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5 Alternative Approaches for Acquiring Federal Facilities BACKGROUND Facilities investments typically require substantial up-front funding for de- sign, construction, or outright purchase. The benefits from such investments may not begin to accrue for 2 or more years as facilities are constructed or renovated. Private-sector organizations typically finance facilities investments by bor- rowing all or a portion of the required funds from a bank or other lending institu- tion, by using their own financial resources, or by using some form of third-party financing or equity arrangement. Additional arrangements are routinely used, such as alliances with other firms, joint ventures, sale-and-leaseback, and public-pri- vate partnerships. All involve varying levels of risk, and some incur debt. A loan or other commitment is typically repaid over time, allowing the organization to receive value from the investment before the debt is fully repaid. In the federal government, significant facilities investments are primarily funded from the annual budget. Individual departments and agencies may not borrow funds or otherwise incur debt to finance facilities.1 They must receive authorization from Congress for funding to cover the full, up-front (design and construction or purchase) costs in a specific fiscal year budget. Although the annual budget is the primary source of funding, a number of alternative approaches for acquiring facilities are being used by federal depart- ments and agencies, on a case-by-case basis under special agency-specific legis- 1The Tennessee Valley Authority, an independent, wholly owned corporation (not a department or agency) of the federal government, has the authority to issue bonds and notes and thus to incur debt and other financial obligations (GAO, 2003h). 76

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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 77 lation. This chapter first discusses issues related to full, up-front funding of fa- cilities, including procedures for budget scorekeeping, and issues related to al- ternative acquisition approaches. A number of alternative approaches, including public-private partnerships, capital acquisition funds, trust funds, sale-and-lease- back arrangements, outleasing, real property exchanges, and shared facilities, are then described and analyzed in greater detail. The chapter concludes with a summary and a recommendation for the federal government. ISSUES RELATED TO FULL UP-FRONT FUNDING OF FACILITIES The requirement for full, up-front funding of federal facilities is intended to (1) give adequate scrutiny to the initial costs and proposed benefits of an invest- ment; (2) avoid the risk of allowing projects to be started through incremental funding before they are adequately scrutinized; (3) give Congress the flexibility to respond to changing circumstances and priorities; (4) provide for transpar- ency in the budget by making sure the investment proposal is understandable to a range of constituencies, and (5) allow for the informed participation of those constituencies. Under current procedures, the budget authority associated with requests to design and construct a new facility, to fund the major renovation of an existing facility, or to purchase a facility outright are scored up front in the year requested even though the actual costs may be incurred over several years. Thus, the pro- jected costs, which may easily run more than $50 million per facility, are counted against the agency's overall budget request for a given fiscal year. The requirement for full, up-front funding, however, typically results in a spike in a department's or agency's budget request. If it is to stay within its spend- ing cap, a request for a significant facility investment will force cuts in other programs or activities within the department or agency, causing tension among the various in-house decision-making and operating groups. The focus on first costs of facilities investments is reinforced by the budget scorekeeping rules mandated as part of the Budget Enforcement Act of 1990. "Scorekeeping" is a process for estimating the budgetary effects of pending and enacted legislation and comparing those effects with limits set in the budget reso- lution or legislation. It has no analogue in the private sector. Scoring facilities costs up front is intended to provide the transparency needed for effective congressional and public oversight. The objectives are to (1) high- light the full costs of decisions when they are being made; (2) discourage the undertaking of investments that are not cost-effective; (3) protect congressional control over federal spending; (4) see how legislation fits into the overall plan for federal spending; and (5) determine if any ceilings in those plans have been breached (CBO, 2003). In actuality, up-front scoring of major facility proposals does not disclose the full costs of facility investment decisions; only the projected design and construc-

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78 INVESTMENTS IN FEDERAL FACILITIES tion costs of facilities are transparent. Facilities operation, maintenance, repair, and disposal costs are accounted for in different functional areas of the budget and are not identifiable for specific facilities. Scorekeeping procedures also create incentives for agencies to drive down the first costs of facilities investments--even if it may increase the life-cycle costs--in order to lessen their apparent impact on the current year budget. In rewarding such behavior, the scorekeeping procedures can indirectly increase the long-term operation and maintenance costs of facilities--that is, 90 to 95 percent of their life-cycle costs--and decrease the staffing efficiencies that might result from additional initial investment. Another consequence of the scorekeeping procedures for major proposals is that [a]gencies faced with the upfront costs of acquiring new capital assets--facili- ties and equipment--often have the option of continuing to produce goods and services using what they have even if it is old and obsolete. Although the ap- proach can increase the costs of producing output in the long run, it holds down budgetary costs in the short term. (CBO, 2003, p. 21) ISSUES RELATED TO THE USE OF ALTERNATIVE APPROACHES FOR ACQUIRING FACILITIES Recognizing some of the difficulties of providing adequate funding for re- quired facilities investments through the annual budget process, legislation has been enacted over the years on a case-by-case basis for individual departments and agencies to allow the use of alternative approaches for acquiring facilities. Legislation allowing the use of these approaches on a government-wide basis has not occurred for a variety of reasons. First, the use of alternative approaches for acquiring federal facilities creates a tension between government-wide oversight groups--Congress, the OMB, the CBO--and the line agencies. As noted by the GAO, From an agency's perspective, meeting capital needs through alternative fund- ing approaches (i.e., not full funding) can be very attractive because the agency can obtain the capital asset without first having to secure sufficient appropria- tions to cover the full cost of the asset. Depending on the financing approach, an agency may spread the asset cost over a number of years or may never even incur a monetary cost that is recognized in the budget. From a government wide perspective however . . . the costs associated with these financing approaches may be greater than with full up-front budget authority (GAO, 2003a, p. 1). The use of alternative approaches for facilities investments raises a second issue: Who retains the proceeds from the sale or leasing of properties, called "offsetting collections," for federal budget purposes? Under federal procedures, any proceeds realized by the sale of federal buildings or properties are returned to the general treasury unless special legislation has been enacted.

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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 79 For individual federal agencies, authorization to retain and use the proceeds for the sale or leasing of property could provide incentives to find more cost- effective ways to manage their facilities portfolios. On the other hand, from a government-wide perspective, retention of proceeds could spur some agencies to sell properties that are required for long-term mission support to generate funding for more short-term needs. A third issue relates to the public nature of facilities investments. Because federal facilities are located in all states and most communities, the perspectives of state and local governments and constituencies must be accounted for when alternative funding approaches are considered. Federal departments and agencies are not typically subject to local zoning and land use controls when siting facili- ties. What may appear to be cost-effective from a departmental or agency per- spective may significantly affect the surrounding community and may not appear to be cost-effective or desirable from the perspective of the locality and citizenry. In some cases, the short-term benefits of some alternative approaches may not outweigh the long-term, quantifiable costs. Still, in certain circumstances, such approaches can provide other, less tangible benefits to the public. These include the preservation and upkeep of historic properties, investment and occu- pancy of buildings in downtown and inner city neighborhoods, and more conve- nient access to services. A number of alternative approaches currently in use by federal agencies are described below. Each approach has advantages and disadvantages for particular types of organizations and types of facilities. None can guarantee effective man- agement absent agreed-upon performance measures, feedback procedures, and well-trained staff. It should be noted that state and local governments have also developed innovative funding approaches that could be adapted to the federal government. Identification and evaluation of such approaches were beyond the scope of this particular report, but such an analysis by the appropriate federal entities is warranted. Public-Private Partnerships In general, the concept underlying public-private partnerships is to utilize the untapped value of real property. One type of public-private partnership is a project for which the private sector provides cash and financing ability to renovate or redevelop real property contributed by the federal government. Once such a project is completed, both partners share in the net cash flow that is generated (PriceWaterhouse, 1993). A more general conception of a public-private partner- ship includes sharing of other responsibilities such as project planning and initia- tion, design, construction, and operations management. The extent of the alloca- tion between the public and private sectors in any of these areas depends on the specific agreement between the two sectors. Two examples of current programs follow.

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80 INVESTMENTS IN FEDERAL FACILITIES Department of Veterans Affairs Enhanced-Use Leasing Authority In 1991, Congress gave the Department of Veterans Affairs (VA) authority to lease underused property and facilities to private or other public entities for up to 35 years in return for cash or in-kind consideration, such as services, goods, equipment, or facilities. The basic intent of this authority was to increase the agency's flexibility to utilize underused assets that could not or would not other- wise be disposed of. In 1999 this authority was extended for 10 years, and the applicable lease term was extended to 75 years. As part of this extension, the VA was also allowed to lease properties for the sole purpose of generating revenues to provide better services for veterans, and the agency was also allowed to make capital contributions to joint ventures on agency properties (FFC, 2001a). The basic process for using the enhanced authority requires local VA offices to develop a business plan. The organization that initiates a successful proposal can retain the net proceeds from an enhanced-use lease agreement. Public hear- ings are held on any proposal, after which the proposal moves to the VA head- quarters for review. Projects valued at more than $4 million must be approved by the OMB and go through the Federal Register process before a Request for Pro- posal is issued. Once a proposal is negotiated, Congress is notified and the VA must wait 30 days before entering into a lease. As of 2003, the authority has been used in more than 27 agreements (GAO, 2003a). As an example, in Texas a private developer constructed a regional VA office on the VA's medical campus, and the agency in turn leased land on the campus to the private developer so that it could construct commercial buildings with space rented out to private businesses (FFC, 2001a). Enhanced-use leasing authority recently has been granted to the National Aeronautics and Space Ad- ministration and the Department of Defense, although the specific procedures and requirements of their authorities vary from those of the VA. National Park Service Concessions Program For many years the Department of the Interior's National Park Service has entered into long-term agreements with private entities to manage certain facili- ties on government-owned properties. In 1998, 630 concessionaires provided ser- vices grossing $765 million in revenues. Almost two-thirds of this total came from the 73 concessionaires that provided lodging. A change in the law that same year increased competition for those concessions and created an advisory board to the Secretary of the Interior to suggest ways for improving the process. Potential benefits of public-private partnerships include the conversion of properties that might currently drain public resources into useful and productive facilities that provide net cash inflow to federal agencies. Partnerships also can attract private funding sources for renovations and repairs. In addition, the intro- duction of private-sector, profit-motivated entities may increase the efficiency with which existing properties are managed (GAO, 2001d).

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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 81 The up-front and long-term costs of public-private partnerships vary. Con- siderations for the government include the contract agreements for occupancy by federal entities, restrictions on the use of the property, liability for the actions of any particular lessee, and the leasehold interests of the government in relation to any lender of the nongovernmental partner. Any federal public-private partner- ship is subject to budget scorekeeping rules. There could be cases where a finan- cial analysis of a transaction by an agency is at variance with the scorekeeping analysis as determined by the OMB or the CBO--that is, the agency analysis might show a net benefit, while the scorekeeping analysis might show a net cost.2 Although the study committee supports more widespread use of public-pri- vate partnerships, it offers some caveats. The public interest must be considered before entering any partnership. Even if a transaction is viable from the private perspective, there should be sufficient financial returns to the government to war- rant it. Public objectives related to accessibility, the environment, and historic preservation should not be compromised. Strict controls to avoid conflict of inter- est and other forms of potential or actual corruption are required. All of these factors should be weighed in a partnership feasibility analysis because they may argue against a partnership that looks attractive on more narrow financial grounds. Program design must also take these factors into account. The VA program, for example, has many checkpoints, including public hearings at the local level, that must be passed through before an enhanced-use lease agreement becomes final. No matter how well designed an agreement may be, poor implementation and execution can undo the benefits or, worse, lead to losses. The Park Service's concessions program, for example, has in the past suffered from the fact that agency staff overseeing the contracts are often inadequately trained and have lacked basic business analysis and management skills (GAO, 2000a). Lack of performance-based contracts in that agency is another problem, as is a muddling of lines of authority and accountability from project-level staff to higher-level agency executives. For example, the chief of concessions has no direct authority over staff in the individual park units who manage individual concessions. Al- though these are particular examples relating to the Park Service, they illustrate the kinds of issues that must generally be resolved satisfactorily in any broaden- ing of the use of public-private partnerships in the federal government. Capital Acquisition Funds Proposed in the Report of the President's Commission to Study Capital Bud- geting (1999) and in the President's Budget for FY 2004, capital acquisition funds (CAFs) are accounts that would receive appropriations for large capital projects, 2See the CBO report Budgetary Treatment of Leases and Public/Private Ventures (2003) for a full discussion of these points.

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82 INVESTMENTS IN FEDERAL FACILITIES appropriations that are now made to individual operating units within federal agencies. The CAFs would use the authority represented by those appropriations to borrow against the general fund and would acquire the assets on behalf of the operating units within the agencies, charging those units rent on the facilities equal to the cost of debt service on the relevant project. Thus, if an agency wanted a new capital project, Congress could allow the agency to borrow money through its CAF to purchase it. Agency programs would then repay the fund, based on their use each year. Although proposed as agency-wide, a CAF could be applied at a higher level across agencies; for example, appropriations committees could appropriate to a CAF established for all agencies under the purview of their particular committee. A CAF would not replace the General Services Administration (GSA) revolving fund (the Federal Building Fund3 ). Instead, agencies would use their CAF only if their office space acquisition could be done more effectively and efficiently than through GSA. CAFs have not yet been used in the federal government, and how they would operate is still unclear. It would seem that oversight and management of such funds should reside in a central budget organization such as OMB. Under the proposal in the President's Budget for FY 2004, departments would no longer receive separate appropriations for support services and capital assets but would create a fund at each department that program managers would use to buy facili- ties-related requirements. Managers could then buy support services from the government or the private sector with the funds. Although the proposal is broader than a CAF alone because it covers noncapital services in addition to capital programs, CAFs are explicitly a part of the proposal. A CAF has several perceived advantages over current agency methods of capital funding. First, it would require capital asset coordination and planning across agency operating units. Second, a CAF could smooth out funding and expenditure spikes that occur when individual units have especially large peri- odic capital requests. Finally, because operating units would be charged annual "rent" (representing debt service and other asset overhead), a CAF could lead to more accurate allocation of asset costs to affected parties within agencies, giving asset managers incentives to make more efficient decisions. The existence of a CAF by itself would not ensure good implementation and management. As proposed, a CAF is an additional layer of administration that could complicate program management rather than streamline it. Issues to be worked out include the relationship between a CAF and the GSA Federal Build- ing Fund, the managerial relationship between a CAF and individual operating units within agencies, and the status and treatment of CAF activities within the current overall operating budget. 3The Federal Building Fund was established under the Federal Property and Administrative Ser- vices Act of 1949.

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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 83 The measure could also present challenges for agencies that own extensive property. Whereas currently a congressional appropriation for a capital project is simply added to the budget of the fiscal year in which it is appropriated, under a CAF, as outlined in the new proposal, an agency's capital acquisition fund would borrow the needed money, and that money would be gradually paid off by the agency programs that used it. Assigning costs in this way would make projects appear more expensive. That is an intended consequence meant to ensure the overhead costs of a capital project are more explicit and borne by the managers and users of that project. Indeed, according to the CBO, such an approach works on the premise that the federal budget should recognize capital costs up front when the decision to invest is made while spreading those costs out over time in program managers' budgets (CBO, 2003). Despite these caveats and issues, the committee believes that CAFs offer an opportunity to fulfill facilities-related requirements more cost effectively and ef- ficiently. The committee supports implementation of pilot programs using CAFs to determine if their promise can be realized in the federal operating environment. Dedicated Funding, Trust Funds, and Earmarked Receipts Dedicated funding refers to any mechanism whereby resources are commit- ted to a specific purpose in advance of any actual spending or activity and which in some way guarantees that those resources will actually be spent according to that initial commitment. A variety of mechanisms are used to ensure dedicated funding. A simple one is a direct mandate, perhaps contained in the charter of an organization that contractually or legally forces an entity to spend certain monies in a specified way. More widely used are the devices of trust funds and earmarked receipts. In the private sector a person creates a trust fund using his or her assets to benefit specific individuals. The creator of the trust names a trustee who has fiduciary responsibility for managing the designated assets in accord with the stipulations of the trust (GAO, 2001a). In the federal government, Congress creates a federal trust fund in law and designates a funding source to benefit specified groups or individuals or, in some cases, itself. The Treasury Department and the OMB de- termine the budgetary designation as a trust fund when a law both earmarks re- ceipts and identifies the account as a trust fund account (GAO, 2001a). Earmarked receipts are collections that are stipulated by law as being dedi- cated to a specific fund or purpose. Earmarked funds do not always go to trust funds. They also are deposited into entities such as public enterprise funds, which often have the same purposes as trust funds but are not designated as such. Two examples of earmarked funds are the Nuclear Waste Fund and the Postal Service Fund. Examples of federal trust funds include Social Security, Medicare, and the Highway Trust Fund. There are two types of federal trust funds: (1) revolving funds, which support

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84 INVESTMENTS IN FEDERAL FACILITIES a cycle of businesslike operations in which earmarked receipts are derived mainly from revenues generated by those businesslike activities, making the relationship between the sources and uses of funds relatively clear, and (2) nonrevolving funds, in which the earmarked receipts are not generated by businesslike activities but come from periodic revenues such as annual appropriations and a variety of other sources, from cigarette and payroll taxes to customs duties (GAO, 2001a). Designation as a trust fund does not impose a greater commitment on the part of the government to carry out that activity than it has to carry out other activities. Although special constituencies may create pressure to spend earmarked revenues, the federal government does not have fiduciary responsibility to the trust benefi- ciaries in establishing and operating a trust fund, revolving or otherwise. While the law establishing a given trust fund does govern the collection and disburse- ment of revenues going into that fund, Congress can change the law to change the terms of how much money is collected, how much is disbursed, to whom it is disbursed, or the purposes for which the funds are used. In addition, in most cases the federal government has custody and control of the funds and the earnings on those funds. One example of a trust fund used for facilities acquisition and investment is the U.S. Mint Public Enterprise Fund. Established in 1996, this fund allows all receipts from the Mint's operations to be deposited into an account from which all operations are then funded. Such operations include "the acquisition or re- placement of equipment, the renovation or modernization of facilities, and the construction or acquisition of new buildings" (P.L. 104-52). The fund is unique in that the Mint's operations are exempted from the Federal Acquisition Regula- tions, which cover government procurements and public contracts. The exemp- tion allows the Mint to operate more like a private-sector entity, thus gaining the flexibility and efficiency that purportedly accrue to such entities. Under this ex- emption, the Mint itself determined that it also had statutory lease authority and thus did not fall under the leasing rules set forth by the General Services Admin- istration (OIG, 2002). Trust funds, earmarked funds, and charter mandates have the advantage of being relatively simple in concept and focused on a single aim: provision of dedi- cated and sufficient funds for an intended purpose. In that sense they have per- formed well. The public readily understands the concept, and when one of these mechanisms exists, it tends to create momentum toward keeping funding at least at a certain minimum level. Similar results can accrue to public enterprise funds and other special funds in the federal budget receiving earmarked funds. However, the existence of a trust fund or other mandate does not guarantee that funds or facilities will be well managed. An investigation of the U.S. Mint found that the agency was leasing too much space for its needs, was not following prudent business practices in its leasing arrangements, and in general had weak management controls. Thus, having a dedicated trust fund, which in this case

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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 85 gave extra operational flexibility, is not a replacement for good management (OIG, 2002). There are also issues surrounding the interpretation of trust fund balance information. A fund may be running a surplus, something that may be interpreted as indicating a healthy program. Yet the program may not be financially or mana- gerially sustainable in actual fact if the trust fund flows are not designed with long-range needs in mind and if program funds are not soundly administered. Similarly, a deficit does not necessarily indicate a troubled program. Even if it does, the response may be to simply add more funds without addressing funda- mental problems. Trust funds, earmarked funds, and special funds are widely used in the fed- eral government. In FY 1999 half of federal receipts went into trust funds, and 130 of them existed at that time--120 nonrevolving and 10 revolving. Issues related to their continued use include whether they should be renamed to avoid confusion on the part of the public with private sector trust funds, whether there should or could be some tightening of terms to make them more like private trust funds, whether information provided on them should be revamped to reveal more about program operations than a mere fund balance, the strength of the link be- tween the source of the funds and their use, and how the use of funds is linked to underlying program management regimes--that is, the transparency of the fund- ing (GAO, 2001a). Sale-and-Leaseback Arrangements Sale-and-leaseback arrangements are routinely used in the private sector. The owner of a building sells it to another company or entity and then leases it back for a specified time period. At the end of that time, the original owner buys the building back. This type of arrangement allows the original owner to raise capital and still retain use of the building, in essence temporarily borrowing funds that can then be used for other purposes (Groppelli and Nikbakht, 2000). A sale-and-leaseback arrangement offers few, if any, incentives for a federal agency unless it can retain the sale proceeds and use them to achieve some benefit or purpose that is not being funded through its annual budget. In at least one instance, the GSA was granted authority to retain the proceeds if it entered into a sale-and-leaseback arrangement. In this case, the GSA had planned to excess a Class C office building in West Virginia after the federal tenants in the building moved to a new courthouse. In the interim, the Social Security Administration contacted the GSA about moving into the Class C space in order to better serve the public by consolidating its functions with those of the West Virginia Disabil- ity Determination Agency. Legislation was enacted allowing GSA to sell the building and retain the proceeds for the Federal Buildings Fund. The new owner committed $11 million to upgrade the building to Class A office space; in turn,

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86 INVESTMENTS IN FEDERAL FACILITIES GSA committed to leasing a portion of the building back for 20 years, thus assur- ing the owner of a stream of revenue to pay back its investment. Both the GSA and the Social Security Administration claimed immediate benefits from this ar- rangement. However, the GAO expressed concern whether this arrangement would be cost-effective in the long term (GAO, 2003a). Outleasing Under an outleasing arrangement, a federal agency leases all or a portion of a facility to a private-sector or not-for-profit organization. The lessee assumes the maintenance and repair costs of that space and in some cases invests in renova- tions. In essence, the federal agency becomes a landlord to nonfederal entities. Outleasing arrangements have been used by the GSA, the Coast Guard, and possibly other agencies, for some underutilized and historic properties (GAO, 2003a). The Coast Guard, for instance, has outleased and divested 28 historic lighthouses in the State of Maine to organizations that will ensure the lighthouses are repaired and maintained. Under this arrangement, the Coast Guard receives some income from the lighthouses that can be used to offset expenses at other historic properties and avoids annual maintenance and repair costs of $3 to $5 million. It thus receives a benefit from properties that are no longer integral to its mission. The public benefits in that the properties are preserved for posterity and in a better state of repair. The GSA has used outleasing to gain similar types of benefits from other historic properties, such as customhouses (GAO, 2003a). Clearly such arrangements raise questions about the relative costs and ben- efits of selling excess historic and underutilized facilities outright and maintain- ing some control and stewardship over heritage properties. They also raise issues related to local land use control and interests. The costs and benefits, financial and intangible, will vary case by case but offer the potential for improved stew- ardship of federal properties. Real Property Exchanges Sometimes land and buildings owned by a federal agency have a greater value to another entity than to the agency itself. On occasion, the GSA, the Air Force, other military services, and possibly other agencies, have been able to exchange real property with a private developer or a state or local government in return for a different piece of property or facilities. Such exchanges are different from public-private partnerships in that they typically do not involve an exchange of funds or competitive bidding; there are a limited number of potential special- purpose exchanges; congressional oversight is more limited; and such exchanges are not reflected in the federal budget (GAO, 2003a). In one instance, the Army Reserves conveyed approximately 11 acres of land used for training activities to a private-sector developer that required the land to

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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 87 build a road for access to a new development. In exchange, the developer con- structed a new fire station for the Army Reserves, to replace an older, less modern one (GAO, 2003a). In another example, the GSA conveyed two small parking areas and a par- tially vacant, deteriorating historic property to the city of Albuquerque, New Mexico, in exchange for a large parking garage proximate to other federal build- ings (GAO, 2003a). In a third instance, legislation was enacted that authorized the Air Force to convey land it owned on the Los Angeles Air Force Base to a private developer in exchange for the design and construction of a new 560,000-square-foot space and missile systems center on the base. The new center replaced two outdated build- ings that were vulnerable to earthquakes. In these cases and others, the federal agencies involved were able to ex- change real property for other land or buildings that provided greater benefit to the agency without having to use funds from their annual budget appropriation. From a government-wide perspective, real property exchanges raise issues about the property valuation procedures used, the fair market value of the property if a competitive bidding process is not used, the sufficiency of congressional over- sight, and how to reflect such exchanges in the federal budget. Shared Facilities "Shared facilities" refers to the practice of having independent operating en- tities with large portfolios of facilities share the use and/or management of those facilities in some way. The sharing could apply to information about the facili- ties, coordination of planning and management, joint oversight, or actual shared use of facilities. As an example, the GSA oversees and coordinates the Govern- ment-wide Real Property Information Sharing (GRPIS) program, which allows different federal agencies to share information about facilities under their indi- vidual control. Purely voluntary in its participation, GRPIS has so far resulted in the formation of interagency real property councils in several regions of the coun- try; development of an automated inventory of real property; a Web site for shar- ing information about best practices, ongoing issues, and follow-on initiatives; and joint analyses of common issues in the regions and possible coordinated solu- tions to those problems (GSA, 1998). Sharing facilities is a way to extract more utility from a portfolio of facilities. By treating a facility as commonly held rather than individually held, managers can avoid duplication of effort in both current operations and future investments; fully utilize assets that, if used only by the owner of the facility, might be underused; and share costs, making the facility more affordable and manageable. Disadvantages of facility sharing vary according to what is being shared. The GRPIS program is a voluntary information-sharing program. As the GSA itself notes, while a voluntary program increases the level of trust and perhaps enthusi-

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88 INVESTMENTS IN FEDERAL FACILITIES asm for participation, it also potentially makes for less effective joint action. If more than information is shared and if participation is mandatory, other problems might be introduced. Joint use and management of facilities, for example, can be a costly activity, in terms of both staff time and direct outlays. And depending on how disparate the operating entities are and how diverse the facilities portfolio being managed is, sharing of facilities can make management slower, less re- sponsive, and less effective. SUMMARY AND A RECOMMENDATION Based on a consolidation of research, interviews, briefings, and the commit- tee members' collective and individual experience, the committee found that a range of alternative approaches to acquiring federal facilities are used by indi- vidual agencies under special legislation specific to the agency. Capital acquisi- tion funds, not yet implemented in any federal agency, offer the potential for improved capital asset coordination and planning across operating units, more accurate cost allocation of assets, and incentives for asset managers to make more cost-effective decisions. However, each of these approaches has advantages and disadvantages. Suc- cessful implementation of alternative approaches requires effective oversight and management by federal employees with the appropriate skills and training. When implementing an alternative approach, the committee believes that all the potential costs and benefits to federal departments and agencies and the pub- lic should be taken into account. The impacts on state and local communities should be accounted for and attempts should be made to balance national, depart- mental, and agency objectives with those of other public stakeholders. Taking these caveats into consideration, the committee believes that if alter- native approaches for acquiring facilities were carefully applied, their use on a government-wide basis could provide federal departments and agencies with more cost-effective ways to acquire facilities, reinvest in the existing stock, and pro- vide a range of benefits to the public. Pilot programs to test the effectiveness of various approaches and to evaluate their outcomes from national, state, and local perspectives should be implemented as a first step. If changes to the budget scorekeeping rules are required to expand the range of alternative approaches, such changes should be tested through the pilot programs. Recommendation: In order to leverage available funding, Congress and the administration should encourage and allow more widespread use of alternative approaches for acquiring facilities, such as public-private partnerships and capital acquisition funds.