Print this page

Cost Saving > General government

Agencies could realize cost savings of at least $3 billion by continued disposal of unneeded federal real property

Why Area Is Important

The federal real property portfolio is vast and diverse. In fiscal year 2009, the federal inventory included over 3 billion square feet of building space and over 900,000 assets. The Departments of Defense and Veterans Affairs, the U.S. Postal Service, and General Services Administration (GSA) hold the majority of federally owned and leased space.

The Office of Management and Budget (OMB) is responsible for reviewing agencies' progress on federal real property management and chairs the Federal Real Property Council, which includes representatives from the major property-holding agencies. Congressional committees that provide oversight of this area include the Senate Environment and Public Works, Senate Homeland Security and Governmental Affairs, House Transportation and Infrastructure, House Oversight and Government Reform, and appropriations committees.

GAO designated management of federal real property as a high-risk area in 2003 due to problems with excess and underutilized property, among other things.

What GAO Found

Many federal agencies hold real property they do not need, including property that is excess or underutilized.[1]Disposing of these properties presents potential governmentwide cost savings by generating sales proceeds, reducing maintenance and operating costs, and avoiding rent costs by ending leases. According to data from the Federal Real Property Profile, a central database, in fiscal year 2009, agencies reported 45,190 underutilized buildings, an increase of 1,830 such buildings from the previous fiscal year. These figures are conservative, as they do not include the U.S. Postal Service, a major property holder that does not report to the Federal Real Property Profile. Excess and underutilized properties present significant potential risks to federal agencies because they are costly to maintain. For example, in fiscal year 2009, agencies reported underutilized buildings accounted for $1.66 billion in annual operating costs. Excess properties also represent a lost opportunity to generate sales revenue for the federal government. Many assets are no longer effectively aligned with, or responsive to, agencies' changing missions. In April 2007 GAO reported that technological advances have changed the way the public interacts with the federal government, and this change will have significant implications for the type and location of property needed in the 21st century.

In 2004, Executive Order 13327 established the Federal Real Property Council and required senior real property officers to, among other things, develop and implement an agency asset management plan, identify and categorize all real property owned and leased by their agency, and prioritize actions needed to improve the operational and financial management of the agency's real property inventory.[2]According to OMB officials, a governmentwide initiative started under the executive order focused on disposing of unneeded assets. In a June 2010 Presidential Memorandum to federal agencies, the administration established a new target of saving $3 billion through disposals and other methods by the end of fiscal year 2012. However, federal agencies continue to face obstacles to disposing of unneeded property, such as competing stakeholder interests. For example, the U.S. Postal Service has faced resistance to facility closures and consolidations because of concerns of how these actions might affect jobs, service, and communities as GAO reported in April 2010. Legal and budgetary limitations also have implications for real property decisions. For example, as GAO reported in April 2007, federal agencies are required by law to assess and pay for any environmental cleanup that may be needed before disposing of a property—a process that may require years of study and result in significant costs, and in some cases, may exceed the costs of continuing to maintain the excess property in a shut-down status. If the government does not address the issue of excess and underutilized property, the costs to maintain these properties will continue to rise, putting the government at risk for lost dollars and missed opportunities.



[1]"Excess property" has been determined by the controlling federal agency as not required to meet the agency's needs. "Not utilized property" is property not occupied for the agency's current purposes. "Underutilized property" is property that is used only at irregular periods or is used for purposes that can be satisfied with only a portion of the property.

[2]Executive Order 13327 applies to 24 executive branch departments and agencies but not to the U.S. Postal Service, which is an independent establishment in the executive branch.

Actions Needed

The recent Presidential Memorandum's targeted $3 billion in savings related to property disposals and other methods represents another step in realigning the federal portfolio to agencies' missions and needs. However, OMB could assist agencies in meeting this target by implementing GAO's April 2007 recommendation of developing an action plan to address key problems associated with disposing of unneeded real property, including reducing the effect of competing stakeholder interests on real property decisions. OMB agreed with the recommendation but has yet to fully implement it.

The cost savings for real property disposals are not limited to a one-time savings or income. Once a lease is ended, the government continues to save the rent payments from that property indefinitely. As GAO reported in June 2010, operations and maintenance costs typically represent from 60 percent to 85 percent of the costs of a facility over its lifetime, while design and construction costs represent about 5 percent to 10 percent of these costs. Thus, once the government disposes of an owned property, it avoids costs related to operations and maintenance that would have otherwise continue to accrue, eventually representing approximately 10 times the design and construction costs of the property.

Framework for Analysis

The information contained in this analysis is based on the related products listed under the "Related GAO Products" tab. In addition, to update existing information on this topic, GAO staff interviewed federal government officials from OMB and real property-holding agencies (Departments of Defense, Homeland Security, Energy, the Interior, State, and Veterans Affairs; U.S. Postal Service; and GSA), and analyzed governmentwide and agency-level real property plans and reports.

Area Contact

For additional information about this area, contact David Wise at (202) 512-5731 or wised@gao.gov.

 

Related GAO Products

Go to the Next Area

Jump to another area below related to this mission.