Appendix C
Executive Summary from Stewardship of Federal Facilities

Since its establishment in 1789, the federal government has constructed and acquired buildings, other facilities, and their associated infrastructures to support the conduct of public policy, defend the national interest, and provide services to the American public. Today, the federal facilities inventory comprises more than 500,000 buildings and structures, as well as the power plants, utility distribution systems, roads, and other infrastructure required to support them. Federal facilities are located in all 50 states, U.S. territories, and more than 160 foreign countries. They span decades, sometimes centuries, of building design and construction technologies, support a myriad of government functions, and represent the investment of more than 300 billion tax dollars.1

Federal facilities embody significant investments and resources and therefore constitute a portfolio of public assets. These buildings and structures project an image of American government at home and abroad, contribute to the architectural and socioeconomic fabric of their communities, and support the organizational and individual performance of federal employees conducting the business of government. These assets must be well maintained to operate adequately and cost effectively, to protect their functionality and quality, and to provide a safe, healthy, productive environment for the American public, elected officials, federal employees, and foreign visitors who use them every day.

Despite the historic, architectural, cultural, and functional importance of, and the economic investment in, federal facilities, studies by the General Accounting Office (GAO) and other federal government agencies indicate that the physical

1

As of fiscal year 1996, federal agencies reported $215.5 billion of investment in structures and facilities and almost $82 billion of construction in progress (GAO, 1998).



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Appendix C Executive Summary from Stewardship of Federal Facilities Since its establishment in 1789, the federal government has constructed and acquired buildings, other facilities, and their associated infrastructures to support the conduct of public policy, defend the national interest, and provide services to the American public. Today, the federal facilities inventory comprises more than 500,000 buildings and structures, as well as the power plants, utility distribution systems, roads, and other infrastructure required to support them. Federal facilities are located in all 50 states, U.S. territories, and more than 160 foreign countries. They span decades, sometimes centuries, of building design and construction technologies, support a myriad of government functions, and represent the invest- ment of more than 300 billion tax dollars.1 Federal facilities embody significant investments and resources and therefore constitute a portfolio of public assets. These buildings and structures project an image of American government at home and abroad, contribute to the architectural and socioeconomic fabric of their communities, and support the organizational and individual performance of federal employees conducting the business of government. These assets must be well maintained to operate adequately and cost effectively, to protect their functionality and quality, and to provide a safe, healthy, productive environment for the American public, elected officials, federal employees, and foreign visitors who use them every day. Despite the historic, architectural, cultural, and functional importance of, and the economic investment in, federal facilities, studies by the General Accounting Office (GAO) and other federal government agencies indicate that the physical 1As of fiscal year 1996, federal agencies reported $215.5 billion of investment in structures and facilities and almost $82 billion of construction in progress (GAO, 1998). 

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0 CORE COMPETENCIES FOR FEDERAL FACILITIES ASSET MANAGEMENT condition of this portfolio of public assets is deteriorating. Many necessary repairs were not made when they would have been most cost effective and have become part of a backlog of deferred maintenance. In addition, a large proportion of federal facilities are more than 40 years old. As wear and tear on buildings and their systems increases, the need for maintenance and repair to sustain their per- formance and functionality also increases. Federal agency program managers, the GAO, and research organizations have all reported that the funding allocated for the repair and maintenance of federal facilities is insufficient. Although there is no single, agreed upon guideline to determine how much money is, in fact, necessary to maintain public buildings, a 1990 report of the National Research Council, Committing to the Cost of Ownership: The Mainte- nance and Repair of Public Buildings, did recommend that “an appropriate budget allocation for routine M&R [maintenance and repair] for a substantial inventory of facilities will typically be in the range of 2 to 4 percent of the aggregate cur- rent replacement value of those facilities” (NRC, 1990). This guideline has been widely quoted in the facilities management literature. During the course of the present study, federal agency representatives indicated that the funding they receive for maintenance and repair of their agencies’ facilities is less than 2 percent of the aggregate current replacement value of their facilities inventories. In an environment of inadequate and declining resources, federal facilities program managers face a number of challenges: • Extending the useful life of aging facilities. • Altering or retrofitting facilities to consolidate space or accommodate new functions and technologies. • Meeting evolving facility-related standards for safety, environmental quality, and accessibility. • Maintaining or disposing of excess facilities created through military base closures and realignments, downsizing, or changing demographics. • Finding innovative ways and technologies to maximize limited resources. To help federal agencies meet these challenges and optimize available resources, the sponsoring agencies of the Federal Facilities Council requested that the National Research Council review current federal practices for plan- ning, budgeting, and implementing facility maintenance and repair programs and (1) develop a methodology and rationale federal facilities program managers can use for the systematic formulation and justification of facility maintenance and repair budgets; (2) investigate the role of technology in performing automated condition assessments; and (3) identify staff capabilities necessary to perform condition assessments and develop maintenance and repair budgets. The study was conducted under the auspices of the Board on Infrastructure and the Constructed Environment by a committee of recognized experts in bud-

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 APPENDIX C geting, facilities operations and maintenance, decision science, engineering eco- nomics, and building and facilities technology. Many of the committee members have professional experience with the management of large facilities portfolios. In addition, they were assisted by representatives of federal agencies, private sector organizations, and individuals who provided information on current budgeting, financial, maintenance, and building engineering practices in the federal govern- ment and the private sector. Throughout this study, the committee was hampered by a lack of published data related to federal facilities inventories, programs, and practices. Accurate counts of basic items, such as the total number of federal facilities, the age of facilities, and expenditures for maintenance and repair, were not available. (This issue is addressed in the study’s findings and recommendations.) The committee also found that current maintenance and repair budgeting procedures, definitions, and accounting have advanced little since 1990. For information on the physical condition of federal facilities, maintenance and repair budgeting, condition assess- ment practices, deferred maintenance, and related topics, the committee relied heavily on reports of the GAO, briefings by federal agency program managers, and personal experience. The committee began task 1 with the idea that it could develop a methodology for the systematic formulation of maintenance and repair budgets. However, the current state of practice, the general lack of data, and the lack of research results, in particular, precluded the development of a methodology per se. Instead, the committee identified methods, principles, and strategies that, if implemented, can be used to develop a methodology for the systematic formulation of maintenance and repair budgets in the future. In approaching task 2, the committee reviewed federal agency condition assessment practices and the role of technology in devel- oping automated condition assessments. The committee found that existing sensor and microprocessor technologies have the potential to monitor and manage a range of building conditions and environmental parameters, but, for economic and other reasons, they have not been widely deployed. The committee also reviewed staff capabilities necessary to the performance of condition assessments and the devel- opment of maintenance and repair budgets (task 3). The committee found that both require adequate training for staff to foster effective decision making in facilities management, condition assessments, and maintenance and repair budgeting. Federal government standards for internal oversight and control require that agencies safeguard all of the assets entrusted to them. This report seeks to foster accountability for the stewardship (i.e., responsible care) of federal facilities at all levels of government. The committee’s findings and recommendations are presented below.

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 CORE COMPETENCIES FOR FEDERAL FACILITIES ASSET MANAGEMENT FINDINgS Finding 1. Based on the information available to the committee, the physical condition of the federal facilities portfolio continues to deterio- rate, and many federal buildings require major repairs to bring them up to acceptable quality, health, and safety standards. Finding 2. The underfunding of facilities maintenance and repair pro- grams is a persistent, long-standing problem. Federal operating and oversight agencies report that agencies have excess, aging facilities and insufficient funds to maintain, repair, or update them. Information pro- vided to the committee indicated that agencies are receiving less than 2 percent of the aggregate current replacement value of their facilities inventories for maintenance and repair. Finding 3. Federal government processes and practices are generally not structured to provide for effective accountability for the stewardship (i.e., responsible care) of federal facilities. Finding 4. Buildings and facilities are durable assets that contribute to the effective provision of government services and the fulfillment of agency missions. However, the relationship of facilities to agency mis- sions has not been recognized adequately in federal strategic planning and budgeting processes. Finding 5. Maintenance and repair expenditures generally have less visible or less measurable benefits than other operating programs. Facili- ties program managers have found it difficult to make compelling argu- ments to justify these expenditures to public officials, senior agency managers, and budgeting staff. Finding 6. Budgetary pressures on federal agency managers encourage them to divert potential maintenance and repair funds to support current operations, to meet new legislative requirements, or to pay for operating new facilities coming on line. Finding 7. It is difficult, if not impossible, to determine how much money the federal government as a whole appropriates and spends for the maintenance and repair of federal facilities because definitions and cal- culations of facilities-related budget items vary, as do methodologies for developing budgets and accounting and reporting systems for tracking maintenance and repair expenditures.

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 APPENDIX C Finding 8. There is evidence that some agencies own and are responsible for more facilities than they need to support their missions or than they can maintain with current or projected budgets. Finding 9. Federal facilities program managers are being encouraged to be more business-like and innovative, but current management, budget- ing, and financial processes have disincentives and institutional barriers to cost-effective facilities management and maintenance practices. Finding 10. Performance measures to determine the effectiveness of maintenance and repair expenditures have not been developed within the federal government. Thus, it is difficult to identify best practices for facilities maintenance and repair programs across or within federal agencies. Finding 11. Based on the information available to the committee, federal condition assessment programs are labor intensive, time consuming, and expensive. Agencies have had limited success in making effective use of the data they gather for timely budget development or for the ongoing management of facilities. Finding 12. Organizational downsizing has forced facilities program managers to look increasingly to technology solutions to provide facilities-related data for decision making and for performing condition assessments. Finding 13. Existing sensor and microprocessor technologies have the potential to monitor and manage a range of building conditions and environmental parameters, but, for economic and other reasons, they have not been widely deployed. Finding 14. Training for staff is a key component of effective decision making, condition assessments, and the development of maintenance and repair budgets. Finding 15. Only a limited amount of research has been done on the deterioration/failure rates of building components or the nonquantitative implications of building maintenance (or lack thereof). This research is necessary to identify effective facilities management strategies for achiev- ing cost savings, identifying cost avoidances, and providing safe, healthy, productive work environments.

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 CORE COMPETENCIES FOR FEDERAL FACILITIES ASSET MANAGEMENT Finding 16. greater accountability for the stewardship of facilities is necessary at all levels of the federal government. Accountability includes being held responsible for the condition of facilities and for the allocation, tracking, and effective use of maintenance and repair funds. The committee recommends that the government take the following actions (which are not in any particular order of priority). RECOMMENDATIONS Recommendation 1. The federal government should plan strategically for the maintenance and repair of its facilities in order to optimize available resources, maintain the functionality and quality of federal facilities, and protect the public’s investment. A recommended strategic framework of methods, practices, and strategies for the proactive management and maintenance of the nation’s public assets is summarized on Figure ES-1 (Findings 1 and 2). Recommendation 2. The government should foster accountability for the stewardship of federal facilities at all levels. Facilities program managers at the agency level should identify and justify the resources necessary to maintain facilities effectively and should be held accountable for the use of these resources (Findings 1, 2, 3, and 16). Recommendation 3. At the executive level, an advisory group of senior level federal managers, other public sector managers, and representa- tives of the nonprofit and private sectors should be established to develop policies and strategies to foster accountability for the stewardship of facilities and to allocate resources strategically for their maintenance and repair (Findings 1, 2, 3, and 16). Recommendation 4. Facility investment and management should be directly linked to agency mission. Every agency’s strategic plan should include a facilities component that links facilities to agency mission and establishes a basis and rationale for maintenance and repair budget requests (Finding 4). Recommendation 5. The government should adopt more standardized budgeting and cost accounting techniques and processes to facilitate tracking of maintenance and repair funding requests, allocations, and expenditures and reflect the total costs of facilities ownership. The com- mittee developed an illustrative template as shown in Figure ES-2 (Find- ings 3, 5, 6, 7, and 16).

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 APPENDIX C GOAL Protect and Enhance the Functionality and Quality of the Federal Facilities Portfolio OBJECTIVE: OBJECTIVE: FOSTER ACCOUNTABILITY STRATEGICALLY ALLOCATE FOR STEWARDSHIP RESOURCES FOR MAINTENANCE AND REPAIR Strategy: Create a climate for Strategy: Incorporate a facilities stewardship in agencies component in every agency's strategic plan Strategy: Empower facilities program managers by providing Strategy: Restructure and refocus incentives and removing condition assessment programs institutional barriers Strategy: Adopt more standardized Strategy: Develop and integrate budgeting and cost accounting technologies for performing techniques and processes automated condition assessments Strategy: Provide appropriate Strategy: Manage the size and continuous training for staff of the federal facilities portfolio Strategy: Establish government- Strategy: Support research on wide performance measures for deterioration/failure rates of maintenance and repair programs building components and effects of maintenance on building users Strategy: Establish a senior executive level advisory group on federal facilities FIgURE ES-1 Strategic framework for the maintenance and repair of federal facilities. (Figure ES-1, Figure 4-1, Figure 5-1)

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 CORE COMPETENCIES FOR FEDERAL FACILITIES ASSET MANAGEMENT Included Facilities Management- in 2%-4% Funding Category Related Activities Benchmark and Comments A Routine Maintenance, Repairs, Yes Annual operating budget and Replacements • recurring, annual maintenance and repairs including maintenance of structures and utility systems (including repairs under a given $ limit, e.g., $150,000 to $500,000 exclusive of furniture and office equipment) • roofing, chiller/boiler replacement, electrical/lighting, etc. • preventive maintenance • preservation/cyclical maintenance • deferred maintenance backlog • service calls B Facilities-Related Operations No Annual operating budget • custodial work (i.e., services and cleaning) • utilities (electric, gas, etc./plant operations) • snow removal • waste collection and removal • pest control • security services • grounds care • parking • fire protection services C Alterations and Capital Improvements No Various funding sources, • major alterations to subsystems, including no year, project- (e.g., enclosure, interior, mechanical, based allocations such as electrical expansion) that change the revolving funds, carryover capacity or extend the service life of of unobligated funds, fund- a facility ing resulting from cost • minor alterations (individual project savings or cost avoidance limit to be determined by agency strategies $50,000 to $1 million) D Legislatively Mandated Activities No Various sources of funding • improvements for accessibility, hazardous materials removal, etc. E New Construction and Total No Project-based allocations Renovation Activities separate from operations and maintenance budget. Should include a life-cycle cost analysis prior to funding F Demolition Activities No Various sources of funding FIgURE ES-2 Illustrative template to reflect the total costs of facilities ownership.

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 APPENDIX C Recommendation 6. government-wide performance measures should be established to evaluate the effectiveness of facilities maintenance and repair programs and expenditures (Finding 10). Recommendation 7. Facilities program managers should be empowered to operate in a more businesslike manner by removing institutional barriers and providing incentives for improving cost-effective use of maintenance and repair funds. The carryover of unobligated funds and the establishment of revolving funds for nonrecurring maintenance needs should be allowed if they are justified (Findings 3 and 9). Recommendation 8. Long-term requirements for maintenance and repair expenditures should be managed by reducing the size of the federal facilities portfolio. New construction should be limited, existing buildings should be adapted to new uses, and the ownership of unneeded buildings should be transferred to other public or private organizations. Facilities that are functionally obsolete, are not needed to support an agency’s mis- sion, are not historically significant, and are not suitable for transfer or adaptive reuse should be demolished whenever it is cost effective to do so (Findings 2, 8, and 16). Recommendation 9. Condition assessment programs should be restruc- tured to focus first on facilities that are critical to an agency’s mission; on life, health, and safety issues; and on building systems that are critical to a facility’s performance. This will optimize available resources, pro- vide timely and accurate data for formulating maintenance and repair budgets, and provide critical information for the ongoing management of facilities (Findings 4 and 11). Recommendation 10. The government should provide appropriate and continuous training for staff that perform condition assessments and develop and review maintenance and repair budgets to foster informed decision making on issues related to the stewardship of federal facilities and the total costs of facilities ownership (Findings 14 and 16). Recommendation 11. The government and private industry should work together to develop and integrate technologies for performing automated facility condition assessments and to eliminate barriers to their deploy- ment (Findings 11, 12, and 13). Recommendation 12. The government should support research on the deterioration/failure rates of building components and the nonquantita- tive effects of building maintenance (or lack thereof) in order to develop

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 CORE COMPETENCIES FOR FEDERAL FACILITIES ASSET MANAGEMENT quantitative data that can be used for planning and implementing cost- effective maintenance and repair programs and strategies and for bet- ter understanding the programmatic effects of maintenance on mission delivery and on building users’ health, safety, and productivity (Findings 12 and 15). REFERENCES GAO (General Accounting Office). 1998. Deferred Maintenance Reporting: Challenges to Imple- mentation. Report to the Chairman, Committee on Appropriations, U.S. Senate. AIMD-98-42. Washington, D.C.: Government Printing Office. NRC (National Research Council). 1990. Committing to the Cost of Ownership: Maintenance and Repair of Public Buildings. Building Research Board, National Research Council. Washington, D.C.: National Academy Press.