Right-sizing Inventory is Key to Capital, Federal Execs Say

Congress has no deadline for disposal of surplus property, and may not provide sufficient incentives for disposal. Still, these early initiatives will lead to right-sizing of the federal inventory, making funds available for continued improvement and maintenance.

That was the consensus among a panel of federal executives speaking at a breakfast seminar hosted by the Federal Real Property Association (FRPA) on October 15.

Incentive Not Enough, But a Good Start

Stan Kaczmarczyk, Deputy Associate Administrator of GSA’s Office of Governmentwide Policy was asked whether 20 percent of disposal proceeds was sufficient incentive to cover agency costs of such disposal, as recommended in proposed Congressional pilot legislation.

“Is twenty percent enough? Probably not, but it’s a good start,” Kaczmarczyk said. He noted however, that the incentive was not the true purpose of the proposed legislation.

“One of the things I’ve heard through Congressional staffers is that the real intention of this was to collect data,” Kaczmarczyk explained. “Every time they came to agencies for data on disposal and value of properties to get back into the market they came up empty.”

One of the purposes of the pilot program, he said, was simply to collect data, give agencies some proceeds as an incentive and use that as a platform to fund continued work on the real property inventory.

If the pilot legislation is passed, Kaczmarczyk said, he was confident that some surplus property would be disposed of that would not otherwise have been.

No Deadline for Disposal

On the topic of surplus inventory, Danny Werfel, Acting Controller, Office of Federal Financial Management, Office of Management and Budget (OMB), was asked about the status of a list of surplus properties submitted to Congress by OMB in June. That list represented some 130 properties deemed most eligible for disposal as surplus, with a value of $17 billion.

Congress imposed no deadline on OMB or the agencies for disposal of the assets on that list, Werfel noted.

“Each agency on the list knows that they have a property on the list, and will make sure that the property is in its queue for disposal,” Werfel explained.

“Some of those assets have been disposed of; others are still in process. We’ll know more after December 15, when we update the annual snapshot of our real property portfolio,” he said.

“We’re using the annual update to refresh the list,” Werfel noted. “It’s an ever-changing and dynamic process. Once we get that data in, it will allow us to remove properties from the list that have been disposed of, and add new ones that should be on the top tier.”

Access to Capital Means Reinvesting Assets

When asked about access to capital for improvements, maintenance and operation of the real property inventory, David Winstead, Commissioner of the GSA’s Public Buildings Service, said the real answer is “appropriate asset management, getting underperforming assets out, reinvesting those assets and improving performance as a result.”

While constrained by Federal Building Act and the Budget Act, GSA is constantly looking at innovative approaches for access to capital. In some cases, he said, it requires examining “disposal authority and appropriate ways to utilize it.” Winstead has seen actions from Congress that respond to the need for capital, he said, citing direct appropriations for the Courts, and similar proposed appropriations being considered for customs and border protection functions.

While managing the federal building fund and reapplying predicted revenues to capital program, other successful capital initiatives come from local and municipal governments partnering with the federal sector, Winstead said. He gave an example of an agreement in the Denver area in which two parcels of federal land have been sold, one of which will be used for a municipal hospital.

Challenging and Frustrating

Werfel acknowledged a “tension between seeing with greater clarity an agency’s real property and funding needs, balanced against other budgetary priorities.” He conceded this is both “challenging and frustrating” for agencies. He praised the result of Executive Order 13327 on Real Property Asset Management, noting, “We have had approximately $4.5 billion in excess real property removed from the federal books.”

“Billions more in the queue,” he added.

“The initiative has not only told us what assets we can get rid of, but shows us…what our backlogs are for maintenance, what we need to do to invest, and how critical those assets are to our mission,” Werfel explained.

“It doesn’t necessarily mean that information solves our budgetary pressures,” he said. “But it is critical to smarter decision-making for appropriations.”