The White House is increasing the pressure on agencies to get rid of excess or unused real property.
But it’s not because agencies have failed; rather it’s because they have been so successful.
OMB controller Danny Werfel said agencies now will be expected to save or avoid spending $3.5 billion by the end of fiscal 2012, up from the $3 billion goal President Barack Obama set in a June 2010 executive order.
“We are able to demonstrate agencies have executed $1.5 billion in savings since the Presidential directive,” Werfel said in an interview with Federal News Radio. “That’s great news. To us, it shows us we are on track.”
“The fact we are getting rid of assets on the list is important progress. The fact we are adding assets to the list of excess assets is important progress,” Werfel said. “We really want agencies managing their real-property inventory very aggressively and if they are finding properties are underutilized or mission critical, the fact they are being aggressive in moving them onto this excess list is an important part of our improvements in our performance.”
Better space management
The Energy and Agriculture Departments have almost reached their 2012 goals. Energy has achieved $287 million of its $375 million goal, while USDA has reached $279 million of its $300 million goal.
But other agencies still have a long way to go. The Justice Department has only saved $24 million out of the $335 million it committed to, while the Homeland Security Department avoided spending $48 million out of the $260 million it committed to.
OMB’s data also show most of the $1.5 billion in savings — $854 million — came from better space management of agency buildings. That includes which includes lowering operating costs through:
Renegotiating or eliminating leases
Reducing square footage through techniques such as reduction in office and work station sizes
Moving from leased to federally-owned space
OMB also identified 1,400 properties agencies got rid of this year, including a 1 million square foot Brooklyn warehouse that sold for $10 million and a Bethesda, Md. office building that sold for more than $12 million.
Property ‘SWAT Teams’
Werfel said a lot of the credit for the early success goes to the Federal Real Property Advisory Board made up of six or seven chief financial officers and agency real-property experts.
“We’re kind of like a SWAT team,” he said. “We’ve worked with each agency, unpacking their inventory, doing deep-dive analytics — and not just within each agency’s inventory and advising each agency — but looking across agencies and looking across property types. We are looking at warehouses across agencies. We are looking at office buildings and searching and combing for opportunities that may not be obvious on first blush.”
OMB set up the advisory board in May to help address legal and policy challenges, while Congress works a reform bill through its processes.
The advisory board is also responsible, in part, for the increased goal for 2012.
High-valued buildings on sale
Werfel said the board found several high-valued office buildings that could bring in hundreds of millions of dollars or more, including one in the Georgetown section of Washington.
“That building has not been utilized going on 11 years,” he said. “We can no longer afford to that anymore. We have to be able to get rid of these assets more quickly.”
The White House submitted a legislative proposal to create a civilian property disposal commission earlier this year, and two lawmakers — Rep. Jeff Denham (R-Calif.) and Sen. Scott Brown (R-Mass.) — introduced legislation to create the panel.
The Transportation and Infrastructure Committee approved Denham’s legislation earlier this month. Brown’s bill is before the Committee on Environment and Public Works.
Obama included civilian property disposal reforms as part of his recommendations to the congressional supercommittee. And Denham sent a letter Thursday to the members of the supercommittee asking for his bill to be included in final report as well.
Brown has not yet sent a letter and an email to his office asking if he plans to was not immediately returned.
“There are a lot of champions emerging here,” Werfel said. “It definitely resonates with a broader and broader set of policymakers that we need to give federal agencies the tools we need to operate in unprecedented budget cuts that we are currently experiencing and confronting. And giving us the tools to reduce our overall real-estate footprint and the costs associated with that footprint is a very clear and obvious strategy to help federal agencies manage with smaller taxpayer funds at play.”
Bill depends on the supercommittee
Dave Baxa, CEO of Vista Technology services, which worked closely with the Defense Department on its Base Realignment and Closure initiative to dispose of buildings, said the bill’s best chances for passage may be through the supercommittee.
He said the House version includes a “poison pill” — it requires the government to sell the Energy Department’s Forrestal building and move the Federal Trade Commission to a new headquarters, which might not be popular with lawmakers.
“I think there is a lot of desire to get something into law,” he said. “There seems to be enough interest on both sides of the aisle to get something done this year.”
The effort by agencies and OMB is much different than previous attempts to dispose of federal real property, Baxa said.
In 2004, President Bush signed an Executive Order creating among other things a Federal Real Property Council and requiring agencies to develop asset-management plans.
But, Baxa said, the Bush White House didn’t get a lot of interest from Congress so they tried to tackle the arduous process of getting rid of real property as best they could.
Now, the fiscal environment is different, he said.
“I think what you are seeing is a few champions in various departments and agencies,” Baxa said. “We need to do something different because agencies are real good at accumulating, but not disposing of buildings. I do see some signs that folks are trying to get their data inventories in line so they have a good feel of what they do have. There are some hurdles around getting cooperation between agencies and within departments.”
Baxa also questions OMB’s savings goals. While he said there will no doubt be savings in getting rid of buildings, $3.5 billion seems like a lofty goal, especially after looking at federal data from March.
“There were about 9,000 buildings, but unfortunately 70 percent of them were less than 2,000 square feet in size. There was a lot of ash and trash,” he said. “About one-third of them were Defense Department buildings and properties, and some of that was already in the mill as it related to BRAC 2005. I’m not denying there are savings. I think we might need to take a closer look at the amounts. Of course, anything that is cut out of the inventory at this time, over time will realize savings.”
The Congressional Budget Office also recently questioned how much money this effort would end up costing the government. CBO estimated Obama’s proposal would increase net spending by $60 million by 2021 and it would cost another $420 million to identify and prepare property for sale or transfer between 2012 and 2016.
Agencies are taking big steps in the right direction, Baxa said, but Congress needs to act to give the initiative the extra shot in the arm it needs.