Federal real property portfolio could be ripe for picking under Trump administration

President Donald Trump has pledged to construct a wall and drain a swamp, but what can he do for the federal buildings?

Some say Trump, a businessman who’s built hotels, resorts and golf courses around the world, could be just the person the federal government needs to help balance its real property ledger.

“I think different presidents coming in are going to have different levels of interest in the topic, and I would say of all the presidents we’ve had in the last 20 or 30 years, I would think Trump would be most interested in this topic,” said R Street Institute Senior Fellow Kevin Kosar. “He has the experience in developing a federal property. Also, the whole spirit of his campaign has been that you’ve got to get government out of a lot of the stuff it’s been in to. There’s clear data showing that the government has properties it doesn’t need. It has buildings it doesn’t need and it’s spending more money to keep them up.”

According to the Government Accountability Office’s audit of the federal government’s fiscal 2015 and 2016 consolidated financial statements, the government has 275,000 buildings in its domestic real property inventory.

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That inventory costs about $18.7 billion in annual operation and maintenance expenditures, the audit found, including more than $7 billion in leasing.

Trump wants to cut government spending, Kosar said, and he’s campaigned as someone who said there needs to be a beautifying of infrastructure and more hard hats put to work.

“This could be a way to do that,” Kosar said. “If you sell off a property that’s been sitting there vacant and wrapped in a chainlink fence for two decades to a developer, well guess what, you’re going to create some jobs. I guess I’d be shocked in the first year if Trump did not move to do something to unload federal properties.”

Excessive and underutilized

Cleaning up the federal real property portfolio isn’t a new effort. Real property management has made the GAO’s “high-risk” list every year since 2003.

GAO reported earlier this year that, according to the General Services Administration’s Federal Real Property Profile (FRPP) database, in 2015, 23 agencies reported more than 7,000 excess or underutilized properties.

In recent years, the Office of Management and Budget issued a series of policies aimed at reducing the government’s inventory.

The “Freeze the Footprint” policy, which required agencies to freeze their real property footprint, cut 24.7 million square feet from the inventory between 2013 and 2015, saving the government about $300 million in rent, and operations and maintenance costs.

In 2015, OMB released a National Strategy for Real Property, which requires agencies to implement a five-year rolling planning process that sets annual square foot reduction and disposal targets and prioritizes the disposal of unneeded and inefficiently used properties.

A Reduce the Footprint (RTF) companion policy also was introduced.

“The RTF policy requires agencies to set annual portfolio reduction targets to help implement identified efficiency improvements and to implement an office space design standard to ensure office space is designed for efficiency,” the audit said. “Over time, the strategy and RTF policy will improve utilization of government-owned buildings to reduce reliance on leasing, lower the number of excess and underutilized properties, and improve the cost-effectiveness and efficiency of the federal real property portfolio.”

The GAO audit stated that “focusing policy on reducing the portfolio, improving the quality of FRPP data through mandatory data validation and verification procedures, and the broad use of the new FRPP management tool will support higher RTF square foot reduction targets and efficiency gains in future years.”

A look ahead

Trump has already transformed one of the government’s many properties. The Trump Organization leases the federally owned Old Post Office Pavilion, which is blocks from the White House.

“[He’]s somebody who has gotten ahold of an old federal property and is trying to make something of it,” Kosar said. “And I wouldn’t be surprised to see him and Republicans who long have advocated that the government should get rid of more and more of its lands, and its buildings, get together and do something. So far they have not released any plan, but he hasn’t even started, so we’ve got to keep our eyes on this.”

If the Associated Builders and Contractors has its way, one of the first actions of the new President will be to rescind Executive Order 13502, Use of Project Labor Agreements for Federal Construction Projects.

In a Jan. 10 letter from ABC and roughly a dozen other building and contracting groups, they asked Trump to replace the executive order with previous mandates under President George W. Bush.

“This new policy will prevent federal agencies and recipients of federal assistance from requiring contractors to sign an anti-competitive and costly PLA as a condition of winning a federal or federally assisted construction contract,” the letter said.

“Replacing and rescinding it is our number-one priority,” said Kristen Swearingen, ABC’s vice president of legislative and political affairs. “No one’s flat out telling us that they know what executive orders are going to be gone on day one, but everyone I’ve talked to is now familiar with project labor agreements, so we’re at least hopeful that it’s on their radar.”

Tom Owens, director of marketing and communications at the AFL-CIO’s Building and Construction Trades Department, said his organization was not in agreement with what ABC was proposing, but the current executive order is “pretty much inconsequential anyway,” since he could think of only eight federally funded construction projects that used a PLA.

“I can tell you six of those projects we would have probably gotten a PLA on anyway, just because of locations, market density,” Owens said.

But even if Trump starts his first week in office ready to clear the ledger, he’ll have to navigate a web of rules that Kosar said might have started out as good faith efforts, but instead “make it very difficult to dispose of federal property.”

“There’s a whole tangle of them,” Kosar said. “There’s a statute which can have properties designated as historic, there are environmental statutes about if a building has any sort of chemicals being produced in the building or used in any significant way, which requires the buildings to be kind of cleaned of all that sort of stuff, and the surrounding lands to be cleaned of all that sort of stuff, before the building can be sold off. There’s the requirement that buildings be offered to organizations that serve the homeless population before they can be sold off. There’s all sorts of stuff in there which makes it very difficult to dispose of federal property.”