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Property Management Reform Legislation

 

STATEMENT OF STEPHEN A. PERRY
ADMINISTRATOR

GENERAL SERVICES ADMINISTRATION
BEFORE THE
SUBCOMMITTEE ON ECONOMIC DEVELOPMENT PUBLIC BUILDINGS AND EMERGENCY MANAGEMENT
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
AND THE
UNITED STATES HOUSE OF REPRESENTATIVES

APRIL 18, 2002

Chairman LaTourette and Members of the Subcommittee:

Thank you for inviting me to testify today concerning H.R. 3947, the "Federal Property Asset Management Reform Act of 2002."

I am pleased to be with you to discuss the various reforms in this bill to improve the more than 50-year old statute under which Federal agencies manage and dispose of their real and personal property. The General Services Administration (GSA) believes that agencies should be provided the freedom to manage their property more effectively through the use of appropriate and up-to-date management practices and incentives. Accordingly, we would like to see the existing property management statutes more accurately reflect the current needs of the government and emerging practices of the commercial marketplace. This will help agencies achieve their mission goals by reducing the amount of deteriorated, vacant and underutilized space in the existing Federal real property inventory.

Before I begin my testimony I'd like to introduce the GSA team with me today, which includes Mr. Joe Moravec, the Commissioner of the Public Buildings Service, and Mr. David Bibb, the Deputy Associate Administrator for Real Property in GSA's Office of Governmentwide Policy.

I would like to applaud this Subcommittee on their concern and efforts to improve Federal property management and for taking this on as a priority management reform issue. I also want to thank the Subcommittee for this unique opportunity to discuss the problems, policies, and procedures surrounding the management and disposal of Federal property. As I have already mentioned, on October 15, 2001, the President submitted to the Congress the "Managerial Flexibility Act of 2001." The legislation included a reform proposal to amend many of the existing and outdated provisions of the Federal Property and Administrative Services Act of 1949 (the Property Act). On November 1, 2001, the legislation was introduced by Senator Thompson as S. 1612. On March 12, 2002, Representatives Sessions, Davis, and Burton, introduced part of S. 1612 as a separate bill, H.R. 3947. The bill entitled "Federal Property Asset Management Reform Act of 2002," as introduced, was amended on March 14, 2002, with a bi-partisan proposal and reported out unanimously by the House Committee on Government Reform. Both House and Senate bills incorporate reforms that if enacted could improve the management of the Federal Government's billions of dollars worth of real and personal property.

GSA would like to discuss certain provisions that are included
in H.R. 3947.

Background.

The Property Act is the law that governs the use and disposal of most classes of Federal real and personal property. This law has served Federal agencies for more than 50 years without significant revision. However, certain elements of the Property Act do restrict the Government's ability to adopt for Federal use many of the "best practices" that are now common, every day practices for the commercial sector.

For example, effective property management requires that agencies consider all phases of the life cycle (i.e., acquisition, use, and disposal) of property. However, the current Property Act is heavily oriented toward the disposal phase.

We believe that H.R. 3947 addresses these shortcomings and incorporates a strategic perspective into property management decisionmaking during all phases of the property's life cycle. Specifically, the bill would achieve the following goals:

Goal #1 - Establishes Effective Property Management Processes and Procedures.

  • Asset Management Principles (AMP). Life cycle asset management would be emphasized through the issuance of governmentwide real and personal property AMPs. These principles will serve as the baseline for agencies in their decisionmaking processes. Also, specific principles would be considered when entering into outlease arrangements and using other enhanced asset management tools.
  • Strategic Real Property Planning. Real property is vital to accomplishing many agencies' mission. H.R. 3947 should require agencies to develop real property management plans for agency real property through all life cycle phases that are consistent with the agency missions, strategic goals, and objectives.
  • Senior Real Property Officer. The head of each landholding agency would appoint a Senior Real Property Officer to oversee the management of real property in accordance with strategic objectives, to follow the Asset Management Principles, to prepare real property management plans, and to generally coordinate agency real property functions and processes. Many of today's corporations clearly recognize the importance and value of their real property and have placed strategic emphasis on asset management. The heads of the Government's landholding agencies should do the same.
  • Governmentwide Real Property Information Database. A foundation of this legislation is to coordinate the real property planning and management effort using a database of reliable information regarding agencies' properties. Agencies would maintain and use the information in the database to support sound property management decisions internally and governmentwide.

Goal #2 - Helps Agencies Maintain Property Needed to Accomplish Agency Mission Requirements.

Federal managers are being encouraged to improve agency performance through the use of good, sound management practices linked to their strategic goals. GSA believes that H.R. 3947 provides agencies with common sense, business like practices and techniques to manage their property holdings strategically. The existing Property Act lacks the flexibility and incentives for agencies to manage their property inventories strategically.

The bill would enhance some of GSA's existing authorities and give other landholding agencies several new authorities to address these current limitations under the Property Act. These are:

  • Exchange/Sale of Real Property. Landholding agencies would be authorized to exchange or transfer property with other Federal agencies and enter into agreements with non-Federal entities to exchange or sell property as a means of acquiring replacement property better suited for their mission purposes.
  • Subleasing. The bill authorizes agencies to sublease vacant portions of government-leased property. As you know, GSA already has the authority to sublease leased space and has used this authority effectively to reduce the costs of otherwise vacant space.
  • Exchange/Sale of Personal Property. H.R. 3947 would expand the existing authority to allow agencies to replace personal property or acquire services that perform the functions of such replacement property.
  • Outleasing and Public Private Partnerships. The bill would authorize landholding agencies to enter into public private partnerships and to outlease to the private sector property that must remain in Federal ownership. They could also outlease underutilized portions of non-excess government-owned property to promote the full use and optimum performance of the property. Under certain circumstances, the outleasing arrangement could take the form of a public private partnership where the Government would use private sector resources and expertise to repair, renovate, and construct facilities.

GSA supports the appropriate use of these partnerships and believes that the criteria outlined in the bill assures that the use of public private partnerships and other real property management practices (i.e., exchange/sale, subleasing, and outleasing) are economically advantageous to the Federal Government. Also, there are strong protections for the Government included in H.R. 3947. For example, all public private partnership arrangements over $700,000 must be reviewed by the Congress, and there is a required biennial review by the General Accounting Office on the use of these arrangements with a report of findings sent to the Congress.

Goal #3 - Provides Incentives to Dispose of Property Not Needed for Agency Mission Requirements.

As Federal agencies and programs evolve, facilities need to change accordingly. The average age of government-owned buildings is now over 50 years, and many have not been adequately maintained. As a result, many buildings have become inefficient and functionally obsolete.

Unlike the private sector, most Federal landholding agencies have no opportunity to obtain the equity that may be recoverable from the disposal of underused or obsolete property and apply the proceeds toward meeting their on-going facilities needs. This results from the fact that these landholding agencies are simply not authorized to sell, exchange, sublease or outlease properties that no longer support their missions, and to use the proceeds for new replacement or capital projects. Consequently, agencies have to divert resources to hold such underused and unproductive property when in fact those resources could be used to improve other facilities that continue to support agency missions. This has resulted in agencies not optimizing property and retaining property that has little or no functional value to their missions. This bill provides the underpinnings for sound property management decisionmaking, and permits the use of proceeds as follows:

  • Personal Property. The bill authorizes agencies to retain the proceeds from the sale of surplus personal property to offset direct and indirect personal property disposal costs.
  • Real Property. The bill authorizes agencies to retain the bulk of proceeds from real property transactions and allows such funds to be used to offset direct and indirect real property transactional costs and in meeting agency capital needs.

Mr. Chairman, In addition, I would like to emphasize two significant points.

First, landholding agencies would remain responsible for the proper management of Federal resources and continue to keep the Congress, the President and the public properly informed through existing oversight procedures. These include the submission of agency's strategic plans, asset management plans, annual budget submissions, and the review of all public private partnership arrangements over $700,000.

Secondly, the bill expressly preserves the statutory authorities and responsibilities of Federal landholding agencies and their programs. The bill maintains GSA's exclusive authority to construct and alter public buildings. The bill recognizes that strategic asset management should remain an important part of any Federal agency's mission goals.

In conclusion, I would like to say that improving Federal property management is critical to improving each agency's ability to meet its mission requirements and improving governmentwide performance results. H.R. 3947 under consideration by this Subcommittee and Congress would incorporate the life cycle property management practices outlined here to provide the real property management principles, incentives, and flexibility needed by agencies to effectively manage their portfolios of real and personal property. We look forward to working with you to ensure that legislation is passed this Congress.

Mr. Chairman, this concludes my statement. I am happy to answer any questions you or other Subcommittee Members may have.