[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

CUTTING SPENDING AND CONSOLIDATING
FEDERAL OFFICE SPACE: GSA'S CAPITAL
INVESTMENT AND LEASING PROGRAM

=======================================================================

(112-14)

HEARING

BEFORE THE

SUBCOMMITTEE ON
ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT

OF THE

COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

MARCH 10, 2011

__________

Printed for the use of the
Committee on Transportation and Infrastructure

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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

JOHN L. MICA, Florida, Chairman

DON YOUNG, Alaska NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee ELEANOR HOLMES NORTON, District of
FRANK A. LoBIONDO, New Jersey Columbia
GARY G. MILLER, California JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois CORRINE BROWN, Florida
SAM GRAVES, Missouri BOB FILNER, California
BILL SHUSTER, Pennsylvania EDDIE BERNICE JOHNSON, Texas
SHELLEY MOORE CAPITO, West Virginia ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio LEONARD L. BOSWELL, Iowa
CANDICE S. MILLER, Michigan TIM HOLDEN, Pennsylvania
DUNCAN HUNTER, California RICK LARSEN, Washington
TOM REED, New York MICHAEL E. CAPUANO, Massachusetts
ANDY HARRIS, Maryland TIMOTHY H. BISHOP, New York
ERIC A. ``RICK'' CRAWFORD, Arkansas MICHAEL H. MICHAUD, Maine
JAIME HERRERA BEUTLER, Washington RUSS CARNAHAN, Missouri
FRANK C. GUINTA, New Hampshire GRACE F. NAPOLITANO, California
RANDY HULTGREN, Illinois DANIEL LIPINSKI, Illinois
LOU BARLETTA, Pennsylvania MAZIE K. HIRONO, Hawaii
CHIP CRAVAACK, Minnesota JASON ALTMIRE, Pennsylvania
BLAKE FARENTHOLD, Texas TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana HEATH SHULER, North Carolina
BILLY LONG, Missouri STEVE COHEN, Tennessee
BOB GIBBS, Ohio LAURA RICHARDSON, California
PATRICK MEEHAN, Pennsylvania ALBIO SIRES, New Jersey
RICHARD L. HANNA, New York DONNA F. EDWARDS, Maryland
STEPHEN LEE FINCHER, Tennessee
JEFFREY M. LANDRY, Louisiana
STEVE SOUTHERLAND II, Florida
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma

(ii)

Subcommittee on Economic Development, Public Buildings, and Emergency
Management

JEFF DENHAM, California, Chairman

TIMOTHY V. JOHNSON, Illinois ELEANOR HOLMES NORTON, District of
ERIC A. ``RICK'' CRAWFORD, Columbia
Arkansas, HEATH SHULER, North Carolina
Vice Chair MICHAEL H. MICHAUD, Maine
RANDY HULTGREN, Illinois RUSS CARNAHAN, Missouri
LOU BARLETTA, Pennsylvania TIMOTHY J. WALZ, Minnesota
BOB GIBBS, Ohio DONNA F. EDWARDS, Maryland
PATRICK MEEHAN, Pennsylvania BOB FILNER, California
RICHARD L. HANNA, New York NICK J. RAHALL II, West Virginia
STEPHEN LEE FINCHER, Tennessee (Ex Officio)
JOHN L. MICA, Florida (Ex Officio)

(iii)

CONTENTS

Page

Summary of Subject Matter........................................ vi

TESTIMONY

Peck, Robert, Commissioner, Public Buildings Service, U.S.
General Services Administration................................ 2

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Norton, Hon. Eleanor Holmes, of the District of Columbia......... 29

PREPARED STATEMENTS SUBMITTED BY WITNESSES

Peck, Robert..................................................... 32
[GRAPHIC] [TIFF OMITTED] T5449.001

[GRAPHIC] [TIFF OMITTED] T5449.002

[GRAPHIC] [TIFF OMITTED] T5449.003

[GRAPHIC] [TIFF OMITTED] T5449.004

CUTTING SPENDING AND
CONSOLIDATING FEDERAL OFFICE SPACE:
GSA'S CAPITAL INVESTMENT AND
LEASING PROGRAM

----------

Thursday, March 10, 2011

House of Representatives,
Subcommittee on Economic Development, Public
Buildings and Emergency Management,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:16 a.m. in
room 2167, Rayburn House Office Building, Hon. Jeff Denham
[chairman of the subcommittee] presiding.
Mr. Denham. This subcommittee will come to order. Ranking
Member Norton will be detained for a short period of time. She
is at a different hearing right now, testifying. So we are
going to go ahead and get started this morning.
This hearing is focused on the General Services
Administration's capital investment and leasing program, and
examining ways to cut spending and consolidate Federal office
space. Today we are reviewing the 2012 program and the
remaining lease prospectuses from the 2011 program.
Given the financial crisis facing our country, we simply
must reduce the amount of money we spend to house Federal
employees. Excess and under-utilized properties must be
eliminated. The price we pay for space has to be controlled.
And agencies will have to house more people in less space. The
committee intends to scrutinize each project from this
perspective, in order to determine if they will save taxpayer
money.
We received the President's proposal, 2012 budget proposal,
nearly a month ago. That budget proposes to spend $840 million
on construction and acquisition projects, and $869 million on
repairs and alteration projects. The budget includes funding
for specific projects, including ports of entry, FBI
consolidations, and the repair and alteration of other Federal
buildings.
Our committee just received GSA's fiscal year 2012 capital
improvement program yesterday, nearly a month after the release
of the President's budget. Year after year, this subcommittee
has requested GSA provide its capital investment program early
in the year, so that we can act in a timely fashion. I do
appreciate that we did receive the program prior to this
hearing, and hope we can work with GSA on ensuring timely
submission in the future.
I also want to thank Mr. Peck for his response to the
letter signed by all the Members of this Committee last week,
requesting access and information from the Federal real
property profile database regarding GSA properties. I do remain
concerned, however, that some of the requests remain
outstanding. For example, in January GSA briefed subcommittee
staff on the lease prospectuses still pending from the 2011
leasing program, and staff requested information on many of
those projects. Responses to those requests were only received
yesterday.
In addition, at the hearing we had last month, members of
the subcommittee asked for information to be submitted. Many of
those deadlines are today, including: the Old Post Office
Building, an explanation to the subcommittee why the RFP has
not been released; a list of properties losing money on an
annual basis in the national capital region--we did have the
operating costs in there, but without the revenues associated
with that, it does not allow us the opportunity to see whether
or not we are losing money; recommendations on any changes
needed to existing law to streamline the property disposal
process.
We will be coming out with our own recommendations in bill
form. So we would certainly like to work with GSA on their
recommendations in that process.
I hope we are going to receive the responses to those
questions very soon. This committee does not plan to approve
leases until we receive this information. I want to make sure
GSA is very well aware of that.
The administration's goal of addressing the problem of
unneeded and underutilized assets is one that is shared by this
subcommittee. It is critical that we have access to relevant
information in a timely fashion, so that we can effectively
work with GSA and the administration on proposals to stop waste
when it comes to our public buildings and facilities. I look
forward to working with Mr. Peck on these issues.
And I would just like to add for the record we had a great
meeting yesterday over at your office. I appreciate the
opportunity not only to get together, but some frank
conversation on how we can greatly improve the process and work
together.
Ms. Norton will be here shortly, and I will still allow her
an opening testimony.
But for now, I would like to call on Mr. Peck for an
opening statement.

TESTIMONY OF ROBERT PECK, COMMISSIONER, PUBLIC BUILDINGS
SERVICE, UNITED STATES GENERAL SERVICES ADMINISTRATION

Mr. Peck. Well, thank you. And thank you, Mr. Chairman, for
coming over to the office yesterday. I also thought we had a
very productive conversation.
Chairman Denham, Congressman Crawford, and members of the
subcommittee, thank you for inviting me here today to discuss
the investments that GSA is making in our Nation's
infrastructure through our fiscal year 2012 capital investment
program. The projects in our fiscal year 2012 program are
critical investment needs for our country and tenant agencies.
PBS is investing in our Nation's economic recovery while
meeting our sustainability responsibilities. These investments
stimulate job growth, increase space utilization, enhance asset
condition, and improve the environmental performance of our
inventory.
GSA utilizes a detailed asset analysis strategy to drive
investment decisions. This plan prioritizes agency requirements
and asset needs based on criteria, including agency mission,
facility conditions, space utilization, return on investment,
and sustainability.
PBS continues to demonstrate strong operational
performance, surpassing many private-sector benchmarks to
improve asset utilization and achieve the greatest return to
taxpayers. Eighty-three percent of GSA's government-owned
assets achieve a positive cash flow. Our vacancy rate, just
under 3 percent, is well below the private-sector rate of about
17 percent.
PBS is also becoming a green proving ground through
judicious investment in new and innovative technologies. GSA is
the steward of more than 1,500 government-owned buildings,
which have a replacement value of $45 billion. PBS is
requesting a repair and alterations program of $869 million to
enable GSA to maintain and improve these properties, so that
they can continue to meet the needs of our tenant agencies.
Industry benchmarks suggest investing at least two percent
of replacement value annually in capital upgrades, and our
request is at about 1.9 percent. This program includes
completing multi-phase renovations at the Interior and State
Department headquarters in Washington, and at the Prince Jonah
Kuhio Kalanianaole Building in Honolulu. I just say that
because I'm proud that I know how to pronounce it.
[Laughter.]
Mr. Peck. It also includes major consolidations that will
permit us to relocate tenants from lease space into federally
owned space in San Francisco and in Overland, Missouri.
PBS is requesting $840 million, as you noted, for our new
construction program. PBS's fiscal year 2012 priorities reflect
urgent tenant mission needs, and investments that will ensure a
long-term payback for taxpayers. Highlights of the program
include: $217 million for the Department of Homeland Security
consolidation at St. Elizabeths in Washington; $243 million for
FBI projects in San Juan, Puerto Rico and Frederick County,
Virginia; and $371 million for land port of entry construction
in New Mexico, Texas, New York, and North Dakota.
In addition to GSA's budget request, the Department of
Transportation has requested $2.2 billion in service
transportation investments which will be transferred to GSA for
the design and construction of a number of critical facilities
at our Nation's borders. These investments prioritize the
largest border crossings that support high-volume
transportation and cross-border trade.
You have a right to ask if we can deliver on these
projects. In our hundreds of accelerated projects under the
American Recovery and Reinvestment Act passed just two years
ago, we met every contracting deadline, and are also on our
construction targets. We have created some 16,000 jobs to date.
GSA's fiscal year 2012 request assumes full funding of the
President's fiscal year 2011 budget for GSA's capital program.
If, in the end, we do not receive funding for the fiscal year
2011 capital program, GSA may need to alter our fiscal year
2012 request. If any revisions to the fiscal year 2012 budget
request are necessary, we will notify the committee
accordingly.
We do want to thank the committee and subcommittee for
authorizing our fiscal year 2011 capital program in a timely
way last year.
We urge you also to authorize the balance of our fiscal
year 2011 prospectus level leasing program. More than half the
workforce we accommodate is in space leased from private-sector
building owners. As you know, we prefer to provide space in
federally owned assets whenever possible. But when we do not
have such space, we lease in the private market. We will submit
prospectus-level leases for the fiscal year 2012 program to the
committee this summer for authorization.
I need to alert you to an urgent concern. Proposed
continuing resolution cuts to the Federal building funds
operations and leasing accounts for the remainder of the fiscal
year would seriously inhibit our ability to provide basic
building services, and even to remain current on lease payments
to our lessors.
We all want to minimize the size of the Federal inventory.
The President announced in his fiscal year 2012 budget a
legislative initiative to accelerate the identification and
disposal of surplus properties. This is a follow-on to his
memorandum to Federal agencies in June of 2010 ordering
stepped-up efforts to identify excess property. That is a
government-wide effort that we have been leading, since we are
the Federal Government's central agency for disposing of
surplus property.
The administration is proposing a civilian property
realignment initiative that will enable us to improve how we
identify and move surplus properties out of the Federal
inventory, allowing us to realize a financial return, and
perhaps as important, eliminate the cost of maintaining these
properties. An appointed board would review all Federal agency
properties and provide a mechanism to overcome some current
impediments to moving surplus space out of the inventory. And I
thank you for your passion and commitment for helping move
surplus property out, as well.
More than a year ago we stepped up our consulting with
Federal agencies on ways to embrace new mobile workplace
technologies and office strategies that should permit dramatic
reductions in the amount of space agencies need to carry out
their missions. We are using the renovations of our
headquarters building currently underway as an example. We
expect nearly to triple the number of people that that building
accommodates.
The program we present today reflects an analytic and best-
practice-based approach to meeting Federal agency real estate
needs, while at the same time we improve operational
efficiencies and space utilization to minimize costs for the
American taxpayer. We are concentrating reinvestment in core
assets, and disposing of unneeded assets.
Mr. Chairman, this concludes my prepared statement. And, of
course, I am pleased to answer any questions you have.
Mr. Denham. Thank you, Mr. Peck. We have got a number of
questions here, and we expect that we will have more than one
round of questioning. But let me start.
As you point out in your testimony, Administration intends
to aggressively pursue dispositions of unneeded assets.
However, the 2012 budget proposed by the administration
anticipates that GSA's proceeds from sales will drop from $24
million in 2010 to $16 million in 2012. Why is there a drop,
when disposal of properties is a priority for the
administration?
Mr. Peck. Mr. Chairman, as you know, I will get you a more
comprehensive answer for the record. But it takes a while to
get properties into the pipeline, and then to move them through
the process that we have and out into the marketplace.
I will have to check on the numbers. It may be just the GSA
properties that we are disposing. The government-wide total, I
believe, is in the hundreds of millions of dollars for this
year. I think you are talking about--remember, there are two
aspects to our property disposal: properties that GSA itself
owns and controls; and those that other Federal agencies give
to us to dispose of. I think you are giving the GSA numbers,
but I will double-check for the record. We are working pretty--
--
Mr. Denham. You would have those other numbers----
Mr. Peck. We will have--we have the estimates on how much
we are moving through the pipeline right now.
And one thing--can I--one thing I would like to highlight
is we are beginning--for example, this afternoon at noon--an
online auction of the Fort Worth Federal Center in Fort Worth,
Texas. It's about a million-square-foot warehouse and 75 acres
of land.
Mr. Denham. And GSA does liquidate the properties outside
of GSA's----
Mr. Peck. Yes, sir. And it's important, I want to make sure
we're clear on what we do. GSA owns 1,500 building assets, and
we at the moment have something like 30 properties that are
vacant that we ourselves, in GSA, are trying to move out onto
the marketplace. The Federal Government, obviously, holds
thousands and thousands of assets. And, on behalf of other
land-holding agencies such as the Department of Interior, the
Department of Defense, the Department of Energy, we--they--when
we find that they have excess assets, or surplus assets, we
then move them out into the marketplace.
Our job--if you give me a minute--is to take assets that an
agency describes to us as no longer being needed for their
purposes in the Federal inventory, to then, in essence, market
those properties to other Federal agencies and see if anyone
else in the government needs it, because we are the
government's central real estate clearinghouse. If we don't
find anybody in the Federal Government that has it, then we
declare the property surplus, and take them through the surplus
property process, which I think Members of the Committee are
familiar with.
Mr. Denham. So the $16 million that we're looking at here
you anticipate is just from GSA property?
Mr. Peck. Yes, sir. And that's been confirmed by my staff
behind me.
Mr. Denham. And the other properties from other agencies,
you have direct control over the disposal of those, and should
also have those numbers?
Mr. Peck. It's--I mean in most years--and we have stepped
up our efforts over the last 5 or 6--we have hit a number
somewhere around, I believe, $300 million in disposals.
The other thing I will point out, though, is the sales
dollars that we get understates how much property we actually
get off our books. Because, in addition to sales--and, in fact,
more than sales, if you look at square footage--we sometimes
dispose of properties by giving them away for reduced or no
compensation to cities and states for specific purposes that
are stated in the Federal Property Act.
Mr. Denham. Does GSA retain the proceeds for the non-GSA
properties that----
Mr. Peck. No, sir. The--under legislation that passed in
about 2004, Federal agencies can retain proceeds but they go to
the agency that was the original land-holding agency.
So, for example, if the Department of the Interior has a
property that we sell, all or part of the proceeds go back to
the Department of the Interior. The only thing we retain is
we're allowed to take some of our costs out of the proceeds.
Mr. Denham. Also in your written testimony you had pointed
out the President has proposed a civilian property realignment
initiative, a BRAC-like process that we have talked about many
times. What involvement has GSA had in formulating this
process, and what would be the role of GSA, and specifically
the Public Building Service, in the process, should legislation
be enacted?
Mr. Peck. Thank you for asking. Since the President issued
his memorandum last June, GSA has been leading a working group
of Federal agencies that are taking a look at--that have asked
agencies to come back with Federal plans. And I should mention
that this is under the auspices of the Office of Management and
Budget, but we have been with some of their staff, the arm
executing the work on the President's memorandum.
We have been part of a group of Federal agencies that have
been sitting around the table, figuring out how we can make
that effort even stronger. And so, we have been a part of
vetting the President's legislative proposal, and we are
actually now--legislation or no, we are working together to
pull together a stronger inter-agency working group to make
this effort go forward. We are looking at taking detailees out
of some other Federal agencies, putting them in a GSA space
which we have, and working on this thing full time, with our
GSA disposal people helping to lead the effort.
Mr. Denham. So, under the President's BRAC proposal, which
I understand is not fully out yet, or vetted, it would not be
looked--I mean if we're greatly expanding the $15 billion goal,
does GSA, in the next 3 budgets, have the money and the
personnel to be able to liquidate that number of properties, or
are we looking to go out to private companies that can help the
liquidation process, or a hybrid thereof?
Mr. Peck. The President's proposal, which was included as
an--in an appendix to the budget request for this year, asks
for an appropriation for--to capitalize, in essence, the effort
of this property effort of about--I think the request is for
about $80-some million. And then the intention is that, as we
get proceeds from properties that we sell, we would replenish
and increase that fund.
Let me say there are two reasons for that dollar amount.
One is to pay for private-sector expertise, where we need it to
do analysis of the properties and possibly to help take it to
market. I should note that right now, when we do disposals, we
sometimes use private brokers to help sell them under a blanket
purchase agreement.
But we also need some of the money because, in some cases--
I will give you an example from some of our buildings. We have
a couple of buildings that we report as partially vacant. And
if we have as much of--in a case where we have a third of a
building vacant, if there are other Federal agencies in the
area, what we would like to do is have enough money to be able
to move people out of the partially vacant building,
consolidate them into other buildings, and create a vacancy--
and totally empty out the partially vacant building and put it
on the market. It takes some up-front money to do that, as they
learned in the Defense BRAC, as well.
One other thing, Mr. Chairman. The $15 billion is a goal
that the administration put forward in the President's press
briefing last week. It is a $15 billion----
Mr. Denham. We expect to exceed that goal.
Mr. Peck. We would love to, as well. But let me say one
thing, that, again, I want to note that there are two ways to
look at the numbers. One is how much money do we get from
selling. The other is the savings that we get from not
operating and maintaining vacant properties. And even when
they're totally vacant, people say, ``Well, how much can that
cost?'' Well, you have to secure them, just so people don't
break into them, so they don't become nuisances in their
communities. And there are some costs of keeping them----
Mr. Denham. $6 million a year for the Old Post Office,
correct?
Mr. Peck. Well, it's--you know, again, the Old Post Office
has tenants in it. But we do lose money on it.
Mr. Denham. Thank you. And just as a side note before we
start a round of questioning, I'm looking forward to watching
the online auction today on how things go with the Fort Worth,
Texas property. But it did come to my attention that this
committee held a hearing on that in 1997. Why has it taken so
long to get to this process?
Mr. Peck. Well, I can tell you, as Jeff Zients said in his
press briefing last year, a couple of things. One is we had to
move some--we had some of the warehouse space partially
occupied, and we were--I don't know--I can't account for before
2007, which is the farthest back time that I have been briefed
on. But we did have to move some people out of the warehouse so
it could become vacant.
And then we spent a long time talking to local officials
about their interest in taking the property. And as you and I
have discussed, and as Jeff Zients, the deputy director of OMB,
mentioned in his briefing last week, sometimes local political
considerations really extend the amount of time that it takes
us to get properties out on the market. The process that allows
us to talk to states and localities looks like it has a time
bound to it when you look at our process. But I will just say
it sometimes gets extended.
Mr. Denham. Political from both the local level, as well as
sometimes Members from Congress that may have an interest in a
specific area, or----
Mr. Peck. Yes, sir. And, more often than not, it's--
localities have legitimate uses to which they want to put the
properties. But we have, in law, some fairly narrow purposes
for which they can get it at a discount. And if we can't give
it to them under that law at a discount, which usually means
for free, we talk to localities about paying fair market value.
And then, sometimes negotiations become protracted.
Mr. Denham. Thank you. And as we discussed yesterday, some
of the challenges with putting a property like this on auction,
as well as the timing, again, one of the things that this
committee is looking for that we had discussed 30 days ago was
how to streamline the process. And we still look forward to a
list of recommendations on that.
Mr. Peck. Thank you.
Mr. Denham. With that, I would like to start our five-
minute round of questioning. First Member would be Mr.
Crawford, our vice chair.
Mr. Crawford. Thank you, Mr. Commissioner, for being here
today.
In your written testimony you highlighted GSA's vacancy
rates in leased space, as compared to the private sector. How
are those GSA vacancy rates formulated, and do they take into
account the actual utilization by tenant agencies?
Mr. Peck. The fair answer is yes and no, sir. The way we
count tenancy and occupancy--and I have done this in the
private sector--is the way a private sector landlord would. If
a Federal agency is paying us rent on the space, we count it as
occupied space. That--and the ``no'' part of my answer is that
that could mean that an agency is, by our own standards, not
making the optimum use of the space. Or, in some cases, we have
a lease on space where one agency has downsized and another one
has increased, and we are moving people in. So there are
occasional vacancies, too.
And I want to be clear. This is not--we are in a very
different situation from the private sector. This is not a
knock on the private sector. The private sector has vacancy
because the economy has contracted more than in previous
recessions, for example, where the private sector may have
overbuilt. So I don't--this is no knock on them. In our case,
we are much more able to control the tenancy. We just--when we
lease space, it's because we know we have a real need for it.
Mr. Crawford. OK. Thank you. In the 2012 program, GSA
included a number of projects intended to avoid costly leases,
including the consolidation of the FBI in San Francisco, and
back-filling the Veterans Benefits Administration into a
Federal building in Missouri. What would be the avoided lease
cost for those projects?
Mr. Peck. Let me--unless someone behind me knows
immediately, it's something I can provide you for the record.
It's a finite number.
Mr. Crawford. OK, sure. If you want to, provide that for
the record a little bit later on.
And then I have one other question here I would like to
ask, if I could. Can you explain why the request for energy and
conservation measures has doubled from $20 million in 2011 to
$40 million in 2012, especially given that most of the $5.5
billion Recovery Act funds went to converting buildings into
high-performance green buildings?
Mr. Peck. Yes, sir. The Recovery Act funds of the $5.5
billion, about $3.5 billion was money to be--to put--some of it
was new construction, and $3.5 billion was money to put into
repairs and alterations in our buildings that included not just
greening the buildings, it included, in many cases, total
building rehabilitations, where we had a 40-year-old building.
So it means replacing the roof, replacing facades, all that
kind of stuff.
In every case where we did that, we did green the
buildings, that's absolutely true. But even that didn't reach--
there was something like 270 major building renovations
projects. We have 1,500 buildings. And so there are still
buildings that need work on their energy and water
conservation. And these funds generally go to smaller things
that you can do to buildings, like putting in smart meters,
low-cost technology upgrades that can make a difference.
Mr. Crawford. OK. And I've got a little bit of time left,
so I am going to ask you another question. Can you explain why
two of the most costly projects included in the President's
budget for 2012 include an FBI consolidation in San Juan,
Puerto Rico, at a cost of $146 million, and the renovation of a
Federal building and courthouse in Hawaii at a cost of nearly
$200 million? Can you talk about the need for each of those
projects, what the utilization rates are, and how they save
money?
Mr. Peck. In the--in Hawaii, there are two issues in the--
I'm not going to try to pronounce it again--the PJKK Building,
as it's affectionately known. The building is--it's an old
building. It's had some major--we don't have structural issues,
but we have some major facade issues, water infiltration in the
building, and it's--mostly it's--in that case, it's mostly an
operating asset.
And we operate like a private-sector landlord in this
sense. At some point a building gets to the point where it's no
longer functional. We can, by investing that money, save money
on operating costs. And I will say that, since we do operate
like a business in the sense that we have a rent roll--we're
mostly self-financing--when we do that we are also able, over
the years, to recapture our investment by raising the rent,
because the building will now be a higher class building.
That's in that case.
In the FBI--in Puerto Rico, there are--I will get you the
utilization rates in the building, but I'm going to just say to
you, sir, that, looking at our inventory, utilization rates in
general could be improved.
Mr. Crawford. OK.
Mr. Peck. I'm not going to--I will see what they are in
that building, but I think we could improve. And I'm looking
forward to having an opportunity to discuss with you some of
the things that we're doing to do that.
Mr. Crawford. OK. Thank you, Commissioner. I yield back,
Mr. Chairman.
Mr. Peck. Thank you. Mr. Hultgren?
Mr. Hultgren. Thank you, Mr. Chairman. Thank you, Mr.
Commissioner, for being here. A few questions.
The President proposes over $200 million for projects
related to DHS consolidation at St. Elizabeths in D.C. Can you
explain how these projects fit into the overall consolidation
plan, and what is needed for Coast Guard's occupancy of its new
headquarters?
Mr. Peck. OK. The Coast Guard building is well along, as
anybody who flies out of National and gets to sit on that side
of the plane will notice. We are on track to finish that
building. We have got funding for the Coast Guard building. But
there are associated projects at the DHS headquarters that are
essential, both in the fiscal year 2011 and fiscal year 2012
programs.
So, let me just restate. The purpose of the consolidation
is to get--as we all know, one of the issues on homeland--with
improving homeland security is getting the various agencies
that are involved to coordinate better, so that they coordinate
intelligence and operations. And the idea is to get their major
operating entities up on the St. Elizabeths campus.
The next phase of projects, the immediate next phase of
projects in fiscal year 2011, in fact, is to create the
national operations center, which is, obviously, the heart of
their operation. There is some construction on that going
underway at the moment. The space for the Secretary's
headquarters--again, the heart of the agency--is next on the
agenda. And there is a lot of infrastructure work that has to
be done so we can continue with some of the other buildings
which will house aspects of--parts of customs and border
protection.
Mr. Hultgren. The President's proposal requests funds to
begin a repair and alteration project for a Federal building
for ICE in Los Angeles. Wonder if you could just talk briefly,
too, how you see that this project would save money and
increase utilization.
Mr. Peck. I'm sorry, tell me----
Mr. Hultgren. The ICE in Los Angeles.
Mr. Peck. Oh.
Mr. Hultgren. For ICE----
Mr. Peck. That's a--oh, that's a good story. That was a--we
were going to do a--what's called a lease construction project,
a project in which we go out in the private market and ask
someone to basically do us a build-to-suit project. And we have
converted that to a government construction project.
The advantage is--I am going to be clear about what I say
about leasing. As with any corporate real estate operation,
there should be a mix of leased and owned space. You generally
lease space when you have relatively short-term needs, or needs
that you think you might have to move around. When you have
permanent operations that you know will be around--and
generally it's for more than 15 to 20 years--it makes sense
over time to own the asset.
And so, this is a product that we converted from leasing to
construction. And, in the long run, that means that we--that
the Federal buildings fund, which is basically a revolving
fund, will retain the revenues and make enough of a net income
to be able to do those things we have to do in our inventory.
Mr. Hultgren. OK. So you do see it with the ICE project,
there is a net savings?
Mr. Peck. Yes, sir. I could get you the net present value
difference between leasing and ownership, as well.
Mr. Hultgren. That would be great, if you could. Thank you.
The President's proposal also requests funds for the FBI
record center in Frederick County, Maryland. Why is this space
needed, and how will the project cut spending and improve space
utilization, as well?
Mr. Peck. There is a long and, in the end, I think, a good
story here. We have been--the FBI has needed a place for its
records. A lot of things are digitized these days, and so they
need different kinds of record storage facilities. They still
have a lot of paper records. And they have needed this for a
long time.
But because of technology, we have been able to--this
project has gone from at one time being nearly a million square
feet down to where it is today, which I think is a little over
300,000.
And again, at one time we were talking about a lease
construction project, and this too has been converted to a
request for funds to build it. I mean this is a classic kind of
a warehouse records center kind of a facility that we're going
to need for a long time.
Mr. Hultgren. So with the smaller size, though, it does
appear that it would still accomplish the purposes of the FBI,
but also would have the utilization that we really need there?
Mr. Peck. Yes, sir.
Mr. Hultgren. OK.
Mr. Peck. We have taken out of it at least one minor
function that they don't feel needs to be collocated there.
But, because of technology and another look at how they do
their work, we have been able to skinny it down.
Mr. Hultgren. I'm going to switch just a little bit. I've
got just a little bit of time left here.
But dealing with border crossings, the 2012 program
includes funding for a number of land ports of entry. As you
know, last year our committee had concerns that some of the
Recovery Act funds were going to border crossings that saw very
little traffic. Can you provide the committee with the traffic
and utilization rates for each of the facilities in the
President's budget?
Mr. Peck. Yes, sir, I will. And that's in the--these
projects were screened by looking at where we have the most
cross-border traffic.
Could I just say I was in--about a month ago I went down
to--looked at a number of the border crossings in Arizona and
our border crossings in El Paso, and there are places in which
the trucks line up for, sometimes, eight hours to get across
the border. It increases--they need to be screened, there is no
question about that. But it increases cost to the American
consumers when that happens. And so we have--I will get you the
counts.
Mr. Hultgren. Thank you, sir. Do I have time for one more
question, or----
Mr. Denham. Absolutely.
Mr. Hultgren. In your testimony you note that the
Department of Transportation has requested $2.2 billion in
their surface transportation funding for critical facilities at
the borders. These funds, you note, would be transferred to GSA
out of what the DoT account--I'm sorry--out of what DoT account
would these funds come from? Is it from the highway trust fund,
or from another account?
Mr. Peck. I think--yes, it's service transportation funds,
but I'm going to have to--I want to--I know a little bit about
this. I want to find out if it's from highway trust funds. I
don't believe so.
Mr. Hultgren. Well, if you can get that to us, as well----
Mr. Peck. I will.
Mr. Hultgren [continuing]. That would be great. I will just
keep going, if that's OK, until they cut me off.
Would the $2.2 billion in DoT funding be for actual
construction of new buildings and facilities, or for the roads
leading to the facilities?
Mr. Peck. It's mostly design and construction. But in a lot
of cases on our facilities as they are, we--well, not in a lot
of cases. In some cases we do pay for some of the road
infrastructure, although generally that's done by the state
departments of transportation.
But there are cases in which, because if we just plunk a
land port of entry--a new one--down we will create terrible
congestion, we do spend some of the money outside the ports as
well.
Mr. Hultgren. OK. Will we receive prospectuses for the
projects funded with the $2.2 billion in DoT funding?
Mr. Peck. No, sir. I believe on that--am I right? On that
account you would get a spending list, somewhat the way we did
on the American Recovery and Reinvestment Act. I note, though,
that transportation funds come through this committee as well,
so you would certainly have every opportunity to review it.
Mr. Hultgren. OK. One last thing, if I could sneak it in,
you highlight in your written testimony again that more than
10,000 jobs have been created through GSA's $5.5 billion that
was included in the Recovery Act. Do you have a breakdown of
the types of jobs created, and how many of them are long-term
permanent positions? And, if you do, could you get those to us?
Mr. Peck. I will. But I should say they are--these are
generally not long-term, permanent positions. These are design,
architecture, engineering, and construction jobs.
Mr. Hultgren. OK. But if you could, get us a list of
approximate time for those positions, and just a follow-up of
how that's gone.
Mr. Peck. I will. Actually, on those, I have to tell you we
have been very scrupulous about that. We even go out and ask
our contractors on a monthly basis, I think it is, to give us
their breakdown of their jobs.
Mr. Hultgren. Great. Thank you, Commissioner. Thank you,
Mr. Chairman, for your indulgence. I yield back.
Mr. Denham. Thank you, Mr. Hultgren. Obviously, we went
over the five minutes because there is some new questions that
have come up under this. I didn't realize that the $2.2 billion
is coming from the highway trust fund.
Mr. Peck. I believe it is not coming from the highway trust
fund. It is coming from the Department of Transportation. We
are going to check and find out if it's highway trust fund
money or appropriated funds. Generally, appropriated funds.
Mr. Denham. Because the highway trust fund would go to fix
roads and highways.
Mr. Peck. Correct. We know that. And the reason that the
money would come from the Department of Transportation is that
this is--has a lot to do with cross-border traffic and trade.
And the administration felt that it was--that the DoT funding
was appropriate to carry this activity.
You will see the--in the projects that we are going to
propose, you are going to see they're mostly from congested
land ports of entry.
Mr. Denham. OK. And even though this is DoT funding--I know
you're going to go back and see which fund this is coming out
of--but DoT funding, and we're not going to receive
prospectuses on this?
Mr. Peck. That's--it would be because it's a transfer of
funds, somewhat the way the American Recovery and Reinvestment
Act was carried out. We would provide a list of projects that
we would propose to fund under it.
I think some of the thinking has been, Mr. Chairman, that
this committee obviously funds the Department of Transportation
and the transportation program as well, and would have every
opportunity to review the list of projects. It's a matter of
legislative interpretation that funding that comes to us
outside of the public buildings fund, the Federal buildings
fund, doesn't go through a prospectus process.
It doesn't mean that we aren't--that you aren't welcome to
have a hearing and make whatever decision you make, because
it's going to be a full--it's going to be a request for at
least an appropriation. And I believe that an authorization to
the Department of Transportation, but I have to check on that.
Mr. Denham. We can obviously hold a hearing any time we
find out new information. This seems like it is trying to get
around the process, almost like a blank check. We're going to
go out and spend the money, and then we will tell you where we
spent it afterwards.
Mr. Peck. No, sir. I mean you will get a list of proposed
projects to review before any spending is done. Yes.
Mr. Denham. When do you expect to have that list?
Mr. Peck. I will have to get back to you on that. I don't--
it's not being developed--there is a draft list, and I don't
know where it is at the moment.
Mr. Denham. When do you expect to spend the money?
Mr. Peck. Well, it's for fiscal year 2012, so we would
propose to start at the beginning of the fiscal year, if we get
it funded.
Mr. Denham. So, similar to our prospectus, you must have
some information on it----
Mr. Peck. We do. There is--like I said, there is a spending
list that is not--a project list that has not yet been cleared
for submission to the Congress.
Mr. Denham. Thank you. Chairman Mica? Five minutes to
Chairman Mica.
Mr. Mica. Thank you. And thank you, Mr. Chairman. And
welcome, Mr. Peck. Good to see you today. I know you're talking
a bit about some of GSA's capital investment leasing program.
I always go back to my favorite subject, which is the
consolidation of the FTC current space. And for some time now
you have had before us a prospectus to lease a total of over
400,000 square feet. And we have one lease expiring, the FTC
currently has their 306,000 gross feet of space in the Apex
Building, where they are headquartered now. And then they have,
on New Jersey Avenue, I think, another over 200,000 square
feet. And then they lease a smaller amount of space. And there
was the possibility of getting a third building for them, or
consolidation.
Now, the New Jersey space lease expires. Is that in 2012 or
2013, do you recall?
Mr. Peck. Checking my--expires in August of 2012.
Mr. Mica. 2012. The other thing, too, is I know some time
ago you did propose leasing additional space for them, and they
have additional requirements. We also have the Apex Building in
which they are housed as 306,000 gross square feet, a net
usable of 258, and they're using 180, or maybe a little more
than that currently, with somewhere between 450--and they
claimed up to 700--employees. But that request for additional
space--have you been in consultation with them on their space
needs?
Mr. Peck. Yes, I have not personally, but we certainly
have, as an agency. Yes, sir.
Mr. Mica. And when we received the prospectus last year I
had pretty much the agreement of the former chair of the
committee to try to move forward with the consolidation of--
approval on moving forward. And, as you know, we passed a
resolution.
I have been here a while. It's sort of unprecedented to
have a resolution of the nature we did in response to a
prospectus request. Isn't that--that's sort of unusual. I know
it puts you----
Mr. Peck. Right.
Mr. Mica [continuing]. In a dilemma, but I think it set
forth some of the issues that we felt were important. You
provide us with a prospectus and a request, and then I thought
it was incumbent on us to pass or adopt a resolution that
stated our position.
I know that puts you in a little bit of an awkward
situation, and there has been a certain amount of lobbying by
the FTC commissioners to retain their space. Have you
undertaken yet, or your folks undertaken yet, since we have
passed the resolution, any discussions with FTC about, again,
consolidation of space or meeting their space needs, given that
we are intent on trying to transfer their building to the
National Gallery of Art, so they don't have to lease additional
space outside, and could consolidate some of their operations?
Mr. Peck. Mr. Chairman, I have not talked to them. I don't
know that anyone else in GSA has, but I have not personally
engaged them since you all passed the resolution. But I intend
to. And I would like to, if I could, lay out a couple of points
of view, and see if we can continue a discussion soon about----
Mr. Mica. We would like to work with them. My intent is not
to deprive them of any of the space that they need, but rather
to look at a consolidation that makes sense. Folks have quoted,
you know, Roosevelt, when he dedicated the building. We went
back and researched the--when the building was dedicated in the
1930. In fact, it was a consolidation of multiple FTC locations
around Washington that they put into one building. And now we
have a situation where they need much more beyond this space
than they have in the headquarters.
And you also came to us with their request for additional
lease space, which we think would make sense, and finding
something suitable--and Ms. Norton, of course, would like that
in the District--and I think there could be substantial
savings. Our resolution outlined that.
Plus we have the unprecedented situation of the National
Gallery of Art being willing to come in and renovate an 80-
year-old building, and again relieve of us leasing space that
they currently lease, and meeting their space requirements for
the future. So, it's not a wild-eyed proposal, but I think it
also has the potential--if you start out with $200 million in
saving and renovating a building, eventually you will have to
renovate. I saw the figures, 138, but I think it will be closer
to the $200 million mark by the time you get through giving,
again, the cost of projects we have seen that we have a pretty
good handle on.
We have no intent on changing--our proposal wouldn't change
the facade in any way, and I think that many more people would
access the structure. They have 4.5 million versus 450 or 600
or 700 that go into the building every day now, which would
again provide an opportunity also to let people know that that
was historically their building, what the FTC does, and they
wouldn't be lost, so to speak, in the mix.
The other thing, too, is we outlined in legislation we
passed in the transfer--you have space coming up at the GSA
building, we have space behind us next to the Ford building.
And we have also heard--and I won't get into public
discussion of it--several other agencies that might like to
relocate that are in the District that--this might be a good
time to be looking at those kinds of deals, where they, for
security or other reasons might want to relocate or spread out
some of our activities in national security interest that I
think you're aware of.
So, we have a number of choices. The committee will work
with you. We will be willing to sit down, if--I know the FTC
commissioners like their view and their particular setting
right now, but that's not--that shouldn't be the paramount
question. It should be the net savings, the--providing adequate
space, both for the FTC and for the National Gallery, and doing
it all in a responsible fashion that looks out for the
taxpayer, too. Because I know you will work with us and
appreciate it.
And if you see any obstacles, too, that we can assist you
with, I want to make certain that you know that we have
initiated this process, and we are willing partners to work
with you to find a satisfactory resolution. It's not something
we just want to cram down people's throats or act on in a
singular fashion. It has to be a cooperative effort. We know
that.
So, again, I look forward to working with you on it. And if
you start those discussions, you can let Mr. Denham know, and
we would be glad to join you and, again, look for positive
solutions.
Mr. Peck. Mr. Chairman, may I response?
Mr. Mica. Yes.
Mr. Peck. First, I really--I very much appreciate your
statement. And, as you know, I once worked at the National
Endowment for the Arts. I have been friends with two directors
of the Gallery, and I----
Mr. Mica. I didn't know all that.
Mr. Peck. It's the--it's a--it's one of the great art
museums in the world. And I think doing what we can for the
National Gallery is--should be a high priority for the
government, as it has been since the Roosevelt administration.
I very much appreciate your concern, as is ours, and we
have discussed this, that we--since the strategy, which the
committee and GSA mutually has pursued for a long time is
trying to keep government agencies in government-owned space as
much as we can, we have a concern which you have just
expressed, too, that we try to keep the FTC in government-owned
space.
I will just add two things. One is that, as you noted, I
have a--we have a tenant, a client who wants to stay in their
building, they are wedded to it. That's kind of a good thing,
because it's a beautiful building, and I appreciate the fact
that they like it a lot.
And finally, I will just say I will take you up on the
suggestion that we talk to staff and Chairman Denham about how
we proceed on this. As you note, there may be alternatives. I
need to talk to the FTC. And at some point soon we should try
to find a way to satisfy all the parties, including--as I
recognize--the needs the National Gallery of Art, and us, to
keep the FTC in government-owned space.
Can I also assure you that I have spoken to Chairman Denham
any number of times, and he has never once failed to include
this on his list of issues?
Mr. Mica. Well, again, we have certain priorities. This is
my priority, working with Mr. Oberstar--and we were close to an
agreement at that point.
And I think the other thing, too, is we have to do things
that are in the best interest, long-term, of the government.
And this is our Nation's capital. And I think, looking to the
future and what we're leaving here, the National Gallery, which
is the repository of our Nation's treasures, FTC, which has an
important function, we can both serve their needs in a
responsible way for the taxpayers and for the mission that
we're responsible making certain they complete.
So, I look forward to working with you. I know we put you
sometimes in a difficult position. We will be working with the
other body now. But I can assure you that, one way or the
other, that this transfer will take place, and we want to work
with you to make it as smooth as possible.
Mr. Peck. Mr. Chairman, this is a great job that the people
and the President have allowed me to have. And dealing with
issues with this is one of the challenges that I welcome taking
on.
Mr. Mica. And I will just tell you I have no other priority
for the balance of my tenure in Congress, so I am sort of
focused on this. Thank you.
Mr. Peck. All right. Thank you, sir.
Mr. Denham. Thank you. We are going to continue on
questions a little bit further here, specifically the
evaluation process on how you take a look at weighting
different properties and how you sell them.
When you're prioritizing projects, are you looking at
mission urgency, energy conservation, return on investment? How
are the different factors weighted?
Mr. Peck. OK. You're talking about repair and--when we do
the--look for repair and alteration projects and mostly--or new
construction?
Mr. Denham. Yes.
Mr. Peck. Either one?
Mr. Denham. Well, as you're evaluating projects as a whole.
I mean, if you have one that may not be utilized completely,
you know, before that goes out to other agencies and other
uses, are you also weighing in that proposal different weights
on--you know, is it going to--do you have extensive TIs, do you
have energy conservation----
Mr. Peck. If you're asking about properties that we think
are close to being excess or surplus, we--there are two
different levels on which I think we should all be talking
about our surplus properties.
One is--and this will also describe the process that we are
going though right now, under the President's memo, and
hopefully under some kind of legislation to go deeper--is, one,
we have properties that we know are either unused or almost
unused at the moment. And as I said, when the ones that are
almost done used--meaning that we have enough vacancy or enough
underutilization that we think that we can move out--we take a
look at, ``Is it a property worth putting more investment in,
so that we can get more people into the property and use it
better?''
Some properties, I should note, in other agencies--you can
imagine; I will just give you a--the example that people use a
lot is at one point lighthouses were important to the country.
And then, obviously, technology overtook them and the Coast
Guard had a lot of excess property on its hands. Even there, we
asked other agencies if they could use that kind of property on
the coast. And in many, and probably most, cases the
lighthouses went out to somebody else. So, there are those
things, where you say, ``All right. Can anybody use it?''
There are properties in which you--that--in our
properties--more often, say a Federal building, we have areas
in which we ask ourselves the question, ``OK, if we have
vacancy in a Federal building, should we take it to--should we
try to tenant the building, or is this an asset that's not
worth spending the money on?'' And you can do--you can crunch
the numbers on it. Because we charge rent, we can figure out
what our return on investment would be.
Mr. Denham. So, how often do you crunch the numbers? I mean
do you do a general assessment for every property, all 1.2
million properties, to see exactly where we are? Because some
of these properties may not have been assessed for decades.
Mr. Peck. No, I'm talking about GSA properties now.
Mr. Denham. OK. So----
Mr. Peck. Yes. GSA properties, we have three tiers of
properties. We--there are short-term holds, meaning we're
looking to get rid of them; medium term, and we--we're not
sure; and long term, that we are going to keep for a long time.
For our other properties--and can I just say that for the
other properties and other government agencies, one of the
issues that I think anyone will tell you we have in the
government is that there are--we don't, as GSA, review other
agencies' properties, at least haven't until the last year,
unless and until the agencies report them as excess to us?
I will qualify that only through this. We have a very
entrepreneurial, aggressive disposal staff in GSA, and when
they get word one way or another that an agency has a property
that may be underutilized, they have in the past gone out to
the agency and said, ``Is this possibly an excess property?''
I think anyone who has looked at this business over the
last 20 to 30 years would tell you that there are properties
that agencies sometimes hold on to in the wish, in the hope,
that some day they will get the funds to do something with it.
They may even have legitimate plans.
But there comes a point--and this is where I think we ought
to work together--there comes a point where it's pretty clear
that we're not going to get the funding to do it, that the uses
to which an agency wants to put the property are not going to
come about, and that we ought to get them out of the inventory.
And what percentage of underutilized properties are in that
category that we could move them into excess, it's really hard
to tell at the moment. But I think in the next six months or
so, we will have a much better handle on that.
Mr. Denham. Just under GSA properties, 1,500 properties----
Mr. Peck. Yes. Yes, sir.
Mr. Denham [continuing]. You begin your evaluation based on
underutilized properties, and then push them to become surplus
properties at a certain point when you deem the criteria not
met?
Mr. Peck. Right, right. As you will note, we don't have all
that many. We have--most of our properties are in major or
almost major metropolitan areas, in which there is a continuing
Federal need. So if we own a Federal building and some agency
moves out, we almost always have someone we can move in from
leased space.
We do, however, have some smaller properties in outlying
locations around the country where we--too, if we find a
vacancy, we decide, you know, it's probably not worth putting
the money into the building. And in that case we might dispose
of it and lease what space we need. But we just do a financial
analysis, like--that's fairly straightforward, and just like
anybody in the real estate business would do.
Mr. Denham. But there is nothing that would alert you or
your team, unless you have one of the properties that's up for
a new lease, if somebody moves out or----
Mr. Peck. Oh, no. I'm sorry. We, on a rotating basis,
continually look at our own inventory. We have a portfolio
management office in our national headquarters and in each
region, and their job is continually, whether we have something
moving in the building or not, to take a look at it.
Mr. Denham. Continuously, or random?
Mr. Peck. Continuously. And the way that--the----
Mr. Denham. So, how often?
Mr. Peck. Well, I--I'll tell you what drives it. I will
tell you why it's a continuous process. Every year we put out a
call. We have, as I said, a benchmark of wanting to spend
something like two percent of the replacement value of our
inventory on repairs and alterations. We put out a call to our
operating elements, our 11 regions every year, and say, ``Given
your inventory, tell us''--you know, ``do an evaluation of the
inventory that you hold, and tell us which of the buildings you
think need a repair and alteration investment in them.''
We have hurdle rates. We know how much of a return on
taxpayer dollar put into that building we expect to get back in
increased rents or increased usage. So--and as I said, we have
already tiered all of our properties into three tiers in which
we know which ones we think are short, medium, and long-term
holds.
I will note in the early 2000s, GSA disposed of a number of
properties, and we actually sold off about $220 million worth
of properties as a result of that kind of tiering of the
inventory.
Mr. Denham. So the 1,500 GSA properties have all been
evaluated at some point in the recent past?
Mr. Peck. Yes, sir.
Mr. Denham. So you know----
Mr. Peck. You know, I have--first of all, one of the great
things about GSA is we have weekly, monthly data on vacancy,
rent rolls, by asset, by region, and nationally. So we're
constantly looking at where we have vacancy, where we're not
getting--at the beginning of every year we have a budget for a
building. And if we're not getting the rent that we expect from
the building, we go to people and say, ``What's happening here?
Does that mean that nobody is in the space?'' And so we have
that.
We have asset status studies on every single one of our
buildings. And let me ask how--what's the longest period a
building could go before the asset study gets reviewed? Every
building, every year, is going to get some kind of a review of
its asset status.
Mr. Denham. So you are confident that the 1,500 properties
under your purview, you can tell me, square footage, how many
people are in there, what it's worth, what the ROI is?
Mr. Peck. Yes, sir. Yes, sir. I want to be--I want to make
the other point I have made to you before. Take the GSA
building. One of the things we are doing as we are looking at
renovating it is that we could probably assign--we will assign
a lot more people to the building.
So, when we say our main Federal building in a city is
fully occupied, it is. We are in the process of talking to a
number of Federal agencies intensively about how well they
utilize that space. Some of them are--we're probably not far
off from current industry benchmarks, but the industry is
moving. A lot of progressive firms are moving to a point where
they can get a lot more people into a lot less space, because
they just recognize that people can work from anywhere.
So, I think you will see, over the next year or two,
strenuous efforts on our part to increase the space
utilization. And that, in itself--the reason I'm saying that is
that that in itself may mean that what we regard as a fully
utilized occupied building today may not be--that may not be
the same standard we apply to it years from now.
Mr. Denham. On top of the 1,500 properties that are
directly under your purview, how many leases go through GSA?
Mr. Peck. We have about 8,100 leases, and----
Mr. Denham. So----
Mr. Peck. Around the country.
Mr. Denham. So does GSA oversee all leases under the
Federal Government?
Mr. Peck. No, sir.
Mr. Denham. What----
Mr. Peck. We are--when you look at the--if you look at the
data, I believe we are the government's largest leasing agency
in the United States. But other agencies have their own leasing
authority. The Army Corps of Engineers does some leasing on
behalf of the military. And some other agencies also have their
own authority. So we're not the only ones. But we are the--at
least the largest lessee in the Federal Government.
Mr. Denham. So what type of oversight is there over the
independent agencies?
Mr. Peck. The independent agencies are--and what I'm
describing there are agencies that have their own legislative
authority. We sometimes delegate authority to a government
agency to do leasing that would otherwise be done by GSA. And
in that case it's our responsibility to make sure that they
follow--that they're following the government's procurement
rules.
If an agency has their own independent legislative
authority, they are responsible themselves for following the
Federal acquisition regulation and all the other things that
you have to do to do a lease.
Mr. Denham. SEC is independent?
Mr. Peck. They have their own legislated leasing authority.
Mr. Denham. So should those leases not go through you?
Mr. Peck. I would say, given the recent experience of the
SEC, I would say we would have done a better job than they did.
By which I mean, just to be fair, when agencies come to us with
space requirements, we have ways, including checking back with
the Office of Management and Budget--where they say that they
need space to expand their activities, we check to make sure
that the activities are actually budgeted for expansion. That's
a crucial step.
Mr. Denham. I would agree that is a crucial step.
At this time I would like to yield five minutes to Ms.
Norton, as well as an opening statement, if you would like.
Ms. Norton. Well, I thank you very much, Mr. Chairman. And
first, I offer my apologies. There was a mark-up involving a
bill directly affecting the District of Columbia. It has just
ended, and I could not leave. I always know that if I leave
when a District of Columbia matter is up, the Congress could
sell the District. So I stay on duty.
I did want to--however, I am not going to read my opening
statement, but I am going to summarize what was--what is in my
opening statement.
And I want to say to you, Mr. Peck, that you will note that
the chairman has proceeded, although we have not yet received
all the prospectuses for the 2012 program, and I endorse the
chairman's resolve. If your prospectuses aren't up here, too
bad. Because what he is trying to do--and I'm going to say we
should have done a better job with this--is to make sure that
the authorizers indeed have acted before the appropriators do.
So, I fully endorse the chairman proceeding with the 2011 and
2012 budgets.
I do want to note that your submission involving $1.7
billion capital program, while it's modest in keeping with the
President's intention to submit only what he regards as
necessary, that it does represent a 16,000 private-sector
construction and related jobs. Particularly in the absence of
any jobs legislation from the present majority, we should
welcome this small infrastructure contribution at a time when
jobs are--when unemployment is still so high, and the Congress
is doing absolutely nothing to respond to that.
I note that H.R. 1 would totally eliminate the 2011 capital
program. And I want to just say for the record what that will
do. That would bring to a standstill, stop in its tracks,
priority construction projects of the United States, including
the consolidation of the 22 agencies of the Department of
Homeland Security. This, of course, is the highest priority
secured facilities program in the budget.
Moreover, GSA has said to us in prior hearings that
delaying the DHS headquarters and other construction related to
the Department of Homeland Security would cause GSA to extend
leases for short terms, which is, of course, the most costly
way to lease for the Federal Government. In other words, we are
adding to the costs of the Department of Homeland Security.
If we proceeded, however, and this project is on time, what
happens when the project is done is $180 million annually then
goes to the Federal building fund. The Federal building fund is
much depleted now, so that there is every reason that this
project, which was a priority of the last administration and
remains a priority of this administration, will not be stopped
in its tracks, but proceed apace.
If you can imagine what--the cost of stopping a project
that is going full guns, you will have an understanding of why
it would be counterproductive for us to wipe out the 2011
capital program. And I don't believe that the Senate or--and
certainly that the President will allow that to happen. There
is lots of negotiations that's going to have to go on before we
get even close to an agreement on 2011, much less 2012.
The collocation of a number of agencies on the DHS campus
also avoids leasing in the highest commercial cost leasing area
in the United States. So there are multiple reasons to not be
penny wise and pound foolish.
I want to say how much I appreciate the President's work--
his proposal to create a BRAC-type commission for Federal real
estate. He is way out in front of the Congress in this regard.
But there is great concern in this subcommittee and committee,
and in a number of other committees, about surplus property
that the Federal Government has not been able, until now, to
dispose of. So his idea, it seems to me, is one that should be
embraced by us all.
And finally, I want to say to Mr. Peck, the delineated area
and procurements remains a concern for the subcommittee. We
are--the lease--I'm sorry, what is the lease? Parklawn lease
continues to be troubling. We expect procurements to be done by
the book, carrying out congressional resolutions.
Mr. Chairman, again you have my apologies. I am pleased
that you proceeded. This is an important hearing, and you are
right to go now, early, before the appropriators get down to
work on this mission. I thank you very much, Mr. Chairman.
Mr. Denham. Thank you very much. At this time do you have
questions for Mr. Peck?
Ms. Norton. I would ask only about the status of the
Parklawn delineated area issue, which has caused GSA so much
heartache.
Mr. Peck. Thank you, Ms. Norton. That would be a good
characterization of the lease for HHS, which is currently at
Parklawn. Could I just say I share your concern about the way
delineated areas are drawn?
And I think, in part, because of the concerns that this
subcommittee has brought to us, we are taking a look at it,
particularly in the national capital region, to make sure that
we draw delineated areas that maximize competition to get the
agencies' functions done, and then, when we actually carry out
our lease solicitations--which is what these are mostly about--
that we follow the delineated areas.
As you know, we have scrupulous layers of--we have multiple
layers----
Ms. Norton. That procurement has been going on for three
years.
Mr. Peck. Yes, ma'am.
Ms. Norton. And you know what the issue is, Mr. Peck. The
issue is the Agency deciding where it wants to go, rather than
GSA deciding what's the best deal for the taxpayers. Why is it
going on for three years, and when is it going to be settled?
Mr. Peck. Correct. I can't account for all of the three
years, I have only been here for a year-and-a-half. An
announcement on that lease is imminent, is all I can tell you.
I can't say more, because it's--we're in the--we're in that
period called procurement sensitivity. But the announcement
will come very, very soon.
Ms. Norton. Mr. Peck, here is a sensitive procurement issue
for this committee. On February 9th--perhaps you remember that,
it was when you were tortured, along with the entire
subcommittee, at a hearing in the Old Post Office Annex. And
you are aware that I would have done that a little differently.
I would have had you there, and we would have been here,
because we have been doing the right thing all along. So I
don't know why we had to be subjected to that.
But under torture, you said--you committed to either have
the RFP out on the street for the Old Post Office, or provide
an explanation of why it is not out. So this is your chance. Or
you may want to go back to the Old Post Office Annex.
Mr. Peck. I will provide a written explanation this
afternoon. But----
Ms. Norton. No, no. You can give an oral explanation right
now.
Mr. Peck. OK. Of course. But I believe I owe the committee
a--if you like, I will do a written response.
Ms. Norton, I am just going to say this. I suspect you're--
frustrated would be probably an understatement--about the Old
Post Office RFP. And that would accurately describe the way I
feel, as well. I did not have an RFP on the street today. I
am----
Ms. Norton. And what's the explanation for that, Mr. Peck?
Mr. Peck. You know, the explanation is, despite many
meetings with the people in the government who have to review
this, including my own personal participation in it, we have
not been given a go-ahead to put the RFP on the street.
Ms. Norton. You mean OMB is in this again? We have got--
wait a minute. This RFP was very different from any other RFP
since I've been on this committee, because it was mandated by a
statute.
Mr. Peck. Correct.
Ms. Norton. Now, the last I read, OMB cannot override a
statutory mandate of the United States Congress.
Mr. Peck. A point which we have made several times, I can
assure you.
Ms. Norton. So--no, I want to know why it is at OMB at all.
This is not a matter----
Mr. Peck. Ms.----
Ms. Norton. This is--Congress said, ``You will, in fact,
gain revenue for the taxpayers, as you did with the tariff
building, if this building is remodeled.'' And because OMB got
in the way then, the Congress said, ``We know what to do. We
will pass a statute that instructs the administration what it
is to do.''
So, the OMB excuse has run out, because it is overwhelmed
now by a statutory mandate. And we need to know from you what
OMB's issue is with the Old Post Office RFP.
Mr. Peck. As near as--I can give you two general concerns.
One is the details of the RFP itself, and the various
provisions in it, which I think at this point we have fully
discussed, and I believe we are over. As you know, I have
drafted these kinds of things in my private sector as well as
public sector lives, and I can assure you that we have drafted
a request for proposals that is tight, protects the government
interests, and I believe gives private sector interests a full
opportunity to show what they could do with the building.
The second concern has been a concern about the cost
benefit of maintaining the building as federally occupied
space, and putting it out on the market. And----
Ms. Norton. No, no. That can't----
Mr. Peck. And I can tell you that--I have a hunch you're
going to say what we have been saying, which is that the
legislation fully anticipates that that analysis will be
submitted to the Congress, along with a negotiated lease from a
private sector interest. That is what the legislation says.
So, that analysis, in my opinion----
Ms. Norton. You know that there is abundant room to put
that two cents' worth of agencies in many places, and that was
the excuse before.
Mr. Peck. Well----
Ms. Norton. Look, this building is losing the Federal
Government $6 million annually. And you are telling us OMB is
the problem? $6 million each year we lose because of what you
have to put into the building, just to keep it going.
Mr. Peck. But what I'm suggest is that I think the
legislation was responsible, as it should have been, and said,
``We will take a look at what the cost and benefits are when we
have a private sector offerer who says, 'Here is how much money
I will pay you for letting us use the building,' versus what it
costs us to have--to continue Federal occupancy in the
building.'' And that is an analysis which we have done in the
past, we will do again when we get an offer.
I am well aware of the opportunity to move the agencies in
the building someplace else. We have talked to the agencies
about that. And I am just telling you I am frustrated, I am
working as diligently as I know how to get this RFP out.
Ms. Norton. I think you should say to OMB that the
committee expects the RFP on the street within 2 weeks, 14 days
from today.
Mr. Peck. We will be happy to carry that message back.
Mr. Denham. Thank you, Ms. Norton. The chair yields five
minutes to Ms. Edwards.
Ms. Edwards. Thank you, Mr. Chairman. And also thank you to
the ranking member. I think every day on this subcommittee we
recognize that the ranking member probably, you know, is
forgotten more than many of us will know in our service on this
committee.
Mr. Peck, I know that you will be heartbroken to know that
I was almost delayed in another hearing. But I am glad to make
it here.
I want to ask you first, to follow up on the Parklawn
situation--and I know that we're in that critical area where
you really can't talk about things, but I guess I want to hear
from you that you have some assurances that the processes in
which you have engaged, and particularly of late with respect
to that lease, will not result in litigation that will extend
this process even further than it has gone on already.
Mr. Peck. I--the assurance I can give you is that this
thing has been vetted every which way until Monday inside the
GSA in an attempt to make sure that we are abiding by what we
said to the real estate and official and private--for that
matter, the whole public--in this region about how we were
going to make the selection on this procurement.
I can't give you an assurance that someone won't litigate.
Unfortunately, my experience in this is that on very large
lease acquisitions like this one, there is almost always
someone who is willing to take exception to what happened, if
only because they are disappointed and think they may be able
to change the decision.
Ms. Edwards. Well, thank you very much.
Mr. Peck. But I hope that doesn't happen.
Ms. Edwards. I mean people--I understand, you know,
obviously, you know, many of the participants, or some of them,
somebody is going to be disappointed because they're not going
to get the procurement. I think I just worry that this
particular procurement has been so fraught with problems that
it may result in a deep perception that there is a great
unfairness, and that that unfairness has to be litigated. And I
fear that we are going to sit here a year from now discussing
the same thing. But I am going to go on.
I want to ask you about an area that has been of great
concern to me in my time on this committee, and it has to do
with the lease rate disparities from Maryland to Northern
Virginia to the District of Columbia, when it comes to leasing.
I think many of us who live and work here think of this as a
region, and we don't understand why these disparities exist
that seem to favor one jurisdiction over another jurisdiction
that has actually, I think, resulted, and in my view, as a lay
person, a lot of, you know, concern about fairness of process
when it comes to those sort of--the higher quality leases.
So, I wonder if you can explain for the record what the
reason is for the rent disparity. And then I would like you to
go down several jurisdictions. Is there a rental rate disparity
in Denver or New York City or Philadelphia or St. Louis or Los
Angeles or San Diego or San Francisco or even Baltimore, in my
own state, that is like the disparity that exists here in this
region?
Mr. Peck. There are not. We do not pre-set what we call
program rates for any of those other metropolitan areas.
Ms. Edwards. Only for this metropolitan area. And do you
have any idea, historically or otherwise, what the reason is
for that disparity?
Mr. Peck. I have--I don't know why the program rates were
set in the first place. I have been--I don't know for sure. I
have been told that there was--obviously, in this area the
Federal Government is a large lessee. And I believe there was--
may have been a sense at some point that the Federal
Government, by setting rates which were presumably market rates
in advance, or perhaps just below-market rates in advance, we
could save taxpayer dollars by announcing to the real estate
community that this is as high as we are prepared to go on
rent, and no higher.
Ms. Edwards. Well, I don't really get that, when there is a
disparity in the region, when you set the high mark. But there
is a disparity from Maryland to Virginia to the District of
Columbia. It would seem to me that, especially for people who
believe in the value of the marketplace, that, indeed, you have
actually scripted and constrained the marketplace, in terms of
competition. And I am concerned about that.
I--you know, I know I'm just, you know, your average
consumer. And so I live in Prince George's County, but
sometimes I shop in Montgomery County. And other times I drive
over to get a book in Northern Virginia. And I know my car
doesn't make a distinction about where it is in the
metropolitan area. And so I don't understand why GSA does. And
if you can't explain why it does, and you can't find anything
in your history that explains why it does, then we need to get
rid of the disparity, don't you think?
Mr. Peck. Let me make one point to clarify. But, in
general, I think there are--one, I have to say you're no longer
a lay person; I think you know as much about the real estate
market as anyone, given what you've learned--the way you've
delved into this.
There are clearly different rental rates in different parts
of the metropolitan area. In fact, I mean, one of the ironies
of the program rates is one could argue there should be 50
program rates, because there are probably that many real estate
sub-markets. Not every place in Washington is at $49, which is
our program rate. There are different parts of town, different
parts of Prince George's, that have different rates. Closer to
a Metro station will probably pay--you will pay a higher rate
than you will someplace else. So, that reflects the market.
However, you accurately describe what are concerns about
setting these rates in advance, which is that you can constrain
competition. I believe in some cases one can make the argument
that, while the intention was to keep us from paying a higher
rate, in some cases, the fact that we advertise in advance what
we're prepared to pay, in some cases may even raise the rates.
And then there are instances in which, as you and I have
discussed, if we actually have to go out, and someone has to
construct a new building to meet our requirements, there are
times, such as now, in which the program rate may not give a
landlord enough rent to be able to finance new construction.
And so, there are a lot of problems with this. We are
taking a look at--and I am hoping we can have some success in--
reforming this, so it either better does--so that it better
reflects what a good market-based real estate strategy would
do.
Ms. Edwards. Well, the people of Prince George's and
Montgomery County want to know, ``When is it our turn?'' And
so, I know you have been looking at this for some time. These
are questions that we have raised, and I have raised, the
ranking member has raised repeatedly. And I think it's time to
stop looking and to clear it up. If it doesn't exist for New
York City, it doesn't exist for Los Angeles or Denver or St.
Louis, then it shouldn't exist for the Washington Metropolitan
Region.
Thank you very much, and I yield, Mr. Chairman.
Mr. Denham. Thank you, Ms. Edwards. Just a couple of
follow-up questions.
I certainly want the information about the DoT. That is
something that came as a surprise to this committee. I
certainly want to know whether we're using transportation
funds, highway trust funds for buildings, instead of roads.
As well, it came to our attention last night, when we got
the prospectus, there is new leases in there. Could you explain
and justify the lease request for DHS?
Mr. Peck. Can I take a moment here?
Mr. Denham. Sure.
Mr. Peck. Is that a new lease request that we had not--you
weren't aware of before? Do you know where that--what location?
Mr. Denham. We stayed up all night going through it.
Arizona, New York, and Texas in the new leases.
Mr. Peck. Well, new to me, too. So I will--I understand
it's part of an ICE collocation initiative, but I will have to
provide you information for the record.
Mr. Denham. Thank you. And, as well, we have had several
discussions now--in greater detail today--on GSA's
jurisdiction, the 1,500 properties that you oversee out of the
1.2 million. As we are going through not only leases, which you
have a greater percentage of, but also building investments, it
seems like there is more that you don't know than what you know
and control, which obviously provides some issues with this
committee, as we are not only trying to provide valuable
oversight in all of our procurement, but more importantly, in a
time of crisis, we want to work to get rid of those surplus
properties.
If we are only looking at the 1,500, obviously, that is a
very limited window. I understand the President's BRAC proposal
will be coming out soon. As you know, we have also prepared our
own BRAC bill. We look forward to working with you on both. But
the concern that I have is that we don't have the oversight
over all properties currently today, which leaves a huge area
for mistake.
Mr. Peck. Well, Mr. Chairman, we look forward to working
with you on the legislation, too. And the intent of the
legislation is to make--is to have jurisdiction over all of the
properties in the United States for the purpose of making sure
that they are still needed, and--or are available for excessing
or surplusing out of the inventory.
Mr. Denham. And it was at one time GSA's authority over all
properties, wasn't it?
Mr. Peck. Well, we still--I want to be clear. We still are
the government's disposal agent. And so we do have something of
a fishing license to go to other agencies and ask if their
space is excess.
With the President's memorandum last summer--and I think it
would be only strengthened by legislation--we could go with a
little bit more of a--a couple more arrows in our quiver, to
make sure that we actually get good results.
Mr. Denham. Thank you.
Mr. Peck. Probably not fair to say. I shouldn't----
Mr. Denham. Well, we are committed to working with you on
this, as well as the administration, on their proposal. I will
be providing you the legislation that I did on the state level.
Our BRAC commission never moved forward in California, but we
did consolidate all of our buyer power under GSA, which gave us
a tremendous amount of oversight. There were a lot of
departments that came kicking and screaming, and still would
love to get out from under GSA, but it creates greater
accountability, from everything from our vehicles, which we
found thousands that were off the books, as well as properties.
So that would be the same type of system. I would like to
see either under a BRAC commission or separate from, but one
way or another, we have got to get some greater accountability
over what we own, what it's worth, the justification when we
purchase a new property, and I think, most importantly,
understanding the utilization rate, how many people are in each
people, and can we do a better job.
There are some--we understand there are some properties
that are historic properties. The GSA building we may never get
to a--it's one of those properties that has huge corridors and
high ceilings, and you may never get to a current utilization
rate. But we ought to have some type of formula for
understanding that. And we look forward to moving forward with
you on that.
And before I close, I just want to reiterate. Over a month
ago we did discuss a number of different issues which we still
don't have clarified today. One of those, the project that Ms.
Norton was just talking about, the Old Post Office, the RFP for
that. We had expected to have that done by today. As well, a
list of properties losing money on an annual basis in the
national capital region. We did get your list of properties,
but in that only had operating costs and not revenues.
So, we would either like you to--have you present us a list
of losing properties with an analysis behind those, or, at a
minimum provide this committee with the revenue numbers so that
we can figure it out ourselves.
And then, finally, something that we talked about a great
deal today, which you and I have both talked about in the past,
is streamlining the process. We want to see a list of
recommendations that, you know--obviously, we will work with
our staff on recommendations on streamlining the process.
And again, I would let you know that we do not plan on
approving any leases. That will be the next thing that we are
going to be working on. But we want to have this information
first.
Mr. Peck. Thank you, sir. We will get it to you.
Mr. Denham. Thank you. Well, in conclusion, I would just
like to thank you for your testimony today. Especially after
yesterday's meetings, you know, I think that we are going to
have a greater communication and openness. I am hopeful that
all of the other departments that we have been having
challenges with will not only work with you, but work with this
committee, as well. We need some fast answers.
I know the Administration is looking for that, as well. We
want to work together and make sure that those answers are
available for the public at large.
And with that, if there are no further questions, I would
ask unanimous consent that the record of today's hearing remain
open until such time as our witness has provided answers to any
questions that may be submitted to them in writing, and
unanimous consent that, during such time as the record remains
open, additional comments offered by individuals or groups may
be included in the record of today's hearing.
[No response.]
Mr. Denham. Without objection, so ordered. I would like to
thank our witness again for testimony today. And if no other
Members have anything to add, this subcommittee stands
adjourned.
[Whereupon, at 11:52 a.m., the subcommittee was adjourned.]