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Introduction
BACKGROUND
Federally owned capital assets include some 500,000 buildings and similar facilities worldwide acquired during 200 years of government operations. Government facilities are used to defend the national interest; conduct foreign policy; house historic, cultural and educational artifacts; pursue research; and provide services to the American public. 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 (NRC, 1998).
Federal facilities embody significant investments and resources and therefore constitute a portfolio of public assets. At least 30 separate agencies manage these facilities. As stewards of this public investment, federal facilities program managers face a number of challenges (NRC, 1998):
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extending the useful life of aging facilities
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altering or retrofitting facilities to consolidate space or accommodate new functions and technologies
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meeting evolving facility-related standards for safety, environmental quality, and accessibility
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maintaining or disposing of excess facilities created through military base closures and realignments, downsizing, or changing demographics
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finding innovative ways and technologies to maximize limited resources
In the 1990s Congress and the Executive Branch took a number of initiatives to improve capital asset decision making in the federal government. These include enacting the Government Performance and Results Act of 1993, the Federal Acquisition Streamlining Act of 1994, the Clinger-Cohen Act of 1996 and a series of federal financial accounting standards; developing the Capital Programming Guide (1997); and appointing the President's Commission to Study Capital Budgeting (1997). Senior and mid-level agency officials are now seeking ways to implement these initiatives efficiently and effectively.
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PURPOSE OF CONFERENCE
The Federal Facilities Council (FFC) sponsored a conference entitled “Capital Asset Management: Tools and Strategies For Decision Making” to highlight strategies and ideas for capital asset management so that federal and other public agencies can improve decision making for facilities investment. Held at the National Academy of Sciences in Washington, D.C., on September 13, 2000, the conference featured speakers from the public, non-profit, and private sectors. It was attended by some 220 people representing 32 federal agencies, as well as private sector firms, local governments, and professional societies. The FFC is a cooperative association of federal agencies having interests and responsibilities in all aspects of federal facility acquisition, operation and management. The mission of the FFC is to identify and advance technologies, processes and management practices that improve the planning, design, construction, maintenance, management, operation, and evaluation of federal facilities. 1
RECURRING THEMES
Neither the speakers nor the members of the audience were asked to arrive at a consensus on capital asset management issues or recommendations for resolving them. Over the course of the conference, however, a number of recurring themes and issues emerged:
1. Federal agencies have shifted from managing individual buildings to managing program requirements. Agencies are linking facilities requirements to global strategic planning, missions, and programs. This approach is consistent with research, which has shown that leading organizations integrate organizational goals into capital decision making and focus on results, not inputs. Thus, agencies need to broaden their focus and view their facilities not building by building or installation by installation but as individual holdings in a portfolio of capital assets intended to support government activities. Paraphrasing one of the speakers, federal agencies need to understand their facility conditions, the total ownership costs of those facilities, how to link capital assets to mission performance, and how to communicate the return or value added to the mission that can be expected from investing in facilities. This broader view should allow agencies to achieve important savings and improved operations. It will, however, require new approaches, cultural and organizational changes, and continuing support from leadership.
2. The federal budget process and federal regulations contribute to the suboptimal allocation of capital spending among projects; maintenance in particular is short-changed. The budget process focuses on first costs (design
1 The Federal Facilities Council sponsor agencies are the U.S. Air Force, Air National Guard, U.S. Army, U.S. Department of Energy, U.S. Department of the Interior, U.S. Navy, U.S. Department of State, U.S. Department of Veterans Affairs, Federal Bureau of Prisons, Food and Drug Administration, General Services Administration, Indian Health Service, International Broadcasting Bureau, Internal Revenue Service, National Aeronautics and Space Administration, National Institutes of Health, National Institute of Standards and Technology, National Science Foundation, Office of the Secretary of Defense, Smithsonian Institution, and the U.S. Postal Service.
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and construction costs) instead of the total costs of facility ownership (i.e., design, construction, operation, maintenance, repair, and disposal). Caps on federal spending can lead to incremental instead of full funding of projects and encourage leasing of facilities when leasing is not the most cost-effective approach. In addition, the Federal Property and Administrative Services Act of 1949 has not been significantly amended in 50 years. Thus, current regulations and processes may not allow federal agencies to use some of the best capital asset management practices that are used by state and local governments and the private sector. Bipartisan legislation has been introduced in Congress that would amend the Property Act to take a total life-cycle approach to property management, including establishment of asset management principles, strategic real property planning, designation of an agency real property officer, and creation of a government-wide strategic real property information base. Another possible approach is to generate capital acquisition funds by assessing programs the cost of using capital assets.
3. Incentives are also needed to encourage agencies to become more businesslike in managing their capital assets and to reward good management. Current regulations and processes discourage the disposal or sale of underused assets, and other best practices. Authority to use enhanced-use leasing programs (described in Chapter 5) could be extended to a greater number of agencies, allowing agencies that initiate proposals to make better use of their facilities and to retain the proceeds after expenses. Maintenance reserve funds could be established to help alleviate substantial backlogs of deferred maintenance attributable in part to inadequate funding for maintenance and repair and an aging inventory of facilities. Other possible approaches include increased use of public-private partnerships, the subleasing or outleasing of properties, and exchange sales to acquire replacement property.
4. Leading organizations in state and local government and the private sector routinely have 5- and 10-year frameworks in place for capital asset budgeting. A long-term outlook for capital asset management is absent at the federal level. Several speakers advocated creating 5-year strategic plans linked to annual budgets.
5. Leading organizations use extensive performance measurement systems to assess whether major projects have produced expected results. These systems measure such factors as benefits, costs, financial performance, customer satisfaction, and risk. Local government program managers are more exposed to day-to-day pressures from capital markets, shareholders, and voters in bond referenda and are held accountable for their performance.
6. State and local governments and the private sector have instituted practices that could provide valuable lessons for federal agencies. Forums for real property professionals facilitate information exchange that can provide solutions to common issues and problems and improve capital asset
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management. In some cases, the sharing of information has led to the cost-effective sharing of facilities and services among federal agencies.
ORGANIZATION OF THIS REPORT
The following chapters summarize the presentations made at the conference. The speakers focused on trends and best practices in capital budgeting; capital asset decision making processes in three federal agencies; building a case for capital reinvestment; and new tools for federal agencies. Online resources referred to by the speakers are listed in Appendix A. Appendix B contains the speakers' biographies.
REFERENCE
. 1998. Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation's Public Assets. Washington, D.C.: National Academy Press.
