Regulations for Better Regulation

It seems that the further we delve into federal real property asset management, the more it reveals about the need for additional regulations and legislation to make it more workable.

This issue of “Managing Change” includes recommendations from federal real property professionals and private industry on how to make the most of real property asset management. Overall, what it points to is a new way of thinking about this category of asset – and the need for some of that thinking to be codified to be more effective.

Jay Brown, a Managing Director with Alvarez & Marsal, suggests that he Federal government should use out-leasing strategies such as Enhanced Use Leasing and privatization as a key component of its overall asset management strategy. Out-leasing, he says, creates “an enterprise value for assets that are underutilized, thereby attracting private capital as the investment funding source for these assets.”

Of course, most surplus assets flow through the GSA, and in most cases the GSA must authorize out-leasing of real property. Several agencies have delegated authority to make decisions regarding enhanced use leasing of their facilities, and the procedure might be greatly simplified by reviewing the GSA’s policies regarding such transactions. (For more from Jay Brown, see “Three Questions with Jay Brown”)

New regulation or legislation seems to be the preferred way to ensure that agencies gain a budgetary incentive when it comes to compliance with Executive Order 13327 on Federal Real Property Asset Management (EO 13327). The Federal Real Property Association (FRPA) is currently updating its 2005 survey on EO 13327 compliance, for presentation at its October professional conference in Washington DC.

In 2005, 91 percent of those polled said that proceeds from disposal of excess inventory should be returned to the agencies, rather than to the general funds of the Treasury. (See “FRPA to Repeat Important Survey of Federal Professionals.”)

A lack of Incentives was also one of the main obstacles in effective federal real property asset management cited in a survey conducted by the Association of Government Accountants (AGA). Those polled by AGA recommended legislative authority to retain proceeds from leases of land and sale of land or structures. They also suggested changing the Property Act to allow for out-leasing and disposal of Federal facilities, retaining the proceeds for constructing new modern facilities or for deferred maintenance. (For more information, see the article “AGA Survey Cites Lack of Incentives as Real Property Stumbling Block”)

Lease agreements also have somewhat hidden costs when outsourced by agencies. Before making the decision to outsource portfolio management or to keep it in-house, remember that the only measure that makes good business sense is total cost to occupy. An agency has to measure all the additive costs for leases and then apply them to the lease value. That way, agencies can make truly value-based decisions. (See “The True Value of Outsourcing Portfolio Management: Opportunities and Obstacles”)

There is no lack of good intentions when it comes to better real property asset management. But until such time as it ceases to be an unfunded mandate, the most effective way to ensure compliance is, as tedious as it may seem, to have regulators create new regulations to support this regulation.


David Baxa
President and CEO
VISTA