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. 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. 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. To be effective in addressing these problems, it would be important for the  strategy to focus on the underlying obstacles by    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; 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;   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; 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. 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.
Why GAO Did This Study

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 Found

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.