets and make them fully functional. For example, there is a lack of  reliable and useful real property data that are needed for strategic  decision-making. Federal agencies also face challenges in protecting their facilities due to  the threat of terrorism. Various Efforts Initiated, but Real Property Problems Persist Due to Factors that Require Attention

In February 2004, the President added the Federal Asset Management  Initiative to the President’s Management Agenda and signed Executive  Order 13327 to address challenges in this area. The order requires senior  real property officers at specified executive branch departments and  agencies to, among other things, develop and implement an agency asset  management plan; identify and categorize all real property owned, leased,  or otherwise managed by the agency; prioritize actions needed to improve  the operational and financial management of the agency’s real property  inventory; and make life-cycle cost estimations associated with the  prioritized actions. The order also established a new Federal Real Property  Council (the Council) at OMB. The Council has also  developed guiding principles for real property asset management. And, agencies such as DOD and VA have made  progress in addressing long-standing federal real property problems and  governmentwide efforts in the facility protection area are progressing. However, despite the increased focus on real property issues in recent  years, the underlying conditions—such as excess and deteriorating  properties and costly leasing—continue to exist and more needs to be  done to address various obstacles that led to our high risk designation. For  example, the problems have been exacerbated by competing stakeholder  interests in real property decisions, various legal and budget related  disincentives to businesslike outcomes, and the need for better capital  planning among real property-holding agencies. To be effective in addressing these problems, it would be important for the  strategy to focus on minimizing the negative effects associated with competing stakeholder  interests in real property decisionmaking; 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; whether agencies should keep  some of the disposal proceeds to recoup the costs of preparing properties  for disposal; 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; addressing federal human capital issues related to real property by  recognizing that real property conditions affect the federal government’s  ability to attract and retain high-performing individuals and the  productivity and morale of employees;  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 ensuring credible, rational, long-term budget planning for facility  sustainment, modernization, or recapitalization.
Why GAO Did This Study

In January 2003, GAO designated federal real property as a high-risk area due to long-standing problems with excess and underutilized property, deteriorating facilities, unreliable real property data, and costly space challenges. Federal agencies were also facing many challenges protecting their facilities due to the threat of terrorism. This testimony discusses the problems with federal real property, particularly those relating to excess and deteriorating property, and what needs to be done to address them.

What GAO Found

The federal real property portfolio is vast and diverse--over 30 agencies control hundreds of thousands of real property assets worldwide, including facilities and land worth hundreds of billions of dollars. Unfortunately, many of these assets are no longer effectively aligned with, or responsive to, agencies' changing missions. Further, 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. 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 needs, and the cost and challenge of protecting these assets against terrorism. In February 2004, the President added the Federal Asset Management Initiative to the President's Management Agenda and signed Executive Order 13327. The order requires senior real property officers at specified executive branch departments and agencies to, among other things, prioritize actions needed to improve the operational and financial management of the agency's real property inventory. A new Federal Real Property Council at OMB 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. In addition to these reform efforts, some agencies such as the Departments of Defense (DOD) and Veterans Affairs (VA) have made progress in addressing long-standing federal real property problems. For example, DOD is preparing for a round of base realignment and closures in 2005. Also, in May 2004, VA announced a wide range of asset realignment decisions. These and other efforts are positive steps, but it is too early to judge whether the administration's focus on this area will have a lasting impact. The underlying conditions and related obstacles that led to GAO's high-risk designation continue to exist. Remaining obstacles include competing stakeholder interests in real property decisions, various legal and budget-related disincentives to optimal, businesslike, real property decisions, and the need for better capital planning among agencies.