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2 Related Issues The issues related to the maintenance and repair of federal facilities are com- plex and include many interrelated components. This chapter focuses on three broad issues: the federal budget process; the federal facilities portfolio; and the availability of maintenance and repair-related data. FEDERAL BUDGET PROCESS Understanding the issues related to the maintenance and repair of federal facilities requires a basic understanding of how the federal budget is formulated, how maintenance and repair budget requests are compiled and reviewed, how funds are appropriated and distributed, and how expenditures are tracked. Federal Budget Formulation The federal budget is created through the interaction of the President, the Congress, the Office of Management and Budget (OMB), and senior managers of federal agencies. Guidelines for formulating agency budgets are developed at the highest levels of government and communicated down to the agencies. The main- tenance and repair of facilities is subsumed under broader categories of agency operations and receives little, if any, specific attention at this level. However, budgets are also formulated within agencies, and requests for maintenance and repair programs, which often originate at the field office level, are then sent "up the chain" to higher levels of agency management. 24
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RELATED ISSUES 25 Formulation of the President's Budget Formulation of the President's budget begins around February of each year, a full year before it is released publicly and 20 months before the beginning of the fiscal year to which it applies. OMB prepares letters for executive branch offices on behalf of the President conveying the new five-year budget authority, outlay estimates,2 guidance on employment levels, requests for specific information, and other instructions related to agency budget requests. These letters are updated as necessary, and additional guidance is issued in the following months. No spe- cific discussions on policy priorities, total budget levels, or agency allocations are held at this time. Agencies begin developing their budgets in March or April by requesting their bureaus to develop budget options for each of their accounts. Internal agency hearings are held during the summer months. Agency budgets are traditionally submitted to OMB for review on September 1. From September through Novem- ber, OMB program examiners, assisted by agency staff (when requested), review the agency estimates. By early December, OMB completes its review, and agency heads attend a "passback" session to receive OMB's budget decisions. Agency directors are tra- ditionally given 72 hours after the passback session to appeal. The appeals pro- cess may last through December. By law, the President is required to submit the fiscal year budget to Congress by the first Monday in February (NPR, 1993~. Congressional Review and Enactment After submission of the President's budget, the budget committees of the U.S. House of Representatives and Senate hold hearings with agency heads, outside economists, interest groups, and others to solicit information. By April 15, Congress is supposed to produce a draft Concurrent Budget Resolution that (1) establishes the broad outlines of fiscal policy with regard to national needs, including spending and taxation; (2) sets aggregate funding levels by functional categories; (3) sets targets for total receipts and for budget authority and outlays, in total and by functional category.3 If Congress fails to adopt a budget resolution iBudget authority is "the authority granted to a federal agency to enter into commitments that result in immediate or future outlays. Budget authority is not necessarily the amount of money an agency or department actually will spend during a fiscal year but merely the upper limit on the amount of new spending commitments it can make" (Collender, 1995). Outlays are the "actual amount of dollars spent for a particular activity" (Collender, 1995). Functional categories are areas of general interest, including National Defense; Social Security; Income Security; Net Interest; Medicare, Health; Education, Training, Employment and Social Ser- vices; Transportation; International Affairs; General Science, Space and Technology; Agriculture; Administration of Justice; General Government; Community and Regional Development; Natural Resources and Environment; Commerce and Housing Credit; Veterans Benefits and Services; Allow- ances; Undistributed Offsetting Receipts; and Energy. These categories are divided into subcategories according to the major mission they fill.
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26 STEWARDSHIP OF FEDERAL FACILITIES by April 15, the cap included in the President's budget can be used to provide the House and Senate appropriations committees with their budgets. Once adopted, the Concurrent Budget Resolution reflects agreed upon aggregate fund- ing levels by functional categories. Neither the budget resolution nor an accom- panying report on the underlying assumptions is binding on other congressional committees. Presidential approval is not required, and the resolution is not en- acted as law. After the adoption of the Concurrent Budget Resolution, congressional au- thorization and appropriations committees begin drafting legislation to meet the budget resolution targets for the fiscal year. The appropriations committees must not exceed the discretionary spending cap of the Budget Enforcement Act. Ap- propriation bills must be signed by the President by October 1 for most federal agencies to have funds to operate. If appropriations are not passed by October 1, a continuing resolution may be passed to permit agency operations to continue at a reduced level (NPR, 1993~. Formulation of Budget Requests for Facilities Maintenance and Repair From published reports and agency briefings, the committee learned that, over time and for a variety of reasons, federal agencies have developed individu- alized procedures, definitions of terms, formulas and calculations, and method- ologies for developing maintenance and repair budget requests, the formulation of which generally begins at the field office or program level of each agency. For example, "Army Regulation 420-16 requires each installation to prepare an an- nual requirements report that specifies the installation's funding needs for operat- ing and maintaining real property during the next fiscal year. Each major com- mand is responsible for consolidating its installations' requirements report; then, the Assistant Chief of Engineers' Office at Army headquarters summarizes the command reports and forwards them to the Army budget office for preparation of budget requests" (GAO, 1994~. The method used to formulate maintenance and repair budget requests varies from one agency to another. Some agencies take past budgets and increase them by a certain percentage to cover inflation, new program requirements, and/or the backlog of deferred maintenance. Others target a certain percentage of the aggre- gate current replacement value of their agency' s facilities portfolio, such as the 2 to 4 percent guideline recommended in Committing to the Cost of Ownership (NRC, 1990~. Other methodologies have also been developed. The budget request is then sent forward to higher levels of management and administration within the agency, where the maintenance and repair request is generally incorporated into the much larger "operations" or "operations and main- tenance" account. This account is the principal source of funds used to pay for day-to-day expenses, such as personnel, utilities, demolition of real property, refuse handling, grounds maintenance, and other functions, as well as for facilities
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RELATED ISSUES 27 maintenance and repair. The Army and the Air Force's operations and mainte- nance account, for instance, funds many activities, such as recruiting and fielding trained units, maintaining and repairing equipment, child care and family centers, providing transportation services, civilian personnel management and pay, and maintaining the infrastructure to support the forces (GAO, 1996a). Thus mainte- nance and repair comprises only a small proportion of the total operations ac- count for some, if not all, agencies. By the time the budget request is sent from the agencies to the OMB and Congress, maintenance and repair is no longer a separate line item. The Army and the Air Force's annual operations and maintenance budget requests to Congress, for example, are presented in four broad categories: operating forces, mobiliza- tion, training and recruitment, and administrative and service-wide activities, which are further broken down into smaller categories. Except in special circum- stances, little, if any, discussion takes place between federal agencies and OMB staff or congressional committees about funds to be used for facilities mainte- nance and repair (GAO, 1996a). Budget Execution Budget execution takes place during the fiscal year of October 1 to Septem- ber 30, once funds have been appropriated. Funds are made available to agencies over the course of the year, not in one lump sum at the beginning of the fiscal year. This apportionment process was established by the Antideficiency Act to keep agencies from overspending early in the year, which would force Congress to pass a supplemental resolution to allow them to continue operating to the end of the fiscal year. Agency funds must be spent on the programs, projects, and activities for which they were appropriated unless a transfer of funds has been approved or Congress is notified and consents to reprogramming, which means maintenance and repair funds may be used to meet other needs in the same appropriations category. Agencies continually review budget outlays against expenditures throughout the year and determine if reprogramming is warranted. These reviews become more frequent later in the fiscal year to ensure that spending targets are met (NPR, 1993~. When Congress appropriates the annual budget back to the agencies, the agencies themselves determine how much funding from their operations accounts will be allocated to maintenance and repair. Funds are then transferred to the field office or program level accounts. The agencies themselves also determine the projects that will be implemented. Because maintenance and repair funds in most agencies are part of the general operations account, they are not "earmarked" for specific maintenance and repair projects. Structuring the account this way accommodates overlaps between work, operations, and alterations. For example, equipment operators often do routine
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28 STEWARDSHIP OF FEDERAL FACILITIES equipment maintenance and alteration projects, including work that could be considered repairs (FFC, 1996~. Combining operations and maintenance accounts also gives agency managers the flexibility to shift funds to operations as other, more urgent, or unanticipated needs arise or, conversely, to shift funds to maintenance and repair in case of breakdowns, to address environmental compliance issues or programmed projects, or to take care of the backlog of deferred maintenance. The following examples illustrate why funds are shifted within the opera- tions and maintenance account. In the first instance, in 1994, thousands of Haitian and Cuban migrants had fled their homelands for the south coast of Florida. The Navy's Atlantic Fleet was given responsibility for transporting the migrants from the south coast of Florida to Guantanamo Bay and holding them in camps. The Navy "initially found itself spending about $1 million a day . . . primarily out of its maintenance budget" to complete this mission (Peters, 1997~. In contrast, for fiscal years 1993 to 1995, the Army and the Air Force obligated more funds for base maintenance and repair than were requested in their budgets even though Congress had reduced their requests. GAO speculated that this was attributable to the reprogramming of operations and maintenance funds from other accounts to base maintenance and repair (GAO, 1996a). Shifts from operating funds to main- tenance and repair are most likely to occur at the end of the fiscal year when agencies have accounted for most of their operating expenses and can determine with greater certainty how much of the remaining funding can be obligated for maintenance and repair. Accounting Structures Accounting structures for expenditures for maintenance and repair differ from agency to agency. For example, GSA uses two accounts: (1) Operations and Main- tenance and (2) Repairs and Alterations. The Operations and Maintenance ac- count includes operations, maintenance, and minor repairs (up to a certain dollar threshold), and the Repairs and Alterations account includes all repairs, replace- ments, improvements, and alterations in excess of a given dollar amount with no upper limit. At the National Institutes of Health (NIH), the various institutes are assessed a certain amount each year to cover the cost of maintenance by govern- ment personnel and minor repairs by contractors. NIH also receives a direct ap- propriation from Congress as part of the Building and Facilities Budget to cover major repairs and improvements by contractors. The Smithsonian Institution has three categories of maintenance and repair accounts, the State Department has four, and NASA has none. NASA is funded for human space flight, science and technology, and mission support; major programs in the agency fund field instal- lation activities, which include maintenance and repair (FFC, 1996~. Not only do accounting structures for maintenance and repair activities vary, but the definitions of elements within accounting structures also vary across agencies. As a consequence, one agency's definition of a minor alteration or of
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RELATED ISSUES 29 current replacement value may differ significantly from another' s. Because of these variations in accounting structures and definitions, direct comparisons of maintenance and repair allocations and expenditures across federal agencies are difficult to make. Based on briefings and other information gathered during this study, the authoring committee of this report learned that the tracking of maintenance and repair allocations and actual expenditures is not done systematically by federal agencies. This is due, in part, to the structure of the various operations and main- tenance accounts and the need to shift funds during the fiscal year. Because a detailed cost accounting to determine the amount of funding actually appropri- ated to maintenance and repair activities is not required, few, if any, agencies complete one. Another difficulty in tracking maintenance and repair expenditures arises in the DoD agencies. "At some military facilities, maintenance and repair work is sometimes performed by uniformed personnel whose pay comes from a military personnel budget rather than an M&R budget . . . However, agencies have not developed methods for calculating the value of the contribution of such personnel or for determining the impact of such contributions on an M&R bud- get" (FFC, 1996~. Because of differences in methodologies, definitions, techniques to develop budgets, accounting systems, and the lack of tracking of maintenance and repair expenditures, it is difficult, if not impossible, to determine how much money and resources are allocated and spent on facilities maintenance and repair across the federal government. Disincentives and Institutional Barriers Effective facilities management and maintenance requires a long-term out- look and commitment; however, the annual budget process generally reinforces a short-term view. In fact, disincentives for cost effective, innovative maintenance and repair are incorporated into federal budgeting and accounting processes. Maintenance and repair projects range from simple, inexpensive repairs to lengthy replacements of major system components that require substantial fund- ing. In the private sector, a building owner can finance major capital projects by borrowing money and paying it back over time. "By contrast, the federal budget is a unified cash-based budget which treats outlays for capital and operating ac- tivities the same. Federal debt is undertaken for general purposes of the govern- ment rather than for specific projects or activities" (GAO, 1995a). The GAO has found that "there is a certain budget bias against capital projects, particularly when the budget is constrained, because the budget makes no distinction between an outlay for a capital asset that produces a future stream of benefits and an outlay for current operations. Because capital projects tend to require relatively large out- lays in the short run, they are often foregone to meet short-term budget restraints despite their long-term benefits" (GAO, 1991~. This leads to solutions that are not
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30 STEWARDSHIP OF FEDERAL FACILITIES cost effective "because of the requirement that the entire cost of these relatively expensive assets be budgeted for in an agency's or program's annual budget or 'up-front' rather than spread over the life of the assets" (GAO, 1997a). The following examples illustrate how this budget bias can affect agency operations. At the Internal Revenue Service (IRS) building, the heating, ventila- tion, and air conditioning system (HVAC) could not "handle the heat generated by an expanded computer system. Consequently, IRS installed window air condi- tioning units to lower the temperature. Although this action avoided the capital expenditure of replacing the HVAC system . . . installation of the relatively inef- ficient window units increased total operating costs" (GAO, 1991~. At the Penta- gon, which was heated with coal-burning furnaces until 1988, the GSA, which operated the building at that time, was reluctant to replace the system because of limited resources and high replacement costs. Instead, GSA continued to repair the old system. The DoD, which occupied the building, "became so concerned about depending on the unreliable system that it began renting temporary modern boilers to heat the Pentagon at an annual cost of about $1 million" (GAO, 1991~. In cases like these, it would have been more cost effective to make capital invest- ments to operate the facilities, but the federal budget process offers no incentives to make them. The budget process also discourages cost-effective maintenance by usually disallowing the carryover of unobligated funds from one fiscal year to the next, even if a facilities program manager can demonstrate that the most cost-effective way to implement the repair or replacement of a major operating component, such as a chiller, which may cost several hundred thousand dollars or more, may best be paid for by carrying over unobligated funds. Funds that are not spent in the current fiscal year are routinely taken back from the agencies. As an added disincentive, funding for the next fiscal year may be reduced on the premise that money not spent is money not needed. "The pressure to spend is particularly acute when the funds come from an annual appropriation, for those funds are either obligated within the fiscal year or returned to the Treasury. Subsequent year allocations may be reduced because of such returns, since failure to spend funds weakens justifications for the same level of funding the following year . . . it is currently not in any manager's interest to 'admit to' savings. It is much more rewarding to spend all your money and then claim a need for more next year than to show genuine savings" (NPR, 1993~. Because there are few rewards for acting in a cost-effective, fiscally responsible manner, facilities program managers have little incentive to act in innovative ways or to take risks that may lead to more cost-effective management and maintenance programs and strategies. Measuring the Effectiveness of Maintenance and Repair Expenditures Determining if expenditures of maintenance and repair resources are effec- tive is a difficult undertaking. The issue goes beyond the total dollars spent
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RELATED ISSUES 31 because the amount of money and resources allocated to maintenance and repair does not indicate whether those resources were used to repair r`'ission-critical systems or to remove snow. Because government agencies do not consistently track maintenance and repair expenditures, it is difficult to develop measures to determine how effectively funds are being spent either, within or across, agen- cies. (For example, one measure might be total maintenance dollars spent per square foot of administrative space.) Without consistent measures, it is very diffi- cult for facilities program managers to determine whether their maintenance and repair resources are being used optimally across their facilities inventory. With- out objective benchmarks (points of reference from which measurements of any sort may be made) by which to identify "best practices" among the agencies, information that could be shared and used across agencies to improve govern- ment performance in this area is not available. Legislative Requirements Pressures on already limited maintenance and repair budgets may be in- creased through legislative requirements to improve health, safety, or welfare that have facilities-related impacts. The purpose of these requirements may be laudable, but they are usually enacted without the funding to implement them. These so-called "unfunded mandates" result in de facto reductions in agencies' operations and maintenance budgets by requiring them to make additional repairs and alterations using current appropriations, thus dividing up the maintenance and repair "pie" into smaller and smaller pieces. The Americans with Disabilities Act of 1990, for example, prohibits dis- crir`'ination against people with disabilities in employment, transportation, public accommodations, communications, and activities of state and local government. The law requires the removal of barriers from existing facilities, if this is readily achievable, and requires making the altered facilities as accessible as is feasible. However, funds for removing barriers and/or improving accessibility were not appropriated. For most federal agencies, the funding has to come from current operations and maintenance budgets. Similarly, meeting other unfunded man- dates, such as removing hazardous materials, must also be paid for from already constrained agency operations and maintenance accounts. Data on the exact costs of complying with these legislative requirements are not available. However, anecdotal information reported by the GAO indicates that these costs are substantial and have had an impact on operations and mainte- nance budgets. The GSA, for example, spent "about $40 trillion to remove asbes- tn~ from ~ f`~A`~rn1 hililAin~ in Con Fr~nri~rn Eva .`v`~' ~ .~` =~ `~' ~~' ~ `~-v . . . [and] in a federal building in Denver . . . the cost of installing a sprinkler system increased by about $1.5 r`'il- lion after asbestos was discovered in the ceiling" (GAO, 1991~. At Glacier Na- tional Park, "federal requirements for lead paint abatement, asbestos removal, surface and waste water treatment, and accessibility for disabled visitors required
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32 STEWARDSHIP OF FEDERAL FACILITIES park managers to divert staff time and operating funds from visitor and resource management activities" (GAO, 1995b). FEDERAL FACILITIES PORTFOLIO In today's dynamic federal environment, agencies' changing needs for workspace, facilities, and technology have significant implications for mainte- nance and repair. With reduction of the federal workforce, the elimination of programs, and changes in agencies' missions, federal employees are being moved from headquarters to field offices, from one field office to another, or from field offices to headquarters, to improve program efficiencies and reduce costs, among other objectives. These changes have resulted in underutilized space in some lo- cations and in overutilized or "overpopulated" space in other locations. As agen- cies' missions change, some facilities are no longer used at all. The most dra- matic example, but not the only example, is the Base Realignment and Closure process, which has resulted in the closure of one of every five military installa- tions across the country. The elimination of 107,000 civilian full-time positions through downsizing could result in millions of square feet of federal office space becoming unneeded or underutilized (GAO, 1997b). Underutilized Facilities As federal agencies eliminate staff positions, so-called "reductions in force" do not occur across the board but are targeted to specific functions or programs. Thus, an agency program that was once staffed at a level requiring five floors in a building, may now be staffed at a level requiring the occupancy of two floors. This 60 percent reduction in space needs does not, however, translate into a pro- portionate reduction in maintenance and repair needs or costs. As long as the building is occupied, 100 percent of a broken furnace or air conditioning system has to be repaired. Similarly, maintenance and repair costs cannot be reduced in proportion to reductions in the number of employees. The integration of critical operating components (heating, plumbing, ventilation, electrical, fire, communi- cations, and safety systems) usually requires that entire systems be maintained in good working order to protect workers' health, safety, welfare, and productivity. Even closing complexes or installations does not necessarily mean that they no longer require maintenance and repair. For example, some military bases have been closed, but DoD has retained ownership while local communities have sought ways to reuse the facilities. In the interim, DoD is responsible for protect- ing and maintaining these bases. It has been estimated that the "overall cost to maintain bases closed in the 1988 and 1991 rounds was approximately $290 mil- lion through fiscal year 1996." In general "maintenance levels have not been reduced from their initial levels, even where progress toward reuse has been slow" because DoD has attempted to keep the facilities in a reusable condition in
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RELATED ISSUES 33 response to the demands of surrounding communities and political pressure to support the communities affected by base closures (GAO, 1997c). If federal facilities have unique or specialized functions, other factors come into play in cutting the costs of operations and maintenance in underutilized fa- cilities. The Plum Brook Station of NASA's Lewis Research Center, for instance, operates on a cost-reimbursable basis, with most of its operating cost covered by revenue from users of four test facilities at the station. Even if all four of the test facilities were closed, the operating cost would still be about $2 million, prima- rily because the Nuclear Regulatory Commission requires that the reactor be maintained in its current state. The only way to close the location and dispose of the property would be to dismantle the reactor. However, the cost for doing this would be prohibitively expensive about $100 million in 1997 dollars, accord- ing to a 1990 estimate. In addition, there are no disposal sites to accommodate the radioactive waste that would be generated by the dismantling process (GAO, 1996b). Overutilized or Overpopulated Facilities AS agencies attempt to reduce their costs of ownership, office buildings are being retrofitted to accommodate more people, more computers, and more sup- port equipment in the same amount of space. More intensive use of building components, such as elevators, plumbing, and electrical systems, increases the rate of wear and tear on building components and increases the need for mainte- nance and repair. Facilities managers at the IRS, the U.S. Customs Service, and the Federal Aviation Administration have reported that they have to "constantly 'jerry-build' electrical systems to accommodate expanding computer needs be- cause the older electrical systems in the buildings cannot handle the demands . . . more computers place additional strains on the air conditioning systems, not only to cool mainframe computers but also to counteract the heat generated by desktop units" (GAO, 1991~. Thus, more intensive use of facilities can place additional burdens on building systems and components and increase the need for mainte- nance and repair. Excess Facilities and Changing Missions The federal facilities portfolio has grown over time in response to new pro- grams and requirements, defense and foreign policy initiatives, changing demo- graphics, and other factors. More than 500,000 facilities are currently owned by the federal government. In 1995, it was estimated that federal civilian agencies alone occupied more than 750 million square feet of office space in thousands of government-owned and government-leased buildings nationwide (GAO, 1997b). The Federal Property Management Regulation "requires agencies to conduct an annual review of real property to ensure prompt identification and release of unneeded or underutilized property" and to "maintain the minimum inventory
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34 STEWARDSHIP OF FEDERAL FACILITIES necessary to conduct its mission" (GAO, 1997c). In practice, little emphasis has been placed on demolishing obsolete facilities or divesting the government of unneeded, but still viable, properties. Based on the information available to the committee, it appears that the num- ber of excess facilities is increasing throughout the federal government as agen- cies realign their missions in response to changing circumstances. The most dra- matic example is the Base Realignment and Closure process. Between 1988 and 1995, four "rounds" of domestic military base closings were implemented as part of the U.S. military's restructuring of its mission in the post-Cold War era. Ap- proximately one in every five military installations in the United States is slated to close by 2001, creating thousands of "excess" federal military buildings and other constructed facilities. Some civilian agencies also report having more fa- cilities than they need to meet their current and anticipated mission requirements. The Atomic Energy Commission' s (now the U.S. Department of Energy' s [DOE' s]) mission after World War II was to build a nuclear arsenal. Today, DOE is faced with addressing the resulting environmental, health, and safety risks at thousands of contaminated sites. DOE' s Strategic Plan includes a strategy to "complete about 100 surplus nuclear facility deactivation's during FY 1998 and FY 1999. This is about 10 percent of the total remaining facilities that require deactivation." As of October 1995, the "Department of State had identified over 100 overseas proper- ties valued at $467 million for potential sale" (GAO, 1996c). Other agencies are also likely to have excess facilities as their missions change. A case in point is the Department of Veterans Affairs (VA). The VA Health Care System was "established in 1930, primarily to provide for the reha- bilitation and continuing care of veterans injured during wartime service." The VA provided direct care to its clients and owned and operated its own health care facilities, becoming the country's largest direct delivery system (GAO, 1996d). In recent decades, the size of the VA's client population has been declining. As the remaining population ages, its needs for health care services are changing. Between fiscal years 1980 and 1995, the days of hospital care fell from 26 million to 14.7 million, but the "number of outpatient visits increased from 15.8 million to 26.5 million; and the average number of veterans receiving nursing home care in VA-owned facilities increased from 7,933 to 13,569" (GAO, 1996d). In re- sponse to these and other trends in the health care field, the VA is changing its mission from providing in-patient services to providing health care services on an out-patient basis, sometimes through partnerships with private sector health care providers. As a result, "about 50,000 VA hospital beds were closed or converted to other uses between 1969 and 1994, and further declines are likely in the next 7-10 years" (GAO, 1996d). Underutilized facilities are being created in this tran- sition, but as of March 1996, the VA had "not closed any hospitals because of declining utilization (GAO, 1996d)." 4 Like other federal agencies undergoing 4Two hospitals were closed when they were damaged by earthquakes.
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RELATED ISSUES 35 similar mission realignments, the VA is still responsible for maintaining and re- pairing its underutilized facilities. Changing demographics and social trends do not always result in excess fa- cilities, and not all federal agencies own excess facilities. For example, to re- spond to increased caseloads and legislative changes regarding the sentencing of criminals, additional courthouses, prisons, and related facilities are being built nationwide. Not enough information was available for the committee to deter- mine precisely how many federal agencies own excess facilities. Nevertheless, there is evidence that some agencies own buildings and infrastructure that are no longer needed or are otherwise underutilized. The demolition of excess facilities would require an up-front investment of funds but could, in the long run, be cost effective through annual savings on operations, utilities, and maintenance and repair funds. The demolition of federal facilities, however, can be expensive, time-consuming, and difficult. The military services estimate that demolition costs for facilities other than World War II era wooden barracks range from $8 to $12 per square foot (GAO, 1997d). The mag- nitude of the costs for demolishing excess federal facilities can be illustrated by the U.S. Army's demolition program. The Army "has the largest and most cen- trally directed demolition program" among DoD agencies. "Starting in fiscal year 1998, the service plans to spend $100 million in O&M [operations and mainte- nance] funds per year through fiscal year 2003 to eliminate excess space at an estimated cost of $10 per square foot." GAO calculates that it will take the Army about 13 years to eliminate its excess space at a cost of about $1.3 billion (GAO, 1997d). The total cost of demolishing all excess federal facilities would be sub- stantially higher, and many older buildings would require special procedures for the removal of asbestos, underground storage tanks, and other items. The demolition of excess federal buildings might also be de facto reductions in maintenance and repair budgets in the short term. Demolition, like mainte- nance and repair, is funded from the operations budget in most agencies. Unless special appropriations for building demolition have been approved by Congress, substantial demolition projects could cut into the funds that might otherwise be used for the maintenance and repair of occupied facilities. To program managers faced with the choice of demolishing an unused facility or repairing an occupied one, demolition is a much less viable option. Agencies may also try to reduce the number of excess facilities by declaring them surplus facilities and allowing other federal agencies or nonfederal entities to compete for their use. Once it has been determined that no other federal agency has a use for a facility, the agency can offer it to state and local agencies and then to the general public. However, because of security requirements, the locations of buildings within larger installations or complexes, or building design and con- struction factors, such as central utility infrastructure, it is not always possible or desirable to transfer title to a nonfederal owner. Property transfers that are fea- sible may take years to complete.
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36 STEWARDSHIP OF FEDERAL FACILITIES Transferring the title of a facility brings with it the responsibility to meet environmental regulations, which may be costly. In reviewing possible consoli- dations and closures at NASA and estimates of cleanup costs, "officials at sev- eral centers believed the cost could be as much as two to five times higher than if NASA were to retain the property. The higher cost would occur if NASA cleaned up facilities to meet more stringent standards that might be required for disposal" (GAO, 1996b). Transferring ownership, therefore, may not always be cost effec- tive, particularly if significant funds are required to meet environmental or other regulations prior to the transfer. The disposition of former nuclear sites and their associated facilities present unique situations that are not easily resolvable through any of the aforementioned strategies. New Construction Concurrent with the creation of excess facilities, the federal government con- tinues to build new facilities in response to changing needs. Federal courthouses and prisons are being built throughout the country to meet the needs of the crimi- nal justice system. Embassies are being built in newly established countries in Eastern Europe and Africa to support foreign policy and serve U.S. citizens abroad. Substantial new military facilities are being built as a result of the Base Realignment and Closure process; as military divisions and functions are moved from bases slated for closure to active ones, new facilities are being constructed to accommodate the transferred personnel and functions. The acquisition of new facilities has an impact on operations and mainte- nance budgets, although it is not readily apparent. Because the budget process is structured to focus on the first costs of design and construction rather than the life-cycle costs of the facility, the costs of design and construction for substantial new facilities are usually paid from specific line items in the budget. However, as new facilities come on line, their operation and maintenance costs must be funded from current operations and maintenance accounts. The potential impact of new facilities on an agency' s existing operations and maintenance programs does not have to be analyzed in the budget review process. Given already constrained budgets, new facilities can reduce the funds available for maintaining existing buildings. As new facilities age, the requirements for repairs increase, which in- creases their overall impact on the operations and maintenance budget. AVAILABILITY OF MAINTENANCE AND REPAIR-RELATED DATA Throughout this study, the committee was hampered by the lack of data re- garding maintenance and repair needs and expenditures. Facilities program man- agers are similarly hampered by a lack of research and information on mainte- nance and repair-related activities. Information regarding the maintenance and
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RELATED ISSUES 37 repair-related aspects of facilities management is not readily available because "[rjesearch work in facility management, especially cost prediction of facilities, has only begun recently" (Christian and Pandeya, 1997~. Managing the Facilities Portfolio, a report of a study conducted in 1991, found that "though much has been written about the causes and size of the deferred maintenance problem, com- paratively little has been published on models for analyzing, assessing, and fund- ing facility assets on a consistent basis" (AME, 1991~. For day-to-day mainte- nance decisions, no standard methods have been established for diagnosing problems or identifying and evaluating appropriate treatments (Shen and Grivas, 1996~. And, "a major cost analysis problem is that of identifying the lowest cost repair option to repair a component, especially where alternative repair options are available and the costs differ substantially" (Urban Institute, 1994~. The lack of research-based information significantly hinders facilities program managers in developing cost-effective facilities management and maintenance programs and in making effective arguments to justify budget requests. This is not to say that no maintenance and repair-related data exist. A number of private companies and nonprofit organizations regularly gather and publish data on facility maintenance and repair costs and operations. Reports published by the R.S. Means Company, Incorporated, the Whitestone Companies, the Asso- ciation of Higher Education Facilities Officers, the International Facilities Man- agement Association, and the Building Owners and Managers Association Inter- national, among others, include facilities cost data indices, such as per-square-foot costs for building operations and maintenance and standardized charts of accounts for private-sector office buildings and other commercial facilities. Most of this information, however, relies heavily on data gathered from the private sector or academic institutions, and some state and local governments, but not federal fa- cilities. Furthermore, most cost estimating guidelines are based on construction and major renovations; few, if any, are specifically designed to cover a wide range of maintenance and repair items (AME, 1991~. Three important facilities management areas about which relatively little re- search has been done are: (1) the relationship between timely maintenance and the avoidance of future costs; (2) the deterioration/failure rates of building com- ponents; and (3) the nonquantitative implications of building maintenance (or lack thereof). Timely Maintenance and Future Cost Avoidance When agency managers are asked to justify their maintenance and repair budget requests, "public officials . . . find the most convincing and compelling information to be the future costs that can be avoided by undertaking early, pre- ventive or corrective maintenance activities" (Urban Institute, 1994~. But "there appear to be no standard methods for estimating how much additional future cost will be incurred by a decision in the present to defer maintenance on a particular
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38 STEWARDSHIP OF FEDERAL FACILITIES facility" (Urban Institute, 1994). Although some federal agencies account for and track backlogs of deferred maintenance and repair projects, the committee was not aware of any analyses that have been done to identify the effects of continu- ous backlogging or the failure to perform adequate maintenance and repair. Very little research has been published on cost avoidance in relation to the maintenance and repair of building components. "Good information does not seem to be available as to what will happen to components if they are not repaired soon, e.g., how fast a small leak will develop into a much larger and much more costly to repair, leak" (Urban Institute, 1994~. This type of information would help facilities program managers plan and implement cost-effective maintenance and repair programs. It would allow them to anticipate the optimal time to repair or replace an operating component to take advantage of its maximum service life, but replacing it before it deteriorates to the point of disrupting business or other- wise affecting an agency's mission. Research-derived, cost avoidance informa- tion that is meaningful to public officials and senior decision makers would also help facilities program managers make more compelling arguments for adequate maintenance and repair funding. Deterioration/Failure Rates of Building Components Relatively little research has been done on the deterioration rates of building components. "The state-of-the-art in predicting deterioration/failure rates for in- frastructure is not well-developed .... A small amount of work has been done to develop deterioration rates for various types of sewer pipe and very little, thus far, has been done for buildings" (Urban Institute, 1994~. The U.S. Army's Con- struction Engineering Research Laboratories have made a significant effort to predict deterioration rates as a component of their Engineered Management Sys- tems (EMS) programs. These systems, which are discussed in greater detail in Chapter 3, include estimates of deterioration rates for specific types of infrastruc- ture (e.g., road pavement, gas lines, and roofs) in order to develop optimal re- placement strategies that indicate when repairs should be done and at what cost. The newest EMS program, BUILDER, incorporates "deterioration curves devel- oped from experience over time" (Uzarski and Finney, 1997~. Only field experi- ence with the BUILDER program will show how useful and accurate it is. The general lack of research on the deterioration of building components is due, in part, to the complexity of the issue. The rate of deterioration of building components is affected by a number of factors, including but not limited to, the quality of construction and materials, the extent of use, the level of maintenance, weather conditions, soil conditions, structural loading, and environmental pollut- ants. This large number of variables makes it difficult to construct accurate mod- els of component deterioration. Appropriately structured studies could yield valu- able information about the costs, benefits, and other effects of timely maintenance on the deterioration of building components, and, conversely, on the financial
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RELATED ISSUES 39 and other implications of the lack of maintenance on building component service life. Predictions of deterioration/failure rates could be useful for estimating future budget needs and determining optimal repair/replacement cycles for particular types of infrastructure (Urban Institute, 1994~. The results would also help for analyzing the life-cycle of maintenance and repairs (Uddin and Najafi, 1997~. Nonquantitative Effects of Maintenance Winston Churchill, addressing the House of Commons, once said, "We shape our buildings, and afterwards our buildings shape us." Although "procedures for assessing the nonquantitative impacts of poorly maintained buildings, thus far, appear to be based primarily on qualitative, subjective judgments rather than on empirical data and analysis" (Urban Institute, 1994), mounting evidence suggests that not only can the design of buildings affect workers' productivity, but the level of maintenance and repair can also affect building users. Faulty wiring, leaking roofs, and deteriorating pipes can lead to equipment failures and other business disruptions. Defects can cause discomfort, safety, or health risks for occupants. Deferred maintenance also "contributes to poor quality working space, impedes agencies' operations, and in some instances, jeopardizes employees' health and safety" (GAO, 1991~. Evidence suggests that the quality of the work environment, including the quality of the facilities, can affect employee morale and is a factor in recruiting and retaining workers. It has been estimated that over the 40-year life of a typical office building, the salary costs of the people working in that building will equal 95 percent of the total costs of constructing, operating, staffing, and maintaining it (FFC, 1997~. The environment and performance of buildings can contribute to illnesses and injuries. Health effects associated with the indoor environmental quality of buildings can be categorized into building-related illnesses and "sick-building syndrome." Building-related illnesses, medical conditions with known etiolo- gies, such as Legionnaire's disease, respiratory allergies, or asthma, can often be traced to specific sources and eliminated. "Appropriate building design, op- eration and maintenance procedures can prevent such illness in the first place" (NSTC, 1995~. Sick-building syndrome is characterized by nonspecific symptoms and less well defined health problems. Current evidence suggests that improved building design, operation, and maintenance can reduce a variety of still unidentified in- door contaminants and thereby prevent or reduce symptoms among building oc- cupants (NSTC, 1995~. Lost workdays attributable to building-related health problems decrease pro- ductivity and could affect an agency' s mission-related activities. If worker absen- teeism due to building-related factors can be reduced, productivity should in- crease. Worker compensation for lost time, illnesses, and lawsuits can also have a significant effect on an agency's productivity and budget.
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40 STEWARDSHIP OF FEDERAL FACILITIES REFERENCES AME (Applied Management Engineering). 1991. Managing the Facilities Portfolio: A Practical Ap- proach to Institutional Facility Renewal and Deferred Maintenance. Washington, DC: National Association of College and University Business Officers. Christian, J., and A. Pandeya. 1997. Cost predictions of facilities, Journal of Management in Engi- neering 13(1): 52-61. Collender, S. 1995. The Guide to the Federal Budget, Fiscal Year 1996. Washington, D.C.: The Urban Institute Press. FFC (Federal Facilities Council). 1996. Budgeting for Facilities Maintenance and Repair, Technical Report No. 131. Washington, D.C.: National Academy Press. FFC. 1997. Federal Facilities Beyond the 1990s: Ensuring Quality in an Era of Limited Resources, Technical Report No. 133. Washington, D.C.: National Academy Press. GAO (General Accounting Office). 1991. Federal Buildings: Actions Needed to Prevent Further Deterioration and Obsolescence. Report to the Chairman, Subcommittee on Public Works and Transportation, U.S. House of Representatives. GGD-91-57. Washington, D.C.: Government Printing Office. GAO. 1994. Financial Management: Army Real Property Accounting and Reporting Weaknesses Impede Management Decision-Making. Letter Report. AIMD-94-9. Washington, D.C.: Gov- ernment Printing Office. GAO. 1995a. Budget Issues: The Role of Depreciation in Budgeting for Certain Federal Investments. AIMD-95-34. Washington, D.C.: Government Printing Office. GAO. 1995b. National Parks: Difficult Choices Need to be Made About the Future of the Parks. Chapter Report. RCED-95-238. Washington, D.C.: Government Printing Office. GAO. 1996a. Operation and Maintenance Funding: Trends in Army and Air Force Use of Funds for Combat Forces and Infrastructure. Report to the Chairman, Subcommittee on National Security, Committee on Appropriations, U.S. House of Representatives. NSIAD-96-141. Washington, D.C.: Government Printing Office. GAO. 1996b. NASA Infrastructure: Challenges to Achieving Reductions and Efficiencies. Report to the Chair, Subcommittee on National Security, International Affairs, and Criminal Justice, Com- mittee on Government Reform and Oversight, U.S. House of Representatives. NSIAD-96-187. Washington, D.C.: Government Printing Office. GAO. 1996c. State Department: Millions of Dollars Could Be Generated by Selling Unneeded Real Estate Overseas. Testimony. NSIAD-96-195. Washington, D.C.: Government Printing Office. GAO. 1996d. VA Health Care: Opportunities to Increase Efficiency and Reduce Resource Needs. Testimony. T-HEHS-96-99. Washington, D.C.: Government Printing Office. GAO. 1997a. Budgeting Issues: Budgeting for Federal Capital. Chapter Report. Report to the Chair, Committee on Government Reform and Oversight, U.S. House of Representatives. AIMD-97-5. Washington, D.C.: Government Printing Office. GAO. 1997b. General Services Administration: Downsizing and Federal Office Space. Testimony. T-GGD-97-94. Washington, D.C.: Government Printing Office. GAO. 1997c. Military Bases: Cost to Maintain Inactive Ammunition Plants and Closed Bases Could Be Reduced. Letter Report. NSIAD-97-56. Washington, D.C.: Government Printing Office. GAO. 1997d. Defense Infrastructure: Demolition of Unneeded Buildings Can Help Avoid Operating Costs. Report to the Chair, Subcommittee on Military Installations and Facilities, Committee on National Security, U.S. House of Representatives. NSIAD-97-125. Washington, D.C.: Govern- ment Printing Office. NPR (National Performance Review). 1993. From Red Tape to Results: Creating a Government That Works Better and Costs Less: Mission-Driven, Results-Oriented Budgeting. Washington, D.C.: Government Printing Office.
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RELATED ISSUES 41 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. NSTC (National Science and Technology Council). 1995. National Planning for Construction and Building R&D. Washington, D.C.: Government Printing Office, NISTIR 5759. Peters, K. 1997. Funding the Fleet. Government Executive 29(1): 42-45. Shen, Y. and D. Grivas. 1996. Decision-support system for infrastructure preservation, Journal of Computing in Civil Engineering. 10(1): 40-49. Uddin, W. and F. Najafi. 1997. Deterioration Mechanisms and Non-Destructive Evaluation for Infra- structure Life-Cycle Analysis. Pp. 524-533 in Infrastructure Condition Assessment: Art, Sci- ence, and Practice. Mitsuru Saito, ed. New York: American Society of Civil Engineers. Urban Institute. 1994. Issues in Deferred Maintenance. Washington, D.C.: U.S. Army Corps of Engineers. Uzarski, D. and D. Finney. 1997. BUILDER-Managing Buildings. The Military Engineer. 89(586): 36-37.
Representative terms from entire chapter: