Waste and Inefficency in Property Management Cost Taxpayers Billions

Subcommittee Hearing Illuminates Property Mismanagement that Plagues Federal Agencies

WASHINGTON (May 24, 2007) – Pitfalls in management and accountability among federal agencies were brought to light today as a Senate subcommittee revealed difficulties disposing of unused federal government property, budget limitations that result in costly lease agreements, and more than $77 billion in property maintenance backlogs.

The subcommittee hearing, "Federal Real Property: Real Waste in Need of Real Reform," chaired by Sen. Tom Carper (D-Del.), heard testimony from federal agency representatives, as well as officials from the Office of Management and Budget (OMB) and the Government Accountability Office (GAO).

The GAO, in 2003, designated the management of federal real property as a high-risk area, susceptibility to fraud, waste, abuse and mismanagement.

"The federal government controls $374 billion in real property assets worldwide," Sen. Carper said. "We must do more to encourage better management of federal property to reduce inefficiencies that waste billions of taxpayer dollars."

Chief among the management deficiencies discussed is excess property. The GAO reports that the federal real property inventory is "outmoded" and "reflects a business model and the technological and the transportation environment of the 1950s." Some assets are no longer needed to meet agency missions, while others do not accommodate new technologies agencies need to complete their work successfully.

"When an agency maintains possession over a property it does not need, taxpayers pay the price for unnecessary security, maintenance and utility costs," said Sen. Carper. "The GAO reports that 10 percent of the assets of the Departments of Defense and Energy, alone, sit vacant and could be taken off the books."

Sens. Carper and Tom Coburn (R-Okla.) have been working on legislation they plan introduce later this year to streamline property disposal and provide agencies with incentives to dispose of property they no longer need. The senators also hope to address expensive leases and deficient maintenance backlogs.

Agencies rely more and more on leased space even though purchases or new construction are often the most cost-effective way to meet their needs over the long run.

The GAO reported that leases become a problem, in part, because current budget rules make leases look less costly in any given fiscal year, even if they cost more over time, and the federal government then loses an opportunity to build valuable equity.

Because many federal properties are older, the GAO found many agencies have tens of billions of dollars in maintenance backlogs. In a recent GAO report, just seven agencies alone reported more than $77 billion in maintenance backlogs.

According to the GAO, taken together the Departments of Energy, Interior, State and Veterans Affairs, along with NASA, and the General Services Administration reported repair and maintenance backlogs totaling more than $16 billion. The Department of Defense reported a backlog of more than $57 billion, which includes the cost to modernize and restore obsolete buildings.