Are Walter Reed’s Problems Really Government-Wide?
By Ray Summerell

Mainstream media link the recent problems at Walter Reed Army Medical Center to a flawed US Army. The reality, however, is both simpler and somewhat more concerning.

By keeping more land and buildings than are needed to fulfill their missions, government agencies actually end up with less money to maintain their entire inventory properly. What’s more, some “white elephants” in the inventory may be maintained at the expense of mission-critical facilities, sapping resources and driving up operating costs.

Even when operational goals require additional funding, that increase in funding may be reduced or even deferred by a right-sized real property inventory.

The Government Accountability Office (GAO) has sought to improve federal real property asset management since 2003. Federal real property was added to the GAO’s High-Risk Series in 2003 – and was kept on that list in the GAO’s update document released this past January (For details, see http://www.gao.gov/new.items/d07310.pdf).

GAO criticizes “repair and maintenance backlogs”

In its update, GAO cited that the Department of Energy, NASA, the General Services Administration (GSA), and the Departments of the Interior, State, and Veterans Affairs have “reported repair and maintenance backlogs for buildings and structures that total over $16 billion.”

According to the GAO, “over 10 percent” of the facilities are excess or underutilized at the Departments of Energy (Energy) and Homeland Security (DHS) and the National Aeronautics and Space Administration (NASA).

Across the federal government, the financial impact of wasted federal space becomes clear. Clay Johnson of the Office of Management and Budget, speaking before the US Senate, has estimated that five percent of surplus federal real property inventory has a value of $15 billion. The General Services Administration puts the total replacement value of federal assets (buildings and structures) as of 2006 at $1.26 trillion.

The controversy surrounding Walter Reed is just one unintended results of our current approach to federal real property. To take another example posed by some industry observers: Rising costs and competitive pressures have prompted the US Postal Service to propose a more than seven percent increase in the cost of first class postage.

The former Main Post Office Building in Chicago unfortunately was pictured in the GAO’s January update as an example of waste in federal real property. David Walker, U.S. Comptroller General, used the example of government waste at a March 1 oversight hearing of the Senate Committee on Homeland Security and Government Affairs’ Federal Financial Management Subcommittee.

This now vacant Chicago building comprises 2.5 million square feet of downtown real estate, reportedly costing taxpayers in excess of $2 million annually to maintain. In 2006, the commercial real estate company Staubach estimated the annual total occupancy cost of commercial property in Chicago at $33.60 per square foot.

It is a reasonable calculation, then, that if the former Main Post Office building were available for commercial development, at 100 percent occupancy, its 2.5 million square feet would return a gross of $84 million in the first year alone.

The question industry experts have posed is, would the US Postal Service have to raise postal rates as often if all its costs were adequately controlled? Would the decision to raise rates be different if real property professionals were more involved in their agencies’ operational goals?

Budget shortfalls must not stop progress

Unfortunately, real property is too often viewed at the agency level only as a budget expense, not an asset to be considered in making operational decisions.

In recent survey conducted with the Federal Real Property Association, most respondents said they were not asked for their input on operational directives – particularly those related to President’s Management Agenda (PMA) items outside of real property. The respondents also attributed budget cuts to maintenance and program-level deficiencies (For a copy of a White Paper on this survey’s findings, go to http://www.vistatsi.com/news_whitepapers.html).

Many agencies affected by real property initiatives such as Executive Order 13327 and the PMA feel they lack the resources simply to meet mission goals, much less find additional resources to develop and maintain a right-sized real property inventory.

It is a simple fact that such regulatory requirements, which could lead to tangible improvements in real property asset management, are not only unfunded now, they may never be funded. Nonetheless the demand for improved performance will not go away, and the consequences of the current state of affairs are being played out in the media.

Government can do better when it comes to real property asset management. Elected officials must work to ensure that federal real property professionals have the resources to properly maintain their real property holdings, and to dispose of surplus property that may be a drain on their operating budgets.

At the same time, agencies must work with their internal experts to demonstrate significant spending reductions through a right-sized real property inventory. Unless real property is considered in management and financial goals, these possibilities will go unrealized.

No one wants to repeat the current crisis at Walter Reed, but Congress needs to work harder to contribute to the solution. Without more involvement from legislators and senior agency leadership, the federal inventory of land and buildings will continue to be at risk – and no one can predict where the next problems may arise.

Ray Summerell is VP of Corporate Development for VISTA. He can be reached at 703-561-4064, or via email at ray.summerell@vistatsi.com