D

Doing Due Diligence: Government Accountability Office Reports on Renewal of Federal Facilities

Government Accountability Office (GAO) reports on renewal of federal facilities can be understood to be collectively promoting due diligence in managing federal facilities for mission capability or service delivery. GAO reports can help federal agencies do due diligence in managing infrastructure and real property assets, starting with a set of products offering guidance and leading practices. First, a GAO report titled Federal Real Property Asset Management identified an overall asset management framework based in part on International Organization for Standardization (ISO) 55000 standards, an international consensus standard on asset management; but also based on studies and articles on asset management practices and interviews with experts (GAO 2018f). GAO’s report identified six key characteristics of an effective asset management framework that can help federal agencies effectively manage their assets and resources (see Table D-1).

GAO also reported that while the Office of Management and Budget (OMB) had issued guidance to inform federal agencies’ real property management efforts, the existing guidance did not reflect an effective asset management framework because it did not fully align with the ISO 55000 standards and the key characteristics. For example, the guidance did not direct agencies to develop a comprehensive approach to asset management that incorporates strategic planning, capital planning and operations, maintaining leadership support, promoting a collaborative organizational culture, or evaluating and improving asset management practices. The OMB guidance did not reflect information on successful agency asset management practices, information that officials from three of the six agencies with which GAO spoke as part of this review said would be helpful to them. Consequently, GAO recommended that OMB improve existing information on federal asset management to reflect such leading practices as those described in

TABLE D-1 Key Characteristics of an Asset Management Framework^a

^a GAO analysis of ISO 55000 standards, asset management literature, and comments from experts.

SOURCE: Government Accountability Office, 2018, Federal Real Property Asset Management: Agencies Could Benefit from Additional Information on Leading Practices, GAO-19-57, Washington, DC, www.gao.gov/assets/gao-19-57.pdf.

ISO 55000 and the key characteristics GAO identified and make it readily available to federal agencies. OMB had no comment on the recommendation.

Second, GAO has issued reports and other products offering leading practices and internal controls in government that are similarly helpful to agencies managing infrastructure and real property assets.

• GAO’s Cost Guide can be used to develop reliable cost estimates (GAO 2020a),¹ stating that developing reliable cost estimates is crucial for realistic program planning, budgeting, and management. It also states that while some agency guidelines on cost estimating are thorough, other agency guidance is limited regarding processes, procedures, and practices for ensuring reliable cost estimates. The Cost Guide is intended to address this gap. GAO states that for the purposes of the guide, a cost estimate is the summation of individual cost elements, using established methods and valid data, to estimate the future costs of a program, based on what is known. The ability to generate reliable cost estimates is cited as a critical function, necessary to support OMB’s capital programming process. Without this ability, agencies would be at risk of experiencing cost overruns, missed deadlines, and performance shortfalls. The Cost

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¹ The March 2020 Guide updates a previous version of the Guide (GAO 2009b).

• Guide outlines key steps in the cost-estimating process: the purpose, scope, and schedule of a cost estimate; a technical baseline description; a work breakdown structure; ground rules and assumptions; data collection; estimating methodologies; sensitivity and risk analysis; documenting and presenting results; and updating estimates with actual costs.
• GAO’s guide for analyses of alternatives can be used for site selection for a major construction project.² GAO defines a high-quality, reliable analysis of alternatives process as well documented, comprehensive, unbiased, and credible.
• Finally, GAO has issued internal control standards for the federal government (GAO 2014e). GAO defines internal control as a process used by management to help an entity achieve its objectives. It further states that internal control helps an entity run its operations efficiently and effectively, report reliable information about its operations, and comply with applicable laws and regulations.

Taken together, these GAO products can be mutually reinforcing and help provide a comprehensive set of standards and practices that can help federal agencies manage their infrastructure and real property assets more efficiently and effectively.

GAO has also issued numerous reports since fiscal year (FY) 2009 on federal agency real property asset management practices. Some of these reports were addressed to a single cabinet department or agency (hereafter, agency) although the principle is often relevant government-wide and the findings in the reports help illustrate how other federal agencies should proceed. While the reports do not specifically reference ISO 55000 standards or the asset management framework, they do address the extent to which the agencies employ aspects of the key characteristics in real property asset management. These reports can be thought of as offering facilities renewal recommendations to federal agencies for the full life cycle of facilities and can be grouped into three categories. The first group of reports addressed topics that can be thought of as facilities acquisition for mission capability or service delivery. The second group addresses effective facilities management to maintain or otherwise enhance mission capability or service delivery. The third group addresses disposal of unneeded or otherwise obsolete facilities to free up resources for uses more productive than managing or maintaining facilities that are not contributing to mission capability or service delivery. In addition, GAO had both federal real property and defense support infrastructure on the agency’s High-Risk list of federal programs subject to waste,

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² GAO’s guide for analyses of alternatives was previously included in a report on the planned acquisition of a certain military weapons system; see GAO (2015a).

fraud, abuse, or mismanagement, or in need of broad transformation at the time of this report (GAO 2019f).

SEVERAL APPROACHES TO FACILITIES ACQUISITION FOR ENHANCING MISSION CAPABILITY OR SERVICE DELIVERY

The GAO facilities acquisition reports issued since FY2009 have focused on effectively managing facilities acquisition through better planning, project management, and cost estimating; improved leasing practices; consideration of alternative financing; and security considerations. These reports lead collectively to the conclusion that federal agencies need to do due diligence in selecting the acquisition option and implementing the acquisition.

Better Project Planning

GAO’s reports on better project planning have emphasized the need to better match the facilities to be acquired with the agencies’ missions or service delivery needs. First, GAO reviewed the extent to which the Department of Veterans Affairs (VA) was effectively matching veterans’ changing health care needs and expectations in health care facility planning (GAO 2019k). GAO found that VA’s approach to examining demographic trends among current and likely future veterans populations risked poorly matching veterans’ health care needs to the facilities essential to meeting those needs. For example, VA analyzes information about the needs of different veterans’ groups and their demographic data to assess veterans’ future needs for care. GAO reported, however, that VA was not systematically collecting data concerning whether demographic groups differ in their expectations for how they will receive care, such as whether some groups expect different levels of privacy. VA officials told GAO that VA gauges expectations by surveying veterans and talking to veterans’ service organizations. However, GAO’s review found the amount of information collected through these methods to be limited. In addition, GAO reported that most facility-planning officials had concerns with using estimated space needs derived from VA’s strategic capital investment planning process, which converts estimated needs for veterans’ health care into future space needs for the VA Medical Centers. Thus, GAO concluded that VA risked building space in VA facilities not well suited to likely future needs and thereby putting effective service delivery at risk. Consequently, GAO recommended that VA:

• Develop and implement a process to assess veterans’ changing expectations and disseminate this information to VA medical centers;
• Instruct VA medical centers on how to meet VA’s strategic goal of incorporating veterans’ changing needs and expectations into facility planning;

• Provide additional instruction to the medical centers on how to incorporate veterans’ health services into facility planning; and
• Systematically gather feedback from facility planners and address (as necessary) their concerns about the reliability of VA’s strategic capital investment planning process, including providing additional information on how space estimates are derived when using the process (GAO 2019k).

In another review, GAO found that the General Services Administration (GSA) was missing opportunities to determine the extent to which its major construction projects meet federal agencies’ mission needs (GAO 2019c). GAO reported that GSA tests installed in building systems to validate that the buildings’ systems function as designed. However, because GSA relied on outdated guidance, the effectiveness of its activities may have been limited in assuring that buildings were operating optimally, according to GAO. Moreover, GSA also used post-occupancy evaluations to assess projects’ performance and tenants’ satisfaction. However, in the 5 years leading to issuance of the GAO report, GSA had not regularly conducted the evaluations and lacked a policy for selecting projects for evaluation and communicating evaluation findings. GAO concluded that GSA may have been missing opportunities to fully utilize the evaluations to gather tenants’ feedback and inform the design and construction of future projects. As a result, GAO recommended that GSA identify and communicate when and how to conduct the post-occupancy evaluations and share lessons learned with future facilities project teams (GAO 2019c).

Finally, GAO has issued reports that reviewed the extent to which agencies used a high-quality process of analysis of alternatives in major construction projects or project site selection. For example, GAO reviewed the site selection process for a major intelligence agency construction project, the National Geospatial Intelligence Agency’s West Campus project (GAO 2017e). GAO concluded that the process used to select St. Louis, Missouri, as the site for the new campus substantially met three of the four characteristics of a high-quality, reliable analysis of alternatives process. Similarly, GAO reviewed the extent to which the best practices had been used for another intelligence community project, this one in the United Kingdom (GAO 2016g). This latter intelligence community report provides a definition of each of the best practices, a description of the effect of having used the best practices, and a recommendation that the Department of Defense (DoD) determine for what other military construction projects the best practices should be used (GAO 2016g).

The recommendations in these reports are addressed to VA, GSA, or DoD. However, it is fair to conclude that the recommendations encompass the concept that all federal agencies do due diligence by developing and implementing means to match the type, nature, size, purpose, operational considerations, and location of facilities to be acquired to the mission capability or service delivery needs that are the purpose of the facilities’ acquisition in the first place.

Better Cost Estimating

GAO’s construction project cost-estimating and infrastructure recapitalization reviews have focused in part on the extent to which federal agencies have used leading practices to develop reliable cost estimates. GAO relied on its Cost Guide, discussed above, in reviewing the extent to which agency construction project cost estimates were developed using leading practices. First, GAO reviewed VA’s new medical center construction project in Denver, Colorado, and concluded that the overall project would likely cost about $1 billion more than originally estimated. However, GAO also reported that the U.S. Army Corps of Engineers subsequently assumed responsibility for completing the project and the Corps’ midstream cost estimate to complete the project met the leading practices in the Cost Guide (GAO 2017h, 2018h). Second, GAO reviewed three major DoD construction projects and concluded that the projects’ cost estimates were unreliable. GAO explained that DoD’s cost-estimating guidance did not fully incorporate all the steps needed for producing reliable cost estimates (GAO 2018b). Third, GAO reviewed military construction (and nonmilitary construction) cost estimates for the planned realignment of certain Marine Corps units from Okinawa, Japan, to Guam and concluded that, while they had improved since a 2013 report on the same topic, the latter cost estimates still did not meet the best practices for a reliable estimate (GAO 2013c, 2017f). Finally, GAO concluded that the Navy’s cost estimates to recapitalize its shipyards were similarly unreliable because these estimates did not use leading practices (GAO 2019i).

GAO also reviewed the extent to which VA’s minor construction and nonrecurring maintenance project cost estimates were reliable (GAO 2018i). GAO here too concluded that VA’s cost estimating did not fully incorporate the steps in GAO’s leading practices guide. As a result of not incorporating sufficient guidance on cost estimates for projects in the minor construction and nonrecurring maintenance programs, medical facilities staff would be unable to provide meaningful estimates of what it costs to maintain and improve medical facilities, according to GAO (2018i).

Alternative Acquisition Strategies: Leasing

GAO reports since FY2009 have also addressed facilities acquisition alternatives to using direct congressional appropriations for civilian or military construction. These strategies included leasing, rather than constructing and owning, the facilities; developing interagency processes for sharing facilities to better utilize existing facilities and avoid acquisition costs; and certain public–private partnerships (PPPs) in which publicly funded facilities are conveyed to private, for-profit enterprises to operate and maintain for the federal agency. But here, too, GAO found instances in which agency processes could better facilitate doing due diligence.

First, GAO reported that certain of GSA’s facilities leasing practices can lead to higher costs to the government than would otherwise be likely (GAO 2019e). Specifically, GAO reported that GSA leases come with requirements not commonly used in the private sector, such as allowing for tenant substitution during the term of a lease and requiring the responsible lessor to pay for such services as utilities. These leases also involve lengthy negotiations—at times longer than a year—to finalize the lease. GAO continued that these unusual processes and long negotiation periods can lead to higher lessors’ costs, which are then passed on to the government. GSA has sought input from stakeholders on practices that may be increasing costs and has attempted to make some adjustments and develop a model to make some leasing faster and more efficient. However, GAO also reported that GSA’s practices may still be leading to high lessors’ costs, thus prompting the lessors’ to offer high bid prices; and further, that GSA has not fully evaluated the information it has obtained from stakeholders and consequently did not know if its reform efforts were working. GAO recommended that GSA expand its outreach to lessors and evaluate whether its model was in fact leading to desired reforms (GAO 2019e).

GAO also reviewed GSA’s delegated leasing program in which the agency can delegate authority to other agencies to execute their own leases rather than relying on GSA (GAO 2019d). However, GAO reported that GSA does not know if agencies have the ability to manage their delegated leasing activities because it does not regularly assess their policies, procedures, or performance in meeting GSA’s management goals, such as avoiding extensions. GSA officials told GAO that the agencies oversee their own delegated leases. Relatedly, GAO reported that GSA could not ensure that the leases agencies executed under the delegated authority meet program requirements and are within the authority granted because GSA lacked key procedures to do so. GAO found that GSA had only reviewed 1 percent of the post–lease award documents that agencies had submitted, and in some cases, agencies had not submitted required documentation at all. GSA officials said the agencies are responsible for submitting documents and meeting requirements. Nonetheless, GAO recommended that GSA assess agency procedures for managing delegated leasing, track agency performance, and develop a review process for post–lease award documents (GAO 2019d).

GAO Leasing Caution

GAO issued a report on leasing of space that offers a caution that GSA and other federal agencies need to be aware of, especially those engaged in highly sensitive activities such as handling of classified information (GAO 2017c). GAO found that GSA has at times leased space in buildings with foreign ownership for federal agencies that require higher levels of security based on mission criticality or facilities size. Specifically, GAO reported that 26 tenant agencies were occupying about 3.3 million square feet in foreign-owned buildings at an annual cost of

about $97 million and used the space, in some cases, for classified operations and to store law enforcement evidence and sensitive data. GAO determined that the high-security space is owned by companies based in such countries as Canada, China, Israel, Japan, and South Korea (GAO 2017c). Nine of 14 tenant agencies that GAO contacted indicated that they were not aware that the space they were occupying was in buildings that GAO identified as foreign owned. The other five agencies that knew about occupying foreign-owned space had taken actions to mitigate the risk or were not concerned.

GAO also reported that several federal officials who assess foreign investments in the United States, as well as selected real estate company representatives, stated that leasing space in foreign-owned buildings could present security risks such as espionage, unauthorized cyber and physical access to the facilities, and sabotage (GAO 2017c). For example, GAO reported that a Department of Homeland Security foreign investment official said that potential threat actors could coerce owners into collecting intelligence about the personnel and activities of the facilities when maintaining the property. The official said this situation could occur by direct observation or surreptitious placement of devices in sensitive spaces or on the telecommunications infrastructure of the facility (GAO 2017c).³ Continuing, GAO reported that the Secret Service indicated that its counterintelligence branch determined that foreign ownership of a building it occupies could raise counterintelligence and security concerns. According to the Secret Service, the protection of its information, technology, personnel, and space could be in jeopardy if the space were compromised through any unannounced inspections, emergency repairs to the building or any component within, the use of foreign nationals to provide any type of service, and any unescorted access throughout the space by the facility owner or representatives. Other agencies raised similar concerns, according to GAO (2017c).

Since GSA’s leasing policies did not include determining foreign ownership at the time of the GAO report, GSA was not in a position to notify the tenant agencies, thus permitting them to take mitigating action if warranted. As a result, GAO recommended that GSA determine whether the beneficial owner of high-security space that GSA leases is a foreign entity and, if so, share that information with the tenant agencies so they can adequately assess and mitigate any security risks (GAO 2017c).

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³ GAO similarly reported on potential threats from foreign ownership of land or businesses adjacent to or in near proximity to DoD test and training ranges, although these ranges generally do not constitute leased space. Here GAO reported that DoD had not conducted a risk assessment that included prioritizing ranges based on mission criticality, determining their vulnerabilities to foreign encroachment, and assessing the degree to which foreign encroachment could pose a threat to the mission of the ranges. According to GAO, these potential threats included ranges that would be the most valuable collection points for foreign adversaries trying to gather intelligence and which ranges house the most sensitive test and training activities. For more information, see GAO (2014d).

Alternative Acquisition Strategies: Facilities Sharing

Interagency sharing of otherwise unutilized or underutilized facilities can also provide a means for agencies to acquire space for mission capability or service delivery and provide certain financial benefits for the agency providing the space while the tenant agency can avoid some facilities acquisition costs. GAO reviewed a DoD program that permits military installations to share unutilized or underutilized space with other agencies (GAO 2015c), reporting that when a match can be made between an installation’s available space and a potential tenant agency’s needs, both parties can benefit. For example, installations can benefit through the avoidance of direct and indirect costs, such as the cost for utilities and maintenance incurred for unutilized or underutilized space. The non-DoD tenant agency can save costs on commercial leases because DoD charges for use of space by other federal entities on a cost-recovery basis only. Despite the potential benefits, GAO found that routine information sharing was not occurring between DoD and GSA concerning opportunities to move non-DoD agencies onto military installations. Specifically, GSA was not routinely contacting DoD installations to inquire whether space might be available. DoD, on the other hand, was not generally reaching out to GSA or agencies that may be interested in space. Thus, GSA may have been missing opportunities for their clients to reduce or avoid costs, while both GSA and DoD may have been missing opportunities to leverage resources and enhance utilization of federal real property. GAO recommended that DoD and GSA collaborate to enhance routine information sharing concerning non-DoD federal agencies seeking workspace that might be satisfied at military installations (GAO 2015c).

Alternative Acquisition Strategies: Public–Private Partnerships

PPPs offer another approach to facilities acquisition for mission capability or service delivery by leveraging private capital in lieu of appropriated funds. DoD has used these approaches extensively to provide military family housing or, at some installations, transient lodging. First, under the Military Housing Privatization Initiative, a private, for-profit housing developer has taken possession of and renovated or otherwise modernized existing on-installation military family housing and constructed new housing. Servicemembers in turn can use their basic allowance for housing to lease the on-installation housing from the developer or property manager.⁴ It should be noted though that Congress has also permitted the military departments to invest limited amounts of appropriated funds in the developer or to make direct loans or loan guarantees if the purpose of the loans was to construct houses suitable for military families.

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⁴ In most cases, servicemembers may also choose to use their housing allowance to reside off installation instead of residing in the privatized, on-installation housing.

GAO reports cautioned, however, that some privatization projects with occupancy rates below 90 percent were challenged to generate enough revenue to fund construction, make debt payments, and set aside funds for recapitalization. Moreover, reductions in the housing allowance could reduce revenue for future sustainment. GAO reported that this could negatively affect the condition and attractiveness of privatized homes and make it harder to compete with other homes in the community (GAO 2009c, 2018g). Another caution here is that privatization may not fully insulate the federal agency if problems arise or agencies have not done due diligence. To illustrate, GAO testified at congressional hearings that reports of the presence in some privatized houses of lead-based paint and other hazards, such as mold and pest infestations, had raised questions about DoD’s management and oversight of privatized housing (GAO 2019h, 2020b). GAO testified that

• The military departments had conducted some oversight of the physical condition of housing, but some efforts had been limited in scope;
• The military departments used performance metrics to monitor private partners, but the metrics did not provide meaningful information on the condition of housing;
• The military departments and private partners collected maintenance data on homes, but these data were not captured reliably or consistently; and
• DoD provided reports to Congress on the status of privatized housing, but some data in these reports are unreliable, leading to misleading results.

Furthermore, GAO testified that the military departments’ oversight of the privatized housing was limited and that the military housing offices had not effectively communicated their role as a resource for servicemembers experiencing challenges.

Additionally, while the Army has privatized on-installation lodging, GAO reported cautions relevant to implementing privatization of other types of facilities (GAO 2010). First, GAO reported that a private developer had to delay the start of major renovations and new construction by 2 years because of several life-safety and critical system deficiencies at the facilities at the time of the report. The developer was repairing the deficiencies at its expense before these conveyed facilities could be used as collateral to obtain further financing to begin the planned renovations and new construction. Second, GAO reported that the economic downturn leading up to the time of the GAO report in 2010 hindered the private developer’s ability to obtain financing for the lodging privatization project at favorable interest rates, which also delayed the project. In an earlier report on the DoD privatized housing program, GAO reported similarly that several factors related to turmoil in the financial markets at the time of the 2009 report had reduced available funds for project construction, resulting in more renovations relative to new construction and reduced amenities at some newly

awarded projects (GAO 2009c). First, GAO reported, higher interest rates in bond financing had increased the cost of some projects. Second, because of the diminished value of bond insurance, developers were having to set aside project funds to increase assurances the debt was repaid but that reduced available funds for construction. Third, financial turmoil had resulted in lower rates of return on invested funds (GAO 2009c).

In response, GAO issued more cautions: the condition of the facilities at the time of privatization can delay full implementation of the privatization concept in some circumstances. Moreover, because the DoD privatization programs rely on leveraged private capital, the programs may be more exposed to market conditions in the general economy than would otherwise be the case with the use of congressionally appropriated funding. This can require increased management and potentially renegotiation of the privatization deals to keep them financially viable (GAO 2009c). Finally, in another report, GAO concluded that the federal government’s cost of borrowing is lower than in the private sector. When the private sector provides the project capital, the federal government later repays these higher private-sector borrowing costs in some way, according to GAO. However, GAO also stated that, in some cases, factors such as lower labor costs or fewer requirements could potentially help balance the higher cost of borrowing, making partner financing less expensive (GAO 2014a).

ENSURING FACILITIES AND OTHER INFRASTRUCTURE ARE IN GOOD WORKING ORDER AND RELATED FINANCIAL MANAGEMENT ISSUES

GAO’s reports on ensuring existing facilities and other infrastructure are well suited to mission capability or service delivery needs have tended to focus on ensuring the facilities are and remain in good working order. These reports have focused in part on having reliable insight into the facilities themselves as a key step in managing the facilities, diligently maintaining existing facilities, and enhancing facilities’ resiliency to potential threats, such as climate change impacts. GAO has also reported on opportunities to lease existing facilities or property to nongovernmental entities to realize revenue or in-kind consideration in another type of PPP.

Accurate and Current Facilities and Other Infrastructure Data Are Critical for Facilities Management

First, GAO has reported that federal agencies have not had reliable data on the facilities in their inventory, which undermines effective facilities management, although some improvements had been noted in the government-wide Federal Real Property Profile and in DoD’s Real Property Assets Database. Still, GAO has federal real property on the High-Risk list in part because of data

reliability concerns (GAO 2019f). In its High-Risk report, GAO recommended that OMB and GSA continue working with federal agencies to improve the reliability of their real property data through verification and validation efforts and encourage agencies to implement action plans to better assess, address, and track data quality. Data reliability concerns affecting federal agency facilities data are a long-standing issue based on the GAO reports. For example, GAO reported in 2012 that the Federal Real Property Council had not followed sound data collection practices in designing and maintaining the Federal Real Property Profile database, raising concern that the database was not a useful tool for describing the nature, use, and extent of excess and underutilized federal real property at the time of the GAO report. For example, GAO reported that the Council had not ensured that key data elements—including buildings’ utilization, condition, annual operating costs, mission dependency, and value—were defined and reported consistently and accurately (GAO 2012b).

GAO similarly reported that DoD’s Real Property Assets Database contained inaccurate data and lacked completeness, although certain data that GAO reviewed had improved in accuracy since FY2014 (GAO 2018c). GAO reported that accuracy of data elements and completeness of the database are important because DoD, other federal agencies, and Congress use this information to determine facility sustainment funding and to understand DoD’s utilization of its real property as a means to identify potential excess property for disposal. This excess property could, in some circumstances, also be made available to other federal agencies through facilities sharing, as noted above. GAO found improvements in some facilities reporting such elements as whether the facilities had been reviewed within required timeframes and the facilities’ operational status, but problems still existed in these and other elements, such as facilities utilization rates, and circumstances in which facilities that existed were not recorded in the database. GAO recommended that DoD monitor recording processes, develop and implement corrective actions for identified data discrepancies, and develop a strategy to address risks associated with data quality and information accessibility. Similarly, GAO reported that VA’s ability to monitor its minor construction and nonrecurring maintenance programs is limited by a lack of accurate financial data and project information, such as reasons for changes in cost (GAO 2018i).

GAO also reported on data reliability concerns related to the extent to which federal buildings contained asbestos with an emphasis on the risks to federal office workers (GAO 2018a). GAO reported that GSA’s policy says that the agency should have an asbestos survey in each building constructed prior to 1998 and should enter the results of that survey into a specified database. However, GAO found that these data were missing for 66 percent (289 of 436) of the office buildings under GSA’s custody and control that were constructed before that date. GAO recommended that GSA update the database and provide funding to do so or develop an alternative plan to improve the data.

Keeping Facilities in Good Working Order

GAO has issued a number of reports on the extent to which departments and agencies are ensuring that their facilities and infrastructure are in good working order to ensure mission capability or effective service delivery. While these reports have also tended to focus on a single agency, they offer lessons learned associated with the principle of doing due diligence to ensure effective sustainment, which can be applied government-wide.

GAO’s report on VA inspections of its medical facilities found deficiencies reflective of aging infrastructure (GAO 2018j). GAO reported that these buildings were, on average, 55 years old and that, in turn, the aging infrastructure was leading to workload and staffing challenges in addressing maintenance and repair needs.

GAO has also issued numerous reports on the extent to which DoD is adequately maintaining facilities to ensure mission capability. In one report, GAO stated that from FY2009 to FY2014 the military services annually spent about 80 percent of what was needed to meet estimated facility sustainment requirements, although DoD’s goal was for the services to budget for 90 percent of sustainment needs (GAO 2016b). This GAO report, however, also pointed out that the military services’ operation and maintenance budget requests did not meet even the 80 percent level in FY2014-FY2016. DoD officials told GAO that the services were granted permission to submit budget requests that did not meet the 90 percent budgeting goal, in order to fund other priorities. GAO also reported that for FY2014 the following were reported as being in poor or failing condition: 43 percent of the Navy’s facilities, 37 percent of the Army’s facilities, 34 percent of the Marine Corps’ facilities, and 12 percent of the Air Force’s facilities. The military services reported about $100 billion in deferred maintenance and repair at the time of the GAO report (GAO 2016b). GAO concluded that continuing not to meet the funding goal increases the risk of facility deterioration in the future.

Underfunding of facilities sustainment was in part the reason for including defense support infrastructure on GAO’s High-Risk list until the 2011 update, at which point the services had been budgeting for sustainment at the 90 percent level. This prompted GAO to drop facilities sustainment as a continuing problem, explaining that DoD had adequately addressed the defense facilities sustainment budgeting deficiency as of FY2011 (GAO 2011e). As noted above, however, the services have reverted more recently to previous underfunding practices. Prior to the 2011 High-Risk update, GAO (2011c) had reported that defense officials acknowledged that underfunding facilities sustainment can undermine mission capability. For example, in one report, Navy and Air Force officials told GAO that inadequate facility sustainment funding had resulted in deteriorated facilities, reduced mission capabilities, and lower quality of life for installation personnel. Navy officials further stated that, in some instances, installation aircraft runways had been closed because sustainment funds were not available to perform

needed repairs. Finally, at that time, military service officials also told GAO that underfunding of sustainment requirements over many years would likely result in reduced service lives and more costly recapitalization requirements in the future (GAO 2009a).

GAO also issued a report identifying retained fees as an alternative funding source for facilities repair or maintenance (GAO 2014a). For example, instead of up-front funding, the National Park Service used retained recreation fees to fund high-priority projects linked to visitor need, according to GAO (2014a).

Addressing Climate Change Threats to Facilities

GAO has added to its High-Risk list the government’s fiscal exposure to climate change, including risks to infrastructure due in part to the government’s being a large property owner (GAO 2019f). The High-Risk report stated that the federal government owns and operates hundreds of thousands of facilities and manages millions of acres of land that could be affected by a changing climate and represent a significant federal fiscal exposure. For example, DoD owns and operates domestic and overseas infrastructure with an estimated plant replacement value of about $1 trillion. In September 2018, Hurricane Florence damaged Camp Lejeune and other Marine Corps facilities in North Carolina, with a preliminary Marine Corps repair estimate of $3.6 billion. One month later, Hurricane Michael devastated Tyndall Air Force Base in Florida, with a preliminary Air Force repair estimate of $3 billion and upwards of 5 years to complete the work (GAO 2019f).

GAO has issued numerous reports warning that federal facilities and infrastructure are at risk from extreme weather events. In one report GAO found that the federal government had incurred direct repair costs exceeding $320 billion due to extreme weather events over the decade preceding the report (GAO 2016a). Continuing, this report stated that selected standards-developing organizations generally have not used forward-looking climate information—such as projected rainfall rates—in design standards, building codes, and voluntary certifications, relying instead on historical observations. Furthermore, some organizations periodically updated climate information in standards, codes, and certifications, but others did not (GAO 2016a). GAO reported that, according to various reports, representatives of standards-developing organizations, and agency officials, federal agencies had initiated some actions and could take more to help standards-developing organizations address challenges. GAO recommended that the Department of Commerce initiate a government-wide effort to provide the best-available, forward-looking climate information to standards-developing organizations for their consideration in the development of design standards, building codes, and voluntary certifications.

Other GAO reports and testimony statements have suggested that enhancing resiliency to climate change impacts is necessary but has been limited. For

example, in a congressional hearing statement, GAO pointed out that one way to reduce federal fiscal exposure is to enhance resilience by reducing or eliminating long-term risk to people and property from natural hazards. For example, in September 2018, GAO reported that elevating homes and strengthened building codes in Texas and Florida prevented greater damages during the 2017 hurricane season (GAO 2019a).

GAO has also reviewed the extent to which DoD is addressing climate change impacts through enhancing resiliency of military installations. This body of work makes clear that DoD has made progress in addressing climate change impacts on the department’s installations and infrastructure, although the progress was reported to be uneven. First, GAO returned to the theme of looking forward in planning for ways to enhance installation resiliency. GAO reported that DoD installations had not consistently assessed risks from extreme weather and climate change effects or consistently used projections to anticipate future climate conditions. For example, DoD’s 2018 preliminary assessment of extreme weather and climate effects at installations was based on the installations’ reported past experiences with extreme weather rather than an analysis of future vulnerabilities based on climate projections (GAO 2019b). Previously, GAO had reported that the expected impacts of weather effects associated with climate change pose operational and budgetary risks to overseas infrastructure but DoD did not consistently track the impacts’ estimated costs. Operational risks were reported to include interruptions to training, testing, and missions; and budgetary risks were reported to include costs of repairing damages linked to these impacts. However, installations inconsistently tracked these costs because there was no requirement for such tracking (GAO 2017a). GAO also pointed out that DoD had not assessed the vulnerability to climate change of dozens of overseas sites because these sites had been exempted from a vulnerability assessment survey that DoD had carried out. Finally, this report identified that some progress had been made in integrating climate change adaptation into installations’ plans and project designs although the integration had been limited. Earlier still, in its first report on DoD’s climate change resiliency efforts, GAO reported that DoD had begun to assess installation vulnerability to climate change (GAO 2014b). In this first report, GAO had identified several operational impacts from climate change. In one example, GAO reported that restrictions had been placed on the use of live fire during military force training as a result of drought conditions to try and help prevent wildfires. In another example, GAO reported that the combination of thawing permafrost, decreasing sea ice, and rising sea levels on the Alaskan coast had led to an increase in coastal erosion at several Air Force radar early warning and communication installations. According to installation officials, this erosion had damaged roads, utility infrastructure, seawalls, and runways.

Finally, another GAO report focused on climate change impacts at federal facilities, such as National Aeronautics and Space Administration campuses, and at state highways, and local wastewater treatment systems (GAO 2013a). GAO’s

report identified several federal efforts emerging at the time of the report to facilitate more informed adaptation decisions, and GAO also reported that these efforts could better support the needs of local infrastructure decision makers in the future, according to studies, local decision makers at the sites GAO visited, and other stakeholders. GAO also reported that a range of studies and local decision makers GAO interviewed cited the need for the federal government to improve local decision makers’ access to the best available information to use in infrastructure planning. Accordingly, GAO recommended that the Executive Office of the President work with agencies to identify for local infrastructure decision makers the best available climate-related information for planning, and to update this information over time.

Generating Benefits from Unutilized or Underutilized Property

GAO issued two reports that assessed the benefits obtained when federal agencies provide long-term leases of their real property to public or private entities to use the property, known as an “enhanced use lease.” In the more recent report, GAO reviewed the enhanced use lease programs at VA, the National Aeronautics and Space Administration (NASA), and the Departments of State and Agriculture (GAO 2012a). Among other things, GAO found that these agencies reported benefits including cash rent revenue although most were small amounts of cash. The agencies also reported receiving value through in-kind consideration such as priority placement for veterans in a municipal housing project in lieu of cash rent in one example of an enhanced use lease. Agencies also reported certain mission-related benefits such as the NASA’s access to research and development of aerospace technologies.⁵ GAO also reviewed DoD’s use of enhanced use leases but concluded that the cash rent or in-kind consideration received had been less than expected from some leases although still positive in some cases (GAO 2011a).

Finally, both reports concluded that the net benefits received may not be fully understood or may be less than expected. GAO’s report on the non-DoD agencies’ leases concluded that the costs and benefits of these programs are not fully understood, given different agency practices in accounting for enhanced use lease costs. GAO continued, noting that lacking clear guidance and failing to incorporate all of the costs related to agencies’ enhanced use lease programs could cause agencies to overstate the net benefits of these programs when reporting program performance or making decisions about future leases. In the report on the DoD program, GAO concluded at the time of the report that the costs as a percentage of consideration from the leases was 31 percent for the Army and

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⁵ The statutory authority for some of these agencies to continue agreeing to new enhanced use leases may have expired, although existing leases would remain in effect until the agreed-to termination date.

Navy but 135 percent for the Air Force. Specifically, GAO reported that the Air Force had spent about $10.4 million more to administer its enhanced used lease program than the amount of consideration received from its five leases during the period of the GAO study, FY2006-FY2010. GAO recommended that OMB work with the non-DoD agencies reviewed to ensure a more accurate accounting of the benefits received. In the DoD enhanced use leasing report, GAO recommended that DoD develop procedures to regularly monitor and analyze enhanced use lease program administration costs to help ensure that the costs are in line with program benefits.

THE DISPOSAL OF UNNEEDED FACILITIES TO FREE UP FUNDS FOR HIGHER-PRIORITY PURPOSES

GAO has stated that continuing to maintain unneeded facilities risks wasting resources due to ongoing maintenance costs as well as lost revenue from failing to sell surplus property (GAO 2017d). GAO has further stated that they added federal real property to the High-Risk list, in part due to long-standing challenges that federal agencies face in managing federally owned real property, including disposal of excess and underutilized property. GAO has also identified unreliable facilities data as contributing to difficulties disposing of unutilized or underutilized facilities. GAO’s reports have highlighted the need to improve disposal procedures to promote disposal and offered suggestions on the reuse of facilities for another purpose, in a sense, another disposal process. Finally, GAO reports have suggested ways to better manage underutilized facilities to reduce operating costs and facilitate disposal.

Identify Benefits from Disposal

GAO’s facilities disposal reports have pointed out that spending operations and maintenance funds on unutilized, underutilized, or otherwise unneeded facilities consumes funds that could be eliminated from the budget or used for higher-priority purposes (GAO 2014c). While certain of these reports were focused on a single agency, here too, the principle can be applied government-wide. GAO concluded that despite past and ongoing efforts, the federal government continues to maintain excess and underutilized property (GAO 2017d).

GAO has reported on the financial aspects of the disposal and retention of unutilized or underutilized property. First, GAO reported that 15 federal agencies have the statutory authority to dispose of facilities and retain the proceeds of the disposal, such as revenue realized from the facilities’ sale. Specifically, GAO reported that five of these agencies used this authority to retain proceeds of about $557 million from all building sales, as of the time of the report. Of that total, the U.S. Postal Service disposals accounted for $446 million, GSA’s accounted for $89 million, and the other three accounted for the remaining $22 million (GAO 2016c). It should be noted that GAO also reported that the federal agencies

reviewed in this report stated that disposal was primarily based on mission needs. Second, GAO has reported that retaining unutilized or underutilized property consumes funds that could be used for other purposes (GAO 2011b, 2019k).

GAO has reported that disposing of unneeded facilities can lead to cost savings since owning agencies no longer need to budget for the costs of operations and maintenance. One of the largest federal facilities disposal processes is DoD’s base realignment and closure process, although this process is used by DoD only. GAO has reported that DoD has closed more than 100 major bases in the five rounds of base realignment and closure held since 1988, and net annual recurring savings from the most recent round in 2005 are estimated at $3.8 billion (GAO 2013d).

Identifying Challenges That Hamper Disposal

GAO’s body of work also has identified five categories of challenges that can hamper disposal: (1) a lack of reliable data with which to measure the extent of the problem, (2) a complex disposal process, (3) costly environmental requirements, (4) competing stakeholder interests, and (5) limited accessibility of some federal properties (GAO 2016d). Challenges to disposal are a long-standing problem. GAO raised nearly the same concerns as early as FY2011 (GAO 2011d). On the topic of data reliability concerns, GAO’s concerns referenced above as hampering effective facilities management also apply to identifying facilities that may be appropriate for disposal.

On the topic of complex disposal processes, GAO reported that conducting required environmental and historic reviews in a timely manner was among the challenges VA faced in its real property disposal process. Potentially compounding the problem was what GAO termed “VA’s lack of clear procedures for property disposals” (2019j). Among other actions, GAO recommended that VA develop clear procedures for each of its disposal options to help facilities’ managers plan, implement, and execute projects to dispose of vacant and unneeded properties. GAO also reported that the Department of Energy’s procedures for disposal of excess real property appropriate for transfer for economic development purposes be identified and disposed of, but the procedures do not identify what entity is responsible for these tasks or when it should identify such properties (GAO 2015b). GAO recommended that the Department of Energy develop and document an approach for property transfer—including roles and responsibilities—consistent with the department’s policy to identify and transfer properties for economic development purposes.

Similarly, DoD has encountered challenges in disposing of military installations and sections of such installations closed under the base realignment and closure process, according to a GAO report (GAO 2017g). Specifically, GAO reported that DoD identified as a key challenge coordinating with the large number of regulatory agencies involved in environmental cleanup issues at the

federal and state levels, and that certain states have more stringent cleanup requirements for some contaminants than specified at the federal level. In addition, GAO reported that the newly discovered presence of emerging contaminants was another challenge that had delayed the transfer of property and extended the timeline for cleanup in some locations, especially former airfields. GAO added that the most common emerging contaminants on DoD installations are perfluorinated compounds found in firefighting foam used nationwide by the military and commercial airports.⁶ Finally, GAO had also reported that DoD identified other challenges to disposal, including accounting for the time and resources needed to manage consultation requirements for historic preservation, and contingent actions related to disposal in international settings (GAO 2011b).

Identifying a Variety of Ways to Dispose of Space

GAO has issued reports that identify ways to dispose of space through space consolidation and real property exchanges. First, GAO has reported that most of the 24 agencies with chief financial officers reported to OMB and GSA that they planned to consolidate their office and warehouse space and allocate fewer square feet per employee as key ways to achieve their space reduction targets (GAO 2018e). A second approach on which GAO reported consists of GSA exchanging titles to federally owned real property for other properties or construction services, known as “swap exchange,” a form of public–private partnership (GAO 2016e). GAO reported nonetheless that GSA canceled the project and concluded in its February 18, 2016, memorandum on this decision that private-investor valuations for these two buildings fell short of the government’s estimated value. GSA officials told GAO that they intend to improve the appraisal process for buildings involved in swap exchanges by (1) informing appraisers of the swap exchange’s goals, objectives, and processes; (2) allowing appraisers to consider a range of values for uncertainties related to zoning and other economic assumptions; and (3) encouraging appraisers, when appropriate, to develop methodologies that take into consideration the size and complexity of proposed swap exchanges.

GAO also cautioned that these partnerships may not mitigate previously identified challenges to disposing of real property. For example, according to stakeholders interviewed by GAO, partnerships can provide a way for agencies to leverage existing assets to obtain needed improvements and facilities without procuring funding. As noted above, however, partnerships may not mitigate such challenges as the costs involved in accurately assessing the overall value and other challenges, such as environmental remediation costs associated with a property or balancing the interests of numerous stakeholders. In addition, GSA officials acknowledged the additional challenge that negotiating successful public–private partnerships requires unique expertise and organizational experience

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⁶ For more information on emerging contaminants at DoD installations, see GAO (2017b, 2018d).

with these partnerships and exchanges, which, at the time of the report, GSA lacked but was also believed to be gaining (GAO 2016f).

GAO FACILITIES RENEWAL REPORTS: DOING DUE DILIGENCE

GAO’s reports since FY2009 on federal facilities renewal have identified progress made in some areas. At the same time, the reports have also highlighted the need for more federal focus on developing processes for effectively acquiring and maintaining federal facilities for mission capability and service delivery, and for disposing of underutilized or unutilized facilities. This disposal can free resources from operating and maintaining properties not contributing to mission capability or service delivery, thereby permitting the agencies to use the funds for higher-priority purposes. The body of recommendations contained in the GAO reports can be thought of as falling into the categories of acquisition, ensuring facilities remain in good working order, and disposal when no longer needed. It should be noted that many of the GAO recommendations are likely to have been implemented by the time of this report and thus the specific deficiencies GAO identified may no longer exist. At the same time, other agencies’ managing infrastructure and real property can benefit from lessons learned and documented in the GAO reports. Finally, the large set of recommendations contained in these reports suggest policies and procedures that if implemented may help federal agencies to have reasonable assurance their facilities and associated resources are appropriate for mission or service delivery needs. In short, GAO’s reports present ways of doing due diligence.