Raising the Rent

As Terrence Wilmer knows, convincing someone to pay for something that used to be free is difficult, if not impossible. For the past two years, Wilmer and his colleagues at the State Department's Overseas Building Operations have learned that lesson well, wrangling with federal officials over a State-devised plan that would require agencies with employees at embassies and consulates abroad to share the cost of new embassy construction. The total tab: $17.5 billion.

No one doubts that the construction is necessary. The question is: Who pays for it? Agencies with an overseas presence, led by the Agriculture, Commerce and Defense departments, say State should pay for new embassies, as it always has. Cost-sharing, they say, would drain money from the programs they oversee. With no resolution in sight, Capitol Hill figures to be the final battleground as Congress this year considers dividing up building costs.

The impetus for the initiative, known as the Capital Security Cost-Sharing Program, was the 1998 terrorist bombings of U.S. embassies in Kenya and Tanzania that killed more than 250 people and wounded more than 4,000. After the bombings, a presidential commission inventoried overseas facilities and found most were overcrowded, antiquated and did not meet safety standards. The goal since, says Wilmer, has been to move overseas employees "from substandard space into facilities appropriate for the diplomatic and consular work of the 21st century . . . . There is a clear and present danger, and this is the program to fix it."

Since the 1998 bombings, Overseas Building Operations has rebuilt the Kenyan and Tanzanian embassies, along with 13 other facilities, at a cost of $1.1 billion, all borne by State. Another 30 projects are under way, ranging from an $11 million embassy compound in Dili, East Timor, to a $353 million embassy in Beijing. They typically are sprawling complexes on large plots of land, set back from roads, fenced and reinforced to minimize damage from a bomb. Building Operations manages design and construction, working with real estate firms, architects and engineers, and American construction firms with Top Secret security clearances. Local subcontractors handle the less-sensitive construction. Without cost-sharing, State estimates that it would take 26 years to complete funding of 150 facilities slated for replacement; with it, it would take 14. About 60,000 employees from 28 agencies work overseas in U.S. embassies and consulates. Under the plan, agencies would pay fees based on the number of employees they have at U.S. embassies and consulates.

State has the backing of the Bush administration, and Wilmer says it was the Office of Management and Budget that told State to design a cost-sharing system. The objective, from OMB's standpoint, is to provide incentive for agencies with employees abroad to carefully consider whether those jobs could be performed in the United States-a process OMB calls "right-sizing."

OMB believes that right-sizing could generate substantial cost savings, since agencies spend as much as $650,000 a year on housing, security, travel, embassy fees and other expenses to keep an employee overseas. At the same time, Wilmer says Overseas Building Operations sometimes budgets for more workspace than needed because agencies overestimate their space needs. Right now, he says, "There is no accountability. The tendency is to put your hand in the cookie jar and take too many cookies. We're saying that you have to pay for the cookies." The space crunch got worse after the 1998 embassy bombings, when Congress passed legislation requiring almost all overseas personnel to work from an embassy or consulate, Wilmer says.

Agencies shoulder much of the burden for deploying personnel abroad. They pay for housing and travel, for example, and split with State the costs associated with embassy utilities, maintenance and support staff. Agencies have never paid for new construction, however, and they are not pleased about the prospect. Last year, in a letter sent to Marcus Peacock, OMB's associate director for natural resource programs, the Foreign Agriculture Service argued that "soliciting new funds from 30 different congressional subcommittees does not appear to be the most effective means to accomplish the goal of providing well-built, secure and modern embassies."

Officials with the Agriculture and Commerce departments say it would be far more efficient for Congress simply to boost the State Department's budget to cover construction costs. In addition, these agencies say they simply do not have the funds to contribute to the cost-sharing program without scaling back their primary missions-to promote U.S. agriculture and trade overseas.

And, in a shot across State's bow, the Defense Department last year successfully lobbied Senate Armed Services Committee Chairman John Warner, R-Va., for the inclusion of a provision in its 2004 authorization bill that required the State Department to deduct the cost of services it receives for free from Defense from the agency's assessment for the cost-sharing fund. Since the cost-sharing program is not slated to take effect until 2005, the provision was largely symbolic, but it indicated that Defense is not pleased with the plan and will likely fight it this year.

Congressional staffers with the Senate Foreign Relations Committee, House International Relations Committee and House Appropriations Committee say the program now has strong backing on Capitol Hill. But they acknowledge that appropriators overseeing some agencies facing the new fees are likely to fight, and that Warner will have to be convinced of the program's merits for it to win approval.

"Some departments are mad at the State Department and me personally," Wilmer says, adding that his staff has gone out of its way to work with other agencies. Since launching the initiative, the agency has agreed to charge different rates based on whether employees have access to classified areas, or work outside the embassy compound. If agencies rent space outside the embassy, they will be granted a credit. When agencies complained that cost-sharing fees would be too large for them to handle in a single year, Overseas Building Operations agreed to phase in the program over five years. And the agency agreed to sunset the program after the 150 new facilities are completed. "We've tried to make this as painless as possible," Wilmer says. For the agencies facing big bills next year, however, the sting doesn't seem to be going away.

Big Bills

Under the Capital Security Cost-Sharing Program, agencies would pay fees based on the number of employees serving abroad. These 5, with the most overseas employees, would pay the most, over five years.

Source: State Department