The Military has Achieved Real Savings from BRAC. Why not the Civilian Side?

The President’s Management Agenda (PMA) initiative on real property asset management is becoming known in some circles as “Base Realignment and Closure (BRAC) for Everyone Else.” Given that the same basic concerns apply to both defense and civilian sides of government (i.e. real property inventory, facility assessment, condition assessment, operations and maintenance costs, mission criticality, etc.), why is it that the military services seem to have a better handle on the financial implications of their real property assets than their civilian agency counterparts? Why are so many Departments having difficulty getting to Green on implementing their Asset Management Plan (AMP)?

Part of it, of course, is that there have been five iterations of BRAC, while the PMA is only two and a half years old. There’s a lot to be said for having a few agonizing previous experiences under your belt to get the system running smoothly.

For the most part, though, the truth is that the financial implications of surplus or underutilized real property holdings have been drummed into the military services’ way of thinking about mission fulfillment. That same way of thinking, on the other hand, is an enormous paradigm shift for most civilian agencies. This is an unfunded mandate, and money has already been earmarked for other programs.

Perhaps it’s not enough for us simply to underscore that an AMP must identify surplus inventory, and create a timeline for disposal of the excess. What’s the real cost of holding on to unneeded land and buildings – not just for mission fulfillment, but for taxpayer confidence in this time of the greatest budget deficit in history?

What is the waste, exactly?

The federal government owns or leases some 650 million acres and 3.7 billion square feet of building floor area. The current replacement value of federal assets (buildings and structures) is estimated at something like $1.3 trillion.

In a January 2006 White House Summit on Federal Sustainable Buildings, OMB Deputy Director for Management Clay Johnson referenced a potential $15 billion in savings over a 10-year period or sooner by getting rid of unneeded federal real property and redirecting funds to higher priority asset management uses.

So across ten years – maybe less – the government will have wasted almost two percent of the current replacement value of federal buildings and structures on holdings that are not needed to fulfill mission goals. That’s between $1.5 billion and $2 billion per year in wasted taxpayer dollars, if OMB is correct.

Some federal facilities are already becoming rather infamous poster children for surplus inventory. As widely reported in the media, the former Main Post Office in Chicago represents 2.5 million square feet of unused property, which costs taxpayers in excess of $2 million annually. It has been vacant since 1997.

What makes this so disturbing? Recent reports indicate that occupancy costs for prime commercial real estate continue to rise, not just in the US, but around the world. In CB Richard Ellis Research’s semi-annual Global Market Rents survey of 173 markets, as reported by Barbara Jarvie in GlobeSt.com, several North American markets are in the Global Top 50, including Midtown Manhattan and Washington, DC.

Chicago was not among the top global markets. And yet, according to the commercial real estate company Staubach, the annual total occupancy cost of commercial property in Chicago is $33.60 per square foot.

So, if the vacant former Main Post Office in Chicago were available for commercial development (even in a leased arrangement), at 100 percent occupancy, at the current rate, its 2.5 million square feet would return a gross of $84 million in the first year. Granted, the net would be less, after factoring in possible rehabilitation costs.

At this writing, the current national debt is $8.4 trillion. That’s a debt burden of $28,000 for each man, woman and child in the US.

Can we really afford to waste $1.5 billion to $2 billion annually in maintaining surplus real property – to say nothing of the multiple billions of dollars in lost opportunities to reduce the federal deficit through disposal or leasing of this property?

The paradigm shift required to comply with this PMA real property initiative means more than thinking about mission fulfillment. It means making an investment in the fiscal well-being of the nation.

Let’s get to work!


David Baxa
President and CEO
VISTA