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entitled 'Questions for the Record: Hearing on the Judiciary's Ability 
to Pay for Current and Future Space Needs' which was released on July 
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July 27, 2005: 

The Honorable Bill Shuster: 
Chairman: 
The Honorable Eleanor Holmes Norton: 
Ranking Democratic Member: 
Subcommittee on Economic Development, Public Buildings, and Emergency 
Management: 
Committee on Transportation and Infrastructure: 
House of Representatives: 

Subject: Questions for the Record: Hearing on the Judiciary's Ability 
to Pay for Current and Future Space Needs: 

On June 21, 2005, we testified at the Subcommittee's oversight hearing 
on the judiciary's ability to pay for current and future space 
needs.[Footnote 1] This report responds to your June 23, 2005, request 
in which you asked additional questions about the Federal Buildings 
Fund (FBF) and the judiciary's efforts to manage its space needs. To 
respond to these questions, we primarily relied on our previous work 
and knowledge of these areas. We prepared this response during June and 
July 2005 in accordance with generally accepted government auditing 
standards. Because our response is primarily based on previously issued 
products, we did not seek agency comments on a draft of this report. 
Our answers to your questions follow. 

Question 1. On page 6 [of your testimony] you mention the downside of 
"flexible design guidance" - what does that mean and how does it affect 
construction budgets?

As we reported in 1995,[Footnote 2] flexible design guidance refers to 
the wide latitude the General Services Administration (GSA) and the 
judiciary had in choosing the location, design, construction, and 
finishes of courthouse projects. These choices significantly affected 
courthouse construction costs. Because of such choices, some 
courthouses had more expensive materials or costly design 
configurations and enhancements than other courthouses. This 
flexibility contributed to large degrees of uncertainty and variability 
in courthouse construction budgets. For example, in the Foley Square 
courthouse in New York, GSA used white marble from floor to ceiling as 
well as in the main lobby and carried the marble motif to each elevator 
lobby throughout the building. By comparison, GSA used drywall, wood, 
and manufactured stone highlights to finish the lobby of the Alexandria 
courthouse in Virginia. According to the GSA project officer, these 
materials were less expensive than marble. The different choices made 
about the fixtures and finishes of these two courthouses had a major 
impact on their construction costs. 

Question 2. Your testimony also frequently mentions systematic 
oversight (page 6), and the need for a systematic process to oversee 
and manage court projects. As you know, GSA has a Courts Management 
Group currently housed within the Office of the Chief Architect. Do you 
believe that is the best placement for this important office? Since it 
is 4 levels removed from the Commissioner, how effective can it be? We 
have not formally evaluated the overall effectiveness and/or 
organizational placement of the Courts Management Group within GSA's 
Office of the Chief Architect. However, we have recognized that the 
creation of such an office is important to bringing more focus and 
discipline into the courthouse planning, funding, and construction 
process. 

In 1993, the Administrative Office of the U.S. Courts (AOUSC) and GSA 
convened an Independent Courts Building Program Panel to provide an 
objective assessment of the overall courthouse construction program. 
The panel made a number of recommendations intended to improve the 
management of the program, identify opportunities for cost savings, and 
ensure that public funds were being spent efficiently and cost- 
effectively. One of the panel's recommendations was to create a Center 
for Courthouse Programs (CCP) within GSA's Public Buildings Service. 

In 1995, GSA established the Courthouse Management Group, within its 
Public Buildings Service, to be the central management organization for 
the courthouse building program. The Courthouse Management Group 
officially became CCP and was relocated under the Office of the Chief 
Architect, within the Public Buildings Service, as part of a 2003 
reorganization of the central office of GSA's Public Buildings Service. 
CCP was established to serve as the central point of contact for the 
judiciary, GSA's field offices, the Office of Management and Budget 
(OMB), and Congress. CCP's responsibilities include reviewing and 
finalizing prospectuses, which are detailed project descriptions, 
before they are submitted to OMB; developing cost benchmarks; comparing 
cost estimates for new projects with these benchmarks; and determining 
whether proposed courthouse designs conform to the standards published 
in the U.S. Courts Design Guide (Design Guide). According to GSA, its 
Office of the Chief Architect is the source of design and construction 
expertise for GSA's $10 billion construction program and is an 
appropriate location for CCP. GSA indicated that CCP is a technical 
resource to GSA's Administrator and Public Buildings Service 
Commissioner, providing the benefit of professional expertise in the 
creation of buildings, including courthouses, but is not large enough 
to justify an independent office. 

Question 3. What impact have caps had on the Federal Buildings Fund? 
What about the rent the Administrator waives each year? For the Federal 
Buildings Fund to have sufficient monies to manage the federal 
inventory, how important is it that agencies are housed in federally 
owned space?

We have found that rent caps, or restrictions, have had a serious, 
detrimental impact on the ability of the Federal Buildings Fund (FBF) 
to finance the government's real property asset management needs. Since 
the early 1980s, we have repeatedly noted that rent exemptions, such as 
those instituted at various times by OMB and Congress, have contributed 
to shortfalls in FBF. In a 1989 report,[Footnote 3] we described the 
restrictions as a principal reason why FBF has accumulated insufficient 
money for capital improvements, and we recommended the elimination of 
all rent restrictions. 

According to GSA, most of the rent restrictions have been lifted, but a 
number of narrowly focused rent exemptions still remain. Some were 
legislatively mandated, but the GSA Administrator granted most of the 
current exemptions. In general, these exemptions are focused on one 
building or are granted for a limited time. The total amount of the 
estimated annual rent forgone because of these rent exemptions is about 
$170 million. Table 1 lists these exemptions, their justifications, and 
the estimated forgone annual rent. 

Table 1: Current Rent Exemptions in GSA Buildings: 

[See PDF for image]

Source: GAO analysis of GSA data. 

Note: According to GSA, the U.S. Senate does not pay market rates for 
its GSA facilities (district offices) because of an October 1996 signed 
memorandum of agreement between the U.S. Senate and GSA regarding 
tenant-requested improvements, but the U.S. Senate has not been granted 
a formal exemption. 

[End of table]

We have repeatedly reported on the importance for cost reasons of 
housing agencies in owned space rather than leasing space from the 
private sector. In a 1989 study of 43 projects, we found that 
constructing government buildings would cost $12 billion less than 
leasing the same facilities from the private sector over a 30-year 
period.[Footnote 4] These findings were borne out in additional GAO 
studies in 1995 and 1999.[Footnote 5] We also identified a heavy 
reliance on costly leasing as an issue that contributed to our 
identifying federal real property as a governmentwide high-risk issue 
in 2003.[Footnote 6] In addition, we have found that the surplus 
generated for FBF through leasing is minimal. GSA officials said that 
GSA charges agencies the price it pays for the lease plus an 8-percent, 
administrative fee. 

Question 4. What is the schedule for completion of the April request 
from this Committee? Have you begun the work? Any problems?

As discussed on July 15, 2005, with the office of the Subcommittee on 
Economic Development, Public Buildings, and Emergency Management, we 
are pursuing the following three objectives. 

1. How are rent payments calculated by GSA and planned and accounted 
for by the judiciary?

2. What trends has the judiciary experienced in rent payments and space 
needs in recent years?

3. What challenges, if any, does the judiciary face in managing its 
need for space to accomplish its mission?

We plan to complete our design work for this request by August 31, 
2005. At that time, we will be in a position to commit to a final 
issuance date. Our work on the request is underway. We have met with 
the judiciary and GSA, and we have started collecting and analyzing 
relevant data. To date, both the judiciary and GSA have fully 
cooperated with our work. 

Question 5. Government-wide, do landholding agencies receive sufficient 
appropriations to meet their space acquisition and maintenance needs?

Federal landholding agencies we reviewed have not historically received 
enough funding to meet their federal real property management needs. 
These agencies commonly have sizable deferred maintenance backlogs that 
are continually increasing because of insufficient funding for facility 
maintenance. For example, in a 2004 GAO report,[Footnote 7] we cited an 
estimate by the Secretary of Defense that the total cost of improving 
facilities to a level that would meet the department's condition goals 
would be between $62 billion and $164 billion. Using funds for 
infrastructure has, in fact, limited the ability of the Department of 
Defense to devote more funding to other critical departmental needs. In 
January 2003, we reported that the Department of the Interior estimated 
the value of its deferred maintenance backlog at between $8.1 billion 
and $11.4 billion.[Footnote 8] Using facility assessments, the Office 
of Facilities Reliability, within the Smithsonian's Office of 
Facilities Engineering and Operations, determined that the Smithsonian 
Institution had an inventory of about $329 million in deferred 
maintenance projects as of October 2004.[Footnote 9] Even with recent 
increases in congressional funding for facility construction and 
maintenance, many federal facilities are still in an alarming state of 
deterioration. Deteriorating federal facilities, in part, caused us to 
designate federal real property as a governmentwide high risk area in 
2003 and to continue that designation in our 2005 update. 

Question 6. Please comment on the potential effectiveness of the 
Judiciary's efforts to reduce their space costs? What more would you 
recommend they do?

In 1995, we reported that GSA and the judiciary have processes to 
identify needs and to propose courthouse construction projects; 
however, they had not developed and implemented a strategic capital 
investment plan that (1) puts projects in some long-term strategic 
context, (2) sets priorities among competing projects, and (3) 
identifies short-and long-term project funding needs.[Footnote 10] We 
recommended that GSA and AOUSC work together to take the following 
actions: 

* Complete and effectively implement a plan for capital investment that 
identifies, fully justifies, and sets priorities among needed projects 
and lays out all known needed projects in a long-term strategic 
context--including the specific rationale and criteria used for 
identifying each of the higher-priority projects and the estimated 
funding needed to design and construct the projects. 

* Clearly define project scope and refine construction cost estimates 
before requesting project approval and final funding levels. 

* Establish and effectively implement a systematic and ongoing project 
oversight and evaluation process to compare and contrast courthouse 
projects, identify opportunities for reducing costs, and communicate 
and apply lessons learned to ongoing and future projects. 

* Establish a mechanism to monitor and assess the use of the flexible 
design guidance with a view toward striking a better balance in the 
choices made about courthouse design, including features and finishes. 

In a 2004 congressional briefing, we identified key actions the 
judiciary and GSA have taken to improve the courthouse construction 
program. Specifically, in fiscal year 1996, the judiciary implemented 
an annually updated, rolling Five-Year Courthouse Plan, and in 1997, it 
revised the U.S. Courts Design Guide to incorporate new criteria 
intended to encourage cost-consciousness. According to the judiciary, 
several actions designed to improve communications and management of 
the program have been implemented. 

At the Subcommittee's June 21, 2005, hearing, the judiciary discussed 
multiple initiatives designed to control the building program's costs 
and reduce the rent amounts paid to GSA. The initiatives include a 
review of the standards in the Design Guide and a re-evaluation of the 
long-range planning process. While the judiciary's cost-containment 
initiatives could be a step forward, we believe our original 1995 
recommendation to implement a strategic capital investment plan is 
still relevant. Additionally, our 1997 analysis of actual courtroom use 
for trials and nontrial activities at seven locations suggested there 
may be opportunities to reduce costs by building fewer full-sized trial 
courtrooms through implementing courtroom sharing.[Footnote 11]

Question 7. Do the excerpts of prior GAO reports included in testimony 
submitted by the judiciary present a fair and accurate reflection of 
the current status of the Federal Buildings Fund?

Our prior reports have shown that rent payments have provided a 
relatively stable, predictable source of revenue for FBF, but that this 
revenue has not kept pace with demands. All of the excerpts AOUSC 
quoted from our reports were accurate, but they did not reflect the 
full breadth of the issues related to federal real property management 
included in those products. For example, in each of the five cited GAO 
reports and testimonies, AOUSC quoted our findings of FBF's shortfalls 
without noting that in each case we found that rent restrictions--like 
the one AOUSC is requesting--contributed to those shortfalls. The 
following bullets provide additional context for each of AOUSC's 
citations from our reports. 

* As cited by AOUSC, we concluded in 1981 that FBF had not generated 
sufficient revenue for construction and that there was no evidence that 
FBF had improved agencies' use of space.[Footnote 12] However, in that 
report, we also found that initial expectations for FBF were too high 
because GSA relied too much on costly leasing, OMB and Congress 
restricted the rent GSA could charge, and FBF was not established with 
upfront funds. We concluded that FBF may overcome its early cash flow 
problems over time and recommended that Congress strengthen FBF in a 
number of ways, including providing GSA with additional authority to 
borrow from the Treasury or making direct appropriations to augment 
FBF's resources. Since that report, Congress has made numerous 
supplemental appropriations to FBF. 

* As cited by AOUSC, we testified in March 1990 that FBF was not 
generating sufficient revenue for construction or property 
acquisition.[Footnote 13] However, we also stated in that testimony 
that one reason for the insufficient FBF revenues was that OMB and 
Congress have periodically restricted the rent GSA could charge tenant 
agencies. We estimated in that testimony that these restrictions had 
reduced FBF revenue by $4 billion up to that time. Moreover, in a 
report published 3 months earlier, we recommended eliminating all OMB 
and congressional rent restrictions.[Footnote 14]

* In 1992, as cited by AOUSC, we testified again that FBF had not met 
its original expectations and that the Pentagon's removal from the GSA 
system could signal erosion of support for the concept.[Footnote 15] 
However, we also cited problems such as rent restrictions and 
dependence on leased space as reasons for FBF generating insufficient 
revenue. 

* AOUSC cited our 1993 finding that there are a number of obstacles to 
the government's cost-effective, businesslike acquisition and 
management of real property mission assets. These obstacles included 
GSA management weaknesses and FBF shortfalls.[Footnote 16] However, our 
report also noted that a number of reforms had been proposed to remove 
the obstacles and that the principal reasons for FBF shortfalls 
included rent restrictions and a reliance on leased space. 

* AOUSC cited our 1993 finding that rent payments, while providing a 
relatively stable, predictable source of revenue, have not been 
sufficient to finance capital investment and the costs of leased 
space.[Footnote 17] However, AOUSC's citation excluded our observation 
that one reason FBF generated less revenue than anticipated was that 
OMB and Congress periodically restricted the rent GSA could charge 
federal agencies. 

In addition, you asked us if there were other issues in the AOUSC 
testimony that could benefit from additional context. We would like to 
elaborate on three issues. First, AOUSC stated several times that the 
amount the judiciary pays in rent does not match the exact costs that 
GSA incurs for the space it provides to the judiciary. For example, 
according to the AOUSC testimony, GSA's pricing policy allows it to 
include local real estate taxes in calculating rents for tenants in 
federally owned facilities, even though the federal government is 
exempt from such charges. One of the major purposes of the Public 
Buildings Act Amendments of 1972, which established FBF, was to finance 
the real property and related activities of GSA by requiring agencies 
to pay rent to GSA for deposit into FBF. By law, rent is based on 
approximate commercial charges for comparable space and services and 
was chosen over cost recovery to produce more income so that the fund 
could finance construction and major repairs. The rate that GSA charges 
agencies for rent is approved by OMB; is based on market appraisals of 
fully serviced rental values, which reflect what a private sector owner 
would charge for the space; and includes values for taxes, 
depreciation, and liability insurance charges paid in the private 
sector. 

Second, the AOUSC testimony notes that Congress paid for courthouses 
built from fiscal year 1990 through fiscal year 2004 through direct 
appropriations into FBF. We found that Congress can make and often did 
make supplemental appropriations into FBF over this period. However, 
this supplemental funding was not tied directly to any specific 
projects or types of projects. According to the relevant appropriations 
acts, the additional amounts are being deposited into FBF to carry out 
the purposes of the fund. Moreover, according to the statute 
establishing FBF and the relevant appropriations acts, funds in FBF are 
available to GSA for real property management functions, including 
space acquisition and management functions. Thus, the direct 
appropriations into the fund cover more real property activities than 
funding new courthouses, as AOUSC maintains. 

Third, it is important to note that AOUSC's analysis of other agencies' 
rent payments may not capture the full complexity of the rent issue. 
Under the law, courthouses are listed as public buildings under the 
control of the GSA Administrator and GSA is required by law to charge 
the judiciary for the space and services provided to it. Certain 
buildings are specifically exempted by law from GSA management and 
control, including the Capitol Building and the surrounding House and 
Senate office buildings, the Main Treasury Building, and buildings 
located on the grounds of a Department of Defense (DOD) facility. Thus, 
the legislative branch, the Treasury Department, and DOD do not pay 
rent into FBF or receive services from GSA for these properties. 
However, landowning agencies do pay to maintain their own facilities 
out of their budgets. Because the judicial branch is not statutorily 
exempt from GSA's management, the judiciary is required to pay rent 
into FBF for the space it occupies and the services it receives. 

Question 8. What types of data would GAO require to conduct an accurate 
and effective space utilization study of courtrooms?

GAO has not developed criteria for determining effective courtroom 
utilization, but we have recommended that the judiciary do so. 
Specifically, our 1997 recommendations provided the judiciary with an 
analytical approach for determining how many new courtrooms should be 
built. This approach took into account courtroom usage and other 
factors. The judiciary needs to design and implement cost-effective 
research for determining the number and types of courtrooms needed, as 
well as whether each district judge needs a dedicated courtroom. Such 
research should include: 

* establishing criteria for determining effective courtroom utilization 
and a mechanism for collecting and analyzing data at a representative 
number of locations so that trends can be identified over time and 
better insights obtained on court activity and courtroom usage;

* designing and implementing a methodology for capturing and analyzing 
data on latent usage, courtroom scheduling, and other factors that may 
substantially affect the relationship between the availability of 
courtrooms and judges' ability to effectively administer justice;

* using these data and criteria to explore whether the practice of 
assigning one judge per courtroom is needed to promote efficient 
courtroom management or whether other courtroom assignment alternatives 
exist; and: 

* establishing an action plan with time frames for implementing and 
overseeing these efforts.[Footnote 18]

In 2000, we reviewed and commented on part of a May 2000 Ernst & Young 
study on the judiciary's space facilities programs, specifically the 
part of the study pertaining to courtroom use and sharing.[Footnote 19] 
We determined that this study was not designed to provide the type of 
data and analysis we and other research organizations such as the Rand 
Institute for Civil Justice and the Federal Judicial Center, the 
judiciary's research arm, have determined would be needed to help 
resolve the courtroom-sharing issue. 

We are sending copies of this report to the Administrator, GSA, and the 
Director, AOUSC. We will make copies available to others on request. 
The report is also available on GAO's Web site at www.gao.gov. If you 
have any questions, please contact me on (202) 512-2834 or at 
goldsteinm@gao.gov. 

Signed by: 

Mark L. Goldstein: 
Director, Physical Infrastructure Issues: 

(543141): 

FOOTNOTES

[1] GAO, Courthouse Construction: Overview of Previous and Ongoing 
Work, GAO-05-838T (Washington, D.C.: June 21, 2005). 

[2] GAO, Federal Courthouse Construction: More Disciplined Approach 
Would Reduce Costs and Provide for Better Decisionmaking, GAO/T-GGD-96- 
19 (Washington, D.C.: Nov. 8, 1995). 

[3] GAO, Federal Office Space: Increased Ownership Would Result in 
Significant Savings, GAO/GGD-90-11 (Washington, D.C.: Dec. 22, 1989). 

[4] GAO/GGD-90-11. 

[5] GAO, General Services Administration: Opportunities for Cost 
Savings in the Public Buildings Area, GAO/T-GGD-95-149 (Washington, 
D.C.: July 13, 1995) and GAO, General Services Administration: 
Comparison of Space Acquisition Alternatives--Leasing to Lease- 
Purchase and Leasing to Construction, GAO/GGD-99-49R (Washington, D.C.: 
Mar. 12, 1999). 

[6] GAO, High-Risk Series: Federal Real Property, GAO-03-122 
(Washington, D.C.: January 2003). 

[7] GAO, Defense Infrastructure: Long-term Challenges in Managing the 
Military Construction Program, GAO-04-288 (Washington, D.C.: Feb. 24, 
2004). 

[8] GAO, Major Management Challenges and Program Risks: Department of 
the Interior, GAO-03-104 (Washington, D.C.: January 2003). 

[9] GAO, Smithsonian Institution: Facilities Management Reorganization 
Is Progressing, but Funding Remains a Challenge, GAO-05-369 
(Washington, D.C.: Apr. 25, 2005). 

[10] GAO/T-GGD-96-19. 

[11] GAO, Courthouse Construction Sufficient Data and Analysis Would 
Help Resolve the Courtroom-Sharing Issue, GAO-01-70 (Washington, D.C.: 
Dec. 14, 2000). 

[12] GAO, GSA's Federal Buildings Fund Fails to Meet Primary 
Objectives, GAO/PLRD-82-18 (Washington, D.C.: Dec. 11, 1981). 

[13] GAO, The Disinvestment in Federal Office Space, GAO/T-GGD-90-24 
(Washington, D.C.: Mar. 20, 1990). 

[14] GAO/GGD-90-11. 

[15] GAO, DOD Rental Payments to GSA, GAO/T-GGD-92-31 (Washington, 
D.C.: Apr. 8, 1992). 

[16] GAO, Federal Real Property: Key Acquisition and Management 
Obstacles, GAO/T-GGD-93-42 (Washington, D.C.: July 27, 1993). 

[17] GAO, Federal Buildings Fund Limitations, GAO/GGD-93-34R 
(Washington, D.C.: Apr. 5, 1993). 

[18] GAO, Courthouse Construction: Better Courtroom Use Could Enhance 
Facility Planning and Decisionmaking, GAO/GGD-97-39 (Washington, D.C.: 
May 19, 1997). 

[19] GAO-01-70.