GAO: Agencies need incentive to fix crumbling buildings

About half of all federal buildings are more than 50 years old and in dire need of major repairs, witnesses said Thursday at a House hearing on ways to improve federal property management.

But agencies won't take the initiative to repair and maintain deteriorating buildings or find ways to get rid of unneeded space unless Congress gives them a monetary incentive to do so, said J. Christopher Mihm, associate director of federal management and workforce issues at the General Accounting Office.

The U.S. government is one of the world's largest real estate owners, with more than 500,000 buildings valued at $300 billion. Regular maintenance and repair of these properties has been routinely deferred, to the extent that GAO estimates the cost of fixing them would be in the tens of billions of dollars.

But agencies have successfully fixed buildings in cases where Congress gave them the authority to partner with private firms and also allowed them to retain revenue earned from leasing or selling unneeded properties, Mihm said. Such authority was a common thread among six successful building projects GAO studied in a February report, "Public-Private Partnerships: Key Elements of Federal Building and Facility Partnerships" (GGD-99-23), he said.

"Allow them to keep proceeds from partnerships," Mihm said when asked what Congress can do to encourage agencies to emulate the success stories GAO reported. Likewise, G. Martin Wagner, associate administrator at the General Services Administration's Office of Governmentwide Policy, testified that such an approach "would be a boon to federal landholding agencies."

All six projects GAO reviewed have been financial successes. In one case, the Postal Service is recovering $16.5 million per year from leasing space in certain buildings to private developers, Mihm said.

William L. Gregory, a member of the National Research Council, which was assigned to study agencies' maintenance and repair budgets, suggested that those budgets provide little incentive to plan ahead for scheduled and unforeseen repairs. "Give [agencies] more freedom in the budget," he said, or the backlog of deferred repairs will become insurmountable.

According to NRC's report, Stewardship of Federal Facilities, agencies do not allot enough funding for maintenance and repair. Most agencies spend well below the suggested guidelines for facilities management. NRC recommends 2 to 4 percent of an agency's budget be saved for building repairs and management, but the private sector spends even more than that, Gregory said.

When Congress appropriates funds to agencies, maintenance and repair is not singled out, but is simply included under the larger operations budget. That allows Congress and agencies to focus more on factors such as design and construction costs, under the assumption that repairs can be deferred, NRC's report said.

"Facilities managers find their hands tied when it comes to the budget process," Gregory said.