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Commissioner Winstead Testimony on GSA's Fiscal Year 2009 Capital Investment and Leasing Program

STATEMENT OF
DAVID L. WINSTEAD
COMMISSIONER
PUBLIC BUILDINGS SERVICE
U.S. GENERAL SERVICES ADMINISTRATION
BEFORE THE
SUBCOMMITTEE ON ECONOMIC DEVELOPMENT,
PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
U.S. HOUSE OF REPRESENTATIVES
JULY 11, 2008
 

Good morning, Madam Chair, Ranking Member Graves, and Members of the Subcommittee. My name is David L. Winstead and I am the Commissioner of Public Buildings at the U.S. General Services Administration (GSA).  Thank you for inviting me here today to discuss GSA’s fiscal year 2009 Capital Investment and Leasing Program.

GSA's Public Buildings Service (PBS) is one of the largest and most diversified public real estate organizations in the world.  Our inventory consists of over 8,600 assets with over 347 million square feet of rentable space across all 50 states, 6 U.S. territories, and the District of Columbia.  The majority of our space is concentrated in large commercial markets such as Washington, DC, New York City, Chicago, Atlanta and Los Angeles.  Our portfolio of public buildings includes primarily office buildings, courthouses, land ports of entry, and warehouses.  It is the PBS mission to provide superior workplaces for federal customer agencies at an economical cost to the American taxpayer.

In support of our mission, PBS is charged with the responsibility of managing the Federal Buildings Fund (FBF) that was created by Congress in l972 to finance PBS’ real property activities. Using a market-based user-fee and cost reimbursement approach, the FBF funds the space needs of more than 500 executive branch organizations as well as the space needs of the Judiciary and Members of Congress.  Congress appropriates funds to our customer agencies who, in turn, pay into the FBF the equivalent of commercial rent for the space they occupy.  Customer payments into the FBF are used to rent space from the private sector, repair and modernize government-owned facilities, and fund new federal construction in support of our customers’ agency missions.

PBS continues to demonstrate strong operational performance.  As of the second quarter of 2008, 81% of our government-owned assets are achieving a positive flow of rent revenue less expenses (excluding depreciation) and the percentage of vacant space in our owned inventory continues to be below private sector standards.  Our cleaning, maintenance, and utility costs also continue to outperform private sector benchmarks.

Before I address our FY09 capital program, I would like to share several accomplishments that address critical contractor and customer challenges we face.  First, I have established a new organization within PBS dedicated solely to lease acquisition.  Given the business volume, complexity of this work, and significant stakeholder interest, I have made this one of our highest priorities.  This new office, headed by a former chief legal counsel for PBS, will primarily focus on improving the real estate leasing program, including consistency and efficiency in lease acquisition, as well as achieving below market rents.  This new group just held a widely-attended industry roundtable on lease-construction to help improve the procurement efficiency and taxpayer value in these projects. Secondly, we have also strengthened the Construction Excellence program within PBS's Chief Architect’s Office, so that estimating, project variance and tracking, as well as project execution is more uniform across the country.  As a result of client surveys with the Courts, FBI, IRS, DHS, VA and others, the leadership of PBS’s eleven regional offices has strengthened the consistency of customer interface with PBS professionals through our National Program Management initiative. Lastly, we are providing our employees with the best management and IT tools, such as e-Lease, Transaction Management Playbook (TMP), and Building Information Modeling (BIM), which will strengthen their ability to address client needs well into the future.

Given these management efforts, as well as our increasing portfolio needs, I am pleased to be here today to request your authorization of the individual projects that make up our FY 09 capital program.  We believe these projects are the ones that will best meet the needs of our customer agencies.

We have analyzed these projects and determined that they are consistent with our overall portfolio objectives:

  • Optimizing the value of our portfolio of owned assets;
  • Directing capital resources primarily toward performing assets and developing workout or disposal strategies for under- and non-performing assets;
  • Maintaining the continued functionality of our buildings and safeguarding the health and life-safety of their occupants;
  • Providing quality workspace in support of the mission-related goals of tenant federal agencies;
  • Achieving the energy efficiency and environmental goals of the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007; and
  • Fulfilling our responsibilities under the National Historic Preservation Act to protect and preserve our historically significant public buildings.
REPAIRS AND ALTERATIONS
 

GSA is the steward of 1,513 federal buildings, which have a replacement value of about $39 billion.  We are requesting a Repairs and Alterations program of $692 million to maintain and improve those properties that are in GSA’s inventory for which there is a continuing federal need and that are capable of being economically self-sufficient.

The highlights of GSA’s fiscal year 2008 Repairs and Alterations Program include:

  • $350 million for the Basic Program;
  • $91 million for the Limited Scope Program;
  • $215 million for Major Modernization; and
  • $37 million for the Energy Program.

Because we are using finite taxpayer resources, we evaluate and rank our repairs and alterations proposals based on the following criteria:

  • Financial return and life-cycle cost;
  • Project timing and execution risk;
  • Physical urgency based on building condition; and
  • Customer urgency based on mission requirements and overall satisfaction levels.

The projects before you today have passed these criteria and reflect sound investment in the owned portfolio.

The Energy Program is a small but crucial part of our Repairs and Alterations request.  The Energy Independence and Security Act of 2007 (“EISA”) sets  challenging goals for the Federal Government and for GSA.  Beginning in FY2010, it requires GSA to reduce consumption of fossil fuel-generated energy in new buildings, major renovations, and lease construction and by 2030, it requires GSA to totally eliminate fossil-fuel consumption in our new buildings, major renovations and lease construction projects.

EISA also accelerates the rate at which we must reduce energy consumption in our inventory as a whole to 3% per year and specifically requires more energy and water retrofits in our existing buildings.  To meet these goals, we are requesting $37 million for the implementation of energy and water retrofit projects in government-owned buildings during FY 2009.

GSA is currently identifying energy and water retrofit projects required by EISA through surveys and studies in federal buildings throughout the country.  These projects will have positive savings-to-investment ratios, will provide reasonable payback periods, and may generate rebates and savings from utility companies and incentives from grid operators.  Projects will vary in size, location, and delivery method.  They will include installation of high-efficiency HVAC systems, efficient lighting and controls, variable air-flow systems, building automation control systems, and other energy saving technologies.  Based on previous experience, we estimate annual energy savings at 366 billion BTUs and $6 million resulting from projects funded with this request in FY 2009.

NEW CONSTRUCTION
 

We are requesting a Construction and Acquisition of Facilities Program of $620 million.  Our request includes funding for site acquisition, design, infrastructure, construction, and the management and inspection costs of six federal facilities.  PBS traditionally pursues a construction and ownership solution for special purpose and unique facilities that are not readily available in the real estate market.  In addition, we recommend new construction where there is a long-term need in a given locality.

GSA is working with the Department of Homeland Security (DHS) to consolidate its headquarters in the National Capital Region (NCR).  DHS’s current facilities are dispersed across more than fifty locations in NCR.  This is adversely impacting critical communication, coordination, and cooperation across DHS’s many components.  A unified, secure campus that brings together DHS’s executive leadership and operational management will enable more efficient and effective execution of DHS’s incident management and command-and-control functions and will also result in significant taxpayer savings in the long run.

Funds we are requesting for FY2009 will enable GSA to start construction of the U.S. Coast Guard’s new headquarters at St. Elizabeths as well as begin design of the project’s second phase. The Coast Guard will be the vanguard of DHS to occupy the site.  DHS's headquarters should be in the next phase of development, with additional departmental components to follow in the third phase.

The highlights of GSA's fiscal year 2009 New Construction Program include:

  • $331 million for the Coast Guard Consolidation and Development of St. Elizabeths Campus in Washington, DC;
  • $79 million for the Food and Drug Administration Consolidation at White Oak, MD;
  • $19 million for infrastructure activities at St. Elizabeths West Campus and the Denver Federal Center;
  • $7 million for acquisition of an additional ingress/egress point to the St. Elizabeths West Campus; and
  • $74 million for the design and/or construction of two land ports of entry.
LEASING PROGRAM
 

To meet the space requirements of our clients, GSA has entered into more than 8,500 private sector leases in 7,100 locations nationwide.  At 176 million square feet, leased space comprises more than half of our total portfolio square footage.  We are pleased that the vacant space within our leased inventory has been at or below 1.5 percent for the last six years, well below the national industry average of 12.9 percent.  We strive to keep leasing costs at or below market levels and have developed comprehensive strategies to do so, including the standard use of industry benchmarks and market surveys to comparison shop for the best value for our customers.  This year we have submitted 20 lease prospectuses for your consideration.  This submission represents almost half of our above-prospectus lease requirements for FY2009.  Due to the volume and complexity of requirements, we will submit at least one more set of prospectuses separately for your consideration shortly.

CONCLUSION
 

GSA continues to work with our customer agencies to meet their mission requirements within their financial constraints by consolidating requirements, reducing underutilized space, and minimizing tenant improvement costs in expiring space assignments.  At the same time, we continue to work with stakeholders such as this Subcommittee to capitalize the requirements of our aging inventory and the growing and increasingly specialized needs of our customers.

GSA continues to reduce our asset liabilities by concentrating reinvestment in core assets and disposing of underutilized assets. 

Madam Chair, Ranking Member Graves, this concludes my prepared statement. I will be pleased to answer any questions that you or any other Members of the Subcommittee may have about our proposed fiscal year 2009 Capital Investment and Leasing Program, or any other aspects of the Public Buildings Service.


Congressional Testimony