GAO suggests using private money to fix federal buildings

The federal government should consider public-private partnerships when developing plans to rehabilitate aging and deteriorating federal buildings, according to a new General Accounting Office report. The federal government owns more than 400,000 Defense Department and civilian buildings and more than one-half billion acres of land. The General Services Administration manages and maintains approximately 1,700 federal buildings, acting as the government's landlord. At the end of fiscal 1999, GSA estimated that it needed more than $4 billion to repair and upgrade the federal buildings it oversees. For its report, "Public-Private Partnership: Pilot Program Needed to Demonstrate the Actual Benefits of Using Partnerships" (GAO-01-906), GAO brought in a consulting firm to help assess the potential benefit to the federal government of circumventing the federal budget process and allowing private companies to give GSA money to renovate and rehabilitate buildings. GAO developed hypothetical partnerships using GSA properties located in Charleston and Columbia, S.C.; Portland Ore.; Seattle; Andover, Mass.; Jacksonville, Fla.; and Minneapolis. GAO also developed a hypothetical partnership for GSA headquarters in Washington, D.C. These scenarios showed that partnerships with the private sector could help GSA finance repairs of structural problems in deteriorating federal buildings. Under the partnerships, the government would benefit from lower operating costs and increased revenue with no up-front investment, the report said. Private entities profit from interest collected from the government at rates ranging from 13.7 percent to 17.7 percent. However, GAO was reluctant to tout the measure as the saving grace for all of the federal government's property management problems. Instead, the report said, more research is needed to assess the benefits of public-private partnerships compared with other options, such as financing through appropriations or sales or exchanges of property, to make sure the government gets the best deal. Specifically, federal property managers should weigh the financial return against all associated costs, including relocating workers during renovation. Also, some buildings can't wait for public-private partnerships to be authorized and negotiated, as needed repairs are too urgent, GAO said. In a previous study GAO suggested that Congress allow GSA's administrator to experiment with different funding methods, such as entering into public-private partnerships. Last month, Rep. Pete Sessions, R- Texas, introduced the "Federal Asset Management Improvement Act of 2001" (H.R. 2710), which would authorize public-private partnerships to rehabilitate federal real property. Similar bills were introduced in the last two congressional sessions. Congress has already authorized public-private partnerships at the Defense and Veterans Affairs departments and at the Postal Service. In one case, the Postal Service collaborated with asset management firm Hines, which rebuilt the inside of the Grand Central Station Postal Facility in midtown Manhattan and built a 32-story office tower atop it. GAO is continuing to press GSA to use all available strategies to address its property management issues, and recommended that GSA start a pilot program to gauge the actual benefits of public-private partnerships. In a response to GAO's study, GSA Public Buildings Service Commissioner Joseph Moravec said public-private partnerships are a viable option for federal property managemers if used in conjunction with other cost-saving tools.