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5
Alternative Approaches for
Acquiring Federal Facilities
BACKGROUND
Facilities investments typically require substantial up-front funding for de-
sign, construction, or outright purchase. The benefits from such investments may
not begin to accrue for 2 or more years as facilities are constructed or renovated.
Private-sector organizations typically finance facilities investments by bor-
rowing all or a portion of the required funds from a bank or other lending institu-
tion, by using their own financial resources, or by using some form of third-party
financing or equity arrangement. Additional arrangements are routinely used, such
as alliances with other firms, joint ventures, sale-and-leaseback, and public-pri-
vate partnerships. All involve varying levels of risk, and some incur debt. A loan
or other commitment is typically repaid over time, allowing the organization to
receive value from the investment before the debt is fully repaid.
In the federal government, significant facilities investments are primarily
funded from the annual budget. Individual departments and agencies may not
borrow funds or otherwise incur debt to finance facilities.1 They must receive
authorization from Congress for funding to cover the full, up-front (design and
construction or purchase) costs in a specific fiscal year budget.
Although the annual budget is the primary source of funding, a number of
alternative approaches for acquiring facilities are being used by federal depart-
ments and agencies, on a case-by-case basis under special agency-specific legis-
1The Tennessee Valley Authority, an independent, wholly owned corporation (not a department or
agency) of the federal government, has the authority to issue bonds and notes and thus to incur debt
and other financial obligations (GAO, 2003h).
76
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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 77
lation. This chapter first discusses issues related to full, up-front funding of fa-
cilities, including procedures for budget scorekeeping, and issues related to al-
ternative acquisition approaches. A number of alternative approaches, including
public-private partnerships, capital acquisition funds, trust funds, sale-and-lease-
back arrangements, outleasing, real property exchanges, and shared facilities,
are then described and analyzed in greater detail. The chapter concludes with a
summary and a recommendation for the federal government.
ISSUES RELATED TO FULL UP-FRONT FUNDING OF FACILITIES
The requirement for full, up-front funding of federal facilities is intended to
(1) give adequate scrutiny to the initial costs and proposed benefits of an invest-
ment; (2) avoid the risk of allowing projects to be started through incremental
funding before they are adequately scrutinized; (3) give Congress the flexibility
to respond to changing circumstances and priorities; (4) provide for transpar-
ency in the budget by making sure the investment proposal is understandable to
a range of constituencies, and (5) allow for the informed participation of those
constituencies.
Under current procedures, the budget authority associated with requests to
design and construct a new facility, to fund the major renovation of an existing
facility, or to purchase a facility outright are scored up front in the year requested
even though the actual costs may be incurred over several years. Thus, the pro-
jected costs, which may easily run more than $50 million per facility, are counted
against the agency's overall budget request for a given fiscal year.
The requirement for full, up-front funding, however, typically results in a
spike in a department's or agency's budget request. If it is to stay within its spend-
ing cap, a request for a significant facility investment will force cuts in other
programs or activities within the department or agency, causing tension among
the various in-house decision-making and operating groups.
The focus on first costs of facilities investments is reinforced by the budget
scorekeeping rules mandated as part of the Budget Enforcement Act of 1990.
"Scorekeeping" is a process for estimating the budgetary effects of pending and
enacted legislation and comparing those effects with limits set in the budget reso-
lution or legislation. It has no analogue in the private sector.
Scoring facilities costs up front is intended to provide the transparency needed
for effective congressional and public oversight. The objectives are to (1) high-
light the full costs of decisions when they are being made; (2) discourage the
undertaking of investments that are not cost-effective; (3) protect congressional
control over federal spending; (4) see how legislation fits into the overall plan for
federal spending; and (5) determine if any ceilings in those plans have been
breached (CBO, 2003).
In actuality, up-front scoring of major facility proposals does not disclose the
full costs of facility investment decisions; only the projected design and construc-
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78 INVESTMENTS IN FEDERAL FACILITIES
tion costs of facilities are transparent. Facilities operation, maintenance, repair,
and disposal costs are accounted for in different functional areas of the budget
and are not identifiable for specific facilities.
Scorekeeping procedures also create incentives for agencies to drive down
the first costs of facilities investments--even if it may increase the life-cycle
costs--in order to lessen their apparent impact on the current year budget. In
rewarding such behavior, the scorekeeping procedures can indirectly increase the
long-term operation and maintenance costs of facilities--that is, 90 to 95 percent
of their life-cycle costs--and decrease the staffing efficiencies that might result
from additional initial investment.
Another consequence of the scorekeeping procedures for major proposals is
that
[a]gencies faced with the upfront costs of acquiring new capital assets--facili-
ties and equipment--often have the option of continuing to produce goods and
services using what they have even if it is old and obsolete. Although the ap-
proach can increase the costs of producing output in the long run, it holds down
budgetary costs in the short term. (CBO, 2003, p. 21)
ISSUES RELATED TO THE USE OF ALTERNATIVE APPROACHES
FOR ACQUIRING FACILITIES
Recognizing some of the difficulties of providing adequate funding for re-
quired facilities investments through the annual budget process, legislation has
been enacted over the years on a case-by-case basis for individual departments
and agencies to allow the use of alternative approaches for acquiring facilities.
Legislation allowing the use of these approaches on a government-wide basis has
not occurred for a variety of reasons. First, the use of alternative approaches for
acquiring federal facilities creates a tension between government-wide oversight
groups--Congress, the OMB, the CBO--and the line agencies. As noted by the
GAO,
From an agency's perspective, meeting capital needs through alternative fund-
ing approaches (i.e., not full funding) can be very attractive because the agency
can obtain the capital asset without first having to secure sufficient appropria-
tions to cover the full cost of the asset. Depending on the financing approach, an
agency may spread the asset cost over a number of years or may never even
incur a monetary cost that is recognized in the budget. From a government wide
perspective however . . . the costs associated with these financing approaches
may be greater than with full up-front budget authority (GAO, 2003a, p. 1).
The use of alternative approaches for facilities investments raises a second
issue: Who retains the proceeds from the sale or leasing of properties, called
"offsetting collections," for federal budget purposes? Under federal procedures,
any proceeds realized by the sale of federal buildings or properties are returned to
the general treasury unless special legislation has been enacted.
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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 79
For individual federal agencies, authorization to retain and use the proceeds
for the sale or leasing of property could provide incentives to find more cost-
effective ways to manage their facilities portfolios. On the other hand, from a
government-wide perspective, retention of proceeds could spur some agencies to
sell properties that are required for long-term mission support to generate funding
for more short-term needs.
A third issue relates to the public nature of facilities investments. Because
federal facilities are located in all states and most communities, the perspectives
of state and local governments and constituencies must be accounted for when
alternative funding approaches are considered. Federal departments and agencies
are not typically subject to local zoning and land use controls when siting facili-
ties. What may appear to be cost-effective from a departmental or agency per-
spective may significantly affect the surrounding community and may not appear
to be cost-effective or desirable from the perspective of the locality and citizenry.
In some cases, the short-term benefits of some alternative approaches may
not outweigh the long-term, quantifiable costs. Still, in certain circumstances,
such approaches can provide other, less tangible benefits to the public. These
include the preservation and upkeep of historic properties, investment and occu-
pancy of buildings in downtown and inner city neighborhoods, and more conve-
nient access to services.
A number of alternative approaches currently in use by federal agencies are
described below. Each approach has advantages and disadvantages for particular
types of organizations and types of facilities. None can guarantee effective man-
agement absent agreed-upon performance measures, feedback procedures, and
well-trained staff. It should be noted that state and local governments have also
developed innovative funding approaches that could be adapted to the federal
government. Identification and evaluation of such approaches were beyond the
scope of this particular report, but such an analysis by the appropriate federal
entities is warranted.
Public-Private Partnerships
In general, the concept underlying public-private partnerships is to utilize the
untapped value of real property. One type of public-private partnership is a project
for which the private sector provides cash and financing ability to renovate or
redevelop real property contributed by the federal government. Once such a
project is completed, both partners share in the net cash flow that is generated
(PriceWaterhouse, 1993). A more general conception of a public-private partner-
ship includes sharing of other responsibilities such as project planning and initia-
tion, design, construction, and operations management. The extent of the alloca-
tion between the public and private sectors in any of these areas depends on the
specific agreement between the two sectors. Two examples of current programs
follow.
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80 INVESTMENTS IN FEDERAL FACILITIES
Department of Veterans Affairs Enhanced-Use Leasing Authority
In 1991, Congress gave the Department of Veterans Affairs (VA) authority
to lease underused property and facilities to private or other public entities for up
to 35 years in return for cash or in-kind consideration, such as services, goods,
equipment, or facilities. The basic intent of this authority was to increase the
agency's flexibility to utilize underused assets that could not or would not other-
wise be disposed of. In 1999 this authority was extended for 10 years, and the
applicable lease term was extended to 75 years. As part of this extension, the VA
was also allowed to lease properties for the sole purpose of generating revenues
to provide better services for veterans, and the agency was also allowed to make
capital contributions to joint ventures on agency properties (FFC, 2001a).
The basic process for using the enhanced authority requires local VA offices
to develop a business plan. The organization that initiates a successful proposal
can retain the net proceeds from an enhanced-use lease agreement. Public hear-
ings are held on any proposal, after which the proposal moves to the VA head-
quarters for review. Projects valued at more than $4 million must be approved by
the OMB and go through the Federal Register process before a Request for Pro-
posal is issued. Once a proposal is negotiated, Congress is notified and the VA
must wait 30 days before entering into a lease.
As of 2003, the authority has been used in more than 27 agreements (GAO,
2003a). As an example, in Texas a private developer constructed a regional VA
office on the VA's medical campus, and the agency in turn leased land on the
campus to the private developer so that it could construct commercial buildings
with space rented out to private businesses (FFC, 2001a). Enhanced-use leasing
authority recently has been granted to the National Aeronautics and Space Ad-
ministration and the Department of Defense, although the specific procedures
and requirements of their authorities vary from those of the VA.
National Park Service Concessions Program
For many years the Department of the Interior's National Park Service has
entered into long-term agreements with private entities to manage certain facili-
ties on government-owned properties. In 1998, 630 concessionaires provided ser-
vices grossing $765 million in revenues. Almost two-thirds of this total came
from the 73 concessionaires that provided lodging. A change in the law that same
year increased competition for those concessions and created an advisory board
to the Secretary of the Interior to suggest ways for improving the process.
Potential benefits of public-private partnerships include the conversion of
properties that might currently drain public resources into useful and productive
facilities that provide net cash inflow to federal agencies. Partnerships also can
attract private funding sources for renovations and repairs. In addition, the intro-
duction of private-sector, profit-motivated entities may increase the efficiency
with which existing properties are managed (GAO, 2001d).
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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 81
The up-front and long-term costs of public-private partnerships vary. Con-
siderations for the government include the contract agreements for occupancy by
federal entities, restrictions on the use of the property, liability for the actions of
any particular lessee, and the leasehold interests of the government in relation to
any lender of the nongovernmental partner. Any federal public-private partner-
ship is subject to budget scorekeeping rules. There could be cases where a finan-
cial analysis of a transaction by an agency is at variance with the scorekeeping
analysis as determined by the OMB or the CBO--that is, the agency analysis
might show a net benefit, while the scorekeeping analysis might show a net cost.2
Although the study committee supports more widespread use of public-pri-
vate partnerships, it offers some caveats. The public interest must be considered
before entering any partnership. Even if a transaction is viable from the private
perspective, there should be sufficient financial returns to the government to war-
rant it. Public objectives related to accessibility, the environment, and historic
preservation should not be compromised. Strict controls to avoid conflict of inter-
est and other forms of potential or actual corruption are required. All of these
factors should be weighed in a partnership feasibility analysis because they may
argue against a partnership that looks attractive on more narrow financial grounds.
Program design must also take these factors into account. The VA program,
for example, has many checkpoints, including public hearings at the local level,
that must be passed through before an enhanced-use lease agreement becomes
final. No matter how well designed an agreement may be, poor implementation
and execution can undo the benefits or, worse, lead to losses. The Park Service's
concessions program, for example, has in the past suffered from the fact that
agency staff overseeing the contracts are often inadequately trained and have
lacked basic business analysis and management skills (GAO, 2000a). Lack of
performance-based contracts in that agency is another problem, as is a muddling
of lines of authority and accountability from project-level staff to higher-level
agency executives. For example, the chief of concessions has no direct authority
over staff in the individual park units who manage individual concessions. Al-
though these are particular examples relating to the Park Service, they illustrate
the kinds of issues that must generally be resolved satisfactorily in any broaden-
ing of the use of public-private partnerships in the federal government.
Capital Acquisition Funds
Proposed in the Report of the President's Commission to Study Capital Bud-
geting (1999) and in the President's Budget for FY 2004, capital acquisition funds
(CAFs) are accounts that would receive appropriations for large capital projects,
2See the CBO report Budgetary Treatment of Leases and Public/Private Ventures (2003) for a full
discussion of these points.
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82 INVESTMENTS IN FEDERAL FACILITIES
appropriations that are now made to individual operating units within federal
agencies. The CAFs would use the authority represented by those appropriations
to borrow against the general fund and would acquire the assets on behalf of the
operating units within the agencies, charging those units rent on the facilities
equal to the cost of debt service on the relevant project. Thus, if an agency wanted
a new capital project, Congress could allow the agency to borrow money through
its CAF to purchase it. Agency programs would then repay the fund, based on
their use each year.
Although proposed as agency-wide, a CAF could be applied at a higher level
across agencies; for example, appropriations committees could appropriate to a
CAF established for all agencies under the purview of their particular committee.
A CAF would not replace the General Services Administration (GSA) revolving
fund (the Federal Building Fund3 ). Instead, agencies would use their CAF only if
their office space acquisition could be done more effectively and efficiently than
through GSA.
CAFs have not yet been used in the federal government, and how they would
operate is still unclear. It would seem that oversight and management of such
funds should reside in a central budget organization such as OMB. Under the
proposal in the President's Budget for FY 2004, departments would no longer
receive separate appropriations for support services and capital assets but would
create a fund at each department that program managers would use to buy facili-
ties-related requirements. Managers could then buy support services from the
government or the private sector with the funds. Although the proposal is broader
than a CAF alone because it covers noncapital services in addition to capital
programs, CAFs are explicitly a part of the proposal.
A CAF has several perceived advantages over current agency methods of
capital funding. First, it would require capital asset coordination and planning
across agency operating units. Second, a CAF could smooth out funding and
expenditure spikes that occur when individual units have especially large peri-
odic capital requests. Finally, because operating units would be charged annual
"rent" (representing debt service and other asset overhead), a CAF could lead to
more accurate allocation of asset costs to affected parties within agencies, giving
asset managers incentives to make more efficient decisions.
The existence of a CAF by itself would not ensure good implementation and
management. As proposed, a CAF is an additional layer of administration that
could complicate program management rather than streamline it. Issues to be
worked out include the relationship between a CAF and the GSA Federal Build-
ing Fund, the managerial relationship between a CAF and individual operating
units within agencies, and the status and treatment of CAF activities within the
current overall operating budget.
3The Federal Building Fund was established under the Federal Property and Administrative Ser-
vices Act of 1949.
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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 83
The measure could also present challenges for agencies that own extensive
property. Whereas currently a congressional appropriation for a capital project is
simply added to the budget of the fiscal year in which it is appropriated, under a
CAF, as outlined in the new proposal, an agency's capital acquisition fund would
borrow the needed money, and that money would be gradually paid off by the
agency programs that used it. Assigning costs in this way would make projects
appear more expensive. That is an intended consequence meant to ensure the
overhead costs of a capital project are more explicit and borne by the managers
and users of that project. Indeed, according to the CBO, such an approach works
on the premise that the federal budget should recognize capital costs up front
when the decision to invest is made while spreading those costs out over time in
program managers' budgets (CBO, 2003).
Despite these caveats and issues, the committee believes that CAFs offer an
opportunity to fulfill facilities-related requirements more cost effectively and ef-
ficiently. The committee supports implementation of pilot programs using CAFs
to determine if their promise can be realized in the federal operating environment.
Dedicated Funding, Trust Funds, and Earmarked Receipts
Dedicated funding refers to any mechanism whereby resources are commit-
ted to a specific purpose in advance of any actual spending or activity and which
in some way guarantees that those resources will actually be spent according to
that initial commitment. A variety of mechanisms are used to ensure dedicated
funding. A simple one is a direct mandate, perhaps contained in the charter of an
organization that contractually or legally forces an entity to spend certain monies
in a specified way.
More widely used are the devices of trust funds and earmarked receipts. In
the private sector a person creates a trust fund using his or her assets to benefit
specific individuals. The creator of the trust names a trustee who has fiduciary
responsibility for managing the designated assets in accord with the stipulations
of the trust (GAO, 2001a). In the federal government, Congress creates a federal
trust fund in law and designates a funding source to benefit specified groups or
individuals or, in some cases, itself. The Treasury Department and the OMB de-
termine the budgetary designation as a trust fund when a law both earmarks re-
ceipts and identifies the account as a trust fund account (GAO, 2001a).
Earmarked receipts are collections that are stipulated by law as being dedi-
cated to a specific fund or purpose. Earmarked funds do not always go to trust
funds. They also are deposited into entities such as public enterprise funds, which
often have the same purposes as trust funds but are not designated as such. Two
examples of earmarked funds are the Nuclear Waste Fund and the Postal Service
Fund. Examples of federal trust funds include Social Security, Medicare, and the
Highway Trust Fund.
There are two types of federal trust funds: (1) revolving funds, which support
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84 INVESTMENTS IN FEDERAL FACILITIES
a cycle of businesslike operations in which earmarked receipts are derived mainly
from revenues generated by those businesslike activities, making the relationship
between the sources and uses of funds relatively clear, and (2) nonrevolving funds,
in which the earmarked receipts are not generated by businesslike activities but
come from periodic revenues such as annual appropriations and a variety of other
sources, from cigarette and payroll taxes to customs duties (GAO, 2001a).
Designation as a trust fund does not impose a greater commitment on the part
of the government to carry out that activity than it has to carry out other activities.
Although special constituencies may create pressure to spend earmarked revenues,
the federal government does not have fiduciary responsibility to the trust benefi-
ciaries in establishing and operating a trust fund, revolving or otherwise. While
the law establishing a given trust fund does govern the collection and disburse-
ment of revenues going into that fund, Congress can change the law to change the
terms of how much money is collected, how much is disbursed, to whom it is
disbursed, or the purposes for which the funds are used. In addition, in most cases
the federal government has custody and control of the funds and the earnings on
those funds.
One example of a trust fund used for facilities acquisition and investment is
the U.S. Mint Public Enterprise Fund. Established in 1996, this fund allows all
receipts from the Mint's operations to be deposited into an account from which
all operations are then funded. Such operations include "the acquisition or re-
placement of equipment, the renovation or modernization of facilities, and the
construction or acquisition of new buildings" (P.L. 104-52). The fund is unique in
that the Mint's operations are exempted from the Federal Acquisition Regula-
tions, which cover government procurements and public contracts. The exemp-
tion allows the Mint to operate more like a private-sector entity, thus gaining the
flexibility and efficiency that purportedly accrue to such entities. Under this ex-
emption, the Mint itself determined that it also had statutory lease authority and
thus did not fall under the leasing rules set forth by the General Services Admin-
istration (OIG, 2002).
Trust funds, earmarked funds, and charter mandates have the advantage of
being relatively simple in concept and focused on a single aim: provision of dedi-
cated and sufficient funds for an intended purpose. In that sense they have per-
formed well. The public readily understands the concept, and when one of these
mechanisms exists, it tends to create momentum toward keeping funding at least
at a certain minimum level. Similar results can accrue to public enterprise funds
and other special funds in the federal budget receiving earmarked funds.
However, the existence of a trust fund or other mandate does not guarantee
that funds or facilities will be well managed. An investigation of the U.S. Mint
found that the agency was leasing too much space for its needs, was not following
prudent business practices in its leasing arrangements, and in general had weak
management controls. Thus, having a dedicated trust fund, which in this case
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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 85
gave extra operational flexibility, is not a replacement for good management
(OIG, 2002).
There are also issues surrounding the interpretation of trust fund balance
information. A fund may be running a surplus, something that may be interpreted
as indicating a healthy program. Yet the program may not be financially or mana-
gerially sustainable in actual fact if the trust fund flows are not designed with
long-range needs in mind and if program funds are not soundly administered.
Similarly, a deficit does not necessarily indicate a troubled program. Even if it
does, the response may be to simply add more funds without addressing funda-
mental problems.
Trust funds, earmarked funds, and special funds are widely used in the fed-
eral government. In FY 1999 half of federal receipts went into trust funds, and
130 of them existed at that time--120 nonrevolving and 10 revolving. Issues
related to their continued use include whether they should be renamed to avoid
confusion on the part of the public with private sector trust funds, whether there
should or could be some tightening of terms to make them more like private trust
funds, whether information provided on them should be revamped to reveal more
about program operations than a mere fund balance, the strength of the link be-
tween the source of the funds and their use, and how the use of funds is linked to
underlying program management regimes--that is, the transparency of the fund-
ing (GAO, 2001a).
Sale-and-Leaseback Arrangements
Sale-and-leaseback arrangements are routinely used in the private sector. The
owner of a building sells it to another company or entity and then leases it back
for a specified time period. At the end of that time, the original owner buys the
building back. This type of arrangement allows the original owner to raise capital
and still retain use of the building, in essence temporarily borrowing funds that
can then be used for other purposes (Groppelli and Nikbakht, 2000).
A sale-and-leaseback arrangement offers few, if any, incentives for a federal
agency unless it can retain the sale proceeds and use them to achieve some benefit
or purpose that is not being funded through its annual budget. In at least one
instance, the GSA was granted authority to retain the proceeds if it entered into a
sale-and-leaseback arrangement. In this case, the GSA had planned to excess a
Class C office building in West Virginia after the federal tenants in the building
moved to a new courthouse. In the interim, the Social Security Administration
contacted the GSA about moving into the Class C space in order to better serve
the public by consolidating its functions with those of the West Virginia Disabil-
ity Determination Agency. Legislation was enacted allowing GSA to sell the
building and retain the proceeds for the Federal Buildings Fund. The new owner
committed $11 million to upgrade the building to Class A office space; in turn,
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86 INVESTMENTS IN FEDERAL FACILITIES
GSA committed to leasing a portion of the building back for 20 years, thus assur-
ing the owner of a stream of revenue to pay back its investment. Both the GSA
and the Social Security Administration claimed immediate benefits from this ar-
rangement. However, the GAO expressed concern whether this arrangement
would be cost-effective in the long term (GAO, 2003a).
Outleasing
Under an outleasing arrangement, a federal agency leases all or a portion of a
facility to a private-sector or not-for-profit organization. The lessee assumes the
maintenance and repair costs of that space and in some cases invests in renova-
tions. In essence, the federal agency becomes a landlord to nonfederal entities.
Outleasing arrangements have been used by the GSA, the Coast Guard, and
possibly other agencies, for some underutilized and historic properties (GAO,
2003a). The Coast Guard, for instance, has outleased and divested 28 historic
lighthouses in the State of Maine to organizations that will ensure the lighthouses
are repaired and maintained. Under this arrangement, the Coast Guard receives
some income from the lighthouses that can be used to offset expenses at other
historic properties and avoids annual maintenance and repair costs of $3 to $5
million. It thus receives a benefit from properties that are no longer integral to its
mission. The public benefits in that the properties are preserved for posterity and
in a better state of repair. The GSA has used outleasing to gain similar types of
benefits from other historic properties, such as customhouses (GAO, 2003a).
Clearly such arrangements raise questions about the relative costs and ben-
efits of selling excess historic and underutilized facilities outright and maintain-
ing some control and stewardship over heritage properties. They also raise issues
related to local land use control and interests. The costs and benefits, financial
and intangible, will vary case by case but offer the potential for improved stew-
ardship of federal properties.
Real Property Exchanges
Sometimes land and buildings owned by a federal agency have a greater
value to another entity than to the agency itself. On occasion, the GSA, the Air
Force, other military services, and possibly other agencies, have been able to
exchange real property with a private developer or a state or local government in
return for a different piece of property or facilities. Such exchanges are different
from public-private partnerships in that they typically do not involve an exchange
of funds or competitive bidding; there are a limited number of potential special-
purpose exchanges; congressional oversight is more limited; and such exchanges
are not reflected in the federal budget (GAO, 2003a).
In one instance, the Army Reserves conveyed approximately 11 acres of land
used for training activities to a private-sector developer that required the land to
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ALTERNATIVE APPROACHES FOR ACQUIRING FEDERAL FACILITIES 87
build a road for access to a new development. In exchange, the developer con-
structed a new fire station for the Army Reserves, to replace an older, less modern
one (GAO, 2003a).
In another example, the GSA conveyed two small parking areas and a par-
tially vacant, deteriorating historic property to the city of Albuquerque, New
Mexico, in exchange for a large parking garage proximate to other federal build-
ings (GAO, 2003a).
In a third instance, legislation was enacted that authorized the Air Force to
convey land it owned on the Los Angeles Air Force Base to a private developer in
exchange for the design and construction of a new 560,000-square-foot space and
missile systems center on the base. The new center replaced two outdated build-
ings that were vulnerable to earthquakes.
In these cases and others, the federal agencies involved were able to ex-
change real property for other land or buildings that provided greater benefit to
the agency without having to use funds from their annual budget appropriation.
From a government-wide perspective, real property exchanges raise issues about
the property valuation procedures used, the fair market value of the property if a
competitive bidding process is not used, the sufficiency of congressional over-
sight, and how to reflect such exchanges in the federal budget.
Shared Facilities
"Shared facilities" refers to the practice of having independent operating en-
tities with large portfolios of facilities share the use and/or management of those
facilities in some way. The sharing could apply to information about the facili-
ties, coordination of planning and management, joint oversight, or actual shared
use of facilities. As an example, the GSA oversees and coordinates the Govern-
ment-wide Real Property Information Sharing (GRPIS) program, which allows
different federal agencies to share information about facilities under their indi-
vidual control. Purely voluntary in its participation, GRPIS has so far resulted in
the formation of interagency real property councils in several regions of the coun-
try; development of an automated inventory of real property; a Web site for shar-
ing information about best practices, ongoing issues, and follow-on initiatives;
and joint analyses of common issues in the regions and possible coordinated solu-
tions to those problems (GSA, 1998).
Sharing facilities is a way to extract more utility from a portfolio of facilities.
By treating a facility as commonly held rather than individually held, managers
can avoid duplication of effort in both current operations and future investments;
fully utilize assets that, if used only by the owner of the facility, might be
underused; and share costs, making the facility more affordable and manageable.
Disadvantages of facility sharing vary according to what is being shared. The
GRPIS program is a voluntary information-sharing program. As the GSA itself
notes, while a voluntary program increases the level of trust and perhaps enthusi-
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88 INVESTMENTS IN FEDERAL FACILITIES
asm for participation, it also potentially makes for less effective joint action. If
more than information is shared and if participation is mandatory, other problems
might be introduced. Joint use and management of facilities, for example, can be
a costly activity, in terms of both staff time and direct outlays. And depending on
how disparate the operating entities are and how diverse the facilities portfolio
being managed is, sharing of facilities can make management slower, less re-
sponsive, and less effective.
SUMMARY AND A RECOMMENDATION
Based on a consolidation of research, interviews, briefings, and the commit-
tee members' collective and individual experience, the committee found that a
range of alternative approaches to acquiring federal facilities are used by indi-
vidual agencies under special legislation specific to the agency. Capital acquisi-
tion funds, not yet implemented in any federal agency, offer the potential for
improved capital asset coordination and planning across operating units, more
accurate cost allocation of assets, and incentives for asset managers to make more
cost-effective decisions.
However, each of these approaches has advantages and disadvantages. Suc-
cessful implementation of alternative approaches requires effective oversight and
management by federal employees with the appropriate skills and training.
When implementing an alternative approach, the committee believes that all
the potential costs and benefits to federal departments and agencies and the pub-
lic should be taken into account. The impacts on state and local communities
should be accounted for and attempts should be made to balance national, depart-
mental, and agency objectives with those of other public stakeholders.
Taking these caveats into consideration, the committee believes that if alter-
native approaches for acquiring facilities were carefully applied, their use on a
government-wide basis could provide federal departments and agencies with more
cost-effective ways to acquire facilities, reinvest in the existing stock, and pro-
vide a range of benefits to the public. Pilot programs to test the effectiveness of
various approaches and to evaluate their outcomes from national, state, and local
perspectives should be implemented as a first step. If changes to the budget
scorekeeping rules are required to expand the range of alternative approaches,
such changes should be tested through the pilot programs.
Recommendation: In order to leverage available funding, Congress and
the administration should encourage and allow more widespread use of
alternative approaches for acquiring facilities, such as public-private
partnerships and capital acquisition funds.
Representative terms from entire chapter:
trust fund
