The General Services Administration believes public-private partnerships are more than just another tool in the real estate disposal toolbox. GSA officials say this approach may be one of the best ways to quicken the pace of disposal and reduce costs and waste.
“GSA has been looking to utilize new tools to leverage the equity in our older, outdated buildings to get new, highly efficient space for our federal agencies,” GSA Administrator Dan Tangherlini said at July 23 roundtable on Capitol Hill focusing on private-public partnerships in federal real estate. “We’ve already seen that the cuts within the federal government have forced agencies to examine their expenditures and examine which of these expenditures are actually fixed costs. For many agencies, this means taking a look at their space and reevaluating. This need to use space more effectively coupled with the transformational effect of technology in our offices is changing the way we work. … Public-private partnerships, we believe, represent a promising approach, in addition to using these various resources.” Outdated inventory, underutilized properties, high construction costs and reliance on operating leases without an equity position contribute to increasing costs in federal real estate. Agencies can mitigate these challenges through public-private partnerships (P3s), according to legislators on the House Transportation and Infrastructure Subcommittee on Economic Development, Public Buildings and Emergency Management, which hosted the roundtable.
“We have an aging inventory that is not in the best condition, as we all know,” said subcommittee Chairman Lou Barletta (R-Pa.). “Government construction tends to be slower and more expensive than similar private sector projects. Compounding these problems are excess and underutilized buildings that drain resources. While we’ve taken steps to improve the utilization rates, the reality is agencies still need buildings to do their jobs. The question is, can we provide that space in a more cost effective manner? P3s effectively used have the potential to help leverage private expertise in meeting those needs and developing and restoring agency properties.”
Increased pressure on GSA
Lawmakers have been after GSA to do a better job in disposing of real property for the last few years.
The Obama administration responded by offering a legislative proposal to create a civilian version of the Defense Department’s Base Realignment and Closure (BRAC) effort and issued a memo in March to freeze the federal footprint. Lawmakers introduced several bills to change the approach of how GSA and agencies get rid of real property, but progress has been slow.
Under the Freeze the Footprint initiative, OMB required agencies to submit three-year Revised Real Property Cost Savings and Innovation Plans by May 15 that will more narrowly focus on how they will maintain their 2012 real estate footprint and include a prospective analysis of spending for the next three years.
With progress to change the law slow and agency data inconsistent, GSA and lawmakers are looking for alternative ways to get rid of unused or underutilized federal property. Public-private partnerships could be one of those innovative approaches.
Public-private partnership projects are divided into two categories: those that are generated by a surplus of property owned by the government; and those that are generated by an unfunded need by the government, Michael Allen, vice president of Hines Interest said.
Scoring needs to change
One barrier to any public-private partnerships is the manner in which the projects are scored by the Office of Management and Budget.
“It seems like on the scoring front, it’s going to be really difficult to get OMB and the Congressional Budget Office to just change their minds,” said Kim Burke, managing director a Jones Lang LaSalle. “You’re going to have to do something really drastic. … It’s not necessarily the government paying, it’s the users. It’s a user who’s paying for the ultimate use of the asset.”
Tangherlini said he doesn’t believe OMB is at the point to lift the scoring criterion in projects such as the FBI building or the southwest Ecodistrict — two public-private real estate initiatives in the works — but further dialogue could nudge OMB to change its criterion.
“We’re assuming that we’re working within the current constraints of scoring for both cases. So, in the incidence of the FBI building, we’re asking what are the best approaches we’re trying to design a request for proposals that meets the limitations of the market interests as well as scoring those,” Tangherlini said. “But that doesn’t mean that there isn’t a possibility of having conversations that go back and say ‘Well, these scoring rules violate those first principles of trying to do what’s fiscally appropriate for the federal government long-term.'”
Melissa Dawkins is an intern for Federal News Radio