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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
APPENDIX A
Excerpts fromStewardship of Federal Facilities: A Proactive Strategyfor Managing the Nation's Public Assets (pp. 13-18)
FACTORS CONTRIBUTING TO THE DETERIORATING CONDITION OF FEDERAL FACILITIES
Despite the historic, cultural, and architectural importance of, and economic investment in, federal facilities, evidence is mounting that the physical condition, functionality, and quality of the federal facilities portfolio is deteriorating. In response to Congressional inquiries, the General Accounting Office (GAO) has published a number of reports documenting the deterioration of federal facilities since 1990. These include NASA Maintenance: Stronger Commitment Needed to Curb Facility Deterioration (GAO, 1990), Federal Buildings: Actions Needed to Prevent Further Deterioration and Obsolescence (GAO, 1991), Federal Research: Aging Federal Laboratories Need Repairs and Upgrades (GAO, 1993), and National Parks: Difficult Choices Need to be Made About the Future of the Parks (GAO, 1995b). To cite only two examples from these reports, “at Ellis Island in New York, the nation's only museum devoted exclusively to immigration, 32 of 36 historic buildings have seriously deteriorated, and, according to park officials, about two-thirds of these buildings could be lost within 5 years if not stabilized.” In one building used for storing cultural artifacts, “much of the collection is covered with dirt and debris from crumbling walls and peeling paint, and leaky roofs have caused water damage to many artifacts” (GAO, 1995a). A number of factors that contribute to the deteriorating condition of federal facilities, are described below.
Focus on First Costs
The deteriorating condition of federal facilities is attributable, in part, to the federal government's failure to recognize the total costs of facility ownership. Although the “costs to operate and maintain a facility vary between 60 to 85 percent of its total ownership cost ” (Christian and Pandeya, 1997), government budgeting practices have focused on the design and construction costs, or 5 to 10 percent of the total costs of
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
APPENDIX A
Excerpts from Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation's Public Assets (pp. 13-18)
FACTORS CONTRIBUTING TO THE DETERIORATING CONDITION OF FEDERAL FACILITIES
Despite the historic, cultural, and architectural importance of, and economic investment in, federal facilities, evidence is mounting that the physical condition, functionality, and quality of the federal facilities portfolio is deteriorating. In response to Congressional inquiries, the General Accounting Office (GAO) has published a number of reports documenting the deterioration of federal facilities since 1990. These include NASA Maintenance: Stronger Commitment Needed to Curb Facility Deterioration (GAO, 1990), Federal Buildings: Actions Needed to Prevent Further Deterioration and Obsolescence (GAO, 1991), Federal Research: Aging Federal Laboratories Need Repairs and Upgrades (GAO, 1993), and National Parks: Difficult Choices Need to be Made About the Future of the Parks (GAO, 1995b). To cite only two examples from these reports, “at Ellis Island in New York, the nation's only museum devoted exclusively to immigration, 32 of 36 historic buildings have seriously deteriorated, and, according to park officials, about two-thirds of these buildings could be lost within 5 years if not stabilized.” In one building used for storing cultural artifacts, “much of the collection is covered with dirt and debris from crumbling walls and peeling paint, and leaky roofs have caused water damage to many artifacts” (GAO, 1995a). A number of factors that contribute to the deteriorating condition of federal facilities, are described below.
Focus on First Costs
The deteriorating condition of federal facilities is attributable, in part, to the federal government's failure to recognize the total costs of facility ownership. Although the “costs to operate and maintain a facility vary between 60 to 85 percent of its total ownership cost ” (Christian and Pandeya, 1997), government budgeting practices have focused on the design and construction costs, or 5 to 10 percent of the total costs of
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
ownership, the so-called “first” costs. (The remaining 5 to 35 percent of the costs of ownership include land acquisition, planning, renewal/revitalization, and disposal.)
The full life cycle costs of new facilities are not considered in the current federal budget process. Instead, only the projected design and construction costs appear as a separate line item for congressional consideration. The costs of operating and maintaining the new facility are not considered separately but become part of the agency's total operations and maintenance budget request, which includes funding for all existing facilities. The costs of designing and constructing a new facility, then, may receive considerable scrutiny during budget hearings, but the budget process is so structured that the 60 to 85 percent of the total costs, the costs of operating and maintaining the facility, do not receive the same scrutiny. Thus, the federal budget process is not structured to consider the total costs of facilities ownership.
Inadequate Funding for Maintenance and Repair
Inadequate funding for the maintenance and repair of public buildings at all levels of government and academia is a long-standing and well-documented problem. A report by the National Research Council in 1990, Committing to the Cost of Ownership: Maintenance and Repair of Public Buildings, found that “Underfunding is a widespread and persistent problem that undermines maintenance and repair of public buildings” (NRC, 1990). A 1996 study by the Civil Engineering Research Foundation reconfirmed this finding, noting that “underfunding of facilities maintenance and repair projects appear to be a widespread problem in both the public and private sectors” (CERF, 1996). On the subject of federal facilities, GAO has reported that, “mounting evidence shows that the federal government must also face up to the long-term consequences of inadequate capital investment in existing federal buildings” (GAO, 1991). More recently, GAO has found that “despite reductions in DoD 's [ U.S. Department of Defense] basing infrastructure, various DoD and service officials have continued to indicate that they still have excess, aging facilities and insufficient funding to maintain, repair, and update them” (GAO, 1997).
There is no single, agreed-upon guideline to determine how much money is adequate to maintain public buildings effectively. However, Committing to the Cost of Ownership: Maintenance and Repair of Public Buildings did recommend that, “An appropriate budget allocation for routine M&R [maintenance and repair] for a substantial inventory of facilities will typically be in the range of 2 to 4 percent of the aggregate current replacement value of those facilities” (NRC, 1990). This guideline has been widely quoted in the facilities management literature. During the course of this study, federal agency representatives who briefed the committee or completed questionnaires indicated that the funding they received annually for maintenance and repair was less than 2 percent of the aggregate current replacement value of their agencies' facilities inventories 1 . The National Aeronautics and Space Administration (NASA), for example,
1
Agencies responding to the questionnaire included the U.S. Department of Energy, the Department of the Army/Installations, the International Broadcasting Bureau, the National Institute of Standards and Technology, the National Aeronautics and Space Administration, and the Office of the Air Force Civil Engineer.
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
reported the maintenance and repair funding it currently receives to be about 1.3 percent of the current replacement value of all its facilities, and the Architect of the Capitol's Office reported funding at a level of about 1.7 percent.
Deferred Maintenance
If funds are not available to address identified maintenance and repair needs, these projects may be deferred or delayed indefinitely. Deferred maintenance, is defined in the Statement of Federal Financial Accounting Standards Number 6, Accounting for Property, Plant, and Equipment, as “maintenance that was not performed when it should have been or was scheduled to be, and which, therefore, is put off or delayed for a future period (GAO, 1998). Deferred maintenance, also called unfunded maintenance, backlog of maintenance and repair, or unaccomplished maintenance, is generally quantified as the estimated cost of the maintenance and repair needed to bring a facility up to a minimum acceptable condition. The significance of the existence of deferred maintenance is that it “implies that the quality and/or reliability of service provided by infrastructure on which maintenance has been deferred is lower than it should be and thus the infrastructure is not or will not later be adequately serving the public” (Urban Institute, 1994). A report by the American Public Works Association, Plan. Predict. Prevent. How to Reinvest in Public Buildings, found that “in the short-term, deferring maintenance will diminish the quality of building services. In the long-term, deferred maintenance can lead to shortened building life and reduced asset value” (APWA, 1992). In a series of reports, the GAO came to the following conclusions about the deferred maintenance of federal facilities:
The Pentagon is a classic example of the federal government's failure to invest adequately in federal buildings...Needed structural repairs and upgrades to the Pentagon were deferred for more than a decade, and the General Services Administration (GSA) now estimates that its renovation will cost more than $1 billion and take at least 13 years to complete (GAO, 1991).
Other federal buildings have been neglected ... and now need major repairs and alterations to bring them up to acceptable quality, health and safety standards. The total number of federal buildings with deferred major repair and alteration requirements is unknown but our work suggests that the number may be substantial. Continuing to defer needed repairs and alterations accelerates deterioration and obsolescence and results in higher eventual costs to the government...(GAO, 1991).
Most federal research laboratories are experiencing common problems with aging facilities--leaking roofs and gutters, drafty window frames, power outages, and poor ventilating systems that do not meet industry standards for air circulation...the eight agencies GAO reviewed reported backlogs of more than $3.8 billion in needed laboratory repairs (GAO, 1993).
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
The overall level of visitor services offered by the National Park Service is deteriorating. Visitor services are being cut back and the condition of many trails, campgrounds, exhibits, and other facilities is declining. The Park Service estimates that since 1988, the backlog of deferred maintenance has more than doubled to $4 billion (GAO, 1995b).
The magnitude of the numbers cited by agencies indicates that significant needed maintenance and repairs have been deferred because of underfunding or other factors. Historically, public officials have not often found the arguments for maintenance and repair funding compelling and have called into question the methodologies used to define building deficiencies and to calculate the costs involved in repairing them 2 . One reason for this skepticism is that although “the amount of deferred maintenance is important in itself, without also including information on the implications of deferral, public officials and the public will have considerable difficulty in interpreting the deferred maintenance figures” (Urban Institute, 1994). A second reason relates to the lack of a standard methodology for defining and quantifying deferred maintenance. The concern has been that inappropriate items have been included in the maintenance backlog to increase the overall estimate and argue for larger budget appropriations.
Agencies have also used different formulas or standards to compute the costs of eliminating the backlog. This situation may not be improved significantly by new reporting requirements of Federal Financial Accounting Standard Number 6 because under this standard “it is management 's responsibility to ...establish methods to estimate and report any material amounts of deferred maintenance” (GAO, 1998).
Aging of Facilities
The federal facilities portfolio includes structures that span centuries of different planning, design, construction, maintenance, management, and mission requirements. The average age of the federal facilities portfolio by square footage or by current replacement value is not known because accurate data are not available. However, it is safe to say that a large proportion of the facilities in the federal portfolio are already 40 to 50 years old. More than half of the 8,000 office buildings managed by the General Services Administration are more than 50 years old, and the U.S. State Department estimates the average age of facilities to be 39 years. Even in a “space age” agency like NASA, the average age of the facilities inventory is approximately 40 years. As facilities age, wear and tear on building components increases, and electrical, mechanical, and other systems, begin to break down. The rate and onset of breakdowns increases if maintenance has been implemented haphazardly or not at all, and the operating condition deteriorates. Aging facilities require more, not less, maintenance and repair to keep them operating effectively.
2
Fiscal year 1998 is the first year in which federal agencies are required to report periodically on deferred maintenance by disclosing deferred maintenance in agency financial statements. Previously, some but not all federal agencies kept inventories of building deficiencies and the funding required to eliminate them; others provided maintenance needs estimates for budgetary purposes and ad hoc reports.
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
Lack of Information to Justify Maintenance and Repair Budgets
In the federal budget and operations environment, facilities maintenance and repair is often deemed to be a low priority issue because facilities program managers do not have the information they need to present their case for funding to senior managers and public officials. “Interviews indicate that public officials, such as elected officials and chief administrative officers, find the most convincing and compelling information to be the future costs that can be avoided by undertaking early, preventive, or corrective maintenance activities” (Urban Institute, 1994). However, there is “very little study of the costs and implications of deferring maintenance... and cost avoidance information is lacking ” (Urban Institute, 1994). Estimates of the implications of deferred maintenance on cost and quality of service are also lacking even though public officials “appear to believe such information to be of considerable use” (Urban Institute, 1994). Because information on maintenance and repair issues most convincing to public officials, particularly avoiding future costs, is not available, and because the information that is available, such as the backlog of deferred maintenance, is not compelling, facilities program managers have found it difficult to justify their maintenance and repair budget requests to senior executives and public officials.
Lack of Accountability for Stewardship
Buildings are durable assets constructed to last at least 30 years; but they are composed of a number of components with service lives of less than 10 years. Buildings themselves seldom fail in an obvious, catastrophic sense. The deterioration of individual components generally occurs over time and may not be readily apparent: detecting the incipient deterioration of roofs, mechanical and electrical systems, pipes, and foundations requires regular inspections by trained personnel. Once detected through regular inspections or condition assessments, relatively small problems can be repaired before they develop into much more serious problems through an adequately planned and funded maintenance program.
Because facility deterioration occurs over a long period of time, it may appear to senior executives and public officials that the maintenance and repair of facilities can always be deferred one more year without serious consequences in favor of more urgent operations that have greater visibility. Unless a roof actually falls in, senior managers are not likely to be held accountable for the condition of a facility in any given year. Yet they are held accountable for current operations. Consequently, public officials and senior executives have few incentives to practice effective stewardship of the federal facilities portfolio and are subject to few penalties if they do not.
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
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