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Executive Summary 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 facili- ties are located in all 50 states, U.S. territories, and more than 160 foreign coun- tries. They span decades, sometimes centuries, of building design and construc- tion technologies, support a myriad of government functions, and represent the investment of more than 300 billion tax dollars.) Federal facilities embody significant investments and resources and there- fore constitute a portfolio of public assets. These buildings and structures project an image of American government at home and abroad, contribute to the archi- tectural and socioeconomic fabric of their communities, and support the organi- zational and individual performance of federal employees conducting the busi- ness 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 iAs 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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2 STEWARDSHIP OF FEDERAL FACILITIES condition of this portfolio of public assets is deteriorating. Many necessary re- pairs 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 bud- get allocation for routine M&R [maintenance and repair] for a substantial inven- tory of facilities will typically be in the range of 2 to 4 percent of the aggregate current 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 per- cent 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 qual- ity, 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 re- sources, the sponsoring agencies of the Federal Facilities Council requested that the National Research Council review current federal practices for planning, bud- geting, and implementing facility maintenance and repair programs and (1) de- velop 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- geting, facilities operations and maintenance, decision science, engineering eco- nomics, and building and facilities technology. Many of the committee members

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EXECUTIVE SUMMARY 3 have professional experience with the management of large facilities portfolios. In addition to their own expertise, 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 government 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, expenditures for maintenance and repair, were not available. (This is- sue 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 as- sessment practices, deferred maintenance, and related topics, the committee re- lied heavily on reports of the GAO, briefings by federal agency program manag- ers, and personal experience. The committee began task 1 with the idea that it could develop a methodol- ogy 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. In- stead, the committee identified methods, principles, and strategies that, if imple- mented, can be used to develop a methodology for the systematic formulation of maintenance and repair budgets in the future. In approaching task 2, the commit- tee reviewed federal agency condition assessment practices and the role of tech- nology in developing automated condition assessments. The committee found that existing sensor and microprocessor technologies have the potential to moni- tor 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 condi- tion assessments and the development of maintenance and repair budgets (task 3~. The committee found that both require adequate training for staff to foster effec- tive decision making in facilities management, condition assessments, and main- tenance 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 pre- sented below. FINDINGS Finding 1. Based on the information available to the committee, the physical condition of the federal facilities portfolio continues to deteriorate, and many

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4 STEWARDSHIP OF FEDERAL FACILITIES 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 programs is a persistent, long-standing problem. Federal operating and oversight agencies re- port that agencies have excess, aging facilities and insufficient funds to maintain, repair, or update them. Information provided to the committee indicated that agen- cies are receiving less than 2% of the aggregate current replacement value of their facilities inventories for maintenance and repair. Finding 3. Federal government processes and practices are generally not struc- tured 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 effec- tive provision of government services and the fulfillment of agency missions. However, the relationship of facilities to agency missions has not been recog- nized 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. Facilities program man- agers have found it difficult to make compelling arguments to justify these ex- penditures 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 calculations of facilities-related budget items, methodologies for developing budgets, and accounting and report- ing systems for tracking maintenance and repair expenditures, vary. 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 businesslike and innovative, but current management, budgeting, and financial processes have disincentives and institutional barriers to cost-effective facilities management and maintenance practices.

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EXECUTIVE SUMMARY s 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 condi- tion 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 param- eters, 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 deteriora- tion/failure rates of building components or the nonquantitative implications of building maintenance (or lack thereof). This research is necessary to identify ef- fective facilities management strategies for achieving cost savings, identifying cost avoidances, and providing safe, healthy, productive work environments. Finding 16. Greater accountability for the stewardship of facilities is necessary at all levels of the federal government. Accountability includes being held respon- sible 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 strat- egies for the proactive management and maintenance of the nation's public assets is summarized on Figure ES-1 (Findings 1 and 2~.

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6 STEWARDSHIP OF FEDERAL FACILITIES GOAL Protect and Enhance the Functionality and Quality of the Federal Facilities Portfolio FIGURE ES- 1 Strategic framework for the maintenance and repair of federal facilities.

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EXECUTIVE SUMMARY 7 Recommendation 2. The government should foster accountability for the stew- ardship 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 (Find- ings 1, 2, 3 and 16~. Recommendation 3. At the executive level, an advisory group of senior level federal managers, other public sector managers, and representatives of the non- profit 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 facili- ties 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 mainte- nance and repair funding requests, allocations, and expenditures and reflect the total costs of facilities ownership. The committee developed an illustrative tem- plate as shown in Figure ES-2 (Findings 3, 5, 6, 7 and 16~. Recommendation 6. Government-wide performance measures should be estab- lished to evaluate the effectiveness of facilities maintenance and repair programs and expenditures (Finding 10~. Recommendation 7. Facilities program managers should be empowered to oper- ate in a more businesslike manner by removing institutional barriers and provid- ing 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 Andy. Recommendation 8. Long-term requirements for maintenance and repair expen- ditures 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 mission, 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~.

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8 STEWARDSHIP OF FEDERAL FACILITIES A. Routine Maintenance, Repairs, Yes 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 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 major alterations to subsystems, (e.g., enclosure, interior, mechanical, electrical expansion) that change the capacity or extend the service life of a facility minor alterations (individual project limit to be determined by agency $50,000 to $1 million) D. Legislatively Mandated Activities No improvements for accessibility, hazardous materials removal, etc. E. New Construction and Total Renovation Activities F. Demolition Activities Annual operating budget No Annual operating budget Various funding sources, including no year, project- based allocations such as revolving funds, carryover of unobligated funds, fund- ing resulting from cost savings or cost avoidance strategies Various sources of funding No Project-based allocations separate from operations and maintenance budget. Should include a life-cycle cost analysis prior to funding Various sources of funding FIGURE ES-2 Illustrative template to reflect the total costs of facilities ownership.

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EXECUTIVE SUMMARY 9 Recommendation 9. Condition assessment programs should be restructured 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, provide timely and accurate data for for- mulating 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 continu- ous 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 own- ership (Findings 14 and 16~. Recommendation 11. The government and private industry should work to- gether to develop and integrate technologies for performing automated facility condition assessments and to eliminate barriers to their deployment (Findings 11,12andl3~. Recommendation 12. The government should support research on the deteriora- tion/failure rates of building components and the nonquantitative effects of build- ing maintenance (or lack thereof) in order to develop quantitative data that can be used for planning and implementing cost-effective maintenance and repair pro- grams and strategies and for better understanding the programmatic effects of maintenance on mission delivery and on building users' health, safety, and pro- ductivity (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.